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Casinos bet big on L.A. gaming: clubs raked in $310 million in '97; slots next? - Los Angeles, CA, gambling industry
Los Angeles Business Journal, March 9, 1998 by Larry Kanter
No one is likely to mistake Rosecrans Avenue in Gardena for the Las Vegas Strip.
But looming over the busy, six-lane industrial thoroughfare, the large, flashing sign for the Normandie Casino promises just that - "Vegas in L.A."
The claim seems a tad optimistic. Compared to the high-tech glitz and theme-park atmosphere of contemporary Las Vegas, card clubs like the Normandie tend to be drab, catering less to families and tourists than to serious card players. They huddle around dark, oblong tables behind stacks of chips, holding poker hands or shaking cups of dice, shouting out their good fortune and cursing their bad luck.
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But like a gambler with a powerful hunch, local card club executives are betting that in the not-too-distant future, "Vegas in L.A." will be less a wishful boast than a fact of life.
"This industry is in its building stages," said Ron Sarabi, general manager of the Normandie and a 25-year gambling industry veteran who has operated casinos in Las Vegas and Lake Tahoe. "In the long run, this will be as exciting as running a casino in Nevada."
Sarabi is not alone. Across L.A. County, card clubs are taking a cue from their Nevada counterparts and moving from the margins to the mainstream - retooling their product from "gambling" to the more benign-sounding "gaming."
Some clubs are adding luxury hotels and quality restaurants; others are providing new sports and entertainment options. It's all part of an effort to extend beyond the limited and largely saturated market of hard-core gamblers.
The new push comes as the state begins to implement its first-ever set of regulations for California's 176 card rooms, which in the past have been monitored almost exclusively by the municipalities in which they operate.
Under legislation signed by Coy. Pete Wilson last year, the clubs face their toughest regulations ever - including regular reporting of revenues to state authorities and extensive background checks of all but the lowest-level employees.
The rules will be enforced by the attorney general's Division of Gambling Control, which was created as part of the legislation. When the division is funded and implemented in 1999, the attorney general will have an 81-member enforcement staff to oversee the state's card club operations.
In addition to increased enforcement, card rooms face a new annual tax of $3,700 per table, which will fund the new regulatory efforts - a levy that will shave hundreds of thousands of dollars off the clubs' bottom lines.
The new law follows five years of stalled efforts to regulate the industry, as competing interests - including the Attorney General's Office, conservative lawmakers opposed to any new bureaucracy, anti-gambling activists, card club proponents and the state's Indian tribes quarreled over how California should monitor its $9 billion card room industry.
Last year's bill, however, apparently proved an effective compromise - it passed unanimously in the Senate and by an overwhelming margin in the Assembly.
"Card rooms have been the only major gaming industry that has not been regulated," said Matt Ross, a spokesman for Attorney General Dan Lungren. "There's quite a bit of cash flowing in these places, and it's easy to see the criminal element step in."
In 1994, for example, an employee at the Bicycle Club Casino in Bell Gardens was sentenced to 12 years in federal prison for conspiracy, loan-sharking and extortion, after he was convicted of forcing victims to pay as much as 10 percent interest every three days for gambling debts.
Club operators characterize such incidents as aberrations, and insist that most card rooms experience less crime than the average shopping mall. Nonetheless, the clubs are embracing the new regulations.
Why? For one thing, the new law extends until 2001 a moratorium on any additional card rooms, keeping new players out of an already fiercely competitive market,
But equally important, the new laws confer a long-sought-after stamp of approval signaling that card clubs are regulated, safe, and legitimate. As a result, they provide a potentially useful tool in the drive for respectability.
"Our industry needs to be squeaky clean," said Andrew Schneiderman, vice president and general counsel of the Commerce Casino, LA.'s largest card club, with 200 tables, 2,200 employees and revenues of $110 million in 1997. "People want a good honest game in a clean environment. We want to provide that."
The potential payoff can be considerable, says William Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno.
As Eadington sees it, California in the 1990s [TABULAR DATA OMITTED] is not unlike Nevada in the 1960s, when state authorities enacted tough regulations to crack down on Mob activity, laying the groundwork for Las Vegas' transformation from Sin City into something at times resembling Disney World.
"Gambling industries in an unregulated context are marginalized, treated as second-class citizens," said Eadington. "By establishing a regulatory structure, you create an environment to make the industry legitimate. Look at what happened in Nevada - the operators become more respectable. The same thing could happen in California."
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