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Eric Swallow, co-owner of M8trix, is photographed on the 8th floor of the casino in San Jose, Calif. on Tuesday, Feb. 19, 2013. Swallow and his partners invested more than $20 million to buy the bankrupt Garden City card club hoping that the new M8trix will be a future entertainment destination. (Gary Reyes/ Staff)
SAN JOSE -- Casinos are an inherently ground-floor business, with no windows or other distractions in sight of the gaming tables that might impede the process of separating the customers from their money. But when Eric Swallow was designing Casino M8trix, he wanted to create something special to remind players of the exclusive high-rise, high-roller rooms he had studied in Las Vegas."If you look at my competitors, they're like Costco with card tables," Swallow says, airily dismissing Bay 101, the city's other cardroom. Swallow wanted to take gambling in San Jose to new heights -- literally -- with his dazzling club, whose top floor is what puts the 8 in M8trix.The M8trix tower also stood as a monument to the arrival of Swallow's "empire," as he calls it. When the casino opened a year ago, on 8/8, Swallow's skills as a gaming impresario attracted the attention of a San Francisco hedge fund, which was looking for someone to take control of gaming operations at Hollywood Park in Southern California -- formerly a racetrack, now a huge real estate development the fund bought as an investment, with a card club that Swallow owns and operates.With control of both, Swallow became California's undisputed -- and unlikely -- card club kingpin.It also made him a player in San Jose's decades-long effort to rid itself of the scourge of gambling. The flaw in this plan, of course, is the desire of the city's political leadership to continue getting the more than $15 million in tax revenues the card clubs provide -- which exceeds what the city makes from Santana Row, Valley Fair mall and all local car dealerships combined. Mayor Chuck Reed campaigned against the card clubs when he ran for re-election in 2010, but his objections lapsed as tax revenues from the city's two clubs turned into a reliable bulwark against massive budget deficits. "There were times when the current mayor would walk the other way when I came into a room," says Swallow, who eventually managed to lure Reed to the casino's ribbon-cutting ceremony.But that moment came only after four agonizing months between the time Casino M8trix was built and when it was allowed to open, stalled by objections from the Police Department.In the year since the club finally opened, the SJPD has continued to block M8trix from unveiling the four card "salons" that Swallow built on the eighth floor for high rollers. In one of his final acts before retiring last year, former police chief Chris Moore refused to sanction gambling there because, he said, Swallow and his partners, Peter and Jeanine Lunardi, failed to provide adequate assurances that officers could spring surprise inspections after riding eight floors on an elevator.There's a new interim chief, but no sign the old one's decision will be changed any time soon."Nowhere else in America do you have a situation like that," Swallow says, incredulous. "This isn't Tiananmen Square, this is America! You have to have due process." In February, Swallow and his partners sued the city, a move meant to end the impasse with the police department and pry open Swallow's beloved eighth-floor salons. "Most of my day here," he says, "is spent trying to prove I'm not a criminal."City attorney Rick Doyle says he expects most of the charges in the lawsuit to be thrown out, adding that Swallow's complex finances have undermined his credibility. "I don't think it's that people necessarily think he's a crook or a bad guy," Doyle says. "I just think there is some suspicion that not all the information is forthcoming, and it takes some effort to get it."Some city officials disagree. "I don't think that the city is treating M8trix like a regular business," says Vice Mayor Madison Nguyen, "even though they're providing a substantial amount of revenue to the city."San Francisco hedge fund Stockbridge is backing Swallow's overhaul of Hollywood Park; from there he hopes to add San Diego to his growing card kingdom. "San Francisco and L.A. are very big markets for Asia," he says, momentarily mistaking the location of his Northern California base. He has calculated that Asians represent 19 percent of his customer base. "They like gambling," Swallow says. "For them, it's entrepreneurial."Swallow was approached in 2005 by his Diablo neighbor, Peter Lunardi, about buying Garden City, the older of San Jose's two card clubs. He had no idea then he would become California's largest single operator of cardrooms. "I didn't even play cards," he says. In fact, he doesn't gamble at all. Swallow had already succeeded far beyond his scrappy Oakland origins, building an Internet marketing firm that served clients as big as AT&T. And he had dabbled in deal-making with Lunardi before. "I had made him a couple of million bucks on commercial real estate deals," Swallow says. At that point, Swallow was looking to parlay that into something far larger.Garden City had been mired in bankruptcy for five years, but Swallow persuaded the bankruptcy trustee that he would look after the club's employees better than other bidders, and in 2005 he and the Lunardis took control.San Jose was still then known as America's safest big city, and city fathers were in no hurry to ordain Swallow's proposal to build a high-rise gambling den within spitting distance of Bay 101. It took three years to get city council approval.Meanwhile, Bay 101 has bought the former San Jose Airport Hotel directly across the street from M8trix, and plans to open a casino-hotel complex. In an obvious bit of gamesmanship, Bay 101 plans 120,000 square feet devoted to gaming, compared to M8trix's 89,000 square feet.That plan, too, still has to pass through the city's regulatory gantlet. "There's a reason why San Jose is not as big as San Francisco," Swallow says, referring not to population but progressive planning. "They stifle everything here. It's a very small town mindset."The hold on Swallow's dream den of iniquity has been a blow -- both financially and artistically. The casino's operators say they're just trying to offer an amenity that any big shot might crave. "Why is Chuck Reed on 18 instead of 2?" Scott Hayden, the casino's general manager, says, referring to the location of offices in City Hall. "It's just a luxury thing, a way of saying, 'This is very cool.' "Under California regulations, only Indian casinos can run roulette wheels, slot machines and other games found on the Las Vegas Strip. Card clubs make money charging gamblers a fee to sit at the table, and M8trix gets paid the same -- $1 per hand before the first card is dealt -- whether the limit is $2 or $100."I don't want you to lose your money," Swallow says, "I want you to stay in the game because that's how I make my money."The new casino draws an average of 2,127 customers a day, helping increase revenue by 45 percent over Garden City. Swallow's surveys indicate that 62 percent of them come in alone, suggesting they are there as much for human interplay as the play."Gaming's one of the weird places where you can have a lawyer, a plumber and a fireman interacting at the same table," he says. "At a bar, they would never end up talking. But when they're playing cards together, they talk." He calls his casino a "melting pot." And once the city of San Jose gets out of his way, Swallow believes that pot will grow even bigger every day.Staff writer John Woolfolk contributed to this report. Contact Bruce Newman at 408-920-5004. Follow him at Twitter.com/BruceNewmanTwit. On Bay 101 and other card clubs: "If you look at my competitors, they're like Costco with card tables."On his Asian customers: "They like gambling. For them, it's entrepreneurial."
On delays in opening high-roller "salons": "This isn't Tiananmen Square, this is America! You have to have due process."
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