Icahn clears gaming hurdle

Nevada gaming regulators today gave preliminary approval to Carl Icahn's takeover of the bankrupt Stratosphere and Arizona Charlie's hotel-casinos.

At its monthly meeting in Carson City, the state Gaming Control Board approved Icahn as majority owner of the Stratosphere, and approved Icahn to play a limited role in Arizona Charlie's operations.

The action gives Icahn and minority partner Bradford Whitmore full authority to run the Stratosphere, and Icahn consulting authority at Arizona Charlie's. Icahn is allowed to consult with Arizona Charlie's managers in the resort's operation, but does not yet have outright authority to run the property.

For that right, Icahn must submit a full license application for Arizona Charlie's. Because Arizona Charlie's fate was decided only Friday, Icahn had submitted an emergency application to participate in operations. Icahn said a full application would be submitted immediately, and officials said that application would likely be heard in September.

The Gaming Control Board actions were preliminary. Icahn will seek final approval from the Nevada Gaming Commission at its Aug. 20 Carson City meeting.

Though they voted in favor of his applications, Control Board members did not give Icahn a free pass. The billionaire financier faced questions about violations of securities regulations in New York and Virginia, and about his practice of betting on pro football games with a New York advertising executive.

Icahn was fined $10,000 by the New York Stock Exchange in 1978 for filing an inaccurate financial report, officials said. He has also violated Virginia securities regulations by allowing an unregistered stock agent to work for his company.

"My violations have been small," Icahn told board members. "I've proved my record on Wall Street. I've been careful to follow every regulation."

Board Chairman Bill Bible conceded the violations were small, and said he wanted to impress upon Icahn the necessity of toeing the line on all Nevada gaming regulations, no matter how small.

Board members also questioned Icahn about his practice of placing $10,000 bets on pro football games with New York advertising executive Sheldon Kravitz. Members were concerned that Kravitz was a bookie; Icahn said Kravitz lays the bets off on a bookmaker.

"He works as an advertising executive," Icahn said of Kravitz. "He doesn't take a percentage."

Icahn tried to downplay the significance of the betting.

"These are small bets," Icahn said. "We're not talking huge bets."

But Bible was not impressed.

"We're talking large bets to a lot of people," Bible said.

Still, the board's concern seemed to lie more with Kravitz than Icahn, and the betting issue did not prevent their approval of Icahn's applications.

In an interview, Icahn said he still plans to operate and expand Arizona Charlie's.

"We're going to do some expansion," Icahn said. "We're going to try to make this a top-rate casino."

Icahn said he planned to live in a house he recently purchased in Summerlin only part-time.

Icahn gained control of the Stratosphere and Arizona Charlie's in the same way: he bought a majority position in each property's publicly traded debt, making him the largest creditor of each when they entered bankruptcy.

Clearly, the biggest power play for Icahn was his bid for the Stratosphere, the 1,444-room Strip resort distinguished by a 1,149-foot observation tower visible throughout Las Vegas.

By buying a majority of the Stratosphere's debt, Icahn positioned himself as the resort's largest creditor. When Grand Casinos abandoned its investment in the Stratosphere, Icahn's restructuring plan took over, transferring all Stratosphere equity from stockholders to bondholders -- making Icahn the resort's owner. It was approved by bankruptcy court in May.

Gaming regulatory approval is the final step Icahn needs to take control of the Stratosphere.

Icahn's Arizona Charlie's bid was more contentious, pitting the New York financier against Bruce Becker, a Las Vegan with roots dating to wild west days.

Like the Stratosphere case, Icahn's Arizona Charlie's plan transfers all equity from Becker, the current stockholder, to bondholders, making Icahn majority owner.

As in the Stratosphere case, gaming regulatory approval is the final step Icahn needs to gain full control of Arizona Charlie's.

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