U.S. Runs Afoul Of Its Own Laws In Gambling Club

BELL GARDENS, Calif. - The U.S. government owns a controlling interest in a neon-splashed casino here that has reaped an estimated $25 million in gambling profits for federal agencies - and a wealth of embarrassment.

After seizing the Bicycle Club casino four years ago in a drug-money-laundering case, the government found itself investigating alleged criminal activity inside a business it partially owned.

While one arm of the U.S. Justice Department oversaw the Bicycle Club's operations, another indicted the head of the casino's lucrative Asian games for allegedly engaging in loan sharking and extortion of some of the club's customers.

The casino, located 10 miles southeast of downtown Los Angeles, also has run afoul of the Internal Revenue Service. By all accounts, the government's role in the Bicycle Club - billed as California's Premier Gambling Palace - is unique.

The club was the largest single asset forfeited under racketeering laws when it was seized in April 1990. The government's protracted involvement with the casino runs counter to the intent of a system designed to quickly dispose of assets seized from criminal enterprises.

"We don't want to run the Bicycle Club," said Robert Sharp, acting director of the Justice Department's Asset Forfeiture Office.

But disposing of the property has proven to be difficult because litigation over precisely what share the government owns took years. "Just because we want to (sell) doesn't mean it's possible," said Sharp.

Sources estimate that the government's share of the casino could fetch more than $30 million. In the meantime, records and interviews show, the Justice Department has been receiving about $500,000 a month in profits from the casino.

To safeguard its interests, the government now pays a former Las Vegas casino executive and his staff up to $500,000 a year as trustees.

The government's primary partner and the casino's longtime day-to-day manager is George Hardie, an ardent opponent of state legislation to impose tough new regulation of California card clubs.

They are "strange bedfellows," Hardie said. "The problem with the government is (that) this is a new thing. Nobody has ever had an asset like this. Usually you get an airplane (or) somebody's house and they sell it."

The government entanglement with the Bicycle Club dates to the late 1980s.

Even by South Florida standards, the case was notorious. Entire barges and shipping containers of marijuana had been smuggled boldly into New York, New Orleans, and San Francisco.

Later, while the alleged kingpin, champion speedboat racer Benjamin Barry Kramer, awaited trial, he made a daring, but unsuccessful, escape attempt by helicopter. It took years, but the government established that $12 million of the smugglers' profits were invested in construction of the Bicycle Club, then touted as the world's largest poker parlor. Michael Gilbert, the son of prominent developer Sam Gilbert, was charged with funneling the drug money into the casino via banks and businesses.

In 1990, after Kramer, his father and Michael Gilbert were convicted, the government seized the entire casino. Months later, the government relinquished its claim to a partnership headed by Hardie that held 35 percent of the casino, because a federal judge determined he was not involved in the money laundering.

But the government pressed its claim against some other Bicycle Club investors who allegedly knew that drug money was used to help build the casino.

By last November, the U.S. had won a controlling 36 percent interest in the club.

The Bicycle Club is no back-room poker parlor. With valet parking and nearly 2,000 employees, the casino looks like a bit of Nevada plunked along a major freeway. Asian game tables, catering to the club's heavily Asian-American clientele, are the most profitable part.

Because of the complexity of those fast-paced games, the Bicycle Club contracted in 1985 with a businessman, Hollman Cheung, now 42, to run them. It was a big job with an income to match - approximately $6 million a year, according to court records filed last year.

But in 1991, investigators began a probe involving Cheung and an associate, Tony Wong.

Wong had been arrested after threatening a Bicycle Club gambler who had borrowed money from Cheung and had not repaid the debt and interest.

In Wong's car, deputies found a loaded handgun, two sets of brass knuckles, an envelope containing copies of 20 checks, and a notebook with information on 37 people. Prosecutors alleged the majority were Bicycle Club gamblers, employees, or loan-shark victims.

Wong pleaded guilty to three extortion charges and was sentenced to a year in jail.

Using information from the Wong case, the U.S. Organized Crime Strike Force convened a grand-jury investigation of Cheung and Wong.

A secret indictment, unsealed last March, charged them with 10 counts of extortion and conspiracy to "loan money at usurious rates to people gambling at the Bicycle Club" and "use threats of force and violence to collect the loan payments."

Some victims were charged 10 percent interest every three to five days, prosecutors said.

Cheung's attorney, Charles English, said his client has pleaded not guilty. The trial is set for next month.

Prosecutors said Wong is believed to have fled the country.