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Pinnacle CEO resigns after meeting confrontation

Updated Monday, Nov. 9, 2009 | 10:07 a.m.

Pinnacle Entertainment Inc. of Las Vegas today announced that Daniel R. Lee has resigned as chairman, chief executive officer and a director of the company "to pursue other business interests."

Former Aladdin Gaming and Harrah's executive Richard J. Goeglein has been named interim nonexecutive chairman and former Hilton Gaming executive John V. Giovenco has been named interim chief executive officer. Both are board members.

"We want to extend sincere thanks to Dan Lee for his seven years of leadership in transitioning Pinnacle Entertainment from a small casino company to a developer and operator of world-class gaming entertainment properties," Goeglein said. "As Pinnacle embarks on a new phase, we will continue to focus on building lasting shareholder value, supported by our diverse portfolio of gaming properties and a solid balance sheet."

Deutsche Bank securities analyst Andrew Zarnett said the resignation of Lee follows an incident during a St. Louis County Council meeting last week.

"Mr. Dan Lee angrily responded to a council vote, which favored the re-zoning of a site near Columbia Bottoms Conservation Area in North County, permitting the development of a new casino and entertainment complex in this area (limitations had been place on new licenses in that state following the November 2008 statewide referendum). Subsequent to his actions, Sen. Timothy P. Green, D-North St. Louis County, had asked the Missouri Gaming Commission to investigate the actions of Mr. Dan Lee, which we believe may be under way."

"This event clearly brings to the surface the political risk that has historically afflicted the risk profile of the gaming industry. Given the limited diversification available to many gaming operators, adverse political risks such as the one present in Missouri today or for that matter in the past (Station Casinos left Missouri in 2000) may negatively impact a large portion of a company's EBITDA (a cash flow measure)," Zarnett said in a report. "That political risk as well as unexpected (and what could be perceived as arbitrary) increases in gaming taxes or additional fees or perhaps additional licenses as well is why we believe many have had an adverse appetite to invest in (gaming)."

He called Goeglein and Giovenco "highly experienced" but likely not intent on holding the Pinnacle leadership reins for the long term.

"Further, given the changes in this industry over the last couple of years, the bullpen is filled with highly qualified executives like Mr. Bill Weidner and Mr. Brad Stone, formerly with Las Vegas Sands, who could suit up for a new assignment,'' Zarnett wrote.

Pinnacle has operations in Louisiana, Indiana, Missouri, Nevada and Argentina.

Despite the management shakeup, Pinnacle shares rose 4 percent to $9.08 in midday trading today.

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