Sale of Gardena’s Horseshoe Club Stalls

The sale of the Horseshoe Club, one of Gardena’s three poker clubs, was put on hold this week when the City Council voted to table a proposal from a group of investors who balked at the city’s requirements for a license transfer.

City officials on Tuesday told prospective buyer Herbert Stern and his partner, Leonard Baum, that before the city would approve issuing a license to the group, five conditions must be met, including setting up a $180,000 escrow account to cover four weeks pay for the club’s 250 employees.

The city also requested a letter of credit for $6 million to cover the first year of operation under new ownership and an audit of the club’s finances after its first year of operation. Stern, former president of an investment group that owned the Commerce Club, must also sever all ties with that club, city officials said.

Officials said the conditions were necessary to ensure the club’s financial solvency during an extensive remodeling of club facilities at Vermont and Rosecrans avenues.

But Baum, a Los Angeles attorney, told the council that trying to obtain a $6 million letter of credit while working out a plan to finance purchase of the club “is not prudent at this time from a business standpoint.�

Stern asked the council for at least six months to come up with a financing plan and to find additional investors to back it. Stern and Baum had proposed buying the club for $4 million and have paid the city $9,000 in application fees.

At Tuesday’s meeting, City Councilman Mas Fukai requested that the council get a status report on the group’s progress within 60 days.

City officials said the club closed Wednesday for remodeling, which will be paid for by the present owners, City Manager Kenneth Landau said. The remodeling is scheduled to take about three weeks, he said.

The present owners, the Horseshoe Club limited partnership, is a group of about 100 investors who have owned the club since 1951, said spokesman and general manager Miles Corwin. The group has been seeking a buyer for about a year, city officials said.

Before new owners can take over, the city and the state attorney general’s office must do background checks of investors and license the owners, Landau said. The city investigation of Baum and Stern is continuing, he said.