Here's a heart-warming tale. I like to think of it as an allegory of the US economy. Gambler=J6P. Casino=Banks, FNM, Credit Trash companies!
lasvegassun.com
Today: April 17, 2002 at 11:26:42 PDT
Court faults Harrah's for extending credit to bankrupt gambler
ASSOCIATED PRESS
LITTLE ROCK, Ark. -- A Star City lawyer who was launched into bankruptcy should not have been allowed to continue gambling on credit at a Louisiana casino, a federal appeals court ruled.
The 8th U.S. Circuit Court of Appeals in St. Louis ruled Monday in favor of the trustee handling Murray Armstrong's involuntary bankruptcy. It said Harrah's Casino in Shreveport, La., had information "that should have warned it" about Armstrong's financial troubles. The court said the casino knew Armstrong was "in over his head."
Last July Armstrong began serving 55 years in prison for his 1997 conviction on 11 theft charges from Cleveland County. In November, he pleaded guilty to eight of 22 additional counts from Lincoln County.
Armstrong was accused of swindling residents of Lincoln, Cleveland and Bradley counties out of an estimated $6 million through phony timber contracts and trust transactions. Prosecutors determined that most of the money Armstrong embezzled went to pay off gambling debts at several casinos that had granted him a short-term line of credit.
Over the years Armstrong had covered markers of more than $350,000 at Harrah's alone, the appeals court said.
The 8th Circuit said Armstrong began using fake timber contracts in 1990 and that his misdeeds were exposed in 1996. That same year, an involuntary bankruptcy petition was filed against him.
Beginning May 5, 1995, Harrah's Casino in Shreveport allowed Armstrong to sign markers in exchange for gambling chips. His line of credit began at $15,000 and reached $100,000 on Aug. 12, 1995. During that year, he lost $211,400 at the casino, the 8th Circuit said.
The ruling said the casino checked on Armstrong's bank balance three times as his credit authorization inched toward $100,000 and that the balance was between $4,000 and $6,000 on a couple of occasions. The court noted that Harrah's records included some warning signs, including a notation Aug. 23, 1995, in its files that Armstrong had a friend (Stephen Lovett) apply for credit so Armstrong could use the money. "We appear to have Mr. Armstrong in over his head," the notation said. "I strongly suggest no more increases."
A few days later, Armstrong spent $16,800 in cash and was issued $126,000 in markers at Harrah's.
When the markers were presented for payment at Armstrong's bank, the bank returned $28,000. In mid-September 1995, the casino suspended Armstrong's credit line.
The bankruptcy trustee filed a proceeding against the casino seeking to recover money Armstrong had paid the casino to satisfy his markers. The bankruptcy court said Armstrong transferred the money with intent to hinder, delay, or defraud, but the court also said the casino acted in good faith. It said "Harrah's did not have reason to know of Armstrong's financial difficulties and insolvency."
The U.S. District Court reversed the good faith ruling and the casino appealed, contending it had no reason to suspect Armstrong was insolvent.
The casino said it had information that Armstrong spent $41,900 in cash at Harrah's during 1994 and that he had a net loss of $14,800 to show for those wagers. "Information that a person has recently gambled away large amounts of money is not an indication of financial stability," the 8th Circuit said.
The casino also said it relied on the fact that Armstrong was a lawyer, but knew nothing about his income. The trustee introduced evidence that Armstrong's net income from his two law offices barely topped a total of $36,000 for 1994 and 1995 and that he would have needed almost $350,000 in pre-tax income just to cover his loss of $211,400.
" ... Harrah's was in actual possession of information that should have warned it that Armstrong was in financial straits," the 8th Circuit said. The court noted that the casino was aware of a federal tax lien against Armstrong, but never investigated the circumstances. It also mentioned Lovett's application for credit, the notation in casino files that it suspected Armstrong was in over his head and the fact that two days later, he was issued $126,000 in markers.
"On this record, we conclude without hesitation that Harrah's did not successfully discharge its burden of proving its own good faith," the 8th Circuit said.
Harrah's blows, BTW....<NG> |
