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Bankruptcy follows company’s failed plan for Las Vegas casino

Updated Monday, Nov. 29, 2010 | 8:20 p.m.

Indian casino management figure R. Shawn Ellis put one of his companies into Chapter 7 bankruptcy liquidation Wednesday after Ellis was hit with lawsuits and plans for a casino resort in Las Vegas fell through.

Ellis Las Vegas Inc., in its filing in U.S. Bankruptcy Court for Nevada, listed liabilities of $1.4 million against assets of $10,802.

In a statement on the bankruptcy issued Friday, the company said: "The business model Ellis Las Vegas was predicated upon no longer functions in the current economy and Mr. Ellis is moving on to unrelated business ventures."

Records show Ellis Las Vegas has so far this year lost $10.295 million after losing more than $870,000 in 2009 and losing $9.73 million in 2008.

The bankruptcy filing says Ellis Las Vegas officers and shareholders include R. Shawn Ellis, Ellis Development LLC, former Ellis Las Vegas attorney Sanjiv Dhawan, the Muckleshoot Indian Tribe in Auburn, Wash.; and the Shoshone-Bannock Indian Tribe in Fort Hall, Idaho.

But Dhawan said Monday he's never been a shareholder of Ellis Las Vegas or any other entity owned or managed by R. Shawn Ellis.

"I served as a non-employee general counsel for Ellis Las Vegas and resigned that position and ceased all representation of the entity and any affiliation with Ellis in 2009. I represented Ellis Las Vegas only as to its non-litigation corporate legal matters and I had absolutely no management role or authority,'' Dhawan said.

Creditors in the case include the San Pasqual Band of Mission Indians in Valley Center, Calif., with a claim of $120,000; SSB Gaming in Scottsdale, Ariz., with a claim of $180,000; and the Kansas City, Mo., office of architectural firm HOK Sport Inc., owed $350,000.

Codebtors in the case are Ellis Gaming and Entertainment Inc. and Ellis Partners Inc.

Another creditor is the Elk Valley Rancheria, which has a casino in California and which sued Ellis personally in 2008 in Clark County District Court in Las Vegas.

That case, which was later moved to U.S. District Court in Las Vegas, also named as defendants Ellis Partners Inc., Ellis Partners LLC and Ellis Gaming & Entertainment LLC.

As related in the lawsuit, an Ellis company had a casino management contract for the tribe based in Crescent City, Calif., where it has the Elk Valley Casino.

The suit says Ellis in 2006 asked the tribe for a loan that could be converted into an equity interest in Ellis Partners LLC.

Ellis Partners then borrowed $480,000 from the tribe. Upon conversion of the loan to an equity interest, the tribe would own an interest in "Ellis Las Vegas" -- a proposed casino resort in Las Vegas.

The suit says the tribe was told its investment was secure because its funds and funds from other tribes would be used to buy land for the casino resort; that zoning, licenses and permits were in progress; that financing was imminent either from other tribes or sources in Dubai; that the value of the land proposed for the project had increased 25 percent in three weeks and that the project included investors from international gaming companies and foreign countries.

The lawsuit says that in 2007, the tribe was told that four more tribes would contribute another $50 million to $100 million for the project. Those tribes were the San Manuel, Mohegan, Seminole Tribe of Florida and the Soboba Band.

Later in 2007, four more tribes were named as planned investors: Viejas Band of Kumeyaay Indians, Shoshone-Bannock, Gila River Indian Community and the Muckleshoot -- with the Shoshone-Bannock and Muckleshoot each believed to have invested $5 million in the Las Vegas project.

But in 2008, the lawsuit says, Ellis Gaming was not earning revenue from its management of a Hopland Band of Pomo Indians casino north of Santa Rosa, Calif., and it lost its management deals and associated revenue for the Muckleshoot tribe and the Elk Valley casino.

The tribe said it terminated its casino management deal with Ellis Gaming Elk Valley Management LLC due to the Ellis company's "failure to comply with licensing requirements and inadequate performance -- including significant operations problems and failures to perform as required under the management agreement.''

Later in 2008, the suit says, Ellis represented that $200 million in funding was coming from Dubai for the Las Vegas project -- but the funding didn't arrive and Ellis defaulted on his loan to the Elk Valley tribe.

The suit says other tribes, except the Shoshone-Bannock and Muckleshoot, also did not invest in the Las Vegas project.

While the tribe in December 2007 had informed Ellis it would like to convert the loan into an equity interest in Ellis Partners, it says that didn't happen as Ellis considered adding investors to the Las Vegas casino project and because of other factors.

The suit sought more than $551,000 in damages plus interest and charged "R. Shawn Ellis made false representations with the intention to deceive and defraud plaintiff and induce'' the tribe into loaning Ellis the money.

In responding to the suit, attorneys for Ellis charged that nothing was owed since the tribe "irrevocably elected to convert the notes to equity interests'' and that the tribe was then obligated to apply for National Indian Gaming Commission (NIGC) approval for the deal but failed to do so.

But U.S. District Judge Kent Dawson in September granted the tribe's motion for partial summary judgment, ruling: "The court finds untenable defendant's position that plaintiff acted in bad faith, or was obligated to apply for NIGC approval under the terms of the promissory notes."

Four other lawsuits are listed in the Ellis Las Vegas bankruptcy filing.

The filing says Ellis Las Vegas settled a lawsuit last year that had been filed against it and R. Shawn Ellis in Minnesota state court alleging breach of contract. The suit was filed by Craig Keith Potts. Records didn't specify if that was the Craig Keith Potts who formerly owned casino industry supplier Cash Systems Inc. Terms of the settlement were not disclosed.

A person named Craig Potts also was listed in the bankruptcy filing as being associated with SSB Gaming in Scottsdale.

The filing noted a breach of contract suit -- filed April 15 by Dhawan against Ellis Las Vegas and several codefendants in Clark County District Court in Las Vegas -- was dismissed May 20.

Dhawan, a California attorney, said in the suit he was senior vice president and general counsel of Ellis Las Vegas and Ellis Gaming and Entertainment LLC and provided legal services for the Ellis entities from January 2007 to November 2009.

The suit charges the defendants failed to pay him all the money that was due under promissory notes of $70,000 and $82,500.

Dhawan also charges that he was told by R. Shawn Ellis in October 2009 the Ellis entities could no longer pay for his legal services because they were out of money.

At that time, the lawsuit charges, a company called EHI backed out of a deal to provide Dhawan a 10 percent ownership interest in EHI in exchange for Dhawan's work in behalf of EHI and the Ellis corporate defendants.

The suit says EHI had been created by R. Shawn Ellis and fellow executives Simon Keith and Matthew Pearson to fund the operations of the Ellis corporate defendants.

EHI was a company that would "pursue a bond offering of senior life settlement insurance policies," the lawsuit said.

The suit was dismissed because of an agreement by the parties, terms of which were not disclosed.

Two more lawsuits in Clark County District Court involved Insurance Company of the West, which claimed to be owed $10,865 for workers' compensation insurance provided to Ellis Gaming & Entertainment LLC; and Pacific Showcase, which said it was owed nearly $69,000 for millworking services at the Ellis Gaming corporate office on Post Road in Las Vegas.

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