Regulators holding off to let court rule in Watanabe case

By Jeff German

Friday, Nov. 20, 2009 | 2 a.m.

Back in May, a high roller went public with his allegations that Harrah’s Entertainment not only kept him drunk but provided him drugs to induce his massive gambling losses.

Nevada gaming regulators say they are now investigating the claims but are reluctant to go beyond an initial phase because the accusations surfaced in the middle of a criminal case filed against the wealthy gambler for allegedly not repaying Harrah’s Entertainment $14.7 million in markers. Regulators don’t want to interfere with the criminal case, which is being prosecuted by the district attorney’s office, so they have stayed on the sidelines while it plays out.

This has been a common approach in such cases over the years, leading to some public perception that there’s not enough proactive regulation of the industry’s major licensees.

On Thursday lawyers for the high roller, Nebraska philanthropist Terrance Watanabe, may have forced the Nevada Gaming Control Board’s hand by filing a detailed complaint against Harrah’s Entertainment with the agency that gives regulators a blueprint for digging further into allegations against the world’s largest casino company.

Watanabe, 52, wants regulators to “suspend” Harrah’s license or take “other appropriate disciplinary action” against the company. In a 24-page letter to the Control Board, his lead attorney, Pierce O’Donnell of Los Angeles, wrote that “the public’s confidence in the integrity of Nevada casinos will undoubtedly be seriously shaken by the egregious facts of Mr. Watanabe’s case.”

“The only thing worse would be the Nevada casino regulators turning a blind eye to this notorious violation of law, blight on the state of Nevada’s repute and glaring detriment to the gaming industry.”

This week Gaming Control Board members said they regarded the allegations raised by Watanabe as serious, but stressed that they wouldn’t take regulatory action until the criminal proceedings against Watanabe are over.

“We’re not going to do anything until that criminal case is resolved,” Control Board Chairman Dennis Neilander said. “We don’t want to interfere with the criminal case.”

Board member Randall Sayre added, “From my perspective, this is a very serious matter with regards to the allegations. We are watching it closely and reserving our options as to whether or not to take any further action.”

A New Jersey official said regulators there follow a similar approach when allegations of wrongdoing involving a licensee arise out of another law enforcement agency’s criminal investigation.

O’Donnell, however, told the Sun that he hoped Nevada regulators would now launch a full-blown investigation into the information he provided them. If the Control Board doesn’t do that, it would be failing to exercise its statutory responsibility to the public, he alleged.

“The Control Board is not some neutral referee sitting on the sidelines,” he said. “Its job is to investigate and prosecute licensees for known violations of the law.”

Neilander and Sayre could not be reached for comment late Thursday.

Harrah’s spokesman Gary Thompson declined to comment, and so did a lawyer retained by Harrah’s, Dominic Gentile.

But in an August letter to Watanabe’s lawyers, Gentile said the company views Watanabe’s accusations as “meritless” and part of an attempt to “coerce” Harrah’s into encouraging the district attorney to drop the criminal case. Gentile emphasized in the letter that Harrah’s is the victim here, not Watanabe. He warned that Harrah’s would file a countersuit against Watanabe for abusing the legal process if Watanabe sued Harrah’s.

O’Donnell filed Watanabe’s lawsuit against Harrah’s on Thursday.

In O’Donnell’s complaint to the Control Board, he said Gentile’s letter was part of an effort by Harrah’s to cover up its misconduct and deflect legal responsibility from the company.

O’Donnell also alleged that Harrah’s “appears to be engaging in witness tampering and intimidation” by getting people to sign declarations indicating Watanabe was never intoxicated at its casinos.

Watanabe’s lawyer provided regulators with the names of nearly a dozen witnesses who he says could substantiate Watanabe’s accusations that Harrah’s officials unlawfully preyed on his gambling addiction and supplied him nonstop with alcohol and prescription painkillers as he racked up $112 million in gambling losses in 2007.

A large portion of Watanabe’s gambling that year occurred at two Harrah’s properties, Caesars Palace and the Rio. He had switched to the casinos in June 2007 after Wynn Las Vegas Chairman Steve Wynn recognized that Watanabe was an alcoholic and compulsive gambler and no longer allowed him to play at his resort, O’Donnell wrote.

O’Donnell likened Harrah’s treatment of Watanabe over the next six months to “drug dealers feeding a heroin addict’s deadly habit” and said it “warrants the most severe sanctions.”

Casino security officers kept watch over Watanabe during this time under orders from the “highest management levels” — not to protect him but to help casino officials control his movements to keep him gambling, O’Donnell wrote.

He said Watanabe was “reduced to a robot-like existence” at Caesars Palace, where he stayed for months during his epic gambling binge.