LAS VEGAS — A California ice cream mogul who was convicted of four felonies for failure to pay $384,000 in casino IOUs is challenging a Nevada state law that lets Las Vegas Strip resorts turn to county prosecutors to collect unpaid gambling debts.
The Nevada Supreme Court heard oral arguments this week in Reno on a rare constitutional challenge of a 1995 state law that serves as a model for other U.S. states with casino businesses.
Nevada treats written IOUs, known as casino markers, like fraudulent bad checks. It also lets prosecutors tack on a 10 percent processing and prosecution fee with any settlement. In Las Vegas, that amounted to about $2.78 million in the 2012-13 fiscal year.
Harel Zahavi, lost his trial in 2010, and was convicted of four felony charges of drawing and passing a check without sufficient funds with intent to defraud. He was spared prison time, but was sentenced to five years of probation, banned from casinos and ordered to pay $379,000 in restitution.
Now, Zahavi wants the state high court to overturn his conviction.
He argues that casino markers are short-term business loans, not personal checks, because casinos routinely hold them for several months before redeeming them.
His lawyer told justices during arguments Tuesday at Reno High School that Zahavi had no intent to defraud the casinos.
Zahavi, a longtime loyal casino customer who played baccarat, struggled to pay $700,000 in casino debts in 2008. Just weeks later, the Venetian and Palazzo, the Hard Rock and Caesars Palace extended him the hundreds of thousands of dollars’ worth of credit that led to the criminal charges and his conviction, according to court documents.
The Supreme Court didn’t make an immediate ruling. A decision is expected to take several months.