Roski levels new charges in Park Place lawsuit, claims Hilton bid for hotel

Grace Leong

Friday, April 27, 2001 | 11:28 a.m.

Los Angeles developer Ed Roski Jr., who sued Park Place Entertainment Corp. in January over the failed $345 million sale of the Las Vegas Hilton hotel-casino, has leveled new charges against Park Place, saying the sale couldn't be completed in time because it allegedly failed to provide a $30 million loan.

Roski, who said he had difficulties arranging debt financing to buy the hotel, was to have received from Park Place the $30 million seller-subordinated note or what he called "mezzanine financing," to close the deal.

Roski, who added Hilton Hotels Corp. as a defendant in an amended complaint April 13 against the hotel, also accused Hilton Hotels Corp. -- whom he said was an unsuccessful bidder for the hotel -- and its chairman, Barron Hilton, of interfering with an agreement on July 11 by Park Place Chief Executive Arthur Goldberg to sell the hotel to him.

Goldberg died in October.

Roski also accused Hilton Hotels of trying to retain after the sale was aborted a $20 million deposit he had paid. The purchase, which was approved by the state Gaming Commission in October, was to have been financed with a $260 million first mortgage note, the $30 million note held by Park Place and $55 million equity provided by Roski.

Hilton Hotels spun off to Park Place its gaming operations including the Las Vegas Hilton in 1998. Hilton Hotels, however, still maintains close ties to Park Place. Goldberg, who wanted to sell the hotel and focus on Park Place's high-end gaming clients, was "so eager to sell the hotel that he agreed to take a loss on the sale," Roski said.

Park Place was said to have wanted to sell the property because it competes with Caesars Palace -- which Park Place bought in 1999 -- for high-end customers.

But Roski, in his latest filing, accused Hilton Hotels and Barron Hilton -- whom Roski said found the hotel's sale particularly offensive since it had been the flagship of the Hilton Hotels' Las Vegas operations created by him and his father -- of stepping up on their efforts to block the hotel's sale after Goldberg's death.

Hilton Hotels, which Roski said began to make unreasonable demands that affected his ability to procure financing even during Goldberg's term, allegedly began to exert influence over Park Place after Goldberg's death by installing a management group dominated by officers loyal to Hilton Hotels.

Barron Hilton had Stephen Bollenbach remain as Park Place's chairman while continuing as chief executive and president of Hilton, and installed Hilton's former executive vice president and general counsel Thomas Gallagher as Park Place's chief executive, the suit said.

Half of the Park Place board now consists of members who have ties to Hilton Hotels after Barron Hilton allegedly removed from the Park Place board two members brought in during Goldberg's term and cut the number of directors to 10 from 12, the suit said.

Roski said he now seeks court approval for his acquisition of the Las Vegas Hilton at the purchase price "less an adjustment to reflect the diminished value of the (hotel's) assets." He said Park Place's failure to maintain the hotel's cash flow and keep its workforce intact made it impossible for him to find the necessary financing to close the deal.

The suit said the Las Vegas Hilton's "significant and substantial downward trend" in cash flow from July through December 2000 wasn't the result of market conditions but rather resulted from actions by Park Place. Park Place shifted the hotel's executives and workers and also allegedly improperly diverted its high-end customers and related revenues to other Park Place properties, the suit said.