Lender alleges Greek Isles casino was mismanaged

By Steve Green

Thursday, April 23, 2009 | 11:35 a.m.

A lender is charging in newly filed court papers that one of the owners has multiple felony convictions and the Greek Isles hotel-casino in Las Vegas was mismanaged prior to a lender seizing control of the property in March.

Canpartners Realty Holding Co. IV LLC made those allegations in a motion filed Wednesday in Bankruptcy Court in Delaware, where a group of creditors on April 6 filed an involuntary Chapter 11 bankruptcy petition against GIH-SPE II LLC, the investment group that had controlled the Greek Isles.

Canpartners is an affiliate of Canyon Capital Realty Advisors of Los Angeles, a lender on several small casino deals in Las Vegas in recent years. Canpartners says it is owed more than $56 million for a loan against the 202-room property, and last month succeeded in having a local court install outside gaming executive John Groom as receiver of the property.

With the support of the debtors that filed the Chapter 11 petition, Canpartners on Tuesday asked the bankruptcy court to leave Groom in charge of the property for now. The court has not yet ruled on the motion.

In their court filings, Canpartners and Groom said the property is losing an undisclosed amount of money. The losses are so great that the Greek Isles not only can't make its payments on the Canpartners loan, but can't meet operating expenses. Canpartners said it likely will have to provide additional funding to keep the property running.

The creditors initially proposed installing one of the Greek Isles owners, Harold Rothstein, as principal operating officer of the property. But Canpartners said in its court filing that Rothstein likely wouldn't be licensed for gaming because of multiple felony convictions against him, including one in a 1984 Colorado case involving wire fraud and false statements to a bank; and another in a 1988 Illinois case involving wire fraud and the fraudulent use of credit cards.

Online court records today confirmed convictions against a Harold Rothstein in federal courts in Colorado for a 1984 case and in Illinois for a 1988 case, along with probation and parole violations in 1993 related to both cases.

Canpartners said in its court filing Tuesday that the former manager of the property on Convention Center Drive, near the Las Vegas Strip, Convention Center Drive Hotel and Casino LLC, "engaged in a pattern of negative and unproductive conduct."

This includes "failure to pay certain real estate and other tax obligations, potentially violating the liquor laws and jeopardizing the deliveries of food and liquor orders," Canpartners charged.

Groom, who is being paid $195 per hour for his work as receiver, said in court papers he hired EG and GI Hospitality Group LLC to run the nongaming portions of the hotel and to be the employer of the hotel's employees. Groom, the former president of Caesars Palace, is currently chief executive of gaming development company Epic Gaming LLC in Las Vegas.

Attorneys for Canpartners today declined to discuss the case, including the lender's plans for the property, where gaming has been operated by United Coin Machine Co. Efforts to reach Rothstein for comment have been unsuccessful and neither he nor the former management company have responded in court to the allegations leveled by Canpartners. Rothstein has been managing member of a company called DI Development Group.

In suing to have Groom appointed as receiver earlier this year, Canpartners alleged the Greek Isles wasn't being properly maintained and wasn't paying its bills promptly, opening itself up to liens. It claimed customers and potential customers were being scared away by comments by management that the property was being foreclosed on and would be imploded. Canpartners said the Greek Isles had recently lost a contract with Delta Air Lines to house its crews during layovers in Las Vegas. Canpartners also had said Convention Center Drive Hotel and Casino LLC had hired a sister company, Mark IV Hospitality Inc., as the hotel manager and that Mark IV was being overpaid.

Lawsuits remain pending, in the meantime, against Rothstein and others involved in the property.

Palomar Advisors LLC last year sued GIH-SPE I LLC, DI Development Group and Rothstein, claiming Palomar had agreed to buy the Greek Isles in 2007 for $95 million, but couldn't close on the deal because the defendants failed to provide needed financial information and because Rothstein was involved in disputes with unnamed lenders. Also suing DI Development, GIH-SPE and a company called Hi-Tops Hospitality group was Jones Lang LaSalle Inc., which says it's owed $153,000 for work on the property.

The creditors that pushed the property into bankruptcy earlier this month include: ICAG Inc. of Henderson, owed $4.95 million; Windy Point Properties, Silverdale, Wash., owed $1.47 million; Dawn Place LLC of Silverdale, Wash., owed $522,499; Foch Investments of Los Angeles, owed $607,755; Hayner Group, Pittsburgh, owed $232,050; Beresford Bancorporation of Britton, S.D., owed $704,711; Bigwall LLC of Scottsdale, Ariz., owed $847,316; Frank O'Donnell of Las Vegas, owed $958,641; and Economy Currency Exchange, Chicago, owed an unclear amount.