Tangled Paper Trail Shrouds Ownership Of Torched Casino Corporations, Lawsuits, Bankruptcies Muddle Search For Mars Arson Suspects

It took investigators only a few days to sift through the twisted rubble of the Mars Hotel and Casino and determine the fire was arson.

But it will take much longer for investigators to pick through the tangled ownership, bankruptcy and lawsuits heaped upon the defunct business that burned down two weeks ago today, nearly taking a city block with it.

Paper records surrounding the Mars Hotel and Casino are a researcher’s nightmare. They show a crowd of people and companies who stand to lose because of the fire, but they don’t clearly identify anyone who might benefit.

The Spokane Mars Limited Partnership, led by longtime Spokane entrepreneur Robert Saucier, appears to have owned the building at the time of the fire.

At one time, the partnership had insured the building for $4 million through Westchester Fire Insurance Co., according to U.S. Bankruptcy Court documents. The agent who wrote the policy told The Spokesman-Review it lapsed.

It’s not known if the building was insured by anyone at the time of the fire. An insurance policy on the five-story building and its three-story annex might benefit anyone from a former owner to a minor investor to a major lien holder.

Saucier’s business dealings involving the Mars are complex. He formed a half-dozen corporations, some of which are little more than paper. He essentially sued himself before the Mars folded, and he claimed to a bankruptcy court that he resigned as president of the Mars the day it shut down last November.

The Mars Hotel and Casino was under the umbrellas of three corporations and at one point was briefly poised to be taken under two more - all controlled by Saucier, according to records on file with the secretaries of state in Washington and Nevada.

Saucier bought the building in 1992 for $275,000 through the Arlington Hotel Corp., the structure’s historic name.

The subsequent restaurant, lounge, casino and proposed luxury hotel were run under the Mars Hotel Corp. and its parent, the Spokane Mars Limited Partnership.

The partnership was originally made up of four parties: The Mars Hotel Corp., which owned more than 80 percent of the partnership and was controlled by Saucier; Steve Quinones, a chef; Charles and Kathy Watson, friends of Saucier’s; and Saucier’s parents, Ben and Gloria Saucier.

Saucier originally owned 85 percent of the Mars Hotel Corp. The rest was owned by Billy Anders, a former IBM executive who met Saucier in the 1980s.

Neither Anders nor Quinones invested in the Mars enterprise. Their shares were for the work they performed, they said. Both men left the Mars before it shut down last November, Anders leaving in 1997. Both say they are no longer on speaking terms with Saucier.

The business struggled financially almost from the day it opened.

“When we first started, I asked (Saucier) if he had plenty of money to do the project,” Quinones said. “He laughed and said he had plenty to do the whole thing. But before we opened the money had run out.”

The partnership went into debt paying off other debts and trying to raise money to keep the business going. In spring 1997, the partnership obtained two of its largest loans: $825,000 from Sherron Associates and $790,000 from Cyril Randell & Associates.

Both lenders made Saucier, his wife, Julie, and Anders sign the notes, according to documents on file with the Spokane County Auditor’s Office.

“Those final big loans kept the place afloat and they were made by some friends of (Anders),” Quinones said. “After (Saucier) got the money, he fired Billy. It was the biggest shake-up of all.”

Anders confirms Quinones’ account. Saucier kicked him out of the business by holding a meeting of shareholders for the Mars Hotel Corp. in the office of a local attorney. Since Saucier owned two-thirds of the company, Saucier simply declared that the majority of shareholders had voted Anders out, Anders said.

Nearly six months later, when Saucier put the Mars into Chapter 11 bankruptcy, he attributed the company’s financial woes to Anders in various bankruptcy court documents.

Both Anders and Quinones were boggled by Saucier’s finger-pointing, since he was in sole control of the business in the year and a half before its demise.

Since the Mars closed, Saucier has been unreachable for comment. Calls to his attorneys have not been returned.

Chapter 11 bankruptcies give businesses a chance to reorganize their finances and continue to operate in the face of creditors hungry to collect on loans. The partnership owed roughly $3.2 million to investors, lenders and businesses that had provided goods and services.

Bankruptcy proceedings also freeze a variety of government regulatory actions. The Washington State Liquor Control Board was moving toward yanking the Mars’ liquor license in the fall of 1997. The bankruptcy stalled that action.

Within two weeks of filing for bankruptcy, Saucier floated a plan to ostensibly save the business with two new companies, Zephyr Cove Capital, LLC, and its management company, Galaxy Gaming Corporation.

Both were formed in Nevada less than two months before the bankruptcy filing.

Zephyr Cove (the name of a city in Nevada, Saucier’s home state) was to lease the building and pay rent to the partnership to help pay debts. The partnership’s liquor, gambling and other licenses would be transferred to Zephyr Cove.

“It’s not switching it from the left hand to the right hand,” Saucier said at the time.

But attorneys representing the interests of creditors - including the city of Spokane - saw it differently.

“Fraudulent” is how the agreement was described in an objection filed by creditors in U.S. Bankruptcy Court.

“There is no legitimate business purpose for the agreement,” the creditors said. “The agreement discriminates against the unsecured creditors in favor of (Saucier).”

One of the biggest objections was that Zephyr Cove and Galaxy Gaming would keep all the gambling profits.

The plan with Zephyr Cove and Galaxy Gaming never went anywhere and was soon overshadowed by motions to convert the partnership’s Chapter 11 bankruptcy into a Chapter 7 bankruptcy. The city of Spokane and the Washington state Department of Revenue - each owed hundreds of thousands of dollars in taxes - pushed for the conversion.

A Chapter 7 bankruptcy shuts a business down and distributes its assets to creditors, often through public auction.

About six weeks after the motions were filed to throw the Mars into Chapter 7, Saucier went to Spokane County Superior Court and sued himself.

He filed a suit against the Mars Hotel Corp., claiming that the company - of which Saucier was then the sole representative - failed to pay debts of $1.2 million owed to another of Saucier’s companies, the Arlington Hotel Corp.

No attorney’s name appeared on the lawsuit and Saucier got a default judgment the same day he filed it.

The case puzzled attorneys for the creditors in the bankruptcy. At the time, city attorney Mike Piccolo - representing the city’s interest in the bankruptcy - speculated the lawsuit would only have meaning should the partnership completely collapse, which it ultimately did. But Piccolo didn’t know what the judgment would mean in that event.

Piccolo was out of his office this week and could not be reached for comment.

As summer 1998 rolled into fall, the Mars struggled to pay its gambling taxes and ran into trouble with the state Gambling Commission, which gave notice on Oct. 28, 1998, that it would close the casino down for repeated security violations.

About a month later, U.S. Bankruptcy Court Judge Patricia Williams put the Mars into Chapter 7 and the business closed.

Bankruptcy trustee Jack Reeves took control of the assets of the partnership, the most important of which was the building. As trustee, Reeves’ job is to find the assets of the partnership and then distribute them to creditors. Within weeks, Reeves realized there were so many liens against the building that it was virtually worthless in terms of being auctioned off to pay creditors.

Reeves abandoned the building. Once abandoned, the building reverted to its legal status before the bankruptcy - a possession of the partnership.

A Seattle firm, Cyril Randell & Associates, had loaned the partnership $790,000 and held the first lien position on the building. The company wanted to sell the Mars and recoup some of its investment.

However, to sell the Mars, Cyril Randell & Associates had to take possession of it. And to do that, the company needed to foreclose on the building - something it never did.

The firm isn’t saying whether it had insured the Mars.

Graphic: Who owns the Mars Hotel?