Deloitte gains bulk of Andersen gaming clientele

David Strow and Richard N. Velotta

Thursday, May 16, 2002 | 10:58 a.m.

Deloitte & Touche suddenly became the dominant auditor in the gaming industry Wednesday, when three major Las Vegas-based gaming companies hired the firm to replace embattled accounting giant Arthur Andersen.

MGM MIRAGE, Mandalay Resort Group and Alliance Gaming Corp. all announced they were firing Andersen as their independent auditor and hiring Deloitte. The flurry of activity came two weeks after Harrah's Entertainment Inc. of Las Vegas made a similar switch.

These lost customers account for nearly $6 million in annual business for Andersen. Harrah's spent $3.3 million with Andersen in 2001; MGM MIRAGE, $1.23 million; and Alliance, $934,000. Mandalay has not yet outlined what it spent on auditing fees in fiscal 2002, but the company spent $439,000 with Andersen in the fiscal year ending Jan. 31, 2001.

Station Casinos Inc. is now the only major Las Vegas gaming company using Andersen as its independent auditor. And it may not be with Andersen for long -- at Station's May 22 annual meeting, shareholders are scheduled to vote on whether to keep Andersen. In a similar vote earlier this month, MGM MIRAGE shareholders voted to oust Andersen.

Station spent $410,000 with Andersen in 2001. In April the company recommended that shareholders retain Andersen, but said it planned to use Andersen only for audit and tax services "to avoid potential conflicts of interest or the appearance thereof." "Other" consulting services accounted for the majority of Station's business with Andersen; the company spent $248,000 on "other" consulting services with Andersen in 2001.

Deloitte, which once claimed Park Place Entertainment Corp. and Boyd Gaming Corp. as its only major gaming clients, now has six.

For weeks, sources have said a deal was near that would see Andersen's Las Vegas gaming practice go to Deloitte. The two firms even share the same building in the upscale Hughes Center in midtown Las Vegas.

"We will be hiring some Andersen people (in Las Vegas), definitely," said Suzanne Thompson, spokeswoman for Deloitte in Los Angeles. "I can't say how many at this moment, since those negotiations are not final.

"It's not a merger, it's not a buyout, it's not a takeover. It's individual people deciding to come to work for Deloitte & Touche."

Andersen officials could not be reached for comment this morning.

Once the dominant provider of auditing services to the gaming industry, Andersen has lost hundreds of clients worldwide since allegations began surfacing about the company's role in the Enron scandal. The defections sped up after the firm was indicted by federal prosecutors on an obstruction of justice charge, which Andersen is contesting.

Despite the growing scandal, Andersen's gaming clients almost universally stuck by the firm initially, citing its expertise in the gaming industry. But that soon changed, when gaming regulators in New Jersey ordered Atlantic City operators to drop Andersen as a result of the indictment. Louisiana followed suit soon after.

New Jersey's order forced the hand of Harrah's and MGM MIRAGE, as both have interests in Atlantic City. MGM MIRAGE is developing a $1 billion casino in Atlantic City with Boyd, and cited that as a reason for terminating Andersen in the SEC filing.

Alliance, Harrah's and Mandalay did not specify the reasons behind their switches in their SEC filings.

One other gaming company, Acres Gaming Corp., also fired Andersen last week. That company went to PricewaterhouseCoopers.