Reno: Siena's troubles inevitable

Reno casino’s troubles inevitable, some say

Siena Hotel Spa Casino owner Barney Ng says his casino's downward spiral started with faulty slot machines he purchased from International Game Technology.

But a judge tossed out his evidence _ which Ng says he obtained from a former IGT employee who was fired by the Reno-based slot machine maker because he stole the information. The 2005 decision was part of a back-and-forth series of lawsuits about the Siena's lack of payment on the slots and whether the slot machines were faulty.

"That would have changed everything," Ng said about the information tossed from court.

But casino industry experts say even if the accusations were true, other factors, including Ng's inexperience and a massive loan, have put the downtown Reno casino on the brink of going out of business.

The boutique hotel-casino faces bankruptcy, with debts that could be as much as $100 million. It struggles to pay basic expenses such as power bills, room taxes and employee health insurance costs.

Gambling experts say factors in the Siena's downfall date back to its 2001 opening and go deeper than a judge's decision.

"Well, the location is terrible, the market was declining, 9/11 came into play," said Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno. "It was an orphan casino with no ties to any other casinos. Ng had no experience. The whole facility was too small in comparison to what the standard was for successful casinos, even in northern Nevada.

"There were inconsistencies between the hotel rooms and casino floor. It was in a bad neighborhood. The list goes on and on. And to blame it on a software glitch, in my opinion, is not at all credible."

The back-and forth lawsuits between IGT and the Siena is where the evidence emerged that Ng says could've changed his casino's fate.

In 2004, IGT sued the Siena for nonpayment of monthly bills for the slot machines that the company had installed in the casino. The lawsuit also accused the Siena of not paying IGT's cut from the progressive slots.

The Siena countersued, claiming the casino didn't pay IGT because the slot machines were faulty.

As the lawsuits snaked through the court system, Ng's evidence to back up his claims against the slot maker emerged from former IGT employee Baljit Saini.

Before he was fired in 2004, Saini allegedly stole and in 2005 sold IGT's secrets to Ng, according to court papers. Ng acknowledged receiving information from Saini but denies paying for it.

Ng said the secrets proved computer chips used in the machines were faulty, and estimated it cost the Siena about $200 million in the first five years of operation.

"We would have won outright," Ng said, if the data and testimony would have been allowed.

In August 2007, a judge ordered the Siena to pay IGT about $4 million for missed slot machine payments and revenue owed to IGT from progressive slots. A month later, the Siena filed for a new trial, and Polaha granted it in February 2008.

IGT appealed to the Nevada Supreme Court, which ruled in December in favor of IGT and against a new trial.

Now, the case goes back to Washoe District Court, where the Siena has the right to appeal Judge Jerry Polaha's original directed verdict and the exclusion of Saini's testimony and evidence, said John Shaeffer of Los Angeles, Ng's lawyer.

Casino experts and executives point to numerous factors _ other than allegedly faulty slot machines and a lost court decision _ that have negatively affected the Siena:

_Ng was a newcomer to Nevada gaming and did not understand the industry, some experts said. He lacked the savvy to enter a market like Reno, where the local population and visitors had been gambling for generations.

_From the beginning, Ng was saddled with a $50 million loan from his father's investment company, Bar-K. Just paying the interest on a $50 million loan would eat into profits and daily expenses and could move a property from the black to the red, experts said.

_When the Siena opened in 2001, tribal gaming was just taking off in Northern California. Its impact was underestimated by many operators in Reno, including those of the Siena.

_That opening year was also tough on Nevada's tourism industry because of the Sept. 11, 2001, terrorist attacks and its subsequent chilling effect on tourism in the Silver State. The Siena had opened in 2001 after Ng poured between $16 million and $20 million to make over the old Holiday Hotel, which had originally been opened in 1956.

_The Siena has no parking garage, and its parking lot often gets overrun by people attending downtown events.

_The Siena was in a bad neighborhood that was getting worse. The closure of nearby casinos such as the Virginian and Onslow had put the Siena on an island, away from the real action north on Virginia Street.

_Even worse, one block away from the Siena stands the Lakemill Lodge, described by former Siena employees and gaming executives as a notorious flophouse on the edge of downtown Reno.

Ng bristles at the experts' opinions.

"Here's my answer: Everybody can have an opinion as to what went on without knowing, actually, what was going on," Ng said. "They are just opinions, but I am not disrespecting anybody's opinion."

The Siena's location issues don't begin and end with its proximity to the Lakemill, Eadington said.

"It has inadequate access from the freeway for visitors. It is out of the downtown corridor, and it can be a dark and dangerous hike from the nearest casinos.

"It was just a terrible mistake for Ng to buy the property for $3 million and spend whatever he did trying to refurbish it," Eadington said. "It just doesn't make a lot of sense. It didn't make a lot of sense from the outset."