$650,000 settlement with Hard Rock Hotel approved

The Nevada Gaming Commission gave final approval Thursday to a $650,000 settlement between the Hard Rock Hotel in Las Vegas and state regulators, following a complaint that employees sold drugs and let patrons use private restrooms for sex and drugs.

"We conceded that this issue raises regulatory concerns," said Frank Schreck, a gaming attorney with Brownstein, Hyatt, Faber, Schreck LLP., who represented the Hard Rock Hotel at the hearing.

The Nevada Gaming Control Board approved the proposed settlement last month. It was the third highest ever approved by the commission, which could have rejected the settlement and conducted a hearing to change the amount of the fine or consider revoking the hotel's gaming license.

In response to commissioners' questions about whether the culture at the hotel had changed, Kleisner assured them it had. He said all employees were aware that even a few bad employees could put "all of their jobs at risk."

The settlement, which was unanimously approved Thursday by the five-member commission, consists of a $500,000 fine and $150,000 to reimburse police and Nevada Gaming Control Board investigators.

Commissioner Dr. Tony Alamo questioned whether the company would view the fine as a "cost of doing business." Schreck quickly assured the commission that the fine will have tremendous financial consequences.

"It's not a cost of doing business. The Hard Rock has financial challenges ahead of it," he said.

Morgans Group reported a net loss of $37.1 million, or $1.30 a share, for the third quarter of 2010.

"Unless the market improves markedly, or the joint venture generates additional liquidity, there is a risk to (our) equity position and management agreement, which may be terminated by the lenders in the event of foreclosure," the company said about the Hard Rock Hotel in its third-quarter earnings report.

Chairman Peter Bernhard warned company executives there were more "drastic penalties" than a fine available to the commission.

"There could be serious talk about sanctions to your license," he said. "If this had happened with gaming ... your casino license would be on the table."

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.