Behind the Planet Hollywood Penalty

This Just In: Prive to Close

Updated July 24, 3:50 p.m. Eastern

The Clark County Office of Business Licenses delivered a double-whammy to Planet Hollywood’s embattled nightclub, Prive, yesterday when it denied its application for a permanent liquor license. The news came hours after the property and the Gaming Control Board finalized a $750,000 fine, $500,000 of which was paid and $250,000 of which was set aside with the caveat of no complaints over the next 12 months and the second portion of the penalty would be waived. Prive, which had been operating under a temporary license since opening, must now close its doors on July 28 because of “the failure to abide by the duties of a liquor licensee as set forth under Clark County Code 8.20.465,” a sentiment echoed on record by license director Jacqueline Holloway, who added, “The evidence of improper management oversight and disregard for the duties of the licensee is overwhelming and points to only one decision: denial of a liquor license." She went on to note that holding a liquor license is a privilege and there are responsibilities that come with that privilege.

The club, operated by Miami’s Opium Group, can appeal the decision within the next 30 days but would have to remain closed during the appeal process. The core investors of the nightclub, including former Mandalay Bay magnate Billy Richardson Sr., who still have yet to be heard from, seemingly have a decision on their hands. According to sources, their deal with Planet Hollywood gives them first right of refusal on the nightclub space should Prive be forced to leave the premises. A source from within the Opium Group also indicated that the large amount of media outlets pushing the demise of Prive might be in for a surprise. The source was adamant the venue would remain open but would not comment on the specifics of how Prive would obtain a liquor license or whose liquor license they would attempt to use.  Stay tuned…

Posted July 23:

Las Vegas has long been known as Sin City, and for those who have taken the term a little too literally lately, as the old Bob Dylan song goes, the times they are a changing. The Strip is buzzing after the state’s powerful Gaming Control Board came down hard on the Planet Hollywood Hotel & Casino with a $750,000 fine that ultimately holds it responsible for a list of nine complaints against one of their most high-profile tenants, the Opium Group’s Prive Nightclub.

The complaints against Prive include removing and dumping inebriated patrons unattended in the casino, overconsumption by patrons, admitting minors, physically and sexually assaulting customers, hiring people with criminal records and turning a closed eye to topless/lewd activity and drug use within the club. Being the landlord of the venue, the Gaming Control Board held Planet Hollywood responsible for these complaints and levied a $500,000 fine, with a stipulation that an additional $250,000 fine would be waived if no further complaints were received within the next calendar year. Read a copy of the actual complaint by clicking here.

Planet Hollywood copped to the penalty and admits not having control over what took place behind Prive’s staunch red carpet. PH management also says it has made “draconian” changes to Prive’s lease, including allowing Planet Hollywood security personnel to access the club without an employee, which personnel previously were not able to do. Sources also indicate that the Opium Group has been put on notice and should Gaming Control come back with the other $250,000 fine or should complaints continue, the lease will be terminated. Frank Schrek, attorney for Planet Hollywood, told a local newspaper, "We didn't execute proper supervision and we're the message being sent to the rest of the industry."

Because the complaints come from Gaming Control, which has the authority to suspend the property’s non-restricted gaming license, it seems as though Planet Hollywood had no other option but to admit fault, pay the fine and move forward. After all, as the language states, there is not much argument with, “PH knew or should have known, about this conduct and failed to take action to prevent it from reoccurring.”

Did they know or didn’t they, however, seems like a valid question, and considering the Clark County Department of Business Licenses issued Prive a citation in May of last year for allowing topless and lewd activity to take place within the venue, total ignorance would seem to be not much more than blissful thinking. Ditto for the substantial traffic of calls made to Las Vegas Police Department and the Fire Department’s Emergency Services Department since the venue opened, which the complaint lists at 61 calls for service received within the first 12 months of operations with another 106 within the eight subsequent months. This includes three-digit annual increases for service regarding guns, service regarding fights and service regarding narcotics. But Planet Hollywood has admitted fault and should be acknowledged for accepting the complaints and moving forward, even if they didn’t have many other options.

The Opium Group, which has had monumental success in Miami’s South Beach club scene with Mansion and SET, among other venues, remains very tight-lipped on the situation in Las Vegas. And while Planet Hollywood and the Gaming Control Board seem to have moved on, this situation may not be entirely resolved. Still unheard in all of this are the silent investors behind Prive, including Billy Richardson Sr., one of the principle partners of Mandalay Bay before the property was sold to the MGM Mirage group. Sources close to the investment group that funded the project indicate they are being very quiet and very careful while examining all possibilities before moving forward with any or no action.

Word also is very quietly starting to circulate that while Planet Hollywood paid the fine, it allegedly is holding the Opium Group responsible for the penalty and holding a lease termination as the trump card against the nightclub company to recoup the fine. Those same whisperers also allege that the Opium Group has worked out a payment plan with the property to repay those monies, and that Opium already has made its first payment to the property.

This isn’t the first government salvo against the Las Vegas nightlife business: that honor goes to the ongoing Internal Revenue Service investigation against PURE Management Group (owners of PURE, LAX and Christian Audigier Nightclubs along with several restaurants and bar ventures), although sources indicate that, more than a year into that investigation, it has shifted gears, focusing more on individuals who worked for PMG at the time. And if that was the ignition switch to force nightclub owners and resort partners into better regulation and control of their venues, then the Gaming Control Board investigation is the proverbial sound of the second shoe dropping. During the IRS investigation, it became very clear that government officials would hold resorts accountable for what takes place inside venues on property, whether lease-holders or partners, and the Gaming Control investigation sure seems like the bite behind that bark. And while Planet Hollywood is feeling the heat, it looks as though the company won’t be alone for long, as representatives from Gaming Control announced investigations are ongoing in as many as nine other properties on The Strip for activities within venues on those properties, including nightclubs, ultra-lounges and pools.

According to Gaming Control board member Randy Sayre, the nightlife industry should have seen this coming. As early as 2006, the board started issuing warning letters and posting general warnings on its web site — one of which was posted as recently as several months ago — telling nightclubs to clean up their act and corporate landlords that they would be held responsible for whatever the board might find. It would seem as though at least some of these warnings went ignored, forcing the Control board into action.

"I'm not going to write any more letters," Sayre said following the Planet Hollywood announcement. "Having said that, I can indicate with great confidence that a few locations may not have gotten the message loudly and clearly. And these situations will be addressed. Some are more serious than others and we need to address whether or not these venues are conducting themselves under state and local ordinances."  And after all, a multimillion-dollar nightclub will never be more important to a resort property than its non-restricted gaming license. Besides, the tune of a half-million-dollar fine speaks pretty loudly.

Following the announcement and subsequent penalty, other nightclub owners around the city have voiced their displeasure, some quietly and some not so quietly. “They are making us all look bad,” said one high-profile operator. “We have all worked hard to make Las Vegas the nightlife capitol of the world and when people read about club employees assaulting customers it just leaves a bad taste in their mouth.”

Another well-respected club owner said that after the announcement, they met with their resort property partner to fine tune their policies and procedures and make sure they were still on the same page. “Incidents in nightclubs happen. That won’t change, but it’s about how ownership and management deal with those incidents, through disciplining employees, etc., that makes all the difference.” He also said his group held monthly meetings with the property to discuss issues that arise so they can be handled in an organized manner. Additionally, this operator and his team have been proactive in reaching out to government agencies, where relevant, to make sure they are following proper protocol. “There is a reason we have not received these types of complaints,” he said.

Following the announcement, Prive opened its doors for business this past weekend and enjoyed busy crowds, but that doesn’t mean all is in the past. While no one would speak on the record, several sources indicate that the two investigations have brought other high-powered government agencies to the scene and that they have already begun to interview various people within the Las Vegas nightlife world to see if there is justification for more investigation. “They were here last week, asking questions and digging around,” a source confirms. Other sources, also remaining anonymous and off the record, are pointing to the hearing for the renewal of Prive’s liquor license, which isn’t all that far away, as the next challenge for the Opium Group in Las Vegas.

Lastly, it has long been rumored that key personnel from Prive are the so-called “whistle-blowers” for the IRS and its investigation into PMG, and you have to wonder if the recent involvement of other outside government agencies is related to a less-than-favorable outlook from the IRS in relation to the validity of information it received and how the investigation moves forward. 

In typical Vegas fashion, the story has taken on a life of its own with more questions than answers: Who else is being investigated? Who else will be fined? What other agencies are involved? Will any nightlife operators be removed from a property? Will the IRS investigation result in jail time for anyone? As the rumors circulate like buzzards overhead, nightlife operators are battening down the hatches and tightening the screws. Nightlife in Las Vegas has changed forever, and regulation, control and accountability are the new buzzwords of the business. Like the IRS investigation, the true depths of the Gaming Control investigation may not be known for some time, but until then there will certainly be lots to look out for. Stay tuned.

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