The Nevada Supreme Court on Thursday revoked the license for the Wild Horse Canyon brothel, saying Storey County commissioners didn't follow their own law when they granted it.
The court said owner Lance Gilman failed to submit an audited financial statement and the county failed to investigate the brothel manager - both required by Storey County's brothel ordinances at the time.
Informed of the court's ruling, Gilman said Thursday that Susan Austin, brothel manager for the Wild Horse Canyon Ranch and Spa, was extensively investigated before it opened in June 2002, the first new brothel in Storey County in 18 years.
He also said an audited statement as required by the ordinance would be impossible to produce.
"Unless it's prepared over a lifetime, an audited statement is physically impossible," he said. "The stipulation was an error in the county ordinance, a wrong term."
Storey County Sheriff Pat Whitten, a retired senior vice president of commercial banking, conducted Gilman's background check.
"Whitten knew I couldn't produce an audited statement, but he was comfortable with the documentation I provided," Gilman said.
Whitten Thursday said the county's ordinance has been revised since the Wild Horse Canyon case went to the Supreme Court.
As originally written, Whitten said, the ordinance required an audit by a certified public accountant.
"We were advised by CPAs that it would be either difficult or impossible to obtain the audited statement we were seeking," Whitten said. "So we changed the ordinance and received a CPA-prepared statement for the general manager."
Whitten said he conducted "a thorough background investigation on Austin."
The issue has been deliberated in the Supreme Court for months and Gilman said he found it curious that a decision was handed down the day before he is to appear in court for a separate hearing.
Washoe District Court Judge Peter Breen set a hearing for this morning in Storey County on a request by Dermody Properties Industrial to halt transport of the Mustang's buildings to the Wild Horse brothel.
Gilman's brothel in the Tahoe-Reno Industrial Center east of Reno was strongly opposed by DP Operating Partnership, which said it would damage businesses in the industrial park and drive away others that might locate there.
Gilman was granted a brothel license by Storey County in 2002 after commissioners agreed with Whitten the audited financial statement wasn't necessary in Gilman's case.
The Supreme Court, however, said Storey officials couldn't simply ignore their own ordinance.
"While the brothel ordinances grant the board some discretion in making its final determination of whether to grant or deny an application for a brothel license, nothing in the ordinances permits the board to waive the mandatory requirements set forth in the ordinances or gives the board the ability to determine that Gilman's applications substantially complied with the ordinances," the Supreme Court order states.
The order says the district court should have directed the county to revoke Gilman's brothel license.
The rest of the high court's order leaves open whether Gilman can return to the county to get the license back. The court rejected DP's claim the entire issue should have been sent to arbitration over whether Gilman was bound by the recorded covenants, conditions and restrictions on the industrial center.
Those covenants specifically prohibit brothels or other prostitution-related business activity in the park. But justices agreed Gilman wasn't party to those restrictions, because his property is outside their jurisdiction.
The court also denied DP's argument the county meeting where the license was approved violated state open-meeting laws. DP lawyers argued they weren't given proper opportunity to argue against the brothel. But the court noted DP's representative was at the meeting and chose not to make an argument.
The order, signed by all six justices of the high court, also ruled the county was within its rights and within its zoning rules to grant a brothel license at that site.