Wednesday, July 12, 2000 | 8:55 a.m.
DETROIT - State gaming regulators Tuesday put off deciding a plan for two couples to sell their 40 percent Greektown Casino stake, troubled by a provision that could let the founding investors buy back their shares in the virtually finished gambling hall.
Ted Gatzaros, Dimitrios Papas and their wives are divesting their interests in what would become Detroit's third temporary casino, given a state-mandated investigation that uncovered problems in their backgrounds.
Under a proposal argued Tuesday before the Michigan Gaming Control Board, the couples would sell their 40 percent in effect to the Upper Peninsula's Sault Ste. Marie Tribe of Chippewa Indians for more than $200 million over 10 years. The 28,000-member tribe's stake already is 50 percent. Local investors own the balance.
The catch: the proposed deal would leave the door open for the couple to perhaps reinvest in the casino, something the regulatory gaming board made clear it doesn't view favorably.
"I am suspicious (about that provision), and I am concerned," Thomas Denomme, the board's chairman, told Thomas Kienbaum, an attorney for the couples. "My advice is you take it out and make it a clean sale.
"As long as it's in there, we're going to have a hard time" signing off on the transfer, Denomme said.
When Kienbaum countered that he found any suspicion unjustified, Denomme said "you could relieve any suspicion by removing some of this language."
"If you want a smooth-sailing transaction here, take it out," he said. "Today's our day to tell you how we feel in plain English, and that's how I feel."
Board member Paula Blanchard called prospects that the Gatzaroses and Papases reinvest in the casino "a real problem."
The board recessed the matter until Aug. 7, largely to allow its staff and financial advisers to scrutinize the proposal spanning hundreds of pages submitted late last month.
Mike Neiswonger, a spokesman for the couples, said the Gatzaroses and Papases agreed to sell their stakes to hasten the casino's opening, believing they have a legal right to reinvest later.
"They believed they'd eventually be granted a license," but saw the licensing process plod along, Neiswonger said. "They believe what they propose would lead to the quickest opening of the casino."
Neiswonger said the casino could open this fall "if all went smoothly" with licensing, though Denomme said "we should not be held hostage" by the clock or calendar.
If the Papases and Gatzaroses don't sell their shares, they could be found unsuitable by the gaming board and allowed to recoup only what they originally invested. By selling now, they could get as much as $228 million for the 40 percent stake, not including interest.
After Tuesday's four-hour hearing, Denomme said the board has let investors in casinos elsewhere in Michigan buy back their stakes on rare occasions, typically amounting to 1 percent. With the Greektown case, he said, "our concern is it's a huge chunk of ownership" that could be repurchased by the divesting couples.
"If they persist in having that as part of the transfer agreement, it's going to be very hard for me to approve that proposal," he said.
Denomme said it was possible the Gatzaroses and Papases could sue over the matter.
With each passing day, Greektown's $150 million casino falls farther behind its competitors, giving the local MotorCity and MGM Grand gambling halls that opened last year more time to build customer loyalty and costing city coffers additional tax revenue.