500 Club in Clovis could lose state card room license

The 500 Club in Clovis is in jeopardy of losing its gaming license because the state says its major financial backers didn’t have the necessary gaming licenses and background checks.

One of those backers is the card room’s former attorney, who is being sued by the card room owner.

The 500 Club’s gaming license will be discussed by the Gambling Control Commission on Thursday. Card rooms require licensing every two years. The 500 Club’s license expires on Sept. 30.

The state’s top gaming law enforcement officer is asking the commission to pull the 500 Club’s license. Wayne J. Quint Jr., chief of the state Department of Justice’s Bureau of Gaming Control, is also asking that 500 Club owner Louis Sarantos pay the costs of the investigation.

But the board could choose to renew the card room license or submit the case for a hearing in front of a judge, which would allow the card room to operate under an interim license.

The club has been in the shopping center on the northeast corner of Shaw and Willow avenues for a little more than three years. It generates nearly a half-million dollars in annual revenue for the city of Clovis.

Dusten Perry, general manager of the card room, said he is “cautiously optimistic” that the gambling commission will allow the 500 Club to continue operating while the state prepares for a hearing. He said a hearing in front of a judge has already been scheduled in June 2016.

He is hopeful that the 500 Club will be issued an interim license through 2017 pending the outcome of that hearing.

The accusation stems from an agreement by Sarantos, listed as the 500 Club’s sole proprietor, and John M. Cardot, a Fresno lawyer who represented Sarantos on 500 Club business matters in front of the Clovis City Council and the state Gambling Control Commission when Sarantos was trying to get expansion for the club approved.

The new card room opened in June 2012 with 18 tables, tripling in size from the old Clovis Avenue and Fifth Street location. The old site remains a restaurant. There also is a restaurant in the 13,000-square-foot Shaw Avenue site.

Cardot reached an agreement with Sarantos that gave him a 50 percent stake in the card room if he provided a $1.5 million loan to Sarantos to build tenant improvements when the 500 Club was expanded and relocated.

The accusation says that Sarantos failed to disclose Cardot as a financial interest holder and the terms of indebtedness. Sarantos also didn’t disclose names of other financial interest holders and his level of indebtedness to them, the accusation says.

From November 2011 to July 2015, the accusation says, Sarantos “concealed and failed to disclose” to state officials the existence of his agreement with Cardot. Both are violations of the state Business and Professions Code, the accusation says.

But card room officials say they didn’t realize the loan by Cardot for tenant improvements for the new card room and the investors’ role were considered part of the card room’s relocation process, so they thought disclosure was unnecessary.

“We are not regulation specialists; that’s why we hire people to do that,” Sarantos said. “We have nothing to hide.”

Sarantos and Perry said they asked Cardot if their application was complete.

“In 2011, we did ask our attorney if we needed to discuss anything or provide copies of the documents” to the state, Perry said. “We were told it’s not a new license, it’s a relocation.”

Sarantos got a $1.2 million promissory note secured by personal property at the 500 Club, the accusation says.

Perry said Sarantos was having difficulty getting financing for the card room expansion when Cardot made his offer. He said the loan documents were filed with state gambling officials.

“Gaming is a scary thing for a conventional lender,” Perry said. “He came to us and offered us financing, and we jumped at the opportunity to get the loan and finish the relocation.”

The accusation says Sarantos also benefited from a second agreement made by Cardot and six investors who gained interest in the 500 Club: Joseph F. Capps, Leon Bernardi, Lodi Fransesconi, Don G. Nicholson, Edward G. Mason and Jon L. Strecker. Bernardi, Mason and Strecker are listed by the state as “key employees” at the 500 Club.

“Nobody ever asked about the loan,” Perry said, “and all of a sudden we’ve done something wrong years later.”

Sarantos filed a lawsuit in 2013 against Cardot, claiming that Cardot was looking out for his own interests more than those of his client.

“We hired someone we thought was a gaming specialist,” Perry said. “We assumed everything was on the up and up. We relied on that advice, and we paid for that advice.”

Cardot did not return phone calls from The Bee. His law firm, Coleman & Horowitt, also is named in the suit.

The suit says Sarantos was unduly influenced to provide Cardot “with an option to purchase 50 percent interest in the 500 Club at an option price that was grossly below the fair and reasonable value of a 50 percent interest.”

Sarantos wants to “void, rescind and/or reform” any agreements made with Cardot, which include the option to purchase.

For Clovis, the 500 Club generates significantly more revenue than it did prior to the 2012 expansion.

The city was getting about $20,000 annually from the club when it was on Clovis Avenue. John Holt, Clovis assistant city manager, said that the 500 Club generated about $500,000 in fees in its first year at the Shaw Avenue site. Two years ago, the amount fell to about $436,000 and the city expects a similar amount for last year, which ended June 30. The amount is still being calculated.

In approving plans for the expanded card room, the city’s license fee rose from 3 percent to 9 percent for the first seven years of the new club’s operation. The city also charges a $2,000 table fee that provided $36,000 yearly.

The money goes into the city’s general general fund, and there are no restrictions on its use, Holt said. The amount represents slightly less than 1 percent of the city’s $55 million general fund.

The Sarantos family began renting the 500 Club in Old Town Clovis in 1953. In 1974, Louis and George Sarantos bought the club from their parents and formed a partnership. The 500 Club is the city’s only gambling establishment. Perry said it employs 256 people.

This story was originally published September 18, 2015 at 1:30 PM with the headline "500 Club in Clovis could lose state card room license."