LA nightlife king Sam Nazarian faces questions from Nevada regulators to get gaming license

A Los Angeles nightlife entrepreneur who revamped Las Vegas' Sahara Hotel and Casino into a hipper, sleeker destination is getting ready to defend his past again so he can obtain a Nevada gambling license after admitting recent cocaine use and explaining his curious business dealings with felons.

Nevada has long been keen on dismissing perceptions that its gambling industry is as seedy as its mobster beginnings, and the investigations into a person's background to prevent any unseemly activity from reflecting badly on the state's biggest industry can be intense.

But Sam Nazarian can't avoid the process if he wants to keep his 10 percent of the SLS Las Vegas — a stake that makes him subject to the increased scrutiny.

"What he has run into is history," said Michael Green, a researcher for the Mob Museum in Las Vegas and associate professor of history at the University of Nevada, Las Vegas.

The 39-year-old hospitality magnate faced the state's Gaming Control Board for hours earlier this month to answer questions about cocaine use that was more recent than he had led investigators to believe. The board also delved into his past business dealings, mainly repeated payments akin to blackmail adding up to about $3 million, including a $90,000 payment in 2011 to record producer Marion "Suge" Knight for unknown reasons.

As Nazarian faces another likely interrogation into his past misdeeds Thursday in front of the Nevada Gaming Commission, the company that owns 90 percent of SLS Las Vegas took a pre-emptive step. Stockbridge Capital announced this week that Nazarian wouldn't have any role in the hotel and casino's day-to-day operations.

"Sam Nazarian seems to be doing exactly what he needs to be doing, and maybe a little more," Green said of the entrepreneur's effort to pay for his sins by publicly stepping aside. "But he's paying for a lot of sins that preceded him, and sinners."

Gaming Control Board Chairman A.G. Burnett said he respected the move and said it represented a high-level of respect for the process on Nazarian's part.

"They've certainly got the message," Burnett said Wednesday.

On Dec. 3, the Gaming Control Board recommended 2-1 that the commission grant Nazarian a license, but with limits. It would only be good for a year, and the board recommended Nazarian have no oversight of gambling at the SLS Las Vegas, avoid associating with individuals of disrepute, and submit to random drug tests, among other restrictions.

Much of that hearing was spent discussing payments Nazarian made to a former business associate, Derrick Armstrong, whom Nazarian's lawyers described as an unsavory individual. They say Armstrong threatened to harm Nazarian and his family physically and in the public sphere by divulging embarrassing information.

Armstrong said Wednesday by phone that he planned to attend Thursday's commission hearing to clear his name, calling Nazarian's statements about him lies.

Armstrong said he didn't extort or threaten Nazarian. He said the two had numerous business deals, none codified in writing, for Nazarian to back his business deals up to a reasonable amount.

"Does it make sense that a guy would pay a person ... because I was just a nuisance to him?" he asked.

A message seeking comment was left Wednesday for Randy Winograd, a lawyer for the Nazarian family.