Forensic Accountant: $61M in lost profits for Lucky Palace - WSFA.com Montgomery Alabama news.

Forensic Accountant: $61M in lost profits for Lucky Palace

MONTGOMERY, AL (WSFA) -

Jurors for the Macon County Casino civil trial heard from one of the charities in the suit for the first time on the eighth day of testimony.

Lawrence McRae of the McRae Prostate Cancer Awareness Foundation told the court that he felt like his constitutional rights were violated.

McRae testified that after he associated with Lucky Palace in 2004, his charity and Lucky Palace got "shut out" by the amendment to the rules and regulations that set a 60 registered charity maximum. McRae even said that he has been supporting the charity, to this date, with his social security income.

Defense attorneys pointed out that McRae's foundation was established on May 24, 2002. Under the constitutional amendment in Macon County, to qualify for a charity license, the charity had to have been established three years prior to the license being granted. McRae signed and dated an application for a license and gave it to Lucky Palace President Paul Bracy Jr. on January 10, 2005. McRae's charity had not reached that three year point by that date.

"I knew it was going to take some time to go through," explained McRae. "By the time Mr. Bracy got everything together I would've had my three years."

Also on the application, a clause specified that the charity representative needed to have inspected the facility where electronic bingo was going to be conducted. McRae couldn't have inspected the facility because it didn't exist.

Bracy waited until July 2005 to send McRae's application, along with a packet of others, for Sheriff Warren's approval. The applications were denied and returned on the basis that Lucky Palace didn't have a facility available for the sheriff to inspect. When asked about that clause, McRae said he only 'glanced' over the contract like anybody else would have done.

"I glanced through it…most times you just look at the first paragraph of something, then you sign it," said McRae. "I don't waste time looking at things that don't need to be looked at."

Also stated in the constitutional amendment, charities that had their applications denied could have appealed the decision to the Macon County Commission or to the Macon County Circuit Court. McRae did neither. He sued along with the other charities.

When asked why he didn't file an appeal with either entity, McRae said he had been fired by the current commissioner for Macon County so he chose not to go that route.

"Politics in Macon County…everybody goes hand-in-hand. That's why I stay away from that courthouse," said McRae.

McRae also explained that he thought Milton McGregor and VictoryLand had the charities blocked. He didn't realize that he could still have gone and applied to be a charity at VictoryLand after the "60 Charity Maximum" had been passed. VictoryLand did not reach 60 charities until mid-2006.

Following McRae on the stand was Ralph Summerford who served as a Forensic Accountant for the plaintiffs.

Summerford used models presented by Lucky Palace and its lenders, as well as profit reports and calendars from VictoryLand to create what he called a "conservative, reasonable assessment" of the losses suffered by Lucky Palace and the 15 remaining charities on the lawsuit.

Summerford took VictoryLand's "win-per-unit-per-day" or the amount of profit from each machine and multiplied it by the estimated 2,000 machines lenders wanted to put in Lucky Palace. Each calculation was specific to date to what VictoryLand reported. He then multiplied this number by the dates he estimated Lucky Palace would have been in operation - July 1, 2006 through August 9, 2010 - this assumes construction would have been completed in July 2006 and Lucky Palace would have closed when VictoryLand closed in 2010 because of the Governor's Task Force on Illegal Gambling.

Expenses including machine lease, operating costs, labor, sales and other were then deducted from that amount.

Summerford testified that with a reasonable degree of accounting certainty, lost profits for Lucky Palace totaled approximately $50.7 Million.

He then re-calculated that amount with the standard pre-trial interest judgment of 6%. That brought the lost profit number to $61.4 Million.

Lucky Palace promised a $42,000 payment per year for any charities licensed to operate at the facility. Calculating that number over the years Lucky Palace would have been in operation plus the pre-trial interest meant that $3.2 Million of the estimated $61.4 Million would go to the remaining 15 charities named in the lawsuit.

Defense attorneys contest these numbers and say they will present their own expert's findings during testimony next week.

At the end of the day the court presented a portion of a video deposition from Macon County Deputy Sheriff Tommy Miller. Miller was unable to testify for an undisclosed reason.

The deposition explained that Miller was also involved in reviewing and approving charity license applications. He stated in the deposition that he spoke with Sheriff Warren about the Lucky Palace applications. Davis advised Warren not to approve them because Lucky Palace did not have a building as required by the rules.

 

Read a case timeline HERE.

 

Copyright 2012  WSFA 12 News.  All rights reserved.

The Case

Updated:

The civil suit between 17 Macon County Charities and Lucky Palace LLC. against Macon County Sheriff David Warren, Milton McGregor and VictoryLand started litigation in federal court on Monday, May 7, 2012. More>>

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