Officials: Standard same for private equity funds

CARSON CITY, Nevada -- Nevada's gambling regulators assured lawmakers on Friday that private equity funds are held to the same standards as any other investors in the state's gambling industry.

Gaming Control Board member Mark Clayton told the Assembly Judiciary Committee that regulators require anyone who makes decisions about investments in the industry to have a gambling license. The board regulates equity fund managers and voting investors but does not automatically look at investors who don't have a vote or decision-making ability.

"People say private equity is new, should we be concerned. The board has looked at it and it's merely an evolution of various financing sources," Clayton said.

On Dec. 19, the board of Harrah's Entertainment, the world's largest casino operator by revenue, recommended that shareholders approve a $90-per-share, $17.1 billion buyout of the company by private equity firms Texas Pacific Group and Apollo Management Group.

It would be the largest going-private deal ever for a publicly held casino company and, excluding debt, be the seventh-biggest leveraged buyout deal of any kind of company.

Harrah's Chief Executive Officer Gary Loveman will receive about $94 million in stock options and other rights if the world's largest casino buyout deal is completed, documents filed Thursday show.

Loveman would collect on stock options worth $80.3 million, stock appreciation rights worth $8.8 million, and restricted shares worth $4.9 million, according to a preliminary proxy statement filed with the Securities and Exchange Commission.

Loveman would receive an additional $18.9 million in severance pay if he leaves the company under certain conditions, including if he voluntarily quits a year after the buyout is completed.

The board also reported Friday that as the gambling industry turns to new technology, such as wireless betting devices and no-coin slot machines, it has become easier for regulators to perform audits and prevent cheating and theft.

Customer complaints about the industry have remained flat, even as the new technologies emerge, the board reported.

"As the industry continues to develop, we continue to evolve our testing to ensure the integrity of the system," Clayton said. "The board is prepared to respond in a timely manner to technology changes."