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October 21, 2014

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Dispute erupts between Green Valley Ranch partners

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Sun file photo

The Green Valley Ranch casino-resort in Henderson.

Map of Green Valley Ranch

Green Valley Ranch

2300 Paseo Verde Parkway, Henderson

Station Casinos Inc.'s partner in the Green Valley Ranch hotel-casino filed a motion in bankruptcy court Thursday charging Station has breached its management duties under the joint-venture partnership agreement by diverting business to Station's wholly-owned properties.

The motion was filed by GCR Gaming LLC. GCR Gaming and the Las Vegas Sun are both owned by the Greenspun family.

GCR Gaming and Station have been equal partners in Green Valley Ranch under an agreement dating to March 2000; and also are partners in the Aliante Station hotel-casino in North Las Vegas and in a collection of smaller gaming properties.

Station, unable to meet its debt obligations after the recession cut into its revenue, and several subsidiaries filed for bankruptcy protection last July.

The Green Valley Ranch resort partnership was not included in the July filing.

But on Feb. 10, the Station subsidiary that operates the property, GV Ranch Station Inc., filed for Chapter 11 reorganization for reasons that have not been disclosed.

GV Ranch Station Inc. listed assets of $100 million to $500 million against liabilities of $10 million to $50 million.

The filing listed three unsecured creditors -- all associated with Station -- but didn't say how much they were owed. They are Station Casinos Inc., Vista Holdings LLC and Green Valley Ranch Gaming LLC.

Station has said in regulatory filings that in addition to its 50-percent ownership stake in the 496-room resort, it receives as the managing partner a management fee of 2 percent of the property's revenue and about 5 percent of its earnings before interest, taxes, depreciation and amortization. The partners have the same terms for Aliante Station.

In its motion Thursday, GCR Gaming asked the court to dismiss the GV Ranch Station Inc. case, or to cancel the Green Valley Ranch joint venture operating agreement, or to lift the automatic stay of litigation in bankruptcy cases to give GCR the right to enforce its contractual rights under the agreement.

"In late December 2009, GCR first learned of a long-running scheme implemented by the debtor to systematically divert customers, business opportunities and other assets from Green Valley Ranch -- which debtor derisively calls the '50 cent piece,' in reference to its limited 50 percent ownership -- to (Station's) 100 percent-owned casinos," the motion charges. "... the scheme included -- but was not limited to -- debtor's specific, individualized efforts to lure Green Valley Ranch's 'high rollers' to Red Rock (a competing, 100 percent-owned casino); ordering Green Valley Ranch to terminate a highly successful marketing program; all the way down to instructing the food purveyor to deliver the 'prime' cuts of meat to Red Rock, while sending Green Valley Ranch the 'garbage.'"

GCR said this alleged conduct was confirmed by Timothy Wright, former general manager of Green Valley Ranch. GCR said Station's action violated the operating agreement requiring Station, as the manager, to run the resort in the best interests of Green Valley Ranch "and with the same care as a prudent person would exercise in the management of its own hotel and gaming properties."

Station, in a statement Thursday, said: "We intend to vigorously contest the Greenspuns' baseless claims."

"We are extremely disappointed that the Greenspuns have joined the fray of out-of-the-money constituents seeking to bring merit-less lawsuits in connection with our bankruptcy proceedings," Station said in the statement.

"This threatened lawsuit is nothing more than a desperate and improper attempt by the Greenspuns to gain leverage against Station in our ongoing restructuring discussions with Green Valley Ranch's creditors," the statement said.

A Station spokeswoman said the company would have no comment on GCR Gaming's specific allegations.

GCR Gaming's motion was filed by Marc Kasowitz, an attorney with the New York law firm of Kasowitz, Benson, Torres & Friedman LLP.

In an interview, Kasowitz said efforts were made to resolve GCR Gaming's concerns out of court, but GCR had no choice but to file its motion after the Station subsidiary filed for bankruptcy protection.

Kasowitz said GCR has been deprived of an unspecified amount of revenue because of the conduct of Station, which he called an "egregious breach of the operating agreement."

Kasowitz said it is not the goal of GCR Gaming to buy out Station's interest in the resort. A Greenspun family affiliate also owns the District at Green Valley Ranch, a shopping center east of the hotel-casino.

The goal of Thursday's court filing, he said, is to have Station removed as manager of the joint venture. If that happens, he said, arrangements would be made to have another licensed operator take over operation of the resort.

Kasowitz declined comment on whether GCR Gaming is in disputes with Station over the Aliante Station joint venture and the smaller gaming ventures such as Barley's Casino & Brewing Co. in Henderson.