Penn asks Iowa regulators to overturn Hard Rock casino selection

2013-05-08T20:00:00Z 2014-01-21T18:51:55Z Penn asks Iowa regulators to overturn Hard Rock casino selectionDAVE DREESZEN Sioux City Journal

SIOUX CITY | The owner of the Argosy Sioux City petitioned Iowa gaming regulators Wednesday to overturn their decision last month to replace the gambling boat with a Hard Rock-branded casino in downtown Sioux City.

Penn National Gaming Co. claims the Iowa Racing and Gaming Commission violated state law and Argosy's rights to due process. The company also alleges the IRGC ignored a series of deficiencies and improprieties in the Hard Rock group's application for a land-based casino license.

Calls to IRGC administrator Brian Ohorilko and board Chairman Jeff Lamberti were not immediately returned late Wednesday.

By a 3-2 vote, the commission on April 18 selected Hard Rock over two other potential Woodbury County operators, including Penn, which offered a choice of a downtown or rural site for a Hollywood-themed casino. A Ho-Chunk Inc.-led group also proposed a downtown casino at the site of the former Warrior Hotel.

In a news release Wednesday, Penn said it is exercising its right under Iowa law to ask a state regulatory body to reconsider an action. The formal request potentially could be a prelude to additional litigation by the company.

Last year, Penn went to court to try to overturn a pair of IRGC decisions. The company asked a state judge to review the commission's decision to put the Woodbury County license up for bid and its refusal to approve a temporary contract extension between Penn and its nonprofit partner, Missouri River Historical Development. The two cases were consolidated and are pending in Polk County District Court.

In September, MRHD aligned itself with the Hard Rock developer, Sioux City Entertainment.

The IRGC has said it will allow the Argosy to keep operating until construction of the Hard Rock is completed. Sioux City Entertainment expects to open the casino in July 2014.

In the letter Wednesday to the IRGC, Penn attorney Mark Weinhardt described the commission's action as unprecedented in the history of U.S. gaming and a "de facto revocation" of the Argosy's license, "in the absence of any suitability or financial issues ...."

"There is no other rational conclusion to draw from these circumstances other than that the commission's action is arbitrary and capricious, not supported by the facts, and contrary to Iowa law and the U.S. and Iowa constitutions," Weinhardt said in the letter.

In the letter, Penn claims the IRGC:

-- Violated its own selection procedures by allowing Sioux City Entertainment to restructure material aspects of its application, including its financing and ownership structure, after the November 2012 application deadline. In January, the Hard Rock group secured up to $35 million in equity financing from former Iowa casino executive Brent Stevens, who is entitled to a 50 percent stake in the venture.

-- Ignored "substantial criticisms, concerns and unresolved questions concerning the qualifications" of Sioux City Entertainment's principals and MRHD.

Specifically, Penn pointed to Sioux City Entertainment President Bill Warner's role in a 2000 case in Missouri. At the time, Warner was employed by Station Casinos Inc., which agreed to pay $38 million to settle a civil lawsuit alleging it used improper contacts to acquire its Missouri gaming license in 1997, according to the Kansas City Star.

Warner declined to comment Wednesday night.

In the letter to the IRGC, Penn also singled out MRHD board member Dave Bernstein, accusing him of negotiating with potential Iowa operators to replace the Argosy before completing his required licensing with the IRGC.

Bernstein, a Sioux City businessman, denied the allegations.

"It's an interesting assertion as the first actual negotiation I recall was a meeting with (Penn President) Tim Wilmott, where he negotiated for more time, which MRHD gave him, and he threatened us with 'the nuclear option,'" Bernstein said in an email Wednesday.

-- Ignored other "significant defects" in the Hard Rock application, including the developer's need for $22 million in tax-increment financing from the city. The Warrior project would have required $25 million from TIF, a tool that allows local governments to pledge future property tax revenues from a new expansion to pay for infrastructure to support the project.

"The IRGC selected a proposal that unnecessarily burdens local and state taxpayers while overlooking the independent and fully funded Hollywood Casino proposals," Penn's news release said.

Copyright 2015 Sioux City Journal. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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