Financing Behind D.C. Slots Murky
By Lori Montgomery
Washington Post Staff Writer
Sunday, August 1, 2004; Page A01
ST. CROIX, U.S. Virgin Islands -- On the sunbaked streets of Frederiksted, a desolate harbor town on St. Croix's impoverished west coast, everybody seems to know Rob Newell.
The self-proclaimed moneyman behind the D.C. slots initiative showed up here last fall after his firm offered to pay $412,000 cash for 17 Strand, a small building on the sleepy waterfront. Even before the sale closed, Newell set to work, hiring craftsmen to install hurricane-proof windows with mahogany frames and slap a fresh coat of jaunty pink paint on the exterior.
For weeks, the building's former owner, Jim Salafia, thought Newell was renovating the place for himself. Then one day, Newell mentioned that he needed permission for some task from "the big boss." And Salafia realized that "tall Rob," as he calls Newell, was "just a worker bee."
For much of his life, Newell, 43, has built a career as a worker bee in business deals arranged by others. Some ended badly: A California hotel he managed went bankrupt. A Las Vegas casino he owned failed to obtain a gambling license and later was torn down. A Spokane, Wash., investment firm of which he was an officer dissolved after state regulators accused it of swindling elderly, sick people out of their life savings.
Now Newell is campaigning to bring slot machines to the nation's capital. For weeks, he has insisted that his company, North Atlantic Investments, is paying for the slots campaign on its own. But Friday, North Atlantic's general manager, Steve Silver, acknowledged that the company is borrowing cash from Bridge Capital USVI, which owns the pink building at 17 Strand and employs Newell as its "chief operating officer and director of capital markets."
That raises new questions about who stands to benefit if slots come to Washington.
Bridge Capital is owned by Shawn Scott and John K. Baldwin, Las Vegas entrepreneurs who have tried for years to qualify for a license to operate a big-time gambling venture. They have had little luck, public records show. Scott, whose properties have received financial support from Baldwin, has been denied or failed to obtain gambling licenses in five states where regulators found evidence of financial mismanagement, irregular accounting practices and hidden partnerships.
Scott proposed the D.C. slots project in April to attorney John Ray, a former D.C. Council member who serves as legal counsel to slots supporters. Later, Ray said, he discovered Scott's troubled past and demanded that Scott abandon the project. In a June interview, Ray said Scott was out of the picture.
On Friday, Ray did not respond to a message left at his office about the Bridge Capital loans. Businessman Pedro Alfonso, the sole local investor in the slots proposal, declined to comment on Scott's involvement. "If that is happening, I wasn't aware of it," he said.
Since April, nearly $700,000 has flowed to the District from 17 Strand, according to campaign finance reports. Silver would not say whether all or just part of the cash was supplied by Bridge Capital. The money has paid for high-priced attorneys, well-connected local activists and an army of petition circulators who led the drive to win a spot for the gambling initiative on the Nov. 2 ballot.
This week, the D.C. elections board must decide whether to overlook allegations of widespread fraud in the petition drive and allow the slots initiative to move forward. If voters approve it, Newell and his associates would win a 10-year monopoly on gambling in the District and a license to operate 3,500 slot machines on a 14-acre site in Northeast Washington -- where Newell is promising to finance a $510 million entertainment complex with help from other investors.
In the past, Newell's bosses have stumbled in their quest for gambling licenses after failing to survive background investigations. But that kind of scrutiny would not be much of an obstacle in the District, where there are no gambling regulators.
All the rules for oversight are laid out in the slots initiative, which would have the force of law if voters approve it. Under the initiative, D.C. officials would "not [be] permitted to determine the suitability" of Newell and his associates to operate a gambling facility, and would be required to issue them a temporary license if they sign an affidavit attesting to their good character, according to a legal analysis submitted to the elections board by D.C. Attorney General Robert J. Spagnoletti.
"Furthermore, the Temporary Initial License application does not require identification of any of the Licensee's Principals, only that the Licensee certify that the Principals (apparently without having to name them) are not unsuitable," Spagnoletti wrote. And if the principals are "regulated financial institutions," they need never be identified, much less investigated, according to Spagnoletti.
© 2004 The Washington Post Company
The dealings of Rob Newell, right, "clearly demonstrate he's a very good businessman," says former D.C. Council member John Ray, left.
(Sarah L. Voisin -- The Washington Post)
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