Casinos bet big on L.A. gaming: clubs raked in $310 million in '97; slots next?

No one is likely to mistake Rosecrans Avenue in Gardena for the Las Vegas Strip.

But looming over the busy, six-lane industrial thoroughfare, the large, flashing sign for the Normandie Casino promises just that - "Vegas in L.A."

The claim seems a tad optimistic. Compared to the high-tech glitz and theme-park atmosphere of contemporary Las Vegas, card clubs like the Normandie tend to be drab, catering less to families and tourists than to serious card players. They huddle around dark, oblong tables behind stacks of chips, holding poker hands or shaking cups of dice, shouting out their good fortune and cursing their bad luck.

But like a gambler with a powerful hunch, local card club executives are betting that in the not-too-distant future, "Vegas in L.A." will be less a wishful boast than a fact of life.

"This industry is in its building stages," said Ron Sarabi, general manager of the Normandie and a 25-year gambling industry veteran who has operated casinos in Las Vegas and Lake Tahoe. "In the long run, this will be as exciting as running a casino in Nevada."

Sarabi is not alone. Across L.A. County, card clubs are taking a cue from their Nevada counterparts and moving from the margins to the mainstream - retooling their product from "gambling" to the more benign-sounding "gaming."

Some clubs are adding luxury hotels and quality restaurants; others are providing new sports and entertainment options. It's all part of an effort to extend beyond the limited and largely saturated market of hard-core gamblers.

The new push comes as the state begins to implement its first-ever set of regulations for California's 176 card rooms, which in the past have been monitored almost exclusively by the municipalities in which they operate.

Under legislation signed by Coy. Pete Wilson last year, the clubs face their toughest regulations ever - including regular reporting of revenues to state authorities and extensive background checks of all but the lowest-level employees.

The rules will be enforced by the attorney general's Division of Gambling Control, which was created as part of the legislation. When the division is funded and implemented in 1999, the attorney general will have an 81-member enforcement staff to oversee the state's card club operations.

In addition to increased enforcement, card rooms face a new annual tax of $3,700 per table, which will fund the new regulatory efforts - a levy that will shave hundreds of thousands of dollars off the clubs' bottom lines.

The new law follows five years of stalled efforts to regulate the industry, as competing interests - including the Attorney General's Office, conservative lawmakers opposed to any new bureaucracy, anti-gambling activists, card club proponents and the state's Indian tribes quarreled over how California should monitor its $9 billion card room industry.

Last year's bill, however, apparently proved an effective compromise - it passed unanimously in the Senate and by an overwhelming margin in the Assembly.

"Card rooms have been the only major gaming industry that has not been regulated," said Matt Ross, a spokesman for Attorney General Dan Lungren. "There's quite a bit of cash flowing in these places, and it's easy to see the criminal element step in."

In 1994, for example, an employee at the Bicycle Club Casino in Bell Gardens was sentenced to 12 years in federal prison for conspiracy, loan-sharking and extortion, after he was convicted of forcing victims to pay as much as 10 percent interest every three days for gambling debts.

Club operators characterize such incidents as aberrations, and insist that most card rooms experience less crime than the average shopping mall. Nonetheless, the clubs are embracing the new regulations.

Why? For one thing, the new law extends until 2001 a moratorium on any additional card rooms, keeping new players out of an already fiercely competitive market,

But equally important, the new laws confer a long-sought-after stamp of approval signaling that card clubs are regulated, safe, and legitimate. As a result, they provide a potentially useful tool in the drive for respectability.

"Our industry needs to be squeaky clean," said Andrew Schneiderman, vice president and general counsel of the Commerce Casino, LA.'s largest card club, with 200 tables, 2,200 employees and revenues of $110 million in 1997. "People want a good honest game in a clean environment. We want to provide that."

The potential payoff can be considerable, says William Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno.

As Eadington sees it, California in the 1990s [TABULAR DATA OMITTED] is not unlike Nevada in the 1960s, when state authorities enacted tough regulations to crack down on Mob activity, laying the groundwork for Las Vegas' transformation from Sin City into something at times resembling Disney World.

"Gambling industries in an unregulated context are marginalized, treated as second-class citizens," said Eadington. "By establishing a regulatory structure, you create an environment to make the industry legitimate. Look at what happened in Nevada - the operators become more respectable. The same thing could happen in California."

Even now, the card clubs already are a high-stakes business throughout California.

L.A. County's seven card clubs are among the state's largest and most lucrative. Collectively, L.A.'s clubs employ more than 7,100 people and generated some $310 million in revenues last year, according to a Business Journal survey.

Gamblers in California card clubs wagered about $9 billion last year - more than in horse racing and the lottery combined - according to the Attorney General's Office. And that does not include the scores of casinos on California's Indian reservations, which are unregulated by state authorities.

Raising those stakes is L.A.'s proximity to Las Vegas. Southern California is Vegas' largest market by far, accounting for 26 percent of the city's total visitors, according to the Las Vegas Convention and Visitors Authority. A 1997 study by the California State Library found that Californians spend $9.5 billion a year gambling in Nevada, making 14 million casino visits.

"If we could tap into just a small percentage of that, it would be tremendous," said Schneiderman.

Toward that end, the Commerce Casino recently purchased several parcels of land adjacent to the club and is set to break ground on a $25 million, 200-room luxury hotel - complete with a "tropical theme," according to Schneider-mall.

Already, he said, the numerous motels surrounding the casino often fill up on weekends when the casino hosts poker tournaments and other special events. With a larger facility of its own, the Commerce Casino can offer packages to card-players and tour groups; it also hopes to attract group meetings and even conventions.

Schneiderman is not the only one with such aspirations.

Hollywood Park Casino in Englewood is redirecting its marketing efforts to emphasize entertainment. A new series of live jazz concerts draws several hundred new customers to the casino each Tuesday and Sunday night, said Tom Bowling, the casino's vice president and general manager.

The Normandie Casino is putting similar efforts into marketing its 285-seat theater, which has featured Vegas-style acts like Crystal Gayle and Vicki Carr that sell out regularly, said Sarabi.

"It brings in people who have never been to a card club before," he said.

Meanwhile, the New Crystal Park Hotel & Casino in Commerce, the state's only hotel-casino complex, expects its 235-room hotel to attract local gamblers who might otherwise head to Vegas.

The club recently reopened after being shut down last October, when authorities discovered that its operator did not have enough cash to cover his outstanding chips. The new president, former garment manufacturer Leo Chu, insisted that such problems are a thing of the past.

He is more focused on building the club's clientele, paying particular attention to Asian tour groups that might be interested in staying at the hotel en route to Las Vegas.

Rooms that elsewhere in the city would cost more than $100 a night go for just $29.95 at Crystal Park, Chu said. A two-bedroom suite costs just $130.

"It's a very posh environment," said Chu. "We market this hotel like a player's paradise."

Such comments draw sneers from gaming executives in Nevada.

"These places are gambling joints - pure and simple," said Alan Feldman, a spokesman for Mirage Resorts Inc., which owns and operates the Mirage, Treasure Island and Golden Nugget casinos in Las Vegas. "They are very much minor league operations compared to everyone in Las Vegas."

Even the most bullish card club operators admit that L.A. clubs face a tough competitor in Las Vegas - and not only because Commerce, Compton or Inglewood hardly qualify as destination resort towns.

For one thing, California law severely restricts both the kinds of games a card club can offer and how such games are administered. Money is lost to other players, not to the house, which severely reduces a club's profit potential.

California law also forbids clubs from offering games of chance, such as craps, roulette and slot machines; instead, all gambling activities must include an element of skill.

Overturning the prohibition on Nevada-style games would require amending the state's constitution, something that even the most enthusiastic gaming executives say is a long shot at best.

"Our market is so narrow compared to people who have slot machines and '21,' "said Bowling. "People don't walk in here and automatically know how to play the games. There's an education process. You have to be very innovative in your marketing."

Still, card clubs have been able to survive since the region's first such venue, the Embassy Club, opened in Gardena in 1936.

Over the ensuing several decades, small card rooms dotted the region. The industry began to expand following the passage of Proposition 13, when local governments began looking for ways to replace lost property taxes.

Growth also has been fueled by the recent influx of Asian immigrants and tourists to Los Angeles, which has provided a new market of gamblers and spurred clubs to add tables and offer new games.

In the City of Commerce, the Commerce Casino contributes 13 percent of its gross revenues to the city, which last year accounted for 37 percent of the city's $32 million general fund, said Tom Bachman, the city's director of finance.

But Bachman said casino revenues have been relatively fiat for the past several years.

"Most of the clubs have been pretty stagnant," Bachman said. "It's hit the point of saturation. There's only so much market out there."

That situation could get even tougher in the months to come. There is a statewide moratorium on new card clubs until 2001. But before that went into effect, voters in Hawaiian Gardens voted to open a casino; its owners hope to attract players from Orange County.

And Hustler magazine Publisher Larry Flynt has plans to pay $8 million for the Eldorado Club in Gardena, which has been closed since 1996, and is intending a big marketing push when the club reopens.

"We're all fighting for the same customers," said Crystal Park's Chu.

But even as they fight among one another, the clubs are jockeying for position as they make their biggest wager ever - that California will one day allow full-blown casino gambling.

That day may be closer than people think, said Mark Bragg, a Palm Springs real estate developer who is working to put a referendum on the state ballot to allow slot machines - gambling's biggest moneymaker by far - in that city's three card rooms.

While Californians may not be ready for slot machines on every corner, Bragg is convinced voters will not object to full-service casinos in a single, out-of-the-way desert resort like Palm Springs - so convinced, in fact, that the new 250,000-square-foot casino and entertainment center he is building will be wired for slots.

"We eventually will win," said Bragg. "How long are people willing to see those billions of dollars going out of state without us getting any of it here?"

And if Bragg does win, other victories are bound to follow. Already, the wiring ducts that snake beneath the floor at the Hollywood Park Casino are ready to accommodate slot machines, said Bowling.

"If (slot machines) ever are permitted, we won't have to tear up the floors," he said.