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Bloomberg News file
Casino billionaire Stanley Ho and daughter Pansy Ho attend a groundbreaking ceremony for an MGM Mirage casino in 2005 in Macau.
Monday, Feb. 1, 2010 | 2 a.m.
Sun Archives
- New Jersey could come between MGM Mirage, Macau (12-29-09)
- MGM Mirage executive Gary N. Jacobs resigns (12-18-2009)
- Las Vegas Sands moves forward with Macau project (11-11-2009)
- N.J.: MGM Mirage should ‘disengage’ from Macau partner (5-19-09)
- MGM Mirage, Boyd gaming license investigation reopened (7-31-09)
- Ho, MGM Mirage deal should pass regulators (7-19-05)
- MGM Mirage talks continue in Macau (2-10-04)
Sun Coverage
When New Jersey casino regulators said last year that MGM Mirage needed to cut ties with an “unsuitable” business partner in China, the casino giant said it would defend itself against allegations raised in New Jersey, where MGM Mirage owns a 50 percent stake in the Borgata resort.
For the past eight months, both sides — with reputations and track records to uphold — have been gearing up for battle. Or reconciliation.
Defending itself in a hearing is an unappealing option for MGM Mirage given New Jersey’s regulatory structure and the hard line the state has taken on organized crime. And yet, MGM Mirage has indicated that it is willing to put up a fight in New Jersey in order to do business there and maintain its business partnership in Macau.
For now, New Jersey controls the battlefield. Regulators may decide to haul MGM Mirage into a public hearing and force the airing of dirty laundry rather than give the company time to negotiate the sale of its Borgata interest, which would remove the company from regulatory scrutiny there.
In years past, casino regulators have allowed companies to save face by signing agreements to drop pending investigations in return for the swift exit of an offending executive, the sale of a property or another transaction that could solve the problem.
Some industry experts believe MGM Mirage will sell its Borgata interest to avoid the regulatory scrutiny and maintain its business partnership in Macau. New Jersey regulators could force MGM Mirage to dissolve the deal, which includes a half interest in the MGM Grand Macau resort, rights to develop future resorts in Macau and a foothold in the world’s biggest and most lucrative gambling market.
One scenario has Boyd Gaming, which owns the other half of Borgata and operates the resort, buying MGM Mirage’s stake.
But MGM Mirage has not yet shopped the Borgata for sale because the company is still weighing its options with New Jersey regulators, according to a source with direct knowledge of the situation.
Boyd declined to comment on the potential purchase of MGM Mirage’s Borgata stake.
Regulators red-flagged MGM Mirage’s 2004 deal with Pansy Ho because she is the daughter of controversial Macau casino boss Stanley Ho, who has reputed ties to Asian organized crime.
Nevada gaming regulators signed off on the partnership in 2007, saying that MGM Mirage had structured the Ho partnership in such a way that her father would not be able to exert his influence on the business. Nevada regulators said Ho, who ran a ferry and tourism company founded by her father, is a suitable partner because she is a successful and ethical businesswoman in her own right.
Because Ho didn’t need a Nevada casino license to do business with the company in Macau, MGM Mirage didn’t have to prove to Nevada regulators that she was a suitable partner. In passing judgment on Ho, Nevada regulators said they had no reason to believe she wouldn’t act ethically and that her father’s alleged associations — while distasteful — were not enough to harm Nevada.
It’s a different ballgame in New Jersey, where companies must renew their casino licenses every five years. Casino companies must prove their worthiness, and those of partners, at each renewal hearing as if they are obtaining licenses for the first time.
This gives regulators more leverage over companies by allowing them to raise concerns that have cropped up in the course of business.
In recent months, New Jersey regulators have informed MGM Mirage executives that the company must prove that Pansy Ho is a suitable business partner in order to do business in the state. Because this is a difficult, if not impossible hurdle, MGM Mirage believes New Jersey regulators are overstepping their authority.
New Jersey’s Division of Gaming Enforcement outlined this battle in a letter to the state’s Casino Control Commission last July.
“It is well settled that applicants and licensees must affirmatively demonstrate their good character, honesty and integrity and that the burden of proving those elements rests with the applicant or licensee,” the Division of Gaming Enforcement wrote.
According to the letter, MGM Mirage argues the company shouldn’t have that burden of proof given that the upcoming hearing wasn’t intended to reopen the Borgata license. The Division of Gaming Enforcement, in the letter, calls that “Alice in Wonderland logic” because license holders “have the burden of affirmatively demonstrating their good character, honesty and integrity at all times that they hold a license.”
“We have acknowledged we disagree with Gaming Enforcement but we are working together to resolve the matter,” MGM Mirage spokesman Alan Feldman said Friday.
A spokesman for the Division of Gaming Enforcement declined to comment. A spokesman for the Casino Control Commission said regulators are in the process of scheduling a hearing to discuss Pansy Ho’s suitability.
The repeat licensing requirement is a cornerstone of New Jersey’s regulatory system, which was intended to counter the state’s corrupt political climate and keep the mob out of Atlantic City at a time when organized crime still had influence in some Las Vegas casinos, said Israel Posner, executive director of the Stockton Institute for Gaming Management at Richard Stockton College in Atlantic City.
“Imagine trying to legalize gambling in a city and state with a reputation for corruption,” Posner said. “The only way casino gaming could have gotten off the ground in New Jersey was having a very high standard of licensure. And Wall Street investors demanded that as well given the high degree of uncertainty about whether investments would be funneled off someplace else.”
Casino companies over the years have chafed under the New Jersey system, preferring Nevada’s model of licensing companies once.
Nevada regulators recently clarified their authority to use incriminating information against a license holder at any time — regardless of whether the activity occurred before or after the company or individual was licensed. While Nevada regulators may discipline a company at any point, including fining or revoking licenses, they shoulder the burden of proving the company broke laws.
Companies have complained about over-regulation in New Jersey, a state that once required casinos be relicensed every year, offer a certain amount of nongambling space and host nightly showroom entertainment. Las Vegas casino operator Steve Wynn openly griped about overbearing regulations in New Jersey before selling his Golden Nugget resort in Atlantic City to a competitor.
New Jersey has loosened many of its casino regulations over time — while tightly gripping a no-tolerance policy for people in any way associated with organized crime, Posner said.
The system has succeeded in wiping the casino industry’s slate clean of criminal elements there but may discourage investment from companies wary of the state’s strict methods, he said. MGM Mirage’s potential exit from New Jersey “may be more of a loss for Atlantic City than for MGM, by losing a potential investor,” he added.
Borgata has been one of Atlantic City’s most profitable casinos but has lost revenue along with other casinos there, as the recession and competition from newer casinos in neighboring states have taken their toll.
MGM Grand Macau initially lost money but is improving, generating $50 million in operating income in the third quarter.
Confucius say, a picture is worth a 1,000 words. If MGM thinks that they are not affiliated with Stanley Ho, they are dumber than we thought. Pansy and her daddy are obviously very close. If i were a regulator i would be embarrassed to allow this relationship. They might as well be associated with John Gottis son too. He has never been convicted, he obviously has no ties to his dad. Regulators, dont be embarrassed to not allow this relationship. By approving the MGM to partner with a mafia bosses daughter is not right, ethical or fair to all the other people who play by the rules.
SHE DOES NOT LOOK LIKE ANY "PANSY" TO ME.
Nevada has always had more than one set of rules...sometimes associations are allowed, even business partnerships...but this falls under the category of 'selective persecution' which the Gaming Control Board's history reflects. New Jersey will not allow Pansy Ho's relationship with MGM and MGM knows this...they are merely posturing for Wall Street. In the photo, the Chair of MGM is trying to make it seem as he has no idea of who Pansy Ho is speaking with!
Stanley Ho is a respected businessman in Macau. He's a confidant of the Chief Executive (Governor) and has been honored many times for his work in making Macau into the international destination it is today. He was forced to deal with the Triads because they controlled the flow of players. It was distasteful, but necessary. Today, the Triads still have a hand in the VIP market in Macau. How any Nevada company can operate there if the New Jersey model were the norm is astounding. Trying to remove the organized crime connections from any Macau operations is a job even a skilled surgeon could not accomplish. So either take it or leave it. I prefer the Nevada model that ignores it.
Comment removed by moderator. Comment was off topic.
Comment removed by moderator. Comment was off topic.
You got that right, By dave202. The Fertittas seem to have free reign on their associations and yet Nevada Gaming has had little interest in addressing the matter. From the father to the sons, mob association was quite prevalent.
From the article below...
The Fertittas proudly attended Rick Rizzolo's welcome home party on April 4, the day he was released from custody, even though Nevada law prohibits unlimited gaming license holders from associating with ex-felons.
Ted Binion lost his gaming license at the Horseshoe because of his relationship with Herb Blitzstein, and Frank Sinatra lost his gaming license at Cal Neva Lodge because of his relationship with Sam Giancana.
But the same gaming enforcement rules no longer seem to apply to the Fertitta family in this new Las Vegas. This family seems to be immune to scrutiny even though they unabashedly associate with guys who rightfully belong in our state's infamous Black Book of persons excluded from entering casinos.
http://www.americanmafia.com/Inside_Vega...
I do not agree with NJ here. Pansy will in no way have any influence over MGM's operations in AC. The Borgata is not even operated by MGM. Their Macau operation does not harm NJ in any way.
Mr. Lucky it is Stanley Ho in the picture. I met him a couple of years ago at the American Consulate dinner in Hong Kong. It seems his eyesoight is better than yours, and all that without wearing glasses.
There's no money here so China here we come.
There very little money in China for MGM at the moment as well. There has been no improvement in market share for MGM in Macau despite constant excuses by the management there. Their marketing head has no experience in Asia, he is from Wales. The president there spends a lot of money with no effect, they continue to come last out the 6 operators in Macau. If they go for an IPO in Hong Kong, I would be looking for major changes amongst the management as the current lot are not doing the job. 8.5% of market in Macau is not good enough. Maybe there should be some background investigations done on the president and the team he brought over with him.