Columnist Jeff German: Gaming’s image is at stake

By Jeff German (contact)

Wednesday, Feb. 26, 2003 | 10:56 a.m.

Filing currency transaction reports aimed at preventing money laundering has become an important obligation for Las Vegas casinos.

State gaming regulators have persuaded the IRS and the Treasury Department to allow them to oversee the reporting of all cash transactions above $10,000.

By keeping a record of cash flowing into casinos, federal and state authorities increase their chances of tracking down bad guys.

Casinos are supposed to fill out a four-page IRS form documenting the transactions and mail the form to a special unit of the Treasury Department. The Gaming Control Board has the responsibility of making sure the casinos send off the reports.

The process has strengthened the state's regulatory controls over gaming and improved the industry's image in the eyes of the federal government. It also has kept the IRS, which loves to stick its nose into the industry's affairs, at arm's length.

But this week's revelation that more than 14,000 currency transaction reports at the Mirage never found their way to the Treasury Department threatens to change everything.

It will force gaming regulators to improve their oversight of cash transactions, and in the worst-case scenario for the casinos, it may give the IRS an opening to take control of the reporting process.

Somehow, internal checks and balances, designed to make sure that such reports find their way to the government, failed at the Mirage, leaving embarrassed state regulators with no choice but to investigate and, in all likelihood, impose a huge fine.

Four Mirage employees, including Chief Financial Officer Bob Kocienski, were fired two weeks ago after Mirage officials informed the control board about the situation in the face of a routine audit.

Alan Feldman, a senior vice president for MGM MIRAGE, which owns the Mirage, insisted there was no conspiracy to evade the cash-reporting regulations. He called the internal breakdown a "monumental administrative mistake."

All of the currency transaction reports, Feldman contended, were filled out, but, over a period of months, simply were never mailed.

Control Board Chairman Dennis Neilander, who describes this case as a "very strange set of facts," said agents were told the reports were stored in boxes in an executive's office.

Both Feldman and Neilander, however, couldn't say why the reports weren't mailed. They also couldn't explain how the reports piled up for months without attracting attention.

Even executives at other Strip resorts said they had trouble believing that the Mirage's internal controls were unable to catch this.

It all suggests that more than just negligence may be at play.

How do MGM MIRAGE officials know that this was not a conspiracy? Can they tell us whether any of the reports are missing? And why didn't internal Mirage auditors uncover the unmailed reports months earlier?

The company has a lot of explaining to do, as gaming regulators press ahead with their investigation.

It's an investigation that one way or the other will have a profound impact on the image of the casino industry.