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Ruling Clouds Future of Casino--and Cudahy Revenues : Gambling: Arbitrator says partner doesn't have to provide funds to complete project.

December 30, 1990|TINA GRIEGO | TIMES STAFF WRITER

CUDAHY — An arbitrator has further clouded the future of the Silver Saddle Casino, a troubled card parlor counted on by officials to generate thousands of dollars of revenue for the city.

Retired Superior Court Judge William P. Hogoboom last week ruled that the partner who was to arrange financing for construction of the Silver Saddle Casino does not have to provide the money necessary to complete the project.

Only the exterior of the Silver Saddle Casino is finished, and at least $6 million more is needed to complete the 100-table card parlor in Cudahy's small industrial sector, the partners have estimated.

Construction of the casino has been delayed because of financial and legal problems for the last nine years. It was expected to open this fall, but in August, owners Shyr-Jin Tsay and Charles King became embroiled in a financial dispute, and construction ground to a halt. The pair sought Hogoboom's help in resolving their problems.

With each delay, the City Council is forced to dip into its reserves in order to run the city. The city was to receive 8% to 13% of the casino's monthly gross revenues in taxes--an estimated $650,000 that the council was counting on to get through the fiscal year. As long as the casino remains closed, the council must use its reserves.

City Manager Jack Joseph said the council now may consider revoking the casino's license, which was granted to King and Tsay on the condition that they would have the club finished by January, 1990. Joseph said the council chose not to enforce that deadline because construction of the casino was under way and it appeared that it would be open for business soon.

Joseph said there is "not a prayer" that it will open before the end of the fiscal year in July, 1991.

"If Tsay's position is, 'I've given all I am going to give,' and King doesn't have the money to finish, then the conclusion we have to draw is that they don't intend to complete the casino."

The Silver Saddle Casino was King's brainchild. King, 42, is a South Gate real estate agent and owner of Tanlo Inc. He first broached the idea to the council in the early 1980s, promising the area's largest casino. Since that time, he has gone through several partners and investors, spent thousands of dollars, battled a revenue-hungry City Council and succeeded in opening the casino only once. In 1987, the Silver Saddle opened with only four tables in a building that once housed an automobile smog-check station. It closed several months later when King experienced financial problems and filed for bankruptcy.

Tsay and King became equal partners in the Silver Saddle in 1987, and for the first time work on the casino seemed to be going smoothly. Tsay, 51, is a Taiwanese-born engineer who made millions in real estate and owns several hotels and bars in Los Angeles County, according to property records.

It soon became clear, however, that both partners had underestimated the cost of building a casino, and the pair began fighting over how much financing Tsay was obligated to provide for the casino's construction.

According to the agreement between King and Tsay, King was to provide the license and the land upon which the casino is being built, while Tsay was to provide the financing. Since Tsay became King's partner and half-owner in the casino in 1987, he has put an estimated $5 million into its construction. Most of the money has been borrowed.

Tsay refused to put more money into the project unless King gave him controlling interest in the partnership, King's attorney, Ira Rivin, charged. Kay Kochenderfer, Tsay's attorney has denied that, and she said Judge Hogoboom has completely vindicated Tsay.

Hogoboom ruled that there was no evidence that Tsay had agreed to provide "blank check" funding for the casino, and he was not obligated to arrange any more financing.

"We're delighted," Kochenderfer said. "King wanted Mr. Tsay to provide all the money, essentially he wanted Mr. Tsay to be a sugar daddy."

However, Hogoboom did order Tsay to repay about $740,000 he took from casino accounts to repay loans he made to the casino partnership. He was supposed to repay the loans only after the casino had made a profit.

Since the casino has not opened, Tsay essentially took away money he had promised to provide for the casino's construction, the judge ruled.

Kochenderfer said that Tsay has not decided whether he will put any more money into the project.

"I don't think it would be accurate to say that the casino won't be built," she said. "It may be that the casino will be built, though the partnership between Mr. Tsay and Mr. King will not continue. We really are just in the process of evaluating our options."

Kochenderfer also acknowledged that it may be too soon to decide what should be done about the casino and the partnership because Tsay has also has filed a petition of involuntary bankruptcy on behalf of the Silver Saddle Casino with the U.S. Bankruptcy Court in Los Angeles. A hearing is scheduled in January.

Rivin said that he believes that the arbitrator's ruling was off-base. He said that King has not decided what to do next.

"What I can tell you is that Mr. King has committed too much time and energy to the project to walk away now," he said. "If there is anything we can do to keep the project going, we will do so."

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