Caesars Creditors Sue to Have a Lawyer Put on the Stand to Testify

The Caesars Entertainment creditors who are suing the Las Vegas casino company are seeking to have a lawyer put on the stand to testify. The creditors want the attorney, who works for Caesars Entertainment, to explain the decision making process behind his employer choosing to renege on a $7 billion loan guarantee.

The lawyer they plaintiffs want to compel to testify is Gregory Ezring, whose firm works for Apollo Financing, a hedge fund which owns a majority share in Caesars. The creditors want Ezring to share how the main company’s leaders decided to sell a piece of Caesars Entertainment Operating Co (CEOC), which filed for bankruptcy in January.

Want Info on April 2014 Meeting

Bloomberg News reported that the creditors who are suing the casino company want notes prepared for a presentation made to CEOC’s board in April 2014. During that meeting, a laywer who worked with Gregory Ezring assured creditors of CEOC the company would honor a $7 billion debt guarantee to its junior creditors. A month later, Caesars Entertainment sold 5% of its stake in the CE Operations Company. Now, Caesars claims that sell removed its responsibility to honor the debt guarantee.

Caesars supposedly reneging on the $7 billion pledge and its subsesquent removal of profitable assets from CEOC’s portfolio prior to the division declaring bankruptcy are the two key issues at stake in the bankruptcy case. Two sets of creditors have filed parallel lawsuits against Caesars, in Delaware and New York.

Attorney-Client Privilege

CEC claims that Gregory Ezring should not be forced to disclose deliberations involving the April 2014 meeting, because of attorney-client privilege. They have made the same claim for Ezring’s talks with David Sambur, the Apollo Global Management executive who has been the main witness on the stand from CEOC’s perspective.

Arguments for Both Sides

In the latest filing, the creditors claimed David Sambur’s lawyers included information from those deliberations in a previous filing with the court. The junior creditors claim David Sambur cannot have it both ways: that if he is allowed to use information from those meetings to support his case, then the plaintiff’s lawyers should have the same consideration.

Caesars argues that the information used by Sambur did not involve attorney-client privilege concerns, so the standard the creditors are asking for should not be applied. Later this month, the two sides are set to argue in a Delaware Chancery Court, to see which side’s interpretation holds sway.

Steve Jacobs vs Las Vegas Sands

The case sounds similar to the legal situation faced by the Las Vegas Sands Corporation in its 2014 case involving former Sands China CEO Steve Jacobs, in which Mr. Jacobs was suing LVS for wrongful termination. In that case, a Las Vegas judge forced LVS to hand over confidential files when she learned they had been sent to the company’s Las Vegas offices already via email.

Since a similar trap worked in the Las Vegas case, it is possible a Delaware court will have the same ruling. Though Delaware and Nevada have two completely different court systems, Delaware has the most developed civil court system in the world, so it might well call upon the precedent from another US state.

Richard Davis Findings

Meanwhile, December 15 remains the deadline for former Watergate assistant prosecutor Richard Davis to report his findings to the court of US Bankruptcy Judge Benjamin Goldgar. In March 2015, Judge Goldgar tasked Richard Davis with researching 6.4 million documents to see if any “proof of blatant scheming” on the part of Caesars Entertainment existed in the CEOC case.

Caesars Q3 Results Are Bad

Caesars Enterainment recently released its 3rd Quarter financial report recently, and it was ugly. The company reported a loss of $756 million in the Q3 period, mainly due to restructuring costs involving the CEOC bankruptcy. According to gaming analysts, the reports reveal that CEC paid $966 million to first lienholders in the third quarter, in an attempt to keep happy the 80% of creditors still supporting the restructuring plan.

Apollo Global Management’s plan is to keep the majority of lienholders happy, while dumping billions of dollars of debt on the less important creditors. Apollo is said to have a reputation in the business world of leaning on its creditors in such cases.

 

About Cliff Spiller

Cliff Spiller has been an online writer for 14 years. He worked for Small World Marketing for a decade, where he covered topics like gaming, sports, movies, and how-to guides. Since 2014, he has blogged about US and international gambling news on BestOnlineCasinos.com, USPokerSites.com, and LegalUSPokerSites.com

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Articles