SEARCH NEWS:

 

Slot Dispute Hindering Sale of Debbie Reynolds Hotel-Casino

A legal dispute may hold up the sale of the Debbie Reynolds hotel-casino by the World Wrestling Federation, officials said Friday.

WWF, which bought the Debbie Reynolds resort out of bankruptcy in August 1998 for $10.8 million, confirmed a year later it was trying to sell the property when it found the 193-room resort was too small for its plans.

Those plans are for a 1,000-room, 35-story hotel tower and a wrestling-themed 50,000-square-foot casino. The wrestlers are now considering other Las Vegas sites for the project.

In a lawsuit filed last week against Capado Gaming Corp. of Las Vegas, WWF, which is based in Stamford, Connecticut, said it is prohibited from selling the hotel-casino because of a dispute with Capado, its former gaming licensee, over a $250,000 fee that Capado claims it is entitled to.

Capado says it is due this fee because WWF caused its gaming license to be terminated when the hotel's restaurant closed. An operating restaurant was one of the license's requirements.

But the wrestlers say the gaming operator isn't entitled to the $250,000 fee because this was part of a separate deal struck between Capado and the Debbie Reynolds resort before it was acquired by the WWF. The WWF also says the deal wasn't approved by the bankruptcy court.

Capado responded Friday with a countersuit against WWF, blaming WWF for failing to comply with gaming licensing requirements and causing Capado's gaming operations to be shut down.

WWF's suit alleged Capado and the Debbie Reynolds resort made several unauthorized amendments to Capado's gaming lease -- including a last-minute option agreement made just one day before the hotel was auctioned by the bankruptcy court on Aug. 5, 1998 -- that provided "significant unilateral protections" to Capado.

The original gaming lease allowed Capado to operate 25 video poker and slot machines for a monthly rent of $3,750.

The option agreement, however, provides that Capado will be entitled to a $250,000 payment should the gaming lease be terminated or if WWF closes the hotel-casino before the Sept. 30, 2000, expiration of the lease.

The amended agreement also allows Capado to enjoy 70 percent of gaming revenues from its slot machines and to pay WWF the remaining 30 percent of the revenues instead of the $3,750 monthly rent, the suit said.

"This is a sweetheart deal, a one-sided, insider deal that gives Capado additional benefits without giving any benefits to WWF," said WWF attorney James Pisanelli. "And because the bankruptcy judge never approved the amendments and especially the option agreement, it is our contention that the agreement has no legal binding effect."

"We are also trying to get the court to decide what effect, if any, the amendments have on the gaming lease ... which ones are binding and which ones are not," he said.

Capado's suit, however, said WWF should have been aware of the option agreement because the amendments were allegedly discussed and announced to all bidders at the 1998 auction in order to allow buyers who wanted to run their own gaming operations a chance to buy out the lease for $250,000.

WWF's lawsuit also accused Capado of trying to secure the $250,000 fee by causing WWF to breach the gaming lease when it failed to inform WWF of its obligation to maintain the hotel restaurant as part of the gaming license requirement.

WWF alleges Capado never objected to the Debbie Reynolds closing the restaurant and continued to operate its gaming machines even after the restaurant closed.

Leo Flangas, Capado's attorney, disputed the allegations.

"Ignorance of the law is no excuse. WWF is saying that Capado should have told them they are violating the law by not operating the restaurant. But Capado has no responsibility or obligations for the restaurant. That's between Debbie Reynolds hotel-casino and WWF."

"WWF bought a big time project and they don't know what the regulations are for the license? We're just there to run the gaming business, but WWF is there to run the operations and the restaurant. Why do we have to tell them that?" he asked.

"Also why didn't WWF reopen the restaurant again? All they had to do was apply for a restaurant license and the gaming license can be reinstated," Flangas said.

But Pisanelli disagreed.

"Capado is responsible for its license and for complying with Nevada laws and other regulations attached. Capado remained silent throughout the bankruptcy proceedings. And at the time of the auction, Capado never made any references to the restaurant. Any licensee has to know the conditions they are operating under and whether those conditions are in compliance with the license."

"They have an obligation to tell us about the restaurant that wasn't in operation because it would have been an additional and considerable cost to WWF to reopen the restaurant," he said, adding WWF has no plans to reopen the restaurant.

Pisanelli added the ongoing dispute also creates a cloud of uncertainty for potential buyers -- with whom WWF has begun preliminary talks -- who may have plans to operate their own gaming business at the hotel-casino.

He declined to comment on the identity of the buyers and how much WWF wants for the property.

< Gaming News