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To: Bryce Druzin, Silicon Valley Business Journal <email address not displayed> Your Name: Email address: Subject: Message: Bryce Druzin, Silicon Valley Business Journal wrote on the message board: > Owners of Silicon Valley's Casino M8trix are at each others' throats - > Silicon > > The civil war between the owners of Casino M8trix has spilled into > public court. > > On May 17, M8trix's controlling entity, Garden City Inc., filed a > lawsuit against embattled co-owner Eric Swallow for damages in excess > of $4.5 million. The complaint centers around allegations that Swallow > breached his fiduciary duty to the company, including by funneling > millions of dollars to himself from Team View Player Services LLC, a > company Garden City contracted with to provide gaming services. > > The suit was authorized by Garden City President Peter Lunardi and his > wife Jeanine, who together own 50 percent of the card room and fill > two of the company's three directors' seats. Swallow, the other > director, owns the other half of the card room's shares. > > Swallow is being represented in the lawsuit by Los Angeles law firm > Vakili & Leus LLP. In an email, attorney Sa'id Vakili wrote that the > suit "is entirely without merit" and that "we will be vigorously > defending Mr. Swallow’s position ... and we believe that the claims > brought against him will be unsuccessful." Swallow has 30 days to file > a response. > > Non-Indian card rooms in California are not allowed to have an > interest in the outcomes of bets wagered by players. In practical > terms, this means that in order to offer Vegas-style table games like > blackjack, card rooms must contract with companies like Team View > Services to act as the "house," with the card room making money off > fees charged each hand. > > Team View Services employees sit at the table like any other player, > except they have enough money to cover everyone's bets and they almost > always play as the house, giving them a mathematical edge over the > other players (just like Vegas casinos have an edge). > > The state's Bureau of Gambling Control claims that from 2010 to 2012 > Team View Player Services, owned by Timothy Gustin, transferred $4.8 > million made from its M8trix operations to Team View Player Associates > LLC, also owned by Gustin. According to the Bureau, Team View > Associates sent $3.6 million to Secure Stone LLC, owned by Swallow's > wife Deborah. > > The suit alleges the payments were "kickbacks demanded by Mr. Swallow" > and that this violated Swallow's fiduciary duty to Garden City, which > specified that he was "precluded from obtaining personal profits from > his activities as an officer/director and is required to account to > (Garden City) if he does so." > > Complicating matters is the fact that the lawsuit was filed less than > two weeks before the California Gambling Control Commission's May 26 > decision to fine Swallow $13.7 million and strip him of his ownership > license for providing misleading information to state regulators about > his financial ties to companies hired by Garden City, among other > causes. > > That decision goes into effect June 27, though Swallow's lawyer for > the decision, Allen Ruby, has said he intends to appeal the decision. > > Vakili wrote that the commission's decision "contains findings that > completely undermine the claims being asserted by Casino M8trix and > the Lunardis." > > The decision stated that the bureau failed to prove their claim that > payments from Team View to Secure Stone violated state gambling > regulations, and made no claim that the payments were "kickbacks > demanded" by Swallow. But the decision also did not question the > existence of the payments themselves, nor did it comment on Swallow's > fiduciary duties to Garden City. > > Furthermore, the commission stated that Swallow did mischaracterize > his financial relationship with Secure Stone to regulators, though it > had nothing to say about whether the Lunardis were misled. > > It's important to note that the commission's decision stems from a > 2014 bureau accusation that targeted not only Swallow, but also the > Lunardis and the entity Garden City. > > In June 2015, the Lunardis were allowed to keep their ownership > licenses after agreeing to a $1.8 million settlement with the bureau, > with Peter being personally responsible for paying $250,000 of that > amount. > > As part of the settlement, the Lunardis admitted to a number of > misdeeds and violations. One of those was having personally benefited > from the card room's "direct or indirect interest in funds wagered, > lost, or won by Team View Player Services," the very same violation > the commission said the bureau failed to prove against Swallow. > > Oddly, at least from a logical if not legal perspective, the > settlement included the entity Garden City "admitting" that Swallow > had provided false or misleading information to the City of San Jose, > even though only the Lunardis signed the settlement. > > Adding in another settlement-decision mismatch, the commission found > that the bureau failed to prove this specific accusation against > Swallow as well. > > The lawsuit also seeks to recover legal expenses spent by Garden City > to defend the card room and the Lunardis and Swallow. The suit, which > lists the legal fees at more than $1 million, claims Swallow's alleged > "actions and inactions" are responsible for the bureau accusation that > led to the legal costs in the first place. > > The first case management conference is scheduled for September 13. > > http://www.bizjournals.com/sanjose/news/2016/06/10/more-drama-at-casino-m8trix-co-owner-sued-by.html Code: Enter the following code: (required) Consider sharing your comments with the other readers of the message board. They may benefit from your insights If you decide not to send email, post a follow up instead, or return to the original message

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