Tag Archives: Paragon Gaming

When casinos roll into the red, by Glen Korstrom

Posted on April 7, 2011 by | Leave a comment

When casinos roll into the red

Restructuring Gateway Casinos and Entertainment wiped out $1 billion in debt and provided the company with a $100 million capital infusion and a $500 million loan

By Glen Korstrom, Business in Vancouver magazine, April 5-11, 2011; issue 1119

Activists who oppose Paragon Gaming Inc.’s proposal to build Western Canada’s largest casino adjacent to BC Place frequently say their opposition stems from fear that the venture will collapse in debt.

They justify these fears by pointing to a jackpot of casino companies that have run into debt so deep massive restructuring was required. One of those deals was the largest acquisition of 2010 that did not involve a mining company.

As for Las Vegas-based Paragon, it has an option to lease taxpayer-owned land, subject to civic approval and $350 million in financing, so it can build a $450 million casino and hotel complex by 2013.

Its $6 million annual lease payments would help BC Pavilion Corp. (PavCo) pay for the $563 million renovation of BC Place.

Paragon president Scott Menke has refused to open his private company’s books to demonstrate fiscal strength. PavCo chairman David Podmore, however, told Business in Vancouver that he has seen Paragon’s books and that he believes the company is capable of meeting financial commitments.

Things don’t always work out so well for casino operators, however.

The largest non-mining acquisition of 2010 demonstrated that.

Burnaby’s Gateway Casinos and Entertainment Ltd. morphed from being an income fund in 2007 to being owned by two shareholders: Crown and Macquarie Bank.

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Nathan Edelson, Former Vancouver City Planner-Presentation to Council

Posted on March 17, 2011 by | 3 Comments

Presentation to City Council Opposing Casino
Nathan Edelson
March 14, 2011

As some of you may recall, I am a former Vancouver City Planner.

Like former Councillors Ladner, Puil and Ford, I am not from Las Vegas; and I don’t support the proposed casino. I am also proud to be on the same side on this issue as many others with others with whom I have worked including Tom Durrie, Herb Barbolet and John Shayler as well as the Community Arts Council of Vancouver, on whose board I serve.

My reasons are simple:
1. The process doesn’t smell right
2. The stadium roof leaks money and doesn’t look right
3. Enabling addiction to gambling as a public policy doesn’t feel right

Process
Regarding the process, the media has reported that a number of former and current public officials have been working behind the scenes or, in some cases, directly for the casino and associated facilities. Whatever their past contributions to public service – and they are considerable – I believe those who have argued that these facilities should be public priorities may have lost their way. Some have strayed so far along the path toward conflict of interest that it is unclear as to whether they have broken the law or whether the law must be fixed.

• The design of the complex is too large and will further block rather than enhance the important linkages between the Downtown Eastside, including Chinatown, and False Creek.
• The stadium roof now litters our skyline – its design is disrespectful of 3 decades of careful work to protect public views
• The stadium and the roof cost more than $560M. That these funds were spent in advance of this public hearing is disrespectful of the City’s rezoning process.
• More importantly, this is a misallocation of public funds when:

– Hundreds of homeless live on our streets
–Thousands of our children are unsafe in schools that need seismic upgrading; and
–Tim Bits are served in the emergency rooms of our hospitals

The TEAM Council on which Marguerite Ford served in the 1970’s achieved greatness.
1. It had a clear vision of a city made up of liveable, inclusive and engaged communities.
2. It also had the courage to say NO to the freeways that many experts declared were both necessary and inevitable.

The result is what is recognized as one of the most liveable cities in the world, at least for most, if not all of us.

Should you decide that you have to approve this proposal, be careful to check every detail of the permits. I helped negotiate a Community Benefit Agreement with the original owners of Edgewater so that inner city residents would be given at least 10% of the new jobs.

Many of these were contracted through Cook Studio – a social enterprise that trained low income youth. It was contracted to do offsite catering and to operate the onsite restaurant. When Paragon took over ownership of Edgewater, they cancelled the contract. This contributed to Cook Studio going bankrupt and the loss of opportunity for dozens of young people who were taking their first steps out of poverty.

I think it is important for all of us to recognize that Edgewater has been a good employer. This is why so many of its workers have taken the time to speak on behalf of the company and the pride they have in their jobs.

However, I would ask you to question Paragon as to why so many of its current workers fear that unless the casino is expanded, they may lose their jobs. If the Casino – at its current size is relocated or the license is transferred to another company, Council can help protect their jobs as a condition of development or other permissions.

More than a decade ago, Mayor Philip Owen had to wisdom to understand that addiction to illegal drugs is a public health issue. It is time for us to understand that this is also true of Addiction to Gambling.

I would suggest a Four Pillar approach to reduce government’s Addiction to Gambling.

1. The first pillar is Prevention
On one side of the chips, show the high proportion of revenue that comes from the poor;
On the other side, show where the revenues actually go; and
On the large screens show the people driven into bankruptcy, their foreclosures, divorces and innocent children.
2. The second Pillar is Harm Reduction
Develop a policy of no increase in slot machines and tables; and
Gradually eliminate highly addictive internet gambling
3. Treatment is the third pillar
Create a fair taxation policy – so that governments have the resources to provide needed public services without relying on the proceeds of gambling.
4. The fourth pillar is Enforcement
•  Work with the Province to carry out a full public inquiry into all the events that led to the proposal before you this evening. This should include the circumstances under which Paragon took over ownership of Edgewater, the proposal for more than tripling the size of the casino, the public expenditures on stadium and the public engagement process.
•  Whether or not the inquiry reveals illegal activity has taken place, it should check to make sure that the laws regulating conflict of interest are clear and adequately reflect the public’s sense of right and wrong.
•  This will help public officials – both current and former – “To know their limit; and to stay within it.”

In my view, and those of many who have spoken and will speak before you, we need to recognize that the casino is like a freeway – a Social Freeway to Nowhere. Like the TEAM Council of the 1970’s, you have an opportunity to turn this proposal down and to have staff complete much needed planning for this area.

Finally, I think it is important that the roof – the roof that would be retractable – remain for decades to come.

Like the Georgia Viaduct before it, it should serve as a symbol for the path we chose not to take. A reminder that in the early part of this century – with all of its challenges – that Vancouver’s City Council chose to work with the senior governments to house our homeless, protect the lives of our children and become the Greenest, and the most liveable place on earth – not for most of us; but for all of us.

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FOI Requests: PavCo’s Request for Expressions of Interest shows only 2 bidders

Posted on March 5, 2011 by | Leave a comment

 

In short, what we learn from these is that the bid process for developing the property at B.C. Place Stadium was very short and yielded only 2 bidders – Concord and Paragon. Apologies for size. Each PDF is large – downloading may take a minute.

PavCo Request for Expressions of Interest – Part 1 (nearly 2 MB – if you want a clearer, larger copy, please email us)

PavCo Request for Expressions of Interest – Part 2 (caution: over 4 MB)

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BC Place / Paragon Press Packet

Posted on March 5, 2011 by | 2 Comments

Here is the most recent BCPlace/ParagonPressPacket. PDF – approx 1.5 MB.

It offers a full description of the planned complex. There are many questions raised by the plan: are all these new hotel rooms going to be subsidized by the casino? Vancouver already has a surfeit of hotel rooms — will these rooms undercut other hotels? And many more…

As an aside, we hardly need to point out that if you have to say you’re World Class”… you’re not.

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Deloitte Report on the Edgewater mega-casino

Posted on March 2, 2011 by | Leave a comment

Please feel free to peruse Deloitte’s Economic Report – Entertainment Complex for yourself. Please note that the report states that its projection figures were derived from Paragon Gaming itself. These figures do not appear to have been independently assessed. We welcome any and all expert opinion on this report – either comment below or send us an email.

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Edgewater mega-casino fact sheet

Posted on March 2, 2011 by | Leave a comment

THE RAW FACTS ABOUT PARAGON GAMING’S PROPOSED EDGEWATER CASINO EXPANSION AT B.C. PLACE

ABOUT THE PROJECT

Connection with B.C. Place Stadium: direct link to stadium attendees, with a separated walkway directly to the casino from corporate suites.

Size of gambling space in the expanded Edgewater Casino: 2 football fields

Size of this casino compared to all casinos in western Canada: #1

Number of electronic slot machines in current Edgewater Casino: 520

Number of electronic slot machines in expanded Edgewater Casino: 1,500

Percentage of electronic slot revenues estimate to come from problem gamblers: 35%

Number of studies done in B.C. to determine the social, crime and financial costs of problem gamblers in this province: none

Cost of policing, addictions, suicides, fraud, courts related to problem gamblers using this casino: unknown

Estimated annual cost of a problem gambler from missed work, fraud, bankruptcies, receiverships, embezzlements: $13,200

ABOUT THE PROCESS

Date that B.C. Lottery Corporation chair Richard Turner buys shares in Paragon’s Alberta business: 2003

Date that Turner discloses that interest: 2005

Date that Turner resigns from BCLC board: late 2005

Date that Paragon Gaming purchases Edgewater Casino out of bankruptcy and installs Turner on the board of Paragon: summer 2006

Amount of donation by Richard Turner to B.C. Liberals while Paragon’s bid is awaiting a decision by Pavco in 2009: $50,000

Time between Pavco’s invitation to two short-listed companies responding to a request for expressions of interest in this $450-million project and its announcement of Paragon as the preferred proponent: less than 11 weeks

Normal time for big government projects to determine the best proponent, according to Partnerships B.C.: 12-16 months.

Number of minutes spent debating Edgewater’s expanded casino by Vancouver City Council: 0

ABOUT BROKEN PROMISES TO THE CITY OF VANCOUVER

Projected return of expanded Edgewater casino to City of Vancouver: $10 million in new revenue from gambling

Projected revenue to City of Vancouver from Edgewater’s original casino in 2004: $10-12-million in new revenues

Actual annual return of Edgewater Casino to City of Vancouver over the past two years: $6.3 million

Promise to arts groups and charities in 2004: increased funding
What charities got in 2010: 14% less than they got in 1995
What BC Lottery Corporation got in 2010: about three times as much revenue as 1995.

Promise to bingo players and their funding recipients in 2004: New Planet Bingo hall at Edgewater
Status of promise in 2011: Never delivered

ABOUT PARAGON GAMING

Number of slot machines in Paragon’s only Las Vegas operation, a sports bar: 15

Source of Paragon’s financing for Vancouver: unknown

Number of jobs promised by Paragon in 2010 bid for a casino in Missouri: 573

Number of jobs calculated by the Missouri Department of Economic Development for the same project: 280

Estimated annual revenue by Paragon in Missouri bid: $103.4 million

Estimated real new annual revenue calculated by the Missouri independent review of the same project: $21.7 million

Status of Paragon bids to build casinos in Sugar Creek, Missouri; Moncton, New Brunswick; Oxnard, California; and Ventura County, California: all failed

Answer of Unite Here, a union of 100,000 gaming workers across North America, to the question: “Is Paragon really the right company to take on this project?”: “no”

Disturbing event that occurred at Paragon’s Cree River Casino outside Edmonton in August 2010: customer murdered after a fight in a lounge that spilled outside.

ABOUT CRIME AND GAMBLING IN B.C.

The two best places to meet gangsters in B.C., according to Fred Pinnock, former Commander, Integrated Illegal Gambling Enforcement Team: in jails and in casinos

Hours of shifts of loan sharks at River Rock Casino revealed in Oct. 2006 murder trial of loan shark Lily Li: 24/7

Percentage increase in gambling-related crime reported by Richmond RCMP after River Rock’s establishment: 400%

Percentage of money-laundering and terrorism financing cases discovered in 2008-9 that took place in casinos, according to FINTRAC: 20%

Date that RCMP’s Integrated Illegal Gaming Enforcement Team issued a report to the provincial government warning of “extreme vulnerability” of casino industry to organized crime–money laundering, infiltration, loan sharking: January, 2009

Date that B.C.’s Integrated Illegal Gambling Enforcement Team was disbanded by the provincial government: February, 2009

Date that BC Lottery Corporation was fined $670,000 by FINTRAC for repeated failure to monitor suspicious transactions, the first fine of its kind in Canada: Summer, 2010

Number of dollars involved in suspicious cash transactions at 2 casinos in Metro Vancouver, including $460k in 20’s in plastic bags, and a suitcase with $1.2 million in casino chips, revealed by CBC in 2010: $8 million.

Reaction of Insp. Baxter, head of RCMP Proceeds of Crime Unit, to these transactions: “suspicious”

Reaction to these transactions of Rich Coleman, Minister of Public Safety and Solicitor-General, also in charge of raising revenues through gambling in B.C.: “not suspicious”

Number of sentences in Vancouver city staff’s 55-page report on the B.C. Place rezoning mentioning organized crime or money-laundering: 1

ABOUT THE ECONOMIC CASE

Amount listed in Deloitte report on this project as an annual capital payback from B.C. Lottery Corporation to Paragon: $16.9 million

Estimated increase in business over Edgewater’s current revenues: 180%

Percentage of North American casino customers who live within 45 minutes of the casino: 90%

Paragon’s estimate of the number of gamblers expected to come to Vancouver every day exclusively to gamble in the new casino and stay in its 648 new hotel rooms: 548.

Feb. 2011 comment by veteran hotel broker Angus Wilkinson on the demand for new hotels needed in the city: “This city doesn’t need another single hotel room.”

Amount that would have to be charged per night for a new hotel to survive financially in Vancouver, according to Wilkinson: $400/night

Average hotel room rate in Vancouver in 2010: $166/night

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Paragon Gaming’s Diana Bennett – Time Magazine: “Wheel of Misfortune”

Posted on March 1, 2011 by | Leave a comment

Indian Casinos: Wheel Of Misfortune

Reprinted from Time Magazine, Monday, Dec. 16, 2002. By Donald L. Barlett and James B. Steele

Maryann Martin presides over America’s smallest tribe. Raised in Los Angeles in an African-American family, she knew little of her Indian ancestry until 1986, when at age 22 she learned that her mother had been the last surviving member of the Augustine Band of Cahuilla Mission Indians. In 1991, the Bureau of Indian Affairs (BIA) certified Martin and her two younger brothers as members of the tribe. Federal recognition of tribal status opened the door for Martin and her siblings to qualify for certain types of government aid. And with it, a far more lucrative lure beckoned: the right to operate casinos on an Indian reservation.

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Summary of issues surrounding the Edgwater Casino expansion plan

Posted on February 16, 2011 by | 2 Comments

UPDATE: here is a fuller summary of issues with the Edgewater Casino expansion (PDF with hyperlinks).

This post is for those interested in some of the more technical details surrounding the Edgewater Casino application. To read the full application, visit the City of Vancouver site.

Procedural Issues

1. No Adequate Notice to Public

The application before Council is described as a re-zoning application by PavCo (crown corporation BC Pavilion Co). Included, but not detailed in the public notice, is a second application by Edgewater Casino for a by-law amendment licensing approximately 1000 new slot machines and 75 new slot machines; Notices mailed only to residents within a 2 block radius of the project, etc.

No notice to public of scale of expansion: gaming floor equivalent to two NFL football fields (114k sq. ft)

2. Due Diligence gaps

a) Calculation of expected revenues only, no calculation of expected costs–policing, counseling, housing homeless;
b) No report on mental health and addiction issues/social ills;
c) Policing report is one paragraph long. Only one sentence respecting organized crime, money laundering. No estimate of impact or cost to manage. No weapons policy or enforcement provisions in a casino/hotel/sports complex. No reference to the RCMP report cautioning about extreme vulnerability to organized crime and infiltration.
d) Background check of Paragon Gaming–corporate profile misrepresented in public materials. No assessment of suitability to operate a major project of this scale.

3. Key Information Relevant to Public Review

PavCo represents that there is no risk to the taxpayer in the corporate structure of the project; however:

The BC Lottery Corporation Facility Development Commissions (FDC) and Accelerated Facility Development Commissions (AFDC) cover roughly 42% of casino capital development expenses.

Do FDC’s and AFDC’s extend to ancillary buildings such as hotels, restaurants, theatres, and parkades?

Projections indicate the cost of the complex will be approximately $450 million. 42% is almost $190 million in public money. The BC Lottery Corporation has budgeted for capital expenditures of $346 million over the next 3 fiscal years. What percentage of that will go into the Edgewater development?

a) Public disclosure of all financial commitments
b) Public disclosure of the deal structure: Is there an incentive to overbuild? How are expenses calculated and netted out?

4. Irregularities in the BC Lottery Corporation and PavCo Bid Process

a) BC Lottery Corporation board chair Richard Turner purchases shares in Paragon Gaming (operating in Alberta) in 2003. Share purchase violates board code of conduct, and is not disclosed until 2005.
b) In late 2005 Turner resigns from BCLC board. Summer 2006 Paragon Gaming purchases Edgewater Casino out of bankruptcy and installs Turner on the board of Paragon.
c) Fall 2008, City plan for Northeast False Creek is amended to permit major casino at request of PavCo.
d) March 2009, PavCo puts out an RFEI (Expressions of Interest), with an 18 day window. Only two respondents, including Paragon, reply. While the Paragon bid is before PavCo during the RFP phase one month later, Turner issues a $50k cheque to the BC Liberal Party. Paragon Gaming is the successful bidder
e) Autumn 2009 Turner places a phone call to Minister Kevin Krueger advising that Paragon will withdraw if the roof is not built per plans.

What were all the communications between Richard Turner and PavCo in the period 2005-2009?

5. Criminal Concerns

2006: Richmond loan shark Lily Li is murdered. Evidence emerges at trial that loan sharks operate on shifts 24/7 inside River Rock Casino;
2009, January: RCMP special unit IIGET (Integrated Illegal Gaming Enforcement Team) issues a report to government warning of “extreme vulnerability” of casino industry to organized crime–money laundering, infiltration, loan sharking. No resources to investigate suspected money laundering. Concerns expressed about perception of conflict of interest and corruption. Most information redacted from report.
2009. February: IIGET disbanded
2010/ Summer: BC Lottery Corporation fined by FINTRAC for repeated failure to monitor suspicious transactions. First fine of its kind in Canada.
2010/August-October: CBC investigates over $8 million in suspicious transactions at 2 casinos in Metro Vancouver, including $460k in 20’s in plastic bags, and a suitcase with $1.2 million in casino chips.
Insp. Baxter, head of Proceeds of Crime Unit, calls transactions suspicious. Solicitor General Rich Coleman, also responsible for gaming, disagrees that transactions are suspicious and publicly disagrees with Baxter.

Conclusion: Weak BCLC enforcement of rules of conduct and poor compliance and oversight of casinos, leaving the industry vulnerable to uncontrolled criminal conduct and potentially to infiltration.

6. Paragon Gaming: Parent Co of Edgewater

All other projects and operations are on First Nations reserves in the US and Canada. All are small market. No international tourism expertise. No expertise with the Asian market.

BC’s model: Closed door bidding process with a single (geographically pre-selected) casino applicant, and no public input.

By contrast, Missouri recently awarded a casino license in an open, public, competitive bidding process, with multiple applicants and more than one physical location. The successful bidder demonstrated both strong community support via a referendum, and strong local roots in the community. Paragon Gaming was one of the bidders in this process, but was unable to garner a single vote of support from the Missouri Gaming Commission.

US small market casino operations have notoriety, particularly vis-à-vis political corruption. In more than one instance, individuals with some connection to Paragon Gaming or their advisors have been implicated, charged, or convicted on political corruption charges. A detailed background check on Paragon Gaming is recommended, including investigation of the relationship of Paragon principles with Milton McGregor and Robert Sigler (shareholder in Paragon Gaming Missouri) of Alabama.

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Speeches by Bing Thom, Peter Ladner and Sandy Garossino

Posted on February 15, 2011 by | Leave a comment

Three members of our Vancouver Not Vegas! Coalition speak out against the proposed Edgewater mega-casino.

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PUBLIC FORUM Feb. 9 on massive casino expansion for Vancouver – come & be heard!

Posted on February 3, 2011 by | 2 Comments

Democracy consists, unfortunately, in citizens showing up to meetings. Sad fact, but true!

Please join us:

Chinese Cultural Centre in Chinatown (Stadium-Chinatown skytrain station)
7 pm, Wednesday February 9
(See the Facebook event page)
50 East Pender Street between Carrall and Columbia
(travel instructions to the site, click the link above)

Please come out. You will have fun, meet a mix of people, and feel good about helping us demonstrate our numbers. Bring your ideas and your concerns about the proposed Edgewater mega-casino.

If we approve this mega-casino in Vancouver—if this public land is effectively given away to a sketchy Vegas company on an endless 70 year lease—we will never be able to get rid of it. Is this the image we want for Vancouver, internationally? No other major Canadian city has put a casino in its downtown core, or even close to residential areas. Once we go down this path, we can’t turn around. They don’t just want to put this casino in our downtown, they want to make this the biggest casino in Western Canada, and to have it built by a company that has only ever built truck stop, highway-side, trailer park casinos. The City of Vancouver has not done studies that indicate what the true economic costs of a casino are, but they easily make up a sum in the millions. And for what, $17 million a year? That’s not enough of an inducement for Vancouver – that’s a pittance in the City budget. This is a bad idea. Come out and have your say.

Vancouver will only be forced to make the right decision if the citizens of Vancouver show up and get involved.

Thank you!

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