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Howard Stutz

Animosity threatens to spoil Maloof/Morton alliance

6 December 2010

LAS VEGAS, Nevada -- Palms owner George Maloof and N9NE Group principal Michael Morton took part in the "Legends of Gaming" during the 2009 Global Gaming Expo, a panel discussion hosted by Union Gaming Group.

They sat a few seats apart at the event inside the Playboy Club atop the Palms.

Their partnership turned the Palms, with its trendy restaurants and nightclubs, into a place to be seen and where stars from Hollywood and professional sports partied the night away.

Maloof and Morton recounted some business tips for the benefit of the gaming industry investors in attendance.

Apparently, they are pretty good actors.

According to recent court filings, Maloof hired attorney Donald Campbell a few months before the event to investigate Morton, his business partner who manages the joint venture overseeing the venues.

Campbell, a former federal prosecutor, was asked to look into Morton's alleged "serial acts of misconduct, including both theft and embezzlement."

Today, Maloof and Morton would like to throw each other off the top of the hotel's Fantasy Tower.

They have traded lawsuits and countercharges over the past few months and the partnership appears headed toward a nasty unraveling. The feud threatens to end some of Las Vegas' most lucrative hot spots, including ghostbar, N9NE Steak House and the Moon Nightclub.

In Campbell's affidavit, filed in Clark County District Court on Nov. 23, the lawyer said he found probable cause that Morton evaded income taxes and committed fraud. Campbell wants court approval to hire an independent accounting firm for a more in-depth review.

Maloof asked for Campbell's help after state gaming regulators told casino licensees in April 2009 that they needed to be cognizant of outside companies operating their nightclubs and ultralounges. The edict came after Planet Hollywood Resort was fined $750,000 for illegal activity at the now-closed Privé.

Maloof believes Morton mismanaged the joint venture by diverting company resources to develop a wine bar at Wynn Las Vegas.

Attorneys for Morton, whose father created and operated the original Playboy Clubs with Hugh Hefner and built the Morton's of Chicago steakhouse chain, say the allegations are baseless. If Morton is forced out, the brands and trade names could follow him out the door.

Other observers speculated that the venues would remain, but without Morton's stewardship.

The all-too-public fight saddens observers who know Maloof and Morton.