In a stunning move Greg Lee, CEO and Executive Officer of Eureka Casino Resorts, announced on Thursday, Oct. 29 that his family is selling their interest in the Eureka Casino Resort to its employees in what’s called an Employee Stock Ownership Plan (ESOP). This transaction is subject to the approval of the Gaming Control Board and the Nevada Gaming Commission.
In an exclusive interview with the Mesquite Local News, Lee and Andre Carrier, COO of Eureka Casino Resorts revealed details of the transaction and its benefits for the casino’s 550 employees.
“We think this is the next logical step for the culture of our organization looking out 10 to 20 years,” Carrier explained. “An ESOP is a retirement plan under federal law that allows employees to gain retirement benefits that are tied to a beneficial ownership and equity of the company without any personal financial investment.”
Essentially, the company’s operating profits are shared by all employees and in this case will be vested in retirement benefits. Employees will become fully vested after six years on the job.
“As we looked at ways to align our employees with our business needs we found that an ESOP is a unique way of accomplishing that,” Carrier said.
Lee added that “We have been thinking about this for two years and decided this was best for everyone. This transaction helps create a retirement benefit for employees and creates a ‘stickiness’ for the management team.”
ESOP structures create a great deal of federal tax advantages to the company. Profits are held in a trust and are used to fund retirement benefits. The company doesn’t pay federal tax on its profits. Rather, all the profits are required to be invested for the benefit of the employees. The IRS and Department of Labor oversee the management of the ESOP as does the trustee.
“Under the federal tax guidelines, the Eureka can invest in itself more this way,” Lee explained. “Since 2007 the gaming industry as a whole has stagnated. We think this is a way to re-energize our company and allow us to become more strategic and more aggressive in our growth. In certain ways the tax code punishes a company’s profits. One way of looking at this is that profits are pooled with the employees and not the government.”
“This is only a change in form not a change in function for us,” Carrier added. “The ESOP is similar to a 401k retirement fund but in this case the employees don’t actually contribute their own money. The money in their retirement fund so-to-speak comes from the profits. We want our employees to develop an ‘owner’s mindset’ and feel that the Eureka is their company.”
Lee will remain as the CEO and Executive Officer of the Eureka and Carrier will remain as the Chief Operating Officer. “I wouldn’t know what to do with myself if I wasn’t here and involved,” Lee lightheartedly said. Carrier will also serve as trustee of the ESOP trust.
“My family has always viewed our employees as the ‘Eureka family. Many of them have been with us since my father and mother first opened the Eureka in 1997,” Lee remarked. “The ESOP makes the Eureka even more of a ‘family business’ and honors the employees’ contributions to our success.”
“My family will remain just as deeply committed to the company and to Mesquite because we continue to have a significant financial interest in the company and many investments in Mesquite,” Lee explained. “The Lees sold 100 percent of their stock but not all of their interest.”
Carrier agreed with that saying “Given the core values of our family business, this is a natural next step. We are excited to pioneer Nevada’s first casino ESOP and we’re optimistic for what it means for our employees and the Mesquite community.”
Indeed, no other casino in Nevada has ever tried establishing an ESOP. If successful, the Eureka will be the first casino in the state and only the second one in the nation to move to this type of financial structure. The Casino Queen in East St. Louis, Il began its ESOP in December 2012.
The ESOP must be approved first by the Nevada Gaming Board who will hear Lee’s plan on Nov. 4. If it passes that level of review it will go on to the Nevada Gaming Commission for final approval Nov. 19. The change will become effective at the end of the year if the Commission gives its blessing.
Lee declined to give any numbers or dollars associated with the transaction saying “that would reveal too much information to our competitors.”
The ESOP only affects the Eureka Casino Resort Hotel and no other businesses owned by the Lee family. The old Mesquite Star hotel now under renovation through the Lee’s Urban Land company will not be included nor will the Eureka Las Vegas Casino.
The Lee family has long been known for their community involvement and contributions. In 2011 Doris and Ted Lee gave a $15 million endowment to the University of Nevada Las Vegas that created the Lee School of Business. In 2012 the Eureka Casino created the Eureka Community Initiative to serve the local community with programs like Mesquite Reads, Best of Fest Film Festival, Shreek-Reeka, a para-golf initiative, and the annual Nevada Pops 4th of July concert and fireworks display.
Greg Lee serves on the Board of Directors of the UNLV Foundation, the Las Vegas Metro Chamber of Commerce and the Las Vegas Convention and Visitors Authority.