Bob Brennan Has A Lot Riding On This Toss Of The DiceJoseph Weber
When Robert E. Brennan rolls the dice at Atlantic City's casinos, he doesn't bet small. Donald Trump's Taj Mahal is still smarting from the $800,000 he collected in two recent visits to the craps tables. Says the former penny-stock mogul of his betting: "I have on occasion enjoyed it, and on occasion I've enjoyed it a lot."
Now, Brennan is making one of the bigger bets of his career. Nearly six years after quitting the retail end of the stock business amid still-unresolved allegations of fraud at First Jersey Securities Inc., his brokerage firm, Brennan on Mar. 18 told regulators at the New Jersey Casino Control Commission that he wants a casino owner's license. For a modest $16.5 million or so, he has amassed a 7% stake in Bally Manufacturing Corp., parent of two Atlantic City casinos and other leisure operations. He says he may boost his holdings.
The move makes trouble for all concerned: Bally, the casino commission--and Brennan himself. For Brennan, the biggest headache is that his license application rekindles interest in a suit filed in 1985 by the Securities & Exchange Commission. In the action, which finally may go to trial this year, the SEC alleges that First Jersey, by dominating the market for its low-priced underwritings, gouged customers with illegally high markups of as much as 124% during the early 1980s.
THORNY QUESTIONS. Brennan, whose First Jersey ads, starring himself, were once a fixture on late-night TV and the financial pages, doesn't think much of the SEC's case. He calls it a "near duplicate" of old charges, but these securities-fraud claims are different enough that a judge refused to dismiss the action. Brennan says the SEC is pursuing the suit "out of animus" and plays it down as "a civil lawsuit like any other."
Indeed, aside from the fraud claims, many of the charges are familiar. In 1987, Brennan settled for $10 million a class action filed by investors who alleged similar abuses. But the SEC is different in one respect. In addition to seeking at least $9.8 million in allegedly illegal profits, the agency wants a court-appointed examiner to probe First Jersey's records for evidence of wrongdoing. "It's potentially a lawsuit of much greater proportions" than the class action, says SEC assistant chief litigation counsel Mark Kreitman.
Brennan's application raises other questions for the casino commission. After all, Brennan has never been convicted of a crime. Years of tussles with regulators have produced a string of civil fines and settlements--for him and First Jersey--but that's all. What's more, he already has a license to do nongaming business with the casinos through his Garden State Park horse track in southern New Jersey, which plans to simulcast races at the gaming halls. One longtime casino lawyer gives Brennan a 70% shot of winning a license, as long as he can hold off the SEC.
Bally thinks his odds are much lower, but it's taking no chances. Although Brennan holds three times as many Bally shares as Chairman Arthur M. Goldberg, he hasn't been invited to serve on the company's board. "He's an investor," says Goldberg. "We have a lot of investors." If Brennan does try to oust management, Bally says its investigators will fight back with a dossier on his past scrapes with regulators.
SMUDGED NAME. Still, Bally is vulnerable. While profitable, it has one Nevada casino in Chapter 11 and is in a dispute with the Internal Revenue Service. Brennan insists he doesn't want to depose Goldberg, but he admits he's "disappointed" that Goldberg has been selling his shares. He adds that he wants to "be helpful" to all shareholders.
Above all, Brennan is intent on winning the gaming license. More than getting him into the improving Atlantic City market, the license would cap years of efforts to clear his smudged name. And a healthy casino operation would spin off a lot of money.
That could come in handy for Brennan. He declines to estimate his net worth, but even while one of his stallions earns $100,000 stud fees at one of his three Due Process Inc. stables, his International Thoroughbred Breeders Inc. has lost $45 million over the past five years. ITB made money last year only by selling one of its two tracks. The horse-breeding and racing businesses, he admits, are "in a tailspin." But he claims his construction operations are profitable, even though their markets in New Jersey's Monmouth County are overbuilt. And he predicts that the red ink is over at another outfit, CCC Franchising Corp., whose interests include medical-management services and a company that makes electronic-monitoring bracelets for homebound prisoners.
Despite the close scrutiny, the competitive Brennan isn't likely to cave in on the casino bid. Now 48, he boasts that in 1989 he ran the New York City Marathon in a respectable 3 hours, 31 minutes. And as Trump knows, he loves to beat casinos at their own games.
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