IRS deals poker 'prop' new hand.

In the murky world of legalized betting parlors, the house gambler is a little-noticed figure.

Dubbed "prop players," they are paid hourly wages by the casinos to sit at tables and keep the games going. Unlike "shills," long used in Las Vegas, prop players in California card rooms must gamble with their own money. They keep their winnings and absorb their losses.

And that's become a problem for George Chang, a former Hollywood Park Casino house gambler who, according to the Internal Revenue Service, owes $8.6 million in back taxes on his winnings.

Chang, who had been paid $40 an hour to play poker for the Inglewood casino, failed to report $11 million in additional taxable income, the IRS claimed in April. It has demanded $4.9 million in back taxes for 1996-2000, plus another $3.7 million in penalties.

Chang's lawyers have filed a petition asking the U.S. Tax Court in Washington to overturn the IRS ruling, claiming the agency erred when it reconstructed his earnings based on a line of credit he had with the casino.

"They contended the money he borrowed was income," said Arthur A. Oshiro, Chang's Long Beach tax attorney, before quickly cutting off a telephone call. "I can't talk about that (case)."

An IRS spokesman said the agency is barred from commenting on pending tax cases. Chang, who left Hollywood Park's employ four-and-a-half years ago, could not be reached for comment.

His petition listed his home as the Crystal Park Casino Hotel in Compton, but the hotel operator said he checked out without leaving a forwarding address.

Keeping games alive

Chang's job--to lure other players to the tables where he was positioned--is not unusual among Los Angeles-area card rooms. "Petitioner's job was to help start games for the casino and to play continuously in games which needed players," Chang's petition said.

Most casinos have prop players, said Vanetta Watkins, an assistant to the president of the Hollywood Park Casino. "The only catch is they have to play with their own money," she said.

Watkins estimated that the 70,000 square foot casino, with 114 tables for various types of poker games and blackjack, has between 70 and 80 prop players on its payroll. Generally, prop players are paid between $15 and $50 per hour and are assigned to tables by casino operators. They are used mostly at poker tables, where as many as nine players at a time can keep the stakes high.

"You want to have the games going all the time," said I. Nelson Rose, a professor of gambling law at Whittier Law School in Costa Mesa. "Most people don't like to bet at a (nearly) empty table."

Casinos generally dictate where prop players are seated. If one table fills up, the prop player might be reassigned to a different table where a smaller number of people are playing and the stakes are lower. "They generally look for holes--tables with two or more seats open-and they'll jump in," said Mike Dixon, poker manager at the Hustler Casino in Gardena, which employs 30 prop players for its 55 tables.

Prop players used to act solely as independent contractors, and many still do. But in recent years, the industry has seen the emergence of companies that bankroll the players' bets.

"There are actually independent companies that will come in with a large amount of money and will play in games for hours," said Rose. "They are sometimes called prop players."

In Chang's case, the petition said he would put in eight hours a day at Hollywood Park's tables, using his own money to gamble. He was paid $40 an hour until April 1999, when he was placed on a part-time basis at $25 an hour.

According to his petition, Chang established a line of credit with Hollywood Park Casino to obtain the cash he needed to participate in the games.

In ruling that the cash borrowed and repaid on the credit line was income, the IRS estimated Chang had $8.6 million in winnings that should have been reported as income from Hollywood Park Casino alone, plus another $1.5 million at Crystal Park during 1998-2000.

The agency ordered Chang to pay a 75 percent penalty for civil tax fraud on additional income it determined he had earned playing at Hollywood Park and Crystal Park, along with Las Vegas casinos including the Mirage, Rio Hotel & Casinos, Treasure Island, Bellagio and Mandalay Bay.

Chang's petition challenged the IRS' method of estimating the additional earnings.

Odd job

Being a prop player isn't exactly a mainstream occupation. Casinos find them through advertisements in industry trade publications or fielding walk-in applications. Operators don't approach regular gamblers at their tables to become prop players because they don't want to put someone on their payroll who is already a steady customer.

"You like somebody who is not tight, likes to play and has a bankroll," said Dixon. "They're going to play (somewhere) anyway so they're looking to make an hourly wage plus benefits."

Unlike casinos in Las Vegas, Atlantic City or on Indian reservations, the 100 or so card rooms operating in California only rent space at the tables. Players are charged by the hand or for a fixed-time period.

In card room poker games, players take turns dealing and win or lose among themselves with the management of the casinos collecting fees from the participants.

In blackjack, players pay by the hand to participate. For instance, the fee may be 25 cents or some other amount for each hand played.

Al Underwood, marketing director at the Hustler Casino, said the pay players are usually aware when a prop player is at their table. "It's not a hidden device," he said. "It's a common business practice."

Nathan Barankin, a spokesman for the California Department of Justice that oversees enforcement of the state's gambling Jaws, said there are restrictions on how prop players can be used. "They can't move around the table to control the betting," he said. "The point of being a prop player is that he has a lot of money."

Currently, players don't have to register with the state, but the California Gambling Control Commission is devising a regulation that would require registration and ultimately state licensing.

Staff Reporter David Greenberg contributed to this story.