Federal government files lawsuit against Clark County, alleges 'tens of millions' in under-collected rent from Bali Hai golf course
The federal government is suing Clark County and a development company run by prominent Las Vegas gambler Billy Walters over allegations of millions of dollars in under-collected rent at a major golf course near the Las Vegas Strip.
The complaint, filed in Nevada District Court on Friday by the Department of Justice, follows through on demands made to the county in an August letter asking for more than $75 million in current and future expected rent on a portion of federal land that currently houses the Bali Hai golf course. It names the county and Nevada Links — the management company run by Walters — as defendants in the suit.
The suit alleges that the county — which received the land in 1998 from the federal government — failed to follow through on a contractual requirement that the parcel be leased at “fair market value,” and that a 2011 amendment to the lease set the rent at such a level that would cause the federal government “tens of millions of dollars in damages.”
“Instead, without obtaining an appraisal to determine the fair market rent, the County leased the land to Nevada Links for an annual fixed rent of $100,000 — less than 5 percent of the fair market value,” the complaint states.
Under the original 1999 land transfer, the county was obligated to follow certain requirements, including a requirement that any lands must be sold or leased at fair market value, and requiring 85 percent of the proceeds go to a Department of Treasury account centered on promoting conservation and acquiring environmentally sensitive lands, with the remaining 5 percent going to Nevada educational programs and 10 percent to the county aviation authority.
Clark county leased 154 acres of land to Walters in the late 1990’s including 91 acres of federal property. It’s failed to generate a profit from the site since it was built in 2000. Critics have contended that the original lease was being too favorable to Walters, and allowed the developer wide latitude in what could be declared as an expense.
Walters was convicted of insider trading charges in April, and was sentenced to five years in prison in July over a $43 million insider trading scheme that included giving stock tips to golfer Phil Mickelson.
While the original rent was set at 40 percent of “net proceeds” of profits made by the golf course, the county in 2011 voted to amend the lease and change the rent to a flat $100,000 with minor annual adjustment and open up the property to potential future commercial development.
The suit alleges that the amended lease was processed without either assessing a fair value of the land, or without the express written approval of the Bureau of Land Management, as required in a 2004 agreement between the federal agency and Clark County. It also states that the assessed fair market rent for the 91 acres was at least $2.2 million per year, according to a 2013 appraisal agreed to by the county and the BLM.
The lawsuit states that despite the “gross discrepancy” between the amended rent and fair market value rent, the county went forward anyway with the changes to the lease. It states the county has paid the Department of Interior a little more than $147,000 in rent proceeds for a period of time between 2013 and 2016.
Clark County spokesman Erik Pappa said the county’s attorney had not had a chance to review the lawsuit on Friday afternoon and thus couldn’t comment.