The Government Bungles Management of Seized Casino

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The Government Bungles Management of Seized Casino

by Leon Felkins

As the government expands its program of seizing private assets (see POLICING FOR PROFIT: THE DRUG WAR'S HIDDEN ECONOMIC AGENDA by Eric Blumenson and Eva Nilsen at the FEAR site), they have found that some assets require management in order to maximize the profit (whoops, I meant maximize the punishment as we all know they are not in this for profit but to fight the Drug War). They have had to deal with taking care of race horses, art objects, automobiles, farms, air planes, and -- yes -- a casino. At first, they didn't worry too much about maintenance and, if the person from whom the property was forfeited managed to get it back, they would deliver it back -- typically in a very deteriorated condition. Congress got wind of this and passed legislation requiring that seized property while in the custody of the government must receive appropriate maintenance.

For something like a casino, this poses some challenging problems, because adequate maintenance means a day to day, continuing operation. So when the Federal government became the proud owners of a controlling interest (45%) in the "Bicycle Club" Casino (see United States v. Kramer), they quickly realized that operating it with a bunch of Federal Marshalls would be laughable and immediately contracted out the operation to a private firm. Still they had management problems and a deteriorating profit. They have tried to sell but have found no takers.

Now there are accusations that they have really tried to get into the swing of "casino operations" and are attempting to do things that a private casino might do to increase the profits. Sleazy things -- like "money laundering" (see Gambling in California), extortion by club employees, and donating money to political organizations that fight the opening of any new casinos (see Card Club Accused of Dirty Tactics, A.P. article of 3/9/98).

But still the operation is not going well. Their latest problem was revealed in an Associated Press article of April 2, 1998, "Investors in Seized Casino Sue Government", which says in part that:

Private investors in the Bicycle Club casino in Bell Gardens filed a $150 million lawsuit Thursday against the federal government's management of the enterprise since it was seized by the Justice Department eight years ago.


"Since the government seized control of the Bicycle Club casino, it has engaged in a course of mismanagement, recklessly negligent conduct and a gross violation of the constitutional rights of innocent investors whose financial interests in the club have been a sacrificial lamb to government run amok,'' Park Place general partner George Hardie said Thursday.

Now, who would 'a thought! Somewhat defending the government the article goes on to say:

In a blistering report earlier this year, Justice Department Inspector General Michael Bromwich said: "The department is in the business of fighting crime and seizing the ill-gotten gains of criminals, not in managing complicated businesses that were once owned by criminals.''

I suppose that was a jab at congress because of their passage of the stupid law requiring that seized property not be allowed to deteriorate.

One solution, of course, would be to avoid seizing property that requires maintenance! But I guess that is not being considered as just a couple of weeks ago, the Feds seized the Red Carpet Inn down in Texas (see FORFEIT: U.S. Attorney Here Overstepped Bounds in Motel Seizure, Houston Chronicle, 3/11/98).

Well, here we go again. I just don't think that a motel, even a motel as well known as the Red Carpet Inn, is going to do that well if the potential tourists (possible some drug runners, even) find out that it is owned and operated by U.S. Marshals!


Originally posted by Leon Felkins, April 3, 1998 to the FEAR-List. More of Leon Felkins' essays may be found on his webpage, A Rational Life. Leon's other pissedOff rants can be found here.

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