There’s a great article by Liz Benston in the LV Sun today about the investigation that ultimately deprived a nightclub of its license:
Managing a Las Vegas nightclub requires the deft and daring skill of operating a party environment that almost crosses the line into illegal activity. Anything less would be considered too tame to generate a buzz.
Planet Hollywood knew its tenant, the Prive nightclub, was crossing the line but didn’t stop it, and gaming regulators pounced.
Last week Planet Hollywood agreed to pay a $500,000 fine to the Gaming Control Board after acknowledging it knew of illegal and illicit activities occurring at the club, which operates on the mezzanine level above the casino. On Thursday the county denied the club a permanent liquor license, forcing its closure at midnight Tuesday, when its temporary liquor license expired. The club opened less than two years ago.
As a result of the unprecedented enforcement action against Planet Hollywood for allowing a nightclub to run wild, contracts between hotels and their nightclubs are now being rewritten to give the hotels greater authority to lay down the law with nightclub managers.
If you haven’t already, I encourage you to click over and read the whole thing.
The goings-on at Prive bring up a deeper issue that I alluded to in a story about Randall Sayre’s 7/21 Industry Letter (pdf). Here’s most of the letter:
Recently there has been a great deal of attention focused on nightclub operations affiliated with Nevada licensees. Clearly, this is an important issue which, if
left unattended, can lead to serious regulatory ramifications. In addition to nightclub operations, there are a number of other areas where
regulatory concerns have surfaced. Either through lack of knowledge or apathy, licensees are creating regulatory challenges in areas requiring corrective action. Following are just a few examples of these areas of interest:
• The conduct of promotions;
• Approval and conduct of tournaments and charitable events;
• Race and Sports Book Operations;
• Intellectual property theft; and
• Questionable or misleading advertising
The vast majority of this State’s licensees attempt to “get it right” and any indiscretions are typically addressed in a non-disciplinary fashion with the cooperation
of the licensee. The Board recognizes these are hard economic times and licensees are facing increased competitive pressures. This does not mean, however, the Board
can allow a reduction in the regulatory standards governing licensees’ operations. In order to reduce disciplinary actions and foster open communication between
the Board and gaming licensees, the Board is proposing informal seminars covering our collective areas of concern. These seminars would allow the Board to identify some
common pitfalls frequently seen and provide an opportunity for the industry to voice their challenges and concerns. The process will also provide any needed clarification of
governing statutes and regulations.
This would be an operator’s workshop, not a formal seminar on law. The appropriate audience would be mid-level supervisors and program managers. It would
be property individuals that are responsible for following and enforcing policy and legal/regulatory requirements.
I hope that Sayre is successful in getting the casinos to send their managers to these workshops. This is the kind of program that they should be thankful for. Here’s why:
Imagine a homeowner throwing a party. During the course of the night, things get a little loud. The police are called. Should they break down the doors and immediately rest everyone for disturbing the peace, or knock on the door, ask to homeowner to keep it down, and see what happens?
The first option preserves public order and minimizes the burden on law enforcement–imagine if they had to arrest, transport and book everyone in the house, instead of policing the rest of their jurisdiction. Of course, if things get loud again and noise complaints continue, they would have to take “corrective action,” but usually, a little reminder of neighborly courtesy is enough.
This is essentially Sayre’s approach. Some parts of the regulations casinos operate under–the Minimum Internal Control Standards–are completely unambiguous. You’re either in compliance with them, or not. Others are more nebulous. Take, for example, NRS 463.0129, the backbone of gaming regulation in Nevada:
NRS 463.0129 Public policy of state concerning gaming; license or approval revocable privilege.
1. The Legislature hereby finds, and declares to be the public policy of this state, that:
(a) The gaming industry is vitally important to the economy of the State and the general welfare of the inhabitants.
(b) The continued growth and success of gaming is dependent upon public confidence and trust that licensed gaming and the manufacture, sale and distribution of gaming devices and associated equipment are conducted honestly and competitively, that establishments which hold restricted and nonrestricted licenses where gaming is conducted and where gambling devices are operated do not unduly impact the quality of life enjoyed by residents of the surrounding neighborhoods, that the rights of the creditors of licensees are protected and that gaming is free from criminal and corruptive elements.
(c) Public confidence and trust can only be maintained by strict regulation of all persons, locations, practices, associations and activities related to the operation of licensed gaming establishments, the manufacture, sale or distribution of gaming devices and associated equipment and the operation of inter-casino linked systems.
(d) All establishments where gaming is conducted and where gaming devices are operated, and manufacturers, sellers and distributors of certain gaming devices and equipment, and operators of inter-casino linked systems must therefore be licensed, controlled and assisted to protect the public health, safety, morals, good order and general welfare of the inhabitants of the State, to foster the stability and success of gaming and to preserve the competitive economy and policies of free competition of the State of Nevada.
(e) To ensure that gaming is conducted honestly, competitively and free of criminal and corruptive elements, all gaming establishments in this state must remain open to the general public and the access of the general public to gaming activities must not be restricted in any manner except as provided by the Legislature.
The key here is the requirement that licensees “protect the public health, safety, morals, good order and general welfare of the inhabitants of the State, to foster the stability and success of gaming and to preserve the competitive economy and policies of free competition of the State of Nevada.” Technically, a casino could have its license revoked for a kitchen worker forgetting to wash his hands after using the bathroom–that is, after all, endangering the public health. Should that happen? No, because no one would be willing to build a multi-billion casino if their license rested on such a slender thread.
I’m aware that there is some disconnect–some might call it hypocrisy or at least confusion–in the idea of casinos as watchdogs of “morals” when the bulk of promotion for Las Vegas in the past few years has been geared towards proving that the city is a place without morality. But it’s clear that, in the minds of the industry and its regulators at least, that there is immorality and then there is immorality. Gambling more than you should is OK; cheating on your spouse with a consenting adult is OK; engaging in public sex or, if you a prostitute, soliciting clients in casinos is not. I’m not saying that drawing the line between these things is logical, or even rational; I’m just saying that it’s there, and everyone in the industry knows it.
A lot of things that Sayre makes reference to blur that line between permissible and impremissible immorality. The letter is the Control Board’s offer to work with the industry to clarify exactly where the line is, to explain what will put licensees in clear violation of NRS 463.0129. With this letter, the GCB is saying that, regardless of what’s been going on until now, here’s how things are going to run from now on. They’re doing this without staging intrusive raids or indiscriminately levying fines for things in this gray area.
If the operators don’t take the Board up on its offer, they will be out of excuses if they are tabbed for “corrective action.” They have an out–“I didn’t know that was a violation”–and if they don’t take it, they’ll only have themselves to blame.