Two Adelson companies sue a third

Grace Leong

Thursday, March 20, 2003 | 11:24 a.m.

The legal battle over the delayed opening of the $1.5 billion Venetian megaresort on the Las Vegas Strip has gotten so convoluted that two of Venetian owner Sheldon Adelson's companies are now suing The Venetian.

Venetian parent Las Vegas Sands and Venetian affiliate Grand Canal Shoppes Mall at the Venetian filed lawsuits against Venetian Casino Resort LLC, the hotel-casino's operator, in Clark County District Court last week to recover more than $45 million in lost revenue and profits because of the "late and troubled opening" of The Venetian.

These two lawsuits stem from a ruling by a Clark County District judge that found Las Vegas Sands would be the aggrieved party due to the late opening and that it must sue the Venetian Casino Resort to collect from the resort's contractor, Lehrer McGovern Bovis Inc.

"If not for this technicality, we would not be suing ourselves," said Michael Mathis, Venetian's attorney.

"That's because of a 2002 ruling by Clark County Senior District Judge James Brennan (on a motion filed by Bovis in response to earlier litigation by Venetian), which states that since Venetian was the entity that had the construction management contract with Bovis, procedurally, Las Vegas Sands would have to sue Venetian and Venetian can then sue Bovis to collect those damages," he said.

Las Vegas Sands, in a March 11 lawsuit, said the Venetian Casino Resort failed to honor a lease agreement to open the casino and remaining areas of the resort including the hotel on time for public use. That in turn, caused Las Vegas Sands to lose $43.5 million in casino revenue and profits, the suit said.

The Adelson companies are seeking damages of more than $100 million in various lawsuits against Bovis over the delayed opening and unpaid bills to contractors that are the subject of lien disputes. Those damages, however, do not include the $45 million in damages currently sought in the two suits.

Venetian wants Bovis and its guarantors to pay its subcontractors and compensate the hotel-casino for violating a construction-management agreement to meet the guaranteed substantial completion date by April 21, 1999.

The Adelson companies say Bovis "severely damaged" The Venetian's reputation by delaying the resort's opening until May 4, 1999, forcing it to "walk" customers to other hotels and costing it "substantial income and patronage from its hotel, retail, restaurant and bar, and casino operations."

Similarly, Adelson's Grand Canal Shoppes at the Venetian, which is trying to recover $2.3 million in lost business profits, was also required by the same technicalities to first sue the Venetian Casino Resort before it can try to recover those damages from Bovis, Mathis said.

The operators of the Grand Canal Shoppes accused Venetian Casino Resort of failing to honor representations it allegedly made to them and its tenants that construction of the common areas of the mall and other portions of the resort, including the hotel, would be completed by April 21, 1999.

The Grand Canal Shoppes blamed the delays on Bovis' failure to complete The Venetian's construction on time. That caused Venetian Casino Resort to violate the mall lease and forced Grand Canal Shoppes to make $2.3 million worth of monetary concessions, reimbursements and rent abatements to its tenants.

Meanwhile, trial proceedings that began in August 2002 are continuing, with both parties presenting witnesses and testimonies to establish who is responsible for delays and cost overruns at The Venetian, Mathis said.

Venetian and Bovis executives blame each other for failing to pay scores of subcontractors, which together with Bovis have filed more than $300 million in mechanics' liens against the Strip resort to date. Included in the total are $145.6 million of liens Bovis filed against The Venetian.

Venetian claims Bovis allowed "defective or incomplete work" to be done by failing to manage and coordinate subcontractors' work and submitted false and misleading schedules about the date construction was supposed to be completed.

Venetian, in its third quarter 2002 financial statement, said it purchased an insurance policy in June 2000 covering expenses related to the ongoing construction lien litigation. These include amounts to be determined at trial that may be owed to Bovis or its subcontractors as well as legal costs.

The Venetian will self-insure the first $45 million and the insurer will insure up to the next $80 million of any possible covered losses.