Dunes Hotel Files for Chapter 11 : Remains Open Despite Financial and Legal Problems
The Dunes Hotel & Casino, faced with a growing number of financial and legal problems, filed for Chapter 11 protection in U.S. Bankruptcy Court on Wednesday.
The filing placed in limbo a series of legal maneuvers under way against the troubled Strip resort, which remained open for business.
Officials of Las Vegas-based Valley Bank had been scheduled to appear Wednesday morning in District Court to ask for a receiver to oversee the hotel, which defaulted in September on a $68.6-million loan. Attorneys for the resort filed the Chapter 11 papers shortly before the District Court hearing was scheduled to begin, and the hearing was canceled.
In addition, a federal judge had set a deadline of 5 p.m. Wednesday for the hotel to come up with a $2-million bond to protect the Culinary Union. The union earlier obtained a $2.1-million judgment for money that the hotel owed the Culinary Union’s health and welfare fund.
If the resort had not obtained the bond, U.S. District Judge Lloyd George had said that he would lift a temporary restraining order that he granted the hotel Friday. The order prevented federal marshals from taking $448,000 in cash from the resort’s casino cage last Friday to pay on the Culinary judgment.
Gaming authorities had been watching the developments, concerned that the casino would fall below its state-mandated cash balance if federal marshals returned to the hotel Wednesday night and removed the cash. Such action would have forced the closing of the casino.
The federal court action was stalled by the Chapter 11 filing.
Bankruptcy papers listed the assets of the Dunes at about $180 million and liabilities at $117 million.
Wednesday’s filing was just the latest in a series of financial problems for Dunes majority owner John Anderson, a Davis, Calif., farmer.
In September, it was revealed that Anderson was facing lawsuits charging that he had defaulted on loans totaling more than $56 million. The loans included $32 million to Eureka Federal Savings & Loan, in the San Francisco Bay Area; $22 million to Crocker National Bank, and $2 million to Aetna Life Insurance Co.
Anderson’s attorney, Kent Calfee, said the damages owed Anderson in connection with the defaulted loans would exceed the amount of his obligations.
Late Tuesday, the resort filed a counterclaim against Valley Bank, accusing the bank of plotting to force the sale of the Strip resort to Golden Nugget Inc. at a “distress” price. Attorneys for the Dunes also alleged that the bank’s suit against the resort, filed last month in state court, was part of an effort to force the property into filing Chapter 11 bankruptcy.
The bank’s intention was to “promote the selfish business interest of Valley Bank or affiliates of Valley Bank,” attorney Steven Glade said in the suit.
Both Valley Bank and Golden Nugget officials denied the charges in the resort’s counterclaim, with Valley Bank President Peter Thomas saying that the action was designed to “throw up a smoke screen” and delay the bank’s efforts to get a receiver for the resort.
Golden Nugget general counsel Bruce Levin said the Dunes’ accusations about the Nugget’s intentions were “incredible, preposterous. It’s ludicrous.”
Valley Bank was instrumental in helping Golden Nugget Chairman Stephen Wynn get started in the gaming business.
Golden Nugget reportedly made a $115-million offer for the Dunes in the spring of 1984, and Levin said the company has “a continuing interest” in the resort, which includes prime Las Vegas Strip real estate.
