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Arnold M. Knightly


Resort remodeling: Oversight defended

10 Oct 2007

By Arnold M. Knightly and Joan Whitely
and Arnold M. Knightly

LAS VEGAS, Nevada -- Clark County Manager Virginia Valentine attempted Tuesday to defuse two controversial aspects to the county's handling of remodeling projects at Harrah's Entertainment properties. Questions about those projects have led to the closure of hundreds of rooms at Harrah's Las Vegas and Rio.

Asked why the inspector who had signed off on a cursory February inspection of the Rio is now involved in the county's reopened investigation, Valentine said Rick Maddox has a lot of knowledge about the property because it falls in his geographic territory.

Asked whether Maddox might be biased, the county manager said Michael Bracy, another supervising building inspector, is present at all times. The two are monitoring what the contractor hired by Harrah's Entertainment is doing to expose or test the remodeling work done in the Rio's Ipanema tower from floors three through 19. Currently 140 rooms on two floors of the Ipanema are out of service indefinitely.

Up to four county inspectors have been onsite at the Rio when specialized construction expertise was called for, Valentine added.

Valentine on Monday also denied that she has a close friendship with Harrah's executive Jan Jones who has been fielding the media questions about the room closures.

Jones is a former mayor of Las Vegas and Valentine is a former city manager.

"I knew her professionally," Valentine said. "I maybe have spoken to Jan Jones once a year, for the last few years."

Their tenures barely overlapped at the city. According to Valentine, after she accepted the city job but before she started, Jones declared her candidacy in the 1998 Nevada governor's race, which was won by Kenny Guinn.

Valentine left the city of Las Vegas in May 2002, becoming an assistant Clark County manager in October 2002, and the county's top administrator in July 2006.

Valentine said it was prudent for the gaming company to voluntarily close rooms at Harrah's Las Vegas on Monday, after an internal investigation revealed several remodeling projects were done without getting proper permits.

The gaming company shut down nearly 510 rooms and 27 suites at Harrah's Las Vegas.

County and Harrah's officials met late Tuesday morning to discuss how to stage a joint investigation, similar to the one now in progress at the Rio, where the resort closed the rooms by county order.

Phil Rosenquist, an assistant county manager, said executives of the gaming company told the county they decided on the abrupt Harrah's Las Vegas closure, in part, by "examining (filed building) plans in relation to what exists" on the property.

Rosenquist also said executives indicated they are trying to establish what remodeling work took place by "going back to corporate records on capital expenditures" for such things as building materials or guest-room fixtures.

In an interview Tuesday, Jones emphasized that the company has identified problems at only two of its Las Vegas properties and expects to find nothing more.

"We believe, and our investigation has found, these incidents appear to be isolated to the two floors at the Rio and the 500-plus rooms at Harrah's Las Vegas," she said. "We are fairly confident we have identified the rooms, and they are isolated to the Rio and Harrah's."

Despite the large number of rooms that have been closed, Jones said, the gaming company has not laid off any workers. She also noted that Harrah's has some 25,000 rooms on the Strip and will be able to move housekeeping and other workers to its other local properties: Caesars Palace, Paris, Bally's, Flamingo, Imperial Palace and Bill's.

Jones said the remodeling problems have captured the attention of company Vice Chairman Chuck Atwood and Chairman and Chief Executive Officer Gary Loveman, who was out of town Tuesday and who has not publicly commented on the remodeling problems yet.

"Gary Loveman takes very, very seriously his role in being the leader of integrity for Harrah's Entertainment," Jones said.

Atwood is overseeing the internal investigation into the matter and is working with corporate counsel on the independent investigation.

The problems are also drawing the attention of gaming regulators, who are tentatively scheduled to consider a $17.1 billion bid by Texas Pacific Group and Apollo Management to take Harrah's private at their December meeting.

Texas Pacific Group declined again Tuesday to comment on the situation, and Apollo could not be reached for comment.

State Gaming Control Board member Randall Sayre said Harrah's executives are cooperating with gaming regulators and, in fact, contacted him before Monday's decision to close the rooms at Harrah's Las Vegas.

However, Sayre said the room closings and the buyout are separate issues and the remodeling problems should not have a major effect on deciding the suitability of the deal.

Gaming Control Board Chairman Dennis Neilander and member Mark Clayton are in Chicago this week attending the International Association of Gaming Regulators conference and could not be reached for comment.

Sayre said when the investigations by Harrah's, the county and independent investigators are completed, the control board might look at any possible culpability by Harrah's or its executives and decide whether appropriate action is necessary from a regulatory standpoint.

The gaming company and the state regulators might not be the only ones awaiting the final reports.

The state attorney general's office says it's up to local authorities to investigate potential criminal aspects to the remodeling problems.

Nicole Moon, a spokeswoman for state Attorney General Catherine Cortez Masto, said her office has launched investigations against businesses based on complaints from individuals or agencies, such as the federal Occupational and Health Safety Administration.

"At that point, we may be able to do criminal charges" against Harrah's, Moon said. "It's way too early to say."

But Moon added that local and county authorities have primary jurisdiction in the matter.

Nevada Deputy Attorney General John McGlamery, who heads the agency's consumer protection bureau, said his office doesn't normally get involved in matters such as these.

"If it's a situation where a casino cut corners, local and county agencies would be the main arbiter," McGlamery said.

But McGlamery said local and state officials could examine, among other things, whether Harrah's used unqualified workers for renovation projects or whether the safety of workers was jeopardized by conditions at a hotel.

At that point, he said, they could decide what, if any, criminal statutes apply.

Nevada law allows criminal penalties against hotel operators for violating safety in the "regulation of construction or reconstruction of (a) hotel or other establishment for transient lodging." Each day that a hotel is in violation constitutes a separate misdemeanor offense, according to Nevada Revised Statutes.

But two Clark County agencies say it's not their job to investigate, either.

"Our office is not staffed to investigate criminal matters. Rather, we receive requests for prosecution from local law enforcement once they have completed their investigations," said Christopher Lalli, head of the criminal division of the Clark County district attorney, by e-mail Tuesday to Fred Frazzetta, a whistle-blower in the expanding remodel crisis for Harrah's Entertainment. Frazzetta was a temporary electrician on the Rio remodel.

"Enough is enough. It is time for you to step in, or if there is a conflict of interest, have the Attorney General's Office open an investigation," whistle-blower Frazzetta had written Lalli earlier Tuesday.

The potential conflict of interest refers to the fact the civil division of the district attorney office is legal counsel to Clark County Development Services.

But the hands of Las Vegas police are also tied, according to police spokesman Jose Montoya.

"I'm not sure that we would get involved. It's not a criminal act. It's more a civil act," Montoya told the newspaper last week. He did not change his response when asked whether remodel managers for Harrah's Entertainment should have known to seek permits, and might have covered up faulty work.

The county investigation of the Rio led to closure of two floors for remodeling that bypassed county safety procedures. One county official says the Rio failed to adequately protect holes between floors so smoke won't spread during a fire.

Development Services in February had cleared the Rio of alleged remodeling without permits or inspection after a superficial one-day review.

But the county department reopened the investigation in late September, after the Review-Journal researched allegations by Frazzetta, who had filed a complaint with Development Services on deficiencies in the Rio remodel in August 2006.

Review-Journal writer Alan Maimon contributed to this report.

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