A view of the Las Vegas Strip looking southbound from Flamingo Road Sunday, March 22, 2020.
Thursday, Dec. 3, 2020 | 2 a.m.
Nevada may have been cheated out of more than $100 million in hotel room tax revenue in recent years by a host of online travel companies, according to a lawsuit.
Filed in Clark County District Court in April, an 11-page civil complaint names nearly 30 online travel entities that are alleged to have bilked the state out of tens of millions in room tax revenue over several years.
According to the suit, companies including Expedia Inc. (which owns the brands Orbitz and Hotwire), Booking Holdings Inc. (which owns Priceline), Tripadvisor and Hotel Tonight have been “knowingly engaged” in a “scheme” to short the state for years.
It works, according to the suit, like this: A company purchases hotel rooms on a wholesale basis for a certain price, say $150 for a night, but then attempts to sell the room at a higher price.
Instead of reporting the price that the room is purchased at from the travel website, say $175, the company has been reporting the original price.
“We believe damages, along with penalties and fees, things like that, could easily exceed $100 million,” said Michael Cristalli, a partner at the law firm Clark Hill, which is representing the plaintiffs, Sigmund Rogich and Mark Fierro, named in the suit.
Rogich and Fierro, both communications company executives in Las Vegas, are acting as whistleblowers.
In legal speak, the suit is a “qui tam” filing, which references an area where private citizens can bring litigation in cases where government bodies could potentially recoup money.
The whistleblowers would then receive a portion of any financial penalty that might be awarded.
Though filed in April, the suit wasn’t made public until this month because the state attorney general’s office had a grace period to decide if it wished to join the litigation team. It ultimately declined, Cristalli said.
When contacted for this story, most of the companies listed in the suit did not respond, although a spokesman for Tripadvisor said it’s the firm’s policy to not comment on “pending litigation.”
Though visitation is down significantly this year in Las Vegas because of the coronavirus pandemic, hotel room tax revenue adds up quickly in a city that has close to 150,000 available hotel rooms during a normal year.
During the 2018 fiscal year, for example, close to $800 million in room taxes were collected in Clark County alone.
Depending on where a hotel or resort is in the county, there’s up to a 13% “transient lodging tax” imposed for each room under state law.
The largest share of the state’s room tax revenue pie — about 40% — is allocated for education funding, both at the state and county levels.
“The bad news is this money should have been going to Nevada’s schools, law enforcement organizations, infrastructure and a broad array of other needs of its citizens,” said Fierro, president of Fierro Communications, in a statement. “The good news is that, when we win this case, it will rank among the biggest windfalls that Nevadans have experienced since the landmark 1998 settlement with the tobacco industry.”
Because of the economic downturn this year for the state’s dominant industry — tourism — Nevada is reeling for cash.
Any windfall from the lawsuit would be welcomed, though Cristalli admits the case could be years away from any type of resolution.
Framework for the case, Rogich said, was in the works long before COVID-19 materialized.
“I had researched this for many years, but the times were so much better that it just didn’t get the traction it deserved,” Rogich said. “I stayed on it and, because Mark has worked closely with our firm on various other projects, this was a natural fit.”
Cristalli said the timing of the suit shouldn’t hold any special significance.
“I don’t think the timing of the lawsuit has anything to do necessarily with the economic downturn, but I think it’s opportune,” Cristalli said. “The state needs this money. It’s owed this money, that’s what the reality is.”
As far as he knows, Cristalli said the practices alleged in the suit are ongoing.
A spokeswoman for the Las Vegas Convention and Visitors Authority, which receives much of its funding through room tax collection, said Wednesday that officials with the organization hadn’t yet read the filing.
Rogich and Fierro said they believe they will have public opinion on their side.
“It is really cut and dried,” Fierro said. “Nevada was shortchanged by hundreds of millions of dollars.”
