Suit against Blockchains CEO surprised Sisolak, chief of staff says

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Jeffrey Berns' vision to create a "smart city" in an "Innovation Zone" in Storey County – based on Blockchains technology and cryptocurrency – should be considered separately from a sexual harassment lawsuit filed against him in nearby Washoe County, Gov. Steve Sisolak's chief of staff said on Nevada Newsmakers Thursday.
"The governor, and our entire office, take any allegation very seriously," Sisolak's Chief of Staff Michelle White told host Sam Shad. "The policy, when we think of Innovation Zones in this legislation, is separate from any one individual or business."
A 45-year-old teacher alleges Berns, the CEO of Blockchains Inc., and his wife lured her into a lucrative job teaching their daughter. Yet really, they wanted her as a sexual partner. Berns is also accused of trying to sabotage the teacher's re-employment at an Incline Village school, after she turned down the sexual advances.
News of the lawsuit broke in the Reno Gazette Journal while Berns' associates were conducting a campaign to convince members of the Nevada Legislature to approve plans for Berns' high-tech city, just east of the Reno-Sparks area.
"The policy is worthy of that debate and discussion," White said. "But, as I mentioned, the governor, myself and this office take any of those allegations very seriously, and want to see that process played out."
News of the lawsuit took the governor's office by surprise, White said.
"I can tell you that it was nothing that we were aware of," White said.
The "smart city" and Innovation Zone concept was first mentioned by Sisolak in his State of the State speech in January, catching many lawmakers by surprise.
Sisolak, looking for ways to boost Nevada economy during a pandemic-related recession, touted the concept as providing a landing spot where emerging technologies could develop. Yet Berns' idea drew opponents in local Storey County government because the smart-city plan also would take away about 67,000 acres from Storey County.
The original plan for the smart city called for it to act independently from Storey County, creating its own school district, transportation department and public utilities, using Blockchain cryptocurrency as a basis for business.
White and Sisolak's senior adviser Scott Gilles, however, tamped down county government fears, stressing the final bill to allow the Innovation Zone concept has not been presented to the Legislature. Lawmakers have yet to read the bill, debate it or move it through the committee process, they said.
"We don't have the bill yet. I'll just bring that up just one more time," White said.
"That is the starting point to really have these conversations, to have a hearing and a robust debate," she said.
White showed empathy for county officials who dislike parts of the plan, reassuring them that Sisolak's background included many years on the Clark County Commission.
"This is a big concept and it is normal for folks to feel nervous about it," White said. "And it is certainly normal for folks to have questions about it. And those questions deserved to be answered, walked through, debated and discussed. So again, we don't have the language (of the final bill) back yet and look forward to getting it and having that discussion with all of those (county government) folks at the table."
The concept of the smart city is much larger and complex than another technological wonder in Storey County's Tahoe-Reno Industrial Center, the Tesla gigafactory, Gilles said.
"Tesla is obviously a very state-of-the-art, huge building but the Innovation Zone would be something different," he said. "It would be a community built on the basis of an innovative technology which is Blockchains. It would be something similar to a general improvement district that you've seen in some places but much bigger with much more authority than that.
"It is a community with a phased-in approach based on the investment made by the underlying applicant (Berns), where there is a board of supervisors that is ultimately going to make decisions with this governance model. And as they grow and housing develops and schools develop, residences develop, there would be elections that they would be responsible for. It is a much different holistic concept than the Tesla building, which is great."
White and Gilles pushed back when Shad suggested that the Innovation Zone concept was the "keystone" to Sisolak's economic plan. Sisolak's economic recovery plan has many points although the Innovation Zone idea is one, they said.
Ultimately, Sisolak wants to consider the Innovation Zone concept as a way to diversify the state economy. The success of the concept, Gilles said, "is about jobs and tax revenue that benefit all of the state, particularity coming off one of the worst recessions Nevada has ever seen.
"We saw very clearly the impact a pandemic and recession has on gaming and resort properties and the tourism industry and it crippled the state," Gilles said. "The evidence was clear through our special sessions last summer. Fiscal year (2020) wiped out the state's rainy day fund. Fiscal year (2021), $1.2 billion cut. That was all related to the impact on the tourism industry in the state of Nevada. So that is why we are pursuing this. And that's why we think diversification makes sense. And ultimately why we are willing to have this debate and have this discussion on Innovation Zones."
Sufficient water must be located for any approval of the Innovation Zone smart city concept, Gilles said. Blockchains LLC has already spent $30 million for about 7,000-acre feet of water rights near Gerlach. Yet water experts doubt that resource will provide all the necessary water. Also, a pipeline of about 100 miles, some of it going over land owned by Native American tribes, may be needed to get that water to the Innovation Zone.
"We don't know, explicitly, if the water is there," Gilles said. "We know they are working on it.
"The point that I want to stress is that they will have to come forward and prove to the state, via GOED (Governor's Office of Economic Development), like any other developer, that they have procured the water necessary for the development that are attempting to build," Gilles said.


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