Mon, Jul 08, 2013 - Page 9 News List

US casinos play Russian roulette in Macau

Pulling in four times as much annual revenue as Las Vegas and Atlantic City combined, Macau is the world’s undisputed gambling hub, but with big profits comes big risks in the form of organized crime and corruption

By Hannah Dreier  /  AP, LAS VEGAS, Nevada

LEGAL TROUBLE

It is not just Sands facing legal and regulatory troubles connected with Macau. Two of the other three major US gambling enterprises are too: Wynn Resorts Ltd and MGM Resorts International. Sands and Wynn are facing related lawsuits from shareholders who claim Macau mismanagement has damaged the companies. Wynn is being investigated by the US Department of Justice and the commission over a US$135 million donation to the University of Macau Development Foundation in 2011. Wynn co-founder Kazuo Okada characterized the donation as “suspicious” last year in a letter to the commission. He said that the foundation’s lead trustee is also a member of the Macau government and that the donation coincided with Wynn’s request for land to develop a third casino.

“I am at a complete loss as to the business justification for the donation, other than that it was an attempt to curry favor with those that have ultimate authority for issuing gaming licenses,” said Okada, who is now the subject of a Justice Department investigation himself for possible bribery in the Philippines, and has fallen out with his former Wynn colleagues.

Okada denies wrongdoing.

If his claim about the donation is true, the Wynn payment could violate the US’ Foreign Corrupt Practices Act, a law that bars US companies from paying off officials to win business overseas. Wynn says it acted properly and had no need to buy off authorities. In a separate investigation, Nevada regulators found no wrongdoing.

MGM got into trouble with New Jersey regulators when it opened a Macau casino with Pansy Ho (何超瓊), the daughter of gambling tycoon Stanley Ho (何鴻燊), who is allegedly linked to Chinese gangs. The state found the partnership “unsuitable” in a 2010 report and forced MGM to sell its stake in an Atlantic City casino. MGM denied that there was anything inappropriate about the relationship, began the process of selling its stake and did not cut ties with Macau.

Two years later, MGM chief executive Jim Murren stands by that choice.

“The Macau market is now larger than the entire US gaming market. Unfortunately for Atlantic City, it’s gone the other way. It’s smaller now than when we entered it. The fortunes of the two couldn’t be more different,” he said.

Last winter, New Jersey agreed to consider MGM’s application for a renewed license.

The Sands inquiries stem from a pending wrongful termination case brought by former Sands executive Steve Jacobs in 2010. Jacobs claims that Sands’ China subsidiary did business with known gangsters, tacitly condoned prostitution and made inappropriate payments to an attorney who was also a Macau lawmaker. Jacobs claims Sands paid the lawmaker to help settle various regulatory issues in Sands’ favor.

Sands has denied all claims, but recently said in a commission filing that an internal audit had found possible breaches of a section of the Foreign Corrupt Practices Act that requires public companies to file proper financial statements and maintain a system of internal controls. In April, Sands’ auditor declined to stand for re-election.

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