Published: Friday, November 24, 1995
Column: James Gill
Byline: By James Gill
When fat cats screw up they throw other people out of work, and when they screw up big-time they hand out pink slips on the eve of the holidays.
The wrong people lost their jobs when the temporary casino turned out to be more temporary than advertised, and construction of the permanent casino was halted, leaving Harrah's with what looks more like a permanent disaster.
The construction workers, and the 2,000 people who worked at the casino, are now paying the price for the breathtaking ineptitude of Harrah's, its consultants and all the city and state officials who sucked up copious amounts of snake oil.
If there were any justice, a whole phalanx of number-crunchers, government planners and high-flying vice presidents would be looking for new positions this Thanksgiving.
Not everyone was taken in when the gambling boys came to town promising 25,000 new jobs, overflowing government coffers and universal bliss. Although, with so many people added to the unemployment rolls, nobody will be in a mood to exult over the casino debacle, there are a few people in town who have been predicting it from the beginning.
More than two years ago, Councilwoman Peggy Wilson earned the derision of her colleagues when she dared to question the wildly optimistic predictions of "the cavalcade of consultants and metro-planning visionaries" then touting a casino as a guarantee of economic salvation. Then-Mayor Sidney Barthelemy was talking about 25,000 new jobs.
The great apostle at the time was Christopher Hemmeter, who later became a partner with Harrah's and a group of local politically connected investors to form the company that filed for bankruptcy Wednesday. Hemmeter came on as quite the big shot for a while, but is now knee-deep in Chapter 11 proceedings, having also proved a colossal flop in the riverboat racket.
New Orleans' two most vocal gambling opponents, attorneys Tommy Tucker and C.B. Forgotston, consistently maintained that Harrah's was overestimating the local gambling market and pooh-poohed assumptions that a casino would bring in hordes of extra tourists just dying to lose bundles of money.
They insisted that Harrah's revenue projections for both the temporary and permanent casinos were a joke, albeit one vouched for at the time by Peat Marwick, no less. Indeed, Tucker needed no more than a pencil and the back of an envelope to come up with figures that proved much more realistic than the projections Harrah's submitted to the casino board and to the Securities and Exchange Commission.
Forgotston has often observed that you could hardly come up with a better recipe for business disaster than selling junks bonds at stratospheric interest rates to spend $820 million building a casino in an impoverished city far from the country's most populous regions.
Will Whitmore, former chief executive for the casino board, did his own analysis and concluded that the casino could not survive unless it found a way to reduce its burden of debt.
A few weeks ago casino board member Fred Cassibry announced that Harrah's had consulted a law firm specializing in bankruptcy. Colin Reed, a vice president of the parent company, Harrah's Entertainment, bristled at what he described as "malicious rumors," and, indeed, Cassibry appeared unable to back up his claims.
Reed insisted that everything would proceed as scheduled and that he had "no problems."
Well, maybe he has less of a problem than the people Harrah's has just fired, but it is apparent that his remarks were somewhat less than candid.
Harrah's Entertainment is supposed to have guaranteed completion of the permanent casino, which will presumably open for business eventually, although probably not as scheduled this summer.
Harrah's will presumably now start to whine that it can't meet its tax obligations to the city and the state and that it needs to add the hotel and restaurant currently verboten.
It would be far better for the taxpayer if some other company, or even a government agency, moved in to complete construction and operate the casino now that we've torn down so much of the city to accommodate it.
Without the crushing debts recklessly assumed by Harrah's, some casino operator might be able to meet payroll.
James Gill is a staff writer.
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