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Caesars Palace: millionaire’s $ 500,000 gambling debt before bankruptcy was a fraud


Monday January 10, 2011 | 10:00 a.m.

Caesars Palace is suing the millionaire owner of the famous Beverly House estate in Beverly Hills, California, accusing him of fraudulently accumulating $ 500,000 in unpaid gambling debt before filing for bankruptcy.

A Caesars Palace lawyer last week filed an adversary complaint in the New Mexico Bankruptcy case of businessman Leonard M. Ross.

Ross is known to own the Beverly House, formerly known as the Hearst-Davies estate, named after publisher William Randolph Hearst and actress Marion Davies.

The estate was listed for sale for $ 95 million, according to a September 20 announcement regarding “unusual circumstances” that led Ross to seek Chapter 11 bankruptcy reorganization on September 15.

The domain greeted John and Jacqueline Kennedy on their honeymoon and appeared in the films “The Bodyguard” and “The Godfather” – the latter in a scene in which a film producer woke up to find his head bloody prize horse in bed.

Ross, known for owning companies like Rossco Holdings Inc., listed nearly $ 133 million in assets against nearly $ 82 million in liabilities in his bankruptcy filing.

Among the creditors listed in the file are MGM Resorts International’s Bellagio Hotel and Casino on the Las Vegas Strip, which owed $ 350,000 for “cashed check and hotel / game”; and Caesars Entertainment Corp.’s Caesars Palace, owed an unknown amount for a “personal advance”.

Caesars Palace, however, clarified in its complaint last week that on August 1-2, Ross signed eight game markers totaling $ 500,000.

The markers – negotiable instruments resembling checks signed by Ross against one of his bank accounts – were presented to the Pacific Mercantile Bank for payment on September 24, after filing for bankruptcy, but were returned and marked “Account closed,” Caesars’ deposits say.

“The defendant intended to deceive the plaintiff by inducing the plaintiff to give him credit for the purpose of gambling,” accuses Caesars Palace in his complaint, which asks the bankruptcy court not to discharge or extinguish the debt.

“On the specific days and times that the Respondent signed and delivered the eight Credit Instruments / Negotiable Instruments at issue to the Applicant, he had no intention of honoring the Credit Instruments unless his gambling activities were financially successful. Caesars accused in his complaint.

“Prior to the date and time when the plaintiff presented the credit instruments / negotiable instruments for payment, the defendant wrongly closed his financial account; therefore, the defendant knew that the credit instruments / negotiable instruments were worthless and would be dishonored.

“The defendant did not inform the plaintiff that the credit instruments / negotiable instruments were worthless and would be dishonored when the plaintiff presented them for payment. The defendant’s conduct in failing to disclose that he had wrongly closed his financial account assured that the eight credit / negotiable instruments issue would be dishonored, would constitute an intentional and willful fraud of the defendant against the plaintiff, or otherwise obtain credit by false pretenses and material representations, ”accused Caesars.

The casino added in its complaint: “The credit / negotiable instruments and other documents at issue herein were directly related to the financial condition of the defendant at the time he signed them and delivered them to the plaintiff. The Respondent was aware that the aforementioned writings he signed were materially false, as the Respondent stated that the Credit Instruments / Negotiable Instruments would be honored when the Claimant presented them for payment. ”

In the statement announcing the Beverly House was up for sale, Ross said his bankruptcy was linked to disputes with two banks.

A message to comment on Caesars’ complaint has been left with his bankruptcy attorney.