Cocaine and extortion drama at Sam Nazarian’s gaming license hearing

TAGs: cocaine, sam nazarian

nevada-gaming-control-board-nazarianHedge fund Blackstone’s bid to buy the Cosmopolitan of Las Vegas has received the approval of the Nevada Gambling Control Board. Blackstone struck a deal this May to buy the Cosmo from its Deutsche Bank owners for $1.73b. The Nevada Gaming Commission (NGC) will consider the recommendation at its Dec. 18 meeting. The casino, which had the misfortune to launch during the global economic meltdown, has never turned a profit.

Blackstone boss Jonathan Gray said his firm had a simple model: “buy it, fix it, sell it.” Among the fixes planned for the Cosmopolitan is a renovation of the property’s 11,000-square-foot casino floor. The Cosmopolitan currently earns around 80% of its revenue from its hotel, restaurants and nightclubs, so Blackstone needs to boost the casino’s performance in order to maximize the Cosmo’s resale value.

The real drama at Wednesday’s Control Board meeting came via the grilling of Sam Nazarian (pictured), who related tales of extortion, cocaine use and a cameo by hip hop impresario Suge Knight. Nazarian’s appearance before the board was to determine whether he was a suitable candidate for licensing in Nevada. Nazarian’s SBE Entertainment owns 10% of the SLS Las Vegas aka the former Sahara casino, which had its grand opening this August following a $415m makeover.

Nazarian’s three-and-a-half hour session with the Control Board made for great entertainment for anyone following the Twitter feed of Las Vegas Review-Journal writer Howard Stutz (@howardstutz). The Control Board said they couldn’t give Nazarian’s application outright approval but they did vote 2-1 in favor of granting Nazarian a one-year, limited license. The recommendation, which will also be considered by the NGC on Dec. 18, comes with the condition that Nazarian have no involvement with the SLS’ casino operations.

Nazarian will also have to submit to random drug testing after admitting that he’d snorted some blow during a vacation in Cabo San Lucas in April. Nazarian said he’d been drug-free for years until the “one-time indiscretion” in “a very social setting” but Control Board member Shawn Reid expressed amazement that Nazarian would be so indiscrete while his license investigation was underway.

Control Board members’ eyebrows arched even higher when the subject turned to Derrick Armstrong, a Los Angeles auto detailer and convicted felon to whom Nazarian had loaned money in 2008. Despite breaking off contact, Armstrong kept coming back for more, threatening to trash Nazarian to gaming regulators if he wasn’t paid.

All told, Nazarian said he paid Armstrong and his associates around $3m. Nazarian admitted to giving $83k to Israeli-born mob figure Hai Waknine, who in 2006 was sentenced to 10 years in prison for racketeering and whom prosecutors described as a “shakedown collections guy.”

Nazarian also paid $90k to Knight, who claimed to be owed for some work he’d done with Armstrong. Knight is the former CEO of Death Row Records who – legend has it – once dangled rapper Vanilla Ice over a hotel balcony to convince him to fork over a share of the royalties from Vanilla’s multi-million selling debut album. (Vanilla denies this rumor, saying Suge merely asked him to look over the ledge and ponder how far down it was to the pavement.)

Nazarian said Armstrong eventually began threatening his family members, prompting him to take out a temporary restraining order. The Los Angeles attorney SBE hired to fight Armstrong’s requests for money told the Control Board that his city was full of “barnacles and parasites.” Control Board member A.G. Burnett suggested Nazarian should have gone to the police because “when you have a barnacle, you cut it off.”


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