Palms to pay $1 million fine to settle drug, prostitution complaint

The parent company of the Palms has agreed to pay a $1 million fine to settle a 17-count complaint by the Nevada Gaming Control Board resulting from a failure to prevent illegal activity, including drug sales and prostitution, at clubs on the property.

FP Holdings L.P. also agreed to pay $78,000 to cover the cost of the control board's investigation.

"We are deeply concerned and disappointed about the matters outlined in the complaint as they are not consistent with the values of our company," the Palms said Friday in a statement. "We are resolved to address these problems comprehensively and decisively."

The Nevada Gaming Commission must approve the settlement. The violations contained in the 21-page complaint made public Friday were gathered during a joint undercover investigation by the board and Las Vegas police.

The complaint charges that on March 16 about 11:15 p.m., an undercover officer on his way to the Moon nightclub contacted a host manager, asking whether he could "supply some girls for their party because they wanted to get laid and didn't care how much it would cost."

The host manager said it would not be a problem. About 12:50 a.m., the host manager brought two women to the undercover officer's table at Moon. According to the complaint, they went to the club's outdoor deck where the host manager asked whether he "was happy with the girls because (host manager) could provide different girls if (the undercover officer) wanted."

In addition, a security officer and bottle runner told the officer they could provide prostitutes. The complaint said the undercover officer bought cocaine, Ecstasy and Percocet at Moon and Rain nightclubs.

On April 22, an undercover officer requested "two 8-balls of cocaine" from the host manager at Moon. Hours later the host manager sold the officer 5.6 grams of cocaine.

Another incident occurred on May 4, when the service manager met undercover officers at the door of ghostbar. While escorting the officers to their table the service manager sold them 2.4 grams of cocaine, according to the complaint.

None of the club workers is named in the Control Board's filing, nor is there any indication if any faced criminal charges.

"The club venues are owned and operated by NM Ventures LLC and NM Ventures II LLC (collectively Nine Group), which at the time of the investigation were only partially owned affiliates of Palms," the company said. "Additionally, at the time of the investigation, Palms did not employ, direct or control the employees whose actions formed the basis of the allegations of the complaint."

The Palms completed its acquisition of Nine Group in September.

"Nonetheless, Palms as a Nevada gaming licensee accepts full responsibility for all activities taking place on its property," the company said.

The Nevada Gaming Commission has approved fines in the past, including several larger than $1 million, for Las Vegas casinos found to be allowing drug sales or prostitution on their property.

On Jan. 27, 2011, the five-member commission approved a $650,000 settlement between the Hard Rock Hotel and state gaming regulators after a complaint that employees sold drugs and let patrons use private restrooms for sex and drug use.

The Nevada Gaming Commission can reject the settlement and conduct a hearing to change the amount of the fine or even revoke the hotel's gaming license. As of Friday, no hearing date had been scheduled.

As a result of the complaint, the Palms said it has disbanded the separate Nine Group security department and mandated that all Nine Group employees working in the clubs submit to drug tests.

"We look forward to working with the Gaming Control Board and the commission in the coming weeks to resolve the complaint," the company said.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893. Follow @sierotyfeatures on Twitter.