The Indiana Gaming Commission is scheduled to meet this week to consider renewing the license of Hard Rock Casino Northern Indiana in Gary.
Before then, Jahnae Erpenbach, CEO of Spectacle Entertainment, the casino’s owner, has made it clear to investors that they must submit all the financial and background information required under the emergency rule the IGC adopted on March 23.
In the letter, Erpenbach said any direct or indirect Spectacle investors who do not apply for an IGC Level 1 occupational license by June 21 will have their shares automatically repurchased by the company at the current market price or original purchase price, whichever is lower. “Due to the impending casino license renewal, time is of the essence with respect to this matter,” Erpenbach wrote.
It’s not known how many of Spectacle’s primary investors will comply with Erpenbach’s request. At least one, Windy City H&C Investors LLC, submitted a letter to Marion Superior Judge John Chavis claiming Spectacle and the IGC are attempting to “squeeze minority investors out of Indiana gaming,” wrote the company’s attorney Paul Edgar Harold. Chavis heard oral arguments in a lawsuit filed by Spectacle investors seeking to halt enforcement of the IGC rule requiring extensive financial and background checks.
Harold added, “As Windy City has been alleging since this case began, Spectacle is improperly and aggressively using the emergency rule to squeeze out Windy City at a fire-sale price. This letter is further confirmation that Windy City will lose the value of its investment and get pushed out of Indiana gaming if the court does not enjoin the emergency rule.”
Court records show Windy City is headed by Dave Shepherd, a Carmel, Indiana, insurance agent who was named Mr. Basketball in 1970. Shepherd purchased about 4 percent of Spectacle for $2.5 million in 2018. He said it will take 80 to 100 hours to complete the forms the IGC requires regarding financial and background information and it’s not even necessary as he has no direct involvement in gaming operations at Hard Rock.
Also, Shepherd said the $6 million offered by Spectacle to buy back his shares is a “lowball” offer, especially since the value of his Spectacle investment has increased substantially since the Hard Rock Casino opened May 14. Similar claims have been made by Laelaps LLC and MD Twenty-Twenty LLC, both registered to Dan Dumezich, a retired attorney, former state representative and town court judge for Schererville, and past treasurer of the Indiana Republican Party.
Chavis recently agreed to allow additional documents to be filed with the court. That’s likely to postpone his ruling on the investor lawsuit until after the June 24 IGC meeting, when the Hard Rock Casino license renewal will be considered.
The IGC has asked Chavis to dismiss the investor lawsuit. It said the integrity rule applies only to Spectacle, the holder of the Gary casino owner’s license, not the individual Spectacle investors. “Plaintiffs lack standing to pursue the claims in this lawsuit because they have no demonstrable injury,” the IGC said.
Without the integrity rule, the IGC said the public’s confidence and trust in the state’s gaming industry could−and already has−been affected, due to objectionable investors. The IGC said, “Since early 2020, Indiana’s gaming industry has been the subject of widely reported derogatory information concerning entities in which these plaintiffs hold ownership. The information includes the federal indictment of a licensed Indiana casino owner and executive, concerning references to another licensed casino owner and executive in court documents, casino ownership transfers hidden from the commission and undisclosed ties to lobbyists. These events have cast a shadow over the industry and served to undermine its reputation and integrity. Refusal to provide information for licensure creates a blind spot in the commission’s ability to ascertain the nature of casino transactions, the associations of casino owners and the overall suitability to hold ownership interest.”
As privately held entities, Hard Rock Casino in Gary and the soon-to-be-built Terre Haute casino are the only two in Indiana that face the investor integrity rule. The Terre Haute casino’s license renewal also will be considered June 24.
Meanwhile, according to the IGC, with the May 14 grand opening of Hard Rock Casino Northern Indiana in Gary added to the northwest Indiana mix, the area’s four gaming operations posted a 24 percent increase in revenue in May compared to the same month in 2019.
Hard Rock Casino Northern Indiana posted $20.6 million in revenue during the 18 days it was open in May, a whopping 57.3 percent higher than the $13.1 million its predecessors, Majestic Star I and Majestic Star II, together took in for May 2019. In comparison, the Horseshoe Casino Hammond reported $38 million in revenue over 31 days in May, giving it a daily average of $82,251 ahead of the Hard Rock. Horseshoe typically is the top performing casino in Indiana.
Hard Rock President Matt Schuffert said, “We are extremely pleased with the level of business we experienced in the 18 days we were open in May. Guest feedback has been very positive and we look forward to continued growth.”
The Ameristar Casino in East Chicago posted $26.6 million in May and the Blue Chip Casino in Michigan City took in $12.5 million, a 5.3 percent revenue drop. Statewide casino revenue totaled $220.8 million last month, a 4.3 percent increase compared to April and 15.1 percent more than May 2019. All Indiana casinos were closed in May 2020 due to Covid-19. IGC records show March 2018 was the last time casino revenue surpassed $220 million.
Ed Feigenbaum, editor of Indiana Gaming Insight, said it remains to be seen if Hard Rock Northern Indiana will dominate the landscape. He said people always want to try out a new casino. Whether they become regular players will be determined in the next months or year. He noted revenue at Rivers Casino in Illinois also increased dramatically in May. These increases could be due to Covid-19 restrictions being slowly lifted. “People felt more comfortable going out. There was some pent up demand, particularly in the first half of May,” Feigenbaum said.
Also, he noted casinos didn’t have much competition for entertainment sector, with sports facilities and movie theaters still at a limited capacity, even though casinos had limited occupancy but hold more people.
May sportsbooks total was $254.5 million, a 7.6 percent increase compared to April. Sports wagering handle at Ameristar was $89.2 million and $80 million at Blue Chip; these two sportsbooks led the rest, mainly because bets were placed through their mobile wagering partners, Draft Kings and FanDuel, respectively. PlayIndiana.com Analyst Nicole Russo said, “Even with the expected slowdown over the last two months, no Midwestern state has held its ground better than Indiana. Some of that can be attributed to local events driving interest, including the Indy 500. But the market’s structural advantages that were built in before sports betting launched is also paying dividends.”
Russo and other analysts noted Indiana has an advantage over Illinois because bettors can register for mobile sports wagering online, plus they have a wide variety of professional, college and international sports to bet on. IGC data show mobile wagers accounted for about 90 percent of sports bets placed in Indiana.
The top sport for bets still is basketball, followed by multi-sport or multi-game parlay bets, baseball and other sports. The IGC already has approved wagering on a dozen Olympic sports in anticipation of the games beginning in July.
