Macau casinos lose steam

July 30, 2012 9:20 am

The booming casino market in the Macau region of China appears to be cooling off, impacting the profits of several major U.S. casino companies.

Las Vegas Sands Corp.’s earnings dropped 34 percent in the second quarter, due mainly to a slowdown in Macau, where the company has four casinos. Earlier, Wynn Resorts Inc. announced that its second quarter earnings dropped by 7 percent. Both stocks are down 30 percent since April.

The slowdown could spell trouble for the Sands, which has plans to keep building in Macau. The company, controlled by billionaire Sheldon Adelson, almost went bankrupt during the 2008 financial crisis. But the booming Macau market saved Adelson’s company and has been the main source of profits for the Sands and Wynn in recent years. The growth has also led to legal troubles for both companies, which are under federal investigation for possible violations of the Foreign Corrupt Practices Act. (See here and here.) New questions were raised last week in the probe of Adelson’s company.

Adelson has also emerged as the biggest Republican donor during this year’s election cycle, giving tens of millions of dollars to conservative causes and candidates, including Mitt Romney. Adelson traveled with Romney to Israel over the weekend, where there was a fundraiser and Romney upset Palestinians with his comments.

Karl Rove’s high rollers

July 13, 2012 11:35 am

Sheldon Adelson isn’t the only billionaire casino mogul giving tens of millions dollars to back efforts to defeat President Obama and elect Republicans to Congress.

Steve Wynn, until recently a Democrat, has been giving millions to Crossroads GPS, a political group founded by GOP strategist Karl Rove, according to Politico. Rove and other conservatives plan to spend $1 billion to defeat Obama, Politico reports.

The story details how Rove courted Wynn, who attended Rove’s wedding and provided a private jet to fly the newlyweds to Italy. Wynn’s lobbyist also has close ties to Mitt Romney. Rove divorced in 2009.

The casino companies controlled by Adelson and Wynn are both under federal investigation for violations of the Foreign Corrupt Practices Act, stemming from their lucrative casino operations in the wild west Chinese territory of Macau. Both casino moguls have emerged as two of the more high-profile GOP supporters who are upending election-year spending in the wake of the Supreme Court’s Citizens United decision that has opened the door to unlimited campaign giving from corporations.

Wynn’s world in Macau

July 2, 2012 1:04 pm

Steve Wynn’s plans for a $4 bill casino in Macau, included a $50 million payment by Wynn Resorts to a little-known company with ties to top officials in the Chinese territory and a prominent Beijing family, according to a report in The Wall Street Journal.

The complex deal dates back seven years and provides yet another window into the murky world of U.S. casinos doing business in Macau, a booming but corrupt enclave that generates five times the revenue than Las Vegas.

Billionaire casino mogul Steve Wynn sat for a lengthy interview with The Journal at his Cafe Esplanada casino in Macau, where he brought along two lawyers, two board members, two bodyguards and his wife. Wynn explained the company checked out the people they were dealing with and “everybody came up dandy.”

Wynn’s company is already under investigation for its business practices in Macau. The Securities and Exchange Commission is investigating a $135 million donation Wynn’s company made last year to the University of Macau. The company said the donation was legal and consistent with the company’s tradition of philanthropy. The university said the gift will support activities at the school’s Asia-Pacific Academy of Economics and Management.

Wynn is also embroiled in lawsuits from a former board member and shareholders, involving allegations of wrongdoing by his casinos in Macau. Meanwhile, Wynn’s rival, the Las Vegas Sands, is under investigation by both the SEC and the Justice Department for possible violations of the Foreign Corrupt Practices Act, which bans bribery by U.S. companies abroad. Las Vegas Sands denies any wrongdoing and says it is cooperating with investigators.

Last week, a former executive alleged that Sands’ chief executive Sheldon Adelson approved a “prostitution strategy” at his casinos in Macau. Adelson denied the allegation, which is part of a wrongful termination suit brought by the executive.

Not all fun and games in Macau

June 28, 2012 11:10 am

The Chinese territory of Macau has been billed as the new Las Vegas. But it may be more like the old Las Vegas – or worse – when violent mobsters ran the town.

A top figure in Macau’s gambling industry was beaten by six men in a restaurant at his own casino while he dined with a young woman. The brazen beating recalled the gang violence that dominated the gambling just a decade ago, as The New York Times details here.

Not long ago, murders, bombings and attacks were routine in Macau. A senior police official attempted to calm tourists by announcing Macau had “professional killers who don’t miss their targets.” Translation: Don’t mind the gunfire, please keep gambling.

More recently, Macau has tried to clean up its act and become more like Las Vegas. In fact, gambling has exploded and now tops Vegas. But the beating of Ng Man-sun, a casino hotel investor, raised fears that those bad old days are coming back.

The beating appeared to be the work of triads, the Chinese criminal societies that have long been associated with Macau’s gambling industry. The attack took place in the restaurant of the New Century Hotel, which was also the scene of a July 1997 attack. At the time, Ng was feuding with one of Macau’s most notorious gangsters, Wan Kuok-koi, known as Broken Tooth.

The Chinese government has tried to clean up Macau’s reputation by allowing U.S. casino operators to open there. Vegas casino moguls Sheldon Adelson and Steve Wynn have spent billions building casino resorts in Macau. Both of their companies are under investigation for violating the Foreign Corrupt Practices Act. See here and here.

Neither company has been charged. But it remains clear that Macau remains a dangerous place to do business – in more ways than one.

Nora Ephron on Steve Wynn & Picasso

June 27, 2012 1:33 pm

The passing of the great Nora Ephron brought to mind her excellent essay on the time she was in Las Vegas with Steve Wynn who was showing off a famed Picasso painting he was getting ready to sell for a record $139 million.

That was, of course, until Wynn accidentally poked his elbow through the canvas.

“I felt that I was in a room where something very private had happened that I had no right to be at,” Ephron wrote. ”I felt absolutely terrible. At the same time I was holding my digital camera in my hand – I’d just taken several pictures of the Picasso – and I wanted to take a picture of the Picasso with the hole in it so badly that my camera was literally quivering.  But I didn’t see how I could take a picture – it seemed to me I’d witnessed a tragedy, and what’s more, that my flash would go off if I did and give me away.”

Ephron had a great eye for detail. The essay is worth reading though it is not as good as her classic piece in Esquire about breasts. But this is a gambling blog so it is best to stay as close to the subject matter as possible.

The New Yorker magazine also did a beautiful job chronicling Wynn’s colossal screw-up, which can be read here as well. Ephron’s writing is brilliant and she will be missed. But one detail worth noting in her essay is how little time she spent gambling in Vegas. It seems as if the trip was built around one of her other passions: food.

How casinos do business in Macau

June 8, 2012 10:45 am

In 2009, the Las Vegas Sands, a large casino operator, received an interesting offer from an outside legal adviser with political connections in China and Macau, the booming gambling market, according to a report in The Wall Street Journal.

The adviser said he was approached by “someone high ranking in Beijing” who proposed that Sands pay $300 million to win long-awaited government approval to sell a luxury-apartment complex in Macau and to settle a lawsuit, according to an email reviewed by the Journal. An offer the Sands couldn’t refuse?

Flash forward three years and the Sands is out from its deep debt, thanks to the huge profits it is reaping in Macau, a gambling mecca that is tightly controlled by the Chinese government. Sands denies making any improper payments or receiving any improper benefits.

Last year, Sands disclosed that it is under federal investigation into whether it violated the Foreign Corrupt Practices Act, which prohibits bribery to enter foreign markets. Steve Jacobs, the former head of Sands’ Macau unit, filed a wrongful termination lawsuit against the casino operator. The suit alleges Jacobs warned company officials that the use of the outside legal adviser, Leonal Alves, “posed serious risks” to Sands because of the federal law barring U.S. companies from bribing foreign officials.

Sands faces a separate $375 million lawsuit from its former partner in Macau.

Sands is controlled by billionaire Sheldon Adelson, who was in the spotlight earlier this year after giving millions to prop up Newt Gingrich’s failed bid for the GOP presidential nomination. (Read Connie Bruck’s excellent New Yorker profile of Adelson here. Check out this New Yorker story about how Macau surpssed Las Vegas as the world’s casino giant.)

Sands is not the only U.S. casino operator under investigation for how it does business in Macau. Last year, Wynn Resorts Ltd. donated $135 million to University of Macau in advance of approval to build a casino in Macau. Earlier this year, the Securities and Exchange Commission launched an inquiry into the payment. Wynn is also embroiled in dueling lawsuits with his largest investor and director regarding dubious business dealings overseas. A columnist for a Las Vegas newspaper said the legal drama reads like a screenplay.

Home or abroad, when it comes to the down and dirty casino business, it seems like some things never change.

Steve Wynn folds in Foxboro

May 9, 2012 11:58 am

Chalk one up for the little guys.

Las Vegas casino mogul Steve Wynn and New England Patroits owner Bob Kraft gave up on their plan to build a casino in Foxborough, Mass. after voters elected a slate of candidates opposed to a gambling hall in their rural neighborhood. The vote was a sharp rebuke for Wynn and Kraft and all but assured their casino plan would be rejected.

Casino bosses are used to getting their way, usually after greasing the political skids and touting inflated benefits. But the folks in Foxborough understood the social and economic costs of gambling outweigh any benefits. (The Globe has rightly called for a similar citywide vote on whether to allow a casino in Boston.)

Foxborough is a suburb of Boston that is more professional than working class. Casinos don’t usually try to locate in those kinds of markets, and the backlash in Foxborough explains why. Casino prefer desperate and downtrodden working-class towns and cities. (See post below on Chester, Pa.) Those locals welcome a casino because the political leadership there is often bankrupt of any good ideas on how to revive their economic fortunes. The unsophisticated residents also buy in to the notion that a casino will be a savior. Of course, everyone ends up poorer, except the casino owners.

So Wynn rolled craps in Foxborough. But don’t cry for the brash billionaire. Casino moguls have no conscience. Wynn will quickly move on. Like a bad penny, he will turn up in another town or city selling fool’s gold to anyone who will listen. As P.T. Barnum said: “There’s a sucker born every minute.”

Voter backlash against casino

May 8, 2012 1:44 pm

Here’s some insight into why elected officials go to great lengths to keep voters from deciding whether to allow casinos: Voters in Foxboro, Mass. overwhelmingly backed a slate of casino opponents in the town selectmen’s race on Monday.

The vote was big setback to Las Vegas mogul Steve Wynn’s plan to team with New England Patroits owner Bob Kraft to bring a casino to Foxboro. “Monday’s election was the first time local voters have weighed in on a casino proposal since Massachusetts’ expanded gambling law passed last year,” The Boston Globe reported. ”The voting margins seemed to confirm academic studies that suggest casino opponents are highly motivated voters who turn out in great percentages.”

Elected officials know that most voters oppose casinos because they know the problems outweigh the benefits. That’s why in many states, lawmakers hold late-night votes and cut backroom deals when it comes to casinos. The last thing elected officials or casino operators want is a full, fair, open, honest and independent debate about the social and economic impact of casinos.

In fact, Massachusetts officials essentially crafted the casino law in secret before ramming it through the state House and Senate. The measure was influenced by casino industry lobbyists, and not the public good. A similar playbook has been followed in other states, including Pennsylvania, where lawmakers legalized gambling in a late-night vote that avoided little public debate.

Gov. Andrew Cuomo is following the same road map in New York, though voters there will have the final say. Of course, by then the casino industry will have spent millions of dollars shaping public opinion, while the state avoids an independent analysis regarding the true costs of gambling.

Macau’s casino boom

May 1, 2012 6:33 am

Macau is already the biggest casino market in the world. But the explosive growth shows no end in sight as another casino company announced plans to spend billions to expand its operations in Macau.

Galaxy Entertainment said Thursday that it planned to spend $2.1 billion on the second phase of its latest resort in Macau. The news comes two weeks after the Sands China opened a new casino near Galaxy. Sands is owned by casino mogul Sheldon Adelson.

Two other large casino owners – Wynn Macau and MGM China – are awaiting government approval for their developments. It is easy to see why casino firms are expanding so rapidly. Gamblers spent $33.5 billion in Macau last year compared with $6 billion in Las Vegas. But the explosive growth raises questions about labor and supply. Is Macau creating a casino bubble? Will it be able to sustain the growth?

Macau is the only place where the Chinese government allows legalized gambling. One other concern is what happens if the government decides to change policy and restrict access by mainland residents to Macau or allow gambling in other parts of the country?

Death threat over casino vote

April 19, 2012 10:22 am

Tensions are running alarmingly high in the fight to bring a casino to Foxboro, Mass. A man wielding a hatchet threatened to kill one of the Foxboro selectman to vote in favor of the casino plan that is being pushed by Las Vagas mogul Steve Wynn and Patroits owner Robert Kraft.

“If you don’t change your (expletive) vote … you’re a dead man,” Michael Viscardi, 40, told Selectman Mark Sullivan on Sunday, according to a police report.

Sullivan and Viscardi are neighbors. Or were neighbors. Sullivan moved his family after Viscardi’s threat. Sullivan is seen as the deciding vote on the Foxboro casino, which has divided the town. Many citizens rightly understand the long-term downsides of a casino don’t outwiegh the short-term benefits of extra tax dollars and some jobs.

The death threat is an extreme example of the high stakes surrounding the spread of casinos. But the reality is, casino – in many ways – have been known to cause their own death and destcrution. Studies show that where casino locate, there is an increase in crime, divorce, bankruptcy and suicide. Sullivan gets that and should be applauded for standing up for what is right in the face of a death threat.