Sunday, July 11, 2010

7 YEARS OF BAD LUCK: Station Casinos gets bogged down in Missouri

...after Carl Thomas dies in a mysterious single car accident, everything still goes bad for Frank Jr. and his heir Frank III.

Part Three in a Four-Part Fertitta Family History.

By: Rich Bergeron

Lorenzo and Frank Fertitta III, with father Frank Jr.’s help and counsel, built Station Casinos up from a single off the strip hotspot in Las Vegas into an economic empire other casino barons envied. The empire went public and back to private in the blink of an eye and now stands to face bankruptcy if something drastic doesn’t happen soon.

To help myself understand the current scene a little better, I had to look back to when the oldest brother first put his name on the dotted line. It was Frank III who did the deed, literally. He did it to help the family business get into the hotbed state at the center of Frank Junior’s Mafia connections: Missouri. Home of the Kansas City Civellas for some of Frank’s best early days at the Fremont in Vegas.

The transition to power for the eldest son would not come easy. Frank Junior’s old demons plagued the company yet again during early attempts to expand into Missouri in 1992-1993. Again, another star witness’s testimony before a gaming commission had the potential to cause Frank Junior bigger problems than he could afford. This time it was old friend and business partner Carl Thomas himself who was asked to offer on-the-record insight into the elder Fertitta’s past transgressions. He would never get the chance.

Carl Thomas’ agreement to attend an inquiry with the Missouri Gaming Commission may have been the worst—and last—decision he ever made in his life. The mystery begins with Thomas travelling to Vegas from his home in Oregon to meet with Station executives and discuss his pending testimony. If Frank Junior himself attended the November, 1993 meeting it was the last time he saw his old friend Carl.

Thomas left Vegas alone to return to Oregon before heading to Missouri. Strangely enough, Thomas never made it to Missouri. Instead he died in a still unexplained single car accident.

According to Reporter C.D. Stelzer, The Harney, Oregon Sheriff's Department report shows Thomas died at approximately 4:30 p.m. on Thursday, Nov. 4, 1993, after his car ran off a gravel road in the mountains of Oregon: "The report describes the crash as a "single-vehicle roll over." The crash took place on a straight stretch of Plush Road. The vehicle appeared to have veered off the 18-foot-wide road to the left, came back on the road, spun around twice, rolled over, and came to rest partially on the graded, right shoulder, facing the opposite direction."

Stelzer adds: "At the time of his death, Thomas was driving a 1992 Chevrolet Suburban. Because he wasn't wearing a seat belt Thomas was ejected from the vehicle and apparently crushed when it rolled over. Approximately a half-ounce of cocaine was found in Thomas' jacket pocket, according to the report."

Due to the master skimmer’s untimely death, the Missouri Gaming Commission couldn’t complete their inquiry into Frank Junior and they granted licenses to Station Casinos. Even without Carl Thomas telling his story, the Missouri licenses in St. Charles and Kansas City came only with the understanding that Frank Fertitta Jr. would have absolutely no role in the company's operations.

Whatever really happened to Thomas, it seemed as if his spirit haunted the Fertittas as long as they maintained a Missouri presence. According to Reporter Steve Wiegand, of The Sacramento Bee, in California, "Station was fined a total of $1.9 million between 1997 and 2000 for violations that included dumping fill materials in the Missouri River, allowing a 12-year-old girl to play slot machines and refusing to testify before a state regulatory agency looking into corruption charges." The company surrendered its Missouri licenses and sold its properties there in 2000 amidst an even more intriguing scandal that was apparently overlooked and under reported when it actually happened.

It seemed that even the dawning of a new millenium didn’t prevent the father’s sins and bad Karma from catching up with his sons.

St. Louis Attorney Michael Lazaroff helped the Fertittas break into the Missouri market, but his crude, sloppy methods were later exposed and resulted in more heat than the Fertittas could withstand. According to another C.d Stelzer report Lazaroff later pled guilty in federal court to defrauding his law firm by going off the reservation and taking $500,000 in bonuses from Station. He also pled guilty to defrauding clients, including Station, by padding his expenses.

Stelzer's reports also revealed the following:

Investigators found Lazaroff made 205 private phone calls to former Missouri Gaming Commission Chairman Robert Wolfson on behalf of Station Casinos, which was against state law.

Testifying before the commission in August of 2000, Lazaroff said he used his personal relationship with Wolfson to increase Station's chances of getting their Kansas City gaming licenses. Lazaroff also testified that Station officials knew exactly what he was doing.

"They from time to time would ask me to run things by Chairman Wolfson and see what he knew about it," Lazaroff testified.

Station officials vehemently denied they knew Lazaroff was doing anything improper. Still, they declined to testify at public hearings, despite subpoenas. A Station attorney objected to the hearing being public and voiced frustrations over not being able to cross-examine Lazaroff.

But, that’s only half the story. Ambitious, go-getting former Riverfront Times Reporter C.D. Stelzer levels even more outrageous accusations against his own colleagues in the media and Station executives surrounding Station’s Missouri days. Here are all of the “Media Mayhem” blog postings by C.D. Stelzer, which lay it all out in a number of in-depth stories.

David Helfrey (pictured), Station's outside counsel in Missouri, had an interesting background. Perfectly suited for the occasion, Helfrey was a federal prosecutor in Kansas City before deciding to turn to a career as a criminal defense attorney. Exactly what led him to make such a drastic career move is unknown, but my instincts tell me it might have had something to do with the government paychecks not being big enough for busting open the Mob's Vegas piggy bank. Helfrey must have been pretty hard up to do such a complete 180, easily assuming a role as the unofficial Fertitta Family consigliere in Missouri after years of prosecuting so many of Frank Junior’s old associates.

Helfrey definitely knew all about the Fertitta family's background. While working as a prosecutor, he would have had to review and be familiar with FBI transcripts that recorded Frank Junior in conversations related to casino skimming operations orchestrated by Carl Thomas. FBI tapes of Thomas himself mention Fertitta repeatedly as being a part of his crew, a crew that bilked the Argent casinos out of millions and funneled much of their Vegas proceeds to Mafia families in Kansas City, Milwaukee, Cleveland and Chicago. Helfrey worked on those cases and knew all the usual suspects well. Looking back, Helfrey’s interaction to help Frank Junior’s family business in Missouri is not only ironic but also extremely telling of something bigger going on behind the scenes.

Even before I found this information about Helfrey on Stelzer's blog I had long suspected that Frank Fertitta, Jr. and Carl Thomas both cooperated with the government to save their skins. If that is true, of course it would be essential to keep the whole matter an untold secret forever. The Mafia’s “Oath of Omerta” places made men in the organization in a position that forbids them from revealing any family secrets. The “rat” is the most unforgivable scum on the face of the earth in Mafia tradition, and all rats are punishable by death.

Yet, if it wasn’t for the rat’s existence, the worldwide power of La Cosa Nostra would be inconceivably and exponentially stronger than it is today. With the help of the Federal Witness Protection Program, even a "made" turncoat like Sammy "The Bull" Gravano bucked the rat rubout trend and moved on relatively unscathed after corroborating with the government against his high level Mafia associates. More than ever in this day and age the organized families have had to burrow their operations further and further underground, cut out the swaggering old-school bravado, and crack down on risky behavior that leads to government investigations. Those investigations typically start small, with a “little fish” being hooked as a primary low-level informant to take out all the bigger fish, exactly like a rat infected with Bubonic Plague biting everyone it can before it goes down itself.

As I know all too well now from my own family’s law enforcement history, the government has also experimented with recruiting big fish informants in the hope that they will be able to devour all the little fish criminals beneath them and around them. The theory must be: if the process works one way it could work the opposite way, too. This means that our own government sometimes works directly in coordination with known mass murderers, drug kingpins, master extortionists and leg breakers. A few casino skimmers cooperating with the government doesn’t seem too far fetched in that context. I'm not sure if any "big fish" operations were hugely successful, but 20/20 hindsight in some of the government's most high-profile interaction with "big fish" reveal that the technique was often a miserable failure (see Osama Bin Laden and James Whitey Bulger).

Next time you go fishing, I wouldn't recommend throwing a giant fish on a rope into the depths hoping it will eventually swallow a smaller one. Even if that angling technique were to miraculously work for you, it's certainly not practical. Eventually the fish either escapes or stops working for you. As an avid fisherman myself, I recommend sticking to the bait bucket full of shiners. You'll catch much more prey in the long run by putting small guys out there for the big guys to eat up with your hook.

Under another 20/20 hindsight analysis, perhaps, Frank Fertitta, Jr. decided to become a Whitey Bulger-esque “top-echelon informant” for the FBI. After all, it was just recently reported in the Las Vegas Review Journal that none other than Frank “Lefty” Rosenthal served as just such an informant for the FBI. Rosenthal’s secret only surfaced after his recent death of a heart attack.

If Frank Junior did inform on his associates secretly, David Helfrey’s coming to the aid of Station Casinos is likely not a mere coincidence.

Helfrey’s transition to a criminal defense lawyer from a federal prosecutor obviously rises to the level of curiosity, but it’s not unheard of by any means. I’m sure it’s not at all that uncommon for state and federal prosecutors to get burnt out and grow tired of government service. The private sector can be lucrative as an attorney, and some hardened prosecutors maybe even develop a soft spot eventually for the innocent guys they sometimes have to go after, the folks who get convicted before the right evidence is revealed to show they didn’t do it.

So, the fact that Helfrey changed careers is not the real surprise. What is really amazing is how Helfrey so zealously went from going after the old Vegas skimming operations to trying to cover them up as far as Frank Junior’s involvement. It doesn’t compute when you try to reconcile the fact that Helfrey heard all the evidence incriminating Fertitta for his role in the Argent skimming but then went to bat for the same guy to help get him another casino license he could potentially utilize to skim again for the same Kansas City organization. It all makes a heck of a lot more sense to surmise that Helfrey didn’t help Frank Fertitta, Jr. in Missouri for nothing. Maybe Helfrey instead acted out of a sense of loyalty to Fertitta for Frank’s help in bringing down his former KC Mob associates, which paved the way for Helfrey to start his own successful law practice. Helfrey had been the lead prosecutor in the mob trial in which Frank Junior was revealed to be an associate of organized crime, and the lead investigator in the case was then-FBI agent Gary Hart, who was also Helfrey's law partner in 2000 and still works at Helfrey’s firm today. Both just might have worked in concert under the auspices of their firm to return the favor Fertitta may have done for them in the 80s by turning State’s evidence on the sly.

Fertitta and Thomas were friendly enough to buy their own casino together, but did they sing together as well? It would certainly explain the balls to the wall approach Helfrey took in support of the Fertitta family. Though, corruption, greed, and a complete lack of a moral backbone could also explain Helfrey's huge change of heart. Nobody really knows the real answer at the moment, but it certainly begs further examination in light of Lefty's post-mortem revelation.

At one of the Missouri hearings regarding Station Casinos, as described by Stelzer, retired FBI agent and former Gaming Commissioner William Quinn testified. Quinn detailed three meetings he had with Helfrey when the former federal prosecutor was acting as Station's lawyer. The two already knew each other because they both worked together on the Strawman cases. The overall FBI operation the two men helped build resulted in the conviction of 19 Mafia members in the Midwest, including the Civellas brothers of Kansas City. The investigations and prosecutions shattered skimming operations at the Hacienda, Fremont, Stardust and Tropicana casinos in Vegas.

Quinn testified that, on one occasion, Helfrey asked him to meet with him and a Station's representative. Quinn also revealed that Helfrey came to Station’s rescue in Missouri only after the Lazaroff scandal broke. However, Quinn discovered that Helfrey was already representing Station in a legal capacity in other matters before Lazaroff went completely off the reservation in Missouri.

To make matters worse for Helfrey, if the attorney did obtain a meeting with Quinn including a Station’s representative, such a meeting would have been in violation of the Commission's "ex parte" rule. The “ex parte” rule was set up in 1994 to make sure that state gaming commissioners did not fall under the influence of the casinos that they were supposed to be regulating. Quinn said he was concerned about his former colleague's suggestion and he refused to meet with Helfrey and the Station's representative.

On behalf of Station Casinos, Helfrey went after Lazaroff with particular intensity, and the crooked, influence-peddling lawyer was an easily intimidated target. He reportedly attempted to take his own life after being caught up in the Station scandal in Missouri, and he told anyone who would listen that he feared the possibility of being rubbed out. Lazaroff retained state police protection during and after the Missouri Gaming Commission hearings that were held in Jefferson City in the summer of 2000 as a result. The embattled lawyer even claimed that Helfrey personally delivered a veiled death threat. Helfrey could be a very imposing person, and Lazaroff himself testified as much:


“Okay. Did you have any further meetings with -- with Mr. Nielson while he was in the area?”


“Yeah. Monday, December the 6th we met at the law office of Arthur Margulis, and it was Mr. Margulis and myself, Rich Haskins, Scott Nielson and David Helfrey. And during that meeting Mr. Helfrey said words to the effect of, we don't think that the Commission has anything. We have your sworn testimony that you did not have ex parte conversations. And there will -- there will undoubtedly come a time where you'll be tempted to lie in order to save yourself because of all of these other problems that you have, but we know that you'll do the right thing. Okay? And that was repeated. And I remember walking out of that meeting and turning to Scott and said, I don't want to meet with that guy ever again. He scares the Hell out of me. And Scott said -- said to me, he scares the Hell out of me too.”

Lazaroff was eventually prosecuted for his multiple crimes, and he even pleaded guilty, but not before he rolled over on many of those he had bilked money from in the first place, including Station Casinos executives. In return, U.S. District Court Judge Charles Shaw gave him the country-club treatment. Lazaroff was sentenced to 30 days in jail, 90 days' house arrest in his Town & Country manse, 120 days' community service and restitution.

Station Casinos was finally forced to pull up stakes and leave Missouri like a dog with its tail between its legs in the closing days of 2000. A November 29, 2000 Las Vegas Review Journal article reported: “Station Casinos' Missouri license renewals were rendered unlikely by a disciplinary cloud hanging over the company. Six company officials refused to obey subpoenas to appear at an August meeting of the commission."

Carl Thomas died in early November of 1993, and exactly 7 years later Station Casinos found itself embroiled in hearings and investigations that would lead to their ouster from Missouri on bad terms. The state gaming commission eventually voted unanimously to strip Station and its top executives of their Missouri licenses. Station also agreed to pay a $1 million fine in November of 2000. A voluntarily surrender of its licenses precluded Station’s departure from the state for good late that year.

During his hiatus from holding the full official, financial and managerial reigns of Station Casinos Frank Fertitta Junior has maintained his land buying and trading ways, given a great deal of cash to charities and civic interests, and laid relatively low other than his various publicly reported Republican Campaign contributions.

12 years ago Mother Jones Magazine ranked Frank Junior in a tie for the 10th spot for America's political contributors who work in the shadows. He and the rest of the family and business interests have loyally given hundreds of thousands, if not millions of dollars to political figures from local judges and sheriffs in Vegas to presidential campaigns Like Rudy Giuliani’s recent failed bid for Mayor of America. It is an old Texas family tradition to pay it forward to politicians, grease the wheels, and prosper. I counted one year’s political contribution records that showed Fertitta family and business interests gave a combined $65,000 to Las Vegas Sherriff Doug Gillespie’s unopposed campaign for the seat.

Frank Junior himself gave Gillespie $5,000, each of his sons gave $10,000, Wife Victoria Fertitta gave $5,000, and Fertitta Enterprises gave yet another $5,000:

As for the guy Gillespie replaced, the retiring Sheriff Bill Young found fast work. A 2007 Las Vegas Review Journal report explained:

“He [Young] will oversee 630 workers and the security and surveillance operations for Station Casinos' 16 properties in Southern Nevada. Young would not reveal his new salary, but it was expected to top his annual salary of $134,263 he earned as sheriff.”

Station Casinos even put out campaign flyers for currently-sitting Clark County District Court Judge Timothy Williams’ successful campaign for the bench. The company publicly endorsed him for his judge’s seat. Williams was the first judge to oversee my existing case against Xyience. When I raised the issue that the judge’s own Web-site showed the Station Casinos endorsement letter, Williams did not recuse himself, although he did rule in my favor in the first hearing I was actually able to appear at.

I have even heard that Frank Junior still does butt into some Fertitta Enterprises company business, and some inside sources have told me Frank Junior put some of his very own money behind the $12 million Xyience bailout. Perhaps the most interesting aspect of Frank Junior’s life that I’ve discovered in my investigations is that I’m told he goes to church services every single day. I’m sure the question’s been asked a billion times or more, but yet again it reveals itself here: can one be loyal to God and Mob at the same time?

Looking back it's easy to see how Frank Junior’s blacklisted enterprise could only expand itself for so long in the same place. It's easy to imagine the pressure he must have felt to get out of the town that wouldn’t let him take an inch of new gaming territory without a fight. Yet, he could not escape his reputation by crossing state lines. His organized crime history still impacted the Missouri situation heavily. The state only opened up for the Fertitta family because of the tragic and suspicious death of someone who could have stopped the whole operation cold just by telling the truth about what he knew about Frank Junior's past. Whatever happened on that stretch of farm road in Oregon in November of ‘93 is only known by one entity who’s willing to protest, and it seems that entity is the curse of Carl Thomas.

In our next installment we’ll explore the current Fertitta Empire, including the Zuffa purchase. We’ll focus on the folks I call “The Brothers Fertitta” and their billionaire boom days. We’ll also lay out exactly why Station Casinos now faces a flat out financial bust due to overbuying land and gambling on better days for the Vegas suburbs hit hardest by the housing crisis.

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