Las Vegas Sun

December 18, 2018

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Real estate developer rejected by board

Luke Brugnara tried to portray himself as the top real estate developer in the United States, a rising star with the connections and funding necessary to give the north end of the Las Vegas Strip a new start.

Nevada gaming regulators, however, saw an entirely different version of Brugnara -- a young man with a long track record of poor judgment, questionable accounting and financial practices and volcanic eruptions of temper.

In the end, Brugnara's business connections weren't enough to overcome that image, as the state Gaming Control Board voted unanimously Tuesday to deny his application for a Nevada gaming license.

The Nevada Gaming Commission will have the final say on his license application March 22. However, the commission must vote unanimously in favor of Brugnara, 37, to overturn the control board's recommendation.

The board's vote came after a six-hour hearing that saw Brugnara erupt several times at the questioning of board members.

"I'm being treated like a 5-year-old kindergartener in front of the principal," Brugnara fumed halfway through the hearings. "How do you expect people to come into this community and put up hundreds of millions of dollars ... and go through this? No one in the world will. I hope (Desert Inn owner) Steve Wynn lives to be 2,000 years old, because no one else will come in after this.

"This is (expletive)! This is not the way you do billion-dollar deals!"

But at the conclusion of the hearing, board members said the evidence against Brugnara -- which ranged from allegations of death threats to accounting irregularities -- made it impossible for them to take any course but denial.

"I don't even think you come close to meeting the suitability requirement for operating a gaming establishment in this state," said board member Bobby Siller. "I'm not sure I'd even support an application from you for a work card."

Denial of a license application is a rare move, and is essentially a formal censure by the state's gaming regulators. Nevada gaming license holders are prohibited from doing any business with denied applicants without prior approval.

Brugnara first entered the Strip market in 1999, when he acquired the Silver City casino on the Strip's north end. The property closed soon after, and Brugnara said he wanted to build a massive, San Francisco-themed casino resort at the site. On Wednesday, Brugnara sought a license that would have allowed him to re-open the property, which does not have a hotel. He claimed he had a commitment from Wall Street investment firm Jeffries & Co. to raise $550 million for the project in a bond sale.

But it became clear shortly after the hearing started that Brugnara would have a tough time convincing the board to let him move ahead. The most damaging allegations were claims by four separate individuals that Brugnara had made threatening statements to them.

One claim came from a woman with whom Brugnara had an affair. He said during the hearing that it was likely he was the father of her child, and said he was making voluntary child support payments of $2,000 a month to her.

"I told her I'll continue to support (the child) because I want to," Brugnara said. "It's by my goodwill that she's even able to take care of that child."

The woman left her husband shortly after finding she was pregnant with the child, and the two began a legal battle over how much Brugnara should pay her. Brugnara claimed that on a number of occasions she threatened to come to his home with the child. He described the situation as similar to that portrayed in the movie "Fatal Attraction," with the woman constantly harassing him with calls to his home.

Last March, the woman filed a complaint with the San Francisco police against Brugnara, alleging he'd made threats against her life. The woman claimed she was told by Brugnara that "I've never seriously threatened anyone, but if you (expletive) with me, I'll kill you."

At a later date, her ex-husband claimed that Brugnara had told him that "the police won't help you ... if you tell them anything, you'll end up at the bottom of (San Francisco) Bay."

Brugnara pointed out that the district attorney's office declined to pursue either matter, and that both the woman and her ex-husband retracted the statements in letters sent to the control board.

Siller didn't fully buy this retraction, implying the woman could be influenced by the monthly payments being made by Brugnara.

It wasn't the only incident of threats cited by board members in the hearing. In one instance, a San Francisco city attorney received a restraining order against Brugnara after claiming Brugnara made a slashing gesture at his throat in a courtroom, then allegedly said, "You're dead." A second city attorney confirmed seeing the gesture.

In a separate incident, a Merrill Lynch executive received a restraining order against Brugnara after Brugnara allegedly asked him if he knew "what it's like to get your ass kicked."

Asked about a lawsuit in which Brugnara companies are accused of failing to pay $709,000 in real estate commissions to Colliers International for a Las Vegas business deal, he said the dispute is being moved to mandatory arbitration.

Court records show a Las Vegas judge on Feb. 2 denied Brugnara's request to dismiss the suit and ordered both parties to arrange for binding arbitration.

Gaming Board members appeared to be more concerned about the alleged death threats and financial irregularities uncovered by state investigators.

"When I look at these things, it looks like a pattern to me," said board Chairman Dennis Neilander.

Brugnara portrayed the attorney as having a political vendetta against him, claiming the attorney had filed hundreds of frivolous lawsuits for code violations that weren't being made against other San Francisco landlords. He said he was loosening his tie and collar, not making a throat-slashing gesture.

"There was a political falling out between my uncle and the mayor," Brugnara said. "Three weeks later I had 200 retroactive violations. If I don't get my license because of them, they've succeeded."

When asked why a second attorney would corroborate the throat-slashing story, Brugnara implied the two were acting in concert because they were homosexual.

Board members didn't buy it.

"I find it very difficult to believe four individuals, saying they were physically threatened by you ... would independently make these thing up," Siller said.

Board members also questioned numerous discrepancies in Brugnara's financial records. In one instance, loan applications filed by Brugnara showed a substantial difference in reported income from his federal tax returns. In another, Brugnara sent an incorrect copy of his tax return in with a loan application. In yet another case, the board noted big differences in the net worth Brugnara reported to the city of San Francisco and that reported to the control board.

Brugnara said all the incidents weren't intentional efforts at fraud -- rather, he said it was because of poor record-keeping practices. All of Brugnara's financial books were kept on paper, rather than electronically, and Brugnara regularly mingled personal and business funds in the same bank account.

"My strong point is getting financing," Brugnara said. "I am not good at record keeping. But I'll do whatever I need to do to be in full compliance at every level."

Board members, however, noted that their primary job was to ensure gaming taxes were being paid properly -- and said poor record-keeping would make that job nearly impossible.

In the end, Neilander said, the history of "reckless conduct" made it impossible to support Brugnara's application. Board member Scott Scherer then noted that Brugnara had reported losses for years to the Internal Revenue Service -- and expressed concern that a Brugnara-run casino might not be financially viable.

Scherer's remark pushed Brugnara over the edge. In a raging monologue, Brugnara accused the board of being little more than a group of bureaucrats under the sway of a small cartel of businessmen controlling the Strip.

"I find it ludicrous that you three can sit here and make judgments about my business acumen," Brugnara said. "You have people on the Strip just winding you up. I have more business acumen than anyone in this room. Steve Wynn can't even get a forward (financing) commitment. I have a commitment."

Several minutes into the tirade, Siller lost his patience with Brugnara and cut him off.

"You're only making things worse," Siller said. "You've only proved my point."

Brugnara said he believed the commission would side with him later this month. If the commission does uphold the board's decision, Brugnara hinted he would sue.

"I'm a big believer that if things aren't handled fairly, the U.S. is still built on the Constitution," Brugnara said. "I am not going to give up. If I feel I'm right, I'll take it as far as I can take it."

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