The Bicycle Hotel and Casino reopened in the pre-dawn hours Wednesday following a raid by federal agents that temporarily closed the facility to the public.
But not before raising fears about the possible hit the closure could have on workers and the city of Bell Gardens where it is located.
Dozens of law enforcement officials with the Los Angeles High Intensity Financial Crime Area Task Force — which includes the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE), IRS Criminal Investigation, the California Department of Justice, Bureau of Gambling Control and the United States Attorney’s office — descended on the property around 7:00 a.m. Tuesday to execute a search warrant. Sources, speaking on the condition of anonymity, said the warrant was related to money laundering by “high-rollers” who frequent the gambling facility.
Bell Gardens police have in the past taken part in these types of joint federal task forces, but told EGP Tuesday they were not involved in Tuesday’s raid.
It is not yet clear what the task force was looking for because, according to Virginia Kice of U.S. Immigration and Customs Enforcement, “The search warrant issued by a United States magistrate judge was filed under seal in relation to an ongoing investigation.
“Because the warrant is under seal, we are not able to comment on the scope or nature of the investigation.”
The task force, however, is known to target money laundering, so there’s speculation Tuesday’s raid could be related to organized crime.
The Casino did not respond to EGP’s request for comment, but in a statement released prior to the reopening, said: “We are serving our customers and resuming normal operations immediately. Our priority is to provide a safe and fun environment for our guests.”
With the exception of a few hotel and casino managers, most employees were allowed to leave the premises Tuesday.
Boxes of items believed to be financial documents were removed from the Casino. No arrests were made.
As the raid got underway, players inside the Casino were told to leave immediately. Some were left scrambling to gather up their chips, unsure if or when they would be allowed to exchange them for cash. The Casino was closed to the public until 3 a.m. Wednesday, but hotel guests with a room key card were allowed inside.
News of the raid spread quickly through the small Southeast city, drawing people to stand outside the facility to get a closer look.
It also sparked conversation amongst neighbors, with some venturing their own ideas about the early morning raid.
Jorge Gonzales, a longtime city resident whose mother at one time worked for the Casino, told EGP he believes federal investigators are looking into criminal activity he says has been going on for years.
“I’m not surprised, it’s actually about time they look into what’s going on here,” he said.
“This place was put up with gangster money,” he said, referring to the Casino’s early history.
Founded in the mid-1980s, the Bicycle Club was seized in 1990 by the federal government after investigators said the club was partly built with laundered drug money.
For Bell Gardens City Manager Phil Wagner, retelling the past seems unfair.
“Some in the media have used the events of today as an opportunity to dredge up unrelated issues that happened 27 years ago when the Casino was under completely different ownership and management,” he told EGP in an email. “That’s totally unfair to the Casino and to this community.”
Many Bicycle Hotel and Casino employees live in Bell Gardens, so the raid Tuesday on the city’s top source of revenue is a serious concern to some residents, both for their wallets and their reputations.
“Most people who work here are honest, humble, good people,” said one employee, who did not want to use his name out of fear of putting his job at risk.
“The people gambling are not from Bell Gardens,” he added, implying the raid may have been targeting activity by foreigners.
Bell Gardens’ financial stability depends heavily on the Casino and Tuesday’s raid put the spotlight on the importance of that relationship.
“I can’t imagine what will happen if they close this place down,” said one worried employee.
“It’s not beneficial for the casino or the city” for it to be closed down, interjected a woman in Spanish.
The Bicycle Casino Hotel opened to great fanfare in December 2015. Gov. Jerry Brown was at both the groundbreaking and grand opening of the $50 million, seven-story, 100-room hotel.
In years past, nearly half of Bell Gardens’ General Fund revenue has come from the Casino. It is expected to generate $13 million in funds for the city during the 2016-17 fiscal year that ends in June, an amount projected to be slightly higher in 2017-2018.
While Casino operations appear to have returned to normal, a long time closure or the revoking of its license, or any event that results in a big drop in business, could have a negative impact on city finances. In 2012, for example, when Casino revenue dwindled to an all-time low, Bell Gardens found itself with a budget deficit that required a great deal of belt-tightening.
However, such drastic action – long time closure or revoking the Casino’s license – seem unlikely based on similar raids of other casinos.
Federal authorities last year investigated the Gardena card club formerly known as the Normandie Casino for violating anti-money laundering laws.
The partnership that ran the Normandie was ordered to pay about $2.4 million to settle federal charges that the poker club failed to report large cash transactions to federal authorities, as required.
As part of an agreement with the government, the four partners agreed to pay a $1 million fine and to forfeit nearly $1.4 million for failing to maintain an effective anti-money laundering program and conspiring to avoid reporting to the government the large cash transactions of some of the casino’s “high-roller” gamblers.
Under the Bank Secrecy Act, casinos are required to implement and maintain programs designed to prevent criminals from using the clubs to launder the large sums of cash that illegal activity can generate.
For example, casinos must record and report to the government the details of transactions involving more than $10,000 by any one gambler in a 24-hour period.
Wagner said he does not believe the current Casino owners and management are the targets of this investigation, citing reports that the probe is focused on individual gamblers who may or may not have used the casino to launder illegally obtained cash.
“Unfortunately for the many law-abiding customers of the Casino, its employees and the community which has suffered a great deal of negative publicity,” Wagner told EGP.
Longtime Bell Gardens resident Nury Balmaceda calls the Casino the working-class city’s “crown jewel.”
It “helped build all this,” she said, pointing to the surrounding development that now includes high producing retailers like Ross and Marshals and the newly opened Dunkin’ Donuts and Chipotle.
“It helped bring all these businesses here.”
She found the presence of ICE agents in the Southeast city, home to a large immigrant population, alarming.
“A lot of undocumented people may be afraid to come out,” said Balmaceda, who hopes nothing bad comes out of the raid.
In addition to city revenue, The Bicycle Casino Community Foundation provides scholarships for local students, recognizes local businesses and hosts an annual Christmas celebration for low-income residents.
“This is hit for the people of Bell Gardens,” Balmaceda said. “In the end we are the ones who will pay for it.”
An earlier version of this story was posted Tuesday to EGPNews website. Information from City News Story was use in this report.
The opening of the highly anticipated hotel at The Bicycle Casino turned into a $1 million jackpot for the city of Bell Gardens, which wagered on the success of the project to increase city revenue.
It was only a couple years ago that the city faced a $1 million budget deficit resulting from the economic recession and state closure of its redevelopment agency (RDA), which had contributed millions of dollars to rehabilitate the city’s blighted areas.
Bell Gardens’ luck has since turned around and the city is anticipating a $1 million dollar surplus in its 2016-2017 Fiscal Year Budget of $29.7 million. $200,000 of the surplus will go to the city’s reserves – a fund set aside for emergencies or unexpected expenses.
Mayor Pro Tem Pedro Aceituno credits the surplus to staff being frugal and holding the line during troubled times.
“We didn’t overspend,” Aceituno said.
Bicycle Casino profits continue to play a major role in the predominately Latino blue-collar community’s financial health, with nearly half of the city’s general fund revenue coming from Casino fees.
In 2012, Casino revenue dwindled to an all-time low of $9.3 million, sparking a budget deficit that year. Now on the rebound, Casino revenue is expected to reach $13 million this year, $1.8 million more than in 2015-2016 and $170,000 more than its peak in 2008.
“For years, we were losing players to other casinos with hotels, [but] now we are able to keep them here,” City Manager Phil Wagner told EGP, referring to the opening of the Casino’s new hotel.
However, “It’s not just the economy doing better or hotel improvements, but a lot of it was that we managed our money very well,” he said.
The added revenue will offset $234,000 in lease revenue lost when the city was forced to sell of two city-owned shopping centers, as part of a settlement with the state over the closing of its redevelopment agency. Wagner believes the city is in the “9th inning” of the RDA ordeal, “it’s over when the state says it’s over,” he added.
“The key thing is the loss from the RDA negotiations could have been much bigger.”
Staff worked hard to minimize the damage, which could have reached up to $4 million, said Director of Finance Will Kaholokula.
Mayor Jennifer Rodriguez also credits city staff and elected officials for Bell Gardens’ “thriving” economy. “We’re one of the cities that had a plan to get us through rough times,” she told EGP.
Unlike some neighboring cities, “we have worked efficiently together without worrying about the politics,” she pointed out.
That’s a major step forward from years past when Bell Gardens City Council meetings were often the scene of loud political bickering. Rodriguez and Aceituno, both longtime councilmembers, believe the lack of political turmoil is why food retailers like Dunkin Donuts and Chipotle are now flocking to the city, despite its predominately Latino, working-class demographics and being only 2.4-square-miles in size, factors that have been deterrents to investments in other cities.
As a result, sales tax revenue is up and unemployment is down.
Like neighboring Montebello, the Bell Gardens City Council will continue to grapple with its aging and money losing water system.
After years of putting off a decision, plans are in the works to hold workshops and public hearings on the water utility’s future. Experts say the 50 year old infrastructure needs costly long term repairs, but the utility does not generate enough revenue to even cover current operating expenses. Purchased in 1991, the Bell Gardens water system services about 30% of city residents. Rates have not been raised in over 20 years.
The city can continue to offer the low rates but it will require long term planning, according to Wagner. “The city council will have to decide whether they want to maintain the system, sell the system or increase water rates,” he explained.
Another bright note in city finances has been the significant reduction in golf course related losses, from a deficit of $90,000 per year to $18,000 after turning the facility over to an outside management company.
“We do a lot that doesn’t make money but we want to be able to make enough to cover the costs,” said Wagner.
The rising cost of California Public Employees’ Retirement (PERS) obligations will continue to challenge the city, but Wagener says there’s not much the city can do except save up. City staff has proposed starting an irrevocable trust fund to cover future pension obligations as part of a long-term solution.
Like most southeast communities, Wagner says Bell Gardens must address infrastructure and general capital improvement projects including streets, alleys and parks.
Turf on the soccer field at Ford Park needs be replaced at a cost of $1 million, notes Assistant Manager John Oropeza.
“Now that we have a little surplus we can make sure that comes back to our residents,” said Aceituno who would like to see some previously cut programs return.
But Rodriguez believes a surplus does not translate to a party.
“We can’t start splurging just because there’s a surplus,” she told EGP. “Before we even touch the money we have to exhaust all other options and continue to plan ahead.”