MGM agrees to $275,000 fine

Friday, May 12, 2000 | 11:26 a.m.

CARSON CITY -- The MGM Grand agreed today to pay a $275,000 fine for violating state gaming regulations by collecting more than $1.2 million in markers from South Korea gamblers and then trying to cover up the activities.

The state Gaming Control Board filed a 21-count complaint against the Las Vegas Strip resort, alleging it violated South Korean laws in the collection of the money, filtered the funds through various sources including a church and did not properly account for the receipt of the money.

The board's complaint and the stipulation by the MGM Grand were filed simultaneously today.

The Nevada Gaming Commission will decide at its next meeting whether to accept the agreement.

The settlement, signed by MGM Grand President William Hornbuckle and Senior Vice President Thomas Peterman, admits to all of the violations.

The Control Board and the hotel agreed there was no willful violation of regulations by the casino or its employees.

The complaint said MGM employed a sister corporation named Destron Inc. to handle all international and domestic marketing. Destron hired employees to collect gambling debts, acting as agents for MGM.

South Korean laws restrict the movement of money out of the country, but Destron employees Stella Kwon, Joseph Kae and Ray Lee ignored those laws in at least 10 cases, the Control Board said.

The board said that in one instance Kwon and Lee visited Korea and received "two duffel bags filled with South Korean won (the official money of that country)" to satisfy the near $1 million gambling debt of a South Korean national.

A friend of Kwon, who owned an art gallery in South Korea, carried the money out of the hotel room in smaller amounts over a two or three-day period. The board, in its complaint, said the money was filtered through money transfer agents or other methods to get the funds out of the country in violation of the laws.

That illegal activity, the board said, "reflects on the repute of the state of Nevada and acts as a detriment to the development of the industry."

The money apparently ended up at the Los Angeles Prayer Mountain (Church), located in a remote area of Lake Hughes, Calif. The church, through its pastor, Myung Lim, signed the check over to Destron.

The board said Kwon, secretary of the church, used it to make the payment to the MGM on behalf of the South Korean gambler.

The Control Board said in February 1998 it asked MGM for a list of its Korean gaming customers. It received a letter from Mark Whitmore, the MGM's vice president of cage, credit and collections, who later made 60 revisions to the collection procedures used.

In his original document, he said the representatives of the hotel will collect the money while in South Korea. In the revised letter several months later, he said the MGM representatives will visit customers personally while in South Korea and there was no mention of collections.

The complaint said, "The delay in providing accurate information constituted interference with a proper and lawful investigation by the board in violation of Nevada Gaming Commission Regulation 4.040."

The board said that unauthorized people were used to collect money in South Korea, that proper records were not kept by the agents in receiving the money and that proper records were not made at the MGM in recording receipt of the funds.

MGM, in agreeing to settle the case rather than go through a disciplinary hearing, said it has "taken aggressive and prompt remedial measures to prevent the conduct alleged in the complaint from recurring."

It has hired the law firm of Baker & McKenzie to identify the restrictions on removing money from foreign countries and to set up procedures to follow those laws. It will also modify its cash-transaction reports to comply with state regulations.