Published: Wednesday, September 21, 1994
Column: James Gill
Byline: By James Gill
If attorney Tommy Tucker is right, the Rivergate casino could be done in, or at least subjected to further serious delays, by problems in what you would normally regard as a routine part of the dull business round - title insurance.
This is by no means the first time Tucker has proved a fly in the ointment for the Harrah's group, which, according to its latest announced schedule, will go to market Nov. 1 and borrow the $800 million needed to open a temporary casino at the Municipal Auditorium and build a permanent one at the Rivergate site.
As chairman of the Historic District Landmarks Commission, Tucker did not share then-Mayor Barthelemy's conviction that whatever the gambling boys wanted, the gambling boys should get. So, naturally, he was fired last year.
Tucker is attorney for heirs of pre-Civil War owners of land on which the Rivergate stands. The land was ceded to the city on condition that it revert to the donors when no longer needed for a "public purpose." The heirs have filed suit to get the land back, which could, of course, put the kibosh on the whole casino scheme by invalidating Harrah's lease.
Would you lend $800 million - or a measly million for that matter - to an outfit that could be run out of town on a rail at any minute? Maybe, if title insurance guaranteed return of your money, but you'd want to see plenty of proof.
Harrah's has steadfastly insisted it has ample insurance in place, and just as steadfastly refused to furnish evidence of it to the media or to Tucker. Such stonewalling would normally be a pretty futile exercise, since Harrah's operating contract requires comprehensive documentation of title insurance to be filed with, and approved by, the state casino board.
So, if rebuffed by Harrah's, all the curious reporter or attorney needs to do is to ease round to the board's offices and bag the papers under the public-records act.
Trouble is, the board doesn't have them either. Harrah's provided no more than a First American policy with a face value of $800 million, although nobody pretends the company has anywhere near enough reserves to write that much insurance. First American, Harrah's officials say, has arranged to share the burden with a pool of other insurance companies, although they have refused to name them.
Prodded by casino board director Will Whitmore, Harrah's has now written him a letter listing nine co-insurers. No policies or contracts were enclosed and Whitmore was forbidden to release the names of the nine companies to any "third parties."
This is a curiously shifty way to behave, given that Harrah's won't be selling bonds on Nov. 1, or any other time, unless Whitmore and casino board attorneys approve every detail of the primary insurance and of any reinsurance treaties.
Now along comes Tucker, in a letter to the casino board, to note that the entire American title insurance industry could not provide more than $900 million in coverage on any one risk. Harrah's acknowledges that the Rivergate coverage stretches the title-insurance market to its limits.
Some of the major companies, moreover, are known not to be participating in this deal, Tucker maintains.
Furthermore, by state law "no property or casualty insurer" shall take on "any one risk in an amount which exceeds ten percent of the insurer's capital and surplus."
If that limit applies to title insurers, and Tucker's correspondence with the state insurance department indicates that it does, considerably less than $100 million would be available from the primary companies. More than $700 million have to be covered by reinsurance, probably on the international market, and Whitmore says he would need to be assured that claims could be met before authorizing any such arrangements.
Harrah's, moreover, in documents filed with the Securities and Exchange Commission, offers "no assurance" that the title insurance will be sufficient or that the companies writing it will be able to meet claims.
Harrah's, we can assume, wants to start separating sporting citizens from their money as soon as possible, but there is no way, as things stand, that dollar one can be hazarded at the Auditorium until everything is in place for the Rivergate. That is a condition of the lease with the city and, besides, state law requires that profits from the temporary casino go towards construction of the permanent.
This, as it turns out, is unfortunate for the state and city, which are counting on casino revenues, and for Harrah's, which could get things up and running at the Auditorium for pocket change - $38 million.
Indeed, if title-insurance or bond-market problems should stymie the Rivergate project, someone could well come up with the idea of leaving the casino at the Auditorium. That would require some toing and froing by both the City Council and the Legislature, but it would be no bad thing for Treme or for the French Quarter.
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