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Dec. 13, 2007
Copyright © Las Vegas Review-Journal

REMODELING CONTROVERSY: Harrah's shutters subsidiary

Supervisors of renovations included in mass layoff

By ARNOLD M. KNIGHTLY and JOAN WHITELY
REVIEW-JOURNAL

A bellhop pulls a cart near the entrance to Harrah's Las Vegas hotel-casino in December 2006. Renovations at Harrah's, the Rio and Flamingo are under scrutiny.
Photo by Isaac Brekken/Review-Journal

The subsidiary of Harrah's Entertainment at the center of the company's room remodeling controversy was closed Wednesday, terminating the employment of some 200 workers including supervisors of troubled renovations at the Rio, Harrah's Las Vegas and Flamingo.

"Effective immediately, we are closing Roman Empire Development, a subsidiary of Harrah's, that has been providing construction, supervision and labor for room renovation projects in Las Vegas," said Harrah's spokeswoman Marybel Batjer. "This will include all employees responsible for directly supervising improper renovation work."

She added that Harrah's is not suggesting that any of the terminated employees were responsible for the improper renovation work.

"However, we think this action is a necessary component of making sure the mistakes of the past are not repeated," Batjer said.

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    • The decision resulted from a four-month internal investigation. Batjer was unsure whether additional actions will follow.

    An internal employee memo, announcing the decision and authored by Harrah's Chairman and Chief Executive Officer Gary Loveman, was distributed late Wednesday to all employees of Harrah's Entertainment.

    "Many of you have no doubt heard recent reports about improper renovations at Rio, Harrah's Las Vegas, and Flamingo. These incidents have been the most disturbing issues I have faced in my five years as CEO. I am troubled that in Las Vegas, they may have jeopardized our most precious asset: the confidence and trust of our guests and employees," Loveman wrote.

    The company's renovation projects will be handled by outside contractors yet to be determined.

    The company would not release any names of individuals who were affected by the closing.

    But Tom Adams and Mike Whitehead, two individuals whose names have been connected with the hotels' troubled remodeling projects, have been identified by former remodeling workers as managers of Roman Empire Development, which is based in a warehouse at 3665 W. Twain Ave.

    Reached Wednesday afternoon at a cell phone number assigned to Adams, a man who identified himself only as Tom, said, "I have no comment," when asked about the dissolution of Roman Empire Development.

    The employees will receive pay and benefits for 60 days under the WARN Act, a federal worker protection law governing mass layoffs of 100 people or more.

    None of the workers was reassigned to other departments. But some hourly employees might be rehired by individual properties to do general maintenance.

    Clark County Manager Virginia Valentine did not know of the dissolution of Roman Empire Development until late Wednesday afternoon, when a county spokeswoman relayed the information to her from the Review-Journal.

    "No, she wasn't aware," said Stacey Welling, county public information analyst. "I don't have any further comment (the county) can offer. I have to refer you back to Harrah's."

    Roman Empire Development was formed in December 2006 to merge remodeling and capital improvement departments at Harrah's local properties in Las Vegas. But Roman Empire Development did not exist when controversial remodeling took place at the Rio and Harrah's Las Vegas hotels in 2004 through mid-2006.

    Ron Cozart, the business agent for Local 501 of Operating Engineers, whose members took jobs both on the remodeling projects and at Roman Empire itself, said he had no details on the closure but expected to attend a meeting with Harrah's Entertainment representatives today.

    Chuck Gillenwater, a carpenter who recently stepped forward to tell the county fire department about being ordered to cannibalize fire safety equipment on two floors at the Flamingo, had worked for Roman Empire Development until last week, when he says he was laid off. Roman Empire laid 14 people off Friday, Batjer confirmed that day, but she did not know whether that count included Gillenwater.

    "It's a step in the right direction," said electrician Fred Frazzetta when he learned Roman Empire was shutting its doors. "I have no trust in the people that were running RED." RED is an unofficial acronym for Roman Empire Development.

    Frazzetta filed a complaint with the county building division in August 2006, alleging illegal remodeling took place at the Rio. The county then conducted a cursory inspection and approved the remodeling. It reopened inquiries into the remodeling only after the Review-Journal began its own investigation in August 2007 and a reporter questioned county officials about their handling of the complaint.

    "The mentality they had was not on safety," said Frazzetta, who had worked under Adams and Whitehead during the Rio remodeling and as a full-time maintenance employee at Harrah's Las Vegas until he was fired in June.

    Frazzetta called the timing of Roman Empire's closure curious. The company recently had been doing remodeling, still incomplete, at Caesars Palace. "They're not done at Caesars," he said. "They're going to have to line up contractors to finish that."

    Gaming Control Board member Mark Clayton declined to comment on the development and said the regulators would review the investigations when they are done.

    Loveman read a statement about the remodeling problems during a Gaming Control Board hearing Dec. 5, but the regulators asked no questions on the issue at that time.

    Harrah's Entertainment, which is in the regulatory process of a $17.1 billion buyout by private equity firms TPG Capital and Apollo Management, is scheduled to appear before the state Gaming Commission Dec. 20.

    Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or (702) 477-3893, or Joan Whitely at jwhitely@reviewjournal.com or (702) 383-0268.

    TEXT OF THE INTERNAL EMPLOYEE MEMO

    DATE: DECEMBER 12, 2007

    TO: ALL EMPLOYEES

    FROM: GARY LOVEMAN

    SUBJECT: ROMAN EMPIRE DEVELOPMENT

    SEVEN YEARS AGO, WE CREATED THE HARRAH'S CODE OF COMMITMENT AS A WAY OF MEMORIALIZING THE ETHICAL STANDARDS WE HAVE ESTABLISHED FOR OURSELVES IN THE CONDUCT OF OUR BUSINESS.

    UPHOLDING THE CODE OF COMMITMENT IS CRITICAL TO THE SUCCESS OF THE COMPANY AS A WHOLE AND TO THE SUCCESS OF EACH EMPLOYEE.

    MANY OF YOU HAVE NO DOUBT HEARD RECENT REPORTS ABOUT IMPROPER RENOVATIONS AT RIO, HARRAH'S LAS VEGAS, AND FLAMINGO. THESE INCIDENTS HAVE BEEN THE MOST DISTURBING ISSUES I HAVE FACED IN MY FIVE YEARS AS CEO. I AM TROUBLED THAT IN LAS VEGAS, THEY MAY HAVE JEOPARDIZED OUR MOST PRECIOUS ASSET: THE CONFIDENCE AND TRUST OF OUR GUESTS AND EMPLOYEES.

    WHILE A LIMITED NUMBER OF INDIVIDUALS DIRECTED AND CONDONED THE IMPROPER ACTIVITIES, ALL OF US IN SENIOR MANAGEMENT ROLES MUST ESTABLISH THE TONE FOR COMMUNICATING THE CONDUCT WE EXPECT FROM EVERY HARRAH'S EMPLOYEE. IT IS OUR COLLECTIVE JOB TO ENSURE THAT ETHICAL STANDARDS ARE NEVER SACRIFICED IN PURSUIT OF DEADLINES OR PROFITS.

    OTHERS WILL DETERMINE WHETHER GOVERNMENT CODES AND PROCEDURES WERE VIOLATED, AND WE WILL ACCEPT WHATEVER CORRECTIVE ACTION IS METED OUT. BUT WE ALREADY KNOW THAT WE DID NOT MEET OUR OWN HIGHER STANDARDS, WHICH COMMIT US TO THE WELL-BEING OF OUR GUESTS, EMPLOYEES, AND COMMUNITIES, AND WHICH BUILD AND PROTECT THE REPUTATION OF THIS COMPANY. IT IS OUR RESPONSIBILITY TO ENSURE THESE MISTAKES ARE NOT REPEATED.

    TO THAT END, EFFECTIVE IMMEDIATELY, WE ARE CLOSING ROMAN EMPIRE DEVELOPMENT (RED), A SUBSIDIARY OF HARRAH'S THAT HAS BEEN PROVIDING CONSTRUCTION SUPERVISION AND LABOR FOR ROOM RENOVATION PROJECTS IN LAS VEGAS. THIS WILL INCLUDE ALL EMPLOYEES RESPONSIBLE FOR DIRECTLY SUPERVISING IMPROPER RENOVATION WORK.

    WE DO NOT MEAN TO SUGGEST BY THIS ACTION THAT ANY RED EMPLOYEES WERE RESPONSIBLE FOR THE IMPROPER RENOVATION WORK PERFORMED AT HARRAH'S, RIO AND THE FLAMINGO, HOWEVER, WE THINK THIS ACTION IS A NECESSARY COMPONENT OF MAKING SURE THE MISTAKES OF THE PAST ARE NOT REPEATED.

    IN THE FUTURE, ALL RENOVATION WORK WILL BE CONDUCTED BY OUTSIDE CONTRACTORS. WE HAVE ALSO CREATED A "PROJECT CLEARINGHOUSE" PROCESS, WHICH WILL STRENGTHEN THE CORPORATE DESIGN AND CONSTRUCTION DEPARTMENT REVIEW AND APPROVAL OF ALL CONTRACTING AND/OR REMODELING WORK, AND VERIFY THAT ALL WORK COMPLIES WITH RELEVANT BUILDING CODES.

    AS YOU MAY KNOW, HARRAH'S HAS AN ETHICS AND COMPLIANCE HOTLINE, WHERE EMPLOYEES CAN ANONYMOUSLY REPORT ANY ILLEGAL, UNETHICAL, OR IRRESPONSIBLE ACTIVITIES. IT IS OUR PRACTICE TO DILIGENTLY REVIEW ALL INFORMATION RECEIVED FROM OUR EMPLOYEES, BUT IN THIS CASE, WE DID NOT SUFFICIENTLY ADDRESS THE COMPLAINT. THE EMPLOYEE WHO CALLED THE HOTLINE DID THE RIGHT THING; WE OWE HIM GRATITUDE FOR MAKING THE CALL, AND AN APOLOGY FOR THE INADEQUACY OF THE RESPONSE. AND WE ENCOURAGE EACH OF YOU TO REMAIN CONFIDENT THAT WE WILL THOROUGHLY REVIEW YOUR CALLS AND TAKE WHATEVER ACTION IS APPROPRIATE.

    I AM PROUD OF THIS COMPANY AND ITS EMPLOYEES. OVER THE YEARS, WE HAVE CREATED THE MOST RESPECTED AND TRUSTED BRANDS IN THE INDUSTRY. I COMMIT TO EACH OF YOU THAT WE WILL DO EVERYTHING POSSIBLE TO RESTORE ANY TRUST WE MAY HAVE LOST OVER THE LAST FEW MONTHS.

    THANK YOU FOR YOUR COMMITMENT TO HARRAH'S, AND TO THE ETHICAL STANDARDS THAT ARE ESSENTIAL TO OUR SUCCESS.


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    Current Word Count:

    Fred Frazzetta wrote on December 14, 2007 08:53 PM: BREAKING NEWS

    Harrah's cited by county

    The Clark County building division on Friday issued 17 misdemeanor citations to various individuals associated with problematic remodeling at the Rio and Harrah's Las Vegas hotels. An 18th citation involved work done at a warehouse occupied by a remodeling subsidiary that Harrah's Entertainment closed earlier this week. Harrah's spokesman Marybel Batjer on Friday evening confirmed receipt of the citations, and said corporate executives were reviewing them.
    Updated: 12/14/2007 6:40 PM


    Fred Frazzetta wrote on December 14, 2007 08:51 PM: This is the final report of Mr. Maddox the County's Supervising Inspector who investigated my complaint...verbatim!

    Memorandum Department of Development Services, Phil Rosenquist, Director.

    To: Greg Franklin, Manager

    From: Richard Maddox, Supervising Building Inspector (Initials RM appear to right of this line)

    Subject: Rio Hotel and Casino, 3700 W. Flamingo Road, Cabana Tower Phase I, II, and III Complaint of construction
    without permits.

    Date: February 16, 2007

    I have completed the investigation of the complaint by Mr. Fred Ferzzetta that Harrah's Gaming had remolded the 3rd thru 14th floors of the Cabana Tower without permits. the Cabana Tower was built in three phases the first phase beginning in 1989 and third phase completing in 1994.

    The hotel rooms are a standard room from the fourth thru eighteenth floor with the third floor being handicap rooms and nineteenth floor being super suites per the original approved plans for the approved plans of record on the project.

    During the course of inspection 37 rooms where walked from the third to the nineteenth floor. The floor plan, plumbing layouts, mechanical and electrical locations all matched the approved plan on record. The work that had has been done was completed early in 2006 and included new receptacle, switches, switch plates, plant, carpet, flooring, wall paper, new sinks with countertops, and new toilets all of which requires no permits.

    The only work found that requires a permit was the replacement of one light fixture in each unit. They where given a copy of the Clark County Building Administrative code and advised of the requirement for permits. This complaint may be closed.


    Fred Frazzetta wrote on December 14, 2007 07:13 PM: LV Contractor:

    Everyone knows why RED was shut down...except for you! Mike Nasby, Tom Adams, Mike Whitehead & George Kirkwood broke the law by doing illegal remodel projects for many years which is now documented - why would a company keep them working? They have cost the company in the tens of millions of dollars thus far. I find it very interesting that you are willing to defend people who willfully broke the law...it really doesn't say much about you - does it?


    0u812 wrote on December 14, 2007 02:14 PM: They have found impropiety at these hotels and have proof. You recieve 6o days of pay, I have to give two weeks notice to quit my job but 1 minute to be fired, count yourself lucky with 60 days pay. Harrahs will be fined maybe $3,000 no problem some of the fired red workers will drop that in a day gambling. All States, counties,and cities workers are all bought and payed for. Too stop all this B.S. you as WE THE PEOPLE should walk on the city halls, county halls and your State halls and ask for all resignations and hold each one accountable for all violations by any employee it's is there responsibilitie to inform any wrong doing unless they recieve payment in any source. This needs to be done in Washington too. I as one is not a big voice but as 1,000,000 voices and sigtnatures we can take back This AMERICA.


    Ashamed wrote on December 14, 2007 12:28 PM: I lost my job on Wednesday. Two days later I have already received 2 different job offers from the union. Damn it Fred, you ruined my christmas!!!

    If you can't find a job before your 60 days of pay runs out, something is seriously wrong with YOU. There are plenty of jobs out there for those who are willing to work.

    To NOT ashamed:
    Just because you were never asked to cut corners doesn't mean that none of the other 200 employees weren't. You are just one guy. There wasn't a announcement, "Attention Roman Empire employees. Please cut corners." Using your logic, nobody has ever been struck by lightning(because I havn't), climbed Mount Everest(because I havn't), or smoked a cigar.

    By the way, Tom Adams never asked me to cut corners...Mike Whitehead did.


    LV Contractor wrote on December 14, 2007 09:24 AM: Anyone want to know why RED was shut down???? Because it didn't matter what they did right every lazy, crackpot, nutcake, whiner that didn't like this or that supervisor, didn't like the job he was sent to or doing, didn't like the people he had to work with or WHATEVER was going to make trouble. Everyone knows that RED was being held to high standards by Clark County Building and Fire, in fact they were being held to standards that don't exists. Yes, people this DOES happen and more often than you'd think. The inspectors in this town can make up their own rules; even if you do the work to code if they don't like you (or maybe they're just having a bad day), to bad you don't pass. It happens all the time. I don't know if the fire doors at the Flamingo were sabotaged but it wouldn't surprise me. So Mr. Frazzetta are you keeping an eye on Perini, Penta or any of the other big guys ? Bet not, no agenda with them right? So, former RED employees it wasn't Mr. Adams or Mr. Whitehead that lost you your jobs it was that nut cake, whiner you were working with.


    on your six wrote on December 14, 2007 08:56 AM: He said.....she said....yada yada yada...point is..good people have lost their jobs....because of in house collusion...upper echelon at work here,(again), board and construction meetings.cicumvented... was'nt RED funded by Harraha's???...same pot. same meeting....unfortunately..same people...what about the project manager???/ chief engineer??... little guy loses his employment over board room retoric and enuendo.


    CB4 wrote on December 14, 2007 03:29 AM: FA-ONE,
    Please if you do indeed post again at least post something logical and/or beneficial to this topic. Not this garbage you have pulled out of your you know what.


    FA-ONE wrote on December 14, 2007 01:13 AM: Mike Whitehead is a piece of S*&t and should go to hell for what he did to all of us employees. One week before X-mas and we are all out of the job. For all the money he stole from ripped off used copper from all jobs he should pay us all out of his own pocket. I HOPE HE NEVER WORKS IN THIS CITY AGAIN!!!!

    MIKE WHITEHEAD IS A PUNK


    simonsays wrote on December 13, 2007 09:51 PM: This comment is a response to the comment made earlier today by 'dee mon'. Mr. Frazzetta is no sheep....let's see... The typical characteristics of sheep are: helplessness, defenselessness, non-resistance, submissive, complete dependence on the care of the Shepherd, hummmm.... you must be talking more about yourself. Mr. Frazzetta is "no white sheep"! He's probably more like a black sheep, one that stands out among all the white sheep. It definitely took some gonads to stand up to the wrongdoing of this big corporation called Harrah’s. Good luck finding yours…


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