- The Washington Times - Tuesday, July 13, 2004

A South Carolina company owned by a financier of the District’s gambling initiative held a controlling interest in gambling establishments in that state that failed to pay various taxes and violated state gaming laws before eventually going bankrupt five years ago.

John K. Baldwin, a St. Croix, U.S. Virgin Islands, businessman who has invested heavily in the effort to bring video lottery terminals to the District, was a partner in a company called Carolina Equities LLC in the late 1990s, according to bankruptcy court records.

Mr. Baldwin was a partner in Carolina Equities with Shawn A. Scott, the Las Vegas gambling financier who first proposed bringing slot-machine-style gambling to the District. Mr. Scott since has dropped out of the process over concerns about his background.

Las Vegas-based Carolina Equities held controlling interest in at least five gambling halls in South Carolina in the mid-1990s, according to public records.

The firm still owes more than $1.2 million to the owner of Hot Rod’s in Columbia, S.C. — one of the gambling halls it controlled, according to Alton Bivens, an attorney for Hot Rod’s owner Frederick McCary.

Mr. Bivens said Mr. McCary sold to Carolina Equities his corporate stock in a company called T&G; Enterprises Inc., which operated a video-pokergallery and strip club in Columbia in the late 1990s. Carolina Equities paid $250,000 upfront and promised to pay the rest gradually, the attorney said.

Mr. McCary continued to own and operate the strip club, while Carolina Equities controlled 10 video-poker machines worth $5,000 each and a “sneak-a-peak” blackjack machine worth $15,000, Mr. Bivens said.

In 1999, Carolina Equities defaulted on its payments to Mr. McCary and removed the video- poker machines, said Mr. Bivens, citing bankruptcy records.

“The machines were taken out, and so there was no collateral to take,” he said. “We did get a judgment against them, but almost immediately they declared bankruptcy, which prevented us from being able to collect.”

Mr. Bivens said Mr. McCary couldn’t afford to sue Mr. Scott and Mr. Baldwin personally.

“It left my client trying to chase a corporate shell of a business,” Mr. Bivens said. “To execute the judgment against them, you’d have to pierce the corporate veil, and that costs money.”

LLC, which stands for limited liability company, refers to a business whose owners are protected from personal liability for business debts and claims.

Mr. Baldwin and Mr. Scott together have owned and operated numerous limited liability companies, several of which have dissolved.

Mr. Baldwin could not be reached yesterday for comment at his office in the Virgin Islands.

Former D.C. Council member John Ray, who has been lobbying for the gambling initiative, did not return a phone call yesterday. Mr. Ray had asked Mr. Scott to remove himself from the process over concerns about his business dealings.

The Video Lottery Terminal Initiative of 2004 calls for establishing 3,500 slots-like devices in a gambling facility on New York Avenue NE. The D.C. Board of Elections and Ethics is authenticating 50,000 petition signatures submitted for a Nov. 2 referendum on the issue.

Mr. Baldwin’s offshore firm, Bridge Capital LLC, has provided $70,759 for the D.C. gambling proposal.

His bankrupt firm, Carolina Equities, also held a controlling interest in at least five other gambling halls in South Carolina, according to a report last year by the Maine Harness Racing Commission. The commission performed background checks of Mr. Scott in connection with his bid to operate slots at a Bangor racetrack.

In 1998, the South Carolina Department of Revenue cited one of Carolina Equities’ gambling halls — Bugsy’s Surfside, in Columbia — for operating more video-poker machines than the law permitted and for failing to identify the machines’ owners, the Maine report said.

Another Carolina Equities gambling hall — Chubby’s in Columbia — failed to pay $17,979 in merchant taxes, according to a report in 2000 by the Richland County Board of Assessment in South Carolina.

In 2000, South Carolina officials rejected applications for seven video-poker licenses to a company called Tycoons Gallery of Games because of delinquent property taxes. Tycoons was a subsidiary of Carolina Equities, according to the Maine report.

Video-poker machines first appeared in South Carolina in the early 1980s. They were outlawed, effective July 1, 2000, after the state’s Supreme Court banned them in 1999.

Bridge Capital’s chief operating officer is Robert Newell, whose firm, North Atlantic Investments, is based at the same Virgin Islands address and has provided $592,000 for the D.C. slots plan.

The intermingling of finances among companies controlled by Mr. Scott and Mr. Baldwin has sparked concern among gaming regulators in other states.

Mr. Baldwin was asked by the New York State Racing and Wagering Board last year to submit an application for a license to run the Vernon Downs racetrack in Vernon, N.Y., because it was difficult to distinguish his finances from those of business associate Mr. Scott, the main applicant for the license.

Mr. Scott was denied a license to run Vernon Downs amid concerns about his character and ties to Hoolae Paoa, a Hawaiian business associate with a criminal history.

Henry Jackson, executive director for the Maine Harness Racing Commission, said investigators couldn’t distinguish Mr. Scott’s finances from those of Mr. Baldwin. The Maine investigation concluded that companies under Mr. Scott have demonstrated “sloppy, if not irresponsible financial management and accounting practices.”

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