Friday, June 20, 2003 | 10:58 a.m.
CARSON CITY -- The money laundering violations at The Mirage casino in Las Vegas reflected badly on all the gambling industry, the chairman of the Nevada Gaming Commission said Thursday.
Chairman Peter C. Bernhard told Mirage officials the impact on the integrity of Nevada's gaming control system could be felt in this nation and in the world.
A potential fallout, gaming officials said, is that the Internal Revenue Service might decide to take over regulation of cash transactions in Nevada's casinos. But the federal government has not yet indicated it would do so.
Frank Schreck, Las Vegas attorney for The Mirage, handed over $5 million in checks to settle the 92-count complaint that charged the MGM MIRAGE-owned business failed to file some 15,000 currency transaction records with the IRS over a two-year period.
Deputy Attorney General Jennifer Carvalho, who handled the case, said it was the largest fine ever imposed by gaming regulators in Nevada. The settlement between the casino and the state Gaming Control Board said there were administrative errors made but there was no money laundering or theft of funds.
The settlement, between the Control Board and the casino, said there was no intent by The Mirage to intentionally circumvent the requirement of accurately reporting currency transactions.
Schreck said six or seven employees were terminated after the failures were discovered and the casino conducted an exhaustive investigation. He said extensive changes have been made on how the casino handles the cash transaction reports.
The state has a memorandum of understanding with the Internal Revenue Service that the gaming regulators in Nevada will police this in an attempt to prevent money laundering.
In response to questions by Commissioner Augie Gurrola, Carvalho said the IRS could decide to conduct the audits of these transactions rather than allowing the state to perform them. The casinos must send a record of these transactions, usually for large sums of money involving players, to the IRS within 15 days after they are made. But that was never done.
Bernhard said these violations could have consequences and they "reflect negatively on the entire industry."
Christopher Morishita, who supervised the unit that handles the reporting, was arrested on four felony counts of failing to maintain cash transaction records. Gaming officials said there was no evidence Morishita attempted to launder any casino money.
Schreck said all the employees in that unit were skilled. "That's why they were fired," he said. He said two of the workers were former employees of the Control Board. He said this was "a lapse in human behavior."
The internal audit team should have caught the failure to send in these reports, Schreck said.
Gurrola suggested the reason for the failure might have been a lack of training. But Schreck said the two employees responsible only had to check that the records were all filled out and then mail them.
Commissioner Arthur Marshall of Las Vegas said he was impressed by the efforts put forth by The Mirage in investigating the lapse. "I'm comfortable nothing like this will occur again," he said.
Jonathan Corchis of The Mirage said the casino pulled together its sister hotels and developed a "best practice" procedure for handling these cash reports of exchanges of currency between customers and the casinos.
He said an internal audit team now will make unannounced examinations, rather then letting the unit know when it is coming. And there is a process to verify that all currency transaction reports are submitted to federal authorities.
The commission also accepted a $15,000 fine from the El Cortez in downtown Las Vegas to settle a complaint that it allowed at least three of its key employees to gamble at the casino, which is a violation of regulations. Two of the employees wrote checks to get the money to gamble -- but the checks were put on hold and never processed.
Bill Curran, Las Vegas attorney for the El Cortez, said steps have been taken to comply with the regulations. He said former Control Board Chairman Steve DuCharme was brought in to review all operations to make sure the rules were being followed.
The casino established a compliance committee to ensure the regulations were being followed.
The complaint against the El Cortez said a Control Board agent in 1992 informed the casino that its cage manager was gambling before, during and after her shift and that it should be stopped.
The female employee continued gambling and tax records showed she won $828,000 in jackpots since the warning was issued. She would write checks in the casino to obtain money. But the checks were placed on hold and stored in a vault drawer. During surprise audits, she would move the "hold" checks between drawers to give the appearance of balancing.
During her employment she accumulated more than $532,705 in hold checks. She resigned in October 2001 and refused to pay the debt. The El Cortez filed a suit to recover the money.
The complaint against the El Cortez said the board warned the casino about another key management official that was gambling on the property in 1998.
A third key employee at the El Cortez was allowed to gamble at the club using "hold" checks. She accumulated $123,910 in debt. Her debt in 2001 was converted to a promissory note payable to the El Cortez.
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