Wynn fights demand for return of gambling debt payments

By Steve Green

Sunday, Dec. 19, 2010 | 6:21 p.m.

The bankruptcy liquidator for an Illinois company tainted by fraud is encountering resistance in his efforts to recover millions of dollars he says was wrongly sent to Las Vegas casinos to cover gambling debts.

The liquidating bankruptcy plan administrator for Equipment Acquisition Resources Inc. of Palatine, Ill., William Brandt Jr., filed suit in October in bankruptcy court in Illinois against Wynn Las Vegas, the Luxor, the Rio and Harrah's hotel-casinos — all on or near the Las Vegas Strip.

The suits charge Equipment Acquisition Resources (EAR) sent checks to the casinos to cover gambling debts for EAR executives including Sheldon Player, his wife Donna Malone and Mark Anstett. Those executives all left the company before or as Brandt took over.

EAR, which claimed to be in the semiconductor machinery sales business, was forced to file for bankruptcy in October 2009 after it "engaged in a massive fraud by which it sold equipment at inflated prices and leased the equipment back from various lenders,'' the administrator's lawsuits say.

"The debtor misrepresented the value of the equipment and pledged certain equipment multiple times to secure the financing,'' the suits say, adding EAR was, "in effect, not a real, functioning company.''

EAR from October 2005 to October 2009 sent 21 checks to Wynn totaling $1.785 million so "Player, Malone, Anstett or others personally could engage in gambling and gaming activities at one or more of the Wynn casinos,'' the suit against Wynn charges.

"The debtor did not receive any value for making the payments,'' the lawsuit charges.

It further alleges some of the payments were "fraudulent transfers'' as "the debtor received less than reasonably equivalent value for the transfers.''

When the checks were cut "the debtor either was insolvent'' or had unreasonably small capital or was incurring debt it would be unable to pay, the suits say.

The suit against Wynn sought return, for the benefit of EAR creditors, of the $1.785 million. The trustee also sought $236,500 from the Luxor, $471,000 from the Rio and $30,000 from Harrah's.

Court records show the administrator has also been looking into at least $4.3 million in payments to the Horseshoe Casino in Hammond, Ind., $584,000 in payments to the Ameristar Casino in East Chicago, Ind., and at least $30,000 to the Palms hotel-casino in Las Vegas. Complaints, however, have not been filed against those properties.

Among the casinos sued, Wynn so far is the first and only defendant to answer the complaint and last week it disputed the assertions the $1.785 million should be paid back.

An attorney for Wynn argued in a court filing that the money paid to Wynn was not the property of EAR but rather was compensation to its executives Player, Malone and Anstett.

As EAR officers, board members or employees, "they were entitled to receive compensation and/or other remuneration from the debtor,'' Wynn's filing said.

"The transfers were compensation for services rendered by Malone, Anstett and/or Player,'' the filing said. "Malone, Anstett and/or Player directed that their compensation by paid directly to defendant (Wynn), instead of to them.''

Wynn's filing also argued Wynn "provided value'' to the EAR executives by "among other things, applying the transfers in satisfaction of Malone's, Anstett's and/or Player's debts to defendant (Wynn).''

The EAR bankruptcy has attracted attention in Midwest banking circles and the nation's equipment financing industry, with the liquidating officer saying the company ran a Ponzi scheme.

As part of the bankruptcy, the bankrupt company sued Player, Malone, Anstett and several limited liability companies saying EAR reported net income of $17.3 million in 2007 and $34.9 million in 2008, but charging: "Beginning in at least 2005, the individual defendants, for the purpose of enriching themselves, the Player children and the LLC defendants at the debtor's expense, misappropriated debtor's assets to purchase real and personal property and funded the LLC defendants.''

Reports in Crain's Chicago Business and Bankruptcy Court Decisions News & Comment indicate many lenders to EAR apparently were unaware its president, Player — now of Jackson Hole, Wyo., and Chicago — had served 31 months in prison for a massive loan fraud in the 1980s involving equipment sales and leasing and victimizing Greyhound Leasing & Financial Corp. of Phoenix (which later became part of FINOVA Group).

Player, then a businessman in Vernal, Utah, and Mesa, Ariz., had used phony collateral to borrow $66 million from Greyhound on the pretense it was intended for machinery leases and sales in which Player was the middleman. He instead plowed some of the money into Arizona real estate ventures and Greyhound sustained tens of millions of dollars of losses.

A 1985 Wall Street Journal story on Player quoted a Greyhound attorney as calling Player's scheme "one of the most complicated, sophisticated and convoluted frauds I've ever seen.''

The story noted that at the time, Player was an avid gambler who frequently flew in his private plane with employees and business associates to play baccarat at Caesars Palace.

With criminal investigators looking into the collapse of EAR, Player has declined comment on that case, Crain's Chicago Business reported.

EAR creditors owed some $175 million will likely recover just a few million dollars, court records show.