State regulator admits Macau is out of reach

Give Nevada Gaming Control Board Chairman A.G. Burnett credit for candor.

Nevada’s history is festooned with gaming officials who have bragged like small-town mayors about the state’s unique and amazing ability to regulate its casino industry. It’s been awfully good for business. For decades that hype has intoxicated casino moguls, governors and esteemed members of our congressional delegation — all of which have benefited from growing the legend.

But Burnett brought a refreshing reality check to his June 27 testimony before the U.S. China Economic and Security Review Commission’s hearing on Macau and Hong Kong when he offered his informed perspective of that part of the gambling world. While attempting to protect our state’s regulatory image, Burnett also admitted Macau’s complex maze is beyond the Gaming Control Board’s investigative reach.

Finally, someone cracked a window and let out some of the hot air. Turns out the understaffed, overworked investigators aren’t all-knowing and all-seeing, after all.

A simple truth? Perhaps. But it’s been a long time coming.

Nevada regulators are way out of their depth in Macau. That should seem self-evident to anyone who has studied developments in the Chinese enclave, which has been a smuggler’s paradise for generations and whose casinos racket has been riddled with triad mob influence. That criminal association has continued into Macau’s modern era, a time when Nevada-licensed casino operators have banked billions operating grand gambling palaces there.

In his prepared statement, Burnett said, “From our perspective of regulation in this matter, we have limitations.

“The first is evident. We are the Nevada State Gaming Control Board. We regulate gaming within our borders, but have neither the authority nor the desire to regulate gaming in another jurisdiction.”

He then quoted Nevada’s Foreign Gaming Statute, which essentially mandates that licensees doing business elsewhere “conduct the operation in accordance with the standards of honesty and integrity required for gaming in this state.”

Are the Nevada licensees pulling in billions in Macau doing that?

Burnett acknowledged the challenge of running a casino in Macau, where Asian organized crime figures and their associates continue to influence credit and customers in the VIP rooms off the main gaming floor.

“Though VIP Operator transactions conducted directly with the casino are tightly controlled and regulated, criminal transactions are widely alleged to take place just out of the direct purview of the casino,” Burnett said. “Such activities include back-betting, side-betting, loansharking, violent loan collections, underground banking, and money laundering.

“Furthermore, it is common knowledge, the operation of VIP Rooms in Macau casinos had long been dominated by Asian Organized Crime (AOC), commonly referred to as ‘triads.’ With the evolution of gaming in Macau, the same AOC figures are allegedly still working the VIP Operations; only now they do so behind the façade of ‘legitimate’ public corporations, complex corporate structures, financial guarantees, and third-party assignments. Public media and intelligence sources have affiliated all but one of the seven VIP Room Operator groups with reputed AOC figures. Many of these associations are linked through public records. As such, since March 2010, the industry has been facing an increasing deluge of media scrutiny concerning the Nevada gaming companies’ ties to organized crime in Macau.”

Common knowledge. Near-pervasive Asian organized crime influence lurking behind the façade of legitimacy.

If such activity were as blatant inside a Las Vegas casino, the operator’s license would be yanked like a rotten tooth. Not so in Macau.

As I said, Burnett’s frankness is refreshing. And he should be lauded for his professionalism.

But the trouble with being candid about the state’s regulatory limits is simple: It is bound to lead some to logically surmise that increased federal oversight is warranted for American casino companies doing business in foreign jurisdictions.

Others might ask: If it’s acceptable for Nevada licensees to do business — even at arm’s length — with triad associates in Macau, will it one day be acceptable for triad-influenced companies to do business on the Strip?

Burnett concluded, “Nevada has long enjoyed a formidable reputation for strict and effective regulation. The globalization of gaming beyond our borders brings challenges, however, as we do not have the authority nor the resources to either regulate gaming or conduct criminal investigations in a foreign jurisdiction.”

That just about says it all — even if it runs contrary to the tired hype floated by Gaming Inc.’s promoters and pundits.

John L. Smith’s column appears Sunday, Tuesday, Wednesday and Friday. E-mail him at jsmith@reviewjournal.com or call (702) 383-0295.

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