Sam Nazarian, the businessman behind the development of SLS Las Vegas, was unable to persuade state regulators on Wednesday to let him be fully involved with gambling operations at the Strip’s newest casino-resort.
During a lengthy hearing in Carson City, the three members of Nevada’s Gaming Control Board grilled Nazarian and his representatives on his professional and personal background. They focused largely on Nazarian’s relationship with a man who allegedly extorted him, as well as his admission of using cocaine earlier this year.
After more than three hours of questioning, the board voted 2-1 to recommend Nazarian for a limited license with a series of restrictions. Board chairman A.G. Burnett and member Terry Johnson voted in favor of giving the license to Nazarian; member Shawn Reid voted against.
The board’s recommendation, if finalized by the Gaming Commission on Dec. 18, would continue to leave Nazarian excluded from the casino side of the business for a year, after which he’s to come before the board again. He’s also required to submit to drug testing.
Nazarian, the CEO of SBE Entertainment Group, is a well-known Los Angeles nightlife and hospitality tycoon. In 2007, he took over what was then the Sahara, then closed it four years later. In August, after a $415 million renovation, the property reopened under the SLS brand.
SLS Las Vegas was the biggest resort to open on the Las Vegas Strip since the Cosmopolitan debuted in 2010, and Nazarian was hailed for his role in aiding the city's recovery from the recession.
Since the SLS opened, Nazarian has been unable to be involved in the casino operations while he works his way through the regulatory process. Gaming at the SLS is overseen by the property’s president, who in turn reports to the executive managing director of majority owner Stockbridge Real Estate.
Among the regulators' concerns were payments Nazarian made to a convicted felon named Derrick Armstrong. Nazarian and attorneys representing him described the connection between the two men as a professional one that eventually turned sour, to the point that Armstrong allegedly extorted Nazarian.
After Nazarian first invested in a business of Armstrong’s, Nazarian and his attorneys say that Armstrong demanded more funds at different points over several years. Nazarian made payments through settlements on multiple occasions.
Joseph Taylor, who represented Nazarian, said Armstrong leached on to the resort owner.
“This isn’t the first time I’ve had to deal with this kind of parasite,” he said.
Andrew Winograd, one of Nazarian’s legal representatives, told regulators that he bore most of the blame for a recent instance in which Nazarian gave Armstrong money. He said he recommended that Nazarian make another payment Armstrong last year.
He said that he believed Armstrong wouldn’t bother Nazarian anymore and that he was “trying to get his life straight.”
“I was wrong,” Winograd said. “I let Sam down. I let the company down.”
Nazarian told regulators he takes full responsibility, saying that “the buck does stop with me.” Tony Cabot, another of his representatives, urged the board to look past Nazarian’s relationship and more strongly consider his extensive business experience.
But there were other concerns. Board members were also alarmed by payments Nazarian admitted to making to two men who’ve spent time in prison, Hai Waknine and Suge Knight, for $83,000 and $90,000, respectively, because of their alleged connections to Armstrong.
In total, Nazarian paid around $3 million to Armstrong or others connected to him, according to the board.
Regulators also questioned Nazarian about a recent episode in which Nazarian confessed to using drugs. In April, Nazarian went on a trip to Mexico with friends and used cocaine, he said.
After Johnson asked Nazarian when was the last time he used drugs before that episode, Nazarian said it was years, but couldn’t give a specific time. He insisted that his drug use this year was an “isolated incident.”
“It was never a material part of my life,” Nazarian said.
Johnson was dissatisfied with Nazarian’s responses. He said he had hoped Nazarian would be more forthcoming when addressing his drug use.
The board did at times acknowledge Nazarian’s good work. They were generally uncomfortable with the idea of outright rejecting his application, given the positive impact his business has had in the region.
“I know that it’s been hard talking about these things,” Burnett said. “What we’ve been talking about is the tip of an iceberg — and the rest of that iceberg is your success in business.”