Vol. 7 • No. 19 • May 25, 2009, Cover Stories

New Jersey Regulators Find MGM Macau Partner ‘Unsuitable’

The New Jersey Division of Gaming Enforcement submits a report to the state Casino Control Commission that calls for the denial of approval for a partnership between Pansy Ho (l.) and MGM Mirage for the MGM Grand Macau and other ventures.

MGM could be forced to sell interest in Macau or Atlantic City


The New Jersey Division of Gaming Enforcement has sent a report to the state Casino Control Commission today recommending that the approval requested by MGM Mirage of a partnership with Pansy Ho, the daughter of Macau gaming magnate, Stanley Ho, be denied. Pansy Ho and MGM Mirage have partnered on the MGM Grand Macau, a $1 billion casino resort in the Chinese gambling enclave, which opened in 2007. In gaming jurisdictions where it is licensed, MGM Mirage was required to obtain approval for the partnership. Four states—Michigan, Illinois, Nevada and Mississippi—have already granted their OK, but New Jersey had spent many months doing a complete investigation.

Details of the report were issued because it has just been delivered to the CCC, but MGM Mirage issued an SEC filing detailing its understanding of the document.

“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.

Casino Control Commission Chairwoman Linda Kassekert told GGB News that she and her staff have not yet read the report, since it had just been delivered, but was “likely” to hold hearings on its findings.

The contention of the DGE report is likely to be an ongoing connection between Pansy Ho and her father, Stanley, who held a monopoly on gaming in Macau for many years. When Portugal turned over its former territory to China in 1999, the Chinese government opened up gaming to international companies. Three concessions were granted at that time: Stanley Ho’s SJM, Wynn Resorts and Galaxy Entertainment. The MGM Macau operates under a sub-concession granted to Pansy Ho from SJM.

In a statement released following the report by Ms. Ho, she said, “I and my advisers will need time to read and consider the contents of the report and decide how best to respond to it.”

In most jurisdictions, Stanley Ho would not be able to be licensed because of real connections to the Triads, Chinese organized crime groups. Pansy, and her sister and business associate, Daisy, have admitted to receiving some of their funding from Stanley, but deny he wields any influence over them or their business operations.

Some of the consequences for MGM Mirage could be giving up its license in New Jersey should it decide to continue its relationship with Ho in Macau. MGM owns 50 percent of the Borgata in Atlantic City, which is operated by partner Boyd Gaming. The company also owns 50 percent of MGM Grand Macau, which it operates for the partnership. The company could choose to relinquish the Macau investment and retain its New Jersey license.

MGM Mirage had announced a $5 billion MGM Grand Atlantic City and had begun the planning and design process until the declining economy and sinking revenue in Atlantic City caused a halt to the process. The company insists that the project is merely on hold and it will resume design and construction once the economy turns around. But should it decided to focus on Macau rather than Atlantic City, the project would be effectively dead.

In Nevada, just prior to the Gaming Control Board’s decision to approve the relationship between Pansy Ho and MGM, the company announced a huge development in Jean, about 30 miles south of Las Vegas near the proposed international airport. The project included a new casino resort and thousands of homes. Several months later, the project was quietly dropped, citing the bad economy. Company officials deny there was any link between the two events.

Dennis Neilander, chairman of the Nevada Gaming Control Board, told the Las Vegas Review Journal that New Jersey and Nevada have different laws and interpretations of laws when considering the suitability of business partners. He assumes that New Jersey simply weighed the facts differently than did his agency.

“If there was evidence not provided to us, then there would be a concern,” Neilander told the newspaper. “Otherwise, it would seem that the Division of Gaming Enforcement came to a conclusion using the same facts but applying New Jersey law.”

Meanwhile, Crown Casinos, which is in business with Lawrence Ho, Stanley’s son, downplayed any impact of the New Jersey decision on the Melco Crown partnership.

"It has no effect on us, our relationship with Lawrence or Melco … the Lawrence-Melco relationship has been approved in Australia and in Nevada some time ago," said Crown's head of investor relations and director of international business development, Anthony Klok, referring to Melco Crown’s potential purchase of the Cannery Resorts, which got the OK in Nevada.

When the approval of the Pennsylvania Gaming Control Board was sought, however, the deal broke down and the license application was withdrawn.

By Staff