Monday, Jan. 10, 2011 | 10 a.m.
Caesars Palace is suing the millionaire who owns the famed Beverly House estate in Beverly Hills, Calif., charging he fraudulently ran up $500,000 in unpaid gambling debts before filing for bankruptcy.
An attorney for Caesars Palace last week filed an adversary complaint in the Los Angeles bankruptcy case of businessman Leonard M. Ross.
Ross is known for owning the Beverly House, formerly known as the Hearst-Davies estate that was named for publisher William Randolph Hearst and actress Marion Davies.
The estate was put up for sale for $95 million, according to a Sept. 20 announcement regarding "unusual circumstances" that led to Ross filing for Chapter 11 bankruptcy reorganization on Sept. 15.
The estate hosted John and Jacqueline Kennedy on their honeymoon and was featured in the movies "The Bodyguard" and "The Godfather" -- the latter in a scene in which a movie producer awoke to find the bloody head of his prize horse in his bed.
Ross, known for owning companies including Rossco Holdings Inc., listed assets of nearly $133 million against liabilities of nearly $82 million in his bankruptcy filing.
Among the creditors listed in the filing are MGM Resorts International's Bellagio hotel-casino on the Las Vegas Strip, owed $350,000 for "cashed check and hotel/gaming;" and Caesars Entertainment Corp.'s Caesars Palace, owed an unknown amount for a "personal advance."
Caesars Palace, however, specified in its complaint last week that on Aug. 1 and Aug 2, Ross signed eight gambling markers totaling $500,000.
The markers -- check-like negotiable instruments signed by Ross against one of his bank accounts -- were presented to Pacific Mercantile Bank for payment dated Sept. 24, after the bankruptcy filing, but were returned and marked "closed account," Caesars' filings say.
"Defendant intended to, and did, deceive plaintiff by inducing plaintiff to extend credit to him for the purpose of gambling," Caesars Palace charges in its complaint, which asks the bankruptcy court not to discharge, or extinguish the debt.
"On the precise days and times that defendant signed and tendered the eight credit instruments/negotiable instruments at issue to plaintiff, he was devoid of any intention to honor the credit instruments unless his gaming activities were financially successful," Caesars charged in its complaint.
"Prior to the date and time plaintiff presented the credit instruments/negotiable instruments for payment, defendant wrongfully closed his financial account; hence defendant knew the credit instruments/negotiable instruments were worthless and would be dishonored.
"Defendant failed to notify plaintiff that the credit instruments/negotiable instruments were worthless and would be dishonored when plaintiff presented them for payment. Defendant’s conduct in failing to disclose that he had wrongfully closed his financial account assured that the eight credit instruments/negotiable instruments at issue would be dishonored, constitute defendant’s intentional and deliberate fraud against plaintiff, or otherwise obtaining credit by false pretenses and material representation," Caesars charged.
The casino added in its complaint: "The credit instruments/negotiable instruments and other documents at issue herein directly related to defendant’s financial condition at the time he signed and tendered them to plaintiff. Defendant knew that the aforementioned writings which he signed were materially false, as defendant represented that the credit instruments/negotiable instruments would be honored when plaintiff presented them for payment."
In the statement announcing the Beverly House was being offered for sale, Ross indicated his bankruptcy was tied to disputes with two banks.
A message for comment on the Caesars complaint was left with his bankruptcy attorney.