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Lawsuit claiming travel firms cost Nevada millions in taxes clears path to trial

Updated July 20, 2022 - 9:34 pm

A lawsuit alleging high-profile online travel companies avoided paying hundreds of millions of dollars in hotel room taxes in Nevada has overcome a major legal hurdle and is now on a path to trial.

Clark County District Judge Mark Denton issued an order July 13 refusing to reconsider a decision denying a motion filed by the travel companies to dismiss the case. Denton stayed the order for 21 days to allow the companies to decide whether to ask the Nevada Supreme Court to intervene in the matter.

The 2020 suit, filed by well-known Las Vegas communications consultants Sig Rogich and Mark Fierro, seeks damages on behalf of the state against the biggest names in the online booking business, including Orbitz, Travelocity, Expedia, Priceline and Hotels.com.

“We feel we are correct and we will win the lawsuit,” lead plaintiffs lawyer Dominic Gentile said.

That would be an enormous windfall for state and local governments dealing with an unstable economy and the ongoing COVID-19 pandemic, according to Gentile and his co-counsel, Michael Cristalli.

More than $1 billion in lost revenues and damages could be recovered if the plaintiffs win a judgment at trial, Gentile said.

Gentile is hoping the Supreme Court will decide not to get involved in the case and make a quick determination whichever way it leans.

No trial date has been set, but Denton’s decision paves the way for lawyers to begin gathering evidence that could determine the amount of the tax dollars the online companies allegedly failed to pay.

“What they’re trying to do is to prevent us from opening up their books so that we can accurately obtain the exact calculation of how much taxes they have illegally withheld from the state,” Gentile said.

AG backs suit

Nevada Attorney General Aaron Ford threw the weight of his office behind the suit earlier this year in a letter to Denton voicing opposition to dismissing the case. A similar case filed by Clark County to reclaim tax revenues from online travel companies is proceeding in federal court. Gentile and Cristalli represent the county in that case, which also does not have a trial date.

According to an amended state court complaint, the booking companies for years have been contracting with hotels in Las Vegas and elsewhere in the state to buy rooms at discounted prices and then selling them on their websites to consumers at higher rates. The companies have been charging their customers for the room taxes based on the more expensive retail rates, but have only been paying the state at the discounted prices, the suit alleges.

The room taxes pour hundreds of millions of dollars each year into the Las Vegas Convention and Visitors Authority, the Clark County School District, Nevada Department of Tourism, state and local general funds and other public agencies, according to the lawsuit. The funding makes up the majority of the LVCVA’s budget to promote Las Vegas tourism, which has been rebounding in recent months from the pandemic.

The lawsuit was originally filed in April 2020 under the Nevada False Claims Act, which prohibits anyone from knowingly concealing or improperly avoiding an obligation to pay money to state and local governments.

The suit alleges the online booking companies “engaged in a practice to evade payment of substantial amounts of taxes on rent charged to customers” and that deprived the governments of much-needed revenues.

Rogich, who founded the influential advertising firm R & R Partners, and Fierro, a former television anchor who specializes in public relations and crisis management, are asking for damages on behalf of the state of more than three times the amount of the potential loss in public funding. They also are seeking between 15 and 30 percent of any collected proceeds for themselves for bringing the legal action.

R & R partners is the LVCVA’s longtime advertising and marketing firm that promotes Las Vegas around the world.

Rogich, who now runs The Rogich Communications Group, has been a campaign adviser to many of Nevada’s most prominent elected officials, including the late Sen. Harry Reid, over the past 40 years.

He served as a former senior White House assistant to President George H.W. Bush and was appointed U.S. ambassador to his native Iceland during Bush’s tenure. Before that, Rogich was a key member of President Ronald Reagan’s re-election campaign team.

Contact Jeff German at jgerman@reviewjournal.com or 702-380-4564. Follow @JGermanRJ on Twitter. German is a member of the Review-Journal’s investigative team, focusing on reporting that holds leaders and agencies accountable and exposes wrongdoing.

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