EFTA01091533.pdf

Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 1 of 212 Exhibit A EFTA01091533  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 2 of 212 ICM! WI] Official Committee of Second Priority Noteholders, derivatively on behalf of CAESARS ENTERTAINMENT OPERATING COMPANY, INC., and its debtor subsidiaries, Plaintiff, VS. CAESARS ENTERTAINMENT CORPORATION; CAESARS ACQUISITION COMPANY; Case No. CAESARS GROWTH PARTNERS, LLC; CAESARS ENTERTAINMENT RESORT PROPERTIES, LLC; CAESARS ENTERPRISE SERVICES, LLC; CAESARS INTERACTIVE ENTERTAINMENT, INC.; APOLLO GLOBAL MANAGEMENT, LLC; TPG CAPITAL, LP; HAMLET HOLDINGS LLC; DAVID BONDERMAN; ROBERT BRIMMER; MICHAEL COHEN; KELVIN L. DAVIS; JONATHAN HALKYARD; ERIC HESSION; FRED J. KLEISNER; GARY W. LOVEMAN; MARC C. ROWAN; DAVID B. SAMBUR; CHATHAM ASSET MANAGEMENT LLC; 3535 LV CORP.; 3535 LV NEWCO, LLC; BALLY'S LV, LLC; CAESARS GROWTH BALLY'S LV, LLC; CAESARS GROWTH BALTIMORE FEE, LLC; CAESARS GROWTH CROMWELL, LLC; CAESARS GROWTH HARRAH'S NEW ORLEANS, LLC; CAESARS GROWTH LAUNDRY, LLC; CAESARS GROWTH PH, LLC; CAESARS GROWTH PH FEE, LLC; CAESARS GROWTH QUAD, LLC; CAESARS LINQ, LLC; CAESARS TOURNAMENT, LLC; CORNER INVESTMENT COMPANY, LLC; FLAMINGO CERP MANAGER, LLC; FLAMINGO LAS VEGAS OPERATING COMPANY, LLC; FLAMINGO LAS VEGAS PROPCO, LLC; HAC CERP MANAGER, LLC; HARRAH'S ATLANTIC CITY OPERATING COMPANY LLC; HARRAH'S ATLANTIC CITY PROPCO, LLC; HARRAH'S LAS VEGAS, LLC; HARRAH'S LAS VEGAS PROPCO, LLC; HARRAH'S LAUGHLIN EFTA01091534  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 3 of 212 PROPCO, LLC; HARRAH'S LAUGHLIN, LLC; HIE HOLDINGS, INC.; HIE HOLDINGS TOPCO, INC.; HLV CERP MANAGER, LLC; LAUGHLIN CERP MANAGER, LLC; PARBALL NEWCO, LLC; PARIS CERP MANAGER, LLC; PARIS LAS VEGAS OPERATING COMPANY, LLC; PARIS LAS VEGAS PROPCO, LLC; PHWLV, LLC; Rio CERP MANAGER, LLC; RIO PROPCO, LLC; RIO PROPERTIES, LLC; JAZZ CASINO COMPANY, LLC; LAUNDRY NEWCO, LLC; LVH NEWCO, LLC; FLAMINGO-LAUGHLIN NEWCO, LLC; FHR NEWCO, LLC; PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP; and FRIEDMAN KAPLAN SEILER & ADELMAN LLP, Defendants, and CAESARS ENTERTAINMENT OPERATING COMPANY, INC., and its debtor subsidiaries, Nominal Defendants. COMPLAINT Plaintiff Official Committee of Second Priority Noteholders brings this action derivatively on behalf of Caesars Entertainment Operating Company, Inc. ("CEOC") and its debtor subsidiaries (together with CEOC, "Debtors") against CEOC's controlling shareholder, Caesars Entertainment Corporation ("CEC"); several of CEOC's present and past directors and officers; several of CEC's present and past directors and officers; Caesars Acquisition Company; Caesars Growth Partners, LLC; Caesars Entertainment Resort Properties, LLC; Caesars Enterprise Services, LLC; Caesars Interactive Entertainment, Inc.; Apollo Global Management, LLC; and TPG Capital, LP; Chatham Asset Management LLC; affiliates of CEC that were transferees of assets fraudulently transferred from CEOC; the law firm of Paul, Weiss, Rifkind, 2 EFTA01091535  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 4 of 212 Wharton & Garrison LLP; and the law firm of Friedman Kaplan Seiler & Adelman for (a) recovery of fraudulent transfers and the return to CEOC of valuable assets that were wrongly taken from CEOC by the actions of its directors, its controlling shareholder, and others, (b) monetary damages and/or rescission for breaches of fiduciary duties, unjust enrichment, aiding and abetting breaches of fiduciary duties, civil conspiracy, misappropriation of corporate opportunity, and waste of corporate assets, in a sum no less than the range of $8.1 billion to $12.6 billion, (c) imposition of a constructive trust or equitable lien over the transferred assets, and (d) disgorgement of legal fees paid by CEOC to Paul Weiss and Friedman Kaplan for their representation of CEOC despite conflicts of interest. INTRODUCTION 1. This action arises from a series of self-dealing transactions between CEOC — at all relevant times an insolvent corporation — and entities controlled by CEC, or under common control with CEC. Each of these transactions involved transfers that were made for inadequate consideration and less than reasonably equivalent value and that were made with the intent to hinder or delay CEOC's creditors. These transactions were conceived, crafted, and implemented by Apollo Global Management, TPG Capital, CEC, Paul Weiss, and individuals connected with these entities. The transactions were effectuated through a series of complex agreements that enabled Apollo, TPG and CEC to gain control of CEOC's high-growth assets, unencumbered by CEOC debt, and to remove those assets beyond the reach of CEOC's creditors. Later, CEC and defendants who were also CEOC directors, with the assistance of Paul Weiss and Friedman Kaplan, even went so far as to file a lawsuit seeking declaratory relief sanctioning these asset transfers and insulating CEC, Apollo, TPG, and their affiliates from fraudulent transfer claims and other legal liabilities. 3 EFTA01091536  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 5 of 212 2. In January 2008, Apollo and TPG, using a vehicle called Hamlet Holdings LLC ("Hamlet"), acquired the company then known as Harrah's Entertainment Inc. — and now known as CEC — in a highly leveraged $30.7 billion buyout (the "LBO"). Through Hamlet, Apollo and TPG (with Hamlet, the "Sponsors") continue to own 60% of the common stock of CEC and control all aspects of CEOC's governance and operations. 3. At the time of the buyout, Harrah's operated primarily through a wholly-owned subsidiary then known as Harrah's Operating Company, Inc. — now known as CEOC — and it was this operating company that incurred most of the debt used to fund the LBO.1 Harrah's owned and operated a network of casinos in regional markets throughout the country, as well as a significant number of casinos in destination markets — at that time, primarily Las Vegas and New Orleans. 4. Harrah's used its customer loyalty program to encourage customers in its regional markets to give Harrah's a greater share of their local gaming wallet so that they earned more reward credits to use at other Harrah's properties, particularly Harrah's destination properties in Las Vegas and New Orleans. Many of these regional casinos were only modestly profitable in their own right, but they provided Harrah's with the critical ability to interact with customers in their home markets. Harrah's portfolio of regional and destination properties created a hub-and- spoke business model that let the company capture customers on a regional basis and feed them to its destination properties. 5. Harrah's also developed synergies within Las Vegas. Through various acquisitions preceding the LBO transaction, Harrah's developed a dominant and concentrated For purposes of simplicity, this Complaint sometimes refers to the collective operations of CEC and its subsidiaries as "Caesars" and, where appropriate, refers to the two Harrah's entities by their Caesars names. 4 EFTA01091537  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 6 of 212 presence in the center of the Las Vegas Strip, including properties such as Caesars Palace, Paris Las Vegas, Bally's Las Vegas, The Flamingo Las Vegas, Rio Las Vegas, The Cromwell (formerly Bill's Gambling Hall & Saloon), Harrah's Las Vegas, and The Quad Resort & Casino (then known as the Imperial Palace), as well as parcels of undeveloped land near the Las Vegas Strip. Control of these contiguous casinos, hotels, restaurants, and entertainment locations was intended to assure that, once brought to Las Vegas, Harrah's customers would remain within the Harrah's system. 6. In 1998, Harrah's hired Harvard Business School professor Gary Loveman to refine, develop, and expand Harrah's customer loyalty program. That program, known as Total Rewards, pioneered the use of data analytics and behavioral tracking to maximize play and profitability throughout the Harrah's casino network. As a result of Loveman's innovative approach and the success of Total Rewards, Harrah's became one of the premier operators of casino properties in the world. Loveman was promoted to Harrah's Chief Executive Officer in 2003. 7. Within months of the Harrah's LBO, the global financial crisis and ensuing recession crippled the gaming industry. CEOC was especially hard hit as the revenues needed to service its massive debt fell short. At first, CEOC and the Sponsors responded to CEOC's unsustainable capital structure with exchange offers for CEOC's distressed debt and with credit facility amendments, which reduced some of CEOC's indebtedness and extended the maturity of much of the rest. 8. Soon, though, the Sponsors and CEC realized that CEOC would never be able to repay its enormous debt and embarked upon a new strategy. Beginning in 2009, the Sponsors and CEC devised a plan to salvage their multibillion-dollar investment in CEC by stripping 5 EFTA01091538  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 7 of 212 CEOC of valuable assets and moving them to affiliates of CEC that the Sponsors and CEC controlled and which were not liable for CEOC's massive debts. In implementing this plan, the Sponsors' role went beyond mere governance and supervision of CEC and CEOC. Instead, partners and officers from those firms — in particular, Apollo — played an active role in the day- to-day management of CEOC, in determining the specifics of CEOC's corporate strategy, in choosing which assets would be transferred, in deciding which CEC affiliates would receive the assets, in selecting CEOC's financial and legal advisors, in negotiating for (and, simultaneously, against) CEOC, and in determining the prices to be paid for assets. Often this was done with little evident input from the management of CEOC itself, who were relegated to staffing the strategic initiatives the Sponsors, CEC, and their advisors devised. 9. In the course of these transfers, the Sponsors, CEC, and their advisors created a profusion of affiliates, holding companies, intermediate entities, and special purpose vehicles. In 2009, they created an affiliate named Harrah's Interactive Entertainment — now known as Caesars Interactive Entertainment ("CIE") — which was owned by two layers of holding companies, each with multiple classes of stock. In 2013, they created Caesars Entertainment Resort Properties, LLC ("CERP") which, with various affiliated entities, took ownership of six existing properties indirectly owned by CEC (the "CMBS Properties") and two CEOC properties. Also in 2013, the Sponsors, CEC, and their advisors created an entity called Caesars Acquisition Corporation and a subsidiary, Caesars Growth Partners, to receive the transfer of properties from CEOC. In 2014, they created a "services company" called Caesars Enterprise Services, which, among other things, took control of CEOC's Total Rewards program, its enterprise services (including most of its employee workforce built over many years, and predating the LBO), and its property management business. Each of these affiliates was directly 6 EFTA01091539  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 8 of 212 or indirectly controlled by CEC and the Sponsors, and each was created for the purpose of transferring assets beyond the reach of CEOC's creditors. In fact, in some cases, the Sponsors and CEC openly characterized these affiliates as "bankruptcy remote", that is, remote from the CEOC bankruptcy case they knew was coming. 10. In May 2009, the Sponsors and CEC engineered the transfer of CEOC's online gaming business, including CEOC's World Series of Poker trademarks and intellectual property rights, to Caesars Interactive Entertainment. In August 2010, the Sponsors and CEC ordered CEOC to transfer its intellectual property rights in the CMBS Properties to affiliates that managed those properties and, later, to transfer those rights to CERP. In September 2011, CEC and the Sponsors forced CEOC to sell CIE its rights to hold World Series of Poker tournaments. In October 2013, CEC and the Sponsors caused CEOC to convey two of CEOC's significant Las Vegas properties to CERP. The next month, CEOC was instructed to transfer two other valuable properties to Growth Partners, along with valuable management fee streams. In March 2014, the Sponsors and CEC engineered CEOC's sale of four of its most important remaining properties to Growth Partners, along with valuable management fee streams and 31 acres of undeveloped land. As part of that same transaction, CEOC transferred its rights in Total Rewards to a vehicle controlled by CERP and Growth Partners. II. In mid-2014, the Sponsors and CEC announced, in rapid fire fashion, a number of further initiatives designed to enrich CEC and the Sponsors at the expense of CEOC and its creditors. In May 2014, the Sponsors orchestrated what they described as a sale of 5% of CEOC's common stock in an attempt to extricate CEC from its guarantee of CEOC's bond debt. Also in May 2014, the Sponsors and CEC launched a tender offer for CEOC's 5.625% Senior Notes due June 2015 and 10% Second Priority Notes due 2015. Although those notes had been 7 EFTA01091540  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 9 of 212 trading at a significant discount to their face value, the Sponsors and CEC had CEOC spend over $1 billion to redeem them at par, plus a premium, plus accrued interest, largely from Growth Partners and a hedge fund that had been secretly cooperating with Apollo. A few weeks later, the Sponsors ordered CEOC to repay all amounts remaining under an intercompany revolver facility between CEC and CEOC, exhausting another $261.8 million of CEOC's dwindling cash. In June 2014, the Sponsors and CEC caused CEOC to announce the closure of its modestly profitable Showboat Atlantic City property and to direct its VIP customers to a casino owned by CERP. In August 2014, the Sponsors, CEC, and CEOC filed a collusive lawsuit in New York seeking a declaratory judgment that none of their fraudulent transfers and other acts had been illegal. In December 2014, on the eve of its bankruptcy filing, CEOC entered into a Restructuring Support Agreement which, for very little consideration, would have released the Sponsors, CEC, the transferees of CEOC's assets, CEC's directors, CEOC's directors, and a host of officers, advisors, and others from any liability to CEOC for their role in these transfers. 12. The Sponsors and CEC's strategy had several purposes. The first, obviously, was to move CEOC's most valuable assets into new entities that would be insulated from CEOC's inevitable bankruptcy and improve the otherwise dismal prospects for the Sponsors' investment in CEC. The net effect was to divide Caesars' business into two segments — one a "Good Caesars," consisting of CIE, Growth Partners, CERP, and CES, that owned and controlled the prime assets formerly belonging to CEOC, and the other, a "Bad Caesars," consisting of CEOC, which remains burdened by substantial debt and whose remaining properties consist primarily of underperforming regional casinos. Only the "Bad Caesars" remains liable for the vast majority of the debts incurred in the 2008 LBO. 8 EFTA01091541  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 10 of 212 13. But there also was a second, and equally crucial, objective: once the principal benefits of the synergies of the Caesars' network of properties and control of the Total Rewards customer loyalty program had been transferred to the Sponsors and CEC, CEOC's remaining regional assets would have greatly reduced value to any potential third-party purchaser. And by severing CEOC from its assets and from the core enterprise functions that it previously performed, the Sponsors and CEC were able to create legal and regulatory hurdles that they knew would inhibit the ability of CEOC's creditors to restore the Caesars network without the cooperation of the Sponsors or CEC. Thus, when the long-expected bankruptcy came, the Sponsors and CEC could acquire cheaply the assets that remained in CEOC and recreate the synergistic Caesars network without CEOC's troublesome debt.2 14. This second objective was, in essence, the willful destruction of CEOC's value. Ordinarily, such efforts would have been prevented by CEOC's board, which owed fiduciary duties to the company and, because CEOC was insolvent, had a duty to maximize CEOC's value for the benefit of its creditors, who were its ultimate stakeholders. However, CEOC's board at the time was completely dominated by CEC and the Sponsors: indeed, at most times, it consisted of only two directors, both of whom were officers or directors of CEC and neither of whom was independent. (In fact, CEOC had no outside directors until June 2014.) In addition, CEOC did not have, and was not afforded, separate legal counsel or financial advisors to advise it on the transfers; CEOC's board did not create special committees of disinterested directors to assess the 2 And this, of course, is precisely what eventually happened. CEC engineered a new-value bankruptcy plan where it proposed to buy CEOC's assets for very little money. See CEOC 8-K filed on Dec. 31, 2014. Almost simultaneously, CEC announced its plans to merge with Caesars Acquisition Corporation, thus recapturing the properties CEOC had transferred to Growth Partners. See CEC 8-K filed on December 22, 2014. As part of the proposed plan, the Sponsors proposed that CEOC would grant all persons and entities involved in the transfers sweeping general releases from any claims CEOC might have against them. 9 EFTA01091542  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 11 of 212 proposed transfers; there was no market process to assure that CEOC received reasonably equivalent value for the assets it transferred; and, in virtually all cases, the board did not ask for or receive independent fairness opinions. 15. A third objective — admitted by the Sponsors — was to strengthen the Sponsors' hand in restructuring negotiations with CEOC's creditors. With CEOC's valuable assets stripped from CEOC and now firmly under the Sponsors' control, the Sponsors would enjoy leverage in their negotiations to force creditors to write down their debt. If creditors balked at a restructuring, the Sponsors would have nonetheless created — in their words — a "war chest" to use against the creditors in CEOC's inevitable bankruptcy. In the meantime, CEOC's ever- shrinking pool of assets would weaken the creditors and [TO BE INSERTED]. 16. Because the consideration received by CEOC for these transfers was woefully inadequate and because the transfers were intended to enrich CEC and the Sponsors at the expense of CEOC and its creditors, the transfers were unlawful and avoidable. 17. In addition, the transfers were made with actual intent to hinder, delay, or defraud its creditors and thus the transfers should be avoided or the value of the property transferred must be returned to CEOC. Defendants also are liable for monetary damages for their role in these transactions. 18. CEC, as CEOC's controlling shareholder, CEC's directors (by virtue of their domination over CEOC and its board), and CEOC's directors and officers owed fiduciary duties to CEOC. Because CEOC was insolvent at all relevant times, these defendants had a duty to maximize CEOC's value for the benefit of its creditors, who were CEOC's ultimate 10 EFTA01091543  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 12 of 212 stakeholders. Defendants breached their fiduciary duties or aided and abetted others in breaching fiduciary duties, and are therefore liable for damages to CEOC. 19. The conduct of the defendants named in this lawsuit has already been the subject of a comprehensive investigation conducted by a court-appointed examiner, Richard Davis (the "Examiner"). As summarized by the Examiner at the outset of his 930-page report: The principal question being investigated was whether in structuring and implementing these transactions assets were removed from CEOC to the detriment of CEOC and its creditors. The simple answer to this question is "yes." As a result, claims of varying strength arise out of these transactions for constructive fraudulent transfers, actual fraudulent transfers (based on intent to hinder or delay creditors) and breaches of fiduciary duty by CEOC directors and officers and CEC. Aiding and abetting breach of fiduciary duty claims, again of varying strength, exist against the Sponsors and certain of CEC's directors. The Examiner concluded that "[t]he potential damages from those claims considered reasonable or strong range from $3.6 billion to $5.1 billion." The Examiner defined "strong" claims as those "having a high likelihood of success" and "reasonable" claims as those "having a reasonable, or better than 50/50, chance of success." Importantly, that range of potential damages excluded other claims that were characterized by the Examiner as viable, albeit with a less than a 50/50 chance of success. Nor did the Examiner's range include several categories of damages that were determined by the Examiner to be available on the strong and reasonable claims, but that the Examiner did not quantify. Such amounts, if quantified and included, would increase the damages to a figure in excess of $10 billion. JURISDICTION AND VENUE 20. This Court has subject matter jurisdiction over the claims for relief in this adversary proceeding pursuant to 28 U.S.C. § 1334(b). 11 EFTA01091544  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 13 of 212 21. Venue for this adversary proceeding properly lies in this judicial district pursuant to 28 U.S.C. § 1409. PARTIES A. Plaintiffs 22. Plaintiff Official Committee of Second Priority Noteholders ("Noteholder Committee") was appointed by the Office of the United States Trustee for the Northern District of Illinois Eastern Division on February 5, 2015, to represent the interests of all holders of more than $5.2 billion in principal amount of Second Priority Notes issued by CEOC under three indentures executed in 2008, 2009, and 2010, who are the primary beneficiaries of the claims asserted in this Complaint. The Noteholder Committee is vested with, among other things, the powers described in Bankruptcy Code § 1103, including the power to investigate the acts, conduct, assets, liabilities, and financial condition of the Debtors, and to perform such services as are in the interest of those represented. 23. The Noteholder Committee asserts the claims in this Complaint derivatively on behalf of nominal defendants CEOC and 172 of its subsidiaries (collectively, the "Debtors") who filed voluntary chapter 11 petitions under the Bankruptcy Code. CEOC is a Delaware corporation that owns, operates, and manages casinos and other entertainment properties in Las Vegas and elsewhere in the United States. CEOC's headquarters are located at One Caesars Palace Drive, Las Vegas, Nevada 89109. Standing to commence this action was granted on , 2016, by order of the United States Bankruptcy Court for the Northern District of Illinois. B. Corporate Defendants 24. Defendant Caesars Entertainment Corporation ("CEC") is a Delaware corporation that, through subsidiaries, joint ventures, and other arrangements, owns, operates, and manages 12 EFTA01091545  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 14 of 212 gambling casinos and properties in the United States and foreign countries. CEC's offices are located at One Caesars Palace Drive, Las Vegas, Nevada. The Sponsors own approximately 60% of the voting stock of CEC and have the right to appoint CEC's entire board of directors. 25. Defendant Caesars Acquisition Company ("CAC") is a Delaware corporation CEC formed in 2013 to make an equity investment in Growth Partners. CAC is a public company whose stock is listed and traded on NASDAQ. 66% of the voting stock of CAC is owned by affiliates of the Sponsors. The Sponsors also control CAC pursuant to an Omnibus Voting Agreement that gives them the right to appoint CAC's entire board of directors. CAC's offices are located at One Caesars Palace Drive, Las Vegas, Nevada. 26. Defendant Caesars Growth Partners, LLC ("Growth Partners") is a Delaware limited liability company that was formed in 2013 as a joint venture between CEC and CAC to acquire assets from CEOC and CEC. All of the voting units of Growth Partners are owned by CAC. All of the non-voting units of Growth Partners are owned by CEC or its subsidiaries and affiliates. Upon information and belief, Growth Partners' offices are located at One Caesars Palace Drive, Las Vegas, Nevada.3 27. Defendant Caesars Entertainment Resort Properties, LLC ("CERP") is a Delaware limited liability company that was formed in October 2013 as a wholly-owned subsidiary of CEC for the purpose of acquiring, holding, and operating certain Caesars properties. CERP's offices are located at One Caesars Palace Drive, Las Vegas, Nevada.4 3 For purposes of this Complaint, Growth Partners is defined to include all of the direct and indirect subsidiaries, affiliates, holding companies, and other entities owned by, controlled by, or under common ownership or control with Growth Partners that received assets or ownership interests in conjunction with any of the relevant transfers. 4 For purposes of this Complaint, CERP is defined to include all of the direct and indirect subsidiaries, affiliates, holding companies, and other entities owned by, controlled by, or 13 EFTA01091546  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 15 of 212 28. Defendant Caesars Enterprise Services, LLC ("CES") is a Delaware limited liability company that was formed on April 4, 2014, for the purpose of acquiring and managing the enterprise-wide assets of CEOC for the benefit of CEC, CEOC, Growth Partners, and CERP. Upon information and belief, CEC's offices are located at One Caesars Palace Drive, Las Vegas, Nevada. 29. Caesars Interactive Entertainment, Inc. ("CIE") is a Delaware corporation formed in April 2009 by CEC. CIE operates an online gaming business that includes so-called "play for fun" games as well as "real money" games in certain jurisdictions. In addition, CIE owns the World Series of Poker tournaments and brand. The majority of the voting stock of CIE is owned by Growth Partners. Upon information and belief, CIE's offices are located at 1411 Peel, Montreal, Canada. 30. The following chart illustrates the Caesars organizational structure following the creation of Growth Partners and CERP in 2013, the purported transfer by CEC of 11% of its equity stake in CEOC beginning in May 2014, and the creation of CES: Apollo, we Apollo. TPG Pablo Public and Co- and Shareholders Shareholder1 Investers Co-Investors 443% 337% 60 )% 3t. Caesars Enterprise Sendeas (CES) Cars Aosulaltlen Caesars Entertainment Corp. Company (CAC) (GEC' CEOC I Third Party 21% sass toe V% enownin Inv st'OrS 00% wing O%.era0 2: 21 1. S OM Caesars Growth Partners Caesars Entertainment Resort Caesars Entertainment Operating Company (CEOC) (COP) Properties (CERP) I ' - ITotalRewards/. : (continued...) under common ownership or control with CERP that received assets or ownership interests in conjunction with any of the relevant transfers. 14 EFTA01091547  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 16 of 212 31. CEC, CEOC, CERP, CAC, and Growth Partners have created and do business through dozens of direct and indirect subsidiaries, affiliates, holding companies, and other entities, all of which are owned or controlled by these companies or by the Sponsors. CEC, CEOC, CERP, CAC, and Growth Partners frequently create new such entities, or abandon older ones, for purposes of avoiding taxes, circumventing contractual requirements, or concealing the nature or details of transfers. Because these entities are owned, controlled, and dominated by the Sponsors, CEC, CEOC, CERP, CAC, or Growth Partners, and have been used for improper purposes, their independent identities should be disregarded and they should be treated as alter egos of their ultimate owners. 32. Apollo Global Management, LLC is a Delaware limited liability company formed on July 3, 2007. Apollo's global headquarters are located at 9 West 57ih Street, New York, New York. For purposes of this Complaint, Apollo is defined to include all of its funds, subsidiaries, or vehicles that have invested in CEC or any of its affiliates. 33. TPG Capital, LP is a Delaware limited partnership formed on November 15, 2011. Upon information and belief, TPG's global headquarters are located at 345 California Street, San Francisco, California. For purposes of this Complaint, TPG is defined to include all of its funds and/or subsidiaries that invested in Caesars. 34. Hamlet Holdings LLC ("Hamlet") is a Delaware limited liability company. Upon information and belief, Hamlet was formed in 2002 and is headquartered in Fort Worth, Texas. Hamlet and affiliates of Hamlet are the vehicles by which the Sponsors raised money to invest in and execute the LBO, now control CEC, and invest in and control CAC. According to SEC filings, Hamlet's members consist of five persons from Apollo and TPG. The Sponsors, together with investment vehicles they created, at all relevant times owned approximately 60% of the 15 EFTA01091548  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 17 of 212 voting common stock of CEC and 66% of the voting common stock of CAC. According to SEC filings, Apollo and TPG gave an irrevocable proxy to defendant Hamlet under which Hamlet has sole voting and sole dispositive power with respect to these shares of CEC and CAC. C. Individual Defendants 35. David Bonderman was at all relevant times a director of CEC and is currently a director of CEOC. Bonderman is a founding partner of TPG and, upon information and belief, stood to benefit personally from some or all of the transactions described in this Complaint. 36. Robert Brimmer is an officer of CEC. In February 2014, Brimmer was the head of Caesars' Planning and Analysis group, and he later was promoted to the position of CEC's Director, Corporate Finance. 37. Michael Cohen worked in CEC's legal department from February 2006 to April 2014. From November 2011 to April 2014, Cohen served as Senior Vice President, Deputy General Counsel, and Corporate Secretary of CEC. In addition, Cohen was a director of CEOC from July 2012 to April 2014. In April 2014, Cohen became Senior Vice President, Corporate Development, General Counsel, and Corporate Secretary of CAC and Senior Vice President, General Counsel, and Corporate Secretary of CIE. 38. Kelvin L. Davis was at all relevant times a director of CEC and is currently a director of CEOC. Davis is a senior partner of TPG and, upon information and belief, stood to benefit personally from some or all of the transactions described in this Complaint. 39. Jonathan Halkyard was the Chief Financial Officer of CEC from August 2006 to May 2012. In addition, upon information and belief, Halkyard was a director of CEOC from at least April 2009 until his departure in May 2012. 40. Eric Hession was a CEOC director from May 2014 until June 27, 2014. Upon information and belief, Hession also served as Vice President of Finance of CEC and CEOC 16 EFTA01091549  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 18 of 212 from February 2011 to November 2011 and as Senior Vice President of Finance of CEC and CEOC from November 2011 until he became Chief Financial Officer and Executive Vice President of CEC on January 1, 2015. 41. Fred J. Kleisner became a member of the CEC board in July 2013. Upon information and belief, Kleisner stood to benefit personally from some or all of the transactions described in this Complaint. 42. Gary Loveman was at all relevant times the Chairman and a director of CEC and CEOC. Loveman also was the Chief Executive and President of CEC and CEOC until June 30, 2015. Upon information and belief, Loveman stood to benefit personally from some or all of the transactions described in this Complaint. 43. Marc C. Rowan was at all relevant times a director of CEC and from June 2014 to March 2016 was a director of CEOC. Rowan is a founding partner of Apollo and, upon information and belief, stood to benefit personally from some or all of the transactions described in this Complaint. 44. David B. Sambur has been a director of CEC since 2010 and a director of CEOC since June 2014. Sambur is a partner of Apollo and, upon information and belief, stood to benefit personally from some or all of the transactions described in this Complaint. 45. According to CEC's proxy statements, CEC does not consider Messrs. Loveman, Bonderman, Davis, Rowan, or Sambur to be independent directors because of their relationships with affiliates of the Sponsors or other relationships with CEC. D. Other Defendants 46. Chatham Asset Management LLC is an asset management company with its principal place of business at 26 Main Street, Chatham Township, New Jersey. Chatham is a limited liability company organized under the laws of Delaware. 17 EFTA01091550  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 19 of 212 47. Paul, Weiss, Rifkind, Wharton & Garrison LLP is a law firm organized as a limited liability partnership under the laws of New York, with its principal place of business at 1285 Avenue of the Americas, New York, New York. At all relevant times Paul Weiss simultaneously served as counsel to Apollo, CEC, and CEOC. Upon information and belief, between 2009 and 2016, Paul Weiss collected tens of millions in fees for its work representing and advising CEC, CEOC, and other Caesars entities and interests. 48. Friedman Kaplan Seiler & Adelman LLP is law firm organized as a limited liability partnership under the laws ofNew York, with its principal place of business at 7 Times Square, New York, New York. Friedman Kaplan simultaneously served as counsel to CEC and CEOC in the preparation, filing, and advocacy of the action filed in New York styled Caesars Entertainment Operating Company, Inc. and Caesars Entertainment Corporation v. Appaloosa Investment Limited Partnership I, et aL, Sup. Ct. •. Co., Index No. 652392/2014. Upon information and belief, CEOC has paid over $1 million to Friedman Kaplan for its work on that lawsuit. E. Transferee Defendants 49. In addition to CIE, CEC, CERP, CAC, and Growth Partners, the Sponsors and CEC formed numerous entities that received transfers of real property, tangible and personal property, intellectual property, and other assets from CEOC and from affiliates of CEOC. Upon information and belief and unless otherwise indicated, the offices and premises of each of these defendants are located at the same Las Vegas address as CEC. 50. The "2009 Transferees" are the entities that received assets and business CEOC transferred from its online gaming business. These include the following defendants: a. CEC and CIE; b. HIE Holdings Topco, Inc., a Delaware corporation; 18 EFTA01091551  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 20 of 212 c. HIE Holdings, Inc., a Delaware corporation; d. Caesars Tournament, LLC, a Delaware limited liability company; and e. Rio Properties, LLC, a Nevada limited liability company. 51. The "CMBS PropCos" are the entities that received assets CEOC transferred in 2010 as a result of the CMBS Loan Agreement Amendment and Trademarks Transfer. These include the following defendants: a. CEC; b. Rio PropCo, LLC, a Delaware limited liability company; c. Harrah's Las Vegas PropCo, LLC, a Delaware limited liability company; d. Harrah's Atlantic City PropCo, LLC, a Delaware limited liability company; e. Harrah's Laughlin PropCo, LLC, a Delaware limited liability company; f. Flamingo Las Vegas Propco, LLC, a Delaware limited liability company; and g. Paris Las Vegas PropCo, LLC, a Delaware limited liability company. 52. The "WSOP Transaction Transferees" are the entities that received assets CEOC transferred in 2011 as a result of the WSOP Transaction. These include the following defendants: a. CEC; b. CIE; c. Caesars Tournament, LLC; and d. Rio Properties, LLC. 53. The "Linq/Octavius Transferees" are the entities that received assets CEOC transferred in 2013 as a result of the Linq and Octavius transfers. These included defendants CEC and Rio Properties, LLC. 19 EFTA01091552  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 21 of 212 54. The "2013 Transferees" are the entities that received assets CEOC transferred in 2013 as a result of the 2013 Transaction Agreement. These include the following defendants: a. CEC, CAC, and Growth Partners; b. Caesars Growth PH Fee, LLC, a Delaware limited liability company; c. Caesars Growth Baltimore Fee, LLC, a Delaware limited liability company; d. PHWLV, LLC, a Nevada limited liability company; and e. Caesars Growth PH, LLC, a Delaware limited liability company. 55. The "Services Transferees" are the entities that received management services from CEOC and access to CEOC's Total Rewards program pursuant to the 2010 Shared Services Agreement, the 2013 Shared Services Agreement, and the Management Services Agreements. These include the following defendants: a. CMBS PropCos, CEC, CERP, and Growth Partners; b. Flamingo Las Vegas Operating Company, LLC, a Nevada limited liability company; c. Paris Las Vegas Operating Company, LLC, a Nevada limited liability company; d. Harrah's Laughlin, LLC, a Nevada limited liability company; e. Rio CERP Manager, LLC, a Nevada limited liability company; f. Paris CERP Manager, LLC, a Nevada limited liability company; g. Laughlin CERP Manager, LLC, a Nevada limited liability company; h. HLV CERP Manager, LLC, a Nevada limited liability company; i. HAC CERP Manager, LLC, a New Jersey limited liability company; j. Harrah's Las Vegas, LLC, a Nevada limited liability company; k. Flamingo CERP Manager, LLC, a Nevada limited liability company; I. 3535 LV Newco, LLC, a Delaware limited liability company; m. Parball NewCo, LLC, a Delaware limited liability company; 20 EFTA01091553  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 22 of 212 n. Corner Investment Company, LLC, a Nevada limited liability company; and o. Jazz Casino Company, LLC, a Louisiana limited liability company. 56. The "2014 Transferees" are the entities that received properties from CEOC as a result of the 2014 Transaction Agreement. These include the following defendants: a. CEC, CAC, Growth Partners, 3535 LV Newco, LLC, Parball NewCo, LLC, and Corner Investment Company, LLC; b. Caesars Growth Bally's LV, LLC, a Delaware limited liability company; c. Caesars Growth Quad, LLC, a Delaware limited liability company; d. Caesars Growth Cromwell, LLC, a Delaware limited liability company; e. Caesars Growth Harrah's New Orleans, LLC, a Delaware limited liability company; f. Caesars Linq, LLC, a Delaware limited liability company; g. Caesars Growth Laundry, LLC, a Delaware limited liability company; h. FHR NewCo, LLC, a Delaware limited liability company; i. Flamingo-Laughlin NewCo, LLC, a Delaware limited liability company; j. LVH NewCo, LLC, a Delaware limited liability company; and k. Laundry NewCo, LLC, a Delaware limited liability company. 57. The "Easement Transferees" are the entities that were granted easements in 2011 on four lots of unimproved real estate, comprising approximately 25.8 acres, directly east of various Caesars properties. These include the following defendants: a. Flamingo Las Vegas Propco, LLC and Caesars Linq, LLC, each of whom is identified above; and b. 3535 LV Corp. (formerly known as the Imperial Palace Corporation), a Nevada corporation. 21 EFTA01091554  Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 23 of 212 58. The "Total Rewards Transferees" are the entities that received access to or rights in Total Rewards as a result of the 2014 Transaction Agreement and the formation of CES. These include the following defendants: a. CEC, CERP, Growth Partners, and CES; b. Caesars Growth Bally's LV LLC, a Delaware company; c. Flamingo Las Vegas Operating Company, LLC; d. Harrah's Las Vegas, LLC; e. Harrah's Laughlin, LLC; f. Paris Las Vegas Operating Company, LLC; g. Rio CERP Manager, LLC; h. Paris CERP Manager, LLC; i. Laughlin CERP Manager, LLC; j. HLV CERP Manager, LLC; k. HAC CERP Manager, LLC; and I. Flamingo CERP Manager, LLC. STANDING 59. Standing to commence this action was granted on , 2016, by order of the United States Bankruptcy Court for the Northern District of Illinois. 60. The Internal Revenue Service ("IRS") serves as a "Golden Creditor" pursuant to section 544(b) of the Bankruptcy Code because it held claims against CEOC both at the time of the LBO on January 28, 2008 and on the Petition Date. Moreover, the IRS is not bound by the statute of limitations found in state fraudulent transfer laws and is instead subject to a federal 10- year statute of limitations, measured from the date of assessme