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Gaming Guru

Richard N. Velotta

Hard Rock Deal Rejected

21 May 2004

LAS VEGAS -- A hearing has been ordered on the Hard Rock hotel-casino's controversial advertising campaign, even though the state attorney general's office, the state Gaming Control Board and casino management had brokered a settlement.

The Nevada Gaming Commission on Thursday voted unanimously to reject the settlement, setting the stage for a hearing that likely will occur sometime this summer.

In April, the Hard Rock agreed to pay a $300,000 fine -- the maximum permitted by state law -- to settle the Gaming Control Board complaint about Hard Rock advertising filed in January.

There were two ads addressed in the settlement, both published in the Las Vegas Weekly. One ad showed a man and a woman on a gaming table, surrounded by playing cards and poker chips, with the caption, "There's always a temptation to cheat."

The other ad read, "At the Hard Rock Hotel, we believe in your Monday night rights: large quantities of prescription stimulants (and) having wives in two states ... Tell your wives you are going; if they are hot, bring them along."

The original Gaming Control Board complaint cited two ads, in billboards and publications.

One, which appeared in billboards and publications just prior to the National Finals Rodeo in Las Vegas, depicted a woman shown from the knees down with her underwear falling to her angles, with the text saying, "Get ready to buck all night."

The other, again displayed in both billboards and publications last summer, showed a naked woman holding a pair of dice over her nipples, with the caption reading, "We sell used dice."

Senior Deputy Attorney General Toni Cowan, who filed the original complaint on behalf of the Gaming Control Board, said the sexual content of the ads was not the primary issue, but the public raised the issue on those billboards and others around the city at the same time the complaint was filed.

The settlement addressed inferences of the Hard Rock condoning cheating at gambling and illegal drug use. It also directed the Hard Rock to pay closer attention to an in-house compliance committee to review "questionable elements" of its promotional materials.

The Hard Rock's compliance officer, who reviews all advertising material, is Chief Financial Officer Jim Bowen. Any questionable material would be reviewed by a compliance committee composed of Bowen, Chief Executive Officer Kevin Kelley, former Nevada Gaming Commissioner Bob Lewis and Brian Ogaz, vice president and assistant to Chairman Peter Morton.

The settlement did not address one of the controversial aspects of the advertising campaign -- the sexual content of the ads that raised the ire of community activists who packed a Gaming Commission hearing in March. Some of those same activists prematurely praised the commission for taking action against the casino during a public comment session that preceded the Hard Rock action.

Observers present at Thursday's two-hour hearing were clearly surprised by the commission's decision.

"We've done about everything we can do," said Cowan, who filed the initial complaint on behalf of the Gaming Control Board. "Everybody has been pushed to their limits. As I said at the beginning of the hearing, nobody was really happy about the settlement, which I thought was a good indication that it was a good settlement. Everybody had to compromise a little to get there."

Her counterpart from the Hard Rock also was surprised.

"I had no indication of what was going to happen," said Las Vegas attorney Jeffrey Silver. "What the commission did was unprecedented."

Cowan said from the beginning that the case was extremely difficult and commission members, with their comments, indicated that there were several aspects of the case they found unsettling. Among them:

Because the Hard Rock management agreed to the settlement to put the issue behind them, the commission found that it was going to be left without any precedence to provide guidance on future advertising issues. Silver said the Hard Rock simply wanted to dispose of the matter and avoid the cost of defending itself in a hearing.

Commissioners clearly weren't seeking a more severe penalty for the Hard Rock. Commissioner Arthur Marshal repeatedly questioned how the two parties reached the $300,000 figure for the fine and Commissioner Radha Chanderraj said she thought the fine was excessive.

While the Hard Rock was chided in the five-page settlement document for condoning illegal activities in its ads, Commissioner Augie Gurrola said those ads were clearly satirical in nature. "I don't believe any operator in their right mind would condone cheating in their businesses," Gurrola said.

Commissioners also thoroughly discussed whether the Hard Rock's failure to use its in-house compliance committee for advice on advertising appropriateness constituted any violation of regulations. They concluded that management was ultimately responsible for all public advertising, regardless of what a compliance committee may have recommended.

Commissioners also were interested in views presented in a letter from Gaming Control Board member Bobby Siller, who didn't sign off on the Hard Rock settlement and couldn't be present at Thursday's meeting.

In the letter, addressed to Gaming Commission Chairman Peter Bernhard, Siller clarified his position on the Hard Rock matter, saying he was concerned that despite promises from company management that they would avoid problems with the compliance committee in place, that didn't happen.

"In particular, concerning advertisements, I was told, both in writing and orally, that future Hard Rock advertisements which contain 'questionable elements,' would be channeled through the compliance committee," Siller's letter said. "This committee was composed of Hard Rock management and other individuals experienced in gaming in Nevada and sufficiently mature to assure that any advertising or promotion effort to reach the young crowd would not violate gaming regulations. Unfortunately, I have been disappointed."

Siller concluded his letter with a threat.

Assuming that the commission was on track to approve the settlement, Siller wrote, "Should the Hard Rock fail in in this effort again, I will seek for other board members' and the commission's consideration, not a fine for any subsequent failure, but disciplinary action against its license."

Meanwhile, on the periphery of the issue, is another thorny conflict.

Carole Gates, who represented American Mothers Inc., told commissioners she was happy that they were examining advertising issues.

Speaking in a public comment session prior to deliberations on the Hard Rock issue, Gates said, "I represent thousands of mothers here in town and across the nation who are so grateful that you have upheld our community standards by fining the Hard Rock Hotel and Casino for its vulgar billboards."

Gates said she knew the commission was not addressing sexual content in its review but saw an opportunity to make her point about what she considers obscene billboards.

"We, who are here today, are not puritans nor prudes," Gates said. "But we are decent people, as are you, who want our children and families to experience the good of Las Vegas and Nevada. We look to you to protect us."

On the other side of the issue is the American Civil Liberties Union of Nevada. Gary Peck, the state ACLU's executive director, said his organization is ready to go to bat for any gaming company that wants to challenge regulations and "the commission's claimed authority to act as censor."

"Very clearly, the government does not have the ability under the Constitution to sanction lawful advertising because the government doesn't think it fits with community standards of good taste," added Allen Lichtenstein, ACLU of Nevada general counsel.

Lichtenstein also called the Gaming Control Board's complaint against the satirical advertising as "a bogus issue."

"Nobody seriously can believe that the Hard Rock was advertising for people to come and cheat the Hard Rock," Lichtenstein said. "That notion is silly. Clearly, it was a play on words. It exemplifies why the Constitution and the Supreme Court do not permit government agencies to act as a censor because results may be politically popular among some people."

What happens next?

The Gaming Control Board and the attorney general's office will develop a case against the Hard Rock and the Gaming Commission will schedule a hearing. Initially, commissioners said a hearing could occur in July. Cowan said it may take longer to develop the case, considering that it took from January to May to hammer out the aborted settlement agreement.

Cowan and Silver said they weren't optimistic that any new settlement agreement could be presented soon.

"It's clear to me that they desire to have a hearing," Silver said.