by Hector San Miguel
The Indiana Gaming Commission has fined Pinnacle Entertainment more than $2 million and suspended the gaming license of Belterra Casino Resort for two days. The action by the commission came at its monthly meeting July 29 in Indianapolis.
The sanctions center on allegations that prostitutes were brought to Belterra last year for a group of high-roller gamblers who came to the casino to play golf. Pinnacle will pay a $2.26-million fine under the settlement, and put up another $5 million as a guarantee it will expand its 308-room hotel at Belterra.
The settlement agreement between Pinnacle and the commission also includes sanctions against Pinnacle's former chairman of the board, R.D. Hubbard, who was ordered to pay a $740,000 fine and another $10,000 to pay for investigative costs. Though Hubbard was not found unsuitable for other gaming licenses outside of Indiana, he had to surrender his Indiana gaming license and agree to never apply for another one in Indiana.
Hubbard was also ordered to sell his stock in the company. As of April, he was the single largest owner of Pinnacle stock with 2.62 million shares, or 10.3% of the outstanding shares. Hubbard resigned in April along with then-Pinnacle president Paul Alanis when the allegations about the prostitutes first came to light.
Hubbard, chairman of Ruidoso Downs in New Mexico, has an application pending before the New Mexico Racing Commission to build a racetrack in Hobbs, N.M. The project is called Zia Park.
The Belterra fine and suspension are the toughest sanctions ever imposed by the Indiana Gaming Commission since riverboat gambling began in 1995.
Under the settlement agreement, Belterra, located along the Ohio River in Switzerland County, must close its doors from 6 p.m. on Oct. 6 until about noon on Oct. 9. The casino's license will be suspended during the period, but it will still have to pay wagering and admission taxes as if it were open, according to the agreement. Casino employees also must be paid during the closure.
Pinnacle has also agreed to expand its hotel by 300 more rooms in the next two years. The company has put the $5 million into an escrow account that it will forfeit if it doesn't meet the deadline.
Commissioners had been leaning toward yanking Belterra's gaming license, which would have forced Pinnacle to sell the Indiana casino. However, negotiations have been ongoing since April between Pinnacle officials and commission staff over the settlement. Pinnacle officials wanted to pay a fine and show the commission that changes will be made to prevent that kind of incident from occurring again.
The "undisputed facts" of the settlement agreement between the commission and Hubbard states that the Belterra Casino held a golf outing last year called the Hubbard Invitational Golf Classic. "Specific individuals were invited" to the event by Belterra's marketing department based on a list provided by Pinnacle corporate personnel. It was held from June 26, 2001, through June 29, 2001.
On June 26, 2001 eight or more women were flown to an area airport on an aircraft leased by Pinnacle, the agreement states.
"According to numerous witnesses, these women were brought to Belterra for the entertainment of the guests of the golf tournament. On several occasions several of the women were referred to as hookers," the agreement states. "On the evenings of June 26, 2001 and June 27, 2001, Hubbard directed Belterra casino employees to provide money to the invitees for gambling and to pay other fees without the necessary paperwork."
The agreement also says: "On at least one occasion, on Hubbard's authority, Belterra employees made a distribution from the cage to an associate of Hubbard's."
Regarding the prostitutes, the commission investigation found that the women and golf guests went to parties on two nights in the casino's Celebrity Room adjacent to the concert arena. The parties were so loud that concerts held by comedian Howie Mandel and country music singer Waylon Jennings next to the Celebrity Room had to be stopped several times because "of the disturbances by the group," according to the agreement.
The women and golfers later retired to a room on the casino's 15th floor where the party continued. The invited guests and women left the casino by car and airplane June 29, 2001.
The commission's investigation into the Belterra incident found four "potential regulatory violations," according to the settlement agreement. They are:
–– "All of the events and matters set forth should have been disclosed to the Indiana Gaming Commission by Belterra management and the Pinnacle corporate officers upon learning of the events."
–– "Hubbard pressured casino employees to issue funds and chips to the golf invitees prior to the proper documentation being completed."
–– "Hubbard caused cash to be withdrawn from the cage for an associate. Sometime later, Hubbard issued a personal check for funds that he had previously directed to be withdrawn from the cage for the associate."
–– "Distributions were made from the cage to an associate of Hubbard's, on Hubbard's authority, without following Belterra's internal controls."
–– Under the agreement, Hubbard has agreed to cooperate with the commission's investigation into the matter by providing testimony and other information if needed.
Pinnacle Entertainment owns and operates seven casinos (four with hotels) in Nevada, Mississippi, Louisiana, Indiana, and Argentina, and receives lease income from two card club casinos, both in the Los Angeles area. The company was awarded the 15th and final riverboat gaming license for a project in Lake Charles, La. It plans to build a $225-million casino resort there similar to the Belterra Casino Resort.