MGM Grand apologizes for gaming violation

David Strow

Friday, May 26, 2000 | 10:56 a.m.

One of MGM Grand Inc.'s top executives apologized to the Nevada Gaming Commission Thursday for improper debt collection procedures in South Korea, vowing the company was taking aggressive steps to ensure such incidents never happen again.

"We have 16,000 employees, and when you have a handful of employees that don't obey (gaming regulations) ... that hurts me to have them ruin the good things this company has done and will do," said Dan Wade, co-chief executive of MGM Grand. "I owe you an apology."

After a short hearing, the commission unanimously approved a $275,000 fine agreed to by MGM Grand to settle the case. The complaint, filed by the Nevada Gaming Control Board earlier this month, alleged that employees working for a sister company of MGM Grand collected more than $1.2 million in markers in South Korea in violation of that country's currency laws, then funneled some of the proceeds through a church.

MGM Grand admitted to the violations and agreed to the fine.

Ellen Whittemore, attorney for MGM Grand, told the commission that the incident came to light after MGM Grand launched an internal probe of its international collection practices in 1997, following the arrest of casino hosts from other casino companies in South Korea.

"Every allegation is the result of a self-reported violation by MGM Grand," Whittemore said. "MGM did an investigation, and will suffer the consequences as a result."

All debt collection activities in South Korea have been halted, she said.

Wade told commissioners that MGM Grand had initiated an overhaul of its international collection practices and compliance procedures. International hosts will be required to sign forms saying they understand the currency and debt collection laws of the nation they'll visit and MGM Grand will help organize an industry-wide legal panel designed to help casinos prevent violations of international currency laws.

Wade also said MGM will place "the strongest minds of compliance" on its compliance committee to prevent repeat violations.

"We take this very seriously," Wade said.

Commission Chairman Brian Sandoval praised MGM Grand's cooperation in resolving the matter.

"It's very unfortunate that this happened, but it's very refreshing that it was self-reported," Sandoval said. "The commission seriously believes that this sets an example for the entire gaming industry."

Following resolution of the complaint against MGM Grand, the commission approved a new set of regulations that will require operators of inter-casino linked systems -- slot systems such as International Game Technology's "Megabucks" -- to receive licenses from the commission for each system.

The commission was required to approve the new regulations overseeing such systems under a new state law passed last year.

But the approval came only after a long argument by an attorney for the Nevada Resort Association, who claimed the new regulation didn't go far enough.

Jack Godfrey's argument centered on the word "system modification" as defined in the proposed regulation. New systems would have to be approved and licensed in a public meeting of the commission, while "modifications" could be approved by the control board without a public hearing.

The board's proposed regulation defined new systems as the computer "link" hooking the games together across the state. Once approved, new denominations or themes would not have to go through a separate licensing procedure, so long as the new game used the same computer technology.

Under that language, Godfrey argued, IGT would be able to introduce new progressive systems at will, without ever going through the licensing procedure called for under state law.

"This is such a huge loophole that it will basically eviscerate (licensing of such systems) after June," Godfrey argued. "Basically everything (new) would be a modification of an existing system."

But board member Dennis Neilander, author of the new regulation, said the only element that needed to be regulated under the law was the link itself.

"The law says two or more similar games, linked together," Neilander said. "Different slot machines are still similar games, whether they're 'Elvis' or 'Frankenstein.'

"You may have 20 different games within that link, and they may have different denominations, but the link is still the same."

Sandoval also expressed concern that calling slot makers before the commission for each new system theme "will begin to encroach on business practices."

Following more than two hours of debate, the commission voted unanimously to adopt Neilander's proposed regulations.

The commission also turned aside a rare challenge -- a petition to allow denied applicants to do business with gaming operators without prior commission approval, launched as a last-ditch move by a Las Vegas travel agent.

Under state gaming regulations, anyone previously denied a license cannot do business with a gaming operator, even if that business has nothing to do with gaming operations. To prevent licensees from running afoul of this requirement, the state established the "gray list" -- a listing of denied applicants that licensees can't do business with.

Bernard Gilman, a Las Vegas travel agent, was denied a gaming license in 1993 after he failed to post a deposit for a control board investigation. The investigation was triggered after Gilman, then an independent agent for the Riviera, failed to pay the hotel-casino for a block of rooms he'd booked on behalf of his clients.

Gilman later organized Las Vegas Holidays and Convention Connection, two Las Vegas-based travel companies. After discovering that Gilman was the principal of both firms -- and that he was booking rooms at Las Vegas hotel-casinos -- the board placed the companies on the gray list, and called Gilman forward for an investigation and licensing hearing in 1998. If Gilman could be approved in such a hearing, he would be removed from the gray list.

Since that time, the investigation hasn't been launched, and Gilman attorney Jeff Silver said his client's business has suffered as a result.

"No one's talking to us ... we have the mark of Cain on us," Silver said.

Though acknowledging his petition was an extreme measure, Silver said it was his only recourse with the delay.

The problem, it turned out, was that the commission had voted in 1998 to require the control board to fund the investigation. But since the board didn't have money budgeted for such investigations, it has been unable to finance the investigation so far, said board Chairman Steve DuCharme.

"We don't have the extra $30,000, $40,000 lying around to have this investigation go forward," DuCharme said.

Sandoval said Gilman had only one alternative -- to apply for permission to do business with specific gaming licensees, one at a time.

"I wish we had a better remedy," Sandoval said. "Unintentionally this commission, by ordering the board to pay for this, set the process back. If we hadn't done that, we probably wouldn't be still addressing this today."

Since Gilman had other means for seeking permission to do business with licensees, the commission ruled that his petition to overturn the "gray list" provision could not move forward.