Inside Gaming: Pinnacle Completes Purchase, Miccosukee Sue IRS and a $1 Million Mishap
In this week’s edition of Inside Gaming, Pinnacle Entertainment completes a big purchase, the Miccosukee Tribe sues the IRS, and the Horseshoe Casino Cincinnati mistakenly awards a million-dollar prize twice.
Pinnacle Completes $2.8 Billion Buyout of Ameristar Casinos
A few weeks ago, we reported that Pinnacle Entertainment announced a deal to sell an under-construction casino project in Louisiana to Landry’s Inc., the company which owns the Golden Nugget. Well, on Wednesday, Pinnacle continued to make moves, completing a $2.8 billion buyout of regional rival Ameristar Casinos.
The purchase was announced last December, and the eight-month process needed approval from nine state gaming regulatory bodies, Ameristar stockholders, and the Federal Trade Commission.
This merger was a first for the gaming industry in several years due to the negative affects of the recession. After the announcement was made, Bally Technologies announced that they would be purchasing slot machine-making rival WMS Industries for $1.5 billion.
Pinnacle’s aforementioned sale of a future casino in Louisiana was necessary to avoid any antitrust issues. With the completion of the purchase, Pinnacle now owns 15 casinos and racetrack casinos in nine states, including Ameristar’s two casinos in the Northern Nevada city of Jackpot.
“With this transaction, we have doubled the size of our company, the gaming and entertainment options four our guests, and career opportunities for our team members,” Pinnacle CEO Anthony Sanfilippo said in a statement.
The merger is receiving positive reviews on Wall Street. When Pinnacle sold the in-construction casino in July, their shares rose 4.3%. After the merger was completed on Wednesday, however, Pinnacle’s shares dropped 11 cents (0.5%) on the day.
Deutsche Bank gaming analyst Carlo Santarelli told investors Wednesday that Pinnacle’s projected profits may be conservative.
“In short, we see several positives for Pinnacle stemming from the Ameristar acquisition,” says Santarelli. “The pro forma free cash flow of the combined companies will contribute meaningfully to the equity value of the company as debt reduction commences.”
Pinnacle agreed to purchase Ameristar for $26.50 a share and to assume $1.9 billion of debt. The company has a senior secured credit agreement to help finance the transaction.
Brean Capital gaming analyst Justin Sebastiano told investors that Pinnacle’s growth makes the company’s shares “a core long-term holding for any consumer investor, not just those interested in the regional casino sector.”
Pinnacle also announced that the company has granted stock options and restricted stock to nearly two dozen Ameristar executives in an attempt to keep them on board.
“We now move forward in a collaborative manner with a clear focus on achieving a seamless integration, maximizing the synergies between these two complementary asset portfolios, and unlocking the value that is created by this much larger company,” says Sanfilippo.
The Las Vegas Review-Journal has more.
Miccosukee Tribe Sues IRS Over Back Taxes
On Thursday, the Miami Herald reported that the Miccosukee Tribe, which owns and operates Miccosukee Resort & Gaming, is suing the Internal Revenue Service over the tribe’s alleged failure to report and withhold income from its gambling distributions to members. The tribe currently owes the IRS $170 million, but rather than settling, the Miccosukee intend to countersue.
The counteroffensive from the Miccosukee also includes Attorney General Eric Holder and the Secretaries of the Treasury and Interior departments.
While several members of the Miccosukee face tax liens, the tribe believes they have evidence of a “secret deal” with a former chairman and the IRS. According to the Miccosukee, in 2005 former tribe chairman Billy Cypress, his personal lawyer, and the tribe’s general counsel made a deal with the IRS and handed over the financial records of certain tribe members. The West Miami-Dade tribe claims that the IRS has used this list to exploit their members and wage an unconstitutional tax war.
Colley Billie, the tribe’s leader, claims in the suit that he and the other tribe members didn’t know about the alleged deal until 2010 when Cypress left office.
“This suit involves willful, purposeful, and malicious actions by the United States... by selectively targeting the Miccosukee Tribe and its people for federal tax audits,” the suit says.
The IRS and other federal agencies have declined to comment.
The Miccosukee Tribe argues that it doesn’t have to withhold taxes on gaming distributions and that individuals don’t have to pay taxes on income from the tribe’s bingo-style slot machines and poker. The tribe’s general counsel, Bernardo Roman III, expanded upon this in 2011, writing to the IRS that “the distributions at issue are not subject to federal income taxation and therefore not subject to federal reporting and withholding under applicable Supreme Court precedent.”
Federal law states that, because the Miccosukee Tribe is a sovereign nation, the entity itself isn’t subject to federal taxes. However, once the tribe distributes profits from the casino to its members, they are individually responsible for reporting and paying income taxes. Additionally, the tribe must withhold taxes on income and turn those deductions over to the IRS.
In April, the IRS issued penalties totaling $58 million to hundreds of Miccosukee for failure to pay personal income taxes on shared casino profits from 2000-2005. The liens are likely to increase, because the tribe has continued to refuse to report and withhold taxes on individual allocations, as required under federal law.
This isn’t the first time the Miccosukee have engaged in aggressive, legal action. Last July, the tribe accused Cypress and one-time Miami U.S. attorneys Dexter Lehtinen and Guy Lewis, who represented the tribe, of embezzling $26 million. In May of 2013, Courthouse News reported that a judge in Miami ruled that the tribe must arbitrate the case.
For more, check out the Miami Herald.
Will the Real Kevin Lewis Please Stand Up
Horseshoe Casino Cincinatti, which is celebrating a $3 Million Summer Giveaway promotion, made a massive mistake early this week, resulting in the casino losing an extra $1 million.
On Saturday night, in front of a packed house, including news cameras and reporters alike, an announcer called out “Kevin Lewis” as the winner of the second of three million-dollar giveaways. Kevin L. Lewis, a 52-year-old Cincinnati native, was on hand, and happily accepted a ceremonial piece of paper alongside with his overjoyed fiancé.
“When I heard my name I said God finally gave me a big win,” he told ABC 7 in Cincinnati. “A lot of screaming and happiness, being at the right place at the right time.”
However, after Kevin L. Lewis stood before cameras to ceremonially accept his prize, casino leadership learned that a different Kevin Lewis was the rightful winner.
“This was our blunder,” Horseshoe Cincinnati Senior Vice President and General Manger Kevin Kline says. “So, consistent with our commitment to do the right thing for our guests, Horseshoe awarded a one-million dollar prize to each of the men.”
The second Kevin Lewis, 50, and also a native of the Queen City, was at home when the drawing occurred.
“I didn’t believe it at first,” he says. “[My fiancé] called me and said they called your name. I was calm. I calmed [my fiancé] down.”
The casino practices two levels of verification for its $3 Million Summer Giveaway contests, but Jennifer Kulczycki, Communication Director for Horseshoe parent company Rock Game LLC, declined to go into further detail about the process.
“There were several similarities between the gentlemen that led to the confusion on our end,” she told ABC News.
The third, and final, $1 million summer drawing will go on as planned at the Horseshoe on Sept. 1.
For more, head to WXYZ.com.
Photo courtesy of CountryInns.com.
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