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Mob-themed Vegas attraction sleeping with the lawyers

by Kelsey Butler | Published October 19, 2011 at 10:25 AM

Slashed visitor numbers, strangling debt and duels in state court have turned out to be real killers for Las Vegas entertainment company Murder Inc. LLC.

The operator of an entertainment exhibit called the "Las Vegas Mob Experience" made a prenegotiated Chapter 11 filing in the U.S. Bankruptcy Court for the District of Nevada in Las Vegas on Monday.

In court papers, Murder said it displays the "world's largest collection of organized crime artifacts from famous reputed mobsters" including Benjamin "Bugsy" Siegel, Anthony "The Ant" Spilotro, Charles "Lucky" Luciano, Meyer Lansky, Sam "Mooney" Giancana and Allan Sachs.

Murder Inc. was the name given to a crime syndicate of Italian and Jewish gangsters headed by Siegel and Lansky that carried out contract murders for mob bosses across the country in the 1920s, 1930s and 1940s.

Artifacts in the museum, located at the Tropicana Las Vegas Hotel & Casino on the Las Vegas Strip, include "weapons, letters, photographs, jewelry, furniture, and other personal effects of reputed mobsters," court documents said.

In spite of the extensive collection, the debtor said in court papers that declining patron numbers have made it difficult for Murder to survive since it opened this spring. In court papers, Murder said the museum averages about 130 visitors per day, compared to about 400 per day when the LVME was fully operational.

When the attraction first opened, the LVME also included an interactive element where actors would portray the notorious gangsters, court papers said. In an attempt to hack costs, the LVME on Sept. 12 scaled back its operations to only the museum portion, which displays the artifacts. (The debtor still operates a souvenir shop on the premises.)

As a result of closing the interactive experience, tickets prices were reduced from $29.95 per person to $15 per person, court papers said. Subsequently, the debtor's gross revenues now total about $103,000 per month, compared to $192,000 per month when the LVME was fully operational.

Murder also blamed its bankruptcy filing on litigation related to the entertainment company, including numerous lawsuits against former Murder principal Jay Bloom. In a Monday declaration from current debtor principal Louis Ventre, Ventre alleged Bloom used the debtor's assets for his own benefit and the benefit of the debtor's affiliates, leaving Murder insolvent and unable to meet its obligations.

There are at least nine pending lawsuits against Bloom and his companies seeking to foreclose and take other prejudgment collection actions that could shut down the LVME, court papers said. (Bloom alleges that the artifacts displayed at the LVME are owned by debtor affiliate Mafia Collection LLC, though Murder paid for, insures and secures the artifacts. Murder disputes the ownership of some of the artifacts.)

Lenders Strategic Funding Source Inc. and Vion Operations LLC on Aug. 4 filed a complaint against Bloom claiming breach of contract, fraud and concealment. Bloom allegedly submitted records to the lenders that "revealed nothing of the true financial condition of Murder, did not reveal he was looting the company and were provided to conceal Bloom's alleged ongoing fraud," according to Ventre's declaration.

Murder on Feb. 25 entered into a purchase agreement with SFS and Vion for the sale of future receipts. On March 14, SFS and Vion entered into a second agreement for the purchase of future credit card payments related to museum admission. The two companies paid $3.15 million to the debtor for future credit card receipts in the amount of $4.09 million, court papers said.

Meanwhile, on June 30, due to "mismanagement," Bloom was forced to relinquish his 95% ownership interest in the company to secured lender GC-Global Capital Corp., according to Ventre's declaration. GC-Global ultimately transferred the 95% ownership interest over to Ventre, and he took over as managing member on July 1, court papers show.

GC-Global on March 16 purchased bonds totaling $2.62 million from Order 66 Entertainment LLC, owned by Bloom. Order 66 had purchased the bonds from the original noteholders just one day earlier at the original face amount of $2.2 million, court papers said.

The debtor initially raised capital through two private debt issuances in early 2009, totaling $13.56 million in secured and unsecured debt. Murder said in court papers that it is unclear from the company's records how much of this debt was incurred in the first raise and how much was incurred in the second.

About $9.69 million of the noteholders' debt is secured by artifacts in the museum, and about $1.58 million in notes are unsecured, court papers show.

GC-Global also acquired an additional two loans from the debtor on April 4, increasing the total amount owed to the lender to $3.19 million.

The lender's debt is secured by substantially all the debtor's assets, as well as the Mafia Collection artifacts, under the terms of the April loan agreement.

Murder failed to make a C$1 million ($1.03 million) principal payment due June 16 to GC-Global, and the lender subsequently declared a default and accelerated amounts due under the notes, court papers said.

The lender and other Murder creditors entered into a forbearance agreement option to purchase on July 26. Under terms of the deal, GC-Global agreed to refrain from filing suit or foreclosing on the collateral for 60 days, court papers show.

The forbearance agreement expired on Sept. 24 and on Oct. 5, GC-Global whacked the LVME operator with a complaint for breach of contract and foreclosure of its collateral in the Eighth Judicial District of Clark County, Nev.

Murder plans on reviving itself through a prenegotiated reorganization plan, which would sell off its assets to an affiliate of a proposed debtor-in-possession lender.

Under the plan, a newly created entity of JVLV Holdings LLC, owned by investor John Vipulis, would solve Murder's issues by purchasing substantially all the assets of the fledgling company in a $4 million deal.

The purchaser would pay $2.43 million in cash for the assets, as well as provide a $375,000 DIP to Murder.

The remainder of the deal value is related to prepetition professional costs, capital contributions to the new entity and future operational expenses of the LVME.

According to a Monday DIP motion, the financing will mature on Jan. 30. Interest on the DIP will mature at a 12% annual interest rate, or, in the event of a default, an 18% annual interest rate, court papers said. It is unclear in court papers if the DIP is new money.

Secured noteholders will receive a pro rata share of Class B membership interest in the new company.

Secured and unsecured creditors will receive a pro rata share of a trust that will be established to repay creditors.

Under the plan, Murder will also modify its lease with Tropicana. The new 10-year lease will include a single five-year term renewal at the debtor's option. Through the plan, Tropicana will defer rent payments until JVLV and contractor MJ Dean Construction Inc. have recovered their investments. After that, Murder will have to turn over about 20% of its gross sales until the landlord has recovered all unpaid rent due under the lease.

Rent will total 10% of the museum's gross sales from the start of the lease until JVLV and MJ Dean recover on their investment, but Murder will not have to pay rent into the recovery, court papers show. Once the LVME operator is current on its rent obligations, the company will turn over 10% of its gross sales under the terms of the lease.

MJ Dean, due $4.64 million, and JVLV, owed $2.7 million, are two of Murder's largest unsecured creditors. The debtor also owes about $5.75 million related to materials and labor for the construction of the attraction.

In court papers, Murder said its equipment, props and inventory are valued at $250,000 to $500,000.

In court documents, Murder reported $100,000 to $500,000 in assets and $10 million to $50 million in liabilities.

Debtor counsel, Gerald Gordon and Gabrielle Hamm of Gordon Silver, could not be reached for comment Tuesday.

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