Tensions still high between Hard Rock, gaming regulators

Thursday, Dec. 2, 2004 | 11:12 a.m.

CARSON CITY -- Those who thought the Hard Rock Hotel advertising controversy had ended when regulators and resort officials signed a settlement agreement last month turned out to be wrong.

Hard Rock owner Peter Morton was grilled on the resort's rocky relationship with state regulators at Wednesday's state Gaming Control Board meeting during a hearing on what was expected to be a routine stock transfer matter for Morton.

Eventually, the board unanimously approved the conversion of 1,365 shares of privately held stock from a voting classification to a non-voting classification and the transfer of those shares to a trust fund for Morton's children.

The action was one of several stock transfer matters fielded by the board Wednesday and Morton and his attorney, Jeffrey Silver, said prior to the board's consideration that they expected the board would treat it as a routine transfer.

But Morton and Silver were clearly caught off guard when board member Bobby Siller began questioning them about previous run-ins with regulators.

Siller said he was troubled by "a lack of management and oversight" by Morton at the Hard Rock, which has had two high-profile violations in the last three years.

The most recent violation was settled just last month by the Nevada Gaming Commission and involved the Hard Rock's failure to live up to pledges that it would monitor advertising through a compliance committee. The resort's promise was called into question when a series of risque print ads and billboards appeared, resulting in communitywide scrutiny of the issue.

During 45 minutes of questioning, Siller said he wanted to get Morton on the record about who ultimately is responsible for approving the content of the Hard Rock's ads.

Morton said he makes the final decision on all ads. But Siller said the response confused him because Hard Rock President Kevin Kelley recently told him that he was authorized to make the final decision on ads.

"If he said that to you," Morton said, "it wasn't correct."

Siller said the inconsistency was an example of the Hard Rock's lack of credibility with him.

"I don't like being in this situation," Siller said, minutes before making the motion to approve the stock transfer. "You need to build this trust and credibility back with me."

In other business, the board recommended approval of a series of debt securities transactions for companies controlled by gaming executive Randy Black that is expected to lead to a major renovation and expansion of his properties in Mesquite. Board members also signed off on several end-of-the-year stock transactions and shelf renewals.

Black won board approval on bond market applications and transfers of interest in connection with his Mesquite casino empire, which includes the Virgin River, the Mesquite Star, the Casablanca and the Oasis.

Black is in the midst of a bond market road show to raise capital for a $35 million renovation and expansion. He told regulators that included in his plans are the conversion of all slot machines to coinless ticket in-ticket out technology, $5.5 million in improvements to the Oasis and the construction of a 200-room tower at the Casablanca.

Black said with $15 million invested by Las Vegas entrepreneur Michael Gaughan, the bond sale which will close within a month and the steady 5 percent growth that has occurred in the Mesquite market over the past 14 years, he expects cash flow at his properties to increase from $23 million to $27 million a year. That, he said, would enable the proposed new Casablanca tower to be built out of anticipated cash flow.

The move to finance expansion and to refinance other debt was spurred by recent offers to acquire the Mesquite properties. Black did not name suitors, but said in the past two weeks he has received offers of $186 million and $210 million for his holdings.

The Control Board also recommended approval of other stock-related matters, which will be considered later this month by the Gaming Commission.

The board unanimously approved renewals of shelf offerings by Alliance Gaming Corp. and Caesars Entertainment Corp.

Board members also recommended approval of licensing applications for representatives of Las Vegas-based Mikohn Gaming Corp. and Vegas Bar One LLC, which is acquiring The Lift, a small neighborhood casino on Valley View Boulevard between Sahara Avenue and Desert Inn Road.

Because The Lift was previously licensed by the city of Las Vegas and not the state, it will have a maximum of 35 slot machines -- and the new owners say they have no plans to try to expand any further.