Chaos at Club KAOS! (NASDAQ:RRR)
LAS VEGAS, NV: On October 31st, 2019 KAOS Nightclub opened the Demon Dome at the Palms Casino (NASDAQ:RRR) in Las Vegas. On November 5th, 2019 the mega-million dollar club closed. The opening of the Demon Dome was the final piece to celebrate the $690 million remodel that the company embarked on last year in 2018. The Jedi are hearing rumors about defaulting on the note.
KAOS bartenders and servers were given the choice: take two weeks severance or stay on for 60 days to cover banquets and events. From what we've heard, the staff was informed of the layoff via the news.
Earlier this month, Nightclub Manager Alex Cordova was escorted off the property by Palms security. He was fired in a harsh way. Rumor is that Alex was skimming millions off the top of contracts from DJ Skrillex and DJ Marshmellow. Alex previously worked at Hakkasan and PURE. He instated the policy where then bartenders at PURE had to make cold calls in the office because they made so much money in tips.
What Happened That Caused KAOS to Close So Abruptly?
This is a bigger story that just the Palms. Alien Nic has noted that ever since the Las Vegas Review-Journal was purchased by the Sheldon Adelson (who also owns the Las Vegas Sands (NASDAQ:LVS) in 2015, investors have been bamboozled. The journalists who are supposed to question the numbers presented by the casino are now employed by the casinos. The RJ journalists receive their paycheck from the company they are supposed to be investigating
The Gaming Control Board gets their numbers from these same CFOs. Without an independent news media source pressing these creative CFOs, then there is no check and balance on your investments in Las Vegas - except the Jedi.
After claims that several executives were getting payoffs to book DJs including paying Marshmello an overwhelming $60 Million Dollars, it seems that the Palms has decided to close their entire nightlife venue at an extreme loss.
The Review Journal pointed at John Gray being at fault,while purposely avoiding any claims that there was “fraud” or payoffs. “Gray’s departure lined up with the collapse of the Palms’ relationship with the superstar DJ Marshmello at Kaos Nightclub and Dayclub, a two-year agreement worth a reported $60 million. Gray was one of several high-level executives, including the resort owners, who signed off on the deal. It was apparent pretty quickly that the company over-shot Marshmello’s value to Kaos, currently dark as the ballyhooed Kaos Dome is installed in time for Cardi B’s “Demon Dome” Halloween party.
In a statement from Red Rock Resorts, Inc. to KTNV Las Vegas, the company cites challenging entertainment and fixed costs as the reason for their decision. “Therefore, we have decided to take some time to reassess the programming and use of those venues going forward,” reads a passage. “In the interim, we intend to use the venues for private meeting space and special events, in addition to everyday resort pool operations.”
From the start, KAOS appeared to be paying frothy valuations to secure their all-star talent roster. Marshmello reportedly received a record-breaking $60 million deal from the club. However, after just a few months the cracks began to show when both Marshmello and Skrillex abruptly ended their residencies in September.
One person named in the Scandal was Wynn Executive Alex Cordova, who Bob Morris, a local “in the know” claimed was involved in a scam to inflate the value of DJs while getting kickbacks. According to him, “Alex Cordova, who managed Wynn Nightlife, was walked out the door a few days ago by security there. Much of the management at Kaos Club at Palms, who booked Marshmello, have been fired. Top management there is being fired too, including the GM.”
How Did The Palms Casino (NASDAQ:RRR) Shareholders Get Scammed?
'Red Resorts Inc owns the Station Casinos in Nevada. These are the "local" casinos. You know where you can always get cheap rooms and cheap $1 drinks. Its the "old Vegas". You don't expect much but a clean, decent room, a warm, decent meal and fair gaming with a smile.
However, Station Casinos decided they wanted to "up their game". They convinced investors to give them over $1 billion to purchase the Palms Casino and renovate it. Huge project. This task was handed to Jon Gray. I don't know much about Jon except you can tell a lot from a corporate photo.
When I was a CEO, I could tell a lot from a person by their shoes. I could also tell a lot by how long someone takes to do their hair. In business, you are often on the road together doing last minute calls. Corporate appearance is important, but a handkerchief tells me that you spend more time in front of the mirror than you do hiring, firing and managing.
A $690 million project is no joke. When hiring executives, I have found that there are three types of leaders: the finders, the grinders and the minders.
A "finder" is a leader you want when you have a start up. This leader has a different set of skills that require "off-the-cuff" thinking and quick action. These are the people who hit the streets to sell along side the sales team. An example of a "finder" CEO is John Ledger. His shoes are probably well-worn from wear.
The grinders come in after the finders. They grind the business once it's off the ground. They find ways to reduce costs, simply processes and they focus on profitably rather than growth. These leaders should be operations oriented. An example of an operations oriented leader would be Gordon Gecko played by Martin Sheen in the movie WallStreet, or Donald Trump. Their shoes are polished, but worn.
Finally, you have the "minders". You hire these guys to "mind" your business.
These leaders spend most of their days "minding" the business. It's a kush job, but it requires a social skillset. The CEO who minds your business should be very customer service oriented, spend time with employees listening to their grievances and complaints and you communicate outwardly to the public through social appearances.
These leaders should have perfectly polished, brand new shoes. And a handkerchief a plus.
If I was the CEO directing $1 billion of investor money, I would have made sure that whoever was overseeing the development had managed projects similar in size; and I would have made sure they had well worn shoes.
KAOS Nightclub Laying Off Entire Staff November 8th, 2018
The Palms Resort and Casino was purchased by Station Casinos ( NASDAQ: RRR) in 2016 for $313 Million.
In May 2018, Station Casinos headed up $690 million in renovations project that was managed by Former General Manager, Jonathan Gray. Part of those renovations included The Demon Dome, which was scheduled to open Oct 31st, 2019.
We don't know all the details but the Jedi reported last month that Alex Cordova was somehow involved with skimming off the op of a botched a $60 million DJ contract with Skrillex and DJ Marshmello.
Last heard, Alex was headed for Ibiza where they have no U.S. extradition laws.
But that’s not why the servers are getting laid off. In April 2018 the employees voted to unionize with the Bartenders Union and Culinary Union. Ferittas and Jon Gray did not honor their vote. The workers picketed in June 2019. In August 2019, Bernie Sanders called out the Ferittas brothers as lazy fat cats who exploit workers. In September 2019, Alex got fired, Skrillex and Marshmello bailed on KAOS and Jon Gray resigned at Palms.
If you want to be mad at anyone, its Lorenzo Ferittas who lost $1 billion of investor money. But what would you expect form a guy who owned the Ultimate Fighting Championships? Aren't those fights the fakest sport in history. Shame on the investors for not paying attention.
Jedi Rich is a former CEO who transformed from a banker into a modern day independent music & film maker.
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*NOTICE: Ideas and opinions are meant to provoke and initiate conversation