GAMBLINGCOMPLIANCE: DFS Companies Pull Out Of Idaho, Alabama

DraftKings and FanDuel have quit providing paid daily fantasy sports (DFS) contests in Idaho, making it the second state in less than a week in which the companies have agreed to pull out and refund player deposits.

The agreement with DraftKings and FanDuel was reached after three months of negotiations, Idaho Attorney General Lawrence Wasden said Monday.

On Friday, both companies pulled out of Alabama following a similar agreement.

“The concern I have is that paid daily sports offerings provided by these companies constitute gambling under Idaho law,” Wasden said in a statement.

“I have a duty to enforce and uphold that law. I commend the companies for negotiating in good faith and agreeing not to make these contests available in Idaho.”

Under the terms of the agreement, as of May 1 the companies will not allow any consumers in Idaho to participate in any of their paid online fantasy football, baseball, basketball and other sports contests.

Both FanDuel and DraftKings have agreed to process requests by their Idaho customers to withdraw their account balances in a timely manner. The companies will monitor Idaho players based on geoblocking technology or through IP addresses.

Wasden began a review of the companies and their websites in January amid concerns regarding the legality of the daily fantasy sports contests offered by those companies.

The Idaho Constitution prohibits gambling except for the state lottery, pari-mutual wagering, bingo and raffle games.

“Idaho defines gambling, in part, as risking money or other thing(s) of value for gain that is contingent in whole or part upon chance or the outcome of an event, including a sporting event,” Wasden said.

Wasden said he was concerned that DFS offerings require participants to risk money for a cash prize contingent upon individual athletes’ collective performance in various sporting events.

“As I see it, this falls within Idaho’s definition of gambling,” Wasden said.

However, Wasden did say Monday the sites could offer “free” DFS leagues or other contests that offer prizes to players in Idaho.

Idaho and Alabama became the 10th an 11th states in which the attorney general considered DFS to be a form of gambling and illegal.

On its website, the lobbying group Fantasy Sports For All urged Idaho residents to email their standard note to state lawmakers asking them to keep “fantasy sports accessible for Idaho residents.”

“You should decide if you play fantasy sports, not lawmakers,” the group said.

In an email to its Idaho users, FanDuel said it had “always operated within the law in Idaho, however, as we continue to evaluate the legal framework, we have decided to suspend our paid operations in the state.”

“We are continually working to clarify the law and look forward to working with legislators to enact consumer protections so that we can bring our paid contests back to Idaho sports fans once again. As has always been the case, users in Idaho can withdraw their funds at any time,” FanDuel said.

Attorneys general in several states, including Texas, Hawaii and Mississippi, have formally opined that DFS is illegal under state law, according to U.S. Daily Fantasy Sports Tracker, GamblingCompliance’s legislative monitoring service.

One of those opinions from the Tennessee attorney general was overruled last week after Governor Bill Haslam signed a bill legalizing and regulating DFS. The state joined Indiana and Virginia in regulating DFS, but Tennessee is the first state to impose a direct tax on contests adjusted revenues.

Wasden also said the Idaho Legislature could act to legalize and regulate DFS, or the contests could resume “if a court with authority and jurisdiction in Idaho rules in favor of any form of such contests.”

The agreement is not “an admission of liability or evidence of wrongdoing by the companies,” the attorney general said.

The two-page release made no specific references to other DFS companies.

There is a similar story in Alabama, where both FanDuel and DraftKings are complying with a cease and desist letters issued by the state attorney general last month.

In a statement emailed to GamblingCompliance, a FanDuel spokeswoman says the company believes it had always operated within the law in Alabama.

“And while we strongly disagree with the attorney general’s opinion, we respect him and the office and have decided to suspend paid contests in the state. It’s an unfortunate development for legions of fantasy sports fan, but the state legislature can conclusively resolve this issue and bring fantasy play back to Alabama,” she said.

DraftKings also issued a statement announcing its decision to leave Alabama.

“While we disagree with the Attorney General’s conclusions and know that DFS players join in our disappointment that we are ceasing operations in Alabama, we look forward to continued and constructive engagement with state legislators,” the company said.

Neither FanDuel or DraftKings stated how many customers would be affected by their decision to pull out of Idaho or Alabama.

On April 5, Alabama Attorney General Luther Strange announced the cease and desist letters after reviewing the state’s gambling statutes and determined that “paid daily fantasy sports contests constitute illegal gambling.”

A pair of identical bills was filed in the Alabama House and Senate in early February to create a regulatory framework for DFS operators under Strange’s office.

Both House Bill 56 and Senate Bill 114 must pass both chambers before the legislature is scheduled to adjourn on May 16.

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Las Vegas Review-Journal: Cosmopolitan already tabbed as trendsetter

By Chris Sieroty
LAS VEGAS REVIEW-JOURNAL
Posted: Apr. 5, 2011 | 3:29 p.m.

The Cosmopolitan of Las Vegas may have lost $139.5 million over 17 days in December, but gaming industry analysts believe the hotel-casino is positioned to be the property to follow in the future for emerging trends on the Strip.

The upscale hotel-casino, which opened Dec. 15, has already defied the notion that Las Vegas casinos need to be built on sprawling parcels. It has also changed the notion that U.S. visitors would not respond positively to a vertical resort, analysts said.

Both Joel Simkins of Credit Suisse and Sterne Agee’s David Bain agreed that The Cosmopolitan had begun to establish stronger brand awareness out of the box than its neighbor CityCenter did when it opened in December 2009.

“The Cosmopolitan found an identity,” Bain said. “Aria is still trying to find their identity. In my view Aria and CityCenter are trying to be everything to everyone in the luxury market.”

The Cosmopolitan is on a parcel 13 percent the size of CityCenter’s 67 acres.

Although not all of its 2,995 rooms are open, the hotel-casino had average daily occupancy of 98.7 percent in its first two weeks of operations, benefiting from a relationship with Marriott International and a listing in the company’s Autograph Collection.

“The partnership with Marriott has given The Cosmopolitan access to Marriott Rewards members as well as leads into convention demand,” Simkins said in a research report.

Bain said the effect of The Cosmopolitan’s new-room inventory on the Strip market would not be felt until “we’re out of convention season and into consumer season.”

The Comsopolitan has just 185,000 square feet of convention space, but Simkins believes meeting planners like the hotel’s compact layout and the flexibility of having facilities located on the second through fourth floors away from the casino.

While nongaming revenues were a modest $14 million, Simkins said a more complete financial picture would not emerge until this year’s second quarter or third quarter .

He said The Cosmopolitan’s “fairly high” preopening expenses of $116.5 million resulted from “generating buzz” and having many high-profile entertainers perform during the fourth quarter of 2010 and this year’s first quarter.

Bain and Simkins both believe that gaming revenues, which were reported at $4.3 million for the hotel’s opening reporting period, will take time to build.

“Naturally, without a pre-existing gaming database, we believe slot/table volumes have been soft,” Simkins said. “However, we believe the strong buzz … will eventually spill over in terms of repeat visitation, and eventually gaming revenues as the property builds its database.”

Bain said his only concern was sustained $4-a-gallon gasoline prices, which would effect The Cosmopolitan’s numbers and especially its count of visitors from Southern California.

Nevada Property 1 LLC, the reporting entity for The Cosmopolitan, was formed in 2008 after Deutsche Bank AG purchased the 8.7-acre property out of foreclosure. The hotel, between Bellagio and CityCenter, was built for $3.9 billion.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.

Las Vegas Review-Journal: Pinnacle offers stock rewards program

By Chris Sieroty
LAS VEGAS REVIEW-JOURNAL
Posted: Apr. 13, 2011 | 2:01 a.m.

In Las Vegas, some hotel loyalty card programs reward their members for the total amount spent at their property, while others offer discounts to the buffet, $50 in free slot play, or even a free two-day stay based on the amount wagered.

Pinnacle Entertainment Inc. is offering something a little different — an ownership stake in the company. The unique reward is only being offered to its best customers.

Pinnacle Entertainment created the owner’s club stock program within its “mychoice” loyalty program, rewarding customers with shares of common stock for their spending.

Customers who have earned or obtained 175,000 points are eligible to apply for membership in the stock rewards program. In a regulatory filing, the company said new members would be awarded 100 shares of common stock or a number of shares valued at $1,500.

“We believe that this sort of awards program presents a unique opportunity for our customers to realize value for their loyalty and to develop a greater proprietary interest in our casinos,” the company said.

In its filing with the Securities and Exchange Commission, Pinnacle Entertainment registered 200,000 shares of common stock. The proposed maximum asking price was $12.47 a share.

Shares of Pinnacle Entertainment lost 43 cents, or 3.19 percent, to close Tuesday at $13.04 on moderate trading of 507,116 shares on the New York Stock Exchange.

The stock program was just one new benefit offered by the casino company, which relaunched its “mychoice” loyalty program on Tuesday.

“We’re excited to relaunch ‘mychoice’ and unveil its many new and innovative benefits,” Pinnacle Entertainment President and CEO Anthony Sanfilippo said.

Sanfilippo described the loyalty program as unique for giving members “greater control over both how and where they enjoy their rewards.”

The program also offers a chance to earn annual lease payments on Mercedes-Benz vehicles and cruises on Royal Caribbean International. Pinnacle Entertainment will give its high rollers access to Wynn Las Vegas and Encore. Pinnacle doesn’t own a hotel in Las Vegas.

The trips will be offered at the program’s highest three tiers. Pinnacle has about 1 million customers in its database, 20,000 of which would qualify for the Wynn Resorts’ reward program.

Las Vegas-based Pinnacle Entertainment operates seven casinos in Louisiana, Missouri, Indiana and Reno. The company also operates a racetrack in Ohio and is developing a $357 million casino in Baton Rouge, La., scheduled to open next year.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.

Las Vegas Review-Journal: Caesars signs deal for online poker

By CHRIS SIEROTY
LAS VEGAS REVIEW-JOURNAL
Posted: December 22, 2010 | 2:52 p.m.

Caesars Entertainment Corp. has expanded its online presence in Europe, signing a contract with an Italian network provider to promote online and offline poker tournaments under its World Series of Poker brand.

The Las Vegas-based company’s subsidiary, Caesars Interactive Entertainment Inc., said it had come to terms with Microgame, which operates the largest online poker network in the newly regulated Italian market.

Terms of the deal were not disclosed.

“There is plenty of upside to this deal if we execute it properly,” Seth Palansky, a spokesman with Caesars Interactive, said Wednesday.

The European Commission, which is the executive body of the European Union, opened the Italian online gambling market to offshore firms after a ruling in May.

Before Italy changed its law, the Italian Olympic Committee and the National Horse Breeders Enhancement Society had the exclusive right to organize sports betting, including online gambling.

“This agreement is a logical step in our European and global expansion strategy to partner with leading local companies as we look to expand the WSOP brand,” said Caesars Interactive CEO Mitch Garber. Garber is former chief executive officer of PartyGaming, an online gambling site founded in 1997.

Microgame’s People’s Poker, a network of over 120 sites, will be co-branded using the WSOP brand and will serve as the online hub for poker in the Italian market.

As part of the agreement, Microgame become the exclusive satellite provider in Italy of WSOP events, a spokesman said. Microgame will also act as the exclusive pre-registration booking office for Italian players for the WSOP even in Las Vegas.

The company, formerly Harrah’s Interactive Entertainment, already has agreements to brand three gaming websites in the United Kingdom. Palansky said the company’s British properties are WSOP.com, caesarscasino.com and caesarsbingo.com.

“We do expect at least one more European Union market next year,” he said. “Our mind set has been to look at expansion (possibilities) market by market.”

Palansky said Nevada gaming regulators were aware of the company’s European partnerships. The company’s latest expansion comes less than a month after a bill to legalize online poker in the U.S. introduced by Senate Majority Leader Harry Reid, D-Nev., failed to be voted on in the Senate.

Palansky declined to discuss Reid’s bill or online gaming regulations. The Italian online poker market that Caesars has entered is considered to be one of the biggest and most lucrative in the world, according the European Commission.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.

 

Las Vegas Review-Journal: Cosmopolitan condo owners still upset

By CHRIS SIEROTY
LAS VEGAS REVIEW-JOURNAL
Posted: December 29, 2010 | 12:00 a.m.
Updated: December 29, 2010 | 8:18 a.m.

Buyers of condominiums at The Cosmopolitan of Las Vegas will get the opportunity to tour and close escrow on completed units next month, according to a company spokeswoman and lawyer representing a number of investors.

But all is not what it appears to be, said Lisa Lawrence, an attorney with Lurie & Park LLC in Los Angeles, which represents about 150 condominium buyers.

“What appears to be happening is that buyers will be given an hour or two to inspect their condominiums before they have to close on their purchase,” Lawrence said. “But they still haven’t received all the required real estate disclosures.”

She said her clients still had not received a soundproofing report commissioned by The Cosmopolitan and recently completed.

“We have to know if the units are soundproofed to residential standards,” she said. “It’s required from what I understand. They seem to be pushing buyers into closing on their condominiums.”

Lawrence said she had been give different dates in January for when the first units were expected to be ready for inspection and then occupancy. She didn’t know how many of her clients would be willing to close on their purchases.

Amy Rossetti, public relations director for The Cosmopolitan, said Tuesday that all Phase 1 units are completed.

She said closing notices started going out last week and tours will begin next month.

“The closings will be sequenced to allow for orderly closings and staffing, beginning in mid-January,” said Rossetti, who declined to comment on matters of pending litigation.

An arbitration hearing had been scheduled for Tuesday. Messages left with Andre Sherman, an attorney with the Los Angeles-based law firm Girardi Keese, were not returned.

Sherman, Lawrence and Sigal Chattah, a Las Vegas-based lawyer with the law firm Sigal Chattah P.C., represent condo buyers in their case against the owners of The Cosmopolitan, Deutsche Bank AG and Nevada Property 1.

On Dec. 14, Clark County District Judge Elizabeth Gonzalez granted an injunction that prevents The Cosmopolitan from renting any of the 214 condos still under escrow until the potential owners had a chance to see those units.

Lawrence said the injunction remains in place. She said it was possible she would seek another court order to force the owners of The Cosmopolitan to turn over the soundproofing report.

The condominiums were not included in the 2,000 units that opened on Dec. 15. In April, Cosmopolitan developers competed a $60 million settlement with more than 400 buyers involved in a class action lawsuit.

When Deutsche Bank paid about $1 billion for the half-finished development in August 2008 buyers had paid deposits of 20 percent to secure one of the planned condominiums, which ranged in price from the high six- to low-seven-figures.

One of those buyers was Benny Perry, owner of Perry Enterprise LLC, a Las Vegas-based real estate brokerage firm. In May 2005, he put down a $116,000 deposit on a condominium valued at around $600,000.

“I want them to repay all of my deposit,” Perry said Tuesday. “Did they perform on time? Did they deliver the product they promised? I would have to say no. I have a problem with that.”

He said his escrow was scheduled to close in early 2008, even though the resort didn’t put a completion date in his contract. Perry, 57, said he bought the condominium as an investment.

“I don’t know what games they are playing. But this is the worst of the American dream when they try to use their size to force individuals to settle for less,” he said.

Perry, who has been negotiating a settlement and the return of his deposit on his own for three years, was undecided Tuesday about whether to hire an attorney to negotiate on his behalf.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.

Las Vegas Review-Journal: Moody’s analysts project stable outlook for U.S. gaming industry

By CHRIS SIEROTY
LAS VEGAS REVIEW-JOURNAL
Posted: December 23, 2010 | 2:32 p.m.
Updated: December 24, 2010 | 9:09 a.m.

Moody’s Investors Service has increased its expectations for the U.S. gaming industry, issuing a “stable” outlook while projecting revenues will grow 1 percent to 2 percent and casino operator profits will increase 2 percent to 4 percent in 2011.

But, Moody’s analysts expect Las Vegas hotel-casinos to continue to struggle because of an oversupply of gaming and hotel rooms.

The increased expectations are a revised estimate from a previous report by the rating agency, which estimated 2011 gaming revenues would be flat, between a 1 percent decrease and a 1 percent increase. Moody’s analysts expected operating profits to decline by as much as 2 percent or grow by 2 percent.

“The stable outlook expresses our view that fundamental credit conditions in the gaming industry will neither erode significantly nor improve materially over the next 12 to 18 months,” said Moody’s Senior Vice President Keith Foley, a co-author of the report.

The recovery in the gaming sector will be uneven, the report said. More mature and built-out markets like Las Vegas and Atlantic City will continue to struggle, the report said, while newer destinations like Pennsylvania will drive industry growth.

Foley expects further gaming proliferation, resulting in more companies competing for the same customers rather than more expansion of the industry.

Growth on the Strip will continue to be affected by a decline in consumer spending. However the Strip has an added challenge because of an oversupply of gaming and room capacity.

Foley wrote that the Strip will struggle to absorb the new supply that has entered the market, especially the 11,000 rooms brought on line in December 2009 with the opening of MGM Resorts International’s CityCenter, and the 2,995 rooms at The Cosmopolitan of Las Vegas.

The new rooms were expected to increase the number of Las Vegas hotel rooms to approximately 149,000, the Las Vegas Convention and Visitors Authority said.

“Even if general U.S. economic conditions continue to improve, the oversupply is likely to slow the prospects of a recovery in Las Vegas because it will keep considerable pressure on hotel room rates,” the report found.

Foley said the slow recovery on the Strip would affect larger gaming companies, including MGM Resorts and Caesars Entertainment Corp. Although impacted by their Strip properties, Las Vegas Sands Corp. and Wynn Resorts Ltd. have been less affected because of their holdings in Asia, which have experienced strong consumer demand trends.

Strip gaming revenue for the month ended Oct. 31 was nearly $494.8 million, up from $426.3 million for the same period a year earlier.

However, the report found a large portion of the increase was due to higher-than-average “table hold percentage” for baccarat. Foley cautioned that, on a normalized basis, the monthly increase would have been in the low single-digit range.

Year-to-date as of Oct. 31, Strip gaming revenue rose to $4.8 billion from $4.5 billion a year earlier.

Las Vegas visitor volume grew 5.7 percent in October to 3.33 million from a year earlier, while the occupancy increased 2.3 percent to 84.9 percent in October compared with a year earlier.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.

The Business Press: Still bullish on the Inland Empire

09:32 AM PDT on Wednesday, October 20, 2010

By CHRIS H. SIEROTY
Contributing Writer

James Robinson is chairman and chief executive officer of Security California Bancorp – a small but successful community bank focused on serving small and mid-sized businesses.

Known locally as a career banker, he joined the Riverside-based company along with several other industry veterans at its formation five years ago when the region’s economy was at its peak, creating thousands of construction and logistics jobs, new homes and attracting residents Inland from the coastal counties.

But Robinson, 75, and his team, which features Michael Vanderpool as president and COO, and Ernest Hwang, its president and CLO, have had to endure a turbulent period that saw the bank receive $6.8 million in funding from the Troubled Asset Relief Program and report a modest loss for 2009.

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Paul Alvarez / Contributing Photographer
Ernest Hwang, Michael Vanderpool and James Robinson make up the senior leadership team for Security Bank of California, which has locations in Redlands, Riverside and San Bernardino.

Having been through the depths of the economic downturn, Robinson is confident the worst was over for Inland Southern California and the bank was on track to finish the current fiscal year in the black after reporting two strong quarters.

He also doesn’t regret his decision to accept a position with the parent company of Security Bank of California after more than 40 years in the industry. During his career, Robinson has held a number of high-ranking positions including executive vice president with City National Bank and president and chief executive officer of Riverside National Bank.

“We wanted to form a highly professional financial institution, with a good commercial and industrial lending group at its core,” Robinson said. “We also chose professionals who knew the community well.”

Robinson Vanderpool and Hwang recently sat down with The Business Press for an interview. Surrounded by University of Southern California football memorabilia in his eighth floor office at 3403 10th St. in downtown Riverside, Robinson said he’s been in the region his whole career, and while he could have lived or worked anywhere he wanted, he chose to stay in Inland Southern California.

“I want to live right here. We love this area,” he said. “It will come back, and when it does, the region will need a strong bank to service businesses out here.”

Vanderpool, 54, attributed Security Bank’s success and growth to employees who have the lending expertise found at a larger bank, but are committed to the community banking model. He said Security Bank needed to play a significant part in assisting the region’s business community. The difference, Hwang said, Security Bank does not have a formula to the way it conducts its business lending, adding the bank will work with seasonal businesses to match a line of credit to their business.

“We’ll work with the company with $500,000 in revenue, for a larger bank, anything under $1.5 million is formula lending,” he said.

Hwang, 46, said the company had a diversified portfolio in term of loan types. As of June 30, professional loans those to doctors and lawyers were 45 percent of the bank’s loan portfolio; while wholesale loans were 23 percent, manufacturing 13 percent, construction 8 percent, agriculture 5 percent, food service 4 percent and other listed at 2 percent.

“The Inland Empire may have a 14.8 percent unemployment rate, but 85 percent are still employed,” Hwang said. “Economically, hospitals are being built here and there is an economy that is going on. Our institution is supporting that economy. It may be hard for Beverly Hills and Newport Beach to understand … there is still business and dollars out here.”

At the end of the second quarter, Security Bank gross loan portfolio stood at $267 million, down slightly from $272 million at the end of 2009.

Robinson pointed to the bank’s financial performance as proof it is positioning itself to take advantage of the region’s economic turnaround. Since reporting a loss of $2.15 million, or 72 cents per share, for 2009, Security Bank of California has produced back-to-back profitable quarters with $201,558, or 6.7 cents per share, for the first quarter and $414,082, or 13.7 cents per share, for the second quarter ended June 30.

Vanderpool explained the loss last year was due to proactive additions to the bank’s loan loss reserves, and unanticipated increase in the Federal Deposit Insurance Corp.’s premiums as well as the costs associated with opening a branch in Redlands in July 2009. At the end of the second quarter, the bank continued to maintain an allowance for loan losses of $5.7 million, or 2.12 percent of gross loans.

But Hwang described the loan loss figure as somewhat misleading. As of June 30, the bank had one loan valued at $320,000 listed as past due out of a $267 million loan portfolio, he said.

Vanderpool said the provision was also needed to pay the FDIC assessment. Last year, the FDIC added a one-time special assessment of 20 cents on every $100 of insured deposits so it could restore reserves to its deposit insurance fund.

“We also had some concerns about the economy last year,” said Vanderpool, adding the bank was well capitalized to take advantage of future opportunities.

RBC Capital Markets last month raised $20 million in a private placement of common stock to help recapitalize the five-year-old regional bank. The company issued 2.58 million shares of common stock at $7.75 each. The offering represented an 82.1 percent stake in the book value of the company.

Robinson said the company needed to raise additional capital to support continued growth in loans and deposits. He said the offering could be used to support Security Bank’s acquisition of deposits, loans, or branches negotiated through the FDIC or new branches.

He said the successful sale also represented a strong vote of confidence by the bank’s investors who recognize “our team has built a strong community bank.”

“Well established institutional investors took part in the share sale,” he said. “Management also put in money. We (acquired) 30 percent to 35 percent of the sale, which includes management and directors. We have personal money invested, which makes us different.”

At some point, Security Bank of California will use a portion of the new capital to repay its TARP loan. On Jan. 9, 2009, the company received $6.815 million in federal funds and has paid $592,000, or $92,000 quarterly, in interest on the loan.