N.J.: MGM Mirage should ‘disengage’ from Macau partner

Published Tuesday, May 19, 2009 | 8:22 a.m.

Updated Tuesday, May 19, 2009 | 6:36 p.m.

Headlines from the Vegas gaming industry

Regulators in Nevada and Mississippi cleared MGM Mirage's partnership with the Ho sisters for their Macau casino -- but New Jersey regulators don't see it that way and are recommending rejection of the deal.

MGM Mirage said today the New Jersey Division of Gaming Enforcement has found its joint venture partner in Macau to be unsuitable and it's recommending that if MGM Mirage wants to continue to do business in New Jersey with its half-owned Borgata resort in Atlantic City, it "be directed to disengage itself from any business association with its Macau joint venture partner."

MGM Mirage today said the issue will not have a material adverse effect on its finances. Its stock initially rose today, but fell to close at $8.34, down 40 cents. And an analyst called the statement about no material adverse effect vague.

JPMorgan's Joseph Greff said in a client note: "Does that mean MGM will sell its 50 percent joint venture interest in MGM Grand Macau, keep Macau and sell Borgata so that MGM has Macau market exposure? Will MGM be required to do nothing and hope that other state gaming regulators do not act on it?"

Greff predicted that the best outcome for MGM would be that nothing happens and it "perhaps just suffers loss of face." The worst case scenario would be that MGM has to sell the Borgata or its Macau interest, he added.

At the heart of the issue is Pansy Ho, daughter of longtime Macau casino operator Stanley Ho, who for years has fought allegations that his gaming operations have been tainted by organized crime.

Pansy Ho and her sister, business associate Daisy Ho, have said some of their initial investment in the Macau joint venture with MGM Mirage came from their father -- but insist he doesn't overly influence their business operations.

MGM Mirage today said: "On May 18, 2009, the DGE (Division of Gaming Enforcement) issued a report to the New Jersey Commission on its investigation. While the report itself is confidential, at the conclusion of the report, the DGE recommended, among other things, that: (i) the Company’s Macau joint venture partner be found to be unsuitable; (ii) the Company be directed to disengage itself from any business association with its Macau joint venture partner; (iii) the Company’s due diligence/compliance efforts be found to be deficient; and (iv) the New Jersey Commission hold a hearing to address the report."

"However, the report is merely a recommendation and is not binding on the New Jersey Commission, which has sole responsibility and authority for deciding all regulatory and licensing matters. The New Jersey Commission has not yet taken any action with respect to the report, including whether or when a hearing should be scheduled," the company said.

MGM Mirage said the report "is still being reviewed by the company and may be the subject of a hearing by the New Jersey Commission; therefore, no assurance can be given as to the ultimate impact of the report."

MGM Mirage spokeswoman Yvette Monet said Tuesday that the company has “fully cooperated” with New Jersey regulators investigating the Pansy Ho relationship.

The company disagrees with the DGE’s recommendation but anticipates the opportunity to present its position at a public hearing before the New Jersey Casino Control Commission, she said.

A report in the Star-Ledger newspaper of New Jersey last year spelled out some of the troubling information about Stanley Ho, though the Ho sisters continued to insist they are not influenced by their father.

The information came from an initial public stock offering by Stanley Ho's casino interests.

It included statements that Ho's company could not assure that the activities of the promoters or their patrons in its VIP rooms comply with "applicable laws and regulations, such as usury or anti-money laundering laws or regulations."

The filing noted Macau's casino industry is "prone to potential money laundering and other illegal activities" and that Stanley Ho has a stake in a casino in North Korea, a nation constantly under fire by the international community for its nuclear program.

The Associated Press contributed to this report.

Discussion: 4 comments so far…

By CynicalObserver

5/19/09 at 8:55 a.m.

Suggest removal

The New Jersey Gaming Commission. What a joke. New Jersey is the most "mobbed up" state government in the U.S.A. They have sky high state and local taxes, all to support state and local government payrolls bloated with employees who are "connected".

I think the MGM Mirage should just do a corporate reorganization, splitting off stock in the MGM Mirage's casino in New Jersey, and then distributing it to MGM Mirage's shareholders. Set up a separate Board of Directors with no overlap with the Las Vegas based company. Then let the New Jersey Gaming Commission figure out what they are going to do.

First the Flamingo and now the MGM in New Jersey. What is it that the New Jersey gumballs on their Gaming Commission want?

It seems to me that what the New Jersey Gaming Commission wants is all of the casinos in New Jersey not controlled by their local mobsters to go out of business.

This is why normal people in Connecticut, New York and Pennsylvania stay out of New Jersey, and don't do business there.
By Westerly8

5/19/09 at 10:40 a.m.

Suggest removal

At least when a smoking ban is passed in NJ, the law is actually enforced. And for the high taxes that are paid, most kids actually graduate school and can read and write. Most of the state is not plagued by grafitti either the way it is here. Somehow the taggers must have something they wear that makes them invisible, because no one ever seems to get caught.
Corruption is not limited to NJ.
By dave202

5/19/09 at 12:02 p.m.

Suggest removal

Corruption in NJ does not extend to the gaming regulatory process, which has always been the most stringent in the world. Sometimes too tough. But in this case, it's correct. Pansy Ho is clearly a stalking horse for her father, who is connected to the most vicious and violent organized crime in China, the triads. Nice that Nevada and Mississippi could ignore that little fact, but NJ has enough balls to understand the facts.

MGM now has a decision to make: Atlantic City or Macau? Unfortunately, the decision is easy now. AC is dying and Macau is rising, so MGM will be forced to see its Borgata interest and give up its NJ license.
By LVBear

5/19/09 at 2:22 p.m.

Suggest removal

At least New Jersey has a somewhat-legitimate regulatory system, unlike the ridiculous Nevada Gaming Control Board, which is a corrupt lapdog for the casino industry and does almost nothing to protect patrons or the general public from casino industry wrongdoing.

--------------------------------

The Nevada Gaming Control Board - Clean it Up or Disband It!

http://www.thebeargrowls.com/?p=32

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