Hard Rock says settlement won’t affect its operations

By Liz Benston (contact)

Thursday, Oct. 28, 2004 | 10:46 a.m.

A settlement and fine levied by Nevada regulators against the Hard Rock to settle a dispute over the casino's advertising policy isn't expected to change the way the property conducts business, a top Hard Rock executive said Wednesday.

The Hard Rock agreed to pay $100,000 -- the maximum allowable fine -- to settle a complaint by the state Gaming Control Board. The Nevada Gaming Commission must still vote on the settlement at its monthly meeting Nov. 18.

Hard Rock President and Chief Operating Officer Kevin Kelley said he is relieved by the settlement and said the deal, if approved by the Gaming Commission, would allow the property to return to business as usual.

Kelley said the settlement essentially asks management "to use good judgment" -- something he says the company had been doing all along.

The Gaming Control Board originally filed a three-count complaint against the Hard Rock. Two of the counts concerned a racy advertising campaign that board members said condoned illegal activity. The Gaming Commission in September dismissed two of the complaints, saying the ads were satirical in nature.

The Hard Rock and the board reached a settlement on the remaining count that accused the property of reneging on an agreement it had with regulators that all advertising be reviewed by the Hard Rock's compliance committee.

The Control Board said the Hard Rock didn't follow procedures in its own company handbook that required "questionable" ads to be run by the compliance committee. The Hard Rock created the handbook after it was fined $100,000 by Nevada regulators in 2002 for allowing sex acts.

The well-publicized incident involved patrons who were engaging in sexual activity in the former Baby's nightclub while surveillance employees and security officers looked on. The incident occurred in connection with a swingers party hosted by the Hard Rock.

The Hard Rock interpreted the rules in the handbook to apply only to advertising connected with "special events or promotions" rather than all ads, Hard Rock attorney Jeffrey Silver said.

"We would never have agreed to have everything reviewed by the compliance committee," Silver said. "There are at least 50 pieces of advertising a day that go through that hotel, and this is a compliance committee that meets quarterly."

The settlement means that the Hard Rock's compliance committee, which had been reviewing ads on a piecemeal basis since the January complaint was filed, will no longer be required to perform that task, he said. The duty to review advertising will ultimately rest with management, he said.

That position also rests well with the Nevada Resort Association, the trade association that represents most of the major casino companies in town. The association and the American Civil Liberties Union had filed amicus briefs supporting the Hard Rock and arguing that the board's attempt to police advertising campaigns violated the First Amendment.

The two groups did not get a chance to argue their case in public because the Hard Rock chose to settle rather than contest the final count in a hearing before the Gaming Commission.

The Nevada Resort Association President Bill Bible said his group was primarily concerned with the first two counts because they concerned advertising content. The agreement on the final count, though more of a procedural matter specific to the Hard Rock, puts the property in line with other casinos that generally leave advertising decisions up to management, he said.

"I don't believe there's any industrywide implications here but if there are any, it would be that compliance committees are advisory only. That's been the industry's position all along," he said.

In the settlement, the Hard Rock admits that the company's handbook could be misinterpreted and takes responsibility for the confusion.

The settlement also stipulates that it is not a legal decision, nor does it set a precedent that can be relied upon by other casinos.

But Silver said the closely watched decision has broader implications.

"This communicates the message to the industry that if there's any misunderstanding it will be construed against the (casino) and not the board," he said. "You had better make things crystal clear when you submit things to the board."

Silver said the Hard Rock chose not to fight the board on the count because "it would not have served the industry or the board."

"The Hard Rock wants this chapter close just as much as the board does," he said. "There was a lot of good that came from the exercise. Perhaps there had to be a clarification."

While Hard Rock managers will continue to call the shots on ads, the property has become more sensitive to regulators' concerns, Kelley said.

"Going forward, we're always going to be mindful of our relationship with the regulators," he said.

The Hard Rock won't necessarily run "racy" advertising to get its message across, he added.

"We can be irreverent and impactful and relevant in many different ways. We think there's lots of opportunities out there to continue that path. It's not going to be a race to the bottom."