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John L Smith

John L. Smith: Macau's reputation doesn't seem to bother Nevada gaming licensees

5 April 2012

If the state Gaming Control Board doesn't subscribe to The New Yorker, it might be a good time to start.

Check that. Times are tight. Given state government's current budget restraints, a full subscription might be too much to ask.

Perhaps it's best that a dedicated agent takes up a collection around the office and purchases a single copy. An article by Evan Osnos titled "The God of Gamblers: Why Las Vegas is Moving to Macau" in the magazine's latest edition promises to be fascinating reading and should generate interesting conversation at the GCB water cooler.

Osnos paints a portrait of Macau and its current cast of characters that's filled with light and shadow, color and intrigue. The historical smuggler's paradise is now home to the greatest gambling boom the world has ever known.

The story conjures a question many are asking these days: Can American casino moguls do business in Macau without interacting with VIP room operators linked to triad organized crime families?

And, if they do, what can gaming regulators in far-off Nevada realistically do about it?

Macau's casino success is unprecedented. The latest figures released for March show revenues up a staggering 24 percent to $3.12 billion for the month in a place that already does about five times the action of Las Vegas. The trend shows little sign of slowing -- not as long as throngs of gamblers from the mainland continue to be recruited to play for high stakes in the VIP rooms. Because it's illegal for the casinos to market those players, or advertise their resorts, it would appear the VIP room companies and junket operators will remain an indispensable part of the business strategy.

But that success comes with no small amount of risk. The more comfortable multi-billionaire U.S. gambling tycoons such as Steve Wynn and Sheldon Adelson get, the greater the chance they take.

Writes Osnos: "The United States government has come to believe that the cash changing hands on the tables in Macau is only a small part of the picture. 'The growth of gambling in Macau, fueled by money from mainland Chinese gamblers and the growth of U.S.-owned casinos, has been accompanied by widespread corruption, organized crime, and money laundering,' according to the 2011 annual report by the U.S. Congressional-Executive Commission on China. The place has emerged as the 'Macau Laundry Service,' as U.S. diplomats put it in an internal cable in 2009. Juan Zarate was a senior counterterrorism official in the Bush Administration who worked on sanctioning a private bank in Macau that allegedly facilitated, among other things, the financing of nuclear proliferation by North Korea. 'Anyone who knows anything about anti-money laundering understands both the inherent and the real risks in Macau,' Zarate said."

But if Macau's international reputation as a money-laundering crossroads and "cesspool" of financial crimes bothers the Nevada gaming licensees who are making such amazing scores there, it certainly doesn't show. When New Jersey gaming authorities called MGM Resorts International to account for its business relationship with Pansy Ho, savvy daughter of Macau casino king Stanley Ho, the American casino company opted to give up its Atlantic City casino partnership.

Longtime UNLV public administration professor William Thompson has been studying Macau for years, and he says it has cleaned up its act substantially. He believes Nevada's casino operators have little concern about the state regulators looking over their shoulders from long distance.

"They (GCB officials) don't have the personnel, and they don't have the resources to be flying to China," Thompson says. Besides, Nevada authorities already signed off on the Macau gambit years ago. "I think we only revisit it if there are critical episodes that yell out, 'Revisit it.'"

Makes sense.

But given the Strip casino kings' devotion to Macau despite its increasingly notorious reputation, I'm left wondering just how loud that episode would have to be before our state's gaming regulators were moved to action.