Scientific Game

Taking the High Ground

Everyone’s quick to claim the role of Macau’s policeman now that US federal investigators are on the case

Sunday, 01 May 2011 16:51
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It’s currently very fashionable in Macau for casino operators to claim the moral high ground in the fight to weed out rogue practices in the local gaming market. Everyone’s a sheriff now that the US federal authorities are breathing down the collective neck of the industry from afar.

The US-based casino operators in Macau will have seen what the Federal Bureau of Investigation did to the online poker services PokerStars, Full Tilt and Absolute Poker, and will have taken note. They will also have taken note of the fact that although the FBI and other federal bodies are staffed by bright, highly motivated people, it allegedly took the evidence of an insider in a tight spot to build a case against those poker companies. That was despite the fact those poker businesses had continued to feed online players to live tournaments in US casinos and some had even advertised on US television—under the nose of the federal authorities and notwithstanding the supposed strictures of the Unlawful Internet Gambling Enforcement Act (UIGEA). Whether information provided by another gaming industry insider in a tight spot—Steve Jacobs—will be sufficient to cause significant problems for Las Vegas Sands Corp in Macau remains to be seen.

It is surely hypocrisy on a truly epic scale, however, for the US Department of Justice to have been writing reports since 1988 about alleged triad infiltration in Macau VIP rooms run by Stanley Ho and yet for the DoJ to assume no such infiltration could be possible or have been attempted in the Macau VIP rooms of US-owned casinos. The harsh fact of the matter is that Western governments like the idea of boosting export earnings and raising taxes from companies doing business in China and other developing markets but prefer to look the other way in cases where the host markets have financial and legal safeguards that are not as robust as at home.

Inside Asian Gaming has been told of a practice in at least one casino in Macau where customers have been allowed to deposit money at the cage and then ‘lend’ it to ‘friends’ to buy chips. In principle this is not very different from the parallel junkets allegedly operating in Singapore, although in the latter case the unofficial junkets are allegedly directly handling the chips and passing them to the players. Nonetheless, the commercial behavior underlying the Macau practice is revealed by the fact that in another Asian casino market, such informal lenders are known as ‘financiers’. One Western-owned Macau operator was so concerned about the legality and morality of the practice that it sought internal legal advice. It was reportedly told that strictly speaking, the casino was within its rights to do so. A senior executive eventually ruled against the practice after consulting with some other operators. In the current climate that looks like a very good call.

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