a publication of the international masters of …...hurricane katrina brought unimagin-able...

Supplement to Casino Enterprise Management magazine

VOL. 2 NO. 4 SPECIAL KATRINA ISSUE 2006

A P U B L I C AT I O N O F T H E I N T E R N AT I O N A L M A S T E R S O F G A M I N G L AW

VOLUME 2 NUMBER 4 Special Issue 2006Casino Lawyer is published four times a year by Casino Services Publishing, LLC . Copyright ©2006 IMGL Inc. This material may not be reproduced without written permission.

PresidentMichael Lipton

Elkind & Lipton, LLPToronto, Ontario, Canada

(416) 367-0871

Vice PresidentRobert Stocker, ll

Dickinson Wright, PLCCLansing, Michigan, USA

(517) 487-4715

SecretaryAnthony R. Coles

Jeffrey Green RussellLondon, England

011 44 207 339 7000

Treasurer & Membership DirectorJames B. Deutsch

Blitz, Bardgett & Deutsch, L.C.Jefferson City, Missouri, USA

(573) 634-2500

Vice President Affiliate MembersJohn Sullivan

Territory IncorporatedLas Vegas, Nevada, USA

(702) 222-1402

President 2002Frank Catania

Catania Consulting GroupNorth Haledon, New Jersey, USA

(973) 427-2500

President 2004-2005Anthony N. Cabot

Lewis & Roca, LLPLas Vegas, Nevada, USA

(702) 949-8280

President 2003Heidi McNeil Staudenmaier

Snell & Willmer, LLPPhoenix, Arizona, USA

(602) 382-6366

IMGL Executive DirectorMelissa Lurie

International Masters of Gaming LawBoulder, CO, USA(303) 449-9955

Summer 2006 Casino Lawyer 11 Casino Lawyer Summer 2006

It has been one year since the fury ofHurricane Katrina brought unimagin-able devastation to the U.S. Gulf Coast,its economy and its people.

Today, our most indelible images arethose of an historic city under water,followed by horrifying images ofwidespread lawlessness and thousandsof impoverished people waiting forhelp that would take days to arrive.

During those dark weeks, the mediaimages of post-hurricane despairemanated mostly from New Orleans,and viewers worldwide felt that greatcity’s despair. Mississippi’s Gulf Coastsuffered similarly, with lives lost,century-old historic homes andmansions destroyed, and the industrythat had for a decade served as theregion’s primary economic enginesimply washed away.

New Orleans garnered the lion’s shareof media attention – bothcompassionate and repulsive. It didthen and it still does a year later. Whilethe media loudly trumpeted the uglyside of humanity in the weeksfollowing Katrina, tens of thousands ofremarkable people – in Louisiana,Mississippi, and from around the world– quietly rolled up their sleeves andbegan the long and laborious task ofrebuilding America’s last truly uniquecity, and refashioning a thrivingcoastal state that only a decade agoseemed hopelessly impoverished.

Watching T.V. images of the Gulf Coastin the days following Katrina, it wasn’tdifficult to imagine a clean-up effortthat could drag out for years. It washard to fathom that casinos andrestaurants and other businesses vitalto the region’s rebirth would be back inoperation anytime soon. But in just a

year, the clean-up is nearly complete,much of the important planning isdone, and the rebuilding effort is infull swing.

Despair is giving way to rebirth.“The aftermath of Hurricane Katrina isproviding unique opportunities forrenewal and development inMississippi, unmatched in our state’shistory,” Gov. Haley Barbour said inannouncing a Katrina Recovery Expoheld in August in Biloxi.

I’m pleased to share with you this specialedition of Casino Lawyer, dedicated tothe thousands of gaming industryexecutives and employees, lawyers,lawmakers and regulators who pickedthemselves up off the mat, and are nowbuilding and shaping an alreadyemerging post-Katrina landscape.

International Masters of Gaming Law ishonoring two of those remarkablepeople with the inaugural GamingExecutives of the Year award. W. OwenNitz is an attorney and managingpartner of Nitz, Walton & Heaton in LasVegas. Jeffrey M. Cooper is a CPA withBradshaw Smith & Co. in Las Vegas.Together they are the co-trustees of theformer Imperial Palace, now IP Biloxi.

In describing how the casino and hotelamenities would be completelyrevamped, Owen famously told theMississippi Gaming Commission, “It’sgoing to be a mindblower.” Turns out,“mindblowing” best describes Nitz andCooper’s remarkable dedication torestoring their community.

They showed up to ride out thestorm and haven’t left.In the months after the storm, IP Biloxihoused the emergency’s first

Summer 2006 Casino Lawyer 3

responders, such as FEMA personneland an army of relief workers andinsurance adjusters. In just fourmonths, they completely overhauledtheir property and reopened it inDecember, the first Biloxi property to doso. That meant roughly 1,500 jobs backon line – bolstering both the economyand a community’s battered morale.

Beverly Martin, executive director of the Mississippi Casino OperatorsAssociation, praised the IP for helpingto restore a sense of normalcy to thecommunity by opening its meetingspace to community functions that hadnowhere else to go, such as Chamber ofCommerce events and the region’sannual Mardi Gras ball. The IP was hostto dozens of events that might not havehappened without the property’ssupport – events that helped bring acommunity together again.

There have been plenty of tangiblecontributions to the community, aswell. More than 1,300 wheelchairsdistributed throughout the region.Furniture and bedding from the oldImperial Palace distributed. A semi-trailer filled with nice, new clothing(shipped in from Las Vegas, thanks tothe efforts of Jan Nitz and KennaCooper). And monetary contributions:

• Harrison County Habitat for Humanity, $200,000

• The Living Cities, $50,000

• Salt and Light Ministries Foundation, $30,000

• Mississippi Coast Coliseum, $15,000

• Gulf Coast Symphony, $15,000

• Ohr-O’keefe Museum, $10,000

They even helped bring a schoolback to life.Sister Mary Jo of Nativity BVMElementary School recalled “a phonecall from two gentlemen” who wantedto offer a donation toward rebuildingthe school. I’ll let her describe whathappened after several meetings withOwen and other representatives of theImperial Palace Mississippi Charity.“Owen simply said that the trustees hadagreed to take care of things for us.When I asked which portion of thedamage they would be sponsoring, hesimply said ‘All of it.’

“My friends, The Imperial PalaceMississippi Charity has agreed to takecare of the entire restoration of ourschool. This donation will include:replacement roofs for the gym, school,and new addition; stage curtains;flooring for the gym; flooring for thestage; all broken windows in the school;all broken blinds in the school;replacement of the floor tile in the firstfloor hallway; a new sound system forthe gym; fencing repairs to the schoolperimeter and to the back playgroundand soccer goals for the playground.The total amount is somewhere around$500,000.”

IMGL Biloxi member Britt Singletaryoffered this supreme praise. “Not asingle IP employee lost their job.Everybody who wanted to work still hada job.” To learn more about these twoextraordinary men, the company theyrepresent and what they have meant toBiloxi and its people, turn to Page 8 andread Singletary’s feature story.

Also in this special issue of CasinoLawyer: Sharon Harris writes about the regulatory issues facing both governmental/law enforcement

agencies and operators followingcatastrophic disasters like Katrina andRita; Len Blackwell says the MississippiGulf Coast will prevail and shares hisreasons why; Sam Weaver outlines thechallenges and opportunities that lieahead; and Tina Singletary writes aboutplayer disputes.

According to Stephen Richer, executivedirector of the Mississippi Gulf CoastConvention and Visitors Bureau, therebirth in Mississippi is gainingmomentum:

6,800 of 17,500 pre-Katrina hotel roomsare open, and occupancy averages 80 to90 percent.

Most golf courses have reopened,helping to rebuild an industry worth$100 million a year to the coast.

Airline bookings at the Gulfport-Biloxiairport in August 2006 are 14 percentabove last August, pre-Katrina.

The casino industry is rebounding alongwith the community, Richer says. Fivecasinos have reopened, putting about6,000 people back to work. Severalothers are expected to open by Sept. 1,bringing that number to 10,000. Thecoast had 12 casinos before Katrina.Richer expects 20 by 2010.

To the thousands of men and womenwho have brought the Gulf Coast andthe gaming industry back from thebrink: we applaud your efforts, weadmire your passion and determination.

Michael Lipton,

President

4 Casino Lawyer Summer 2006

ContentsVOLUME 2 NUMBER 4 Special Katrina Issue 2006

page 6

DEPARTMENTS

1 Officers

2 Message from the President

4 Contents

A Rising Tide Lifts All BoatsMississippi maintains buoyant gaming market. By Britt Singletary6Enduring Regulatory Challenges in a DisasterHow did the gaming industry handle the devastation of HurricanesKatrina and Rita?

By Sharon Harris

8

Why the Mississippi Gulf Coast PrevailsMississippi’s continuing robust recovery is cause for great optimism.

By Leonard Blackwell14

The Shifting Landscape of GamingHow a natural disaster changed Mississippi legislation.

By Samuel Weaver20

Katrina’s Impact on Louisiana CasinosLouisiana casinos that are back in operation have had an unexpectedboost in revenue since the storms.

By J. Kelly Duncan

24

INDEX OF ADVERTISERS

Aladdin Construction ..........................................................................................................................28Bradshaw, Smith & Co., LLP ................................................................................................................12Community Bank ................................................................................................................................28Delta Sanitation ................................................................................................................................CV3Ernst & Young......................................................................................................................................25Glenn Rieder Inc. ................................................................................................................................13Haynes Electric Company, Inc...............................................................................................................26Industrial Corrosion Control, Inc. ........................................................................................................19International Masters of Gaming Law (IMGL)..............................................................................28, CV4IP Hotel & Casino ................................................................................................................................11J. Daniel Schroeder Realty..................................................................................................................CV3James B. Donaghey, Inc. ....................................................................................................................27J. E. Borries, Inc. ................................................................................................................................19KHS&S Contractors ..............................................................................................................................15Konami Gaming ..................................................................................................................................9KONE Inc. ............................................................................................................................................13Louis Smith Construction, Inc...............................................................................................................28Nitz Walton & Heaton Ltd. ................................................................................................................12Northern Trust ....................................................................................................................................23Roy Anderson Corporation ................................................................................................................CV2Sanders Hyland Corporation .............................................................................................................. 29Sawyer Foster Group............................................................................................................................17Shuffle Master Inc. ................................................................................................................................5Singletary & Thrash, P.A. ....................................................................................................................21

page 8

page 14

page 20

page 24

On the Cover: Owen Nitz and Jeff Cooper, IMGL 2006 Co-Gaming Executives of the Year. Photo courtesy of the IP, Biloxi, Miss.

Congratulations...Congratulations...


In 1972, Ralph Engelstad, like HenryFord, had a better idea.

He purchased Flamingo Capri Hotel andCasino on the Las Vegas strip, whichwas in bankruptcy, and soon foundhimself in the hotel-casino business.

The property was renamed ImperialPalace and initially consisted of 350rooms and a small casino. Engelstad andhis wonderful wife, Elizabeth, “Betty,”operated the Imperial Palace until hedied. By that time, the hotel hadexpanded to 2,700 rooms and employedover 2,000 people.

His attorney at the time was W. OwenNitz who remained his attorney for 41years until Engelstad’s death, November26, 2002.

Yet another symbol of Engelstad’s long-time friendships with so many in thegaming world, his attorney, JeffreyCooper of Bradshaw, Smith & Co., sawto it that Imperial Palace continued tobe a success.

Later, in 1993, Engelstad decided toexpand into the Mississippi market bybuilding the Imperial Palace ofMississippi. The resort opened inDecember 1997 with 1,200 rooms and1,500 employees.

Prior to Engelstad’s death, he and hiswife established the Engelstad FamilyTrust which would be guided by threetrustees: Elizabeth Engelstad, W. OwenNitz, and Jeffrey Cooper.

Before Hurricane Katrina, Betty, Owen,and Jeff made the decision to performrenovations to the Biloxi property tomake it more competitive. The casinoand room renovations were barelyunderway when Hurricane Katrinastruck on August 29, 2005.

When Ralph purchased the presentlocation of the Imperial Palace, he waswell aware of the dangers of a majorhurricane.

On many occasions he predicted a hur-ricane would drive the casinos on the

front beach all over Biloxi, but ImperialPalace was in a safe harbor and would beback in business before the other casi-nos could rebuild.

While Ralph did not live to see his pre-diction come true, Owen and Jeff sawthat while the hurricane was a tremen-dous catastrophe for the gaming indus-try on the Mississippi Gulf Coast, it alsocreated an opportunity for the ImperialPalace to not only improve its positionin the Biloxi market but to become aleading gaming force in the state.

The day after the hurricane, Owen andJeff pulled into our driveway. Theyasked if Tina and I were okay and if theycould live in our home, and then direct-ed us to get to the property as soon aspossible to assist in reopening the hotelto house FEMA employees, constructionworkers, and insurance adjusters.

General Manager Jon Lucas directed hisgreat management staff, Pete Burns,Ralph Burdick, Brad Rhines, StephenMorgan, Bob Brigham, Kelli McCarthy,

By Britt Singletary


and other employees in a monumentalcleanup effort.

Within days the hotel was occupied bymuch needed relief workers.

With the support of FEMA, the Corps ofEngineers, and the City of Biloxi, utili-ties were restored so the hotel was notonly habitable but also enjoyable.

During Katrina, the casino barge floatedup approximately 24 feet within itsberth area and, when flood watersreceded, came down in that place.

While it suffered damage, it was essen-tially intact and ready for renovations.Roy Anderson Corporation was hired asthe general contractor to protect theproperty from additional damage and tobegin a room-by-room renovation ofthe hotel. Roy hired numerous subcon-tractors, most of whom placed congrat-ulatory messages to Owen and Jeff inthis magazine.

These contractors expedited their sched-ules to make the Imperial Palace dreamcome true.

They worked to exhaustion and workedmiracles.

For the 122 day time period between thehurricane and the grand reopening ofthe hotel and casino on December 22,2005, Owen Nitz and Jeff Cooper werein Biloxi, Miss., practically on a dailybasis.

They decided to rename Imperial PalaceIP after the reopening.

Some older restaurants were eliminated,others renovated, and new food andbeverage venues created. A gourmetrestaurant named Thirty-Two has been ahuge success and IP added the Carnivalde Brazil, a new sports bar named TheSports Page, a new lobby bar known asThe Chill Lounge, and a late nightvenue offered as Club IP.

New slot machines were added; a pokerroom and high-end gaming areadesigned and built.

When the IP held its grand reopeningon December 22, 2005, it was embracedby the community and has enjoyed acontinuously packed house and record-breaking gaming revenues.

Cooper said, “Owen and I have been

constant companions on this wild ride.The entire experience has been incredi-ble.”

IP has proven itself to be a great corpo-rate citizen for the Mississippi GulfCoast.

As outlined in the IMGL President’s let-ter, IP has donated substantial sums ofmoney for the rebuilding of Biloxi. Itprovided continued employment,including bonuses and gift certificates.It provided charitable assistance in theform of money, services, wheelchairs,equipment, and clothes.

None of this would have been possiblebut for Ralph Engelstad’s foresight inbuilding IP Biloxi at the location heselected, as well as the continuing fore-sight and financial courage to commitresources to Biloxi and the MississippiGulf Coast by Owen Nitz and JeffCooper.

They are truly deserving of their selec-tion as Co-Casino Executives of the Yearby IMGL.

Prior to the introduction of gaming intothe Mississippi Gulf Coast, tourismdropped to approximately a million vis-itors per year. In the early 1990s, everyhotel on the Mississippi Gulf Coast wasclosed or in bankruptcy. The economy

for the future looked grim indeed.

Before Hurricane Katrina, the state’sgaming industry provided approximate-ly 14 million visitors per year.

Following Hurricane Katrina, no onecould predict the extent to which thegaming market could restore itself and,if so, how long it would take for thetourists to return in numbers necessaryto support the casinos located on theMississippi Coast.

Some casinos decided not to rebuildtheir properties and many people,including the author of this article,advocated a conservative approach torestoration.

Nitz and Cooper had the optimism anddetermination to not merely rebuild IP,but to devote even greater financialresources to make it a premier propertyable to compete with any gaming facili-ty in the State of Mississippi.

Their vision has been proven by thetremendous acceptance and apprecia-tion by the public.

IP’s success has convinced other gamingproperties to not only rebuild but toexpand and improve their facilities aswell. The future for the Mississippi GulfCoast gaming market is going to begreater than it was prior to HurricaneKatrina.

The ripple effect created by Nitz andCooper leads the Mississippi Gulf Coastgaming market’s boom in the develop-ment of condominiums, residential sub-divisions, golf courses, and the desire bynew gaming companies to build addi-tional hotels and casinos along theCoast.

An old adage in Biloxi is that “a risingtide lifts all boats.” The future of the IPand the Mississippi Gulf Coast is nowassured to be prosperous.

The decisions made by Nitz and Cooperto invest their time, expertise, and theEngelstad Family Trust resources backinto Biloxi had a great deal to do withshowing other developers that theMississippi Gulf Coast remains a greatplace for new development.

The future for the

Mississippi Gulf Coast

gaming market is

going to be greater

than it was prior to

Hurricane Katrina.


Once the wind and massive rainsubsided from Hurricanes Katrinaand Rita last year, millions of Gulf

of Mexico residents and business ownersslowly returned. They evaluated thedamage and hoped to resurrect any rem-nants of their former lives.

Navigating the layers of bureaucratic redtape proved challenging. However, thetask for the gaming industry exceededthe obligations of private citizens. Itinvolved several more levels of oversightand regulation.

How did the gaming industry inMississippi and Louisiana handle thedevastation? How has it proceeded torevive and reopen the numerous dam-aged and destroyed properties? How hasthe industry in both states adjusted toany regulatory changes resulting fromthe hurricanes?

The destruction in Louisiana andMississippi was dramatically differentdue to the different storm directions.Louisiana received a double dose ofdamage. New Orleans escaped much ofKatrina’s original surge, only to suffersevere damage from the levee breachesthe following day.

The force of the post-Katrina leveebreaches and Rita’s destructive windsthree weeks later severely damagedHarrah’s land-based casino in NewOrleans and totally destroyed two river-boats: Bally’s in New Orleans andHarrah’s in Lake Charles.

The Mississippi gaming industry alongthe Gulf Coast confronted a differentscenario, but with similar consequences.

Katrina’s strong winds and stormsurges ripped gaming barges fromtheir moorings, often throwing themacross highways.

These unprecedented circumstancespresented a tough burden for regulatorsand other law enforcement personnel.They have had to walk a fine line touphold their obligations to their juris-diction’s gaming laws while adapting toa crisis situation.

Operators have also worked hard toovercome their own set of challenges.

The goal is to rebuild damaged casinosand properties amid strict, but chang-ing, legislation and regulations.

It is a delicate balancing act for all par-ties due to the extraordinary nature ofthe hurricanes and their damage.Everyone is learning as they go along;much of it is a trial and error situation.

Once the skies cleared, operators quick-ly submitted valid insurance claims forprompt payouts. Maintaining adequateinsurance coverage is vital for operators,not only to continue conducting busi-ness, but also to comply with regulatorymandates.

Kelly Duncan, an attorney with Jones,Walker, Waechter, Poitevent, Carrere &Denegre, LLP in New Orleans, urges

operators to follow legal requirements.He said, “State and local governmentshave fixed annual fees and/or long termlease agreements with the casinos.Properties must ensure their appropriatebusiness interruption coverage before acatastrophe in order to manage the risksof natural and man-made disasters.

“Casinos uniquely rely on daily cus-tomer interaction, so any disruptioncould have a negative impact. Also, casi-nos must factor in a ‘loss period’ timefor a casino to restore operations to apre-disaster level.”

Because Katrina instantly left hundredsof thousands homeless and unem-ployed, all casino executives launchedinto disaster management mode toquickly assess their own liabilities andmake hard choices. Operators knewthey must play an important role in therecovery process. The multi-site casinooperators, with corporate offices outsidethe Gulf Coast region, had the extraadvantage of significant resources.

Harrah’s Entertainment faced the dilem-ma of a two-state crisis. The companyimmediately established procedures tocontinue paying more than 6,000employees for months. They alsoworked closely with the Red Cross andother humanitarian groups to providemedical, housing, food, clothing sup-plies, and services to displaced residents.

The company formed the Harrah’sEmployee Recovery Fund, with an ini-tial commitment of $1 million from the

By Sharon Harris


Harrah’s Foundation. Harrah’s employ-ees received first rights to job opportu-nities throughout the U.S. at otherHarrah’s properties.

MGM MIRAGE’s Beau Rivage Resort &Casino in Biloxi, Miss., sustained mil-lions of dollars in damage. Prior toKatrina, the corporate headquarters hadpositioned staff in four states to preparefor a significant recovery effort.

Payroll and benefits continued for all3,400 Beau Rivage employees for 90days, including all earned vacationand full health benefits. TheRecovery Center, located on BeauRivage’s employee parking lot, dis-tributed paychecks.

The Employee Assistance Center providedcrisis counseling services, financial plan-ners, FEMA representation, banking per-sonnel, and state health professionals. AJob Recovery Center opened at otherMGM MIRAGE properties offered employ-ment opportunities for anyone wishing torelocate to their Nevada venues.

A special recovery fund began with a $1million corporate donation, and thecompany later matched the donationsof its 70,000-member workforce.

For decades, residents of the Gulf Coastregion have experienced tropicalstorms and hurricanes, and haverebounded from damage within theirtowns. However, by anyone’s stan-dards, Katrina easily fit into a new cat-egory that required extraordinaryresponses. The Biloxi offices of theMississippi Gaming Commission(MGC) sustained damage, losing elec-trical and telephone service.

Mississippi law mandates that all casi-nos submit an emergency plan to theMGC, detailing their emergency plansfor everything from power failures torobbery. State laws, legislating that allgaming floor barges be attached to thehotels or the docks, proved to be theindustry’s undoing.

Larry Gregory, executive director of theMGC, describes the process. “Once astorm enters the Gulf of Mexico, MGCpersonnel closely monitor the storm inconjunction with state and local emer-gency personnel. Before closures, thereare certain procedures that must be fol-lowed to ensure the safety of theemployees and the security of funds,”he stated.

Katrina ravaged the entire infrastructureof the area, making communicationnext to impossible.

“Despite FEMA trailers being used as tem-porary offices, the MGC could not accessthe database of work permitted personsand perform necessary backgroundchecks. The Vicksburg office, 275 milesnorth of Biloxi, processed and issuedwork permits to ensure that when somecasinos reopened in December, theycould be fully staffed,” Gregory said.

All 13 of Mississippi’s Gulf Coast casinossustained enough damage and destruc-tion to render them inoperable. EvenBeau Rivage, built to withstand 20-footstorm surges, sustained severe structuraldamage and destruction of its first floorcasino, restaurants, and retail shops.

Thousands of destroyed slot machineslay all over the roadways. Despite thecatastrophe, security and accountabilityhad to be protected. The MGC issued aCommission Industry Letter three daysafter Katrina hit, hand delivered fromthe Vicksburg and Tunica Commissionoffices to the general managers of eachoperating property. The order prohibit-ed the redemption of any chips origi-nating from the Gulf Coast casinos.

All MGC gaming agents are law enforce-ment certified, with police powers tomake arrests and enforce the law. Onlyauthorized personnel were permitted toremove the damaged slot machinesfrom the barges and highways.Licensees recorded the serial numbers ofthe slot machines to be destroyed andreported them to the MGC. The CPUboard typically was removed andsmashed separately from the machine.

Louisiana’s gaming industry fared better.

Of their 15 riverboat casinos, only two -Bally’s in New Orleans and Harrah’s inLake Charles - were totally destroyed.The other 13 were far enough out of thestorm’s path to survive. Also, Louisiana’sthree Indian casino locations remainedunaffected.

The Louisiana state government hasprocedures in place for casino personnelto close a property after a disaster. Toensure functioning of the monitoringsystems, casinos must take a “final elec-tronic snapshot” of the final metercounts after the last patron exits theboat. In a power failure, backup powerwill keep the machines operational.

If the casino is destroyed, but themachines may be safely accessed, casinomanagement will attempt to collect themoney from the machines. Stories haveemerged of some casino managers andexecutives cleaning sludge from coinsthat they recovered from the riverboats.

According to Senior Trooper DwightRobinette Jr., public information officerof the Louisiana State Police Bureau ofInvestigations, “If the electronic gamingdevices are ‘floating on the river’ theelectronic snapshot of the meters is usedfor accounting. For unsalvageablemachines, the properties must notifyofficials as to which machines eitherhave been destroyed or that they wishto destroy.

“When possible, the logic boards andsoftware are removed from the cabi-net and crushed separately. A Divisionagent is scheduled to witness the demo-lition of the machines and removal oftheir serial number plates.”

The Mississippi state government real-ized right away that if the gamingindustry were to ever recover andreopen along the Gulf Coast, expeditedchanges had to occur. Mississippi’s regu-lations are based on statutory law,which required amendments to nowpermit casinos on land within 800 feetof Gulf waters.

Gregory said, “In order for the casinosto return and obtain financing andinsurance, some changes had to bemade. The Gaming Control Act givesregulatory authority to theMississippi Gaming Commission(MGC). Fortunately, provisions weremade for the MGC to adopt, amend,or repeal regulations if deemed in thebest interest of the state ofMississippi. This gives us flexibilityduring a disaster.”

Since the change of the laws inMississippi, most coastal casinos willmove onshore and shift to a cashlessfloor. The MGC staff tests all gamesoffered for play, and there is now ade-quate staffing.

Gregory said, “Shortly after Katrina,manufacturers were asked to deter-mine the timeframe for replacement.Due to the staggered reopening of thecasinos, no testing changes were need-ed. The MGC has sufficient staff formachine testing.”

International Masters of Gaming Law2006 GAMING EXECUTIVES OF THE YEAR

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

CONGRATULATIONS

W. Owen Nitz Jeffrey M. Cooper


Mississippi casino operations havebeen streamlined and all slot machinesare connected to a computer systemthat records its activities. The gaminglab examines each slot machine, plac-ing security tape over the computerchip to prevent any tampering. TheMGC maintains a list of slot machineserial numbers.

In Louisiana, the gaming laws haveremained intact. The Louisiana indus-try monitors new placements with abroader scope. When machines areregistered, a manufacturer’s represen-tative, the operator, and a state agentmust all be present. “Prior to reopen-ing any boats, a sample of the games istested to ensure communication withthe host has been maintained orrestored,” Robinette said.

One year later, the chainsaws arebuzzing, the hammers are thumping,and the drills are humming.Reconstruction is underway all alongthe Mississippi Gulf Coast, withimpressive results. The first group toopen was Imperial Palace, Isle of Capri,

Palace Resort & Casino, BoomtownBiloxi, and Treasure Bay. For some, thejob was made easier by their Back Baylocation, which spared them a devas-tating direct hit.

Most recently, Grand Casino Biloxiand Beau Rivage opened for businessin August. Beau Rivage purposelyreopened on August 29, on the firstanniversary of Hurricane Katrina.Casino executives realized thepoignant symbolism of the date.Fortunately, no employees died duringthe storm, and employment hasincreased to 3,800.

Beau Rivage President and COOGeorge Corchis said, “We’re confidentin the future of the Biloxi market …theopening of Beau Rivage on August 29isn’t the end of MGM MIRAGE’s devel-opment in Biloxi. We’ll continue ourinvestment in the community.”

One hundred miles west, New Orleanshas its own reconstruction story.Harrah’s New Orleans reopened itsland-based casino this past February.

The site in downtown New Orleanshad closed shortly before HurricaneKatrina made landfall near the city.The building sustained storm damage,and was used by first responders as abase of operations in the days follow-ing the storm.

After several months, the extensiverepairs to the facility have beencompleted. The casino’s electronicsystems and gaming devices on the115,000-square foot gaming floor arefully operational.

As economic development continuesover the next several years, the GulfCoast should enjoy a transformation,as it did in the 1990s. Thanks to thegaming industries in Mississippi andLouisiana, the region can anticipatecoming back bigger, stronger, and bet-ter than ever.


KONE Inc. is pleased to honor

W. Owen Nitz and Jeffrey M. Cooperof Imperial Palace Casino

as IMGL’s 2006 Gaming Executives of the Year.

1-800-956-KONE (5663) lwww.kone.com

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.

Glenn Rieder, Inc. is the manufacturer of architecturalmillwork and related trade interior contracting servicesfor IP Hotel & Casino Biloxi, Mississippi.

• Lobby• Carnaval de Brasil Restaurant• Chill Ultra Lounge• Suites• Executive Off ices• Spa

Architec tural Millwork &Custom Interior Contracting

Glenn Rieder

Congratulations to Owen Nitz and JeffCooper from IP Hotel & Casino for beingawarded the Co-Casino Executives of theYear Award by International Masters ofGaming.

Glenn Rieder, Inc. thanks Roy AndersonCompany and IP Hotel & Casino for itsinvolvement in this project .

Carnaval de Brasil Restaurant

Chill Ultra Lounge

Visit our new website:www.glennrieder.com

Glenn Rieder, Inc.3420 West Capitol DriveMilwaukee, WI 53216Phone (888) 449-2888

By Leonard A. Blackwell II

One year after Hurricane Katrina ravaged the Mississippi GulfCoast, 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 herein Mississippi: Our experience gained from survivingHurricane Camille in 1969 and the spirit of our people; ournew Onshore Casino Siting Legislation; the Gulf OpportunityZone Act of 2005; the Mississippi Gulf Coast Region UtilityAct; and, the foresight and leadership of our elected officials.

First, we saw after Camille that recovery can happen and thatlife is measured in milestones.

I had been here on the coast practicing law for three yearswhen Hurricane Camille roared ashore on the night of August17, 1969. With sustained winds of 175 miles per hour andgusts 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 wasa tightly wound storm with 27-foot surges and came throughlike General Sherman’s army, except it was marching from thesea, killing people and destroying property all the way fromMississippi to Virginia.

I remember returning to my home the following day and see-ing downtown Gulfport in shambles, several barges in the


middle of our beach road, U.S. Highway90, 1500-pound rolls of newsprintwashed from the port storage facilityand strewn like toys all the way to WestGulfport, not to mention severe devas-tation along the beach.

But we recovered.

Without electricity or air conditioning,we used Coleman lanterns to light ouroffice and old manual typewriters tohelp people fill out proof of loss to theirinsurance companies and make SmallBusiness Administration (SBA) loanapplications.

There was nothing heroic in this; it wasjust typical of how every business andgovernment sector performed. Onceutilities were restored, SBA started dis-bursing funds and people startedrebuilding. Businesses started springingup to handle the needs of the popula-tion in the rebuilding process.

The point I want to make is that the levelof business activity was magnified afterCamille, there was an influx of new resi-dents, commerce was ratcheted up toanother level, and while from time to timewe had the occasional cyclical slowdownsexperienced by the nation as a whole, wenever returned to the sleepy coastal com-munities we had been prior to Camille.

That ratcheting up to the next level hasalready occurred following this recenthurricane, but catalysts are in place tomake it happen again in a more robustfashion, on steroids.

Also, I want to acknowledge the church-es and individuals who have helped inour recovery effort. Every day we wit-ness acts of real charity—of a Catholicchurch being restored by a group ofCarolina Baptists; of a Jewish groupendowing a mental health center forpost-traumatic storm-related stress; of aNew York congregation contributing$250,000 to help my own church, St.Mark’s Episcopal, rebuild its sanctuary.

IMGL even gave money to help MercyCross students in Biloxi purchaseschool uniforms. To so many we owe adebt of gratitude.

Secondly, we now have on shore gaming.After Interstate 10 bypassed the route ofour scenic beaches in the late 1980s, the

Mississippi Legislature legalized “cruisevessel” gaming.

How does gaming exist as such a cata-lyst for tourism in a straight-laced Biblebelt state like Mississippi? In a state thatpresently has only seven gaming coun-ties and 75 non-gaming counties, howcould such a thing pass through theconservative Mississippi legislature?

It all started as a cruise vessel gaming lawwith cruises to nowhere, so long as thevoyage was outside the three mile limit.Later, a judge signed an order saying“You don’t actually have to go beyondthe three mile limit, as long as you aresailing around in the Mississippi Sound.”

One night, during the last weeks of the leg-islative session, in the dead of night wheneveryone was tired, a very smart Greenvillelegislator, Sonny Meredith, removed theword “underway” from the law by addingan amendment that few members read,and when the vote was taken the next day,dockside gaming was born.

Mississippi’s Gaming Control Act is theone patterned among all the states mostclosely to that of Nevada, except it is bet-ter. Mississippi’s “double whammy” is areasonable tax rate coupled with a stableregulatory environment. We also haveno convenience gaming. The only placeone can legally place a wager is in a fullfledged, regulated, taxpaying casino.

The flaw was that until October of 2005,all casinos were required to float. Eventhough they were on huge barges thatlooked like buildings, they operated assuch, based on the legal fiction thatthey were still dockside “cruise vessels.”

Pre-Katrina dockside gaming businesson the Mississippi coast, even with the“floating” requirement, attracted over$3 billion in capital investment in casi-nos, hotels, and restaurants, and grew toa business generating $1 billion annual-ly and directly employing 15,000 peo-ple—just on the Mississippi Gulf Coast.

Although we advocated moving casinosinto permanent onshore structures, thelegislature wouldn’t touch the law (InMississippi, it is generally reckoned thatProtestants don’t recognize the Pope,Jews don’t recognize the Trinity, andBaptists don’t recognize one anotherinside casinos).

Then came Hurricane Katrina, and casinobarges were snapped from their huge per-manent mooring pilings and depositedlike matchboxes along the shoreline; theLegislature met in special session and onOctober 17, 2005, the Onshore GamingLaw was enacted, allowing casinos hence-forth to be in permanent structures so longas they are within 800 feet upland of themean high tide line.

The impact of the Onshore Gaming Lawhas already been momentous. Insuranceissues have been simplified. Over $5 bil-lion in capital casino projects arealready in the works, with more tocome. Confidence in market sustain-ability is high.

Third, there is the impact of federal leg-islation providing for hurricane relief.

As our state leaders were acting, our con-gressional delegation was busy steeringthe Gulf Opportunity Zone Act of 2005through the United States Congress. Oneof our senators, Trent Lott, is the formermajority leader of the Senate. Our seniorsenator, Thad Cochran, currently chairsthe Appropriations Committee.

On the House side, DemocraticCongressman Gene Taylor is a rankingmember of Armed Services andTransportation. Democrat BennieThompson has long been a stalwart sup-porter of tourism and a leader in recog-nizing that gaming is a real catalyst tomake our state a resort destination.Congressmen Roger Wicker and ChipPickering have also been leaders.

And our Governor Haley Barbour usedto be a lobbyist. So with such a steeringcommittee, the Gulf Opportunity Zonelegislation was adopted.

Aside from providing tax incentives foremployers who hire people in the 49counties in the affected area inMississippi, 11 counties in Alabama, and31 parishes in Louisiana, the GulfOpportunity Zone Act contains two pow-erful business incentives for recovery.

First, taxpayers (investors) who build orreconstruct business properties in theaffected area and place them in serviceby 2008 can take a 50 percent deprecia-tion allowance in the first year. Gohome and tell them: Y’all come!


Alternatively, the Act authorizes govern-ing authorities to issue qualified privateactivity bonds for the construction,reconstruction, or renovation of quali-fied business properties based on thecredit of the business applicant borrow-ing the money. In other words, this con-duit tax exempt financing does not obli-gate the local or state government, so itis a financing mechanism that works inmuch the same way as industrial rev-enue bonds.

The “GO Zone” Bonds are patterned aftera similar program of “liberty bonds”Congress enabled for New York after the9/11 tragedy. Because the interest theybear is exempt from state and federal tax,borrowers who interest in the zone canenjoy low interest financing.

The fourth tool for recovery comes fromMississippi’s share of the $19 billionKatrina appropriation made byCongress and involves, in addition todirect grants for housing, the provisionof water, sewer, and storm water man-agement infrastructure in the six south-ernmost counties of our state.

As Community Development BlockGrant funds awarded by Housing andUrban development, we are told $500million will be spent in these sixcounties - the three counties border-ing the coastline and the second tierof counties immediately north of us –to expand water, sewer, and stormwater infrastructure to accommodateanticipated growth.

The Mississippi Department ofEnvironmental Quality has underway aplanning process to develop a regionalwater, waste water, and storm waterplan for these utilities, and this infra-structure will stimulate growth inupland areas in unprecedented ways.About 30,000 homes need to be rebuiltor repaired, and planned communitiesutilizing smart growth concepts arealready underway.

The experience of recovery after Camille,the new Onshore Gaming Statute, theGulf Opportunity Zone Act, and theMississippi Gulf Coast Region Utility Actare all measures to give us confidence inrecovery. But the final point I want tomake is perhaps the most significant ofall – the foresight and leadership of ourlocal government officials.

The economy on the Mississippi GulfCoast was simmering, just about to boil,just before Katrina hit. Biloxi had 2,900condo doors in the pipeline. Majorexpansions had been funded and wereunder construction. There was $1.4 bil-lion in highway funds for the U.S. 49,the Port Connector, and the I-10 con-nectors 605 and 67, not to mention theBayview and Caillevet Street projectsfunded by the City of Biloxi, $72 mil-lion in bond and federal grant fundingfor the Gulfport Biloxi Regional Airport,$68 million in funding to expand ourColiseum Convention facility, and over$125 million in water and sewerimprovements in Harrison County.

The stage had been set before Katrinato provide a better resort destinationenvironment.

The leadership and foresight of mayorslike A.J. Holloway of Biloxi, and of citycouncils, our county board of supervi-sors, and other local officials enabledthis area to be poised for growth evenbefore Hurricane Katrina. They madethe hard decisions to fund needed proj-ects and find responsible ways to pay forthem, not to take the expedient path ofleast resistance, but sometimes the polit-ically unpopular position of doing whatis right for our community.

Today, Biloxi has 9,000 condo units inthe pipeline. Now there is over $5 bil-lion in announced casino hotel projects.New factories and new businesses arespringing up in the southern mostcounties. Now the Stennis Space Centeris seeing a flowering of hi-tech enter-prises in Hancock County, our neighborto the west.

The Gulfport-Biloxi Regional Airport isoperating at 110 percent of its pre-

Katrina passenger counts, and by theanniversary of the storm will be at 114percent, with 23 jets and four major car-riers, a new parking garage justannounced, enhanced air cargo facili-ties, and an additional runway designedfor construction.

This robust recovery did not happen byaccident.

Mississippi’s Gaming Control Act doesnot limit the number of licenses—itallows market forces to control growth.With the most stable gaming tax rate inthe nation, an honest, strict regulatoryenvironment, and safe streets andneighborhoods, I believe the MississippiGulf Coast is about to emerge from “dia-mond-in-the-rough” status to become areal gem of gaming related tourism.Harrah’s is rumored to be planning a bil-lion plus project, MGM MIRAGE’s BeauRivage reopened more splendid thanever on August 29, and IP, Boomtown,Treasure Bay, and the New Palace arealready minting money.

Those on front lines of community lead-ership know how hard it is just to stayin the arena, but they also know that iswhat garners victory.

When William Faulkner, one ofMississippi’s native sons, perhaps thebest of all of our many wonderful writ-ers, accepted the Nobel prize for litera-ture in Stockholm on December 10,1950, spoke of the universal struggles ofmankind—the challenge, and the “loveand honor and pity and pride and com-passion and sacrifice.” He said we mustnot be afraid, “leaving no room in [our]workshop for anything but the old veri-ties and truths of the heart.” I believethe Mississippi Gulf Coast is followingFaulkner’s admonition, and that we will,to paraphrase his most famous sentence,“not merely endure: [we] will prevail.”

With that, I invite each of you to visitour beautiful and soon to be recoveredMississippi Gulf Coast.

Leonard A. Blackwell II is an adjunct facul-ty member for Casino Resort Studies at theSchool of Continued Studies, TulaneUniversity, New Orleans, La.

IMGL even gave money

to help Mercy Cross

students in Biloxi purchase

school uniforms. To so many

we owe a debt of gratitude.



On June 29, 1990, the Mississippi StateLegislature approved the MississippiGaming Control Act pursuant to a 1990executive session.

This action authorized Mississippi tobe a legal gaming jurisdiction andmarket into which the gaming industry was invited and welcomed toconduct business.

The Mississippi State Tax Commissionwas given initial regulatory authorityand the responsibility to oversee thegaming industry in Mississippi untilOctober 1, 1993, when those powerswere transferred to the newly createdMississippi Gaming Commission.

In 1990, as an agent with the CorporateSecurities Division of the Nevada StateGaming Control Board, I was given the responsibility to investigate and monitor all Nevada licensees who hadapplied for foreign gaming (i.e., outsideof Nevada) approval in Mississippi.

In the course of this activity, I workedclosely with the Mississippi State TaxCommission, Mississippi Office of theAttorney General, Mississippi GamingCommission, and the gaming industryregarding regulatory matters of common interest, mutual concern, andshared benefit.

Many of the initial patterns, policies,practices, and procedures developed andimplemented in 1990 by the Mississippi

State Tax Commission and in 1993 bythe Mississippi Gaming Commission arestill in place and operational today.

Additionally, the Mississippi GamingCommission has continued to adapt tothe increased needs of a dynamic andgrowth oriented industry by focusing itsorganizational approach, resources, andstructure into three primary functions:(1) administration (2) investigations,and (3) operations.

Prior to Hurricane Katrina on August 29,2005, the Mississippi GamingCommission had nearly 12 years ofexperience regulating the gaming indus-try relative to registrations, licenses,findings of suitability, cash protection,game protection, and gaming deviceintegrity. The regulatory foundationand structure which was established andimplemented over the course of those12 years has been tried and tested subsequent to Hurricane Katrina, and itsmodest record of achievement and competence has been challenged.

This historical experience has becomecritical as the Mississippi GamingCommission continues to regulate thegaming industry in a post-HurricaneKatrina environment.

The challenges currently confrontingthe Mississippi Gaming Commission, ingeneral, and the Corporate SecuritiesDivision, in particular, include certainexternal and internal factors in what has

become a paradigm of opportunity.

The basic objective of the MississippiGaming Commission is to provide regulatory oversight for the day-to-dayoperations of a 24/7 gaming industrywhich involves approximately 100licensees (i.e., gaming operators, manufacturers, distributors, and multi-site wide area progressive operators)who are conducting business in threeregional gaming markets in Mississippi(i.e., Northern, Central, and Southern).

The Corporate Securities Division isresponsible for the corporate investiga-tions of all applications submitted tothe Mississippi Gaming Commission bylegal entities (i.e., publicly-traded corpo-rations and privately held companies)for registrations, licenses, findings ofsuitability, and related approvals.

The Corporate Securities Division inves-tigates and monitors approximately 300legal entities relative to these approvals.

The Corporate Securities Division conducted, completed, and closed 56corporate investigations in Fiscal Year2006, compared to 35 such corporateinvestigations projected. This wasaccomplished by a modest group ofinvestigators consisting of one full-timecorporate investigator (i.e., ChristineMcCoy) and three part-time corporateinvestigators (i.e., Monica Barnes, JohnMortimer, and Sandra Munden).

By Samuel G. Weaver


Singletary & Thrash, P.A.Attorneys at Law

North Biloxi:Britt R. Singletary

[email protected] D. Smith

[email protected] Office 1229

Biloxi, Mississippi 39533Tel: 228-432-8900Fax: 228-396-3746

Downtown Biloxi:Tina R. Singletary

[email protected] Lameuse Street (39530)

Post Office Box 171Biloxi, Mississippi 39533

Tel: 228-374-2004Fax: 228-374-2005

Jackson:Gary D. Thrash

[email protected] N. Satcher, III

129 North State Street (39201)Post Office Box 587

Jackson, Mississippi 39205Tel: 601-948-7410Fax: 601-353-0126

Firm e-mail: [email protected]


Additionally, the Corporate Secur-ities Division is responsible for thepreparation and submission ofnumerous agenda matters eachmonth for consideration by theMississippi Gaming Commission.The Corporate Securities Divisionprepared and submitted 114 agendamatters in Fiscal Year 2006, compared to 80 such agenda mattersprojected.

The number of applications submittedto the Mississippi Gaming Commissionfor registrations, licenses, and findingsof suitability by international compa-nies has increased dramatically.

Historically, the Corporate SecuritiesDivision has completed two corpo-rate investigations of such interna-tional companies a year. TheCorporate Securities Division com-pleted seven corporate investiga-tions of international companies inFiscal Year 2006. Moreover, numer-ous applications by domestic compa-nies have been submitted to theMississippi Gaming Commission as aresult of new market opportunity inMississippi.

The Corporate Securities Division currently has over 40 applications forregistrations, licenses, and findings ofsuitability pending.

As a result of Hurricane Katrina, thesouthern district has been the economicand political focus for rebuilding, recon-struction, and recovery for the gamingindustry. In the aftermath of HurricaneKatrina, the Mississippi State Legislaturein 2005 legalized shore- based gamingpursuant to Mississippi Code Annotated§97-33-1(ii) and (iii) (2005).

Additionally, the Mississippi GamingCommission has adopted and amendedMGC Regulation II. A. Section 3(h) andMGC Regulation II. B. Section 2(a)(3)relative to the gaming site approvalprocess.

Gaming site approvals, like registra-tions, licenses, findings of suitability,and all other approvals granted by theMississippi Gaming Commission, are aprivilege and, not a right. There is noentitlement or guarantee that any pro-posed gaming site is a legal gaming site.Each application for gaming siteapproval is considered and evaluated onits own merit.

Potential developers and would-be oper-ators have submitted to the MississippiGaming Commission several applica-tions for gaming site approvals relativeto potential gaming sites in theSouthern District.

Likewise, new applications for gaming site approvals continue to besubmitted for the northern and central districts. The challenge is toapply a consistent and reasoned evaluation and review process toeach application for gaming siteapproval relative to statutory andregulatory requirements.

The gaming industry is currently in theprocess of undergoing highly innova-tive and technological transformationsrelative to casino operations and gaming related products.

Many new concepts and products havebeen advanced, developed, and areemerging which use state-of-the-artelectronics and computer scienceapplications. These include, for exam-ple, electronic table games, mobile or wireless gaming devices, digital surveillance systems, digital tablegame chips, player tracking systems,multiple player electronic table gamestations, and ticket-in /ticket-out(TITO) cash redemption kiosks.

Historically, the most complex andtechnical corporate organizationalstructures encountered have involvedthe separation of voting securities andnon-voting securities.

Recently, however, new proposals haveincluded many new features relative toequity ownership and multiple holdingcompanies, including such concepts, forexample, as “blocker entities.”

Additionally, Japanese law has recentlyallowed for the shift to a holding com-pany organizational structure and twoJapanese licensees have recently adopt-ed this new form of corporate organiza-tional structure.

Corporate mergers, acquisitions, andreorganizations have always been ahighly visible part of the gaming indus-try. However, the frequency of occur-rences and size of transactions recentlycompleted and currently pending areenormous and have helped to reshapethe market landscape of the gamingindustry in Mississippi.

This business trend appears to be a permanent feature of a focused andorganized gaming industry.

Corporate finance has become morecomplicated with the use of creativeand innovative financing transac-tions. Credit facilities now common-ly use various forms of debt tranchesinvolving senior secured term loans,senior secured revolving credit facili-ties, senior subordinated bridge loansand senior subordinated notes,including combinations and hybridsthereof.

Security features (i.e., affirmative equity pledges, imposition of equityrestrictions including negative equitypledges, guarantee of securities, andhypothecation of assets) associated withsuch credit facilities have become technically advanced.

The combination of the above factorshas produced a challenging work environment at the Mississippi GamingCommission.

The Corporate Securities Division hasdeveloped, maintained, and relied upona highly organized and systematicapproach to promote effectiveness, effi-ciency, and productivity at a time ofincreased challenges and limitedresources.

As a result of this organized approach,the Corporate Securities Division andthe Mississippi Gaming Commission arebetter positioned and prepared to meetthese demanding challenges and benefitfrom the many opportunities for indi-vidual and institutional learning,knowledge, and understanding.

Samuel G. Weaver was employed by theNevada State Gaming Control Board withthe Investigation Division in Las Vegas,Nev. from 1981–1989 and the CorporateSecurities Division in Carson City, Nev.from 1989–1993. He was employed byLady Luck Gaming Corporation in Tunica,Miss. from 1993–1996. Samuel G. Weaverhas been employed by the MississippiGaming Commission in Jackson, Miss.since 1996 and is currently Director of theCorporate Securities Division.


On August 29, 2005, Hurricane Katrina,a Category 5 hurricane, the strongestand most dangerous of water-bornestorms, pummeled an area stretchingfrom New Orleans to the westernFlorida panhandle.

The surge caused by Hurricane Katrinaresulted in the flooding of 80 percent ofNew Orleans for several weeks. Lessthan one month later, Hurricane Ritastruck a second devastating blow to thesouthwestern part of Louisiana, and par-ticularly Lake Charles, La.

These two hurricanes combined to cre-ate the worst natural disaster in the his-tory of the United States. Due to amandatory evacuation, more than750,000 people were forced to leavetheir homes and relocate to northernLouisiana and elsewhere in the UnitedStates.

More than 200,000 homes were signifi-cantly damaged, and in many cases,destroyed by flooding and/or hurricanewinds.

An estimated 360,000 people remaindisplaced from their homes.

Louisiana legislation authorizing river-boat gaming and land-based casinos,which was enacted in the early 1990s,provides for only 15 riverboat casinos,with no more than 30,000-square feet ofgaming space, to be berthed on certaindesignated waterways, as well as for theestablishment of a single land-basedcasino in New Orleans.

As a result of Hurricane Katrina, theBelle of Orleans casino boat, located ineastern New Orleans, broke from itsmoorings and sustained substantialdamage. The marina where it was locat-ed was destroyed and hundreds of boatsmoored at the marina sank.

To this date, services we take for grantedsuch as electricity, water, and sewer sys-tems are lacking in the area, and onlylimited police and medical facilitieshave been reestablished.

As a result of the devastation, there is anabsence of adequate housing for localpatrons, much less the hundreds ofemployees of the Belle of Orleans.

Similarly, two Lake Charles riverboatcasinos owned by Harrah’s were sub-stantially damaged by Hurricane Ritaand they, like the Belle of Orleans, arestill not operating pending repairs.

Subject to approval by the LouisianaGaming Control Board, Harrah’s hasagreed to sell the two vessels to PinnacleEntertainment.

Due to damage sustained as a result ofHurricane Katrina, Harrah’s land-basedcasino in New Orleans did not reopenuntil late February, nearly six monthsafter Hurricane Katrina hit New Orleans.

Finally, the Fairgrounds racetrack inNew Orleans, owned and operated byChurchill Downs, and recently permit-ted to have slot machines, sustainedsubstantial flooding and remains closed.

Louisiana, like other states that havelegalized gaming, has come to rely heav-ily on the revenue generated by casinos.This is particularly significant givenreports of a 29 percent decrease in gam-ing revenues in the month followingHurricane Katrina. State officials warnedthe sharp decrease in tax revenueswould result in substantial reductions inspending.

Nevertheless, Louisiana’s response tothe impact of the storms on the casinoindustry in the state was in stark

contrast to Mississippi’s. A month afterHurricane Katrina devastated theMississippi Gulf Coast, Governor HaleyBarbour convened an extraordinary session of the Mississippi Legislaturewhich ultimately resulted in the passageof legislation authorizing casinos to bebuilt on land within 800 feet of Gulfwaters.

Notwithstanding bleak revenue fore-casts, Louisiana did not consider, muchless enact, legislation to allow the own-ers of riverboat casinos to relocate oper-ations to facilities on land as allowed inMississippi. Furthermore, New Orleans’Mayor Ray Nagin’s trial balloon (floatedshortly after Hurricane Katrina) to openup the city’s major downtown hotels to casinos was quickly deflated byGovernor Kathleen Babineaux Blanco.

Unlike her predecessors, GovernorBlanco has been unyielding in her gen-eral opposition to an expansion of gam-ing. Other than emergency measurespassed by the Louisiana GamingControl Board to suspend rules thatwould have resulted in the loss of licens-es held by thousands of video pokerdevice operators whose machines wererendered inoperative by HurricanesKatrina and Rita, there were no regula-tory changes to address the adverseimpact of the hurricanes on the state’scasino industry.

The good news for Louisiana from a rev-enue standpoint is that due to an unex-pected influx of emergency responders,construction workers, insuranceadjusters, volunteers from across thecountry, and displaced gamblers fromthe Mississippi Gulf Coast, the undam-aged riverboat casinos operating inLouisiana were able to more than offsetthe loss of the two Harrah’s vessels inLake Charles and the Belle of Orleans.

By J. Kelly Duncan


There was a surge in the revenue for the remaining properties, includingHarrah’s New Orleans land-based casi-no, which has had record-breakingresults for each month since its first fullmonth of operation after HurricaneKatrina in March, 2006.

As early as October 2005, revenue stabilized and since then has steadilyincreased each month thereafter,notwithstanding three riverboat casinosthat remain closed.

Fueled by the post-hurricane boom,Louisiana’s casinos (land-based, river-boat casinos, and slots at the racetracks)won a record $2.38 billion from gam-blers during the fiscal year that endedJune 30, 2006 resulting in $507.5 million in tax earnings this fiscal year,$54.8 million more than the year beforewhen the casinos took in $2.2 billion.

As a result of the storms, Louisiana hasseen substantial shifts in population.The fortunes of Belle of Orleans andBelle of Baton Rouge reflect these shiftsand their impact on Louisiana casinos.In eastern New Orleans, not only wasthe Belle of Orleans riverboat casinobadly damaged, but thousands of homesin the surrounding area were devastatedby flood waters to such an extent thatany hope for a short-term recoveryremains unrealistic.

Recognizing this, the Louisiana GamingControl Board has approved the move ofthe Belle of Orleans from Orleans Parishto St. Mary Parish. The Belle of BatonRouge, on the other hand, has realizedan increase in revenues consistent with apopulation shift from New Orleans toBaton Rouge after Hurricane Katrina.

While Louisiana casinos that are back inoperation have had an unexpected

boost in revenue since the storms, thedevastation of the Mississippi GulfCoast and Louisiana casinos hasreminded casino chief financial officersof the need for adequate insurance.

Obviously, property and casualty cover-age is important.

However, with the recognition that stateand local governments, pursuant totheir agreements with casinos, oftenrequire substantial fixed annual feesand/or expensive long term leases, it isessential that adequate business inter-ruption coverage be in place.

Casinos, unlike many other businesses,rely on daily onsite customer interac-tion, such that these business interrup-tion needs are materially different thanthose of businesses that can operateremotely in the event of a natural orman-made disaster.

Furthermore, casinos experience longerloss periods, in that it takes them moretime to restore operations to their pre-disaster level. Accordingly, businessinterruption coverage is crucial.

It is important to keep in mind thatbusiness interruption covers actual lossof income only as a result of physicaldamage to the insured property. Assuch, it requires: actual physical loss tothe property for a loss covered under thepolicy; actual interruption of the busi-ness operations; and loss of income as aresult thereof.

Thus, if the property insurance does notinclude, for example, flood coverage,then interruption of business operationsdue to flooding is not covered.

Furthermore, coverage is generally limited to loss of business income that

occurs within a specified period of timeafter the date of the physical loss andthe damage, or until the business inter-ruption limit of the insurance isexhausted.

Among the lessons to be learned fromHurricanes Katrina and Rita is that anycasino, considering its exposure forinterruption of business operations as aresult of either a natural or man-madedisaster, must ensure adequate businessinterruption insurance has beenobtained before a disaster strikes.

This means that it is imperative to knowthe type of business interruption that is covered, whether the amount is sufficient, and whether the time periodcovered is adequate.

In some cases, this could be the onlyway a casino can survive a disaster.

With billions of dollars in public andprivate monies that soon will be avail-able to assist in the rebuilding of homesand businesses devastated by HurricanesKatrina and Rita, recovery workers withtime and money on their hands willonly continue to contribute to the coffers of the Louisiana casinos thatwere able to weather the storms.

Thus, while Louisiana perhaps missedthe opportunity to make substantivestatutory and regulatory changes following the storms that would allow itto be more competitive with Mississippi,there is every reason to believe casinosin Louisiana will continue to do wellpending the eventual return of dislocated Louisianans and tourists whohave traditionally supported theLouisiana casino industry.


James B. Donaghey, Inc. proudly salutes Owen Nitz and Jeff Cooper

for their selection as the 2006 GamingExecutives of the Year.

We sincerely appreciate the opportunity to join with Roy AndersonCorp and the construction team to partner with Owen & Jeff, and

the rest of the Imperial Palace staff, in the rebuilding of theImperial Palace Casino & Hotel in Biloxi, Mississippi.

James B. Donaghey, Inc. is proud to have been a leader in theconstruction 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 SandersP.O. Box 469

109 Oak StreetBiloxi, MS 39533

Tel: 228-432-0582Fax: 228-432-5969Cell: 228-806-3426

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