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Perini Threatens MGM Mirage with $492 Million Lawsuit on Unfinished Las Vegas CityCenter Hotel Project

Posted by Alex Finkelstein 03/16/10 2:20 PM EST

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(LAS VEGAS, NV) -- Perini Building Co., one of the oldest and largest hospitality and gaming general contractors in the U.S., has threatened Las Vegas-based MGM Mirage with a $492 million lawsuit for non-payment on the unfinished 49-story Harmon Hotel at CityCenter in Las Vegas.

MGM Mirage disclosed the information in a Securities and Exchange Commission filing. The developer of the $8.5 billion CityCenter, which opened in December 2009, states it is considering filing a countersuit against Perini for unfinished work.

The counterclaim amount may top Perini's $492 million lawsuit figure, MGM Mirage states.

The Harmon Hotel, the only unopened hotel in CityCenter, is in the middle of a developer-contractor dispute.

MGM Mirage owns the mixed-use, multi-tower site in a 50-50 joint venture with Infinity World, a subsidiary of Dubai World.

Perini, based in Henderson, NV, might file the lien within the 15 days following the date of notice, MGM Mirage said in the Friday, Mar. 12 filing. Perini Building Co. is a division of Tutor Perini Corp. (NYSE: TPC), headquartered in Sylmar, CA. Perini was formed in 1894.

MGM believes its actual obligation to the general contractor is "substantially less than the amount claimed, and it will pursue all its rights and remedies, including arbitration," according to the filing.

MGM states it also has "significant claims against Perini related to construction delays and errors with the Harmon Hotel, one of six components on CityCenter's 18-million-square-foot campus.

Originally intended to be a 49-story, mixed-use condo/hotel, the project was stopped at 28 floors when the structural engineer deemed the project compromised after discovering 15 floors worth of improperly placed reinforcing bar.

The rest of the CityCenter project opened in December.

Throughout much of the blame game that ensued between MGM Mirage, Perini and a number of other parties, Perini maintained the errors stemmed from faulty designs that contained elements of reinforcing steel that could be not installed as drawn.

But during an interview with HotelNewsNow.com in December, Pat Hubbs, executive VP of field operations, admitted Perini "should have stopped that whole process (of laying concrete over the rebar) long ago."

Richard J. Rizzo

Richard J. Rizzo, Perini's vice chairman, said the construction errors weren't conducted in a vacuum and that many involved parties were aware of the modifications.

"There were many people that were involved who were at that point aware of what was being done and were OK with that," Rizzo says.

"It was only after a point where it was discovered by ... the structural engineer that what had been done as a modification, he wasn't comfortable with that, so he put a stop to that.

"And that started the whole exercise of re-evaluating and deciding what really he felt needed to be done structurally."

Rizzo says who is at fault is "very blurred," and that "everybody's a part of it."

He states MGM "can do pretty much what they want to do" regarding a lawsuit, but he was confident that recouping damages through litigious action was not the casino operator's intention, according to HotelNewsNow.com.

MGM is still investigating the general contractor's potential liability for the Harmon's construction errors and delays, according to the SEC filing.

"While CityCenter's investigation into the general contractor's potential liability regarding the Harmon Hotel is continuing, and there can be no assurance at this point as to the ultimate outcome of any action CityCenter may undertake, CityCenter believes that the amount of its claim against the general contractor may exceed the amount of CityCenter's estimated remaining liability to the general contractor," MGM Mirage stated in its SEC filing.

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