Inside Asian Gaming

January 2015 inside asian gaming 45 “Even I got a little nervous the deeper we dug into Macau,” he said. “Although I was long on the US casino operators, like Mr Adelson and Mr Wynn, I began to really get concerned about the risk I was taking with clients’ money under the Foreign Corrupt Practices Act.” Both Las Vegas Sands, headed by Sheldon Adelson (NYSE: LVS), and Mr Wynn’s Wynn Resorts (Nasdaq: WYNN) derive the bulk of their earnings in Macau, and in September, Mr Wynn sued. “Chanos is now a defendant,” he proclaimed at October’s Global Gaming Expo in Las Vegas. “I’m not going to let Chanos go. … If you mention the Foreign Corrupt Practices Act in the same sentence as this company, you get a day in court.” Wynn Resorts’ Macau business has been investigated at various times by authorities in the US and Macau. The timing of a $135 million pledge to the University of Macau—made at a time when the company was seeking approval from the Macau government for the new US$4 billion casino it is developing in the city’s Cotai resort district—was scrutinized in the context of the FCPA, and last year, it was reported that Macau’s Commission Against Corruption was looking into a $50 million payment the company made to third parties to secure the land for the Cotai project. In November, it was reported in The Wall Street Journal that the company had been contacted by two US Attorney’s offices, the Internal Revenue Service and Drug Enforcement Administration seeking information on scores of high rollers in connection with an investigation into money laundering. None of these probes has resulted in charges to date, and Wynn has never been accused of wrongdoing, a point the company has emphasized repeatedly. Judge Orrick, however, ruled that Mr Chanos’ remarks are not rendered false by any definitive proof the company didn’t violate the FCPA, according to a Bloomberg report on the ruling. “It takes a significant inferential leap to conclude that Chanos’ general uncertainty about the questionable business methods in Macau equates to an assertion that Wynn violated the FCPA,” he said. Wynn has until 13th January to revise and refile its lawsuit, according to Bloomberg . “We intend to take advantage of that opportunity,” a spokesman for the company said. of the Bank Secrecy Act, the US government’s primary anti-money laundering law. The Treasury Department’s Financial Crimes Enforcement Network (FinCEN), which makes and enforces anti-money laundering rules pursuant to the act, is weighing whether to require casinos to vet the sources of high rollers’ funds. Looming behind this is an increasing risk of civil or even criminal penalties from FinCEN and the Justice Department. This was driven home to the industry in 2013 when NYSE-listed Las Vegas Sands, a leading global operator in Las Vegas, Macau and Singapore, paid US$47 million to avoid prosecution in connection with a Justice Department investigation into large cash deposits its Las Vegas casinos accepted from a Chinese-Mexican high roller wanted in Mexico on drug trafficking charges. The scrutiny has reached into Macau as well, the largest source of LVS’ earnings, where the company’s Hong Kong-listed Sands China subsidiary is reported to be demanding greater disclosures from the junket operators who control the high-end trade in the Chinese casino hub. In October 2013, Las Vegas-based Caesars Entertainment (Nasdaq: CZR) disclosed that FinCENwas investigating a subsidiary over alleged shortcomings in compliance with the Bank Secrecy Act. More recently, Wynn Resorts (Nasdaq: WYNN), which also operates in Macau under a Hong Kong-listed subsidiary, was contacted by the Internal Revenue Service, an arm of the Treasury Department, in connection with its money-laundering safeguards. According to a report published in November by The Wall Street Journal , the contact was made through an outside lawyer for the company as part of a request for information about US and foreign customers, the company’s domestic and overseas marketing offices and its internal controls. The AGA recommendations delivered to FinCEN run to 17 pages and were the work of about 20 casino compliance officers and lawyers overseen by the association’s Bank Secrecy Act compliance unit. The document outlines money laundering risks, regulatory requirements and compliance strategies and says casinos should take extra steps to determine where customers’ money originates in transactions that might be considered risky. The recommendations are reported to mention Macau as a jurisdiction of concern. Wynn Comes Up Short in Tiff With Chanos Outspoken China bear and short-seller Jim Chanos cannot be sued by Steve Wynn for statements he made earlier this year expressing concerns about possible applications of US anti-bribery laws in Macau. Mr Wynn’s lawsuit accusing Chanos of defamation was thrown out last month by a federal judge in San Francisco who ruled the remarks were protected speech and not slanderous. Mr Chanos, who heads the well-known US hedge fund Kynikos Associates (Greek for “cynic”), made the comments at an April symposium at the University of California at Berkeley, where he discussed his investment strategy and concerns about how casino operators might run afoul of the US Foreign Corrupt Practices Act. Newsweek characterized the views he aired there as “an indictment of the Chinese financial and economic system”. INTERNATIONAL BRIEFS Jim Chanos