No 'wrongdoing': MGM Mirage's Jim Murren has defended the casino company's partnership with Stanley Ho's daughter, Pansy Ho. Source:Bloomberg
NEW Jersey's casino enforcement agency said MGM Mirage knowingly signed on an unfit partner as it tried to gain a foothold in Macau after Chinese officials denied it a licence in the fast-growing gambling mecca.
“From the beginning of its efforts to enter Macau, MGM pursued partnerships with persons that it knew were associated with those aspects of gaming in Macau most heavily penetrated by organised crime,” New Jersey's Division of Gaming Enforcement wrote in a previously confidential report to the state's Casino Control Commission.
MGM Mirage disclosed the report's existence nearly a year ago, but it was kept confidential until yesterday’s hearing before the casino commission.
The commission had planned to consider the findings and decide whether to revoke the New Jersey licence of Las Vegas-based MGM Mirage, which owns a 50 per cent stake in Atlantic City's Borgata Hotel Casino & Spa.
Instead, MGM Mirage worked out a settlement with the enforcement division, which is part of the state attorney-general's office, to place its Borgata stake in a trust, in preparation for selling it. The commission cleared the plan yesterday, paving the way for MGM Mirage to exit the state.
The report, some of which is redacted, says that the enforcement division found sufficient evidence to conclude that Macau casino heiress Pansy Ho, MGM Mirage's joint-venture partner in Macau, could be susceptible to influence by “unsuitable persons” because of her tight business relationship with her father, Stanley Ho. Mr Ho, who once held a casino monopoly in Macau, has long been suspected by parties including the US State Department of ties to organised crime.
MGM Mirage's pursuit of the partnership underscores how important Macau has become for Las Vegas casino operators. The report says the company was so determined to gain a foothold in Macau's hot casino market that it was willing to take on a partner that risked attracting regulatory scrutiny in the US.
MGM Mirage spokesman Alan Feldman said yesterday that the company believed it had structured the deal so as to comply with regulatory standards.
According to the report, a private-investigation firm employed by MGM Mirage concluded that Stanley Ho was “linked closely” to 14K and Sun Yee On, two major Macau triads, or organised crime groups, and also had links to Russian organised crime and North Korean authorities.
Mr Ho has never faced charges of any kind and has disputed allegations about such connections.
Pansy Ho has said she is independent of her father, despite their business ties.
Representatives of the Ho family couldn't be reached for comment yesterday.
MGM Mirage chief executive Jim Murren said in a statement that New Jersey didn't submit evidence that Ms Ho “has engaged in any wrongdoing or been accused of any illegal activity”. Mr Murren also defended the company's partnership with her.
“MGM Mirage structured its business relationship with Pansy Ho to ensure the highest standards of operation and compliance with all applicable gaming laws and to protect against any improper influence,” Mr Murren said. “We have had a very positive working relationship with Pansy Ho and have a spotless operating record at MGM Grand Macau, which opened more than two years ago,” he said.
In interviews with company executives and reviews of internal company emails and other documents, the New Jersey investigators found that MGM Mirage had been desperate to find a solution after the Chinese government declined to consider it for a licence in 2002, when Macau was opened to outside companies, and that it knew that doing so might involve dealing with some unsavoury characters, the report says. Two of MGM Mirage's Las Vegas competitors - Wynn Resorts and Las Vegas Sands - both ended up with opportunities to build casinos in Macau, where the growth potential was viewed as enormous.
After investigating several potential partners, the company pursued a relationship with Mr Ho, despite knowing that he was a controversial figure, according to the report.
Philip Wang, MGM Mirage senior vice-president for Far East marketing, testified to the enforcement division that contacting Mr Ho “was really a wild card”.
“At the time we were very desperate,” the report quotes him as saying. He added that then-CEO Terrence Lanni, said it was “a crazy idea” but to “give it a shot”.
Mr Lanni couldn't be reached for comment. Attempts to reach Mr Wang through MGM Mirage were unsuccessful.
During a dinner in Las Vegas in 2002, Mr Ho designated daughter Pansy to negotiate on his behalf, the report says. But in September 2003, the company concluded that a joint venture with Mr Ho's subsidiaries wouldn't pass muster with Nevada regulators, and by November 2003 it was dealing with Ms Ho as a potential partner, rather than in her capacity as Mr Ho's representative.
Gary Jacobs, MGM's then-general counsel, testified he made it clear that any investment had to be from Ms Ho's own money, the report says.
Still, the report states, 90 per cent of the $US80 million that Ms Ho was to contribute to the venture came from gifts from her father.
MGM Mirage didn't adequately investigate the financial relationship between Ms Ho or her father, the report says. Mr Ho stayed involved in the business, the enforcement division says, to the extent that some paperwork to form the venture was signed at his home with him present.
The enforcement division also found that MGM Mirage had engaged in a concerted effort to conceal its knowledge of troubling factors in its Macau negotiations. For example, Mr Jacobs drafted a letter that was signed by Francis Tam, a high-ranking Macau official at the time, after Nevada regulators raised concerns about a potential partnership with Mr Ho, according to the report. The letter said the Macau government had conducted a thorough investigation of Mr Ho's companies and found both to be suitable. Mr Jacobs resigned last year.
Neither Mr Jacobs nor Mr Tam could be reached for comment.
After a two-year review, Nevada regulators cleared MGM Mirage's partnership with Ms Ho in 2007, finding the relationship posed no threat to MGM or to the state of Nevada. Two other states - Illinois and Michigan - haven't undertaken such reviews. MGM Mirage said Mississippi discussed the Macau partnership with the company but didn't investigate further.
Dennis Neilander, chairman of the Nevada Gaming Control Board, said that the report from New Jersey contains the same information that Nevada regulators had examined and aired during a hearing. Nevada doesn't plan to re-open its investigation, he said. “I don't believe there's anything in there factually that's different from the Nevada investigation,” he added. “We came to the conclusion that Pansy was not going to be influenced by her father.”
In their report, however, New Jersey regulators cited the potential for substantial negative influence from Mr Ho due to his indirect funding of her portion of the venture and his appearances at several major events related to the project.
“Given the extent of Stanley Ho's influences and involvement in gaming in Macau, and the multiple roles that Pansy Ho plays in the Stanley Ho empire, the possibility of Pansy Ho's competing and conflicting interests influencing the operation of the joint venture's casinos is real and significant,” New Jersey's enforcement division wrote.
Josh Lichtblau, assistant state attorney-general and head of the division, said he couldn't comment on how New Jersey's findings compared with Nevada's.
Under the terms of the settlement with the state approved yesterday, MGM Mirage has 18 months to sell its stake in the Borgata and related property. If the sale isn't completed by then, the trustee would have 12 months to sell the stake. Any sale would have to be approved by the New Jersey commission
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