The Nevada Gaming Control Board detailed the shady dealings in a complaint filed Friday, and the owner of the Palms, FP Holdings LP, said it would to pay the penalty for failing to prevent the illegal transactions.
Among other offenses, the complaint said employees of NM Ventures LLC and NM Ventures II LLC, which operates the nightclubs, offered to sell undercover agents ecstasy, the prescription painkiller oxycodone, and $18,000 worth of cocaine last March.
In one sting, a bottle runner at Rain nightclub agreed to track down prostitutes for a patron. After failing to find the women, the runner reached into a front pocket and produced $100 of cocaine for the undercover agent.
A Moon nightclub host responded to an undercover agent who asked for "party favors" by offering up "$100 of blow."
The commission worked with Metro Police on the stings. Police held off on making arrests during the operation, but some are now imminent, according to Lt. Dave Logue of the department's criminal intelligence section.
Authorities said they targeted the Palms because they suspected its nightclubs. The last comparable operation took place at the Hard Rock Hotel & Casino three years ago, Logue said.
"We are resolved to address these problems comprehensively and decisively," he said.
At the time of the sting, the subsidiaries that ran the nightclubs were only partially owned by the Palms. "They're now fully owned (subsidiaries) so we have a lot more oversight and visibility into the organization," Acuna told The Associated Press.
He said the Palms is also implementing mandatory drug testing, setting up a whistle-blower system and making changes in its security department to discourage employees from straying outside the law to meet customers' requests.
The casino just west of the Las Vegas Strip is also installing "amnesty boxes" at club entrances, where patrons can dump drugs before entering the casino without fear of legal repercussions.
The $1 million fine must be approved by the Nevada Gaming Commission. The Palms has also agreed to pay $78,000 for investigation expenses.
Associated Press writer Joseph Altman in Phoenix contributed to this report.