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Genie
is out of bottle
After overnight delay, Aladdin opens doors By David Strow
<strow@lasvegassun.com>
LAS VEGAS SUN
August 18, 2000
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THOUSANDS of
people check out the Desert Passage retail mall at Aladdin megaresort
Thursday. The shopping complex opened on time, but the grand opening of
the $1.4 billion Aladdin hotel-casino was delayed pending final fire and
safety inspections. Sun photo by Steve Marcus.
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Hotel
facts
Cost: $1.4 billion
Theme: Tales of 1,001 Arabian Nights
Location: 3667 Las Vegas Blvd.
Rooms: 2,567 rooms
Shops: 500,000 square-foot marketplace, Desert
Passage at the Aladdin hotel-casino. Desert Passage is
co-developed, leased and managed by TrizecHahn
Development Corporation. The facility includes
entertainment, retail, dining, shopping.
Entertainment: 7,000-seat Theatre for the
Performing Arts. Casino: 100,000-square-foot main
casino with 2,800 slot machines and 87 table games. Plus
The London Club, 15,000-square-foot European-style
gaming salon operated in partnership with London Clubs
International
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The $1.4 billion Aladdin hotel-casino on the Las Vegas Strip opened at 11
a.m. today -- 16 hours late.
Executives said there was good reason for the delay as Clark County building
inspectors required the resort to complete its fire safety testing. The testing
was complete, and the resort received its certificate to open at 7:45 a.m.
today.
"It's part of policies and procedures. These buildings will be here for
100 years. What's a minute or an hour or a day when you're talking about the
importance of what needs to be accomplished?" Chairman Jack Sommer said.
Added Chief Financial Officer Thomas Lettero, "You just don't know until
the last test passes. But you have to be ready and geared up in case it does
pass. Physically, it has been ready."
By 10:30 a.m. today, a handful of people had made their way inside the resort
and were playing slot machines. But they were told to leave as the resort had
not officially opened. The casino officially opened at 11 a.m.
Officials blamed the delay on last-minute repairs to the casino surveillance
system. They said the hotel itself opened at 10 a.m.
The Thursday night opening -- originally set for 7 p.m. -- was called off
several minutes after midnight. This left thousands of Strip gawkers leaving in
disappointment -- and opening night hotel guests wondering where they'd spend
the night.
By contrast, the attached Desert Passage mall opened right on time, opening
its doors at 7 p.m. to crowds that numbered in the tens of thousands.
Though the Aladdin had rescheduled its opening for this morning, that came
far too late for hundreds of the Aladdin's opening night's guests. All guests on
opening night were by invitation only, and included high-rollers, market
analysts and reporters from across the nation and the world.
In contrast to their usual blue-ribbon treatment, many high-rollers waited
out on the sidewalks in front of the Aladdin for hours, as much in the dark as
anyone else on the Strip. Most were unable to even get to their luggage, since
the hotel had been locked down for testing.
Though Aladdin employees did their best to arrange alternate accommodations
for their guests, tempers still ran high.
Invited gambler Tony Dojcinovic of Los Angeles, waiting outside the Aladdin
with his family until after midnight, fumed after hearing from security guards
that the property wouldn't open until at least the next morning. Dojcinovic and
his relatives had arrived at the property at 1 p.m., and had been waiting for
hours to go to their room.
"I'm just upset, period," Dojcinovic said. "We're just going
to spend our money somewhere else. This is very bad business ... it's just not
right."
Caught in the same predicament was Louie Martinez, a farm owner from
Maricopa, Calif., and regular Las Vegas visitor. Martinez, who said he'd been an
invited guest at the grand openings of the Bellagio, MGM Grand and Paris Las
Vegas, said he'd never seen anything like it. His Aladdin casino host finally
set him up with a room at Paris Las Vegas, though their luggage remained at the
Aladdin.
"They're trying really hard," Martinez said. "They're very
courteous. I'm not that upset, but I'm a little disappointed. Some of my
high-roller friends are a little pissed."
His mood, however, was tempered by fiancee Ellie Placencia's run at the
nearby Paris Las Vegas.
"I'm not too upset, because my girlfriend hit 'em for $8,000,"
Martinez said with a grin.
Will the delay hurt the property in the long run? Analysts in attendance said
it probably wouldn't.
"It ultimately won't make a difference the day after the casino
opens," said Robin Farley, gaming analyst with PaineWebber. "There's
clearly a lot of excitement, and from what we were able to see, the concept was
well-executed."
Gregg Klein, a high-yield gaming analyst with BNP Paribas of New York, noted
that the Venetian had thrived since its rocky opening days more than a year ago.
"It's certainly disappointing," Klein said. "The security
staff could have been more communicative ... they kept giving different times
(for the opening).
"But once it opens, it should do very well. The location of the Aladdin
is fantastic, and the property looks great. It's just a shame it didn't open
tonight."
Aladdin executives said the displaced guests were placed in nearby hotels,
where the Aladdin had reserved rooms in case of a delay.
The delayed opening was a sharp contrast to the successful opening of Desert
Passage at 7 p.m. With her trademark blink, "I Dream of Jeannie" star
Barbara Eden helped open the doors of the mammoth themed mall on time. Tens of
thousands of visitors, unable to go into the casino, poured into the mall
instead.
Doubts over the property's future won't subside with the property's opening.
Two years of rocky relations between the property's owners, difficulties
financing cost overruns and a debt-heavy capital structure have some on Wall
Street yet to be convinced the property will be a long-term success.
"All we know is that these guys couldn't finance it efficiently, and
they couldn't construct it efficiently," said Andrew Zarnett, gaming
analyst with Deutsche Banc Alex. Brown. "The question is, can they operate
it efficiently? We don't know that yet.
"It's capable of having $100 million a year in cash flow. If it was
(Park Place Entertainment Corp.'s) project, it could do that. I think they can
do it, but there needs to be some proof they can capture those revenue dollars
and bring them to the bottom line."
Like many Las Vegas projects of recent history, the Aladdin came in far over
budget. What started as an $826 million hotel-casino project now has a total
cost topping $1 billion, not including the property's mammoth Desert Passage
mall.
The Sommer Trust, owner of the Aladdin since 1994, first brought in partner
London Clubs International in 1998. In exchange for its $50 million initial
investment, LCI received a 25 percent equity ownership in the project. At the
time, the partners anticipated any future costs would come from the partners in
the same 75-25 ratio.
But as additional costs piled up over the next two years, LCI ended up paying
most of the bill, as the Sommer Trust had difficulty liquidating assets to meet
the Aladdin's capital calls. Of the $148.2 million in cost overruns so far, LCI
has paid $143.9 million -- 97 percent of the total, pushing its total investment
to just under $200 million.
Though LCI is now entitled to a far larger portion of the profits --
including the first $30 million in profits each year -- the financing issue
caused stormy relations between the partners.
Even with heavy investments by LCI, just $375 million of the property's $1
billion investment came in the form of equity. The rest of the property's
capital costs -- more than $625 million -- comes in the form of debt, mostly
junk bond debt and bearing an average interest rate of 11 percent per year. The
ultimate price of all that debt will be about $85 million in the first year.
Despite the challenge presented by the heavy debt load, the property should
benefit from its Strip location. Located directly between Paris Las Vegas and
MGM Grand, and across the street from the Bellagio, the Aladdin should benefit
from the tens of thousands of tourists who will walk by its doors daily,
analysts say. That effect will be magnified by the current boom in visitor
traffic Las Vegas is now enjoying.
"Great locations enable properties to capture walk-by traffic,"
Zarnett said. "That is your best customer, because they require no
additional expense, and what they put in your slot machines, less taxes, is all
cash flow."
That should be assisted by Desert Passage, Zarnett said.
"From what I saw, I think they have created a must-see attraction with
the mall, which will create a lot of incremental traffic to their
property," Zarnett said. "It's a wonderful amenity for people spending
three days in town, to spend a few hours in the mall."
That belief certainly seemed justified during the opening hours of Desert
Passage, as shoulder-to-shoulder crowds wandered through the huge mall. Desert
Passage Director of Marketing Paul Beirnes admitted there might be a bit of a
silver lining to the hotel-casino's delays for the mall, particularly as
would-be casino customers decided to kill time in the mall.
"We'll give them somewhere else to spend their money," Beirnes
said.
Another nagging concern Zarnett and other analysts shared about the opening
was a lack of a blow-out national advertising campaign. Beyond a national insert
in USA Today, out-of-town analysts say they've seen little to promote the new
property -- and say that could hurt the Aladdin's attempts to create a
"must-see" attraction that will draw visitor traffic.
"Compelling new resorts purchase a hell of a lot of publicity,"
said Steve Altman, gaming analyst with Duff & Phelps in Chicago. "I
just saw my very first print ad in the Chicago Tribune on Sunday, and it was
fairly non-descript. It's not like they have a big budget to take out television
ads and radio.
"When you read about it, it has the flavor of a me-too property. I'm not
sure what the property offers that you can't find elsewhere in the city
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$1.4 billion megaresort advertising for employees
By Gary Thompson
LAS VEGAS SUN
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AN ARTIST'S drawing
shows what the new Aladdin hotel-casino will look like. COURTESY
IMAGE
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Hotel
facts
Cost: $1.4 billion
Location: 3667 Las Vegas Blvd.
Rooms: 2,567 rooms
Casino: 100,000-square-foot main casino
with 2,800 slot machines and 87 table games. Plus
The London Club, 15,000-square-foot European-style
gaming salon operated in partnership with London
Clubs International
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Aladdin Gaming executives are confident Las Vegas' newest mega-resort
is on track for a successful opening on Aug. 17 despite rumors sweeping
the Strip that the $1.4 billion project is in trouble.
Their optimism is shared by high-yield securities analysts who have
issued "buy" ratings on the company's publicly traded debt,
citing the resort's superior location, strong financial support and
inventive capital structure.
About $52 million in additional construction costs and a technical
default on Aladdin's bank debt last year fueled speculation that funding
wouldn't be available to complete construction of the resort's first
phase.
Adding to the negative speculation was the disclosure that Park Place
Entertainment, which owns the nearby Paris Las Vegas and Bally's Las Vegas
hotel-casinos, had bought a significant chunk of Aladdin's senior discount
notes.
Park Place Chairman Arthur Goldberg acquired about a third of Aladdin's
$221.5 million of 13.5 percent notes, establishing a strong bargaining
position if Aladdin doesn't meet financial projections and needs to
reorganize.
A more likely prospect, though, is that the Aladdin will prosper,
giving Park Place and other bond holders a good return on their
investments, said high-yield or "junk" bond analysts for Morgan
Stanley Dean Witter, Donaldson Lufkin & Jenrette and Jefferies &
Co.
Morgan Stanley's Ashley Craig and Lincoln Isetta issued a "strong
buy" on Aladdin's debt, saying the securities represent a good total
return opportunity and strong value relative to other high-risk gaming
credits.
Lawrence Klatzkin and Robert Welch of Jefferies said if the property
opens successfully, the bond prices should climb sharply from their
current levels, affording investors high potential returns.
"The location may be the best place to build on the Strip, and the
interior offers a multi-level entertainment experience that is very
engaging," said DLJ's John Leupp.
In a recent interview, Aladdin President Richard Goeglein and Cory
Klerk, the company's senior vice president and chief financial officer,
were equally sanguine about the future.
"We're confident we can make the numbers," said Goeglein of
analysts' projections of cash flow between $100 million and $118 million
for the first 12 months of the resort's operations.
That compares with the estimated $130 million of cash flow Paris Las
Vegas will generate this year. Yet, as Goeglein noted, Paris has fewer
restaurants, retail and entertainment attractions than the Aladdin will
offer.
Even at the low estimate, Aladdin's projected cash flow would be more
than enough to cover the $80 million of annual debt service and other
fixed costs for the period.
"We've watched properties such as Paris, Bally's, Mirage and
Mandalay Bay because we believe that, except for the high end of the
business, their customer profiles are similar to ours," Goeglein
said.
Aladdin's proximity to the 8,700 rooms at Paris, Bally's and Bellagio
should help boost walk-in traffic from customers eager to experience the
Strip's newest resort, which will boast elaborate depictions of
mythological legends from the Tales of Sinbad, Scheherazade's Palace and
other themes.
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CARS PASS
by on Harmon Avenue as construction continues on the Aladdin
hotel-casino
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"It's 100 feet from the front door of Paris to our north gate, and
Bellagio is right across the Street," Goeglein said.
Phase I of the Arabian Nights-themed resort is now projected to cost
around $1.15 billion. About $900 million will be spent building and
equipping 2,567 rooms and suites in the hotel tower and 116,000 square
feet of casino space and renovating the Aladdin Theater for the Performing
Arts, a 7,000-seat entertainment facility.
Desert Passage, a 522,000-square-foot retail shopping and dining area
housing some of the resort's 21 restaurants, will cost another $250
million. Phase II, a $300 million expansion that would add 1,000 rooms, a
1,400-seat nightclub and a 50,000-square-foot casino, is at least two
years from debuting.
"We're clearly concentrating on Phase I, making sure that opens
successfully," Goeglein said.
"We don't have much concern on the revenue side, though getting to
full stability and efficiency on the cost side will take a little
longer," he said.
Aladdin Gaming is now advertising for 4,500 full- and part-time workers
and is talking with four potential partners for Phase II, which would be
called the Aladdin Music Project. Goeglein described two as "major
convention-type companies that have shown serious interest."
"The quality of the potential partners has improved dramatically
as construction has progressed," he said. Planet Hollywood, which was
originally scheduled to operate the Music Project, fell on financial hard
times, and early would-be successors included some promoters who didn't
bring any added value to the deal, he said.
Aladdin Gaming is 72 percent owned by a trust controlled by real estate
developer Jack Sommer, while United Kingdom casino operator London Clubs
International (LCI) owns 25 percent. Goeglein owns the remainder.
The completion guarantee between the Sommer trust and LCI includes a
contribution agreement that calls for the parties to be responsible for a
pro rata share of any additional equity contribution needed to cover
construction costs increases, Klerk said.
Through 1999's third quarter, LCI had funded more than 90 percent of
$52 million in added costs. The funding included a loan to Sommer to cover
the trust's share of the costs; the loan is convertible to an additional
15 percentage points of equity for LCI, which would raise its stake to 40
percent should it opt to do so.
All partners are enthusiastic about the growth in visitor volume --
expected to top 35 million people this year -- stimulated by the new
resorts that have opened over the past 15 months.
"Our assumption going in was that the market would continue to
grow and that the additional capacity from the new resorts would be
absorbed," Goeglein said. "The demand side of the market is much
bigger than it used to be.
"And if you exclude Canada, foreign visitors account for about 6
percent of the market. We've never worked very hard to attract that
market, and believe there's a very large opportunity to ratchet up
visitation from the United Kingdom and Europe as the global economy
improves."
In a recent research report, the two Morgan Stanley analysts cited
several reasons for their optimism about the project.
"LCI has demonstrated its commitment to the project ... (and
stated) its willingness to inject more capital if necessary," they
wrote.
"We think the bonds could trade up when the property opens. Much
of the speculation surrounding the credit has been about whether
construction would be completed without restructuring."
They noted that new properties have typically fared well and said the
Aladdin concept should draw new Las Vegas visitors.
"The Aladdin design is well thought out, from a hotelier's
standpoint," the analysts said. And as the last of the new wave of
properties opening on the Strip, "it will not have to face new
competition right after opening and will be able to ride the marketing
coattails of its predecessors."
They added that the Aladdin management team has more than 50 years of
experience in the lodging and gaming industries and said the property
"could be an attractive acquisition candidate for a larger casino
company looking for more growth on the Strip."
Jefferies' Klatzkin said the senior discount notes, which were recently
quoted at 43 bid, 44 asked, have an accreted value in the 60s now and
afford a good speculative investment opportunity.
Aladdin sold $221.5 million par value of 13.5 percent notes at a little
over 50 percent of par, raising $115 million as part of its construction
budget. The notes are subordinate to a $490 million bank credit facility.
Interest accrues until the notes reach par value on March 1, 2003, and
then continues at 13.5 percent until maturity seven years later. The notes
are callable on March 1, 2003, at 106.73 and each year thereafter at a
declining price until March 2006.
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Desert Passage signs up tenants
Feb. 25, 2000
LAS VEGAS SUN
Hotel
facts
Cost: $1.4 billion
Location: 3667 Las Vegas Blvd.
Rooms: 2,567 rooms
Casino: 100,000-square-foot main casino with
2,800 slot machines and 87 table games. Plus The London
Club, 15,000-square-foot European-style gaming salon
operated in partnership with London Clubs International
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The new Desert Passage retail complex on the Las Vegas Strip added nine more
retailers to its list of shops slated to open this summer.
The 500,000-square-foot retail "shopping adventure" center,
adjoining the new $1.3 billion Aladdin hotel-casino, is scheduled to open Aug.
17.
Added to list of Desert Passage retailers are fashion stores bebe, Cutter
& Buck, Eddie Bauer, Joan Vass and White House/Black Market.
Also setting up shop will be travel outfitter Tumi & Brighton; Endangered
Species, a retail specialty store dedicated to raising awareness of endangered
species; Wyland Galleries, featuring marine life art; and French fashion and
jewelry store Clio Blue Paris.
Desert Passage spokesman Paul Beirnes said the complex has leased 90 percent
of its total 130 retail shops and 14 restaurants. Beirnes said the project's
developer, Toronto-based TrizecHahn Corp., expects the project to be fully
leased by its summer opening.
New Aladdin set for August opening
The new $1.3 billion Aladdin hotel-casino and its shopping mall will open on
the Las Vegas Strip Aug. 17.
The 2,600-room resort features a 100,000-square-foot casino, a completely
remodeled performing arts theater, a luxury casino and the Desert Passage
shopping mall.
Desert Passage, a 500,000-square-foot shopping complex encircling the hotel
tower, will have 135 stores and 14 restaurants.
Project developer Aladdin Gaming, LLC said the hotel will allow guests access
to their rooms, the pool and health spa without walking through the casino.
The new resort will replace the old Aladdin hotel-casino, a Las Vegas icon
that was imploded in April 1998.
Aladdin to open Aug. 17 with Gaming Commission blessing
New $50 million loan completes financing for $1.4 billion LV megaresort
By David Strow
<strow@lasvegassun.com>
LAS VEGAS SUN
July 28, 2000
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CONSTRUCTION
continues on the Aladdin hotel-casino. This is the hotel as of
August
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Hotel
facts
Cost: $1.4 billion
Theme: Tales of 1,001 Arabian Nights
Location: 3667 Las Vegas Blvd.
Rooms: 2,567 rooms
Shops: 500,000 square-foot marketplace, Desert
Passage at the Aladdin hotel-casino. Desert Passage is
co-developed, leased and managed by TrizecHahn
Development Corporation. The facility includes
entertainment, retail, dining, shopping.
Entertainment: 7,000-seat Theatre for the
Performing Arts. Casino: 100,000-square-foot main
casino with 2,800 slot machines and 87 table games. Plus
The London Club, 15,000-square-foot European-style
gaming salon operated in partnership with London Clubs
International
Reservations: Click
here |
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The $1.4 billion Aladdin hotel-casino received formal approval from Nevada
gaming regulators Thursday, clearing the way for an Aug. 17 opening of the
Strip's newest megaresort.
"To borrow an English phrase, I think this is a new jewel in the crown
of Las Vegas," said Brian Sandoval, chairman of the Nevada Gaming
Commission. The comment was aimed at London Clubs International, 40 percent
owner of the hotel-casino.
With the approval, Aladdin Chief Executive Richard Goeglein said the pieces
are now in place for a full opening of the property in just three weeks. The
doors of the Aladdin should open to the public around 6:30 p.m. on Aug. 17,
followed by a fireworks show four hours later.
"On Aug. 17, all the major elements of the Aladdin resort-casino will be
complete ... and this includes all of our guest rooms," Goeglein said.
"We will have an opening celebration that will let all of the major markets
in the country knew that we have arrived."
Just 800 of the resort's 2,567 rooms will be available on opening night, but
Goeglein said this shouldn't be construed as a "soft opening." Within
a week of opening, he said, all rooms will be available -- but that Aladdin
management decided to phase these rooms in gradually to keep opening night
stress among staffers to a minimum.
The licensing hearing, which lasted more than two hours, never saw the level
of tension seen during the Aladdin's hearing earlier this month before the
Nevada Gaming Control Board. The contentious hearing pitted LCI against the
Sommer Trust, which owns 57 percent of the Aladdin.
The cause of the rift came with the cost overruns experienced by the Aladdin
over the past two years of construction. When the Sommer Trust failed to meet
capital requests made by Aladdin management, LCI was forced to put up the
additional cash. LCI put an additional $60 million into the project in April,
pushing its total Aladdin investment close to $200 million.
"We were clearly disappointed the (Sommer) trust was unable to support
the Aladdin to the extent London Clubs did," said Alan Goodenough, chairman
of LCI. "But it is in both of our best interests to start with a clean
slate, go forward and work together."
Still, Goodenough seemed to take a jab at the trust while discussing his
company's history of regulatory responsibility.
"We are utterly committed to our investment in Las Vegas, and time and
again, we have demonstrated our commitment with substantial financial
contributions," Goodenough said. "We intend on doing things properly.
We are used to doing things properly.
"We have never failed to come up to the stump so far ... and we will
support (the Aladdin) to the extent which we are able."
Despite the cooler mood that prevailed Thursday, Aladdin Chairman Jack Sommer
did not escape some grilling by commissioners over the failure of the trust to
put up funds for the Aladdin's cost overruns. Sommer explained that was the
result of the trust's limited liquidity, as well as fiduciary responsibilities
to all members of the trust.
"We believe this is an excellent investment for the trust," Sommer
said.
But a recent loan agreement assured that Sommer will have to invest if the
Aladdin needs funding once again. The Aladdin recently received a $50 million
loan from the Bank of Nova Scotia, funds that will be used to get the property
to its grand opening.
"This will cover all preopening costs, marketing and working
capital," Sommer said. "It's everything we need to turn the key."
As a condition of receiving this loan, Sommer said, the trust agreed that it
will be jointly responsible for any capital required by the property from its
owners -- and said the trust is liquidating some assets to ensure that those
funds will be available if needed.
Despite difficulties with cost overruns, the Aladdin's executives and owners
all insisted the property was poised to be a financial success, and that future
capital calls were unlikely.
"Unless we built complete junk there, it's going to work ... and we
invested $1 billion there," Goodenough said.
Before the casino will be able to post a profit, it will have to meet at
least $85 million per year in expenses to meet interest costs and capital
maintenance needs, said Aladdin Chief Financial Officer Tom Lettero. That's the
result of the Aladdin's capital structure -- of the $1 billion invested in the
Aladdin, $375 million came in the form of equity.
The remaining $625 million comes in the form of debt, at an average interest
rate of 11 percent per year, though officials expressed confidence the resort
would produce enough cash flow to service the debt. As evidence, Chief Operating
Officer Bill Timmins said reservations are now growing at a rate of 10 percent
per day, and that the resort is now ahead on budget forecasts as far out as
2002.
"We are confident the Aladdin is now on a sound financial footing,"
Goodenough said.
One key element in the resort's formula will be a reliance on LCI to draw
from its clientele of European and Middle Eastern customers. To promote the
Aladdin among these customers, LCI is holding "Aladdin parties" at its
casinos in London, Egypt, South Africa and Lebanon, and is arranging trips for
its high-end customers to the property.
"There's an untapped market of European Union and Eastern European
customers," Timmins said. "We didn't come here to cannibalize other
properties. We're here to grow the market, and we're determined to add to the
market in Las Vegas."
In other actions on Thursday, the commission:
Approved changes to Nevada regulations loosening licensing requirements by
institutional investors.
The changes in regulations, first proposed by Desert Inn owner Steve Wynn,
permit institutional investors to take up to a 15 percent stake in privately
held gaming companies without being licensed. Until Thursday's changes, even the
smallest investment in a private company mandated a gaming license, a process
most institutional investors were not willing to endure.
By raising the bar to 15 percent, owners of private gaming companies, such as
Wynn, will now have an easier time in drawing capital from institutional
sources, said Wynn attorney Jack Godfrey.
"These regulations are not drafted to benefit just one company,"
Godfrey said. "This is an important step in attracting financing for Nevada
gaming companies."
Though Wynn will be the immediate beneficiary of the change, which took
effect immediately, other private companies are also looking to institutional
investors as a result of the new regulation, Godfrey said.
"It may very well be the start of a new trend (toward privately held
casino companies)," Godfrey said.
Investments held in privately held gaming companies will be tightly
restricted, however. To qualify, an institutional investor must still undergo an
investigation and receive a licensing waiver. The investor is then not permitted
to hold voting rights in the company, and may not sell shares without prior
commission approval.
"This doesn't entitle anybody to anything," said board member
Dennis Neilander. "It allows them to make an application (for a waiver).
This is still a pretty extensive investigation."
After a ringing endorsement by board members, the new regulations passed on a
unanimous vote, with little debate.
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Approved the settlement of a Internet gaming complaint against Las
Vegas-based American Wagering Inc.
Under the settlement, American Wagering agreed to pay a $10,000 fine to
settle the complaint. More significantly, however, the company agreed to
sell off its Australian Internet sports wagering service, Megasports, within
180 days.
Last December, the control board accused Megasports of accepting wagers
from an undercover control board agent in Nevada. This would violate Nevada
law, which specifically prohibits Internet wagering.
Though his company admitted no wrongdoing, AWI Chief Executive Vic
Salerno said he believed his company had no choice but to get out of the
Internet wagering business for now.
"There isn't a way to prove to them that we could 100 percent
guarantee our (bets) weren't coming from the U.S.," Salerno said.
"Next time, we'll make sure the board is in agreement before we move
ahead (with Internet wagering)."
Salerno agreed that the complaint and its outcome has cast a chill over
Nevada gaming companies' thoughts of getting into the Internet casino
business.
"I think it's really dependent on technology (to identify location
of bettors)," Salerno said.
Even Sandoval, who has been the Nevada gaming regulator most open to the
possibility of Nevada's involvement in the booming worldwide online betting
business, said that's an issue that must be worked out before the state's
casinos can move into cyberspace wagering.
"That's always been one of my biggest concerns about this, that we
can't tell who's on the other end of the line," Sandoval said.
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