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Gaming Guru

Richard N. Velotta

Hard Rock, AG Closer to New Settlement

30 July 2004

LAS VEGAS -- Attorneys for the Hard Rock hotel-casino and the state attorney general's office say they're close to a new settlement of a complaint over the resort's controversial advertising campaign.

But just in case negotiations collapse, both sides are preparing for a hearing ordered by the Nevada Gaming Commission -- a session that wouldn't occur until November based on a timetable outlined Thursday.

Commissioners received a status report on the Hard Rock issue at Thursday's monthly meeting.

Senior Deputy Attorney General Toni Cowan and Las Vegas attorney Jeffrey Silver, who represented the Hard Rock, told commissioners they are the brink of a new settlement two months after the commission unanimously rejected a previous agreement brokered by the two sides.

The Hard Rock, in April, agreed to pay a $300,000 fine -- the maximum permitted by state law -- to settle a complaint drafted by Cowan on behalf of the state Gaming Control Board. But when Cowan and Silver presented the settlement to the Gaming Commission in May, the five-member board rejected it, citing concerns about how the Hard Rock would review questionable elements of its promotional materials in the future.

But there were other issues raised, some of which indicated commissioners felt the Hard Rock was dealt with too sternly. Two commissioners questioned how the two sides had arrived at the $300,000 fine -- the maximum $100,000 penalty for each of three counts brought.

And, while Cowan's complaint against the Hard Rock centered on inferences that the resort condoned cheating at gambling and illegal drug use, community activists have used the controversy as an opportunity to air the issue of sexual content on billboards and in advertisements. Cowan's complaint did not address the sexual content of Hard Rock's ads.

Ads cited in the original complaint settlement showed a man and a woman on a gaming table, surrounded by playing cards and poker chips, with the caption, "There's always a temptation to cheat." A second ad said, "At the Hard Rock Hotel, we believe in your Monday night rights: large quantities of prescription stimulants (and) having wives in two states. Tell your wives you are going; if they are hot, bring them along."

Commissioner Augie Gurrola, who has since retired from the board, said at the time that the ads were clearly satirical in nature and that he didn't believe the Hard Rock was condoning cheating.

When the settlement was rejected, the two attorneys were stunned. Silver called the action "unprecedented," and said the Hard Rock simply wanted to dispose of the matter and avoid the cost of defending itself in a formal hearing.

So, after the commission's rejection, the attorneys pursued two strategies simultaneously: They went back to negotiating a new settlement and they began outlining the initial steps for conducting the hearing. Commission Chairman Peter Bernhard said after the meeting that the strategies were proper for resolving the issue.

But the attorneys were still hoping for some additional guidance from the commission Thursday.

"To what extent does this commission wish to operate in this area?" Silver asked. "To what extent are you willing to give us guidance so that we don't stumble and run afoul of someone's opinion as to how we should have operated? I think that's really why it's so difficult. And although we are close, I think that we need the imput of others, perhaps a fresh face looking at this thing with new eyes."

Silver and Cowan did not discuss details of the settlement. They did, however, talk about the other path they're pursuing -- the preparation for the hearing.

Cowan said that by September they hope to have some legal motions for consideration.

The hearing would be conducted like a trial, with the commissioners taking on the role of jurors. Prior to the hearing, the two sides must set parameters on witnesses, evidence and procedure. They'll also consider accepting "friend of the court" briefs from outside parties interested in the outcome.

To that end, representatives of community organizations outraged by the sexual content of the ads could be permitted to file briefs as well as representatives of the American Civil Liberties Union, who view the commission's review of any ad content as a form of prior restraint, potentially in violation of the First Amendment.

Community activist Shari Peterson made an impassioned plea of commissioners Thursday, asking them to consider community standards when reviewing the Hard Rock issue.

By September, the two attorneys hope to set a scheduling calendar to enable each side enough time to respond to their respective motions. If the scheduling goes according to plan, a hearing could be conducted in November.

In other business Thursday, commissioners approved licensing and key employee applications for Station Casinos Inc., in connection with its acquisition of two locals casinos in Henderson, a nonrestricted gaming license for Rock One Inc., which operates the Golden Palm hotel-casino on Tropicana Avenue just west of Interstate 15 and received a request from black business representatives for the commission to review repercussions to minority employees in the proposed merger between Harrah's Entertainment Inc. and Caesars Entertainment Inc.

Station Casinos announced in March the acquisition of the Magic Star Casino on Boulder Highway and the Gold Rush Casino at Sunset Road and Marks Street for an undisclosed amount.

The 11,000-square-foot Magic Star has 191 slot machines while the 8,600-square-foot Gold Rush has 181 slots. Both have sports books and restaurants. Regulators examined the competitive effects of the acquisition on the local market, but that there were no concerns because the two properties are so small.

Commissioners also conditionally approved a license for Marvin Lipschultz and his son, Erik Lipschultz, as officers and shareholders of the Golden Palm, but not before criticizing the elder Lipschultz for failing to disclose a complaint filed against the company by the U.S. Labor Department.

Commissioners said they are losing patience with Lipschultz, who received his third limited license from the state with the approval.

Gene Collins, chairman of the Las Vegas chapter of the Rev. Al Sharpton's National Action Network, asked that commissioners carefully examine Caesars' working relationship with black employees. He also asked that a seven-year-old bribery investigation in Kansas City be reopened and considered as part of the record for the proposed merger announced earlier this month.

After the meeting, Bernhard said he had no comment on Collins' request since it came to the commission as a non-agenda item during a public comment period. Regulators eventually will determine how to pursue the request and could put it on a future meeting agenda.

Hard Rock, AG Closer to New Settlement is republished from