Inside Asian Gaming

INSIDE ASIAN GAMING | June 2009 10 Cover Story unproven) allegations made by US law enforcement agencies against Ms Ho’s father, Dr Stanley Ho, regarding the operation of his Macaubusiness.TheGardenState’s attorneys are also basing their view on due diligence statements made by Dr Ho’s own company SJM Holdings Ltd. The latter, through its subsidiary Sociedade de Jogos de Macau SA (SJM), runs Dr Ho’s casino interests in Macau. The due diligence statements were issued when SJM Holdings Ltd listed on the Hong Kong Stock Exchange in July 2008. This is potentially very significant because when the Nevada Gaming Control Board held its own hearings into MGM MIRAGE’s deal with Pansy Ho in 2007, the due diligence documents for the SJM IPO were not available to it. The Nevada Gaming Control Board called Ms Ho in person, and after hearing her testimony recommended to the Nevada Gaming Commission that Ms Ho was a suitable partner for MGM MIRAGE and that she was acting independently from her father’s operation. It appears that after scrutiny of the SJM IPO document and other material that New Jersey is not prepared to accept Ms Ho’s assurances at face value. “If there was evidence [available to New Jersey] not provided to us, then there would be a concern,” Dennis Neilander, chairman of the Nevada GCB said in remarks to the Macau media. New hearing Neither the New Jersey DGE nor the New Jersey GCC has been prepared to comment in detail on the former’s report ahead of any potential adjudication by the New Jersey Commission. However, NJDGE Director Josh Lichtblau was quoted in the US media as saying he thought his unit’s report “speaks for itself”. Commission chairwoman Linda Kassekert told The Associated Press that the state report cites suspicion among international law enforcement authorities that Stanley Ho is tied to organised crime as the reason MGM MIRAGE should not do business with his daughter. A key passage from the SJM IPO document filed with Hong Kong Exchanges and Clearing Ltd that may be causing difficulties for Ms Ho and MGM MIRAGE reads as follows: “….there have been and we may continue to face allegations and complaints made by various third parties and in media Stanley Ho reports in relation to our and certain of our shareholders’ compliance with applicable anti-money laundering laws or association with other illegal activities. Whether or not justified, any incidents, regulatory investigations or reports through the media or other third parties of possible money laundering or other illegal activities involving SJM, or, with respect to gaming activities prior to 2002, STDM, or their casinos, employees, patrons, Gaming Promoters [sic], or shareholders, could harm our reputation and our corporate image, or otherwise affect our ability to conduct and expand our business, cash flow, financial condition, results of operations, prospects and Share [sic] price. Another passage in the same document states: “despite SJM’s efforts we cannot assure you that the activities of SJM’s Gaming Promoters [sic] or the activities of their business associates and gaming patrons comply with applicable laws and regulations, such as usury or anti-money laundering laws or regulations, foreign exchange controls or sanctions imposed by the Office of Foreign Assets Controls of the US Department of the Treasury.” Standard procedure It would be easy to make too much of these paragraphs given that lawyers preparing IPO documents are usually required by stock market regulations to present the worst case scenario facing a company. And by the standards of due diligence, any casino operator in Macau using the services of third party gaming agents (i.e., all of them) would need to make a similar statement regarding the probity of those agents and their gambling patrons. According to sources spoken to by IAG , the real difficulty for Pansy Ho and MGM MIRAGE in New Jersey is the specific historical allegations made by US federal law enforcement against Sociedade de Turismo e Diversões de Macau (STDM), the company that ran Dr Ho’s casino interests in the days of his Macau monopoly up to 2002 and which still acts as an umbrella company for many of his investments. In 1988, the US Justice Department listed Dr Ho as an associate of an unknown Chinese triad organisation that allegedly operated in Macau’s casino VIP rooms. Pansy Ho is a director of STDM, which still owns an interest in SJM. She is also the managing director of Hong Kong-listed Shun Tak Holdings Ltd, the shipping and property conglomerate with most of its business interests in Macau, and which Dr Ho chairs. According to IAG ’s sources, Ms Ho’s continuing directorship of STDM and the role of that company in relation to the historical organised crime allegations is an important reason why New Jersey doesn’t believe Pansy Ho is truly acting independently from her father. North Korea New Jersey state Assemblyman Richard Merkt, a former senior lawyer for the NJDGE, has also gone on record as expressing concern that STDM owns a stake in a North Korean casino—another fact confirmed in the SJM IPO document that would not necessarily have been available to the Nevada hearings. It’s possible that some judicious reshuffling of Pansy Ho’s directorial jobs might be enough to satisfy New Jersey regulators.MsHo’sbrotherLawrenceHofaced suitability hearings in the Australian state of Victoria regarding his casino joint venture with the Australian company Publishing and Broadcasting Ltd (as it then was). Dr Ho