Stacked deck: Lawsuit charges Sacramento made ‘secret’ deal with Casino Royale

The owners of two Sacramento card rooms are trying to block Casino Royale from transferring its gaming license to Steve Ayers over claims that city officials ignored council members and the public in restoring the license to good standing.

The charges emerged in a lawsuit that also alleges Casino Royale majority owner James Kouretas, the subject of previous state investigations and license suspensions, submitted “false information” to the city in order to unload his gambling failure onto a new owner.

City officials told SN&R they followed the proper procedures for restoring the troubled card room’s license.

Casino Royale has been dealing out controversies in Sacramento since 2013, though it showed its worse hand when a state investigation determined it failed to pay its winners tens of thousands of dollars, triggering the suspension of its state gaming license in 2014 and its city gaming license in 2015.

Soon after, minority owner Will Blanas sued Kouretas for alleged fraud.

Last April, despite the pending fraud allegations, the California Gambling Commission reinstated Casino Royale’s state license. That same month, Sacramento Finance Director Brad Wasson informed the city council that Kouretas and Blanas wanted their city license back.

Initially, Casino Royale had announced plans to move to its third location in three years, this time planting itself in the Little Saigon Plaza in south Sacramento. Yet, once the city reinstated the card room’s license, it filed a new application to sell that license to Ayers, a longtime businessman unveiling his own vision for a card room and bar inside the historic Elks Tower.

A joint lawsuit filed by John Park, owner of Parkwest Casino Lotus card room, and Clark Rosa, owner of Capitol Casino card room, now alleges that city staff and a hearing examiner at McGeorge School of Law were negligent in their duties when restoring Casino Royale’s city license to good standing.

The suit’s claims go back to May 24, 2016, when the city council voted to have a McGeorge hearing examiner determine the question of reinstating the license. Council’s motion specified that staff officially establish “a date and place of the initial hearing before the hearing examiner.” The resolution suggested the hearing occur 10 a.m. June 8, 2016. The task was later assigned to McGeorge hearing examiner Andrew Walker.

But the city attorney’s office now acknowledges that no open hearing took place. Instead, Walker and Assistant City Attorney Matthew Ruyak signed an agreement to restore the license on June 3.

Park and Rosa’s lawsuit blasts that decision as unfair to stakeholders and others who weren’t able to speak about the ways Casino Royale’s dust-ups impacted the industry. “The relatively small number of card rooms in the city, and the secret nature by which the city settled its dispute with Casino Royale, made it unlikely that any other citizens or members of the public would challenge the conduct issues in this petition,” the lawsuit states.

In other words, without an open hearing, no one could raise questions about whether Casino Royale’s bad business practices merited the city downgrading from four card rooms to three.

Ruyak said that, while the city council did set a target date for the hearing, he and his fellow city attorneys weren’t bound by that slot on the calender. Additionally, he argued that the hearing was never meant to be an arena for parties like Clark and Rosa to chime in.

“It’s not a public hearing, it’s just a hearing that involves the direct parties,” Ruyak explained. “In theory, the public could show up to it, but they’d have no legal right to participate.”

Repeated phone calls and emails to McGeorge School of Law went unanswered.

Clark and Rosa’s lawsuit also alleges that by allowing Casino Royale “to skirt the city’s codes, ordinances and regulations,” law-abiding card room owners suffered “specialized injury to their reputation and business goodwill.”

A final claim in the lawsuit is that when Walker ordered Casino Royale’s license reinstated, he did so partly by considering “false declarations” from Kouretas—specifically that there was a genuine agreement to move his card room to the Little Saigon Center.

Ruyak said he couldn’t comment on details of the litigation, but stressed it is the city’s position that it had the right to reinstate Casino Royale’s license. Rosa and Park could not be reached for comment. Kouretas’ attorney will not comment on any of the various lawsuits his client’s named in.

As for Ayers’ plans to open a sleek card room in the Elks Tower, Ruyak noted the state gambling commission would have to agree to the transferring of Casino Royale’s license, and it’s unclear how the current lawsuit affects that dynamic.

“You can’t get a city gaming permit without first having a state gaming license, but the state usually doesn’t want to issue those without having an idea what’s happening in the city,” Ruyak observed. “So we have a chicken-and-the-egg scenario.”