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Regulations Ensure Solid Investors for Casino

Rachel Gallegos

Iowa City Press-Citizen

July 1, 2006

[Note: This material is copyright by the Press-Citizen, and is reproduced here as a matter of "fair use" for non-commercial, educational purposes only. Any other use may require the prior approval of the Iowa City Press-Citizen.]

Washington County is not only the physical home of the Riverside Casino & Golf Resort, but also the locale for many of its investors.

When casino and golf resort leaders went out to raise $18 million in equity, they were met with a response of $27 million, said chief executive officer Dan Kehl.

There were so many interested investors, Kehl said, a lottery system was put in place to turn some away.

To meet the Iowa Insurance Division’s Securities & Regulated Industries Bureau regulations, investors had to meet certain criteria: individual income of more than $45,000 in the previous year, expect to have an income in excess of $45,000 for the current year and have a net worth in excess of $45,000; or have a net worth in excess of $150,000.

The Iowa Securities & Regulated Industries Bureau administers the Iowa Uniform Securities Act to protect investors. The act is designed to prohibit fraud in securities transactions and requires broker-dealer, agent and security registration.

The Washington County Casino Resort LLC, the operating company for the casino and golf resort, registered in January 2005 with the bureau to sell securities, said Craig Goettsch, superintendent of securities. Securities were sold from February 2005 to April 2005.

By having criteria for investors, “it’s probably a protective device for the seller” to ensure the buyers are “sophisticated investors,” Goettsch said.

Chief Financial Officer Ken Bonnet said the casino has about 900 investors, with 375 investing only in the Riverside Casino and about 500 in Catfish Bend Riverside LLC.

All of the Riverside casino investors are Iowa residents because the company decided to not register with the U.S. Securities and Exchange Commission.

“We wanted this to stay an Iowa-owned company,” Bonnet said.

The minimum investment was 1,000 shares at $3 a share, or $3,000, he said.

The casino was not required to use independent broker-dealers to sell the securities, Goettsch said, but the licensed agents were required to give full disclosure to investors. The disclosure document, including details about how the investment will be used, financial statements for the casino, risk factors and the history of the management, is about 40 pages long.

Washington County Casino Resort LLC is owned:

• 43.5 percent by Catfish Bend Riverside LLC. Catfish Bend is 51 percent owned by Kehl Management and 49 percent by investors.

• 6.5 percent by Kehl Management, and

• 50 percent by investors.

The projected investment return for the first year is 7.5 percent.

“That’s what we hope to be able to distribute,” Bonnet said, “if we hit our projections.”