VOL. 2 NO. 4 SPECIAL KATRINA ISSUE 2006
A PUBLICATION OF THE INTERNATIONAL MASTERS OF GAMING LAW
Supplement to Casino Enterprise Management magazine
President Michael Lipton Elkind & Lipton, LLP Toronto, Ontario, Canada (416) 367-0871
Vice President Robert Stocker, ll Dickinson Wright, PLCC Lansing, Michigan, USA (517) 487-4715
Secretary Anthony R. Coles Jeffrey Green Russell London, England 011 44 207 339 7000
Treasurer & Membership Director James B. Deutsch Blitz, Bardgett & Deutsch, L.C. Jefferson City, Missouri, USA (573) 634-2500
Vice President Affiliate Members John Sullivan Territory Incorporated Las Vegas, Nevada, USA (702) 222-1402
President 2002 Frank Catania Catania Consulting Group North Haledon, New Jersey, USA (973) 427-2500
President 2004-2005 Anthony N. Cabot Lewis & Roca, LLP Las Vegas, Nevada, USA (702) 949-8280
President 2003 Heidi McNeil Staudenmaier Snell & Willmer, LLP Phoenix, Arizona, USA (602) 382-6366
IMGL Executive Director Melissa Lurie International Masters of Gaming Law Boulder, CO, USA (303) 449-9955
Casino Lawyer is published four times a year by Casino Services Publishing, LLC . Copyright © VOLUME 2 NUMBER 4 Special Issue 2006 2006 IMGL Inc. This material may not be reproduced without written permission.
1 Casino Lawyer Summer 2006 Summer 2006 Casino Lawyer 1 It has been one year since the fury of year, the clean-up is nearly complete, Hurricane Katrina brought unimagin- much of the important planning is able devastation to the U.S. Gulf Coast, done, and the rebuilding effort is in its economy and its people. full swing.
Today, our most indelible images are Despair is giving way to rebirth. those of an historic city under water, “The aftermath of Hurricane Katrina is followed by horrifying images of providing unique opportunities for widespread lawlessness and thousands renewal and development in of impoverished people waiting for Mississippi, unmatched in our state’s help that would take days to arrive. history,” Gov. Haley Barbour said in announcing a Katrina Recovery Expo During those dark weeks, the media held in August in Biloxi. images of post-hurricane despair emanated mostly from New Orleans, I’m pleased to share with you this special and viewers worldwide felt that great edition of Casino Lawyer, dedicated to city’s despair. Mississippi’s Gulf Coast the thousands of gaming industry suffered similarly, with lives lost, executives and employees, lawyers, century-old historic homes and lawmakers and regulators who picked mansions destroyed, and the industry themselves up off the mat, and are now that had for a decade served as the building and shaping an already region’s primary economic engine emerging post-Katrina landscape. simply washed away. International Masters of Gaming Law is New Orleans garnered the lion’s share honoring two of those remarkable of media attention – both people with the inaugural Gaming compassionate and repulsive. It did Executives of the Year award. W. Owen then and it still does a year later. While Nitz is an attorney and managing the media loudly trumpeted the ugly partner of Nitz, Walton & Heaton in Las side of humanity in the weeks Vegas. Jeffrey M. Cooper is a CPA with following Katrina, tens of thousands of Bradshaw Smith & Co. in Las Vegas. remarkable people – in Louisiana, Together they are the co-trustees of the Mississippi, and from around the world former Imperial Palace, now IP Biloxi. – quietly rolled up their sleeves and began the long and laborious task of In describing how the casino and hotel rebuilding America’s last truly unique amenities would be completely city, and refashioning a thriving revamped, Owen famously told the coastal state that only a decade ago Mississippi Gaming Commission, “It’s seemed hopelessly impoverished. going to be a mindblower.” Turns out, “mindblowing” best describes Nitz and Watching T.V. images of the Gulf Coast Cooper’s remarkable dedication to in the days following Katrina, it wasn’t restoring their community. difficult to imagine a clean-up effort that could drag out for years. It was They showed up to ride out the hard to fathom that casinos and storm and haven’t left. restaurants and other businesses vital In the months after the storm, IP Biloxi to the region’s rebirth would be back in housed the emergency’s first operation anytime soon. But in just a responders, such as FEMA personnel They even helped bring a school agencies and operators following and an army of relief workers and back to life. catastrophic disasters like Katrina and insurance adjusters. In just four Rita; Len Blackwell says the Mississippi Sister Mary Jo of Nativity BVM months, they completely overhauled Gulf Coast will prevail and shares his Elementary School recalled “a phone their property and reopened it in reasons why; Sam Weaver outlines the call from two gentlemen” who wanted December, the first Biloxi property to do challenges and opportunities that lie to offer a donation toward rebuilding so. That meant roughly 1,500 jobs back ahead; and Tina Singletary writes about the school. I’ll let her describe what on line – bolstering both the economy player disputes. happened after several meetings with and a community’s battered morale. Owen and other representatives of the According to Stephen Richer, executive Beverly Martin, executive director Imperial Palace Mississippi Charity. director of the Mississippi Gulf Coast of the Mississippi Casino Operators “Owen simply said that the trustees had Convention and Visitors Bureau, the Association, praised the IP for helping agreed to take care of things for us. rebirth in Mississippi is gaining to restore a sense of normalcy to the When I asked which portion of the momentum: community by opening its meeting damage they would be sponsoring, he space to community functions that had simply said ‘All of it.’ 6,800 of 17,500 pre-Katrina hotel rooms nowhere else to go, such as Chamber of are open, and occupancy averages 80 to “My friends, The Imperial Palace Commerce events and the region’s 90 percent. Mississippi Charity has agreed to take annual Mardi Gras ball. The IP was host care of the entire restoration of our to dozens of events that might not have Most golf courses have reopened, school. This donation will include: happened without the property’s helping to rebuild an industry worth replacement roofs for the gym, school, support – events that helped bring a $100 million a year to the coast. and new addition; stage curtains; community together again. flooring for the gym; flooring for the Airline bookings at the Gulfport-Biloxi There have been plenty of tangible stage; all broken windows in the school; airport in August 2006 are 14 percent contributions to the community, as all broken blinds in the school; above last August, pre-Katrina. well. More than 1,300 wheelchairs replacement of the floor tile in the first The casino industry is rebounding along distributed throughout the region. floor hallway; a new sound system for with the community, Richer says. Five Furniture and bedding from the old the gym; fencing repairs to the school casinos have reopened, putting about Imperial Palace distributed. A semi- perimeter and to the back playground 6,000 people back to work. Several trailer filled with nice, new clothing and soccer goals for the playground. others are expected to open by Sept. 1, (shipped in from Las Vegas, thanks to The total amount is somewhere around bringing that number to 10,000. The the efforts of Jan Nitz and Kenna $500,000.” coast had 12 casinos before Katrina. Cooper). And monetary contributions: IMGL Biloxi member Britt Singletary Richer expects 20 by 2010. • Harrison County Habitat offered this supreme praise. “Not a To the thousands of men and women for Humanity, $200,000 single IP employee lost their job. Everybody who wanted to work still had who have brought the Gulf Coast and • The Living Cities, $50,000 a job.” To learn more about these two the gaming industry back from the extraordinary men, the company they brink: we applaud your efforts, we • Salt and Light Ministries represent and what they have meant to admire your passion and determination. Foundation, $30,000 Biloxi and its people, turn to Page 8 and read Singletary’s feature story. • Mississippi Coast Coliseum, $15,000 Also in this special issue of Casino Michael Lipton, • Gulf Coast Symphony, $15,000 Lawyer: Sharon Harris writes about President the regulatory issues facing • Ohr-O’keefe Museum, $10,000 both governmental/law enforcement
Summer 2006 Casino Lawyer 3 Contents VOLUME 2 NUMBER 4 Special Katrina Issue 2006
page 6 1 Officers 2 Message from the President 4 Contents
DEPARTMENTS A Rising Tide Lifts All Boats 6 Mississippi maintains buoyant gaming market. By Britt Singletary
Enduring Regulatory Challenges in a Disaster page 8 8 How did the gaming industry handle the devastation of Hurricanes Katrina and Rita? By Sharon Harris
Why the Mississippi Gulf Coast Prevails 14 Mississippi’s continuing robust recovery is cause for great optimism. By Leonard Blackwell The Shifting Landscape of Gaming 20 How a natural disaster changed Mississippi legislation. By Samuel Weaver page 14 Katrina’s Impact on Louisiana Casinos 24 Louisiana casinos that are back in operation have had an unexpected boost in revenue since the storms. By J. Kelly Duncan INDEX OF ADVERTISERS
Aladdin Construction ...... 28 Bradshaw, Smith & Co., LLP ...... 12 Community Bank ...... 28 Delta Sanitation ...... CV3 Ernst & Young...... 25 page 20 Glenn Rieder Inc...... 13 Haynes Electric Company, Inc...... 26 Industrial Corrosion Control, Inc...... 19 International Masters of Gaming Law (IMGL)...... 28, CV4 IP Hotel & Casino ...... 11 J. Daniel Schroeder Realty...... CV3 James B. Donaghey, Inc...... 27 J. E. Borries, Inc...... 19 KHS&S Contractors ...... 15 Konami Gaming ...... 9 KONE Inc...... 13 Louis Smith Construction, Inc...... 28 page 24 Nitz Walton & Heaton Ltd...... 12 Northern Trust ...... 23 Roy Anderson Corporation ...... CV2 Sanders Hyland Corporation ...... 29 Sawyer Foster Group...... 17 Shuffle Master Inc...... 5 Singletary & Thrash, P.A...... 21
On the Cover: Owen Nitz and Jeff Cooper, IMGL 2006 Co-Gaming Executives of the Year. Photo courtesy of the IP, Biloxi, Miss.
4 Casino Lawyer Summer 2006 Congratulations...Congratulations...
6KXIÁH0DVWHUFRQJUDWXODWHV2ZHQ1LW]DQG -HII&RRSHUDV,QWHUQDWLRQDO0DVWHUVRI*DPLQJ /DZ·V*DPLQJ([HFXWLYHVRIWKH In 1972, Ralph Engelstad, like Henry Later, in 1993, Engelstad decided to front beach all over Biloxi, but Imperial Ford, had a better idea. expand into the Mississippi market by Palace was in a safe harbor and would be building the Imperial Palace of back in business before the other casi- He purchased Flamingo Capri Hotel and Mississippi. The resort opened in nos could rebuild. Casino on the Las Vegas strip, which December 1997 with 1,200 rooms and was in bankruptcy, and soon found 1,500 employees. While Ralph did not live to see his pre- himself in the hotel-casino business. diction come true, Owen and Jeff saw Prior to Engelstad’s death, he and his that while the hurricane was a tremen- The property was renamed Imperial wife established the Engelstad Family dous catastrophe for the gaming indus- Palace and initially consisted of 350 Trust which would be guided by three try on the Mississippi Gulf Coast, it also rooms and a small casino. Engelstad and trustees: Elizabeth Engelstad, W. Owen created an opportunity for the Imperial his wonderful wife, Elizabeth, “Betty,” Nitz, and Jeffrey Cooper. Palace to not only improve its position operated the Imperial Palace until he in the Biloxi market but to become a died. By that time, the hotel had Before Hurricane Katrina, Betty, Owen, leading gaming force in the state. expanded to 2,700 rooms and employed and Jeff made the decision to perform over 2,000 people. renovations to the Biloxi property to The day after the hurricane, Owen and make it more competitive. The casino Jeff pulled into our driveway. They His attorney at the time was W. Owen and room renovations were barely asked if Tina and I were okay and if they Nitz who remained his attorney for 41 underway when Hurricane Katrina could live in our home, and then direct- years until Engelstad’s death, November struck on August 29, 2005. ed us to get to the property as soon as 26, 2002. possible to assist in reopening the hotel When Ralph purchased the present to house FEMA employees, construction Yet another symbol of Engelstad’s long- location of the Imperial Palace, he was workers, and insurance adjusters. time friendships with so many in the well aware of the dangers of a major gaming world, his attorney, Jeffrey hurricane. General Manager Jon Lucas directed his Cooper of Bradshaw, Smith & Co., saw great management staff, Pete Burns, to it that Imperial Palace continued to On many occasions he predicted a hur- Ralph Burdick, Brad Rhines, Stephen be a success. ricane would drive the casinos on the Morgan, Bob Brigham, Kelli McCarthy, 6 Casino Lawyer Summer 2006 and other employees in a monumental constant companions on this wild ride. for the future looked grim indeed. cleanup effort. The entire experience has been incredi- ble.” Before Hurricane Katrina, the state’s Within days the hotel was occupied by gaming industry provided approximate- much needed relief workers. IP has proven itself to be a great corpo- ly 14 million visitors per year. rate citizen for the Mississippi Gulf With the support of FEMA, the Corps of Coast. Following Hurricane Katrina, no one Engineers, and the City of Biloxi, utili- could predict the extent to which the ties were restored so the hotel was not As outlined in the IMGL President’s let- gaming market could restore itself and, only habitable but also enjoyable. ter, IP has donated substantial sums of if so, how long it would take for the money for the rebuilding of Biloxi. It tourists to return in numbers necessary During Katrina, the casino barge floated provided continued employment, to support the casinos located on the up approximately 24 feet within its including bonuses and gift certificates. Mississippi Coast. berth area and, when flood waters It provided charitable assistance in the receded, came down in that place. form of money, services, wheelchairs, Some casinos decided not to rebuild equipment, and clothes. their properties and many people, While it suffered damage, it was essen- including the author of this article, tially intact and ready for renovations. advocated a conservative approach to Roy Anderson Corporation was hired as restoration. the general contractor to protect the property from additional damage and to Nitz and Cooper had the optimism and begin a room-by-room renovation of determination to not merely rebuild IP, the hotel. Roy hired numerous subcon- but to devote even greater financial tractors, most of whom placed congrat- resources to make it a premier property ulatory messages to Owen and Jeff in able to compete with any gaming facili- this magazine. The future for the ty in the State of Mississippi. These contractors expedited their sched- Mississippi Gulf Coast Their vision has been proven by the ules to make the Imperial Palace dream tremendous acceptance and apprecia- come true. gaming market is tion by the public. They worked to exhaustion and worked IP’s success has convinced other gaming miracles. going to be greater properties to not only rebuild but to expand and improve their facilities as For the 122 day time period between the than it was prior to well. The future for the Mississippi Gulf hurricane and the grand reopening of Coast gaming market is going to be the hotel and casino on December 22, greater than it was prior to Hurricane 2005, Owen Nitz and Jeff Cooper were Hurricane Katrina. Katrina. in Biloxi, Miss., practically on a daily basis. The ripple effect created by Nitz and Cooper leads the Mississippi Gulf Coast They decided to rename Imperial Palace gaming market’s boom in the develop- IP after the reopening. ment of condominiums, residential sub- divisions, golf courses, and the desire by Some older restaurants were eliminated, new gaming companies to build addi- others renovated, and new food and tional hotels and casinos along the beverage venues created. A gourmet None of this would have been possible Coast. restaurant named Thirty-Two has been a but for Ralph Engelstad’s foresight in huge success and IP added the Carnival building IP Biloxi at the location he An old adage in Biloxi is that “a rising de Brazil, a new sports bar named The selected, as well as the continuing fore- tide lifts all boats.” The future of the IP Sports Page, a new lobby bar known as sight and financial courage to commit and the Mississippi Gulf Coast is now The Chill Lounge, and a late night resources to Biloxi and the Mississippi assured to be prosperous. venue offered as Club IP. Gulf Coast by Owen Nitz and Jeff Cooper. The decisions made by Nitz and Cooper New slot machines were added; a poker to invest their time, expertise, and the room and high-end gaming area They are truly deserving of their selec- Engelstad Family Trust resources back designed and built. tion as Co-Casino Executives of the Year into Biloxi had a great deal to do with by IMGL. showing other developers that the When the IP held its grand reopening Mississippi Gulf Coast remains a great on December 22, 2005, it was embraced Prior to the introduction of gaming into place for new development. by the community and has enjoyed a the Mississippi Gulf Coast, tourism continuously packed house and record- dropped to approximately a million vis- breaking gaming revenues. itors per year. In the early 1990s, every hotel on the Mississippi Gulf Coast was Cooper said, “Owen and I have been closed or in bankruptcy. The economy Summer 2006 Casino Lawyer 7 By Sharon Harris nce the wind and massive rain The Mississippi gaming industry along operators to follow legal requirements. subsided from Hurricanes Katrina the Gulf Coast confronted a different He said, “State and local governments Oand Rita last year, millions of Gulf scenario, but with similar consequences. have fixed annual fees and/or long term of Mexico residents and business owners lease agreements with the casinos. slowly returned. They evaluated the Katrina’s strong winds and storm Properties must ensure their appropriate damage and hoped to resurrect any rem- surges ripped gaming barges from business interruption coverage before a nants of their former lives. their moorings, often throwing them catastrophe in order to manage the risks across highways. of natural and man-made disasters. Navigating the layers of bureaucratic red tape proved challenging. However, the These unprecedented circumstances “Casinos uniquely rely on daily cus- task for the gaming industry exceeded presented a tough burden for regulators tomer interaction, so any disruption the obligations of private citizens. It and other law enforcement personnel. could have a negative impact. Also, casi- involved several more levels of oversight They have had to walk a fine line to nos must factor in a ‘loss period’ time and regulation. uphold their obligations to their juris- for a casino to restore operations to a diction’s gaming laws while adapting to pre-disaster level.” How did the gaming industry in a crisis situation. Mississippi and Louisiana handle the Because Katrina instantly left hundreds devastation? How has it proceeded to Operators have also worked hard to of thousands homeless and unem- revive and reopen the numerous dam- overcome their own set of challenges. ployed, all casino executives launched aged and destroyed properties? How has into disaster management mode to The goal is to rebuild damaged casinos the industry in both states adjusted to quickly assess their own liabilities and and properties amid strict, but chang- any regulatory changes resulting from make hard choices. Operators knew ing, legislation and regulations. the hurricanes? they must play an important role in the recovery process. The multi-site casino It is a delicate balancing act for all par- The destruction in Louisiana and operators, with corporate offices outside ties due to the extraordinary nature of Mississippi was dramatically different the Gulf Coast region, had the extra the hurricanes and their damage. due to the different storm directions. advantage of significant resources. Everyone is learning as they go along; Louisiana received a double dose of much of it is a trial and error situation. damage. New Orleans escaped much of Harrah’s Entertainment faced the dilem- ma of a two-state crisis. The company Katrina’s original surge, only to suffer Once the skies cleared, operators quick- immediately established procedures to severe damage from the levee breaches ly submitted valid insurance claims for continue paying more than 6,000 the following day. prompt payouts. Maintaining adequate employees for months. They also insurance coverage is vital for operators, The force of the post-Katrina levee worked closely with the Red Cross and not only to continue conducting busi- breaches and Rita’s destructive winds other humanitarian groups to provide ness, but also to comply with regulatory three weeks later severely damaged medical, housing, food, clothing sup- mandates. Harrah’s land-based casino in New plies, and services to displaced residents. Orleans and totally destroyed two river- Kelly Duncan, an attorney with Jones, The company formed the Harrah’s boats: Bally’s in New Orleans and Walker, Waechter, Poitevent, Carrere & Employee Recovery Fund, with an ini- Harrah’s in Lake Charles. Denegre, LLP in New Orleans, urges tial commitment of $1 million from the 8 Casino Lawyer Summer 2006 Harrah’s Foundation. Harrah’s employ- Katrina ravaged the entire infrastructure If the casino is destroyed, but the ees received first rights to job opportu- of the area, making communication machines may be safely accessed, casino nities throughout the U.S. at other next to impossible. management will attempt to collect the Harrah’s properties. money from the machines. Stories have “Despite FEMA trailers being used as tem- emerged of some casino managers and MGM MIRAGE’s Beau Rivage Resort & porary offices, the MGC could not access executives cleaning sludge from coins Casino in Biloxi, Miss., sustained mil- the database of work permitted persons that they recovered from the riverboats. lions of dollars in damage. Prior to and perform necessary background Katrina, the corporate headquarters had checks. The Vicksburg office, 275 miles According to Senior Trooper Dwight positioned staff in four states to prepare north of Biloxi, processed and issued Robinette Jr., public information officer for a significant recovery effort. work permits to ensure that when some of the Louisiana State Police Bureau of casinos reopened in December, they Investigations, “If the electronic gaming Payroll and benefits continued for all could be fully staffed,” Gregory said. devices are ‘floating on the river’ the 3,400 Beau Rivage employees for 90 electronic snapshot of the meters is used days, including all earned vacation All 13 of Mississippi’s Gulf Coast casinos for accounting. For unsalvageable and full health benefits. The sustained enough damage and destruc- machines, the properties must notify Recovery Center, located on Beau tion to render them inoperable. Even officials as to which machines either Rivage’s employee parking lot, dis- Beau Rivage, built to withstand 20-foot have been destroyed or that they wish tributed paychecks. storm surges, sustained severe structural to destroy. damage and destruction of its first floor The Employee Assistance Center provided casino, restaurants, and retail shops. “When possible, the logic boards and crisis counseling services, financial plan- software are removed from the cabi- ners, FEMA representation, banking per- Thousands of destroyed slot machines net and crushed separately. A Division sonnel, and state health professionals. A lay all over the roadways. Despite the agent is scheduled to witness the demo- Job Recovery Center opened at other catastrophe, security and accountability lition of the machines and removal of MGM MIRAGE properties offered employ- had to be protected. The MGC issued a their serial number plates.” ment opportunities for anyone wishing to Commission Industry Letter three days relocate to their Nevada venues. after Katrina hit, hand delivered from The Mississippi state government real- the Vicksburg and Tunica Commission ized right away that if the gaming A special recovery fund began with a $1 offices to the general managers of each industry were to ever recover and million corporate donation, and the operating property. The order prohibit- reopen along the Gulf Coast, expedited company later matched the donations ed the redemption of any chips origi- changes had to occur. Mississippi’s regu- of its 70,000-member workforce. nating from the Gulf Coast casinos. lations are based on statutory law, which required amendments to now For decades, residents of the Gulf Coast All MGC gaming agents are law enforce- permit casinos on land within 800 feet region have experienced tropical ment certified, with police powers to of Gulf waters. storms and hurricanes, and have make arrests and enforce the law. Only rebounded from damage within their authorized personnel were permitted to Gregory said, “In order for the casinos towns. However, by anyone’s stan- remove the damaged slot machines to return and obtain financing and dards, Katrina easily fit into a new cat- from the barges and highways. insurance, some changes had to be egory that required extraordinary Licensees recorded the serial numbers of made. The Gaming Control Act gives responses. The Biloxi offices of the the slot machines to be destroyed and regulatory authority to the Mississippi Gaming Commission reported them to the MGC. The CPU Mississippi Gaming Commission (MGC) sustained damage, losing elec- board typically was removed and (MGC). Fortunately, provisions were trical and telephone service. smashed separately from the machine. made for the MGC to adopt, amend, or repeal regulations if deemed in the Mississippi law mandates that all casi- Louisiana’s gaming industry fared better. best interest of the state of nos submit an emergency plan to the Mississippi. This gives us flexibility MGC, detailing their emergency plans Of their 15 riverboat casinos, only two - during a disaster.” for everything from power failures to Bally’s in New Orleans and Harrah’s in robbery. State laws, legislating that all Lake Charles - were totally destroyed. Since the change of the laws in gaming floor barges be attached to the The other 13 were far enough out of the Mississippi, most coastal casinos will hotels or the docks, proved to be the storm’s path to survive. Also, Louisiana’s move onshore and shift to a cashless industry’s undoing. three Indian casino locations remained floor. The MGC staff tests all games unaffected. offered for play, and there is now ade- Larry Gregory, executive director of the quate staffing. MGC, describes the process. “Once a The Louisiana state government has storm enters the Gulf of Mexico, MGC procedures in place for casino personnel Gregory said, “Shortly after Katrina, personnel closely monitor the storm in to close a property after a disaster. To manufacturers were asked to deter- conjunction with state and local emer- ensure functioning of the monitoring mine the timeframe for replacement. gency personnel. Before closures, there systems, casinos must take a “final elec- Due to the staggered reopening of the are certain procedures that must be fol- tronic snapshot” of the final meter casinos, no testing changes were need- lowed to ensure the safety of the counts after the last patron exits the ed. The MGC has sufficient staff for employees and the security of funds,” boat. In a power failure, backup power machine testing.” he stated. will keep the machines operational. 10 Casino Lawyer Summer 2006 TUL NGRA ATION CO S International Masters of Gaming Law 2006 GAMING EXECUTIVES OF THE YEAR W. Owen Nitz Jeffrey M. Cooper From the 2,300+ Associates of IP Hotel & Casino. What a year it’s been! IP Hotel & Casino • 850 Bayview Avenue, Biloxi, MS 39530 • 1 888 WIN AT IP Mississippi casino operations have Palace Resort & Casino, Boomtown The site in downtown New Orleans been streamlined and all slot machines Biloxi, and Treasure Bay. For some, the had closed shortly before Hurricane are connected to a computer system job was made easier by their Back Bay Katrina made landfall near the city. that records its activities. The gaming location, which spared them a devas- The building sustained storm damage, lab examines each slot machine, plac- tating direct hit. and was used by first responders as a ing security tape over the computer base of operations in the days follow- chip to prevent any tampering. The Most recently, Grand Casino Biloxi ing the storm. MGC maintains a list of slot machine and Beau Rivage opened for business serial numbers. in August. Beau Rivage purposely After several months, the extensive reopened on August 29, on the first repairs to the facility have been In Louisiana, the gaming laws have anniversary of Hurricane Katrina. completed. The casino’s electronic remained intact. The Louisiana indus- Casino executives realized the systems and gaming devices on the try monitors new placements with a poignant symbolism of the date. 115,000-square foot gaming floor are broader scope. When machines are Fortunately, no employees died during fully operational. registered, a manufacturer’s represen- the storm, and employment has tative, the operator, and a state agent increased to 3,800. As economic development continues must all be present. “Prior to reopen- over the next several years, the Gulf ing any boats, a sample of the games is Beau Rivage President and COO Coast should enjoy a transformation, tested to ensure communication with George Corchis said, “We’re confident as it did in the 1990s. Thanks to the the host has been maintained or in the future of the Biloxi market …the gaming industries in Mississippi and restored,” Robinette said. opening of Beau Rivage on August 29 Louisiana, the region can anticipate isn’t the end of MGM MIRAGE’s devel- coming back bigger, stronger, and bet- One year later, the chainsaws are opment in Biloxi. We’ll continue our ter than ever. buzzing, the hammers are thumping, investment in the community.” and the drills are humming. Reconstruction is underway all along One hundred miles west, New Orleans the Mississippi Gulf Coast, with has its own reconstruction story. impressive results. The first group to Harrah’s New Orleans reopened its open was Imperial Palace, Isle of Capri, land-based casino this past February. 12 Casino Lawyer Summer 2006 KONE Inc. is pleased to honor W. Owen Nitz and Jeffrey M. Cooper of Imperial Palace Casino as IMGL’s 2006 Gaming Executives of the Year. KONE is a recognized global leader in the vertical transportation industry providing complete life-cycle solutions for installation, modernization and maintenance of elevators, escalators and autowalks. 1-800-956-KONE (5663) l www.kone.com Glenn Rieder Architectural Millwork & Custom Interior Contracting Congratulations to Owen Nitz and Jeff Cooper from IP Hotel & Casino for being awarded the Co-Casino Executives of the Year Award by International Masters of Gaming. Glenn Rieder, Inc. is the manufacturer of architectural millwork and related trade interior contracting services Carnaval de Brasil Restaurant for IP Hotel & Casino Biloxi, Mississippi. • Lobby • Carnaval de Brasil Restaurant • Chill Ultra Lounge • Suites • Executive Offices • Spa Glenn Rieder, Inc. thanks Roy Anderson Company and IP Hotel & Casino for its involvement in this project. Chill Ultra Lounge Glenn Rieder, Inc. 3420 West Capitol Drive Visit our new website: Milwaukee, WI 53216 www.glennrieder.com Phone (888) 449-2888 Summer 2006 Casino Lawyer 13 By Leonard A. Blackwell II One year after Hurricane Katrina ravaged the Mississippi Gulf Coast, much of the beachfront still resembles a war zone. Stress levels are high; the impact of this catastrophe, at times, is truly mind-boggling. There is, however, ample reason for optimism. We will recov- er from this disaster, and we will emerge better and stronger. I want to suggest five reasons that contribute to our confi- dence in the kind of robust recovery I am talking about here in Mississippi: Our experience gained from surviving Hurricane Camille in 1969 and the spirit of our people; our new Onshore Casino Siting Legislation; the Gulf Opportunity Zone Act of 2005; the Mississippi Gulf Coast Region Utility Act; and, the foresight and leadership of our elected officials. First, we saw after Camille that recovery can happen and that life is measured in milestones. I had been here on the coast practicing law for three years when Hurricane Camille roared ashore on the night of August 17, 1969. With sustained winds of 175 miles per hour and gusts up to 210 miles per hour, it was the most intense tropi- cal cyclone at that time ever to strike the United States main- land. Camille was a Category Five on the Saffir-Simpson Scale. It was a tightly wound storm with 27-foot surges and came through like General Sherman’s army, except it was marching from the sea, killing people and destroying property all the way from Mississippi to Virginia. I remember returning to my home the following day and see- ing downtown Gulfport in shambles, several barges in the 14 Casino Lawyer Summer 2006 middle of our beach road, U.S. Highway Mississippi Legislature legalized “cruise Then came Hurricane Katrina, and casino 90, 1500-pound rolls of newsprint vessel” gaming. barges were snapped from their huge per- washed from the port storage facility manent mooring pilings and deposited and strewn like toys all the way to West How does gaming exist as such a cata- like matchboxes along the shoreline; the Gulfport, not to mention severe devas- lyst for tourism in a straight-laced Bible Legislature met in special session and on tation along the beach. belt state like Mississippi? In a state that October 17, 2005, the Onshore Gaming presently has only seven gaming coun- Law was enacted, allowing casinos hence- But we recovered. ties and 75 non-gaming counties, how forth to be in permanent structures so long could such a thing pass through the as they are within 800 feet upland of the Without electricity or air conditioning, conservative Mississippi legislature? mean high tide line. we used Coleman lanterns to light our office and old manual typewriters to It all started as a cruise vessel gaming law The impact of the Onshore Gaming Law help people fill out proof of loss to their with cruises to nowhere, so long as the has already been momentous. Insurance insurance companies and make Small voyage was outside the three mile limit. issues have been simplified. Over $5 bil- Business Administration (SBA) loan Later, a judge signed an order saying lion in capital casino projects are applications. “You don’t actually have to go beyond already in the works, with more to the three mile limit, as long as you are come. Confidence in market sustain- There was nothing heroic in this; it was sailing around in the Mississippi Sound.” ability is high. just typical of how every business and government sector performed. Once One night, during the last weeks of the leg- Third, there is the impact of federal leg- utilities were restored, SBA started dis- islative session, in the dead of night when islation providing for hurricane relief. bursing funds and people started everyone was tired, a very smart Greenville rebuilding. Businesses started springing legislator, Sonny Meredith, removed the As our state leaders were acting, our con- up to handle the needs of the popula- word “underway” from the law by adding gressional delegation was busy steering tion in the rebuilding process. an amendment that few members read, the Gulf Opportunity Zone Act of 2005 and when the vote was taken the next day, through the United States Congress. One The point I want to make is that the level dockside gaming was born. of our senators, Trent Lott, is the former of business activity was magnified after majority leader of the Senate. Our senior Camille, there was an influx of new resi- Mississippi’s Gaming Control Act is the senator, Thad Cochran, currently chairs dents, commerce was ratcheted up to one patterned among all the states most the Appropriations Committee. another level, and while from time to time closely to that of Nevada, except it is bet- we had the occasional cyclical slowdowns ter. Mississippi’s “double whammy” is a On the House side, Democratic experienced by the nation as a whole, we reasonable tax rate coupled with a stable Congressman Gene Taylor is a ranking never returned to the sleepy coastal com- regulatory environment. We also have member of Armed Services and munities we had been prior to Camille. no convenience gaming. The only place Transportation. Democrat Bennie one can legally place a wager is in a full Thompson has long been a stalwart sup- That ratcheting up to the next level has fledged, regulated, taxpaying casino. porter of tourism and a leader in recog- already occurred following this recent nizing that gaming is a real catalyst to hurricane, but catalysts are in place to The flaw was that until October of 2005, make our state a resort destination. make it happen again in a more robust all casinos were required to float. Even Congressmen Roger Wicker and Chip fashion, on steroids. though they were on huge barges that Pickering have also been leaders. looked like buildings, they operated as Also, I want to acknowledge the church- such, based on the legal fiction that And our Governor Haley Barbour used es and individuals who have helped in they were still dockside “cruise vessels.” to be a lobbyist. So with such a steering our recovery effort. Every day we wit- committee, the Gulf Opportunity Zone ness acts of real charity—of a Catholic Pre-Katrina dockside gaming business legislation was adopted. church being restored by a group of on the Mississippi coast, even with the Carolina Baptists; of a Jewish group “floating” requirement, attracted over Aside from providing tax incentives for endowing a mental health center for $3 billion in capital investment in casi- employers who hire people in the 49 post-traumatic storm-related stress; of a nos, hotels, and restaurants, and grew to counties in the affected area in New York congregation contributing a business generating $1 billion annual- Mississippi, 11 counties in Alabama, and $250,000 to help my own church, St. ly and directly employing 15,000 peo- 31 parishes in Louisiana, the Gulf Mark’s Episcopal, rebuild its sanctuary. ple—just on the Mississippi Gulf Coast. Opportunity Zone Act contains two pow- erful business incentives for recovery. IMGL even gave money to help Mercy Although we advocated moving casinos Cross students in Biloxi purchase into permanent onshore structures, the First, taxpayers (investors) who build or school uniforms. To so many we owe a legislature wouldn’t touch the law (In reconstruct business properties in the debt of gratitude. Mississippi, it is generally reckoned that affected area and place them in service Protestants don’t recognize the Pope, by 2008 can take a 50 percent deprecia- Secondly, we now have on shore gaming. Jews don’t recognize the Trinity, and tion allowance in the first year. Go After Interstate 10 bypassed the route of Baptists don’t recognize one another home and tell them: Y’all come! our scenic beaches in the late 1980s, the inside casinos). 16 Casino Lawyer Summer 2006 Alternatively, the Act authorizes govern- The economy on the Mississippi Gulf Katrina passenger counts, and by the ing authorities to issue qualified private Coast was simmering, just about to boil, anniversary of the storm will be at 114 activity bonds for the construction, just before Katrina hit. Biloxi had 2,900 percent, with 23 jets and four major car- reconstruction, or renovation of quali- condo doors in the pipeline. Major riers, a new parking garage just fied business properties based on the expansions had been funded and were announced, enhanced air cargo facili- credit of the business applicant borrow- under construction. There was $1.4 bil- ties, and an additional runway designed ing the money. In other words, this con- lion in highway funds for the U.S. 49, for construction. duit tax exempt financing does not obli- the Port Connector, and the I-10 con- gate the local or state government, so it nectors 605 and 67, not to mention the This robust recovery did not happen by is a financing mechanism that works in Bayview and Caillevet Street projects accident. much the same way as industrial rev- funded by the City of Biloxi, $72 mil- enue bonds. lion in bond and federal grant funding Mississippi’s Gaming Control Act does for the Gulfport Biloxi Regional Airport, not limit the number of licenses—it The “GO Zone” Bonds are patterned after $68 million in funding to expand our allows market forces to control growth. a similar program of “liberty bonds” Coliseum Convention facility, and over With the most stable gaming tax rate in Congress enabled for New York after the $125 million in water and sewer the nation, an honest, strict regulatory 9/11 tragedy. Because the interest they improvements in Harrison County. environment, and safe streets and bear is exempt from state and federal tax, neighborhoods, I believe the Mississippi borrowers who interest in the zone can Gulf Coast is about to emerge from “dia- enjoy low interest financing. mond-in-the-rough” status to become a IMGL even gave money real gem of gaming related tourism. The fourth tool for recovery comes from Harrah’s is rumored to be planning a bil- Mississippi’s share of the $19 billion to help Mercy Cross lion plus project, MGM MIRAGE’s Beau Katrina appropriation made by Rivage reopened more splendid than Congress and involves, in addition to students in Biloxi purchase ever on August 29, and IP, Boomtown, direct grants for housing, the provision Treasure Bay, and the New Palace are of water, sewer, and storm water man- already minting money. agement infrastructure in the six south- school uniforms. To so many ernmost counties of our state. Those on front lines of community lead- we owe a debt of gratitude. ership know how hard it is just to stay As Community Development Block in the arena, but they also know that is Grant funds awarded by Housing and what garners victory. Urban development, we are told $500 When William Faulkner, one of million will be spent in these six The stage had been set before Katrina Mississippi’s native sons, perhaps the counties - the three counties border- to provide a better resort destination best of all of our many wonderful writ- ing the coastline and the second tier environment. of counties immediately north of us – ers, accepted the Nobel prize for litera- to expand water, sewer, and storm The leadership and foresight of mayors ture in Stockholm on December 10, water infrastructure to accommodate like A.J. Holloway of Biloxi, and of city 1950, spoke of the universal struggles of anticipated growth. councils, our county board of supervi- mankind—the challenge, and the “love sors, and other local officials enabled and honor and pity and pride and com- The Mississippi Department of this area to be poised for growth even passion and sacrifice.” He said we must Environmental Quality has underway a before Hurricane Katrina. They made not be afraid, “leaving no room in [our] planning process to develop a regional the hard decisions to fund needed proj- workshop for anything but the old veri- water, waste water, and storm water ects and find responsible ways to pay for ties and truths of the heart.” I believe plan for these utilities, and this infra- them, not to take the expedient path of the Mississippi Gulf Coast is following structure will stimulate growth in least resistance, but sometimes the polit- Faulkner’s admonition, and that we will, upland areas in unprecedented ways. ically unpopular position of doing what to paraphrase his most famous sentence, About 30,000 homes need to be rebuilt is right for our community. “not merely endure: [we] will prevail.” or repaired, and planned communities utilizing smart growth concepts are Today, Biloxi has 9,000 condo units in With that, I invite each of you to visit already underway. the pipeline. Now there is over $5 bil- our beautiful and soon to be recovered lion in announced casino hotel projects. Mississippi Gulf Coast. The experience of recovery after Camille, New factories and new businesses are the new Onshore Gaming Statute, the springing up in the southern most Gulf Opportunity Zone Act, and the counties. Now the Stennis Space Center Mississippi Gulf Coast Region Utility Act is seeing a flowering of hi-tech enter- are all measures to give us confidence in prises in Hancock County, our neighbor Leonard A. Blackwell II is an adjunct facul- recovery. But the final point I want to to the west. ty member for Casino Resort Studies at the make is perhaps the most significant of School of Continued Studies, Tulane all – the foresight and leadership of our The Gulfport-Biloxi Regional Airport is University, New Orleans, La. local government officials. operating at 110 percent of its pre- 18 Casino Lawyer Summer 2006 Summer 2006 Casino Lawyer 19 By Samuel G.Weaver On June 29, 1990, the Mississippi State State Tax Commission and in 1993 by become a paradigm of opportunity. Legislature approved the Mississippi the Mississippi Gaming Commission are Gaming Control Act pursuant to a 1990 still in place and operational today. The basic objective of the Mississippi executive session. Gaming Commission is to provide Additionally, the Mississippi Gaming regulatory oversight for the day-to-day This action authorized Mississippi to Commission has continued to adapt to operations of a 24/7 gaming industry be a legal gaming jurisdiction and the increased needs of a dynamic and which involves approximately 100 market into which the gaming growth oriented industry by focusing its licensees (i.e., gaming operators, industry was invited and welcomed to organizational approach, resources, and manufacturers, distributors, and multi- conduct business. structure into three primary functions: site wide area progressive operators) (1) administration (2) investigations, who are conducting business in three The Mississippi State Tax Commission and (3) operations. regional gaming markets in Mississippi was given initial regulatory authority (i.e., Northern, Central, and Southern). and the responsibility to oversee the Prior to Hurricane Katrina on August 29, gaming industry in Mississippi until 2005, the Mississippi Gaming The Corporate Securities Division is October 1, 1993, when those powers Commission had nearly 12 years of responsible for the corporate investiga- were transferred to the newly created experience regulating the gaming indus- tions of all applications submitted to Mississippi Gaming Commission. try relative to registrations, licenses, the Mississippi Gaming Commission by findings of suitability, cash protection, legal entities (i.e., publicly-traded corpo- In 1990, as an agent with the Corporate game protection, and gaming device rations and privately held companies) Securities Division of the Nevada State integrity. The regulatory foundation for registrations, licenses, findings of Gaming Control Board, I was given and structure which was established and suitability, and related approvals. the responsibility to investigate and implemented over the course of those monitor all Nevada licensees who had 12 years has been tried and tested The Corporate Securities Division inves- applied for foreign gaming (i.e., outside subsequent to Hurricane Katrina, and its tigates and monitors approximately 300 of Nevada) approval in Mississippi. modest record of achievement and legal entities relative to these approvals. competence has been challenged. In the course of this activity, I worked The Corporate Securities Division closely with the Mississippi State Tax This historical experience has become conducted, completed, and closed 56 Commission, Mississippi Office of the critical as the Mississippi Gaming corporate investigations in Fiscal Year Attorney General, Mississippi Gaming Commission continues to regulate the 2006, compared to 35 such corporate Commission, and the gaming industry gaming industry in a post-Hurricane investigations projected. This was regarding regulatory matters of Katrina environment. accomplished by a modest group of common interest, mutual concern, and investigators consisting of one full-time shared benefit. The challenges currently confronting corporate investigator (i.e., Christine the Mississippi Gaming Commission, in McCoy) and three part-time corporate Many of the initial patterns, policies, general, and the Corporate Securities investigators (i.e., Monica Barnes, John practices, and procedures developed and Division, in particular, include certain Mortimer, and Sandra Munden). implemented in 1990 by the Mississippi external and internal factors in what has 20 Casino Lawyer Summer 2006 Singletary & Thrash, P.A. Attorneys at Law North Biloxi: Britt R. Singletary [email protected] Scott D. Smith [email protected] Post Office 1229 Biloxi, Mississippi 39533 Tel: 228-432-8900 Fax: 228-396-3746 Downtown Biloxi: Tina R. Singletary [email protected] 117 Lameuse Street (39530) Post Office Box 171 Biloxi, Mississippi 39533 Tel: 228-374-2004 Fax: 228-374-2005 Jackson: Gary D. Thrash [email protected] John N. Satcher, III 129 North State Street (39201) Post Office Box 587 Jackson, Mississippi 39205 Tel: 601-948-7410 Fax: 601-353-0126 Firm e-mail: [email protected] Summer 2006 Casino Lawyer 21 Additionally, the Corporate Secur- Potential developers and would-be oper- This business trend appears to be a ities Division is responsible for the ators have submitted to the Mississippi permanent feature of a focused and preparation and submission of Gaming Commission several applica- organized gaming industry. numerous agenda matters each tions for gaming site approvals relative month for consideration by the to potential gaming sites in the Corporate finance has become more Mississippi Gaming Commission. Southern District. complicated with the use of creative The Corporate Securities Division and innovative financing transac- prepared and submitted 114 agenda Likewise, new applications for tions. Credit facilities now common- matters in Fiscal Year 2006, gaming site approvals continue to be ly use various forms of debt tranches compared to 80 such agenda matters submitted for the northern and involving senior secured term loans, projected. central districts. The challenge is to senior secured revolving credit facili- apply a consistent and reasoned ties, senior subordinated bridge loans The number of applications submitted evaluation and review process to and senior subordinated notes, to the Mississippi Gaming Commission each application for gaming site including combinations and hybrids for registrations, licenses, and findings approval relative to statutory and thereof. of suitability by international compa- regulatory requirements. nies has increased dramatically. Security features (i.e., affirmative The gaming industry is currently in the equity pledges, imposition of equity Historically, the Corporate Securities process of undergoing highly innova- restrictions including negative equity Division has completed two corpo- tive and technological transformations pledges, guarantee of securities, and rate investigations of such interna- relative to casino operations and hypothecation of assets) associated with tional companies a year. The gaming related products. such credit facilities have become Corporate Securities Division com- technically advanced. pleted seven corporate investiga- Many new concepts and products have tions of international companies in been advanced, developed, and are The combination of the above factors Fiscal Year 2006. Moreover, numer- emerging which use state-of-the-art has produced a challenging work ous applications by domestic compa- electronics and computer science environment at the Mississippi Gaming nies have been submitted to the applications. These include, for exam- Commission. Mississippi Gaming Commission as a ple, electronic table games, mobile result of new market opportunity in or wireless gaming devices, digital The Corporate Securities Division has Mississippi. surveillance systems, digital table developed, maintained, and relied upon game chips, player tracking systems, a highly organized and systematic The Corporate Securities Division multiple player electronic table game approach to promote effectiveness, effi- currently has over 40 applications for stations, and ticket-in /ticket-out ciency, and productivity at a time of registrations, licenses, and findings of (TITO) cash redemption kiosks. increased challenges and limited suitability pending. resources. Historically, the most complex and As a result of Hurricane Katrina, the technical corporate organizational As a result of this organized approach, southern district has been the economic structures encountered have involved the Corporate Securities Division and and political focus for rebuilding, recon- the separation of voting securities and the Mississippi Gaming Commission are struction, and recovery for the gaming non-voting securities. better positioned and prepared to meet industry. In the aftermath of Hurricane these demanding challenges and benefit Katrina, the Mississippi State Legislature Recently, however, new proposals have from the many opportunities for indi- in 2005 legalized shore- based gaming included many new features relative to vidual and institutional learning, pursuant to Mississippi Code Annotated equity ownership and multiple holding knowledge, and understanding. §97-33-1(ii) and (iii) (2005). companies, including such concepts, for example, as “blocker entities.” Additionally, the Mississippi Gaming Commission has adopted and amended Additionally, Japanese law has recently MGC Regulation II. A. Section 3(h) and allowed for the shift to a holding com- Samuel G. Weaver was employed by the MGC Regulation II. B. Section 2(a)(3) pany organizational structure and two Nevada State Gaming Control Board with relative to the gaming site approval Japanese licensees have recently adopt- the Investigation Division in Las Vegas, process. ed this new form of corporate organiza- tional structure. Nev. from 1981–1989 and the Corporate Gaming site approvals, like registra- Securities Division in Carson City, Nev. tions, licenses, findings of suitability, Corporate mergers, acquisitions, and from 1989–1993. He was employed by and all other approvals granted by the reorganizations have always been a Lady Luck Gaming Corporation in Tunica, Mississippi Gaming Commission, are a highly visible part of the gaming indus- Miss. from 1993–1996. Samuel G. Weaver privilege and, not a right. There is no try. However, the frequency of occur- has been employed by the Mississippi entitlement or guarantee that any pro- rences and size of transactions recently Gaming Commission in Jackson, Miss. posed gaming site is a legal gaming site. completed and currently pending are since 1996 and is currently Director of the Each application for gaming site enormous and have helped to reshape Corporate Securities Division. approval is considered and evaluated on the market landscape of the gaming its own merit. industry in Mississippi. 22 Casino Lawyer Summer 2006 Summer 2006 Casino Lawyer 23 By J. Kelly Duncan On August 29, 2005, Hurricane Katrina, To this date, services we take for granted contrast to Mississippi’s. A month after a Category 5 hurricane, the strongest such as electricity, water, and sewer sys- Hurricane Katrina devastated the and most dangerous of water-borne tems are lacking in the area, and only Mississippi Gulf Coast, Governor Haley storms, pummeled an area stretching limited police and medical facilities Barbour convened an extraordinary from New Orleans to the western have been reestablished. session of the Mississippi Legislature Florida panhandle. which ultimately resulted in the passage As a result of the devastation, there is an of legislation authorizing casinos to be The surge caused by Hurricane Katrina absence of adequate housing for local built on land within 800 feet of Gulf resulted in the flooding of 80 percent of patrons, much less the hundreds of waters. New Orleans for several weeks. Less employees of the Belle of Orleans. than one month later, Hurricane Rita Notwithstanding bleak revenue fore- struck a second devastating blow to the Similarly, two Lake Charles riverboat casts, Louisiana did not consider, much southwestern part of Louisiana, and par- casinos owned by Harrah’s were sub- less enact, legislation to allow the own- ticularly Lake Charles, La. stantially damaged by Hurricane Rita ers of riverboat casinos to relocate oper- and they, like the Belle of Orleans, are ations to facilities on land as allowed in These two hurricanes combined to cre- still not operating pending repairs. Mississippi. Furthermore, New Orleans’ ate the worst natural disaster in the his- Mayor Ray Nagin’s trial balloon (floated tory of the United States. Due to a Subject to approval by the Louisiana shortly after Hurricane Katrina) to open mandatory evacuation, more than Gaming Control Board, Harrah’s has up the city’s major downtown hotels 750,000 people were forced to leave agreed to sell the two vessels to Pinnacle to casinos was quickly deflated by their homes and relocate to northern Entertainment. Governor Kathleen Babineaux Blanco. Louisiana and elsewhere in the United States. Due to damage sustained as a result of Unlike her predecessors, Governor Hurricane Katrina, Harrah’s land-based Blanco has been unyielding in her gen- More than 200,000 homes were signifi- casino in New Orleans did not reopen eral opposition to an expansion of gam- cantly damaged, and in many cases, until late February, nearly six months ing. Other than emergency measures destroyed by flooding and/or hurricane after Hurricane Katrina hit New Orleans. passed by the Louisiana Gaming winds. Control Board to suspend rules that Finally, the Fairgrounds racetrack in would have resulted in the loss of licens- New Orleans, owned and operated by An estimated 360,000 people remain es held by thousands of video poker Churchill Downs, and recently permit- displaced from their homes. device operators whose machines were ted to have slot machines, sustained rendered inoperative by Hurricanes Louisiana legislation authorizing river- substantial flooding and remains closed. Katrina and Rita, there were no regula- boat gaming and land-based casinos, tory changes to address the adverse which was enacted in the early 1990s, Louisiana, like other states that have impact of the hurricanes on the state’s provides for only 15 riverboat casinos, legalized gaming, has come to rely heav- casino industry. with no more than 30,000-square feet of ily on the revenue generated by casinos. This is particularly significant given gaming space, to be berthed on certain The good news for Louisiana from a rev- reports of a 29 percent decrease in gam- designated waterways, as well as for the enue standpoint is that due to an unex- ing revenues in the month following establishment of a single land-based pected influx of emergency responders, Hurricane Katrina. State officials warned casino in New Orleans. construction workers, insurance the sharp decrease in tax revenues adjusters, volunteers from across the As a result of Hurricane Katrina, the would result in substantial reductions in country, and displaced gamblers from Belle of Orleans casino boat, located in spending. the Mississippi Gulf Coast, the undam- eastern New Orleans, broke from its aged riverboat casinos operating in moorings and sustained substantial Nevertheless, Louisiana’s response to Louisiana were able to more than offset damage. The marina where it was locat- the impact of the storms on the casino the loss of the two Harrah’s vessels in ed was destroyed and hundreds of boats industry in the state was in stark Lake Charles and the Belle of Orleans. moored at the marina sank. 24 Casino Lawyer Summer 2006 There was a surge in the revenue for boost in revenue since the storms, the occurs within a specified period of time the remaining properties, including devastation of the Mississippi Gulf after the date of the physical loss and Harrah’s New Orleans land-based casi- Coast and Louisiana casinos has the damage, or until the business inter- no, which has had record-breaking reminded casino chief financial officers ruption limit of the insurance is results for each month since its first full of the need for adequate insurance. exhausted. month of operation after Hurricane Katrina in March, 2006. Obviously, property and casualty cover- Among the lessons to be learned from age is important. Hurricanes Katrina and Rita is that any As early as October 2005, revenue casino, considering its exposure for stabilized and since then has steadily However, with the recognition that state interruption of business operations as a increased each month thereafter, and local governments, pursuant to result of either a natural or man-made notwithstanding three riverboat casinos their agreements with casinos, often disaster, must ensure adequate business that remain closed. require substantial fixed annual fees interruption insurance has been and/or expensive long term leases, it is obtained before a disaster strikes. Fueled by the post-hurricane boom, essential that adequate business inter- Louisiana’s casinos (land-based, river- ruption coverage be in place. This means that it is imperative to know boat casinos, and slots at the racetracks) the type of business interruption that won a record $2.38 billion from gam- Casinos, unlike many other businesses, is covered, whether the amount is blers during the fiscal year that ended rely on daily onsite customer interac- sufficient, and whether the time period June 30, 2006 resulting in $507.5 tion, such that these business interrup- covered is adequate. million in tax earnings this fiscal year, tion needs are materially different than $54.8 million more than the year before those of businesses that can operate In some cases, this could be the only when the casinos took in $2.2 billion. remotely in the event of a natural or way a casino can survive a disaster. man-made disaster. As a result of the storms, Louisiana has With billions of dollars in public and seen substantial shifts in population. Furthermore, casinos experience longer private monies that soon will be avail- The fortunes of Belle of Orleans and loss periods, in that it takes them more able to assist in the rebuilding of homes Belle of Baton Rouge reflect these shifts time to restore operations to their pre- and businesses devastated by Hurricanes and their impact on Louisiana casinos. disaster level. Accordingly, business Katrina and Rita, recovery workers with In eastern New Orleans, not only was interruption coverage is crucial. time and money on their hands will the Belle of Orleans riverboat casino only continue to contribute to the badly damaged, but thousands of homes It is important to keep in mind that coffers of the Louisiana casinos that in the surrounding area were devastated business interruption covers actual loss were able to weather the storms. by flood waters to such an extent that of income only as a result of physical any hope for a short-term recovery damage to the insured property. As Thus, while Louisiana perhaps missed remains unrealistic. such, it requires: actual physical loss to the opportunity to make substantive the property for a loss covered under the statutory and regulatory changes Recognizing this, the Louisiana Gaming policy; actual interruption of the busi- following the storms that would allow it Control Board has approved the move of ness operations; and loss of income as a to be more competitive with Mississippi, the Belle of Orleans from Orleans Parish result thereof. there is every reason to believe casinos to St. Mary Parish. The Belle of Baton in Louisiana will continue to do well Rouge, on the other hand, has realized Thus, if the property insurance does not pending the eventual return of an increase in revenues consistent with a include, for example, flood coverage, dislocated Louisianans and tourists who population shift from New Orleans to then interruption of business operations have traditionally supported the Baton Rouge after Hurricane Katrina. due to flooding is not covered. Louisiana casino industry. While Louisiana casinos that are back in Furthermore, coverage is generally operation have had an unexpected limited to loss of business income that Summer 2006 Casino Lawyer 25 James B. Donaghey, Inc. proudly salutes Owen Nitz and Jeff Cooper for their selection as the 2006 Gaming Executives of the Year. We sincerely appreciate the opportunity to join with Roy Anderson Corp and the construction team to partner with Owen & Jeff, and the rest of the Imperial Palace staff, in the rebuilding of the Imperial Palace Casino & Hotel in Biloxi, Mississippi. James B. Donaghey, Inc. is proud to have been a leader in the construction industry for over 75 years. We provide a complete Mechanical Contracting service, including HVAC, Piping, Plumbing, and Specialty Metal Fabrication. We specialize in the construction of hospitals, government offices, gaming and entertainment facilities, and industrial and commercial projects. From full Design Build to Design Consultation and installation, we remain committed to providing our customers with the most efficient systems possible, and ensuring their complete satisfaction. James B. Donaghey, Inc. Mechanical Contractors Bradley Sanders P.O. Box 469 109 Oak Street Biloxi, MS 39533 Tel: 228-432-0582 Fax: 228-432-5969 Cell: 228-806-3426 Summer 2006 Casino Lawyer 27 28 Casino Lawyer Summer 2006 Summer 2006 Casino Lawyer 29 Casino Lawyer 0906.qxd 8/16/06 9:02 AM Page 30 INTERNATIONAL MASTERS OF GAMING LAW presents New Orleans 2006 The Winter Conference Nov. 30-Dec. 1, 2006 The premier law review covering the cutting-edge legal issues important to the gaming industry. HISTORIC NEW ESSENTIAL FOR: ORLEANS IS BACK, Attorneys/Lawyers Gaming Vendors MORE VIBRANT AND Regulators Slot Executives LIVELIER THAN EVER. Corporate Counsel Internet Gaming Operators Casino Executives Marketing Executives COME TO AMERICA’S Public Officials Educators MOST UNIQUE CITY TO Entertainment Executives Students ATTEND THIS VITAL CONFERENCE FOCUSING ON TODAY’S MOST RELEVANT GAMING Questions? Write to [email protected] LAW ISSUES. To learn more, visit www.gaminglawmasters.com