New Showboat owners clear first regulatory hurdle

David Strow

Thursday, March 9, 2000 | 11:04 a.m.

The Nevada Gaming Control Board on Wednesday approved Harrah's Entertainment Inc.'s $23 million sale of the Showboat hotel-casino -- but grilled the buyers for more than two hours regarding concerns about the background of one of the new owners.

Harrah's announced in July it was selling the 447-room Boulder Strip property to VSS Enterprises, a group comprised of three private local investors.

The buyers plan to give the property a Latin American, fiesta-like theme, but have no plans to close the property, saying the change over would be "seamless."

"This is something like you'd find at Cabo San Lucas," said Michael Villamor, one of the three partners in the property. The property's name will ultimately be changed as well, though no new name for the Showboat was revealed at Wednesday's meeting.

The board voted unanimously for approval, but grilled Villamor over a business he appeared to be involved in while working as an executive for Primadonna Resorts.

Numerous government documents, including business license applications and tax returns, indicated Villamor was a 50 percent partner in Career Development Associates, an executive recruitment firm used at the time by Primadonna. Primadonna officials told Control Board investigators that Villamor did not inform them of his ownership in CDA.

Villamor's said that the forms were in error. While Villamor did assist in the start-up phase of the business, he said he had no intent of becoming involved with the company in the long term and denied ownership in CDA. The Control Board wasn't entirely convinced, however, noting that documents indicating Villamor's ownership were filed as recently as February 1999.

Still, Villamor impressed board members with his actions while an executive at Gem Gaming, the original developer of the Reserve hotel-casino in Henderson.

At Gem Gaming, Villamor worked for Henderson developer Steven Rebeil. In 1997, Rebeil was denied a gaming license by the Nevada Gaming Commission after investigators found evidence of wrongdoing by Rebeil at his Gem Homes residential development company. Soon after, the commission also denied a license to Rebeil's attorney, Dominic Magliarditi.

Villamor testified he was unaware of these practices -- and when he found out about them, he resigned from the company immediately. When Villamor resigned, he left behind a $2 million profit on his stock in Gem Gaming, which was then on the verge of being acquired by Ameristar Casinos Inc.

"The disclosure issue (at Primadonna) was of concern to the entire board, but when taken in totality, Mr. Villamor's prior practices did meet the suitability requirement," said Steve DuCharme, chairman of the Control Board.

Another point of concern for the Control Board revolved around the financing of the Showboat by its new owners. The property has slowly been losing market share to competitors further south on the Boulder Strip.

"There were concerns that their margins were pretty thin to meet projections," DuCharme said. "Given current operations, they might have difficulty servicing that debt, and none would be available for capital expenditures."

Dan Shaw, the majority owner of VSS Enterprises, has been the primary financial backer of the Showboat acquisition, providing about $13 million in financing to the buyout. Shaw also personally guaranteed the $15 million loan taken out on the property. After paying Harrah's, that would leave about $5 million available for operating capital and property improvements, and Shaw told board members he would help finance the business through its early phases.

Board officials were not initially convinced this would be possible, noting that much of Shaw's assets were not liquid, and could not be readily used to finance the property's expenditures. However, Shaw assured the board he would put his assets into more liquid forms, enabling him to fund the hotel-casino.

The sale must still be approved by the Nevada Gaming Commission later this month. If approved, the sale is expected to be complete by the beginning of April.