IAG JANUARY 2015 - page 45

“Even I got a little nervous the deeper we dug into Macau,”
he said. “Although I was long on the US casino operators, likeMr
Adelson andMr Wynn, I began to really get concerned about the
risk I was taking with clients’ money under the Foreign Corrupt
Both Las Vegas Sands, headed by Sheldon Adelson (NYSE:
LVS), and Mr Wynn’s Wynn Resorts (Nasdaq: WYNN) derive the
bulk of their earnings inMacau, and inSeptember,MrWynn 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
youmention theForeignCorruptPracticesAct in thesamesentence
as this company, youget aday in court.”
WynnResorts’Macaubusinesshasbeen investigatedat 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 newUS$4 billion casino it is developing in the city’s Cotai
resort district—was scrutinized in the context of theFCPA, and last
year, it was reported thatMacau’sCommissionAgainst Corruption
was looking into a $50 million payment the company made to
third parties to secure the land for the Cotai project. InNovember,
it was reported in
The Wall Street Journal
that the company had
been contacted by twoUS Attorney’s offices, the Internal Revenue
Service andDrugEnforcement Administration seeking information
on scores of high rollers in connection with an investigation into
money laundering.
Noneof theseprobeshas resulted incharges todate, andWynn
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
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 thatWynn violated the FCPA,” he said.
Wynn has until 13th January to revise and refile its lawsuit,
according to
. “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
Mexicoondrug trafficking charges.
The scrutiny has reached intoMacau aswell, 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 casinohub.
In October 2013, Las Vegas-based Caesars Entertainment
(Nasdaq:CZR)disclosed thatFinCENwas investigatingasubsidiary
overallegedshortcomings incompliancewith theBankSecrecyAct.
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 itsmoney-laundering safeguards.
According to a report published in November by
The Wall Street
, the contact was made through an outside lawyer for the
company as part of a request for information aboutUS and foreign
customers, thecompany’sdomesticandoverseasmarketingoffices
and its internal controls.
TheAGA recommendationsdelivered toFinCEN run to17pages
and were the work of about 20 casino compliance officers and
lawyersoverseenby the association’sBankSecrecyAct 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 thatmight be considered risky.
The recommendations are reported to mention Macau as a
jurisdictionof concern.
WynnComesUpShort inTiffWithChanos
OutspokenChinabear and short-seller JimChanos cannot be sued
by SteveWynn for statements hemade earlier this year expressing
concerns about possible applications of US anti-bribery laws in
MrWynn’s lawsuit accusingChanos of defamationwas 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 theUSForeignCorrupt PracticesAct.
characterized the views he aired there as “an
indictment of theChinese financial and economic system”.
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