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July 27, 2009 2:21 PM

Harrah's Hires Jenner & Block for Internal High Roller Investigation

Posted by Brian Baxter

Harrah's Entertainment, the world's largest gaming company, has had its fair share of legal problems in recent months.

For one, there's the company's ongoing restructuring efforts, which has kept a team of lawyers from Skadden, Arps, Slate, Meagher & Flom busy in negotiations with bondholders. (The firm has long advised Harrah's two private equity owners--Apollo Advisors and TPG Capital.)

Then last week a former hostess at a Harrah's Lake Tahoe casino sued star Pittsburgh Steelers quarterback Ben Roethlisberger, accusing him of raping her in a hotel penthouse in July 2008. The civil suit also accuses Harrah's Lake Tahoe executives of covering up the incident.

Now the Las Vegas Sun reports that Harrah's has retained Jenner & Block to conduct an internal investigation of charges that its Caesars Palace and Rio casinos in Las Vegas plied a wealthy philanthropist with drugs and alcohol so he'd continue his multimillion-dollar losing streak.

Terrance Watanabe, who made his fortune by selling the Oriental Trading novelty company to a private equity buyer in 2000, turned himself in to police earlier this year after reportedly losing more than $100 million in several Strip casinos. Watanabe was charged with owing $14.7 million to Caesars Palace and the Rio and writing bad checks to offset the debt.

But in May the Sun reported that Watanabe's lawyers were poised to blame their client's predicament on the actions of the two casinos themselves, alleging that a steady stream of booze and prescription painkillers were responsible for Watanabe's placing (and losing) multimillion-dollar bets.

In 2007 alone, Watanabe racked up $112 million in debts at Harrah's casinos, the Sun reports, including a whopping $94.1 million in losses at Caesars Palace and $12.2 million at the Rio. When he wrote bad checks to try and repay the casinos' markers, a grand jury indicted him on criminal charges.

Court documents filed by Watanabe's lawyers, David Chesnoff and Richard Schonfeld of Las Vegas's Chesnoff & Schonfeld, reveal that the defense plans to call three witnesses to testify that Harrah's employees kept Watanabe in a constant state of intoxication.

Even when Watanabe was already slurring and falling asleep at gaming tables, casino officials allowed him to keep gambling in violation of Nevada gaming regulations, Schonfeld claims. The staff even delivered alcohol and the highly addictive painkiller Lortab to Watanabe in his room, the Sun reports. 

A Harrah's spokesman told the Sun that the company would not comment on an internal investigation. A Jenner & Block spokesman also declined to comment.

The Sun reports that Jenner lawyers were in Las Vegas last week to interview two of the witnesses produced by Watanabe's lawyers at Chesnoff & Schonfeld, which also declined a request for comment. (Current Las Vegas mayor Oscar Goodman is a former name partner at the firm.)

Court documents show that Watanabe's lawyers estimate that their clients' losses amount to roughly 20 percent of gross revenue at Caesars Palace and the Rio in 2006 and 2007.

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