Friday, May 21, 2004
Copyright © Las Vegas Review-Journal

ADVERTISING COMPLAINT: Hard Rock resolution rejected

Gaming Commission objects to parts of deal, schedules full trial for July 29

Hard Rock Hotel representatives expressed surprise over Thursday's decision by the Nevada Gaming Commission. Photo by John Gurzinski.

The Hard Rock Hotel might have to do it the hard way after all.

The hotel-casino's hopes of quickly resolving regulatory complaints about its controversial ad campaign were upset Thursday when the Nevada Gaming Commission unanimously rejected a proposed $300,000 settlement and tentatively scheduled a full trial for July 29 to consider the case.

Commissioners rejected the settlement, proposed by the state attorney general's office and the Hard Rock, after more than two hours of heated discussion led them to decide that the agreement raised more questions than it answered.

Specifically, the commissioners objected to elevating the Hard Rock's internal compliance procedures to the status of state regulations, which would set a precedent for other casinos and might establish absurd standards for what can and cannot appear in casino advertising.

Commissioner Augie Gurrola said he was deeply concerned not only about the Hard Rock case, but about the implications of the proposed settlement for the gaming industry.

"If we approve (this settlement), it will become a precedent and elevate all compliance plans (to the status of state laws and regulations)," he said.

The settlement had been approved by the Nevada Gaming Control Board at its May 5 meeting. It was to resolve a three-count complaint brought against the gaming company in January when regulators cracked down on the Hard Rock's marketing campaign.

Regulators said the Hard Rock's ad campaign reflected poorly on the gaming industry and the state. One of the counts also alleged that the Hard Rock failed to live up to the terms of a 2002 settlement of a complaint that included a $100,000 fine for allowing sexual activity in a nightclub.

The 2002 settlement required a mandatory review by Hard Rock compliance officers of any "questionable elements" in the resort's future advertising.

However, the control board claimed the ads cited in the first two counts of its complaint -- one involving an ad containing the line, "At the Hard Rock Hotel, we believe in your Monday night rights: large quantities of prescription stimulants (and) having wives in two states" -- could be construed as promoting illegal activity.

In the proposed settlement, the Hard Rock agreed to pay a maximum fine of $100,000 for each count.

In addition, it agreed to pay a maximum fine of $100,000 for failing to submit disputed ads or two racy billboard ads that allegedly violated community standards of decency to its compliance committee.

The proposed settlement also set up a more complex compliance process to make sure future ads did not promote illegal activity.

Commissioners Ray Marshall and Gurrola, however, objected to the proposed compliance process because it failed to clarify who would decide what was questionable, instead referring the question to a committee that has no enforcement authority.

Further, Marshall said the precedent set by the settlement would damage compliance procedures throughout the gaming industry.

"Compliance committees work when they are seen as being advisory, but not creating liability. If that is not the case, management will be reluctant to consult and members will be hard to recruit," he said.

For the Hard Rock, the rejection of the settlement came as a surprise.

Jeffrey Silver, who represented the Hard Rock before the Gaming Commission, said the company had wanted an agreement that would allow the resort to avoid the cost of a trial in terms of money, manpower and distractions, even though it believed the ads clearly were intended to be satirical.

However, he argued at Thursday's hearing that, while the company did not want to have to spend the money or manpower to present a First Amendment case, the proposed settlement should not have been construed as setting a precedent that would keep any other company from offering such a defense.

Whatever the Hard Rock's position, Allen Lichtenstein, general counsel for the American Civil Liberties Union of Nevada, reiterated his group's view that the state's efforts to control the Hard Rock advertising was unconstitutional.

"The U.S. Supreme Court has made it very clear the government cannot act as a censor based on its perception about what is in good taste. We believe the billboards in question are protected by the First Amendment, absent any false or misleading statements or any statement advertising illegal activity," he said.

However, Silver and Senior Deputy Attorney General Toni Cowan, who represented the Gaming Control Board at the commission hearing, said the settlement was aimed only at advertising allegedly promoting illegal activities, not sexual activity.

Commission Chairman Peter Bernhard and Gurrola both expressed doubts that any reasonable person could realistically interpret the Hard Rock ads as promoting illegal activity.

For example, one of the ads showed a naked male and female lying atop a gaming table with dice by their sides and a card in her mouth, urging players to go the the Hard Rock to cheat.

Cowan argued that the ad encouraged casino players to cheat at table games, while Bernhard and Gurrola said it was absurd to allege that the company was trying to encourage customers to go into the casino to cheat and that the word "cheat" could as easily be construed to have another meaning.

Lichtenstein said the standard is what a reasonable person would construe the advertising to mean.

"The question is whether it was reasonable to say the ad was inviting people to come to cheat the casino, when obviously the intent of the ad was quite obvious. No reasonable person could assume otherwise. That someone (unreasonably) construed the words to suggest illegality doesn't make the ad illegal," he said.

Bernhard said after the meeting that the constitutional issues had not been germane to the question of whether the proposed settlement was appropriate, and they would be argued if no other settlement is accepted and the case actually proceeds to trial. He said the content of the ads also could be addressed at a trial.

Both sides, however, were doubtful that a new settlement could be reached.

"Having signed the agreement, we have to support the stipulations," Silver said.

The deputy attorney general who helped craft the agreement said the settlement process had been difficult.

"I don't think (more negotiations) would work," Cowan said. "People have very different viewpoints on this."

Hard Rock Hotel President Kevin Kelley said he was surprised by the decision, adding that the company was only beginning to assess the situation and it was premature to discuss what its strategy might be at trial.

The Associated Press contributed to this report.