Our network

I-Team: Monorail Accused of Shady Dealings in Court | News

Title (Max 100 Characters)

I-Team: Monorail Accused of Shady Dealings in Court
News

LAS VEGAS -- Shady dealings have been alleged at the Las Vegas Monorail. Now it's all coming out in court.

The people who invested $400 million in the Monorail say the company has been moving money around behind their backs.

The Monorail has always played a shell game. Is it a private company or a public entity? It bounces back and forth between the two, whichever is most convenient at the moment. Now, that is coming back to haunt the troubled train.

Lawyers for the bondholders say the Monorail has been diverting money into a secret account and that it filed for bankruptcy right after it got caught.

Wells Fargo is the trustee for the bonds holder's lien, so the revenue from the Monorail is supposed to stay in a Wells Fargo account so it can be used to pay the bills.

Instead, debtees say monorail CEO Curtis Myles and the Monorail Board of Directors diverted money to a separate account at Bank of America.

The Monorail's attorney says the other account was set up because they weren't being allowed to pay normal operating expenses. But the other side says the money was used to pay for things that should not have been allowed, such as a trip to China for CEO Myles and doubling the pay of board members.

The Monorail has always avoided state and local taxes because it claimed to be doing the work of the government under the direction of the state. This could come back to haunt the train.

"The particular way it was organized and the particular way it was financed means it must be controlled by the State of Nevada and that has obligations as well as benefits," said attorney Bill Smith. "There is the possibility the IRS could come to the conclusion there is not enough state control and then the interest would be taxable."

The Monorail was built on bonds issued by the state and sold to investors. The state declared it a non-profit charity, meaning it has never paid sales, business, property or income taxes.

It's executives now say the train is a private entity, which would allow it to file Chapter 11 bankruptcy.

But if it gets that wish, the IRS could ask bondholders to pay 10 years worth of back taxes. It could also have major consequences for the state, driving up the cost of borrowing money for public projects.

One other note: The I-Team has learned that Nevada State Tax Commissioner George Kelesis has asked the tax board to take a fresh look at the Monorail's tax-free status.

News

Downtown Deals