U.S. gaming firms roll the dice in Macau

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Mississippi panel to probe MGMs ties to The King

Investigators for the Mississippi Gaming Commission will pack their bags and fly to Macau in early January to see what they can learn about plans by U.S. gaming giant MGM Mirage to open a casino there in partnership with a daughter of billionaire gaming magnate Stanley Ho.

Commission investigators say they want to scrutinize MGMs agreement with Pansy Ho, who is managing director of Shun Tak Holdings Ltd., a Hong Kong conglomerate with interests in investment banking, shipping, real estate and hospitality. She is also a well-known businesswoman in Hong Kong and Macau.

We have some concerns, said Leigh Ann Wilkins, the commissions public affairs director. We want to make sure there ... are no financial ties between ... Pansy Ho and [her] father, Stanley Ho.

A corporate securities analyst will be among those making the trip. Alan Feldman, MGMs senior vice president for public affairs, called the process routine.

It is normal that their investigators will take a look at what companies are doing in various parts of the world and in the U.S., Feldman said. Im actually glad to hear they are getting that part of it underway.

Ho has long been rumored to be linked to organized crime figures but has never been prosecuted for any alleged criminal activity. He has denied such links.

Though MGM Mirage is headquartered in Las Vegas, it has licenses in multiple jurisdictions in the U.S. and internationally. Each jurisdiction regulates independently.

Mississippi investigators say they want to make their own determination of whether there are direct financial ties, or questionable activity, surrounding MGMs partner as they are required to do before approving any foreign partnership of a licensee under Mississippi gaming law.

We want to make sure that all ties are separate and there are no financial ties to [Stanley Ho], Wilkins said. Historically, he has had some questionable business relationships that we dont feel comfortable with. Technically, [such ties] could jeopardize the good standing of MGM licenses in Mississippi, if they were to move forward with business agreements.

Feldman said his companys agreements have been exclusively with Pansy Ho and her company and said MGM is not concerned about the investigation.

Things in Vegas were not always about four-diamond resorts, Feldman said of Macaus past. Things were different even here [Las Vegas], 50 or 60 years ago.

Nevada, generally regarded as one of the most stringent of gambling regulatory bodies in the U.S., does not require preapproval of foreign partnership agreements by license holders in their state.

Gambling Commission Chairman Dennis Neilander said state law was changed several years ago to require that licensees engaged in gaming in other jurisdictions file disclosures of partnerships, financial matters and any other information of likely interest to gaming enforcement authorities there.

Those reports are confidential, Neilander said.

So far, he said, reports have been filed only by Sheldon Adelsons Las Vegas Sands, which is currently operating a casino in Macau. Wynn Resorts and MGM Mirage, both of Las Vegas, expect to complete their projects in Macau in 2006. -- D.L.

The political and economic reformation underway in Macau, in which U.S. gaming companies are challenging Southeast Asias King of Casinos over control of a vast, growing Asian gambling market, has drawn four of the worlds most colorful and savvy billionaires to roll the dice in a play big enough to influence nations.

At the heart of it all are three of Americas richest men: Sheldon Adelson, 72, who controls the Las Vegas Sands casino and resort empire; Kirk Kerkorian, 87, the reclusive controlling investor in MGM Mirage, the nations second-richest gaming company; and Steve Wynn, 62, chief of Wynn Resorts, a visionary frequently credited with reinventing the modern Las Vegas as an entertainment and luxury resort destination.

They are invading the once-exclusive territory of the mysterious Stanley Ho, who for four decades has controlled gambling in Macau, built a massive fortune in the process and monopolized the biggest gamblers in Asia.

The Americans -- at the invitation of Macau, or more formally the Macau Special Administrative Region (SAR) of the Peoples Republic of China, about 40 miles west of Hong Kong -- have exchanged gaming licenses for their promise to invest billions of dollars in the island enclave, which financial analysts say is poised to become the new world capital of gambling just five years after its repatriation to China after 400 years of Portuguese rule.

A cash Macau

Analysts and industry insiders predict that Macau will eclipse Las Vegas as early as next year as the most profitable of gambling and tourism centers, even before two of the U.S. gaming giants -- Wynn Resorts and MGM Mirage -- open plush new Las Vegas-style casino-hotels there in 2006.

Skeptics, who have questioned the impending changes ever since Adelson, Wynn and Kerkorians operations won licenses to operate in Macau, have predicted that Asian gamblers might not be attracted to the glittering, flashy, Las Vegas-style casinos.

But the results so far for Adelsons $265 million Sands Macau Casino, the first to be completed, is proving them wrong. The exotic and well-lighted place took in more than $167 million in the third quarter, according to company financial reports, nearly tripling its revenue for its first quarter of operation that began last May.

Within the next five years, some 20 new casinos and resort-hotel properties are expected to mushroom on the small island, home to just under a half-million people on land a tenth the size of metropolitan Washington. 

An estimated 60,000 new hotel rooms are planned, along with hundreds of restaurants and Vegas-type entertainment venues. Macaus new tax revenue stream -- the casino rate is 39% -- will help pay for enhanced transportation facilities and other amenities to serve millions of Asian and international visitors expected to greet the new era of gambling and tourism there.

Adelsons Venetian Macau enterprise, a subsidiary of his Las Vegas Sands Corp., along with Hong Kong-based partner Galaxy Casino Co., has promised to invest $8 billion in Macau over the next two decades, much of it in conjunction with international hotel and resort operators.

Adelson also plans to open the companys second casino, the Macau Venetian Casino Resort, a theme property similar to the Venetian in Las Vegas, by June 2006. An initial public offering now being launched by his company is expected to raise $536 million next year from new stockholders for investments in expansion in both Las Vegas and Macau.

Convention centers are also on tap in Macau, in hopes of attracting business travelers, as are plans for airport expansion and infrastructure developments, including new broad boulevards and bright lights designed to transform the island of the past into the new Strip of the future.

Encouraging investment

Beijing is doing its part, as well, with guarantees to leave development decisions in the hands of local officials in Macau for the next 50 years, a strategy designed to encourage foreign capitalists to invest there. It has also relaxed visa restrictions on currency regulations to open the floodgates to mass marketing gambling to hundreds of millions of Chinese residents who are members of an emerging middle class.

And that, it seems, is just for openers.

Casino gambling is likely to grow dramatically throughout Southeast Asia, in Singapore, Taiwan, Thailand and, eventually, Japan and mainland China, said Peter Collins, director of the Centre for the Study of Gambling at the University of Salford in Manchester, England.

Macau, experts agree, has set the stage for U.S. gaming interests to not only succeed but to help tame what was once the wild and wooly East -- a place heavily influenced by crime lords -- just as major gambling and entertainment companies in Las Vegas tamed what was once the Wild West playground for organized crime in the U.S.

Macau is keen both to become respectable and to become a major gambling tourism destination in the region, said Collins, hence the decision to bring in Wynn and Adelson as highly creative operators from a rigorously regulated jurisdiction.

Confronting The King

Adelson and his U.S. compatriots have been confident in public that staking out new territory in Macau, even under an untried government, has come with little risk and almost no downside. But others note that the ventures have been surrounded from Day 1 by the kind of intrigue that once characterized Las Vegas itself before heavy regulatory control arguably ended the reign of the American mafia there.

At the center of that controversy is Americans chief adversary, the enigmatic and controversial billionaire Stanley Ho, 87, who for more than 40 years enjoyed a monopoly on gambling in Macau under a single license issued by Portuguese authorities. From the 1960s until Portugal returned control of Macau to Mainland China in 1999, the islands gaming district earned a reputation as an anything-goes, vice-driven and crime-ridden environment.

Though Ho, who sometimes refers to himself as the Casino King, has vehemently and repeatedly denied any connection to organized crime, he has flourished and grown rich amid the powerful triads -- Chinese gangs that have operated loan sharking, money laundering and drug trafficking in Macau for decades and are said to have influenced gambling operations there through murder, kidnapping and other business techniques of the underworld.

Raymond Butler, a British citizen now living in the U.S. and a former managing director of a major pharmaceutical company in Asia, said he and his wife toured Macau in the mid-1990s and were enchanted by the culture, churches, gardens and history of the island.

We took pains to stay clear of the gambling district, he said. You didnt want to go there, it just didnt feel safe, he said.

That image didnt deter millions of gamblers over the years, who found Hos parlors appealing largely because they were the only game in town.

The whale watch

But those gambling dens were dim, seedy and run-down, an environment that Las Vegas has exploited to its advantage in trying to lure Hos so-called whales -- largely Asian multimillionaires who risk a small fortune without blinking -- to the brighter lights and luxury treatment that they hoped would cut into Hos market share.

It was also the environment that Macau officials have sought to combat by ending Hos monopoly and picking U.S. companies to remake Macaus gambling district in their own image.

Despite Hos history of operating in an unsavory environment, his power apparently remains potent. He won a two-year reprieve on his gambling monopoly in 2000, as the SAR sorted out its plans to convert Macau to a more peaceable gambling and tourist destination. And during that time, Macaus streets grew quieter. Hos own business model also was affected as he began to remodel his own holdings to be more like his new competitors.

The question now is: Can Macau be transformed from the Las Vegas of the 50s to the Las Vegas of 2000, said William Eadington, a professor of economics and the director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada. There are reasons to be skeptical, but if you have good internal controls and resolve you are not going to let anyone get into trouble, then there is a good chance it will work.

Hos monopoly ended when Macau authorities granted three new licenses in 2002. Wynn Resorts, Galaxy Casino Co. in combination with Adelsons Venetian Macau, and Hos own Macau Gaming Co., a subsidiary of his Sociedade de Turismo e Diverses de Macau, were successful bidders from among some 20 competitors.

Law and order

Since then, a drop in crime already has created a sharp contrast to events of the mid- to late- 1990s that unfolded as the Portuguese prepared to hand over Macau to China. Warring factions of the triads, trying to hang onto loan sharking and prostitution concessions, brought a wave of violence to the citys streets, reminiscent of Chicagos gangland wars of the 1920s.

Disney World it was not, said Sebastian Sinclair, a U.S. gaming analyst with Christiansen Capital Advisors. Triads were running rampant. But the goal of the Chinese was on target: to get a company like the Sands in there and, with the massive infusion of capital, to clean things up.

According to reports in nearby Hong Kongs South China Post, gangland attacks in the enclave surged in that uncertain period, with nearly 100 assassinations on the streets, including those of a Portuguese gaming regulator, several local law enforcement officials and local judges.

What role Ho may have played in helping to bring those gang wars under control remains largely a matter of speculation. The Chinese government itself, in a widespread crackdown linked to the troubles in Macau, has jailed thousands of suspected triad members and their associates since the turnover from Portugal.

And the Americans have done their part, as well. Steve Wynn told Macau officials that he would not begin construction of his hotel and casino project there until there was a change in a long-standing rule in Macau that prohibited casinos from granting credit to gamblers.

The effect, said company insiders, was that gamblers were driven to loan sharks for cash. That single legislative change may well dry up much of the illegal money changing that gamblers depended on in Macau.

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