business

As a poker player, Lyle Berman, who's won more than $1.5 million of official poker tournaments since the early 1990s, knows when to fold 'em.

As CEO, he apparently does, too.

He's decided to reinvent his nine-year-old Lakes Entertainment Inc., which develops and manages Indian-owned casinos. But just what the Minnetonka-based company will become, he's holding close to the vest.

"Indian gaming is a very good business for us, but it's not where we intend to invest the revenue in the future," Berman, 66, said during a recent interview. "Indian gaming is not a growth business."

Indeed, Lakes Entertainment hasn't signed a new casino management contract in nearly three years, as the pipeline of large new projects has nearly run its course and fewer Indian tribes seek outside help running casinos.

The stock has languished on Wall Street, falling 40 percent since April; it hit a 52-week low of $7.57 Friday and closed at $7.72 a share. The decline has erased more than $140 million in market value over the past six months.

Further unnerving investors was Berman's decision in September to unload 300,000 shares of Lakes Entertainment stock. It was Berman's first sale since the former Grand Casinos Inc. spun off Lakes at the end of 1998. Berman, who owns 15 percent of Lakes, insists he was merely paying down personal debt, but investment analysts fear he may have an ulterior motive.

"Their attitude is, 'Don't bug us, trust us,'" said Clinton Morrison, an analyst with Feltl & Co. in Minneapolis. "But if you're running a company, part of your job is to define what your vision is."

Blustery or optimistic?

Now, as the company casts about for a new strategy, Berman's erratic record as a chief executive may be coming back to haunt him.

In its nine years as a public company, Lakes has bounced from $2 a share to as high as $18 a share, before retreating again. Twice in three years, the company revised its financial statements because of accounting mistakes. And last week, the company announced it had fired its senior vice president of operations, Robert Wyre, the company's third-highest-paid executive, but declined to give a reason.

Analysts who follow Lakes' stock say Berman and his team have lost some credibility on Wall Street by announcing overly aggressive timelines for new casinos.

For instance, in 2003, Berman said construction would start in the first half of 2003 on two Indian-owned casinos, one near Sacramento and the other 70 miles from Chicago in southwestern Michigan. One just opened in August and the other won't open until late next year -- four years later than planned.

Even so, unflagging optimism is one of Berman's strongest traits, say analysts. It's helped him rebound from past mistakes and consistently find new opportunities to make money.

In 1997, for instance, Berman resigned as chairman of Stratosphere Corp., the owner of an ill-conceived casino in Las Vegas that went bankrupt quickly after it opened, but only after investors poured $550 million into the project.

Berman was also criticized for conflict of interest when, in 1999, he tried to arrange the merger of Rainforest Cafe to Lakes Gaming Inc., now Lakes Entertainment. Berman was chairman of both companies. Rainforest Cafe ultimately was sold to another company, Landry's Seafood Restaurants Inc., for $125 million.

A gaming guy

Yet Berman proved adept at gaining management contracts with Indian tribes. In 1999, within a year after Lakes was spun off from Grand Casinos, the company obtained contracts to manage large Indian casinos in California, Michigan and Massachusetts.