Tuesday, February 25, 2003
Copyright © Las Vegas Review-Journal

CORRECTION (2/26/03): This story contained two errors. Casinos are required to track all cash transactions of $3,000 or more. Also, Binion's Horseshoe in 1993 paid what was then a record fine of $1 million to settle a cash transaction complaint filed by the state.

State officials investigate Mirage's reporting failures

MGM Mirage could face state fines up to $500 million because The Mirage failed to file at least 14,000 required anti-money laundering reports with federal officials, company and government sources said Monday.

Gaming Control Board Chairman Dennis Neilander said his agency has started an investigation into The Mirage's failure to file currency transaction reports over a several-month period. The reports are used to track large cash transactions by individuals in casinos.

Neilander declined to comment on details of the investigation but said it should be completed within two weeks.

Sources said three senior Mirage executives who would have been responsible for submitting the reports have left the company.

The executives, Bob Kocienski, formerly vice president and chief financial officer of The Mirage; Scott Torman, formerly finance director of The Mirage; and Chris Morishita, former regulation 6A manager for The Mirage; could not be reached for comment Monday.

MGM Mirage spokesman Alan Feldman on Monday said The Mirage's failure to file the reports was an "administrative error."

The company failed to file the documents with the Financial Crime Network of the U.S. Treasury Department.

The fine for failing to submit the reports is $25,000 per count, but investigators have yet to determine how many failures to file occurred and how many would be considered infractions.

Several company and regulatory sources suggested the fines could total as much as $500 million, depending on the final number of counts involved. As a comparison, The Mirage's annual cash flow in 2002 was $152 million.

Whether any possible charges would be criminal or civil was impossible to determine yet, Neilander said, but "they appear on the face of it to be civil."

For a particular report to be missing is not unusual, but the extent of this case is abnormal, industry sources said.

"Something of this magnitude is unusual. The case on its face looks like negligence, but we want to make sure there is nothing overt or willful involved," Neilander said.

Once the investigation is completed, the findings will be considered by the board, which will decide what enforcement action should be taken, he said.

The failure to file currency reports was discovered in mid-December after a regularly scheduled audit at The Mirage that included compliance with regulation 6A, which requires the currency reports, Neilander said.

The Control Board asked for a list of documents including 6A reports and discovered that the currency reports were not being filed.

"The moment we discovered there was a problem, we immediately reported it. We also launched an internal audit and investigation," Feldman said.

The MGM Mirage audit found the paperwork had been filled out properly but was not filed with the appropriate government agencies, he said.

"Every (document) has since been filed. This is a serious, but thankfully only an administrative, error," Feldman said.

The MGM Mirage investigation continues, but an adequate explanation of the failure to file the documents may never be found, Feldman said.

"The facts leave anyone who looks at this shaking their head," he said. The company is cooperating with the state investigation, he said.

Casinos are required to track cash transactions of $2,500 or more and to submit currency reports whenever cash transactions by any individual total more than $10,000 in any 24-hour period.

The reports are filled out manually, usually at the cages on casino floors. The reports are turned over to company officials for auditing before they are mailed to the Treasury Department.

Big properties typically submit 50 or 60 such forms every five days. A few properties on the Strip might submit up to 400 every five days during peak periods of play.

Until 1997, the 6A reports were submitted directly to the Gaming Control Board, but since then, at the request of the Internal Revenue Service, reports have been filed directly with the Treasury Department, which sends copies to the state.

Seven Mississippi casinos recently were fined more than $1 million for failing to report cash transactions in excess of the $10,000 threshold.

Those fines were mainly for cash transaction reporting violations in the initial stages of casino start-up operations, but sources said the fines showed the U.S. government is taking compliance seriously.

Las Vegas professor and casino gambling expert Bill Thompson said the previous record fine for currency reporting problems involved Binion's Horseshoe 10 years ago when it was fined $1.5 million.

"The law is designed to keep money-laundering out of casinos, and to some degree it works," he said.

"This would be very serious if there was a pattern. If it was an accident, a proportionate fine should be handed out, but the board needs to look for a pattern to see if it was done for naughty reasons instead of sloppiness," Thompson said.