Hare 1, Tortoise 0: After reading through the March 13 Harrah's Entertainment 4Q08 filing this earlier this week (one of the benefits of using mass transit), I set it aside for a few days, enabling the Las Vegas Review Journal's Arnold Knightly to beat me to the punch. What caught both his eyes (presumably) and mine (definitely) was a line of copy in which Harrah's acknowledged that its poor Las Vegas Strip performance was partly driven by "fewer hotel rooms availabe due to room remodeling and remediation projects at three Harrah's properties [including The Rio]."

You will recall that, whether to save time or money (or both), Harrah's made an end run around the Clark County permitting process when it wanted to make changes to several of its hotels. In some instances, these alterations not only didn't match the blueprints submitted to the county, they also compromised fire safety. (Lax inspection on the county's part allowed the problem to mushroom.)

Harrah's is presently under indictment for these cheeseparing measures, which were uncovered by dint of a forceful R-J investigation. It was a rare instance of the R-J speaking truth to power and the paper has suffered mightily for it, as Harrah's has retaliated in measures both great (an advertising boycott) and petty, like banning the R-J from Harrah's Las Vegas properties.

Whatever punishment the judicial system may or may not levy upon Harrah's will be nothing compared to the dent this misadventure put in Harrah's balance sheet. (By the way, I should acknowledge that Knightly read the Tolstoyian 160-page version of the quarterly report, while I settled for the 34-page "Cliff's Notes" version.) Harrah's may have thought it was saving money by going rogue but that false economy has now come back to bite it in the ass, to the tune of $60.5 million.

Gargantuan writedowns swung income from positive to negative in almost every jurisdiction. The international sector has bled red ink for two years, as London Clubs has proven to be a money-loser. The venture, like the company's hapless flip-flopping in Kansas, is typical of the spasmodic decisionmaking that has characterized CEO Gary Loveman's stewardship. Seemingly random projects (Slovenia, Singapore, the U.K.) were lunged at and toyed with briefly, then ditched. Having settled for one of the smaller fry of the British casino industry -- London Clubs -- and then unable to swap it for a piece of the big boy, Rank PLC, Harrah's must settle for selling off a little bit of LCI here or there.

Harrah's Atlantic City numbers would look much worse if the company didn't cleverly roll its Pennsylvania competitor, Harrah's Chester, into the A.C. portfolio for reporting purposes. If you had to assign Harrah's Chester to a region (as opposed to "Other"), the only one that fits is "Atlantic City Region," though that's a bit like rolling Laughlin numbers into "Las Vegas Region."

Debt service is murder, up 2.7X from 2007. 'Nuff said.

If asset sales are necessary, a non-Total Rewards property like Bill's Lake Tahoe would be already positioned for spinning off. However, Harrah's would have difficulty justifying more than a $160 million average sale price for any of its outlying Nevada properties, where cash flow is comparatively small. If significant relief is to be achieved from unloading casinos, some trophy properties will have to be sacrificed. After all, why should the bondholders be the only ones taking a bath?