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Gaming Board to Focus on Casino Applicants' Finances

LAS VEGAS--Nevada gaming regulators used a Wednesday license hearing for the owners of the old Flamingo Reno to send a message to Las Vegas-based finance company Vestin Group.

The Nevada Gaming Control Board voted 3-0 to recommend a two-year conditional gaming license for brothers Amin and Ally Visram, owners of the Golden Phoenix, formerly the Flamingo Reno, in downtown Reno.

The Visrams are Canadian real-estate investors who have specialized in hotel turnarounds, and their Vista Hospitality Co. bought the property last year for $6.75 million, financing the purchase with a $6.4 million loan from Vestin.

The brothers reopened the closed hotel in April and now want to operate the property's casino.

The board is curious about Vestin's relationship with Las Vegas real estate investor Shawn Scott, who bought the Flamingo Reno for $5 million from Park Place Entertainment Corp. in October 2001 before engineering the sale to the Visrams' company.

The Visrams told regulators at Wednesday's meeting that they were looking for a hotel property to buy last year and were referred to Scott, who had just bought the then-closed Flamingo Reno.

Scott not only sold them the Flamingo for a $1.75 million profit, he also linked the Visrams with Vestin, the brothers said.

Vestin loaned the brothers $6.4 million. To share some of the risk for the deal, Scott and Vestin agreed to a separate deal, Vestin owner Mike Shustek said Wednesday.

Scott's final $800,000 in profit from the transaction won't be paid by Vestin until the loan from the Visrams is paid, Shustek said.

"We weren't comfortable giving Mr. Visram $6.4 million without sharing the risk, so Shawn took a first loss piece."

Lenders are typically not licensed by the control board, but regulators have the discretion to require lenders to be licensed.

Control board Chairman Dennis Neilander said that if the Visrams' license is OK'd by the Nevada Gaming Commission, the control board would send a letter to Vestin asking the mortgage lender to file an application for a gaming license.

"It's voluntary," Neilander said after Wednesday's board meeting. "We ask them to voluntarily file as a lender. Either they file, or if they decline to file, we can ask the commission to call them forward (to face a licensing investigation and hearing.)"

Neilander said he wasn't questioning the propriety of Vestin's deal with Scott, but admitted that Vestin's relationship with Scott spurred regulators' interest.

Control board member Bobby Siller made it clear that the company's relationship with Scott is behind his call for Vestin to apply for a license.

"I'm concerned about the relationship with Shawn Scott," Siller said. "I'm concerned he has anything to do with this project."

Scott has had problems with the control board. He relinquished his state gaming license in 1997 after regulators said his operation of the Cheyenne Hotel & Casino, now the Speedway, suffered from sloppy accounting practices.

Then-Gaming Control Board Chairman Bill Bible said at the time that Scott hadn't lived up to promises he'd made to the panel to hire experienced casino managers and accountants.

"I agree to a large extent ... that (the Cheyenne's) financial statements are really to a large extent smoke and mirrors," Bible said.

Scott bought and closed the bankrupt Vacation Village last year, and his biggest financial coup was his $125 million sale last year of the Delta Downs racetrack in Bossier City, La., to Boyd Gaming Corp.

The sale came less than 30 months after he bought the track for $10 million.

The racetrack's value escalated after voters in Delta Downs' parish voted in November 1999 to allow slot machines at the track.

Scott also invested in slot machine parlors in Louisiana.

Vestin's Shustek said Scott's regulatory problems were relatively minor and that he expected him to reapply for a Nevada gaming license.

Scott is an investor in Vestin and the company also finances some of his deals, Shustek said.

"Shawn's worked hard and he's made good deals," Shustek said. "We invested in five of his Louisiana truck stops (slot parlors) and in Delta Downs. He's been impeccable and I don't think he's ever been late with a payment."

Shustek said his company will cooperate fully with regulators and that if they want him to apply for a license, he'll do it.

"I'll do whatever it takes to be law abiding," Shustek said.

Neilander said the company's relationship with Scott is an obvious area for inquiry if Vestin applies for a license.

"That interest is based on his regulatory history, relinquishing his license after (failing to meet) the specific terms of a conditional license," Neilander said.

Scott was out of the country and unavailable to return phone messages Wednesday, a company representative said.

Vestin uses investor funds to loan money to real estate developers and owners for land acquisitions and commercial development, raising funds from private investors attracted by higher-than-bank interest rates and the relative security of having real estate as loan collateral.

Vestin has loaned money to several other Nevada licensees, Neilander said.

"They seem to be getting involved in the gaming business to a greater extent," Neilander said. "In general we're looking more at unconventional financing."

The board's recommendation to grant the conditional license to the Visrams is slated to be considered by the Nevada Gaming Commission at its Nov. 21 meeting in Las Vegas.

In other action, the control board voted 3-0 to recommend approval for a gaming license for the Cannery in North Las Vegas.

Property executives told the control board that the 101-hotel room property is slated to open Jan. 3.

The Cannery's owners, who also operate the Rampart Casino at the JW Marriott, told the control board that they borrowed $48 million from Vestin Mortgage, the biggest piece of the property's $105 million price.

They also have a $19 million furniture, fixtures and equipment loan, and themselves loaned the property $8 million. The owners contributed $10 million in cash and $20 million in land, the casino site at Craig and Losee roads.

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