Lawyer: Boardwalk stock sale benefited major stockholders

Tuesday, Oct. 9, 2001 | 9:24 a.m.

CARSON CITY -- An attorney for a minority shareholder in the Holiday Inn Boardwalk on the Las Vegas Strip says minority stockholders were shortchanged when the property was sold to Mirage Resorts Inc. for $135 million in 1997.

Randall Jones, attorney for Harvey Cohen, told the Nevada Supreme Court Monday that the majority stockholders "cut themselves a better deal and got millions of dollars more" for their shares.

Jones wants the court to overturn the order of District Judge Valorie Vega, who handed down a pretrial decision in favor of Mirage and majority shareholders. Mirage is now part of MGM MIRAGE.

Todd Bice, attorney for Mirage and majority shareholders who sold their stock to the Mirage, said Cohen accepted the $5 per share and he is now barred from raising the issue in court.

Bice said Cohen, of Las Vegas, never alleged fraud or misrepresentation. "His acceptance of the buyout ends this case," he argued.

A three-judge panel of the Supreme Court took the arguments under submission and will rule later. But at least one justice -- Nancy Becker -- indicated she sided with the arguments of Bice. She told Jones that Cohen failed to exercise the rights of dissenters to the sale.

Becker said Cohen had the right to challenge the merger if he thought it was unlawful. But he didn't do that. She said Cohen raised his concerns at the stockholders' meeting.

The prehearing legal briefs filed with the court show Cohen held 74,000 shares of common stock at the time of the merger. He believe the majority shareholders received "payments and other inducements that greatly enhanced" what they got for their shares.

Bice said that extra money was from the personal assets and property they sold to the Mirage.

As part of the $135 million deal, Jones argued Mirage paid $35.9 million to acquire all the outstanding shares. He said that had the Mirage paid just for the share value of the real estate, it would have paid $94 million.

When the deal was announced, Mirage said it was paying $39 million for common and preferred stock, assuming $56 million in mortgage and other debt and buying three associated properties for $39 million.

Jones said the majority stockholders "violated their fiduciary duties to the minority shareholders.

Bice said Cohen took his money and then changed his mind more than a year later and claimed his shares were worth at least double what he had received.

The purchase by Mirage gave it more frontage on the Strip for future expansion.