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Nevada Board Approves $5 Million Fine for Mirage

CARSON CITY, Nevada -- The Nevada Gaming Commission Thursday unanimously approved a $5 million fine to end the state's civil case against The Mirage for failing to file almost 15,000 federal anti-money laundering reports in 2001 and 2002.

Despite imposing the largest gaming-related fine in state history, some participants suggested the settlement with MGM Mirage may have left some significant issues unresolved.

Commissioner Augie Gurrola, for instance, tried to get assurances that sufficient safeguards have been put in place to ensure incidents like The Mirage's failure to file thousands of Regulation 6A cash transaction documents is never repeated but was ruled out of order by commission Chairman Peter Bernhard and Assistant Attorney General Mike Wilson.

Mirage Resorts Chief Executive Officer Bobby Baldwin, who attended the commission hearing, later said Mirage Resorts was "glad to get the issue resolved" and said the settlement ensures the incident will not be repeated.

"We did a lot of work to understand what happened and to make sure this doesn't happen again. I'm satisfied and I'm confident gaming control and the commission hold the same belief that this won't happen again," he said.

During the hearing, however, Gurrola started questioning whether administrative safeguards now in place are sufficient to prevent a repetition.

When Frank Schreck, The Mirage's outside counsel and a partner in Schreck Jones, said all the employees involved in the case understood the regulations and procedures affecting the anti-money laundering reports and had been fired or quit for failing to follow them, Gurrola countered that this illustrates why the issue needed to be considered more carefully.

"You take it for granted that because you have a training program, it is adequate when it may not be," he said. "All the training and auditing processes in the world cannot cure the problem if you don't get to the root cause."

Bernhard intervened in the challenge to Mirage procedures, saying it would raise problems for the state or in any related civil or criminal cases if the settlement wasn't approved.

And Bernhard also said although he considers the settlement fair, the case constituted "a serious shortfall of Regulation 6A procedures at The Mirage with consequences that go far beyond The Mirage and the gaming industry in Nevada."

In calling for a vote approving the settlement, Bernhard made it clear the action only related to the Gaming Control Board's civil case against MGM Mirage and will not affect any related civil or criminal prosecutions.

Christopher Morishita, former Regulation 6A compliance officer for The Mirage and the only person to be criminally charged in The Mirage case, is scheduled to be arraigned in Las Vegas Justice Court Monday on four counts of failure to maintain required currency transactions records.

Morishita reportedly has admitted he deliberately failed to file the required cash transaction reports over an 18-month period and lied to his supervisors to cover up his actions.

The Regulation 6A reports are filed with the Treasury Department's Financial Crime Network (FinCEN) and are used to track large cash transactions by individuals in casinos.

Gaming industry insiders have warned that if the penalty imposed in the case is seen as insufficient, the U.S. treasury secretary could cancel a memorandum of understanding with Nevada exempting it from federal control of the currency regulations on 30 days notice.

Until 1997, the cash transaction reports were submitted directly to the Gaming Control Board, but since then, at the request of the Internal Revenue Service, reports have been filed directly with the Treasury Department, which makes copies available electronically to the state. In exchange, state regulators are allowed to regulate compliance with the regulations and approve penalties for violations.

"I know FinCEN is comfortable with the settlement," Baldwin said. "It has been involved throughout. The fine is stiff and they are satisfied,"

Gaming Control Board attorney Jennifer Carvalho said discussions had been conducted with the federal agency about the size of the penalty, especially since federal regulators take into account the size of alleged violators, and agreed with Baldwin they were satisfied.

A FinCEN spokeswoman, reached after the hearing, said the agency "had no input" in determining the size of the penalty.

"(But) are we pleased (the case) seems to have come to a successful conclusion. We have no reason to be displeased," she said.

Before being cut off, Gurrola asked Carvahlo what would happen if the memorandum of understanding with the federal government were cancelled.

"If the (memorandum of understanding) is pulled, FinCEN will be in charge of regulating the casinos," Carvahlo said. "What their oversight would be is hard to say. (But) if the (memorandum) is repealed, we'd lose regulatory control. Essentially, FinCEN would take control over reporting and auditing currency reporting."

Gurrola said after the hearing that although he feels the historic monetary fine is appropriate, he believes serious issues remain to be addressed.

"I won't feel satisfied until all our licensees are doing an excellent job," he said.

Gaming Control Board Chairman Dennis Neilander said his agency has an ongoing dialogue with FinCEN and he is confident the remaining issues can be resolved.

Also representing The Mirage and its parent company, MGM Mirage, were The Mirage President Bill McBeath and The Mirage Chief Financial Officer Jon Corchis.

MGM Mirage has not been alone this year in its Regulation 6A problems.

Like MGM Mirage, Park Place Entertainment agreed to a $75,000 settlement on Feb. 28 after finding it failed to file two transaction reports in December 2000 and December 2001.

Station Casinos also is under investigation for its failure to file regulation 6A reports, control board officials said earlier this month. That investigation allegedly involves "hundreds" of reports.

Neilander said his agency is "in the middle" of the Station Casinos investigation and he doesn't know how long it will take to resolve.

However, on the MGM Mirage case, he said: "It was important to get the matter resolved in a timely fashion."

"It sends a message to the industry they need to pay closer attention to these matters."

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