FinCEN fines California card room; Casino M8trix owner to fight license suspension

fincen-oaks-card-club-fineAn owner of popular San Jose card room Casino M8trix appears set to lose his state gaming license following an administrative court ruling.

Last week, Judge Mary-Margaret Anderson recommended that state gaming officials strip Eric Swallow of his license and slap him with a $430k fine to resolve a variety of allegations, including providing false information to regulators.

The state Gambling Control Commission won’t make a decision on the recommendation until February but Swallow told the San Jose Mercury News that he intends to appeal the ruling. Swallow noted that regulators, who had been seeking restitution of up to $18.8m, had failed to prove its more serious allegations.

In May 2014, the California Bureau of Gambling Control (BGC) launched proceedings against Casino M8trix owners Swallow and the husband and wife team of Peter and Jeanine Lunardi. The three stood accused of failing to report millions of dollars in profits, thereby reducing the venue’s tax bill as well as its contributions to local responsible gambling programs.

The investigation widened to include the card room’s compliance officer Bob Lytle, the former head of the BGC, who was accused of receiving confidential information on the probe from a BGC agent who was in a common-law relationship with Tina Littleton, a member of the Gambling Control Commission. The brouhaha ultimately led to the resignations of Littleton and Commission chairman Richard Lopes, Lytle’s old boss.

In June 2015, the Lunardis reached a $1.5m settlement with the state through Casino M8trix’s parent company Garden City Inc. The settlement included an admission that Swallow provided state officials with false information but Swallow maintains that these weren’t “intentional misrepresentations.”

Swallow stepped down as Casino M8trix CEO in October and plans to sell his 50% stake in the venue to John Park, who has stakes in numerous state gaming facilities. That sale is being delayed by the Lunardis, who want a shot at acquiring Swallow’s stake but haven’t been able to meet Swallow’s price.

Meanwhile, the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has slapped its first fine on a California card room for anti-money laundering lapses. Last week, FinCEN announced that the Oaks Card Club in Emeryville had agreed to pay $650k for willful violations of the Bank Secrecy Act.

FinCEN said the Oaks Club’s misbehavior included encouraging its employees to notify customers in advance that the transactions they were about to conduct would put them over the $10k federal reporting threshold, thereby encouraging these customers to restructure the transactions to avoid filing a report.

Federal officials brought charges against several Oaks Club staff and customers in 2011 yet FinCEN director Jennifer Shasky Calvery said the Oaks Club failed to file any Suspicious Activity Reports following this action. Shasky Calvery said the Oaks Club had been in business since 1896, which she deemed “enough time to become very familiar with what’s right and what’s wrong.”

FinCEN has turned a sharper eye on the casino industry in recent years, doling out seven- and eight-figure fines to casinos in Las Vegas, Atlantic City and even the Northern Marianas.