he Indiana Gaming Commission (IGC) will meet next week to consider renewing the casino license of the company that owns the Hard Rock Casino Northern Indiana, which opened last month in Gary. The operator is working to make sure all its seven shareholders are complying with the state's new investor integrity rules with that aim.
Last Wednesday, Spectacle Entertainment CEO Jahnae Erpenbach sent a letter to investors in the Gary casino asking whether they intend to submit the extensive financial and background information required under the emergency rule adopted by the IGC on March 23, The Times of Northwest Indiana reports. Erpenbach said in the letter any direct or indirect Spectacle investors who fail to apply for an IGC Level 1 occupational license by June 21 will have their shares automatically repurchased by the company, as provided by the rule, at either the current market price or original purchase price, whichever is lower.
The Hard Rock Casino in Gary and the soon-to-be-built Terre Haute casino, whose license also is up for renewal next week, are the only two casinos in the state subject to the investor integrity rule because they're not owned by publicly traded corporations.
One shareholder, Windy City H&C Investors LLC, submitted the letter to a Marion County judge to further its claim that Spectacle and the IGC are attempting to "squeeze minority investors out of Indiana gaming."
According to court records, Windy City is helmed by Dave Shepherd. Records show he spent $2.5 million to purchase approximately 4% of Spectacle in 2018. He objects to submitting his financial and background information to the IGC because he said it will take 80-100 hours to complete the forms and he believes it's unnecessary because he has no direct involvement in gaming operations at the Hard Rock. At the same time, Shepherd said he considers the $6 million offered by Spectacle to buy back his shares to be a "lowball" offer, since he expects the value of his Spectacle investment has increased substantially since the Hard Rock Casino opened for business May 14.
Several other Spectacle investors have made similar claims in the Marion County lawsuit seeking to halt enforcement of the IGC rule, including two entities, Laelaps LLC and MD Twenty-Twenty LLC, that state records show are registered to Dan Dumezich, a retired attorney, former state representative and town court judge for Schererville, and past treasurer of the Indiana Republican Party. Marion Superior Judge John Chavis heard oral arguments in the case May 14 and initially said he planned to rule June 4.
However, Chavis recently agreed to permit additional documents to be filed with the court, likely delaying his ruling until after the June 24 IGC meeting where renewal of the Hard Rock Casino license is expected to be on the agenda.
The IGC has asked Chavis to dismiss the investor lawsuit because it claims the integrity rule imposes obligations solely on Spectacle, the holder of the Gary casino owner's license, not the individual investors in Spectacle. "Plaintiffs lack standing to pursue the claims in this lawsuit because they have no demonstrable injury," the IGC said.
However, absent the rule, IGC claims the public's confidence and trust in the state's gaming industry may suffer significant injury — and already has — due to unsavory individuals investing in privately held casino companies.
"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," the IGC said.
"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."