In Mexico’s messy casino industry, survival isn’t easy. The nation’s gaming laws are masterpieces of ambiguity, rivals use dubious legal tactics to undercut foes and chicanery is a practiced art.
Despite all that, a Colorado-based group that operates six casinos in Mexico has become a significant player. U.S.-owned Exciting Games runs the largest casino in greater Mexico City, and it has hopes of expanding.
President Gordon Burr, a former investment banker, says lax regulation is a challenge but that an even bigger worry is an ongoing battle with a rival who wants him out of business. Burr says the rival orchestrated a media campaign to make it falsely look as though his company had won last-minute favors from the previous government.
Burr and his four partners got into Mexican gaming in its early days, and their showcase Kash casino in Naucalpan, a Mexico City bedroom community, opened its doors in 2006. The casino has 830 slot machines and a sports-betting site, as well as a restaurant and live music venue.
Other casinos followed: two more in Mexico City and smaller casinos in Villahermosa, Puebla and Cuernavaca.
Strolling through Kash, Burr takes pride in the heavy security, tight enough that Mexicans feel safe dropping off older or physically challenged relatives to sit by the gaming floor and watch the kaleidoscope of lights. The casino has only electronic games, no live table poker or roulette.
Burr and his fellow U.S. investors plunged into Mexico thinking that the big global gaming companies – based in Las Vegas, Macau and Singapore – might come in later, perhaps even buying their business.
But the big Vegas boys have been spooked by the lack of clear gaming laws.
“Things are not as black and white in Mexico as far as interpretation of the law,” Burr said. “The regulations need to be tightened up.”
Burr, 63, worked in banking until he was in his 30s, then moved into private equity, he said. He and an eventual partner, John E. Conley, later met the son of a Louisiana entrepreneur, Leandrus “Lee” J. Young, a pioneer in gaming in Mexico.
Burr and Conley, who already had business experience in Mexico, studied Young’s Bella Vista casino in Monterrey in 2005 and came away struck by the potential, unaware that Young would soon be forced out of the business.
They plopped down a total of $12.5 million to operate under a gaming permit controlled by Young’s partner, and started building the Kash casino off a busy highway in Naucalpan.
“We didn’t market it,” Burr said. “We thought we were going to open the doors and be as successful as Lee Young was.”
That didn’t quite happen. Competition was getting fierce. But they kept building, three casinos in 2006 and more in later years.
Exciting Games is overshadowed by several bigger players, including the PlayCity chain owned by the Televisa conglomerate, and Caliente, the chain of Jorge Hank Rhon, a former Tijuana mayor and veteran of several run-ins with the law.
Burr said Exciting Games had operated within the law despite the legal chaos surrounding gaming: “We’ve stressed with all of our management team that this is to be run like a U.S. company.”
Still, they’ve watched with dismay at the explosion of casinos, many operating without federal permits but protected by judicial injunctions.
“The country has too many casinos,” Burr said.
“They are illegal,” Conley interjected, referring to pirate operators.
The two think that their management team and their 1,000 or employees are better trained than competitors’ are, but they’ve tabled plans to expand.
“We were prepared to invest as much as $50 million,” Burr said. “We’d like to expand our operations and do some hotel and casino operations together.”
But for now, Exciting Games is ensnarled in a legal skirmish with the former Mexican partner of Lee Young, Juan Jose Rojas-Cardona, a man dubbed the “Casino Czar” by the Mexican press because he’s behind more than two dozen gaming halls and enjoys powerful political connections.
Unable to get its own federal gaming permit, Exciting Games entered Mexico by paying Rojas-Cardona’s business to operate under its permit. Only after signing a contract with Rojas-Cardona’s firm did Burr learn of the Mexican’s brushes with the law, including an arrest for having 17 pounds of marijuana in his rental car trunk in New Mexico in 1994. By late last decade, Rojas-Cardona had sour relationships not only with Exciting Games but also with several other foreign investors.
In a sign of the bad feeling, Rojas-Cardona’s company, Emex Holdings LLC, defrauded a Chippewa Indian tribe from Michigan’s Upper Peninsula of more than $6 million, according to the tribe’s suit in U.S. court. A London-based hedge fund, BlueCrest Capital, claims it lost a $75 million investment in Rojas-Cardona’s company.
Burr has difficulty bringing himself even to mention Rojas-Cardona’s name.
“We have had a very adversarial relationship with a guy who’s caused us a great deal of problems,” Burr said. “He’s very powerful, very wealthy, and he’s had a unique ability to achieve results.”
Burr is convinced that Rojas-Cardona is behind news leaks about a last-minute approval of casino permits under the government of President Felipe Calderon, who left office Dec. 1. In the final hours of Calderon’s government, the Web page of the gaming and lottery bureau of the Interior Secretariat reflected that Exciting Games had been issued permits for 14 casinos and sports book centers, and a second operator, Producciones Moviles, had won permits for 80 casinos.
According to Burr, it’s a mystery why the permits registered on the Web page in the final moments of the Calderon administration when Exciting Games had received written notification of approval in mid-August. He claimed that the action, whether nefarious or not, obscured his company’s three-year campaign to win a federal permit in its own name.
The tussle is so bitter and the stakes so high that neither Burr nor Conley wanted his photo taken, for security reasons. They seek to sever relations with Rojas-Cardona’s group, saying a judge’s ruling declaring it in bankruptcy releases Exciting Games from any contractual obligations or royalty payments.
In a sign of the go-for-broke battle, a trusted legal adviser to Exciting Games, Alfredo Moreno Quijano, faced an arrest warrant on fraud charges last fall.
In Mexico, civil litigants may appeal to judges to have their legal foes jailed, and Burr said the arrest warrant for Moreno was part of the hardball dispute about whether his company could break its contract with Rojas-Cardona’s company.
A spokesman for Rojas-Cardona’s business, Eduardo A. Campos, said the firm believed that Exciting Games had obtained its Dec. 1 federal permit illegally and should continue to pay royalties.
“They shouldn’t be operating,” Campos said.
Only one other U.S. company has an interest in gaming in Mexico. Playboy Enterprises Inc. is a partner with Rojas-Cardona’s firm in a Playboy Club casino in Cancun, the Caribbean tourism hub.
Officials under President Enrique Pena Nieto say they’ll review procedures for gaming permits, and several lawmakers say they may push for a top-to-bottom shake-up of who may operate.
Burr said he welcomed any effort to bring order to gaming.
“We hope that they do a great job not only with the industry but also with the country,” he said.