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Gaming Guru

Howard Stutz

Brugnara pleads guilty to filing false tax returns

29 January 2010

LAS VEGAS, Nevada -- San Francisco real estate developer and failed Nevada gaming applicant Luke Brugnara, who emerged as a bidder for the bankrupt Fontainebleau this month, has pleaded guilty in federal court to filing false tax returns.

Brugnara, 46, said he was willing to pay $200 million for the Fontainebleau despite having been denied a Nevada gaming license in 2001. He faces up to three years in prison for failing to report the sale of the four properties in San Francisco and one property in Las Vegas in the year the properties were sold.

Brugnara entered the plea Tuesday in U.S. District Court in San Francisco, U.S. Attorney Joseph Russoniello and Special Agent in Charge, Internal Revenue Service Criminal Investigation, Scott O'Briant said in a statement.

On Jan. 12 -- six days before Brugnara told the Review-Journal about the offer for the Fontainebleau that he filed with the U.S. Bankruptcy Court in Miami -- he was charged with filing false tax returns for 2000, 2001, and 2002, and with obstructing the IRS. Brugnara faced similar charges where he was indicted by a federal grand jury in April 2008.

According to the newest indictment, Brugnara failed to report as income the amounts paid to his corporation related to the mortgage of the home in which he lived, automobile loan payments and other personal expenses.

The Strip property named in the indictment now houses a Walgreens and is part of a shopping center developed on the site of the former Silver City Casino, which Brugnara purchased in 1999 for $30 million.

In March 2001, Nevada gaming regulators unanimously denied Brugnara a gaming license for the Silver City and were openly hostile to his application.

The casino has since been closed and converted into a shopping center across from the Echelon site near Convention Center Drive. Brugnara had proposed to build a high-rise condominium tower on the site but those plans have since been dropped.

Brugnara is scheduled to appear in federal court in San Francisco on May 4, before U.S. District Court Judge William Alsup for sentencing.

Corporate raider Carl Icahn was awarded ownership of the Fontainebleau on Wednesday by the federal bankruptcy court in Miami. The court-appointed examiner for the Fontainebleau bankruptcy rejected two bids for the project because they didn't meet certain qualifications. One was thought to have come from Brugnara, who submitted a bid of $170 million with the backing of a New York City hedge fund.