Wembley's bet on US is yet to come up trumps

Voters in Colorado deal a fresh blow to UK gaming group fighting to clear its name in bribery investigation

The run of bad luck at the leisure group Wembley continued yesterday when voters in the American state of Colorado rejected plans that would have transformed the gaming group's prospects, just when the odds are shortening over its future viability.

The unsavoury implications of a multi-million dollar bribery investigation dogging Wembley in the north-eastern state of Rhode Island were more than enough to convince a sceptical Colorado public not to allow the British company to expand its betting interests in their state.

The result was another blow for the former owner of England's national football stadium, which is fighting to clear its name after two of its executives were charged with conspiring to bribe local American officials. Their aim, allegedly, was to get the green light to install additional slot machines in the group's Lincoln Park racetrack.

Thousands of Rhode Island citizens travel from miles away to enjoy the noisy fun of an evening at the dogs. It is Wembley's most lucrative asset, contributing 90 per cent of group profits. Permission came for Wembley to almost double its video gaming machines at its Rhode Island site, but so too did indictments for Nigel Potter, who was parachuted in to help sort out Wembley's mess in the mid Nineties, and Daniel Bucci, its Lincoln Park boss.

Mr Potter has stepped down as chief executive and has resigned from its board. Both men face a $250,000 (£150,000) fine and up to five years in jail if found guilty when the case is heard next year.

But Wembley, which denies the accusations, could be forced to pay out $11m, $500,000 for each of the 22 indictments issued by the Rhode Island district court. It could also lose its licence to operate Lincoln Park, a real risk given the antipathy of the state's Governor, Donald Carcieri, towards the company. The Governor, who controls five out of nine seats on the Lottery Commission, said that he "cannot and will not negotiate a new contract with Wembley".

Yesterday Claes Hultman, Wembley's chairman and acting chief executive, and Mark Elliott, its finance director, were as bullish as a gambler playing double or quits. Although they declined to comment on the legal situation, they know Messrs Potter and Bucci, as well as the company, are innocent until proven guilty. Plus they are adamant no one has done anything wrong.

Mr Elliott was optimistic about the "no" vote, despite admitting the shadow cast by Lincoln Park had been unhelpful. "Colorado was a tremendous opportunity. If it had come off, it could have been worth tens, hundreds of millions of dollars in market value. We always said it was a 50:50 chance, but because of the upside it was a risk worth taking," he said. The campaign cost the group £4.4m, just part of an estimated £8.5m hit it expects to take this year, in part because of spiralling legal costs, which include an unrelated court case in Hong Kong. Mr Elliott hinted that the unwelcome verdict could presage a sale of its four racetracks in Colorado, which it acquired in the early Nineties, admitting their future was something "we will have to consider".

With liberal attitudes to gambling at a premium in conservative America, Wembley had been betting on repeating the runaway success it has had with its all-singing, all-dancing one-armed bandits in Rhode Island.

Legal furore aside, the video lottery terminals, the main way the state's lotto-loving punters can play the big game, still have a loyal following. A trading update revealed the machines were taking more money than ever, with the weekly "drop" increasing by 14 per cent during the quarter to $5.2m, of which Wembley keeps 27 per cent. Peter Joseph, a gaming analyst at Peel Hunt, said: "Despite all the bad publicity, people are still coming through the doors, putting their money in the machines, pushing the buttons and leaving some of it on the table. That's the most important thing."

Analysts believe steady trading at Lincoln Park could be crucial to providing a future exit route for the British company should its legal trials and tribulations prove too much.

American gaming giants MGM Mirage and Harrah's are both reported to have been keeping a watchful eye on events in the hope that Governor Carcieri forces a sale. Wembley has no plans to seek a buyer, but Mr Joseph says: "This management team has been very good at being very rational and selling things that need to be sold. They even sold the stadium when it became worth more to them in cash than as a stadium."

That was in 1999, when the disposal of English football's most hallowed turf was supposed to mark a fresh start for the leisure group. Freed from the burdens of developing the famous London site, and with a healthy balance sheet thanks to a financial restructuring in the mid-Nineties, the disaster-prone Wembley could focus on a glorious and lucrative future as a gaming company. Or so the theory went. A second legal action in Hong Kong, which reaches court this month, is further proof that when it comes to Wembley, all bets are off that the future will be that straightforward.

The company's market valuation has collapsed since its losing streak began, with its shares falling from a peak of 837p in April last year to just 495p yesterday.

Merrill Lynch, its house broker, has warned that the shares could tumble as low as 300p - not quite the £15 price target it once had for the group.

And to cap it all, the downturn that has engulfed Britain's leisure industry for the past 18 months claimed a Wembley scalp yesterday in the form of its Catford greyhound track, one of the group's seven British sites. The loss-making south London track has been closed, contributing a further £600,000 charge to this year's tally so far. Even its Wimbledon site is struggling, leaving the group with all to play for next year.