MGM Mirage says it has begun process of paying CityCenter subcontractors

A Clark County judge will let MGM Mirage try to settle payments owed to subcontractors who worked on CityCenter while the casino operator's legal skirmish with general contractor Perini Building Co. moves forward.

Perini attorney George Ogilvie on Friday asked District Judge Elizabeth Gonzalez for permission to have company executives participate in a meeting MGM Mirage has scheduled for Wednesday at Aria with subcontractors. The judge said, however, it was the casino operator's decision if it wants to include the general contractor.

As of Friday, Perini executives had not been invited.

Gonzalez set a timeline to file lists and documents in a lawsuit in which Perini has sued CityCenter owners MGM Mirage and Dubai World for nonpayment of almost $490 million owed to the general contractor and subcontractors. Perini said about $390 million of the disputed amount belongs to subcontractors, many of whom are small, minority-owned businesses.

MGM Mirage said in a court filing it has begun paying subcontractors caught in the middle of its fight with Perini. The casino operator said it is actively working through the closeout process with 25 of the 220 first-tier subcontractors who worked on the development. MGM Mirage said there are "hundreds" of lower-tier subcontractors who are also owed for their work on CityCenter.

An MGM Mirage attorney told the judge Friday three tentative agreements had been reached with subcontractors.

When asked by MGM Mirage attorney Steve Morris if the meeting with subcontractors could still continue, Gonzalez encouraged moving forward with the closeout process because officials from both the casino operator and Perini have stated their priority is to pay subcontractors.

Another hearing in the case was set for later in June.

Perini President Craig Shaw told the judge CityCenter's total construction budget for the five-year building process was $6.285 billion. MGM Mirage has paid $5.8 billion, leaving roughly $485 million in dispute.

Shaw said $340 million has been billed to MGM Mirage with the other $145 million covering change-orders and costs owed to Perini.

Outside the courtroom, Shaw said MGM Mirage has clouded the matter with construction defect issues involving the Harmon Hotel, which had to be scaled back and redesigned from 47 floors to 26 floors after subcontractors installed defective reinforcement bars. The Harmon remains unfinished.

Shaw said only two or three of the subcontractors performed the defective work on the Harmon and will be held out of the closeout process. He saw no reason why other subcontractors couldn't be paid.

Perini has proposed that MGM Mirage deposit the disputed amount in an escrow account which would allow Perini to pay subcontractors.

"It's a cash flow issue for MGM Mirage," Shaw said. "They want to drag this out as long as they can."

At the outset of the hearing, Morse told the judge that "we do have the money to pay" subcontractors.

In its court filing, MGM Mirage said it needs a detailed accounting reconciliation from Perini, on a subcontractor-by-subcontractor basis, to determine how much is actually owed to the subcontractors.

"At the same time, CityCenter must evaluate back-up for time and material work and must determine the validity of any claims for extra work," attorneys wrote.

MGM Mirage said it has not received that information.

Shaw said the back-up and support information Perini gave to MGM Mirage last month was no different than the information the company presented throughout the construction process.

MGM Mirage said it has more than 65 employees, including accountants, engineers and project managers, working full time to evaluate and process subcontractor claims for payment.

"CityCenter is doing its best to complete this process in a timely and orderly fashion," attorneys wrote in the filing. "However, CityCenter needs certain information from Perini in order to further expedite the process."

MGM Mirage said it has sought payment logs, check registers and other documents from Perini to determine what work was performed by the subcontractors and what the general contractor has already paid.

Last month, Perini executives, subcontractor representatives and MGM Mirage officials met separately with Gov. Jim Gibbons, who sought to mediate the dispute.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.