LONDON, Oct. 5, 1981 -- Playboy Clubs International today was refused renewal of gambling licenses for two multimillion-dollar London casinos that provide the bulk of profits for Playboy magazine publisher Hugh Hefner's empire.
London licensing magistrates, after hearing police and Gaming Board allegations that some gamblers enjoyed millions of dollars in illegal credit and the after-hours company of Playboy Bunnies, ruled Playboy "not a fit and proper" establishment to hold gambling licenses for its Playboy Club on Park Lane and the exclusive Clermont Club on Berkeley Square.
Playboy can continue to operate the two casinos while it appeals through British courts. Playboy lawyers admitted only to technical gambling law violations and contended there was no evidence that the casinos were "dens of vice" or that impropriety was rampant among the Bunnies, as contended in testimony before the magistrates.
Advertisement
Today's decision further clouds the future of casino gambling in London, one of Britain's few boom industries during the 1970s, when immensely wealthy foreign gamblers wagered hundreds of thousands of dollars each night.
The ruling against Playboy capped a crackdown by gaming authorities against gaming law violations that mushroomed in the fierce rivalry among casinos, competing, as time went on, for declining business from big-time players. The crackdown already has closed the casinos of Playboy's two chief competitors, one of which supplied evidence used against Playboy after Playboy testified against renewal of its rival's license.
Today's decision does not affect Playboy's other three casinos and more than 80 offtrack betting shops in Britain, where commercial gambling of every kind from bingo, soccer pools and lotteries to high-stakes roulette in opulent casinos is legal although closely regulated.
Advertisement
But the Playboy Club and Clermont casinos have been the biggest earners in Playboy Enterprises Inc.'s gaming division, which accounted for more than $31 million of Playboy's $32 million earnings before taxes last year. Playboy Clubs International is a wholly owned subsidiary of Playboy Enterprises Inc.
Playboy spokeswoman Susan Tash said from corporate headquarters in Chicago that the fate of Playboy's London casino licenses, "while not determinative, could affect the company's prospects for obtaining a permanent license" for its $130 million Atlantic City casino venture for which Playboy and its joint venture partner, Elsinore Corp., currently have only a temporary license. It could also affect future renewal of its other gambling licenses here.
Rear Adm. Sir John Treacher, who was made Playboy's top British executive earlier this year, acknowledged that the licensing difficulties here have already had an impact on Playboy's financial performance, but he added that "the company is very soundly based and the long-term future is not in doubt."
Advertisement
Britain's 1968 Gaming Act forbids encouragement of gambling by advertisement or promotion. Although almost anyone can become a member of a casino club, a new member must wait 48 hours before being allowed to gamble. Entertainment and live music are banned and liquor cannot be served on the casino floor. No gambler can be extended credit.
The general reputation for probity created by these rules, the slightly better odds of winning in British casinos and their privacy and English gentlemen's club atmosphere helped attract rich gamblers from around the world during the 1970's, particularly Arab potentates enriched by soaring oil revenues who frequently lost hundreds of thousands of dollars each night.
But competition for the trade of these high rollers became intense, especially when their numbers started decreasing, as they have recently. Ladbroke's, then Britain's largest gaming operator, lost all its London casinos last year. It was found, in a proceeding similar to today's, to be violating gaming laws by soliciting customers and using spies in other casinos to keep tabs on high rollers who included Saudi Arabian princes and some of Europe's wealthiest businessmen.
Advertisement
Part of the evidence was supplied by Playboy, which joined the police in opposing the renewal of Ladbroke's licenses. When Ladbroke's owners threatened retaliation, Victor Lownes, a long-time Hefner associate who built Playboy's entertainment club and gambling divisions and then ran its British casinos, said, "I am inviting them to hit back at me because I know my house is clean."
But after another major gaming firm, Coral Leisure Group, had its four London casino licenses taken away later last year, the police, armed with a folder of evidence supplied by Ladbroke's, raided the Playboy Club and Clermont casinos and began the challenge to their licenses. Lownes, a flamboyant American with the highest executive salary in Britain and a Hefner-like lifestyle that included one of Hefner's former Playboy Playmate girlfriends, was summarily fired. He was replaced by a stable of Playboy lawyers and accountants plus Treacher, a retired British admiral and former NATO naval commander-in-chief for the British Channel and eastern Atlantic.
Treacher, who said at Playboy's license hearing that "I don't gamble and am not a Bunny-type of person," testified that Hefner had given him a "free hand" to eradicate any past violations of British gambling regulations and run Playboy's casinos according to "the highest ethics of the business."
Advertisement
But the Gaming Board cited Lownes' removal in its case before the licensing magistrates as evidence that Playboy Club International's casinos were really directed from the United States, a violation of the prohibition against foreign control of gaming operations here. They apparently also were impressed by detailed financial records taken during the raids of the casinos that showed some gamblers, mostly big-spending Arabs, being allowed to continue gambling after falling hundreds of thousands to millions of dollars into debt with Playboy by buying chips with checks that later bounced. Playboy's lawyers contended much of the money was eventually paid back. The practice, however, would be a violation of the British gaming law.
To allegations that at least one regular Playboy Club casino client was rewarded with the after-hours company of Bunnies, Playboy's lawyers acknowledged that some members of the club staff had broken its rule against "dating" customers. But they added this was not typical of the behavior of Bunnies and was done without the knowledge of management.
Playboy Senior Vice President Frank Diprima testified that after making management changes here earlier this year, Playboy conducted an internal inquiry that made 60 recommendations for new rules and procedures to ensure there would be no more gaming law violations.
ncG1vNJzZmivp6x7uK3SoaCnn6Sku7G70q1lnKedZK6zr8eirZ5noKS5qsDInKpoaWltfnB9j2hnb2ecpLulu81mmqitoql6tMDRoqesZaChrrquzrJkqJ5dobaksc2snKxllqS%2Fbn6MnJisoZ6kwHB%2FxWyZnZtlm3qihY9sZG1raGd6o4KSmmScbGJuhaKuxZuYcm5f