Posted 3/31/2014 12:00 am
A version of this article originally appeared in Arkansas Business on Oct. 9, 2000. It is being republished as part of Arkansas Business' 30th anniversary issue. You can access the digital edition for free here.
Last February, Robert W. Buchholz began to worry.
As an officer of Arkansas Casino Corp., the Dallas civil trial attorney feared that what happened in 1998 would happen again. That year, the company failed to round up enough signatures to put an initiative before the voters that would allow it to operate six casinos in Arkansas as well as pave the way for a state-run lottery and legalize charitable bingo.
So Buchholz stepped in with his checkbook and his legal expertise to eclipse Dallas securities dealer James C. Harris as the “go-to” man for the latest incarnation of Arkansas Casino Corp., a company that began as a 19th century Idaho mining enterprise and has repeatedly been cited for selling unregistered stock.
(Harris abandoned his position as chairman about two years ago and disappeared from Idaho corporate records in July of this year. Harris failed to return several phone calls left at his Dallas businesses.)
To make sure there would be enough signatures for the amendment to be placed on the 2000 ballot, Buchholz started circulating petitions in October 1999. Surely, he thought, that would be would be plenty of time for volunteers to collect enough signatures.
He was wrong.
After examining the number of signatures in February, Buchholz realized the company would be about 40,000 signatures short of the 70,601 needed to get on the ballot.
“I knew at the rate we were going, we were not going to make the ballot,” he said.
He then turned to National Voters Outreach, a Nevada company that promises to collect enough signatures to put any initiative on a ballot. NVO is so well known that Gov. Mike Huckabee used it to secure his ballot initiative concerning Arkansas’ share of the tobacco settlement. Fort Smith attorney Oscar Stilley, one of gambling’s chief foes, also has used the Carson City firm.
NVO workers swept the state and collected more than enough signatures to get the amendment on the Nov. 7 general election ballot. Buchholz said he opened his personal savings account to loan Arkansas Casino Corp. $240,818, part of which paid a $180,000 NVO bill.
If the amendment fails, Buchholz will have no way of collecting that money.
Buchholz, who lives in a 1 1/2-story brick house appraised at $272,000, said he hopes he won’t have to write off the money.
“But I’ve invested heavily in cases before and had to walk away from them,” he said. “It’s just kind of the risk. I felt that I had to do it because I made the commitment that I’d get the signatures and I’d get it on the ballot.”
Buchholz said his work with the company is done for now. If the amendment passes, he hopes the resulting legal work and return on his stake in the company will pay off in spades.
But a Mason-Dixon poll released by the Arkansas Democrat-Gazette last week showed 37 percent of 627 registered voters favored the amendment, 51 percent opposed it and 12 percent were undecided. The poll has a margin of error of plus or minus 4 percent.
The Legacy of Lost Bean Lode
About six years ago, Buchholz’ telephone installer introduced him to Harris, whose ATAP Financial Corp. was doing business about five miles from Buchholz’ law office in north Dallas.
At the time, Harris was the chairman of North Star Inc., a company that was then involved in marketing software. North Star has gone through as many changes as a chameleon walking across a multi-colored quilt.
In March 1899, John B. Hanson, W.W. Woods and several other partners chartered North Star Mining Co. in an attempt to mine the Anna Lode and the Lost Bean Lode along the East Fork of the St. Joe River in the forests of northern Idaho.
Eighty-four years later, the copper and silver company, which had been operating sporadically, became North Star Inc., under the control of Utah businessmen Steven G. Pappas and R.A. Miflin.
A decade later, Harris took over the troubled North Star and changed its name to Paragon Classic Inc. Although its interest were centered in Dallas and Little Rock, the company’s paperwork would remain in Boise.
Litigation regarding the software company in Dallas and Tennessee resulted in the company filing for bankruptcy in 1996, Buchholz said. One of the members of the board of directors, R. Frank Sylves of Memphis, was listed as the only plaintiff.
“That was when they decided to emerge from bankruptcy with the dismissal and reorganize and turn it over to theses folks in Arkansas, so they can do their [casino] initiative,” said Buchholz, who also handled the bankruptcy case.
North Star was released from the federal bankruptcy case in Dallas on March 14, 1997. Its principals began issuing stock in Arkansas Casino Partners a day later, according to Arkansas state regulators.
Back in Idaho, Harris changed the name of company again. Arkansas Casino Corp. appeared as North Star’s successor on May 5 — four days before Arkansas Securities Commissioner Mac Dodson accused a related Harris company, Global Productions Inc., of selling unregistered securities in the state.
The company’s interest crystallized in 1998 in the form of the first bid for a monopoly to build casinos in Boone, Crittenden, Garland, Miller, Pulaski and Sebastian counties. In the spotlight for the Fix Arkansas Now Committee, identified as an operating division of Arkansas Casino Corp., were some of the state’s best-known law enforcement officers.
Leading the pack were former Arkansas State Police Director Tommy Goodwin, former Lee County Sheriff Robert “Bobby” May, William Ingram, who’d served with local and State Police agencies for 40 years, and Donna Gordon, Goodwin’s former fiscal officer.
By February 1998, Goodwin and Gordon had made their first concession to regulators in the form of a consent order agreeing to buy back the 5 million shares of stock that had gone to Harris’ ATAP Financial, Buchholz’s law firm and others.
The consent order also said the company failed to disclose information about a board member, David R. Kane, and his actions with Harris’ other company, Global Productions. Kane lost his license to sell securities in 1984 for failing to pay $8,500 in fines.
Arkansas Casino Corp. withdrew its corporate status in Arkansas at the end of 1998.
On July 20, 1999 — 18 months after the first cease-and-desist order — Dodson issued a second one accusing Arkansas Casino Corp. vice president Robert Means of making a stock offer despite the agreement. Dodson said Harris had filed false information with Standard & Poor’s Corp. to inflate the appearance of the company’s assets. Arkansas Casino Corp., he concluded, was a shell much like the defunct mining company from which it sprang in Wallace, Idaho.
Nine days later, Idaho received another name change. Arkansas Casino Corp. re-emerged at the Idaho Secretary of State’s office as Natural State Resorts Inc. Buchholz said he was required under state law to keep the mining company’s paperwork in the state of its origin.
But the troubles with Dodson have followed the company’s succession of names. Harris, identified in August 2000 as a paid consultant for Natural State Resorts, surfaced in a new confrontation with regulators over NSR’s attempt to buy DKE Entertainment Inc., a North Little Rock concert promotion company.
Dodson accused Harris of illegally offering stock in NSR to buy DKE, which he later said “had few assets, a negative net worth, and had never made a profit.”
He said Goodwin, the state’s former top cop, and Buchholz signed an agreement drafted by Harris last April 6, agreeing to trade all of DKE’s stock for $250,000 worth of Natural State’s common stock for a price set when the stock could be publicly traded.
Buchholz responded with a lawsuit in Pulaski County Chancery Court in August, accusing state regulators of harassment and delaying tactics. He asked the court to force Dodson to OK the issuance of stock for the gaming company.
Dodson has countersued, seeking an accounting of the stock he says was illegally sold and fines totaling $250,000 plus the money the casino company raised from the sales.
Buchholz denied all of the allegations and claimed Dodson is carrying forward a directive from Huckabee to keep gambling out of Arkansas. He said neither he nor Harris have ties to the established gaming industry and calls his venture into Arkansas Casino Corp. “an accidental investment.”
A check of financial records, corporate filings and court records in Arkansas, Oklahoma and Texas — the three states where Buchholz is licensed to practice law — and in the five states where NSR and its sister companies have done business show no past ties to casino operations.
Buchholz, who lost two Dallas judicial elections in the early 1990s, has since turned from practicing criminal law to handling personal injury and other civil cases. Notable among them was a 1998 environmental suit he settled on behalf of 600 people who claimed they suffered from toxic emissions emitted by Gibraltar Chemical Resources in Winona, Texas.
Buchholz concedes the jury on casino gambling is still out.
“I certainly don’t have the resources to run the campaign,” he said. “My obligation ended when I got the certificate with the gold seal from the Secretary of State.”
Since Then ...
2014: Although 70,000 Arkansans signed Arkansas Casino Corp.’s petition to get it on the 2000 general election ballot, voters rejected the measure by nearly a 2-1 margin. The backers of Arkansas Casino Corp. didn’t help the campaign when they were charged with felony securities fraud just before the election. James C. Harris, former chairman of Arkansas Casino Corp., was charged with three felonies. He pleaded guilty in May 2001 to a misdemeanor count of selling unregistered securities in 1997. He was fined $100, and the other two felony charges were dropped. Robert W. Buchholz, a Dallas attorney, who was also an officer in the company, faced three felony charges of securities fraud, but those charges were dropped in 2001 because of a lack of evidence.
Still, since 2000, Arkansas’ opposition to gambling has waned. In 2005, it became legal to offer “electronic games of skill” at Oaklawn Park in Hot Springs and Southland Park in West Memphis. In 2008, voters overwhelmingly approved a constitutional amendment to allow a lottery specifically to fund college scholarships. The lottery began selling tickets in 2009.
Some people still are pushing to have casinos in the state. In 2010, Texas businessman Michael J. Wasserman wanted to build casinos in Arkansas that his company would control and not be regulated by the state. But his measure didn’t receive enough signatures to place it on the 2010 November election.