|By Suzette Parmley, The Philadelphia
InquirerMcClatchy-Tribune Regional News
Mar. 18, 2010--ATLANTIC CITY -- In a move likely to uphold New Jersey's reputation as one of the nation's most heavily regulated gambling markets, state regulators yesterday approved MGM Mirage's plan to sell its 50 percent stake in the Borgata Hotel Casino & Spa because of overseas business ties that have been linked to organized crime.
"Is this the perfect solution?" Linda Kassekert, chairwoman of the state Casino Control Commission, asked as she read aloud a prepared statement before the panel's 5-0 vote. "No compromise is, but so long as the commission is satisfied that the essential purposes and policies of the [Casino Control] Act are not offended by the practicalities that this outcome affords, I, as one commissioner, believe that we may proceed. . . ."
In signing off on the settlement reached Friday between MGM and the state Division of Gaming Enforcement (DGE), the commission green-lighted the 30-month process by which MGM will divest its half-share in Atlantic City's most profitable casino and named former state Supreme Court Justice James R. Zazzali trustee over the sale.
MGM will have the right to market and sell all or any part of its share in the first 18 months, with Zazzali to take over that right in the final 12 months.
The plan also calls for MGM-owned land leased by the Borgata to be put into the trust and sold during that same period.
MGM Mirage chairman and chief executive officer Jim Murren defended his Las Vegas-based firm, one of the industry's most prominent.
"The DGE's report acknowledges there is no evidence that Pansy Ho has engaged in any wrongdoing or been accused of any illegal activity," Murren said in a statement, referring to his company's business associate.
"Gaming regulators in the other jurisdictions where we operate casinos are well aware of this matter, had access to the same information as the New Jersey gaming regulators, and have all either determined that the company's relationship with Pansy Ho is appropriate or that further action was not necessary," he said.
But yesterday's action made public for the first time the division's findings from a yearlong investigation into MGM's business dealings with Ho, daughter of Macau gambling titan Stanley Ho, who has alleged ties to Asian organized crime. As a result, MGM's suitability to maintain a casino license in New Jersey was called into question.
The 74-page DGE report went into exhaustive detail on Pansy and Stanley Ho -- their background, other businesses, and close relationship. It found that Pansy Ho had failed to demonstrate personal, financial, and professional independence from her father and that the companies under his control -- and that in dealing with her, MGM was essentially dealing with her father.
"The contents of the report speak for themselves," Josh Lichtblau, Division of Gaming Enforcement director, said after yesterday's hearing. "Hopefully, it highlights what goes back to the integrity of the companies that do business in this state and their associations, as part of that integrity. That's what we look at."
In 2005, MGM and Pansy Ho entered into a 50-50 joint venture, MGM Grand Paradise Ltd., to build casinos in Macau, off the coast of Hong Kong. The venture allowed MGM to enter the rapidly growing Macau market by purchasing a casino subconcession from Ho after rival U.S. gambling companies, including Las Vegas Sands Corp. and Wynn Resorts Ltd., snatched up the available licenses.
MGM said last month that it wanted to apply its resources toward Macau, and that was why it was divesting its share in the Borgata.
Since 2003, MGM has been in a joint-venture ownership with Boyd Gaming Corp., with MGM the silent partner and Boyd the operator of the Borgata. The Las Vegas-style megacasino, with its golden hue and vertical design, debuted in July 2003 in Atlantic City's Marina District.
"We hold the right of first refusal on any sale of MGM's Borgata interest, and we will monitor the divestiture process closely and act in the best interest of our company," Boyd CEO Keith Smith said in a conference call on fourth-quarter 2009 earnings earlier this month.
Under the settlement, MGM will transfer its 50 percent stake into a divestiture trust, of which MGM will be the sole beneficiary. The firm will be permitted to reapply for a New Jersey gaming license 30 months after the completion of the sale.
Gaming analysts said the sale could generate limited interest, despite the Borgata's market dominance.
"First, the Atlantic City market continues to decline and has yet to realize the effect of the opening of two properties in Philadelphia [one that will have the Wynn name attached] and table games," said John Kempf of Barclays Capital. "Second, a prospective buyer would be acquiring only a 50 percent interest -- not the whole casino."
After yesterday's hearing, Kassekert said the ruling solidified one thing:
"If you want to do casino business in New Jersey, you have to be above reproach. You have to have high standards for integrity, honesty, good character -- exactly what it says in the statute."
Gaming Division report excerpts
Made public yesterday was the New Jersey Division of Gaming Enforcement's 74-page report on MGM Mirage's partnership with Pansy Ho. Among its findings:
"In several instances, MGM's conduct evidences a willingness to seek partnerships with persons it knew to be associated with or alleged to be associated with organized crime."
"Simply put, not only are the financial connections to her father related to her primary and continuing source of income, but they serve to establish her position in the same field as her father: gaming in Macau."
"Through his leadership position and ownership control of SJM, Stanley Ho continues to associate with individuals in the Macau gaming industry who are connected to organized crime."
- Suzette Parmley
Contact staff writer Suzette Parmley at 215-854-2594 or firstname.lastname@example.org.
To see more of The Philadelphia Inquirer, or to subscribe to the newspaper, go to http://www.philly.com/inquirer.
Copyright (c) 2010, The Philadelphia Inquirer
Distributed by McClatchy-Tribune Information Services. For reprints, email email@example.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. NYSE:MGM, NYSE:LVS, NASDAQ-NMS:WYNN, NYSE:BYD,