Sacramento’s bad card room bet

On a rainy evening in April, William Blanas sat in the Sacramento City Council chambers waiting to see if elected officials would reshuffle the rules in his favor.

Blanas co-owns a troubled gambling hall that has repeatedly run afoul of both state and city regulations. In the last four years, his Casino Royale has flopped a bad hand of documented troubles—from not paying its winners to having its state and city licenses revoked. The card room is also at the center of two ongoing lawsuits, one of which includes an accusation of fraud via Blanas himself.

Son of former Sheriff Lou Blanas, William Blanas recently accused his partner, majority owner James Kouretas, of a host of financial improprieties: His own paychecks had been inexplicably shrinking and the business records were being kept from him, his lawsuit claims.

Adding to the portrait of a questionable enterprise, state investigators documented that Casino Royale was heavily underfunded most nights, and sometimes even failed to cash out winners. The operation had at that time been shuttered for 17 months.

Yet there Blanas was, inside of City Hall, proverbial hat in hand, asking his elected officials to deal in him and his partner once again. Despite everything that had happened between them, Blanas and Kouretas wanted to reopen the card room and move its location for the second time since 2013. As he waited, Blanas’ attorney asked the city council to erode one of the safeguards that held Casino Royale to account for its various failures and missteps.

And the council did, voting 7-1 in favor of easing its card room regulations across the board, which raises the question: How many times does a swindler get to sit at the table?

When it comes to Sacramento’s lucrative but controversial gambling business, it all comes down, predictably, to money. Casino Royale may not have had enough to pay its winners, but the business and its allies had more than enough cash to give to council members who voted in favor of easing restrictions against local gambling halls. Thanks to those elected officials, it’s now even easier to be in the betting business.

As for potential negative long-term impacts on residents and neighborhoods, their luck may be running out.

While Sacramento has four licensed card room operations, Casino Royale is the one the city’s finance department has dealt with regularly since 2012.

That’s when the card room approached officials about moving from Auburn Boulevard near the edge of Del Paso Heights into the Red Lion Hotel on Leisure Way in north Sacramento. As reported at the time by SN&R (see “Slot calling” by Raheem F. Hosseini, SN&R News, December 13, 2012), the relocation faced pushback from many Woodlake residents. Yet, with former City Manager Bob Thomas working as their consultant, Casino Royale’s owners convinced officials to sign off on the move.

Woodlake homeowners had fears of increased crime and traffic, but that’s not what proved to be the card room’s undoing.

According to the lawsuit against Kouretas, Blanas started getting worried about cash flow around September 2013. The suit claims Kouretas undersold Blanas on the expenses of relocation while overselling him on a potential windfall from setting up inside Red Lion. Blanas, the suit states, noticed “a reduction of his partnership distribution of Casino Royale profits”—meaning he was getting paid less. He asked to review the financial records, but alleges that Kouretas evaded his requests for weeks. Blanas eventually announced he’d be showing up at Casino Royale with an auditor approved by the California Gambling Control Commission.

Blanas and the inspector arrived the night before Halloween 2013. Blanas recalls in the suit that he and the auditor were met by Kouretas’ sister, Karen Kouretas, who identified herself as “an owner” and then “falsely represented that Casino Royale did not keep the financial records requested by Blanas on the card room’s grounds.” By May 2014, Blanas had served Kouretas with papers accusing him of “fraud, faulty accounting and abdication of fiduciary duties.”

An attorney for Kouretas said his client couldn’t comment on pending litigation. Blanas did not respond to interview requests through his attorney from SN&R.

Five months later, state investigators turned to Casino Royale.

Records from the California Gambling Control Commission indicate that, on October 10 and 11 of 2014, a player at Casino Royale won $60,200. When the gambler attempted to cash in his chips, the card room could only pay him $20,000, and issued him an IOU for the rest.

Within five days, the state gambling commission was conducting a probe of Casino Royale. Card rooms, unlike casinos, earn profits by taking a portion of winnings from each hand, or by charging players to sit at the table for a specified time period.

In writing a summary of four separate on-site reviews his agency conducted, Chief Wayne J. Quint Jr. of the California Bureau of Gambling Control noted the card room “lacked sufficient available funds to cover its chips-in-use, the players’ banks, the player-funded jackpots and house-funded jackpots.”

On each visit by his inspectors, Quint added, Casino Royale was underfunded by tens of thousands of dollars and was even short $325,215 on one particular day.

Based on these findings, the gambling control commission revoked Casino Royale’s state gaming license in November of that year. And, after the casino had been nonoperational for more than 90 days, Sacramento officials revoked the card room’s city license in February 2015, according to a staff report from the Sacramento Department of Finance.

City rules had previously never allowed card rooms to keep a license during a long-term closure. Yet Sacramento council members would eventually undo that code.

Just as Casino Royale’s regulatory problems overtook it, some city staffers and elected officials appeared to want to keep it alive and dealing, documents show.

During the same period that Casino Royale’s gaming license was suspended by the city, it had also submitted a request to Sacramento officials to relocate yet again, this time to Little Saigon Plaza at 6790 Stockton Boulevard. The move was prohibited while its city and state licenses were revoked, so—despite the legal battle between its owners—Casino Royale officially appealed both revocations.

According to a city staff report, the Finance Department put the issue on hold until Casino Royale moved past its problems with California regulators.

In April, the state’s gambling control commission settled its complaint against Casino Royale. According to records from that settlement, Casino Royale’s ownership admitted all of the state investigators’ allegations and findings against the card room. Their state license was handed back.

Casino Royale faced no additional penalties beyond the revocation. That’s not uncommon, noted Eric Petosky, a spokesman for the California Gambling Control Commission. Petosky said that when card rooms are underfunded, the moratorium allows the owners time to make financial decisions.

“The commissioners want card rooms to operate legally as defined by statute rather than shutter them permanently,” Petosky explained. “In this case, both parties agreed on the settlement.”

The very same day, Blanas and his attorney appeared before the Sacramento City Council, urging its members to change the rules so that card rooms could be nonoperational for significantly longer periods of time without automatically losing a city license.

Up to that point, the city code had dictated that any card room that was out of commission for more than 90 days would have its city license revoked. In cases when a new permit was requested, that period could be extended, or “tolled,” by the city’s finance department for up to six months.

According to a spokeswoman for the department, a representative to explain the rules of the permit wasn’t available for comment.

According to his report to the city council, Sacramento Revenue Manager Brad Wasson refused to give Casino Royale that six-month extension when the state shut it down because he found other parts of its relocation request “incomplete.”

Nonetheless, Blanas’ attorney Ken Bacon told council members on April 14 that six months wouldn’t be enough time, anyway, for any card room to deal with all of the city’s regulations for moving. Casino Royale might regain both its licenses, but it could lose its city license again if the permits or public hearings around the Stockton Boulevard move proved time-consuming.

Casino Royale was still technically afoul of the very rule Bacon mentioned at that council meeting. A month after Bacon’s comments, city council voted to have the card room’s bid to regain its city license reviewed by an administrative hearing examiner at McGeorge School of Law, who’d brokered a settlement by June for the license to be reinstated. Documents from that ruling don’t reveal the examiner’s reasoning, though Sacramento officials showed their own hand. A draft of the settlement from the City Attorney’s office reads that Sacramento officials were agreeing to give the license back “to preserve the existence of the City’s fourth authorized card room.”

The document raises questions about whether it was more important for the city to keep Casino Royale in business than let it fall victim to gambling safeguards.

Yet it’s the city council’s actions on April 14 that had to be re-reviewed by the state gambling commission. That’s when the council followed Blanas’ advice to extend the amount of time a card room could be nonoperational without losing its city license from six months to 21 months. In the case of Casino Royale, it was Sacramento’s previous code that triggered the suspension of its city license and would have remained a roadblock to reopening on Stockton Boulevard.

Despite the fact that Casino Royale’s minority owner was still actively suing its majority owner for alleged fraud and mismanagement, and that the card room faced another lawsuit from members of the United Auburn Indian Community, claiming it runs illegal gambling—and despite the card room’s history of license revocations—at least one council member acknowledged he was casting his vote to help Casino Royale.

During the April 14 meeting, District 2 Councilman Allen Warren said that relaxing the rules would “allow more flexibility as it relates in particular to the Casino Royale case.” Warren may have been holding the prospects for Casino Royale and the region’s other gambling dens closer to the vest than he revealed.

Records from Sacramento’s Elections Department document that Warren had already received $2,100 in campaign contributions from Capitol Casino and the owners of Thunder Valley Casino Resort. Within weeks of voting to ease restrictions against gambling halls, Warren received new campaign contributions of $500 from Capitol Casino and $250 directly from Blanas.

Warren didn’t return messages for comment.

Six other council members voted with Warren, including District 8 Councilman Larry Carr, who said during the hearing he’d toured one of the city’s card rooms and found it to be clean and professional. Three weeks after the vote, Carr also received a $600 campaign contribution from Sacramento’s Capitol Casino.

District 1 Councilwoman Angelique Ashby, who also voted to change the rules, received a $2,000 campaign contribution the same month from Communities for California Cardrooms, an organization headed by Clark Rosa, the owner of Capitol Casino.

Ashby didn’t respond to SN&R’s request for comment.

By June the cards were on the table: Casino Royale was moving forward with its Stockton Boulevard plan in Councilman Eric Guerra’s District 6, though its owner and other gambling interests had given money to Warren’s campaign, whose district Casino Royale first left on Auburn Boulevard.

It’s 4 a.m., and bettors are hunched over mini arenas of action at Capitol Casino on North 16th Street. Several tables are packed shoulder to shoulder along the edges of the main room, and three more are filled with insomniac luck seekers. The air is filled with the rhythmic jangle of chips contacting before they slide—a faint, ever-present soundtrack, like maracas moving decks along or people betting to the clink of toy rattles.

This is the operation Rosa’s been running for years, a clean, well-lit landscape of uniformed security guards, with speakers switching between country music and dance hits of the 1990s.

As Carr and District 3 Councilman Jeff Harris said at the April hearing, there’s no signs of scams or shenanigans from the shadowy ranks of racketeering. Five hours from now, the Limelight Bar, Cafe and Cardroom will open in East Sacramento. Similar to Capitol, the card room’s a tidy joint. Both card rooms have full-time security, but not as much as the Parkwest Casino Lotus, a gaming destination at 6010 Stockton Boulevard.

If Casino Royale reopens in south Sacramento, it will give Stockton Boulevard two gambling operations within a mile and a half of one other. For neighbors and law enforcement, that equals twice as many late-night card players walking to their vehicles near the boulevard, and hundreds of thousands of dollars sitting in two caged rooms between the businesses.

The concerns go beyond safety, too. Nancy Xiong, an organizer with the South Sacramento grassroots group Hmong Innovating Politics, says she thinks gambling halls and casinos are already harming the large South Asian-American community around Stockton Boulevard.

“The casinos really hurt our families,” Xiong said. “They target our elders, many of whom feel isolated, or are already dealing with mental-health issues like PTSD from escaping the war in Vietnam and having the refugee experience. They may see gambling as a way to escape their problems, but often it ends up exacerbating those problems.”

Guerra did not respond for comment on the District 6 impacts.

And the opportunity for such problems just keeps growing.

New changes to Sacramento’s gaming code have upped the number of poker tables that card rooms can have from 15 to 17, and also clarified that the betting limit in the city is $1,000 per bet, rather than per hand—the distinction meaning a single player can work multiple spots on one table.

Gambling critics, who may want to revisit these changes with Sacramento’s incoming mayor, Darrell Steinberg, will have to make peace with the $61,000 he’s received from gambling interests, including several thousand from Communities for California Cardrooms.

A representative from Steinberg’s office said the mayor-elect was out-of-town and unavailable for comment.

Meanwhile, card room proponents continue to stress the community benefits of their operations. When Rosa addressed the council in April, he emphasized that Capitol Casino employed 202 people. When the Limelight’s and Lotus’ payrolls were factored in, Rosa continued, card rooms provided more than 500 jobs in the city.

Rosa warned such benefits might end if Sacramento’s officials didn’t give card room owners maximum flexibility to compete with California tribes and card rooms in Rancho Cordova and Folsom.

“We’re already, in the entire area, the only ones that have a $1,000 limit, when everyone else has no limit,” Rosa testified.

Rosa didn’t respond to SN&R’s request for further comment.

Each of the council members who voted to change the gaming code offered varying comments about wanting to take the pulse of Sacramento’s four licensed card rooms owners. That included Harris, Guerra and Councilman Jay Schenirer, the three supporting the change who didn’t take money from those very stakeholders after the vote.

District 4 Councilman Steve Hansen was the lone voice of dissent back in April. (Mayor Kevin Johnson had already ducked out of the meeting.) Hansen expressed concerns that the council was encouraging gambling, and doing so simply because business owners like Rosa and Blanas asked them.

“We regulate [gambling] directly,” Hansen pointed out. “This notion that instead of making a decision, which is our legislative power, we would delegate that legislative decision to a group of stakeholders … saying, ’Let’s not make a decision, let’s turn it over to the stakeholders so they can make it for us,’ so we can just take that decision spoon-fed—that doesn’t make any sense to me.”

Hansen’s remarks drew a direct response from Ashby.

“While I appreciate the civics lesson in what local government does, it’s important to include our stakeholders,” she told Hansen, adding that if council did not change Sacramento’s gaming rules its card rooms might be forced to close.

“It’s not going to stop people from gambling, it’s just going to stop them from using our businesses in Sacramento,” Ashby challenged.

Before getting out-voted on the alterations, Hansen wondered aloud why every council member using the term stakeholder was referring exclusively to card room owners, rather than addicted gamblers or impacted neighborhoods.

“This is simply a process that’s being driven by the very people who benefit most from it, and that’s not a fair process,” Hansen said.