MGM Mirage says it’s working on CityCenter subcontractor claims

By Steve Green

Published Friday, May 14, 2010 | 3:24 p.m.

Updated Friday, May 14, 2010 | 5:21 p.m.

There’s now some movement to get CityCenter subcontractors paid at least some of the money they are owed, resort complex co-owner MGM Mirage indicated today.

In a court filing responding to a lawsuit filed by CityCenter builder Perini Building Co., MGM Mirage charged today that Perini has "failed to properly manage the subcontractor close-out process" on the $8.5 billion project and that Perini has failed to pay a number of its subcontractors on the Las Vegas Strip project.

But now that Perini has submitted its final bill to MGM Mirage's CityCenter joint venture, "CityCenter has commenced its own subcontractor close-out process to resolve subcontractor claims."

"CityCenter has undertaken this course of action even though it has no contractual obligation to Perini’s subcontractors," MGM Mirage’s filing in Clark County District Court said.

An MGM Mirage spokesman said the company couldn’t comment further on details about the effort to get subcontractors paid.

MGM Mirage's filing today denied allegations by Perini that MGM Mirage has improperly withheld some $500 million Perini claims is owed to it and its subcontractors.

MGM Mirage’s response today included a counterclaim.

The counterclaim covered what MGM Mirage called "Perini’s highly-compensated but substandard performance." MGM Mirage in the counterclaim blames Perini for construction defects at the Harmon Hotel and other portions of CityCenter.

The court papers indicate MGM Mirage continues to investigate construction defects at the Harmon. It's unknown when, or even if, the building will open.

In its lawsuit against MGM Mirage, Perini charges problems with the project included MGM Mirage delivering completed designs for 12 components of CityCenter between 132 and 520 days late.

"Even after delivering the designs well after the agreed-upon dates, MGM/CityCenter continued to make substantial changes to the designs through the completion of the project, resulting in a price increase of approximately $500 million," Perini charged in the suit.

As for the Harmon, which MGM Mirage says was planned for 47 stories but had to be limited to 26 stories because of defects there, Perini said: "MGM/CityCenter admitted that the upper floors of the Harmon, specifically the condominium portion of the Harmon, were being eliminated due to 'market conditions,' rather than any alleged construction defect."

"MGM/CityCenter’s claim that Harmon is a total loss has no validity and is a recent fabrication by MGM/CityCenter for the sole purpose of improperly withholding amounts due and owing to Perini," Perini’s amended complaint filed May 3 says.

Perini’s lawsuit alleges breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, fraud/intentional misrepresentation and other counts.

But MGM Mirage, in its first legal response to the lawsuit today, said: "After CityCenter paid Perini nearly $6 billion, Perini delivered the project without the Harmon and demanded $490 million in additional compensation."

"Only after launching a scorched-earth legal, media and political attack on CityCenter did Perini get around to submitting its final application for payment. When the application for payment was delivered to CityCenter on May 4, it consisted of 140 bankers’ boxes containing over 300,000 pages of disorganized allegedly supporting documentation that CityCenter must now organize and analyze to determine how much money, if any, is actually owed to Perini," the MGM Mirage filing says.

"CityCenter has begun to review this vast amount of material and believes that the final amount owed to Perini for project work will be far less than Perini’s demand, and in any event, less than CityCenter’s damages and offsets against Perini for Perini’s various breaches of contract – not the least of which is Perini’s abject failure to properly construct the Harmon. CityCenter estimates its damages against Perini for the defective Harmon alone will be in the hundreds of millions of dollars," the filing said.

"In filing this case and taking its media onslaught to the streets, Perini also omitted to tell its audience that Perini consented to pay a fine to the Nevada State Contractors Board last year for its 'substandard workmanship’ at the Harmon," MGM Mirage’s filing said.

Problems at the Harmon listed in the complaint include defectively installed reinforced steel, defects in shear walls, link beams and "critical" beam-to-column and slab-to-column connections, the counterclaim says.

As a result, MGM Mirage’s filing said, CityCenter has suffered damages related to the weakening or deformation of structural components in the Harmon.

Elsewhere at CityCenter, the counterclaim says, examples of "non-conforming work" include uneven floors and ceilings at Veer Towers, defective slab elevations at the Crystals retail center, out-of-tolerance concrete at the Aria Convention Center, defective waterproofing installation resulting in roof leaks at the central plant and defective drywall installation at the Mandarin.

"In some instances Perini repaired the non-conforming work and billed CityCenter for the cost of curing its own defective work," the counterclaim said. "In other instances, Perini was unwilling or unable to correct the non-conforming work and CityCenter was forced to hire other contractors to correct Perini’s non-conforming work."

MGM Mirage also complained Perini repeatedly submitted bills for items it was not entitled to be paid for. The counterclaim asserts claims of breach of contract, breach of the implied covenant of good faith and fair dealing, breach of warranty, negligence and other counts.