Pure launches compliance program in wake of IRS probe

By Richard N. Velotta

Thursday, May 27, 2010 | 3:28 p.m.

More than two years after a raid by Internal Revenue Service agents at the headquarters of Pure Management Group, the Las Vegas company announced today that it has launched a regulatory compliance program to keep it out of trouble with state and county regulators.

In a release issued today, the company, which operates the Pure nightclub at Caesars Palace, LAX at Luxor, Christian Audigier at Treasure Island and other clubs, said the plan was developed “with the assistance, cooperation and guidance of the Nevada Gaming Control Board.”

Pure had no immediate comment on the status of the IRS probe.

IRS agents raided Pure offices in February 2008. Authorities gave no specifics about what they were seeking, but nightclub insiders say the investigation focused on the common practice of employees’ soliciting tips from patrons to get inside the crowded clubs and whether all of those tips had been reported to the IRS.

Many of the tens of thousands of patrons who go to Pure, LAX and other clubs on the Strip each week learn quickly that they must wait for hours in line to get inside — unless they slip the doorman cash.

“Pure Management Group is committed to operating its world-class nightclub venues with a continuing focus on providing a premium club atmosphere, while preventing unlawful activities and maintaining seamless coordination with our gaming property partners,” said Pure CEO Ned Collett, who was chief operating officer when the raids occurred, left the company and then was hired back as the top executive.

“We offer visitors to Las Vegas as well as our local community a fun and exciting environment in all of our nightclubs,” he said in the release announcing the compliance program. “We feel that this cooperative relationship with the Gaming Control Board, the Clark County Department of Business License and other regulatory agencies will help Las Vegas retain its status as the premier destination for outstanding nightclub experiences.”

The release said Pure consulted on the compliance committee with MGM Mirage executives as well as the three members of the Gaming Control Board and Jerry Markling, the board’s chief enforcement officer.

Members of Pure’s compliance committee include Collett, Greenberg Traurig attorney Michael Bonner and Jess Ravich, managing partner and head of debt capital markets for international investment bank Houlihan Lokey.

The plan said emphasis would be placed on coordinating Pure’s security personnel management with their counterparts at resort properties. The committee would meet quarterly and make recommendations to Pure’s board of directors. In addition, the committee would maintain regular communications with the Control Board and the Clark County Department of Business License.

Casino companies have become more aggressive in forming independent compliance committees to head off regulatory problems, but the Pure committee is unusual in that it is a casino lessee.

Gaming regulators have called on their licensees to be more diligent in making sure their lessees are in compliance with state gaming regulations and liquor laws.

In addition to the Pure raid by the IRS, the Nevada Gaming Commission has fined the operators of Planet Hollywood for illicit activities at the Prive nightclub and other law enforcement officials have conducted investigations into illegal activities at clubs and pools.