Monday, Nov. 22, 1999 | 11:09 a.m.
The Maxim hotel-casino closed Sunday, throwing hundreds of employees out of work and leaving unanswered questions about the intentions of its Texas-based owner.
Phone calls to the hotel are answered by a recording aimed at customers who have prepaid vacation packages. The recording says simply such customers "should be receiving refunds shortly in the mail as soon as the refunds are processed."
Meanwhile, hundreds of Maxim employees -- some of whom had worked at the off-Strip hotel-casino since it opened 22 years ago -- are facing a bleak holiday period and uncertain job prospects. Final paychecks will be distributed Friday, although many workers won't be receiving any money for accrued vacation time.
"It's pretty morose, a very said time," longtime gaming executive Ed Nigro said today. "A lot of really nice people are out of work now."
Nigro had operated the Maxim for owner Premier Interval Resorts Inc., which bought the Flamingo Road property out of bankruptcy in May for $36.5 million. But Nigro said he was forced to close the Maxim when Premier failed to make a $300,000 cash advance to tide the property over during the slow summer months.
Premier's refusal to make the cash advance, which was called for under the lease operating agreement Nigro had with the Texas company, came less than 90 days after Premier bought the property.
That raised the suspicions of veteran gaming operators who wondered why Premier would be in technical default of its lease agreement so soon.
The suspicions were further heightened when San Francisco real estate investor Luke Brugnara inspected the Maxim and told hotel officials he was operating with "absolute authority" from the father of Premier's president and was going to buy the property, shut it down and re-open it as a nonunion hotel.
The suspicions peaked on Friday when Meralex Limited Partnership, which had lent $42 million to Premier to buy the Maxim, foreclosed on the property, saying Premier had defaulted on an October loan payment.
Meralex general partner Jenkins Baldwin Corp., which occupies the same Dallas office complex as Premier, is affiliated with financial consultant Gary Kornman, whose son Michael is president of Premier.
"I can't help but wonder why someone would lend $42 million and the only security is a hotel that hasn't made a profit for years," a gaming executive, who requested anonymity, said.
"Then within 90 days the borrowers default on their lease agreement and shortly afterward default on their interest payments. The defaults lead to foreclosure, which wipes out all the liabilities they took on when they bought the property. And Brugnara gets a clean hotel, with no unions, no contracts, no lease."
Those liabilities included contracts with six unions representing Maxim workers, as well as with vendors that supplied food, beverages, linen and other supplies to the resort.
"Premier (officials) said they were 'shocked and angered' at the closing," Nigro said today. "But I've been trying to get them to the table for three months and telling them what would happen if they didn't live up to their agreements.
"We started the gradual close down Sunday morning. At 1 p.m., the last card was dealt at the 21 table and all gaming was shut down. Before long, the hotel was closed."
Nigro said he met with court-appointed receiver Larry Bertsch, who told Nigro he didn't have the authority to keep the resort open by paying employees or vendor bills.
"What will happen next is that when we vacate the premises when our lease is up, the receiver takes control of the property," Nigro said. "And that's at midnight on Dec. 5, unless there's some arrangement between Max Gaming and the receiver to turn it over earlier. And we haven't had discussions about that."
Premier executives couldn't be reached for comment today. Premier said two weeks ago it was "in negotiations with prospective operators to run the Maxim," but the company hasn't issued any statements about who would run the property.
Nigro was scheduled to meet with Premier lawyers earlier this month, but they didn't show up for either of two meetings.
In a three-paragraph statement issued Friday, Maxim executives said the 800-room off-Strip hotel would close Sunday. Nigro said Mission Industries, which supplied all linens to the hotel, would not continue to provide services on a cash-on-delivery basis.
"Without these supplies, without the ability to replace Mission (Industries') services and without the operating funds from Premier Interval Resorts, the Maxim Hotel must close prior to the lease termination date of Dec. 6, 1999," the statement said.
Andy Zimmerman, chief financial officer of Mission Industries, said the company would not make any public comment and would only correspond directly with Maxim officials.
Friday's press release said Max Gaming has repeatedly sought a transition plan with Premier in hope of avoiding a shutdown but "each attempt remains unanswered."
"There's no way to protect those jobs," said Jim Arnold, a spokesman for the Culinary Union, one of the unions with which the Maxim has a contract. "It's a sad situation because the Maxim has been around a long time and many of their employees have been on the job for 20 years."
Arnold said the union has exhausted its legal efforts to keep the hotel afloat and is now concentrating more on seeing that employees are properly compensated and placing some employees in jobs at other properties.
The Culinary was one of the participants in a recent job fair for employees in which 27 companies interviewed Maxim workers to find jobs for them.
Arnold said the closure of the Maxim is an example of the downside of big resort openings.
"The bigger these properties get, the more smaller properties are getting hurt," Arnold said. "It worries me to death that we may see more closures in the future. It's great when the new resorts open, they're fabulous and they bring in a lot of tourists.
"But it's a shame that so many employees will be without jobs, especially right before the holidays."
A memorandum to Maxim employees dated Friday said employees' final paychecks would be distributed between 8 a.m. to 6 p.m. on Friday at the hotel's front desk. Wages for all hours worked through Sunday would be paid, but vacation and "floating holiday" pay won't.
The memo said vacation and holiday accruals would be submitted to Premier for payment. Employees also were told they would receive instructions on how to file for unemployment benefits when they receive their last checks.