Tuesday, Dec. 21, 1999 | 10:35 a.m.
The FBI has launched an investigation of a St. Louis lawyer involved in a scandal that scuttled Station Casinos Inc.'s plans to buy a Missouri casino, a Missouri newspaper reported.
The St. Louis Post-Dispatch reported today that FBI agents searched Michael Lazaroff's law firm Dec. 13 and seized client billing and expense records. Lazaroff is accused of taking $500,000 in legal fees without telling his law partners. There was no indication the FBI had targeted Las Vegas-based Station in the investigation.
Jack Musgrave, head of the St. Louis law firm Thompson Coburn, said Monday his firm's own investigation found that Lazaroff "diverted funds from the firm and clients by manipulating expense items on bills to clients."
Lazaroff resigned Dec. 3 after the Missouri Gaming Commission began questioning a $500,000 bonus payment made by Station to Lazaroff several years ago. The commission had been holding hearings into Station's proposed $22.5 million purchase of the Flamingo Hilton Casino in Kansas City. Lazaroff was Station's attorney-of-record before the commission.
Station later withdrew its offer. But John Finamore, Station's Midwest president, told the Kansas City Star the bid was withdrawn because Hilton had escalated its asking price for the casino as a result of new "open boarding" regulations in Missouri. Citing unidentified sources, the Star put Hilton's new asking price at $48 million.
In court documents, Station said it paid $250,000 in bonuses to outside counsel in Missouri. It defended these bonuses, calling them routine "for a job well done," the Post-Dispatch said.
In a separate development, Thompson Coburn said Monday it has begun making restitution payments to clients who may have been improperly billed by Lazaroff. The Post-Dispatch said firm has already made more than $20,000 in payments, and quoted Musgrave as saying the firm planned to make "full restitution."
News of the Lazaroff scandal has pounded Station's stock in December, sending it from $23 on Dec. 6 to as low as $17 Dec. 16. Station rose 13 cents to $18 in trading today.
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