Regulators leery of problems in Macau

UFA

Nevada gaming regulators are concerned that Strip developers Steve Wynn and Sheldon Adelson could enter a troubled business, political and legal climate in Macau.

The Desert Inn and Venetian owners head two of the three groups that were chosen as semifinalists by Macau officials to build casinos in the $2 billion gambling market that is controlled by mainland China.

The former Portuguese colony, which borders southeastern China and juts into the South China Sea, is a popular destination for Asian gamblers and has a centuries-old reputation for lawlessness that is reflected in reputed links between organized crime and government officials.

Macau’s gaming properties are money makers for prostitutes and loan sharks, who openly conduct business in the casinos. Law enforcement officials believe protection money is often paid to organized crime triads and political leaders to ensure peaceful operations, although Chinese government officials have said that is all about to change.

“I’m concerned because the history of Macau is somewhat jaded in respect to regulated-type activities,” Nevada Gaming Control Board Chairman Dennis Neilander said. “You have to do a substantial amount of due diligence (or background research on people and businesses) to reach some comfort level.”

But it is difficult, Neilander noted, to guarantee the accuracy of the information gathered on potential Chinese and Macau-based partners.

“The whole political and cultural environment for doing due diligence is far different from in the United States,” Neilander noted.

Macau is a one-hour, high-speed boat ride from Hong Kong. Like the former British colony, it was returned to Chinese rule in 1999 when it was given the semi-independent status of special administrative region.

The city of 438,000 people attracted 10.3 million visitors last year, or more than a quarter of the total that came to Las Vegas.

Last year, the Chinese government opened the UFA casino bidding process to wrest control of the peninsula’s 11 small casinos from 40-year casino operator Stanley Ho as mainland leaders attempt to break the hold of criminals on the gambling market, which is a popular destination for Asians throughout the region.

Wynn, Adelson, MGM Mirage and a joint effort of Park Place Entertainment and Mandalay Resort Group were among the 21 bidders to seek approval to receive Macau licenses.

“Concerned? I guess it’s an area where we will watch like Internet gaming,” control board member Scott Scherer said. “We expect them to do their due diligence to live up to Nevada standards.

“There is a concern that that’s going to be difficult to do, but I guess our system has not been to tell them they can’t do that.”

The Wynn, Adelson and Ho groups received preliminary approval in February to move ahead with their development plans.

If one of the three were to drop out of the process for any reason the Mandalay-Park Place combination would make its pitch to government officials.

Wynn declined to comment Wednesday while Adelson’s Venetian lawyer, David Friedman, failed to return a phone message seeking comment.

In 1991, Nevada gaming regulators altered the state’s regulations, which required Nevada-licensed casino companies to seek approval from the control board and gaming commission before they could open new casinos elsewhere in the country or overseas.

The change came as legalized gambling began its decade-long spread throughout the country.

“You have to go the extra step to determine if it’s an environment where you can comfortably operate,” Neilander said of new gambling locales. “I’m sure they’re aware of that. It’s not something we have to tell them about.”

Nevada-licensed gaming operators Hilton Hotels and Station Casinos ran into legal troubles in Missouri, leading to hefty financial fines for the two companies.

Bally Gaming was the subject of Florida and New Jersey investigations in connection with questionable political payments made before Bally was purchased by Hilton spinoff Park Place Entertainment. The company was scolded by New Jersey gaming regulators but never fined.

Wynn visited Macau in February to tell government leaders about his plans to invest $500 million in the gambling enclave.

Wynn promised to build a casino that would be unlike anything he has built along the Strip — a phrase he has employed to describe his past Las Vegas efforts.

He met with local reporters.

“I’ve never had a foreign development before,” he told them. “That’s why it’s so exciting.”