The management of Hard Rock Cafe International colluded with the Seminole Tribe of Florida to rig the bidding so that the Tribe would be the successful bidder for the restaurant and hotel/casino chain, according to a lawsuit filed by the Cordish Company and its affiliate Power Plant Entertainment.
Power Plant Entertainment was the developer of the Seminole Tribe’s two highly successful Seminole Hard Rock Hotels and Casinos that opened in 2004, and was pivotal in securing the license of the Hard Rock brand for those Florida facilities.
London-based Rank Group announced December 7 that the Tribe had purchased the International Hard Rock brand for USD 965 million. Rank shares have fallen more than 12 percent since the announcement and analysts have criticized the company for selling the Hard Rock chain too cheaply.
The lawsuit charges that Hard Rock USA President and CEO Hamish Dodds and others began conspiring with the Tribe months before Rank announced it would seek bids for Hard Rock in exchange for the Tribe agreeing to keep Hard Rock USA management in place if it was the successful bidder
The suit also names as defendant Seminole Hard Rock Entertainment, a Florida corporation established by the Tribe for the purpose of waiving sovereign immunity, operating hotels, cafes and casinos throughout the U.S. and internationally, and accepting the assets of the purchase of Hard Rock.
„Defendants participated in collusion and bid rigging with respect to offers to purchase Hard Rock from RANK,“ states the lawsuit, which was filed late Friday in Broward County Florida Circuit Court. „Defendants agreed, conspired and combined to eliminate, reduce or interfere with competition between themselves, Plaintiffs, and others by precluding Plaintiffs and others from bidding for Hard Rock and by artificially fixing a value and price on Hard Rock by eliminating, reducing or interfering with competition.“
The suit also discloses that Baltimore-based Cordish, Power Plant and its banker Goldman Sachs & Co. sought to bid for the Hard Rock and were refused bid documents by Rank’s banker Merrill Lynch, even though they were capable of offering more for the Hard Rock than the Seminole’s ultimately paid.
„Plaintiffs had the financial means and experience to complete the purchase of the Hard Rock asset and had the intent to submit a bid materially in excess of the accepted offer, if provided access to the documents necessary to complete its due diligence,“ the lawsuit states. „If Defendants had not interfered with Plaintiffs’ right to bid, Plaintiffs would have provided such a bid and prevailed on the bidding to purchase Hard Rock.“
Rank shareholders are scheduled to vote on the Hard Rock sale to the Seminoles on January 8.
The Cordish Company is a major developer of hotel, casino and retail/entertainment projects, several of which are anchored by Hard Rock Cafes, including in Baltimore, Louisville, Houston and Texas, in addition to Florida. The only developer to win six prestigious Urban Land Institute Awards for Excellence, the Company has developed major national entertainment, dining and tourist destinations in Houston, Baltimore, Atlantic City, and Charleston, SC. It has major projects currently under development in Kansas City, St. Louis, Toronto and Atlantic City.
Power Plant Entertainment developed the two Seminole Hard Rock Hotels and Casinos in Tampa and Hollywood, FL, which have become the most profitable gaming properties in the U.S. Power Plant Entertainment is a partnership between Cordish and Coastal Development, LLC, the prominent New York-based casino development company controlled by Richard Fields.
The lawsuit discloses that on September 1, 2006 and September 7, 2006, two different Cordish Vice Presidents approached Merrill to request the Hard Rock offering prospectus and were told both times that Hard Rock senior management had specifically instructed Merrill not to provide Cordish with offering documents, and that Rank would not consider a bid from Cordish.
The lawsuit explains that, „Hard Rock management generally, and Mr. Dodds specifically, believed they would lose their jobs if Cordish prevailed in the bidding and, to prevent that, Hard Rock management, and specifically Dodds, had persuaded Rank to exclude all Cordish affiliates and partners from the bidding.“
The lawsuit charges the defendants with violation of Florida’s Deceptive and Unfair Trade Practices Act. It seeks to recover treble the unspecified financial damages that Cordish and Power Plant incurred as a result of not being able to acquire the Hard Rock chain, exclusive of costs and attorneys fees. Cordish and Power Plant are represented by Hunton & Williams of Miami.