Tuesday, Dec. 31, 2013 | 4:32 p.m.
The Nevada Supreme Court on Tuesday rejected the appeal of two unhappy shareholders of MGM Resorts International — known as MGM Mirage at the time of filing — who complained that current and former officers and directors, including the late Gov. Kenny Guinn, conducted illegal insider trading.
The court said Charles Kim and Sanjay Israni failed to follow rules that require making a demand on the company's board of directors to consider or take action on the alleged problems before filing suit.
Kim and Israni maintain that a demand on the board of directors before filing suit would have been futile. But attorneys for the company and the directors said the requirement to serve a demand on the directors "serves to weed out baseless lawsuits and to encourage shareholders to try to resolve their grievances using intracorporate remedies, like the pre-suit demand, before bring suit."
Kim and Israni claimed officers and directors breached their fiduciary duties in connection with the CityCenter project in Las Vegas. Their suit claimed the costs of the project skyrocketed to $9.2 billion and that directors withheld information about cost overruns from the public. The project nearly drove the company to bankruptcy, according to the suit.
But before the bottom dropped out, some officers and directors privy to MGM Resorts' financial instability sold their stock at "near all-time high profits, collectively reaping close to $81.5 million in proceeds," the court brief filed on behalf Israni and Kim said.
The two shareholders say the cost overruns and other problems were not revealed until January 2009, when the Las Vegas Sun published a story about the flaws in the construction of the center's Harmon tower.
In response to the problems disclosed, MGM’s stock dropped, which has resulted in several other shareholder lawsuits.
In addition to Guinn, defendants named in Kim and Israni's suit were Willie Davis, Alexis Herman, Roland Hernandez, Kirk Kerkorian, Anthony Mandekic, Rose McKinney-James, Daniel Taylor, Melvin Wolzinger, Robert Baldwin, Gary Jacobs, James Murren, J. Terrance Lanni and Daniel D'Arrigo.