New attorneys assist in Harrah’s probe of high roller’s intoxication claims

By Jeff German

Saturday, July 25, 2009 | 2 a.m.

Harrah’s Entertainment has retained a national law firm to assist in an internal investigation into allegations that two of its casinos supplied a high roller with a steady flow of alcohol and drugs as he racked up tens of millions of dollars in gambling losses.

Attorneys for the gambler, Nebraska philanthropist Terrance K. Watanabe, 52, are cooperating with the Harrah’s investigation, sources said.

Watanabe is facing criminal theft charges in Las Vegas for allegedly failing to pay $14.7 million in markers at the two Harrah’s properties, Caesars Palace and the Rio.

But the allegations that Watanabe was kept intoxicated while he gambled, first reported in a May 18 Sun story, are threatening the district attorney’s prosecution of Watanabe and could land the world’s largest gaming company in hot water with state gaming regulators.

The allegations are particularly troubling for Harrah’s because it has held itself up for more than a decade as an industry leader in promoting responsible gambling.

Lawyers from the Chicago office of the national law firm Jenner & Block were in Las Vegas at Harrah’s request this week to question witnesses who could corroborate Watanabe’s allegations.

A spokesman for the firm’s Chicago office did not respond to Sun inquiries Friday, however.

Harrah’s spokesman Gary Thompson would not confirm or deny that the company is conducting an internal investigation.

But Thompson did say: “We have in the past hired outside law firms to investigate serious allegations that have been brought against any of our properties.”

One of Watanabe’s Las Vegas lawyers, David Chesnoff, brought the names of several witnesses to the attention of the district attorney’s office days before the office obtained an April 29 indictment against Watanabe.

In a seven-page letter, obtained by the Sun in May, Chesnoff alleged that the two Harrah’s casinos kept his client in such an incoherent state during late 2007 that Watanabe was “incapable of forming the criminal intent” to avoid paying the $14.7 million in markers.

Chesnoff alleged that Watanabe was often drunk at both casinos and — in the case of Caesars Palace — prescription painkillers were provided by casino employees as his gambling losses mounted.

According to the letter, three casino employees who spent a lot of time with Watanabe in 2007 were prepared to testify that they observed him slurring, having trouble walking and even falling asleep at the gaming tables.

This week, Chesnoff provided the Jenner & Block lawyers with two of those witnesses to interview, sources said.

Chesnoff, who is helping Watanabe fight the criminal charges, declined to comment Friday. “I’ll do my talking in court,” he said.

Nevada Gaming Control Board Chairman Dennis Neilander also declined to comment on the allegations swirling around the Watanabe case.

Gaming regulations prohibit casinos from allowing “visibly intoxicated” players to continue to gamble, Neilander said.

If casino companies substantiate allegations of wrongdoing at their casinos, they generally report it to the Control Board, and the board opens its own investigation, Neilander said.

The district attorney’s office has been informed that Harrah’s is conducting an internal investigation into Watanabe’s allegations.

District Attorney David Roger declined to confirm or deny that Friday. He also declined to comment on what effect the allegations, if found to be true, would have on Watanabe’s prosecution.

If Harrah’s officials had been more forthcoming about the allegations when they asked the district attorney’s office to pursue the criminal case, however, the office might have had second thoughts about filing charges. The allegations could make it more difficult for the district attorney to persuade a jury to convict Watanabe.

In court papers last week, Chesnoff said his client’s prolific play made him “Harrah’s No. 1 customer” and “one of the most noteworthy gamblers in the history of Las Vegas,” bringing in “hundreds of millions of dollars” in revenue to local casinos.

Watanabe’s play amounted to 20 percent of Caesars Palace and Rio revenue in 2006 and 2007, the lawyer said.

The $14.7 million in markers Watanabe is accused of owing pales when compared with Watanabe’s overall gambling losses, which added up to $112 million at Harrah’s casinos in just 2007, Chesnoff said. All but the $14.7 million was paid back to Harrah’s, he said.

Watanabe’s wealth stems from the sale of the Omaha-based Oriental Trading Co., a wholesale novelty importer he ran from 1977 until 2000.

Jeff German is the Sun’s senior investigative reporter.