Retaining staff and finding the right legal moves hasn’t been easy for this down-on-its-luck casino operator, but its executive team has stayed strong.

Casino operator Lakes Entertainment is gearing up to show the world that luck—even a long streak of bad luck—doesn’t always determine the destiny of a shrewdly run company.

Lakes has toiled in a rough patch almost since the day it was born. Eight years ago, a merger of Hilton Hotels and Grand Casinos led the new entity to spin off Lakes with a charge to manage Indian casinos, which had been a specialty area for Grand Casinos.

Ink on the deal had barely dried when opponents of three proposed casinos began lining up to sue. Litigation has stalled Lakes’ prospects ever since. “We were always confident that we would overcome the suits because these are harassment lawsuits that are designed to delay projects,” said Lakes CEO Lyle Berman. “But we’ve learned it can take a long time.”

Now, however, Lakes’ luck is beginning to turn with help from a series of strategic moves. Within the past year, one casino Michigan and one in California have received long-sought approval from the courts. That means Lakes, a public company that has been treading water in a nominal revenue stream, is now looking for a torrent of cash to cascade its way in 2009.

Lyle Berman, CEO

“It’s as if we’ve been storing wine for a long time,” Berman said, “and now it’s finally drinkable.”

Intrinsic value
Getting to this point hasn’t been a matter of rolling the dice. On the contrary, Lakes is reaping the fruit of several disciplined moves designed to retain the company’s value during a revenue drought, manage legal challenges efficiently, and position the firm for long-term success.

Lakes’ executive team realized early in the game that cash on hand would play an important role in making sure the company and its clients didn’t get worn down. With that in mind, they sold property the company owned in Las Vegas and built up cash reserves. With funds at their disposal, executives and the experts they hired went to work defending their interests.

One important priority was to retain the confidence of shareholders. The company trades on Nasdaq and could ill-afford to lose its value, yet simply being flush with cash wouldn’t be sufficient to retain investors’ interest. Lakes’ solution was to launch the wildly successful World Poker Tour in 2001, and it has retained a 60% stake in it. “As a major asset, it’s given our shareholders comfort that we’ve got some intrinsic value that comes from a source other than Indian gaming,” Berman said.

Another challenge was for Lakes to retain its high-caliber casino management team for years when staffers had few operations to manage. (At present, the company is operating just one, a 350-slot casino in Oklahoma). To lose those workers would be to lose Lakes’ greatest value-producing asset.

“We’re a management company, and if we cut back the staff of our core people here, then we aren’t able to provide the services our tribal partners have relied on,” Berman said.

With that in mind, Lakes’ top executives made sure not to spread the pain around. Staffers continued to earn competitive salaries despite the firm’s stalled progress. They even retained opportunities for bonuses and all-important stock options in a company whose best years are possibly in the future. All this, Berman says, enabled the firm to hold on to most of its key employees.

Complex brew
Meanwhile, Lakes was becoming unwittingly seasoned in the task of managing a legal team. Each case involved a complex brew of state, federal, and Indian law. Lawyers brought a variety of specialties in such areas as Indian affairs, environmental law, and gaming law. The legal price tag for pushing through the biggest casino projects, Berman said, topped $5 million each.

Controlling legal costs wasn’t easy, Berman noted, since competent lawyers charge pretty pennies for their expertise. But, he added, Lakes executives could to some degree shape outcomes. They insisted on steady progress from the lawyers, and when setbacks occurred as a result of a lawyer’s tactical misjudgments, Lakes’ top brass would occasionally cut ties and bring in fresh blood.

“If you’re not getting results, you don’t have much of a choice,” Berman said. “When they make one too many mistakes or don’t anticipate something once too often, that doesn’t win us many friends.”

Although Lakes has weathered its storm with limited damage, Berman said in hindsight the company perhaps should have cut back further along the way. “It’s probably something we should have done but we didn’t do,” Berman says. “We never thought the lawsuits would take as long as they did to resolve.”

Nevertheless, Berman now believes Lakes is at long last in the sweet spot for realizing profits. The firm has grown its staff from 35 to 50 over the past year. Its stock price has climbed from $8 per share last year to about $11 in May. And with a little luck, the company may see even better times around the corner.

G. Jeffrey MacDonald is a correspondent for the Christian Science Monitor. Based in Newburyport, Mass., he can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .