Towering doubts: New card room threatened by city’s fraud admission, businessman’s arrests

The dream of an upscale card room in one of downtown’s most timeless buildings may be unraveling on two fronts: City attorneys quietly acknowledged last summer they’d been hoodwinked by an act of fraud from the region’s most infamous gambling hall. And separately, State authorities moved to block prominent businessman Steven Ayers from entering the gambling industry due to his history of alcohol-related arrests, putting in limbo a $2 million interior restoration of the Elks Tower.

Sacramento officials are being sued by Clark Rosa, owner of Capitol Casino, and John Park, owner of Parkwest Casino Lotus card room, for allegedly violating the city’s own gambling ordinances. The plaintiffs claim that city attorneys broke the law when they reinstated a revoked city gaming license to Casino Royale, which California investigators closed in 2014 for illegal bookkeeping and failing to pay winners. Around the same time, Casino Royale’s minority owner, William Blanas, sued majority owner James Kouretas for fraud.

Kouretas died in 2016 before a judge could weigh in on the showdown between him and Blanas. But in the middle of that fight, the Casino Royale business entity applied to get its city gaming license back, specifically on the grounds that it wanted to reopen in south Sacramento. The City Council ordered that the matter be referred to an administrative hearing at McGeorge School of Law, though the City Attorney’s Office later restored the license without holding a public hearing. That’s a key point Rosa and Park are suing over. They claim the city should have followed its own rules and put Casino Royale’s city license up for lottery.

In the course of obtaining documents, Rosa and Parks’ legal team added a potential bombshell to the court file—a letter from the City Attorney’s Office acknowledging that Casino Royale perpetrated fraud against the city when it applied to get its license back. Prepared by Deputy City Attorney Katherine Underwood and addressed to Casino Royale attorney Kenneth Bacon, the letter clearly states that Underwood’s office learned through the deposition of a real estate agent that Kouretas produced fake documents for the city when applying to have the license restored.

“[There] was a fraudulent document,” Underwood wrote. “Accordingly, to avoid perpetrating a continuing fraud on the City, we would like to know if your clients, Casino Royale and its sole remaining member, William Blanas, intend on surrendering Casino Royale’s card room license.”

Despite writing that letter in August, Underwood appeared in court last week to defend the city’s intention to keep Casino Royale’s gaming license active, and help Blanas transfer the license to Ayers. Rosa and Parks’ attorney, Dale Campbell, condemned the city’s approach when making his arguments to Sacramento Superior Court Judge Allen Sumner.

“At some point in time, someone has to hold Casino Royale to its false representations,” Campbell said. “This application was submitted under penalty of perjury. Someone has to hold them accountable, because the city’s not.”

While Sumner hasn’t made a final ruling, he did issue a tentative written ruling that found the city entered into an illegal settlement agreement with Casino Royale because it exempted the card room from complying with existing codes. A final ruling could come in a matter of weeks.

The Sacramento City Attorney’s Office declined to comment further by press time.

While Ayers’ ability to get Casino Royale’s city license is in doubt, he faces a steeper uphill battle to get Casino Royale’s state gaming license. On December 18, 2017, the Bureau of Gambling Control officially recommended that the California Gambling Control Commission not transfer that license to Ayers.

Ayers has been promising to combine the Elks Tower’s art deco atmosphere with an elegant card room and chic, vintage-style bars. Mayor Darrell Steinberg and Councilman Steve Hansen have both expressed enthusiasm for the project. But gaming commissioners are less enthusiastic, after a background check revealed Ayers pleaded guilty to a DUI in 2011, another DUI in 2013 and—just six months ago—a misdemeanor public intoxication that his own attorney acknowledges is part of a domestic incident involving Ayers’ wife. Commissioner Trang To said that he’d listened to the recording of a 911 call associated with the domestic incident and found it “disturbing.”

“[Mr. Ayers] knows he has an issue with alcohol,” attorney John Maloney told the commissioners while defending the well-known businessman. “It has not been his friend over the years.”

Maloney added that Ayers is getting counseling, repairing his home life and taking the reality that gaming is a privileged industry “damn seriously.” Maloney requested that the commission consider issuing Ayers a temporary state license if it was uncomfortable with a permanent one.

The commission revisited that possibility last week. Despite numerous people testifying to Ayers’s scrappy, self-made biography and his work as a philanthropist in Sacramento, the commissioners barred him from getting a temporary gaming license. Ayers will now make his final case at a future evidentiary hearing.

Maloney sounded taken aback. He asked commissioners to consider the potential job loss if the Elks Tower project falls apart.

“I’m extremely sensitive to Sacramento and its potential jobs,” Commissioner Jim Evens responded, “but we are not the economic development department for the city of Sacramento. We have a duty.”