Casino M8trix accused of allegedly hiding $66.5 million in profits

SAN JOSE (BCN)

The California Gaming Control Commission on May 29 could pass judgment on gambling licenses held by owners of the San Jose-based Casino M8trix cardroom, who are accused of hiding tens of millions in profits from regulators, a spokeswoman said Wednesday.

(M8trix website)

The four-member commission is to meet in Sacramento that day to decide if the principal shareholders in the 49-table, eight-story Casino M8trix are suitable to have to their licenses renewed, public information officer Pamela Mares said.

Commissioners may take into consideration a May 2 accusation filed by state Bureau of Gambling Control chief Wayne Quint, who recommended revoking or suspending the licenses of M8trix Casino owners Eric Swallow, Peter Lunardi, Jeanine Lunardi and the Lunardi Family Trust, Mares said.

“It’s up to the commission to decide if they are suitable,” Mares said. “That can be (about) anything.”

Quint claimed that Swallow, his unlicensed estranged wife Deborah, and the married couple Peter and Jeanine Lunardi together shuffled around $119 million in card room profits to multiple companies traced to Garden City Inc., Casino M8trix’s parent firm.

The owners operated “through a maze of affiliated entities” and their objective was to “siphon off monies for themselves and reduce reported income” without documentation or invoices, often listing their monetary gains as expenses charged to Garden City.

Those entities included the Swallow Family Trust, Airport Parkway Two LLC, Secure Stone LLC and Team View Player Services LLC, all of California, plus four firms out of Nevada, Profitable Casino LLC, Dolchee LLC, Potere LLC and Casino M*trix Inc., the Delaware-based Airport Opportunity Fund LLC and two companies registered in Wyoming.

The largest flows of profits funneled through Garden City to the companies included $38.5 million, referred as “game royalties,” to Dolchee LLC, $14 million in “royalties” to Profitable Casino LLC and $14 million in “consulting fees” to Potere LLC.

Dolchee LLC also shifted assets totaling $14.3 million to Casino M*trix Inc. Other millions shuffled around were listed as rent, fees and expenses, down payments or consulting fees.

The owners also underreported sums of money to the Internal Revenue Service, according to Quint. In 2010, Garden City paid Dolchee LLC $8.7 million, but Dolchee reported it as only $6.5 million on its federal tax return.

Casino M8trix offered table games, such as Pai Gow Tiles Gold, Texas Hold-Em Gold and Omaha Gold, that were never approved by the state or the city, and “rebranded” pai gow poker and Texas Hold-Em games owned by the firm ShuffleMaster without the company’s permission, Quint stated.

Swallow and the Lunardis, through their family trusts, each own 50 percent of Casino M8trix and their state gambling licenses expire on May 31 unless extended, according to Quint.

Quint is was seeking to discipline the owners by revoking or suspending their licenses and he has requested that Eric Swallow, the Lunardis, the Lunardi Family Trust and Garden City each be fined “to the maximum extent allowed by law.”

The city’s two card clubs, Casino M8trix and Bay 101, pay the city of San Jose a 15 percent gross receipts tax that amounts to about $15 million a year.

Quint’s accusation against Casino M8trix served as the highlight Wednesday at a news conference outside San Jose City Hill called by City Councilman Sam Liccardo, a candidate for mayor in the upcoming June 3 primary election.

Liccardo, who is against efforts by card clubs to ease city regulations that owners believe are too strict, said the city should order Casino M8trix to close down unless it pays what it owes, including to a charity providing problem gambling services.

Liccardo said that Casino M8trix engaged in a “shell game” to hide its profits from taxation by the city, state and the IRS and from regulatory oversight.

The councilmen said that Casino M8trix did not make annual payments equal to 5.15 percent of its gross profits, or at least $125,000, to Asian Americans for Community Involvement to fund gambling addiction programs as required under a 2009 pact with the city.

Liccardo said he will ask the San Jose City Auditor and the San Jose Police Chief to investigate any underpayments of city cardroom taxes by Casino M8trix.

The councilman said he also wants the city to halt consideration of changes proposed by Casino M8trix and the Bay 101 card club to relax city regulations on gaming businesses.

Casino M8trix spokesman Sean Kali-Rai said that the cardroom “believes the charges are unfounded and the legal process will show that is the case.”

Kali-Rai said the casino is not worried about the state’s license renewal process.

“They are constantly being renewed,” he said. “There is constant oversight for all card rooms in California. This is no different.”

Michelle Gregory, spokeswoman for California Attorney General Kamala Harris, said that Quint’s accusation would be forwarded to the state Office of Administrative Law, which makes recommendations to the gaming commission on licensing.

(Copyright 2014 Bay City News. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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