Business & Real Estate

New lawsuit charges fraud, document shredding at Sacramento's Casino Royale card room

The legal squabbling over the ownership of Sacramento’s Casino Royale card room has taken a dramatic turn, with one of the owners, William Blanas, suing his partner over allegations of fraud, document shredding and using casino funds for personal use.

Blanas, the son of former Sacramento Sheriff Lou Blanas, sued his co-owner, prominent Sacramento attorney and real estate entrepreneur James L. Kouretas, last week after what Blanas’ suit describes as months of fruitless efforts to get Kouretas to let him examine the casino’s financial records.

“Kouretas has failed and refused to fully comply with Blanas’ requests and has instead stonewalled and obstructed Blanas’ efforts to inspect the books and financial records of the company as permitted by the operating agreement and the law,” states Blanas’ suit, which was filed in Sacramento Superior Court.

Blanas accuses Kouretas in the suit of ordering casino employees to “shred and/or destroy business and financial documents” after Blanas asked to see them, of using money from the casino for his own use and mismanaging the card room inside the Red Lion Hotel at 500 Leisure Lane.

Kouretas did not respond Tuesday to a request for comment on the lawsuit, and he has ignored previous efforts by The Bee to reach him for comment on legal challenges facing the card room.

The card room already is the subject of another lawsuit that alleges Kouretas essentially duped three men who claim they are the rightful owners of the gambling hall by acting as their attorney and stealing it away from them, something Kouretas has denied in court papers.

The saga dates back to December 2004, when a fire destroyed the old Duffy’s card room on El Camino Avenue. Faye Stearns was the owner of the Duffy’s card room license – one of only four such licenses allowed by the Sacramento City Council – and began seeking investors to help her rebuild.

Court documents allege that she struck a deal with bail bondsman Rafael Perez, who hoped to go into the gambling business with investments from his father, Pedro, and a real estate salesman named David Hurley.

Rafael Perez claims in court papers that he met with Kouretas to hire him to help guide Perez through the process of establishing the card room and that Kouretas simply stole it out from under him, something Kouretas called a “complete fabrication” in court documents.

That suit is pending in Superior Court.

Blanas, Stearns and Kouretas had been partners in the venture since signing an operating agreement in July 2007 that gave Kouretas a 50 percent share and authority to manage the card room, with Blanas and Stearns each getting a 25 percent interest.

The operating agreement indicates that Kouretas and Blanas expected to pony up a total of $1.1 million to get the casino operating in its first building on Auburn Boulevard, and one estimate has indicated that monthly revenue of up to $800,000 was expected.

According to Blanas’ lawsuit, Kouretas later decided to move the card room from its Auburn Boulevard location to the Red Lion, a move that Blanas says he was told would cost $375,000 to $400,000 and boost revenue. That proposed move was highly controversial, with residents of the surrounding Woodlake area and rival card rooms expressing fear that the Casino Royale would become a “mega card room” by merging its license with that of another card room.

That did not happen, and city officials approved the move in 2012 after Casino Royale’s owners brought in former City Manager Bob Thomas as a consultant.

Last year’s move, however, did not improve business for the card room, Blanas alleges in his suit, which states that “the relocation costs far exceeded the costs represented by Kouretas, and the gross revenues of the Casino Royale have dropped substantially since the relocation.”

Blanas’ suit said he made a written request on Sept. 30 to inspect the books but was rebuffed, with Kouretas responding that “due to tax season” the company bookkeeper and accountant were not available to produce the records. Blanas eventually hired an auditor to help. Kouretas in turn hired an attorney who told Blanas his request was “unreasonable,” the lawsuit states.

Blanas could not be reached for comment Tuesday, but his lawsuit states that he persisted and got a response from yet another Kouretas attorney who offered to provide tax returns from the casino from 2008 through 2012 as “a good faith measure.”

Kouretas also provided copies of the casino’s payroll records and bank statements, and Blanas agreed to hold off on pursuing the matter further until Oct. 22, “so as not to interfere with the grand opening of the Casino Royale at its new location.”

Despite that, Blanas alleges in his lawsuit that “Kouretas still has not fully responded” to his request to inspect the company’s financial records.

“In addition, the records Kouretas produced reflected numerous financial irregularities,” Blanas’ lawsuit alleges.

“Kouretas directed that documents stored (at) Casino Royale and elsewhere be shredded and/or removed from the premises to prevent Blanas from having access to the records or discovering evidence of Kouretas’ mismanagement of the company,” the lawsuit claims.

The Blanas lawsuit is not the first legal challenge Kouretas has faced in recent years over finances.

JPMorgan Chase Bank sued Kouretas and his wife, Rosemary, in September 2012, alleging that they had defaulted on a $712,500 loan. Court records indicate that lawsuit was dismissed last October.

Westamerica Bank sued Kouretas in January 2013, alleging that he had failed to make payments on a $99,520.83 loan. Online court records indicate a notice of settlement was filed in that case in June 2013.

Kouretas and the casino also were sued in November 2013 by two licensed contractors who alleged they were owed more than $20,000 for remodeling work on the casino. That case is pending, according to online court records.

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