The brothers -- two of Colorado's richest men -- were partners in Bullseye Gaming, which developed the $75 million Mardi Gras Casino in Black Hawk. It opened in 1999 with 700 slot machines and quickly became one of the most popular and successful gaming houses in Colorado. Except that Brad Snedeker, a local contractor who controlled the rights to the land the Mardi Gras sits on, decided that his cut of the profits was being, well, cut. He sued Kim and Gary in 2000, claiming they were cheating him out of millions of dollars.
And since Bullseye Gaming and Mardi Gras Casinos were the main parties named, the case will go to a jury in Denver District Court in September. It was originally slated to be heard this week, but Judge Shelley Gilman granted a delay due to the bizarre twist.
A maid found the fifty-year-old son of TeleCommunications Inc. founder and billionaire Bob Magness dead on the floor of his Denver Mariott Tech Center hotel room on March 29, just weeks after he was arrested on drug charges. Initially, Denver police said the death was "suspicious," but they've since indicated that there was no evidence of foul play. However, Magness's widow, RaNae, is requesting that his autopsy not be made public.
On March 7, Greenwood Village police had found Magness's Ford Explorer parked in front of the Woodfield Suites hotel on East Arapahoe Road with the keys in the ignition and the engine running. They matched the name on the registration to the hotel guest list and went to Magness's hotel room to investigate. The door was open, and an incoherent Magness was inside, dressed only in his socks and underwear. A pile of white powder was on top of a desk along with several ounces of cocaine, a small amount of marijuana, some hashish and several prescription drugs. Officers arrested Magness and took him to Swedish Medical Center for treatment.
After sobering up, Magness made plans to enter a drug rehab program in Arizona and stepped down from the board of Liberty Media, a spinoff of TCI. But the snowstorm kept him from making his rehab appointment, and the date kept getting rescheduled -- until it was too late.
Friends and loved ones knew Magness had a longstanding drug problem, and this wasn't his first arrest. In 1973, he was picked up in Garfield County for attempting to sell heroin to an undercover agent of the Colorado Bureau of Investigation. Magness was fined $5,000 and given a five-year suspended sentence. He cleaned himself up and took a more active role in the family business, helping to set up operations in Utah.
When their father died, in 1996, Kim and Gary Magness inherited the largest part of their father's cable fortune (Kim's share has been valued at $660 million), and the brothers decided to try their hand at casinos. They learned that Snedeker had acquired rights to a prime parcel of land on Main Street in Black Hawk, so Gary began courting him in hopes of building a casino. The Longmont contractor says Gary told him all along: "I'm going to be fair with you. I'm going to make you rich."
After months of negotiation, Snedeker and his company, B.W. Development Inc., entered into an agreement with Bullseye Gaming. The two parties signed a Net Profit Interest Agreement giving Snedeker rights to between 10 and 20 percent of the casino's net profits in exchange for control of the land. "My word is gold. My handshake is like gold," Snedeker, in court documents, says Magness told him. "You don't have to go to bed at night wondering if the deal is done. It's done."
And yet it wasn't, according to Snedeker. The casino progressed, but he soon discovered that his share of the profits had been unilaterally reduced to 4.74 percent. In early 1999, he confronted Steve Knudson, one of the Magnesses' partners; according to the lawsuit, he was told that his share was reduced because the project had grown in size, adding new partners and more land. Then, in September 1999, Snedeker says Knudson sent him a letter and a "notice of expulsion," terminating the agreement and informing him that Bullseye would purchase his interest in the casino for a one-time payment of $150,000.
Bullseye's lawyers maintain that Snedeker never entered into a joint venture with the company, because under the law, there must be some type of "fiduciary relationship" for an agreement to share profits to be legally binding -- and since Snedeker was not involved in the day-to-day development of the casino and did not agree to share both losses and profits in it, the original profit-sharing agreement wasn't enforceable.
Now Gillman must decide whether Bullseye and the Magness brothers violated the Colorado Securities Act and committed fraud and breach of contract.
The two brothers have been involved in high-profile litigation before: They were in a nasty dispute with their stepmother, Sharon Magness, over the terms of their father's will, which gave her $20 million in cash and a $15 million marital trust ("Dynasty: The Lost Episode!" January 15, 1998). She contested it in 1997, claiming she needed a larger share of the estate to set up a charitable foundation Bob was planning before he died. At the time, many of her friends let it be known that she thought Kim and Gary would fritter away the money on irresponsible ventures.
Sharon's claim was settled out of court in 1998. Although the terms were never disclosed, she reportedly got $100 million and has become a fixture on the charity-fundraising circuit, supporting such society-approved causes as the Denver Art Museum and Volunteers of America. She was even a supporter of Ocean Journey, bidding $150,000 at the opening gala for the right to host a New Year's Eve party at the aquarium.
Despite their largesse, the Magnesses are known for their aversion to publicity. In Gary Magness's deposition for the upcoming trial, he expressed his frustration with the "paparazzi chasing me around" and told the court, "I don't like having my financials thrown all over the country."
However, he wasn't so shy about letting his wealth be known when InStyle Weddings asked to photograph his nuptials to Celestial Seasonings heiress and lingerie-company owner Sarah Siegel. The couple posed for a lavish six-page spread in the spring issue, and the article detailed their no-expenses-spared October 2001 wedding in a villa on the Mexican Pacific coast. They chartered a 727 (once used by U2 and emblazoned with the band's logo) to fly guests from Denver to Mexico, where they enjoyed a dinner of lobster and prawns under a tent festooned with lilies and orchids. Later, they danced to tunes spun by a DJ flown in from Paris.
