BELL — In an unexpected move, the city has stepped in to resolve the conflicting ownership claims at the California Bell Club.
The Community Redevelopment Agency on Tuesday night voted unanimously to begin proceedings to condemn and acquire the casino and sell it to the highest bidder.
The first step in the process will be a public hearing Sept. 21.
Councilmen Rolf Janssen and Ray Johnson were absent from the meeting, which was conducted by the City Council acting as the agency.
'War of Paper'
The redevelopment agency is proposing the action to end what City Atty. Robert Flandrick called "a war of paper" between two groups trying to buy out the casino's partners, in which both groups claim victory. Flandrick said that if the disputes between the partners are not resolved soon, the club could "go belly up." The agency is stepping in to prevent that happening, he said.
If the city proceeds with the action as planned, it will have the casino appraised to establish a fair market value for the present owners' shares, and will purchase the casino under its right of eminent domain.
The City Council had hoped that a clear winner would emerge from the bidding to take over the club and thus resolve the ownership dispute that has resulted in lawsuits that have kept the casino management in turmoil for months.
Bell City Administrator Byron Woosley said a meeting two weeks ago at which both groups bid for the partners' shares resulted in the threat of even more litigation and fragmentation among the owners.
Each of the bidding groups claims to have lined up commitments to sell from a majority of shareholders.
"This is an unstable situation," Woosley said. "It is simply unclear which of the two groups has a majority. Each group (claims) different degrees of backing and we can't be sure that the problem is on the way to being solved. The CRA is trying to consolidate ownership and get an owner and management team that can make it work."
Casino ownership is divided among dozens of limited and general partners.
The two groups of investors that are bidding for a majority of the partners' shares are Las Vegas-based Southwest Gaming Inc. and LCI Corp., represented by Los Angeles lawyer Arnold Malter.
At the Aug. 17 meeting referred to by Woosley, Southwest gave the shareholders until Aug. 28 to accept its bid, but extended the deadline another two weeks.
LCI, which appeared to be out of the competition when it failed to obtain a majority of the shares at the meeting, has indicated that it will enter litigation in order to continue its takeover efforts, Woosley said.
The city controls more than 12% of the club's shares, acting as trustee for the federal government, which seized the shares from investors convicted of racketeering and fraud three years ago.
The two bids for the club are more than $5 million cash for 100% ownership.
Under the new proposal, according to Flandrick, the city will raise the money to buy the club through revenue bonds guaranteed by club income. Money from the sale of the casino will be used to pay off the bonds.
Flandrick said that before taking the action, the city discussed the plan with with the present management group and the two groups bidding for control. He said that there was general support for the plan. "They could see that if we don't do something to assist in resolving this (ownership dispute)," the club could go under, he said.
"It's a real concern of the Redevelopment Agency, since the club occupies a one-purpose building. If the club goes under, in addition to losing tax revenue, the neighborhood could be blighted."
Single Largest Taxpayer
The casino is the single largest taxpayer in the city and contributes 13% of the city's budget. It paid more than $2 million a year in city taxes in its heyday; so far this year, the city has received about $800,000 from the club.
The City Council has repeatedly asserted its desire to see the club owned and managed by a cohesive group that would rebuild the reputation and profitability of the once-flourishing casino--and give the city a single owner to deal with.