Shareholder suing executives

Friday, Jan. 17, 2003 | 11:05 a.m.

WASHINGTON -- Pinnacle Entertainment Inc. said executives of the casino owner are being sued for breach of duty to investors after a golf tournament led to a harassment lawsuit and a regulatory fine.

Bloomberg News reported that shareholder William Kelsey is suing current and former managers and directors on behalf of Pinnacle, an action called a derivative lawsuit, the Las Vegas company said in a filing with the Securities and Exchange Commission. The suit seeks more than $10 million of damages following the event described in separate litigation as a "weekend of debauchery" involving prostitutes.

"The board of directors intends to evaluate the matters alleged in the complaint and to take such action as it deems in the best interests of the shareholders," the company said in its 8-K filing.

Pinnacle has incurred $6.5 million in legal costs to date over the June 2001 tournament held at the company's Belterra Casino Resort in Indiana, the filing said. The costs include a $2.3 million fine imposed by state gaming regulators. Pinnacle closed the casino for three days, established a compliance board and agreed to build a hotel tower in settling with the regulator.

In addition to a harassment suit by two former employees over the incident, the company was sued by former Chief Executive Office Paul Alanis in December, claiming he was wrongly blamed for the event and fired without severance pay.

The shareholder suit was filed in California Superior Court in Los Angeles County, according to the filing. The company moved its headquarters to Las Vegas from Glendale, Calif., last November.

Pinnacle said in the filing that the shareholder demanded the company investigate the incident before he filed the lawsuit. The board should get a chance to respond before the lawsuit should be allowed to proceed, the filing said.