Caesars Palace under investigation for possible money laundering

Caesars Entertainment Corp. said Monday the U.S. Treasury Department is investigating potential money-laundering allegations at Caesars Palace.

In a filing with the Securities and Exchange Commission, Caesars said it received a letter from the Treasury Department’s Financial Crimes Enforcement Network earlier this month, alleging violations of the Bank Secrecy Act.

The division, known as FinCen, is determining “whether it is appropriate to assess a civil penalty and/or take additional enforcement action against Caesars Palace.”

Caesars said it would cooperate with a federal grand jury investigation into the matter and the FinCen probe.

“Based on proceedings to date, the Registrant is currently unable to determine the probability of the outcome of these matters or the range of reasonably possible loss, if any,” Caesars said in the filing.

Gaming Control Board Chairman A.G. Burnett said Monday state agents have been working with FinCen on the investigation, but it was early in the process. Burnett said said he couldn’t reveal any specifics of the investigation, including the time frame or the nature of the allegations.

“The board has been working closely with FinCen,” Burnett said. “We have a good working relationship with them.”

In August, Las Vegas Sands Corp. struck a deal with federal prosecutors and paid a settlement of $47.4 million to avoid criminal charges in connection with allegation of money laundering activities at The Venetian in 2006 and 2007.

In the filing, Caesars said, “Governmental authorities have been increasingly focused on anti-money laundering policies and procedures, with a particular focus on the gaming industry.”

The FinCen investigation was revealed in the same SEC filing in which Caesars explained reasons the company withdrew late Friday from the process to earn a Massachusetts gaming license. In addition, Caesars said it is severing a deal with the Gansevoort Hotel Group in the $185 million redevelopment of Bill’s Gamblin’ Hall.

Massachusetts gaming investigators, during routine background checks of Caesars’ business partners, took issue with an investor in New York-based Gansevoort.

The investor, a German businessman, is reputed to have ties to organized crime in Russia. Gansevoort is not involved in the Boston venture and was not expected to seek licensing by Nevada gaming regulators for the Strip project. The deal between Caesars and Gansevoort was strictly a licensing and marketing agreement.

Burnett said state gaming agents will review the Massachusetts investigative report and meet with regulators to understand why the Suffolk Downs Race Track, Caesars’ partner in the proposed $1 billion hotel-casino complex in Boston, was asked to remove the Las Vegas-based company from the project.

Burnett said Gansevoort’s background would have been looked at by the compliance committee of Caesars Entertainment. All gaming companies in Nevada have compliance committees, which are normally made up of former regulators and law enforcement officials, who check out potential business partners.

“My understanding is the compliance committee for Caesars investigated the partnership,” Burnett said. “We will talk with the compliance committee as we look further into this matter.”

Burnett said it’s doubtful the board would have investigated Gansevoort because “it was was up to the Caesars compliance committee to handle the due diligence.”

In a statement Sunday, Caesars Entertainment Executive Vice President Jan Jones said ending the Gansevoort relationship would “have no impact on the transformation of Bill’s” into a luxury boutique hotel-casino. Jones said the rooftop pool area and nightclub from Victor Drai and a restaurant operated by television cooking personality Giada De Laurentiis were still part of the project.

In its SEC filing, Caesars said Massachusetts regulators also had concerns about the company’s financial suitability and with Caesars Interactive Gaming CEO Mitch Garber’s employment with European-based Internet gaming companies accepted wagers from Americans before passage of the 2006 Unlawful Internet Gambling Enforcement Act.

The company carries a gaming industry-high $23.5 billion of debt and Garber, who is also CEO of the newly formed subsidiary, Caesars Acquisition Co., was licensed in Nevada earlier this year.

The events surrounding Caesars unfolded over the weekend.

Investors sent shares of Caesars, traded on the New York Stock Exchange, down as much as 9 percent early Monday. The stock closed at $17.81, down 89 cents, or 4.76 percent.

Union Gaming Group Managing Director Bill Lerner told investors Caesars, which operate 54 casinos in 13 states, could have trouble in seeking licensing in other markets.

“That said, while respective states and jurisdictions are independent from a regulatory standpoint, we note Caesars has existing and longstanding approvals throughout domestic gaming markets,” Lerner said.

Caesars had a 4 percent stake in Suffolk Downs and would have managed the property. In Las Vegas the company will need to find a branding solution for the Bill’s casino.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.