Looking in on: Gaming

LAS VEGAS AND MACAU -- While regulators hope Las Vegas-based casino operators will help flush out corrupt influences in the Chinese gambling enclave of Macau, they're not holding their breath.

At an October conference sponsored by the International Association of Gaming Attorneys, Macanese regulators said casino VIP rooms rented out by junket operators linked to triads, or Chinese gangs, are too ingrained a social problem for them to conquer completely and that shutting down the rooms would hurt Macau's gambling-based economy.

Junket operators recruit gamblers and rent gambling rooms, receiving a percentage of casino profit and arranging credit by buying the chips gamblers use to make bets. Macau's casinos are now allowed to issue credit to gamblers, removing one of the junket operators' key functions. But the junkets, some of which use gangs to enforce debt collection, have been unwilling to give up their lucrative trade.

While chafing at Macau regulators' apparent unwillingness to shut down VIP gambling salons with shady connections, Nevada regulators also are chagrined by a Macanese system that has no intention of investigating every casino and junket operator in the region, as Nevada requires of its casinos.

Similarly, regulators in Nevada's early days didn't pry into the backgrounds of operators who didn't cheat gamblers or the state - a practice that allowed Nevada to slowly distance itself from its mob roots.

Nevada also is no stranger to more primitive methods of debt collection. Thanks to English common law and a federal stance against gambling, gambling debts weren't legally collectible until 1983, when casinos could use the courts to enforce debts.

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Before the Gaming Control Board recommended approval of MGM Mirage's business deal with Pansy Ho, the daughter of controversial Macau casino tycoon Stanley Ho, MGM Mirage executives reminded regulators at the public hearing last month that Las Vegas - not Macau - would continue to be the company's home base and the primary focus for economic reinvestment.

"Any success we enjoy elsewhere has benefited this state and that will always be the case," MGM Mirage Chief Executive Terry Lanni said.

While Lanni didn't mention Wynn Resorts or Las Vegas Sands by name, he contrasted that stance with other companies already doing business in Macau.

Las Vegas Sands expects to open its second casino, a version of its Venetian resort, this summer in the Chinese enclave, where the company generated roughly 75 percent of its casino revenue last year.

Lanni said that MGM Mirage, the state's largest private company and taxpayer, generates a larger percentage of the state's revenue than any other company in any other state in the country.

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Things just don't cost what they used to.

As expected, both Boyd Gaming and Wynn Resorts recently increased the budgets for their planned Strip resorts, in part blaming rising construction costs. Boyd's Echelon Place, which will break ground this summer at the Stardust site and is expected to open by the third quarter of 2010, will now cost an estimated $4.4 billion, up from about $4 billion.

And Encore, a resort being built adjacent to Wynn Las Vegas, will cost about $2 billion. The company originally said it would cost about $1.4 billion to build.

In a conference call to investors, casino boss Steve Wynn said about half of the increase went into expanding the scope of the resort, with the remainder going to inflated costs for material and labor. The company has only begun to finalize the resort's design, signing contracts for materials and locking in prices.

"There's a shortage of good help," he said. "Builders are competing with each other to get the best subcontractors. It's a very critical situation here."

Real estate experts say the Palazzo, built by an in-house design and construction team at Las Vegas Sands, may better be able to control spiraling construction costs than competitors, which are relying on just three general contractors. A fourth resort, Cosmopolitan, is being built by Perini Building Co., which is also constructing MGM Mirage's CityCenter, the largest privately funded construction project in the country.