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Monday, March 29, 2010 | 2 a.m.
Sun Archives
MGM Mirage properties have seen their fair share of main event fights. Now the gaming giant’s massive flagship, CityCenter, will be at the center of an owner vs. builder battle with nearly a half-billion dollars at stake.
Moves last week, culminating with Perini Building Co. leapfrogging to a lawsuit, indicate its already bare-knuckle.
At the beginning of last week, Perini officials were still saying they intended to file $491.2 million in mechanics’ liens against CityCenter by today. Mechanics’ liens preserve the rights of contractors, subcontractors and material suppliers to seek foreclosure against the project owner as leverage to get paid for work.
MGM, which co-owns CityCenter with Dubai World, warned it was prepared to file a counterclaim to seek hundreds of millions of dollars from Perini and that the construction contract mandated binding arbitration.
But come Tuesday, MGM security was escorting Perini’s workers off CityCenter’s Harmon hotel construction site, and Thursday Perini hit back by going straight to court rather than waiting for arbitration.
MGM Mirage has been arguing that its 2005 contract with Perini included a provision that disagreements would be settled by a retired Las Vegas judge. Alan Feldman, spokesman for the gaming giant, wouldn’t disclose the name of the arbitrator, but said the company had submitted material to him. MGM now will have to persuade a full-time judge to kick Perini’s lawsuit over to the arbitrator.
Perini laid out the basics of its case in its Thursday filing: a slew of design changes and project modifications, submitted as much as a year-plus late by MGM, ratcheted up Perini’s $3.5 billion contract to $6.8 billion. The massive project was subject to tens of thousands of changes requested by the owner, including a half-billion dollars worth that came after agreed-upon deadlines.
MGM plans to pursue its argument that Perini is responsible for construction-related problems at the Harmon hotel, where work had been suspended by local building inspectors, Feldman said.
The problems at the Harmon apparently have proven too expensive to solve so far. It’s unknown when it will be completed, but it is to have only 26 floors instead of the 49 originally planned. Each side is blaming the other for stubby Harmon.
For CityCenter as whole, the perilous pace and complexity of the project will be a key issue.
The Sun won the 2009 Pulitzer Prize for Public Service for exposing the reasons behind a high death rate among construction workers along the Strip, mainly at CityCenter. Those reasons included unsafe working conditions, weak regulation and lax attitudes among contractors, labor unions and state safety officials.
“It was well documented that MGM was trying to get this project done quickly,” Las Vegas attorney Shane Clayton of Marquis & Aurbach said. His firm represents a material supplier who is seeking payment for work on CityCenter. “Contractors certainly can say that when you’re pushing them faster, it is possible that mistakes will be made.”
But MGM’s easy comeback to that, Clayton added, is “whether the contractor does the work fast or does it slow, the contractor is obligated to do it right.”
Ronald Tutor, chairman and CEO of Tutor Perini, the builder’s parent in Sylmar, Calif., summarized his company’s position this way: “We’re owed a lot of money, and we want to get paid for ourselves and our subcontractors. We finished the job in December, and CityCenter told us many times that we did a good job.”
MGM’s statement, through Feldman on Sunday: “Obviously, we’ve reached an impasse on settlement of the final bills. It’s time for an impartial third party to look at this.”
Experts told the Sun that the amount of money in dispute is not off the charts given CityCenter’s total cost. But the slugfest between Perini and MGM Mirage, in terms of raw numbers, would dwarf the previous heavyweight confrontation, between London contractor Lehrer McGovern Bovis and the Venetian. That $1.6 billion resort, which opened in 1999, was hit with $300 million in mechanics’ liens.
After the longest civil trial in state history, one that lasted 10 months, a District Court jury in Clark County in June 2003 awarded Bovis $44.2 million and the Venetian $2.3 million for contract breaches. Those amounts were only fractions of what both sides sought, but they settled the remaining litigation in December 2005 without disclosing terms.
As with the Venetian case, construction subcontractors and material suppliers are upset that they haven’t been paid what they think they are owed for their work at CityCenter. CityCenter has been slapped with dozens of liens from these businesses.
The situation at CityCenter includes a domino effect for Perini, too.
“Perini isn’t getting paid by MGM so Perini can’t pay its subcontractors, and the subcontractors can’t pay their material suppliers,” Clayton said.
Perini and MGM have both been sued by at least two CityCenter subcontractors.
Show Canada Industries US said it was hired in October 2008 to fabricate and install stage lifts and other equipment for the Cirque du Soleil showroom. But Show Canada said it incurred increased costs and unnecessary delays because of numerous design changes ordered by Perini and because the builder failed to obtain the building permit soon enough.
In the other case, Mechanical Insulation Specialists accuses Perini of nonpayment for work related to material and equipment designed to stop fires. Mechanical Insulation also claims Perini hindered the subcontractor’s work through delays and other disruptions.
Perini had not filed its response to either lawsuit as of Friday.
Clayton said this is just the beginning, that at least a dozen Las Vegas and out-of-state law firms will soon be involved.
He said it’s easy to already see that “this whole thing is going to be a big mess.”
The Associated Press contributed to this report.
Remembering the Strip in the 60's, perhaps it would have been better to be left alone. Now it's "SUE SUE SUE".
This will not be resolved quickly. The lawyers are the only ones that will be making money. A plague to MGM!!
The Grand Opening picture is so classic, can't get enough of it, sucker gamblers acting like they just won the lottery, pre dumping their pockets into Aria.
I was here last weekend. What a gigantic mess. too big, horrible sports book, lots of retail for a rich/employed/rockin economy. This was a real estate roll of the dice by MGM at the absolute wrong time.
My bet is MGM will be sold in pieces to try and finance the big financial mess they created here by year's end.
I still don't understand how they could SCREW UP the Harmon building as badly as it is. Top notch architects, engineers and builders screw up a 700 million dollar building to the point where no one knows when it will be finished???
It defies belief. You might see something like this in a 3rd world developing country...should not happen here with the oversight, inspectors, engineers on board.
It's obvious that there were so many design changes and modifications that the subcontractors were required to perform the work before they even sent in their cost estimates, and certainly before they were paid.
This is a typical problem resulting from starting a project with incomplete plans and design. The Architects and Engineers are responsible, but the Owner is the ultimate target, since he has the deep pockets. And with MGM blaming Perini for the Harmon mess, this will be a protracted, lawyer enriching fustercluck.
I used to work for a giant contractor out of SFO, and I made a lot of money as a contract administrator assisting lawyers in the lawsuits at the end of the work. Easy money.
TomD:
You need to remember that Top notch architects (the ones who pick the colors, tile, slants of the bldg), top notch engineers and builders (the ones who basically use computer software to determine the build), are simply trying to do what the casinos do---maximize profits!!
MGM needs to conserve cash to survive, they will shut down Harmon bldg for years, and make the investments required to minimize cash flow, (like lawyers).
Dont be dissing 3rd world countries, we are quickly catching up.
That Harmon building is an eyesore. I hope they do something with it.
Tell MGM the same thing they tell their visitors...you gamble, you loose...tough luck huh?
The short Harmon Building should have a 10 story statue of Harry Reid (like the statue of Liberty) built on top of it for aesthetic balance.
This should be no surprise regardless of the politics; it's fairly common practice (though a sad mirror of our society) that there are lawsuits at the end of big projects like this.
I'd be willing to bet you MGM / City Center has had a staff architect working on documenting all of this for the last few years.
What I want to know is who had enough juice with the Clark County Building & Fire Departments to allow inspections to take place after ceilings & walls were closed up at City Center? I didn't realize that both departments employed Superman and his fine x-ray vision. Why did Ron Lynn & Steven Smith allow the warp speed of the project & the JUICE dictate to their respective departments unsafe inspection practices? What good does it do to have the strictest construction codes in the United States (this according to Ron Lynn the Director of Clark County Developmental Services)...if they are not going to be enforced? If something is not safe - it is not safe and should be redone or fixed no matter what the cost...Ron Lynn said SAFETY is the number 1 priority of his Department, oh really? Then Ron, why not make Perini fix their mistake at the Harmon...because if you truly believe that high winds or an earthquake could cause the Harmon to fail (a public quote in the RJ by you Ron) then you have a responsibility to dictate to Perini or any JUICE involved that it must be FIXED properly...no ands, ifs or buts. Ron, you have already been found to be a liar (remember your great made up resume?), now you are showing that you are ball-less as well. Your entrenchment in the corruption is showing Mr. Lynn - what are you going to do?
Perini, I wouldn't let you build a cardboard box for me. Because of your lax safety standards several construction workers died needlessly on your jobs - no excuse for many of these deaths to have taken place. If the pace of the project was too fast you had a responsibility to stand up and say so, but you didn't - someone it seems stole your balls as well. As the General Contractor you have the ultimate responsibility to ensure that when it is all said and done that the buildings that you erect are safe, built to specs, and built to code. A good company would accept responsibility for mistakes and fix them...obviously this does not describe Perini because you are blaming everyone else.
Perini, what is up with the Caesar's Towers? are there any problems...with cracking of slabs or walls? Is Harrah's threatening to sue? What about the COSMOPOLITAN, are there any problems there? A warning to you Perini, between friends...I am not afraid to expose your construction defects. I am sure that Deutsche Bank will be very understanding if the opening of the Cosmopolitan were to be delayed because of construction defects
What is the point of filing mechanics liens? MGM either is or soon will be bankrupt and will not be able tp pay off the mechanics liens, even if Perini prevails.
Also, if Perini does prevail, the only way that they will be able to get anything out of this would be to tear down City Center and sell construction material for scrap. But the demolition costs may be too high to do this.
There are going to be no winners here.
if they would have broken ground just 1 year later this place would probably have never been finished.
The problem with the Harmon building is that it appears too short. These building were designed to complement each other. The midget Harmon is now an eyesore...a glorified entrance sign for CityCenter.
I'm still amazed they could fcuk it up so badly.
Good news:
The last time I heard, the law firm Sheldon Adelson & Co. brought from Atlanta to Las Vegas, to litigate the Venetian mechanics lien cases, is still here in Las Vegas, with an office still open for business.
Somebody might want to hire these guys.
By the way, that phrase coming out of Alan Feldman's mouth "It's time for an impartial third party to look at this" is standard property owner speak for 'We don't have the cash to pay these guys, so we are going to stall paying them through use of legal proceedings.'
I've heard it 100's of times.
A hint to mechanics lien claimants who believe that CityCenter is worth less, in terms of appraised value, than the total amount of mortgages and mechanics liens on it: Three of you subcontractor mechanics lien claimants can band together, and file an involuntary bankruptcy against the entity which owns City Center. There's precedent for doing that. No arbitration agreement between MGM Mirage and Perini should stop you from filing an involuntary bankruptcy, simply because Nevada law gives you a direct right to file your subcontractor lien claims against the owner and its property, and litigate them separately.
If you are seriously hurting for payment, at least 3 of you subcontractors should get a Chapter 11 bankruptcy lawyer and get their advice.
As an example of the involuntary bankruptcy filed against a property owner whose subcontractor mechanics lien claimants were sick of being hosed by the property owner, who wouldn't pay the general contractor or the subs, see the following mechanics lien claimant-filed involuntary Chapter 11's at U.S. District Court for the Central District of California at these cases:
In re: LBREP/L-SunCal Master I LLC - Case No. 08-bk-15588-ES (Involuntary Chapter 11 Bankruptcy Case) (Lead Case for Motion Filing Purposes)
In re: LBREP/L-SunCal McAllister Ranch LLC - Case No. 08-bk-15637-ES (Involuntary Chapter 11 Bankruptcy Case)
In re: LBREP/L-SunCal McSweeney Farms LLC - Case No. 08-bk-15639-ES (Involuntary Chapter 11 Bankruptcy Case)
In re: LBREP/L-SunCal Summerwind Ranch LLC - Case No. 08-bk-15640-ES (Involuntary Chapter 11 Bankruptcy Case)
FYI "LBREP" means Lehman Brothers Real Estate Partners" and "L" means Lehman in those entity names. In those cases, despite Lehman Brothers bankruptcy, LBREP was not bankrupt and was and is an entity with billions in assets, and millions in cash flow, which simply decided not to pay its general contractor and subcontractor after work was ordered and completed.
I wonder if there are gin bottles inside the walls, like the old post office building. Also, chinese drywall?
SunCal? is that a fruit drying facility?
This project had upwards of 4000 workers on site. There is no way that number can be managed with oversight. Of course Perini said they could do it, and the owner believed them. The Harmon is proof that they were wrong.
I must agree with CynicalObserver that taking the legal avenue toward settlement probably indicates that MGM simply cannot pay.
CityCenter was a scam from conception. That is what this system produces. The scam is made and sold as if it is something else. That is the script, the CON JOB. CC was sucked down whole on the typical promise of jobs for the slaves...haha
The end game is a few fatcats make a killing and leave society with the bill and the clean-up. They call this Capitalism. Garbage in, Garbage out, simple.
Yeah stephen--this must be the biggest house of cards, the biggest sand castle in history. Wayne Newton must have been the chief financial officer on CC.
stephenrblv :
So very true! it's also a case of the MGM people counting their pennies only AFTER they were spent. Reminds me of Bugsy Seigel..
Is the Harmon Building the Northern most one?
(A gold color in photo 2).
THE RULE - It takes three things to build successfully. 1. A good Contractor 2. A good Architect, and 3. A good OWNER.
Take a good look at the Trump Tower to fully understand. You never hear that it was over budget or late. Why? because it was 3 months ahead of schedule and under budget. Bottom line - The owner hires the 3rd party inspector who missed the steel in Harmon. There were way to many architects in the mix that created confusion, lack of coordination and inevitably those nasty change orders. The Owner hired the many architects and egos that go with it. The Owner should have had the structural engineer of record walk the Tower early in the construction.
MGM will be next after Station Casinos. 2010 will be the make it or brake it year for companies here in the valley.
No one mentions the millions of dollars in tax breaks MGM recieved to hire "minority" contractors that were not qualified to do some of the work. These contractors caused at least three of the deaths on the job site.
Wow...I don't know why some of you people even post. It's clear you have no knowledge about anything at City Center. What MGM is doing is criminal. They haven't released a single subcontractor retention money. Harmon is 1 project of 19 at City Center. You have individual GMPs so that what happens on 1 project does not effect the other. MGM has no right not to pay out everyone else. This is an excuse to try and generate some cash.
There are always problems that arise in construction. Perini can fix Harmon and is willing to do so. MGM pulled the plug on completing the building because it didn't want more empty property. Please open you eyes people. City Center is under the GMP Perini promised MGM. If MGM didn't want to pay that much, they shouldn't have signed a contract.
I would bet that the lawyers are going to make over a $100 million on this contract dispute.
I am definitely in the wrong profession!
Z
Life=Safety took a back seat to project completion time here, just as many other projects. If there is a fire, I would not want to be in ANY of those buildings - period. I know 1st hand how unsafe this place is. I know for a fact Inspectors didn't give a rats behind what or how things were installed. They walked through corridors talking to Perini Superintendents who tried to steer them away from construction that was not yet completed, incorrect or suffered severe life safety defects that they knew would NEVER be corrected, or even done in the 1st place. i was personally told (I could name them if need be, but I wont - for now) If I opened a can of worms on defects that would cost contractors or the builder money I would be fired and tossed off the job site. That I would NEVER work for a MGM company (Like I would want to anyway) Life-safety took a back seat to roach coaches on this job site. If the editor would like detailed information on credible information you know how to get a hold of me. This place took the lives of good men, for no reason other than pure greed. It makes me sick to think that people walk through there everyday and think they should be safe in emergencies, and they might. However, should there be a fire in many many areas they are as good as dead and Perini, MGM and County inspectors know it. The only people who gave a crap about what was important was the QC from Perini and the MECHANICAL insulation Fire Inspectors not county or city. You want more information Las Vegas you dont have to go far.
Remember who is the largest single contributor to Harry Reid's re-election campaign? It's MGM Mirage. They know where to throw seed money and how to collect on an investment.
What I would say to you loyal taxpaying citizens is vote with your feet. If you believe Harry Reid should go, don't patronize MGM-owned properties. Let's move out the corrupt too-nicey-with-government leaders of these corporations and get them back under the control of the shareholders.
In fact I thought about it. I will be blowing the whistle and listing ALL defects I know of, where they are, why they are there and see who really cares..... I bet no one! We will see
LifeSafety68:
You are wrong because I care, and I know others that care as well. Contact me at your convenience, there is no reason for you to go it alone. Together we can & will make a difference...it certainly would be nice to expose the corruption, and then see justice get doled out to the guilty parties! Our motto could be: "NO MORE CORRUPTION ON OUR WATCH."
first of all I was laughing at this so hard i couldn't even spell lastlaugh properly...that being said I spent over a year at City Center with Perini as a contract manager and cannot tell you how many times subcontractors submitted claims for extras on design changes and were told to just proceed with the work and deal with the costs at the end of the job as a formal claim! Guess it is time to deal with these PERINI!
Oh cares! It's not your average Nevadian
I was on that job for a year, even though the perini people I had direct contact with were great the pressure was ridiculous. They wanted everything yesterday and used substandard materials. Bottom line perini screws everyone!!!! I hate to say it but because of perini CC is an accident waiting to happen again.
This is just the tip of the iceburg! You need to look much earlier in the process. From the very beginning MGM and MMDG had no clue what they wanted to build nor how to get there. The design team lost the first design year chasing their tails due to lack of information from the client. But the end date would not change! BTW..most of the design team did not get paid for the first year. MGM was funding the project from cash flow and would not get financing until late in the project. Most of the consultants got stiffed in the end.
One of the problems at City Center was the lack of qualified workers. Too many were not licensed, and obviously, did not have the knowledge or experience to know what the heck they were doing. My husband worked that project for almost 2 years, and he was one of the only local licensed journeyman on his crew. He was constantly complaining about how many of his crew didn't know what to do, and would not follow instruction. {many did not speak English} They were warned many times over that they had to have a license within 6 months of hiring.
Many of them never did, and they are STILL working in the state of Nevada, unlicensed, now on the airport project.
Tutor/Perini has a standard operating plan: low bid every job and kill'em on the change orders. Look at the LA subway, San Francisco Airport, ACTA train corridor in LA. the city of Los Angeles tried to have them disqualified as a bidder on its projects (not possible because of federal low bidder rules)since they require complete supervision so the don't screw you. Try and find any job they haven't been sued on. you can also look at all the suits on all of their projects from subs who want the work but don't know what's coming from T/P. Perini has pocketed the money and the subs will suffer as always. I also think the open hotels and casinos are beautiful but it will take a much better economy to make the numbers work.
Tutor/Perini were pro's at strong-arming subs, especially since the economy was/is such poor health. Companies did the work because they didn't want to be tossed off, or lose future bids where TP were involved (they always were)then in the end, like one said you kill them in the change orders, court, litigation and so on. Good companies got the shaft,and good people lost their lives for once again - the almighty dollar. Here's the painful part. . . they are laughing all the way to the bank. Now, these incompetent people are leading a airport expansion - My god!
Rwal2222- I was on that site a lot when it was being bult and you are right. That's one of the big reasons there have been problems. The contractor and sub-contractors just hired anyone who said they could do the work not making sure it was true.
The Harmon tower problems were found by the architect team. Workers had cut the steel in the pre-stressed concrete. The cost to fix is high and they couldn't go up like they wanted. Really if it's feasible they should just knock it down and start over.
Why do people continue to speak that have no idea what they are talking about. First of all, the owner selected all contractors on the project. The owner's only crieteria was LOW BID. Perini is not pocketing any money right now. They haven't even been paid their general conditions. The architects haven't been paid for their work and are suing MGM. The consultants haven't been paid. People are missing the facts. MGM had no desire to ever pay retention to subcontractors. Not a single demolition sub was paid their full contract value from MGM and they were done well before Harmon was constructed.
Everyone talks about Perini low bidding this job in order to recieve it. Perini wasn't even supposed to do 2/3rds of the project but no other contractor thought they could perform the work. The owner never was ready to build this project from the design side of things. Some of you people should realize MGM is the enemy here. They are going to end up paying for everything because they are going to loose in court!!!
Someone obviously works for Perini here. Either way you shake a stick at it MGM is criminal for their actions on payment and finance. Perini is JUST AS GUILTY for unsafe, unreasonable/unrealistic expectations of Sub-Contractors. Guilty of strong arming and bull s**t backdoor deals. Tired of the defense. BOTH ARE GUILTY OF BEING CRIMINAL! In the end it WILL be exposed - WATCH
Having visited Vdara and what was open of CC (one day prior to Aria opening) and again the last two days I have to say that it is likely to be among the biggest flops in corporate history. They (MGM) advertise a NY Park Ave type of experience and the reality is it is just another Vegas strip stop, certainly no better than any other property (and not as nice as the Wynn or Bellagio in many aspects). Why would anyone with enough cash to think about buying a condo there be stupid enough to consider it? Look at the crowds it's attracting and WOW-it looks like a lot of them are a cross between NYNY and Monte Carlo guests with much fewer Bellagio looking types around. Ed Hardy T's, backward caps and tats with gum chewing bimbos isn't really the target demographic here. To maintain the mystique and comand the $$ this property needs to bring in they have to make it more exclusive-fat chance of that happening now. MGM is so up the creek without a paddle on this thing it will sink the whole company.
Hopefully the $50 min double deck blackjack in there will pay for all of this nonsense.