JAMES Packer's casino operator, Crown Ltd, has applied to have legal action against it in the Nevada Supreme Court dismissed on the grounds it risks being "swept further into the vortex of a massive litigation involving dozens of parties and will be unjustly required to take part in litigating matters in which they have no involvement".
The wide-ranging litigation, alleging fraud, relates to Crown's failed $US250 million ($240 million) investment in Fontainebleau - a 63-storey Las Vegas "destination casino resort" which filed for bankruptcy in mid 2009.
According to Fontainebleau's lenders, as much as $US400 million worth of cost overruns was hidden from the resort in order to keep finance flowing.
Crown acquired a minority interest in Fontainebleau in June 2007. Around the same time, a banking syndicate agreed to lend $1.85 billion to the project run by Miami-based developer Jeffrey Soffer.
Money was drawn against the loan from that date until April 2009, when Bank of America, as agent for the lenders, declared default under the loan agreement. Two months later Fontainebleau filed for bankruptcy. The incomplete shell of the 63-storey building remains an eyesore on the Las Vegas skyline.
According to court documents, by mid-2008 Fontainebleau's main principals had allegedly calculated the project was $US300 million over budget, but did not inform the lenders as they were obliged to do.
It is alleged that instead, to conceal these excessive costs, the "borrowers submitted fraudulent draw requests" on the loan "that contained falsified information regarding anticipated costs and budgets".
Banks that had loaned about $US800 million to the failed project have targeted Crown with the allegation that Crown defendants had "agreed and conspired with the Fontainebleau defendants to continue to misrepresent the financial status of the project" when Crown allegedly found out about the cost overruns.
In its submission to the Nevada court on Friday, Crown said it had suffered and would "continue to suffer reputational damage from insufficiently pleaded allegations of fraud".
The allegations have come to light while Crown's Macau joint venture, Melco Crown, has been embroiled in an investigation by Taiwanese authorities into allegations a subsidiary illegally circumvented the country's tight foreign-exchange controls to allow high-rollers to funnel $170 million of gambling funds to Macau.
The Victorian casino regulator says it is "actively monitoring" the investigation by Taiwanese authorities while it undertakes a mandatory review of Crown's suitability to continue holding its casino licence.
The NSW casino regulator is also conducting a probity check on Crown, which is seeking to increase its stake in a rival casino operator, Echo Entertainment.