BELL — After years of financial and legal troubles, owners of the California Bell Club have agreed to sell their card club to a Los Angeles investors group for $8 million, a casino partner said.
The Moraga Investment Group signed an agreement in May to purchase the club, Samuel Torosian, casino partner and general manager, said last week.
Bell officials say the sale, if approved, may help Bell recoup delinquent taxes and re-establish the casino as a source of much-needed income.
The city has only $50,000 in reserve funds to handle emergencies, and the preliminary budget for the next fiscal year calls for $500,000 in cuts, including elimination of five positions, said City Administrator John Bramble.
Club Owes $1.9 Million
The club, which at one point generated revenues of nearly $2 million a year for the city before competing clubs began to lure away customers, owes the city $1.9 million in unpaid taxes, Bramble said.
The city had started condemnation proceedings in 1987 in an effort to take over the club and regain back taxes. The effort, which would have made Bell the first city in the country to own a gambling institution, was abandoned June 5.
The sale must be approved by a federal bankruptcy judge. The casino's owners in April filed for reorganization under federal bankruptcy laws. Judge Kathleen March is scheduled to rule in September on the sale.
Proceeds from the sale would be used to pay more than $7 million in debts, including more than $3 million in federal, state and city taxes, according to court documents.
Los Angeles attorney Henry S. Stone is listed in court documents as president of Moraga Investment Group. He could not be reached for comment about the casino purchase.
City officials said Moraga executives initially expressed interest in managing the card club for the city if it had taken control through eminent domain proceedings.
"The Moraga group came to us first," said City Atty. Robert Flandrick. "But they felt they could make a better deal directly with the club, which is fine because we were trying to be a catalyst to get a new operator anyway."
City officials had negotiated with several management groups to take over day-to-day operations of the casino, but negotiations generally stalled over the $7.1 million needed to pay off creditors, officials said.
Bramble said only one deal came close to being completed. Earlier this year, California Casino Properties Inc. signed an agreement, and Bell officials prepared to sell bonds to pay off the creditors and partners. The card club's gross receipts would have been used to pay off the bonds, according to the agreement.
But California Casino Properties called off the deal in March. "It certainly was frustrating," Flandrick said. "We had filed for condemnation proceedings and we got a buyer, but they changed their minds."
In late May, Moraga and California Bell signed a preliminary purchase agreement.
Bell then decided to scrap its eminent domain plans early in June, Bramble said. The city's condemnation effort had cost $125,000 to $130,000 in legal fees, he added.
When the 560-seat card club first opened in 1980, city officials said it poured nearly $2 million in annual tax revenues and fees into Bell city coffers.
But as other casinos sprang up in the neighboring cities of Huntington Park, Commerce and Bell Gardens, many customers left the Bell club. Profits shrank, tax revenues dried up and the city of Bell experienced a sharp budget crunch.
Over the years, the casino also has been plagued by legal problems.
In May, 1988, law enforcement authorities raided the club and homes of the general partners in an investigation of alleged illegal activities, including skimming of profits. Two months ago, Wing Lou, one of the four casino partners, was charged with grand theft for allegedly writing $162,000 in club checks to himself.
In a 1985 profit-skimming scandal, two city officials pleaded guilty to conspiring to form a secret partnership with poker club investors.
City officials now are looking to new owners to restore the club to financial solvency.
If the bankruptcy court approves the sale, Moraga will still need to pass a Bell city review to qualify for a business license, City Administrator Bramble said. But a preliminary background check has determined that the group appears to have the financial resources to purchase the club, he added.