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Arnold M. Knightly

Regulators intensify scrutiny of Columbia Sussex properties

1 February 2008

LAS VEGAS, Nevada -- State gaming regulators have stepped up their scrutiny of the Tropicana and five other Nevada casino properties owned by the embattled Columbia Sussex Corp., the state's top investigative gaming official confirmed Thursday.

The revelation comes as Columbia Sussex's critics are questioning the state Gaming Control Board for its perceived inaction following the company's loss of its operating license in New Jersey.

"I'm not going to allow the board to be used as a shield or a sword by any of these parties," Gaming Control Board Chairman Dennis Neilander said. "We have a statutory mission and we're going to fulfill our obligations. It has been suggested that perhaps we are not, so at this point and time I felt it was necessary to go ahead and talk about what we're doing."

The Gaming Control Board's audit division, enforcement division and corporate securities division have been conducting investigations since this summer into the suitability of the Fort Mitchell, Ky.-based operator as a licensee in Nevada.

In a separate investigation, the board's corporate securities division is reviewing New Jersey gaming regulators' December decision to deny the company a license to operate the Tropicana in Atlantic City to see if any of the same issues are a concern here.

Neilander would not discuss specifics about the investigations or say when it might finish.

Depending on the results of the investigations, Columbia Sussex could face no action or it could face fines or suspension, revocation or new limits on its license.

"The disciplinary statutes prescribe a broad range of remedies if violations are found," Neilander said.

Any possible violations would need to brought before the Nevada Gaming Commission for action.

Nevada gaming investigators have already interviewed some Columbia Sussex executives; more interviews are scheduled. Neilander wouldn't say whether company owner William Yung III has been interviewed.

Columbia Sussex spokesman Hud Englehart said the company is cooperating with Nevada investigators.

"We're happy to have the board's involvement because, at least with them, we get a fair hearing," Englehart said. "On that level we are happy to have their involvement. We've cooperated fully with their requests for interviews and documentation."

The company operates casinos at The Westin on Flamingo Road, Tropicana Express and River Palms in Laughlin, and MontBleu and Horizon in Lake Tahoe.

The jewel of the company's gaming holdings is the 50-year-old Tropicana, which sits on 34 acres on the Strip and Tropicana Avenue. Columbia Sussex acquired the property as part of a $2.1 billion buyout of the Aztar Corp. in January 2007.

A few months after the buyout, Gaming Control Board investigators started examining security levels at the property after receiving complaints from customers and workers. Unions and workers also complained to regulators about nongaming staff cuts and poor customer service at the Tropicana.

"We knew Columbia Sussex was going to trim expenses," Neilander said. "We began to follow which areas (were being cut). We received a couple complaints about the security level, and that is when we really kicked off the investigation."

Control board agents have used what Neilander described as some "covert operations" to investigate the security issue.

The Culinary Local 226, which is negotiating a new contract for 750 Tropicana workers, has been critical of how regulators have handled the complaints about staff and service cuts at the Tropicana.

Culinary Local 226 Secretary-Treasurer D. Taylor did not return a request for comment.

The Gaming Control Board has stepped up interim audits at the company's six properties, but no "material violations" have been found, Neilander said.

The regulators' investigations are focusing on the company's casino operations. Other issues, such as hotel-room cleanliness or nongaming staffing levels, are the concerns of other agencies or unions, Neilander said.

"If someone makes a poor business decision it usually means they are going to suffer, their business will suffer," Neilander said. "Typically, that's not a regulatory issue here."