Wandering China

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Documents reveal Chinese crime influence over Macau’s casinos [Las Vegas Review Journal]

Wikileaks: Organized crime influences Macau’s casino industry. Macau, the only place in China where gaming is legal faces scrunity over regulators as “provincial officials in the Mainland increasingly provide sweetheart deals to junket operators … in exchange for bank deposits or cash sums paid to officials upon arrival in Macau.”

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Documents reveal Chinese crime influence over Macau’s casinos
by Howard Stutz
Source – Las Vegas Review Journal, published September 10, 2011

U.S. government officials admitted privately in October 2008 that Chinese organized crime was influencing certain aspects of Macau’s casino industry, according to confidential cables obtained by the whistle-blower group Wikileaks.

Nearly 600 private communications between the U.S. Consulate in Hong Kong and the State Department concerning Macau, going as far back as 2006, were collected and released by the group.

The documents criticized the Macau government and its officials, including the former chief executive of the Special Administrative Region, and detailed a lack of oversight of the Macau casino industry by the enclave’s regulators.

Macau — the only location in China where gaming is legal — surpassed the Strip as the world’s largest gaming market in 2006.

Last year, Macau casinos collected a record $23.5 billion. Through August, gaming revenues are up 47 percent over the first eight months of 2010.

Three major Nevada companies, Las Vegas Sands Corp., Wynn Resorts Ltd., and MGM Resorts International, operate casinos in Macau. Current and former executives of the casino companies were cited or quoted in the documents.

None of the American casino operators was alleged to be tied to organized crime, according to the memos.

Counsel General Joseph Donovan told the State Department on Oct. 23, 2008, that American gaming executives in Macau thought Chinese junket operators, who act as the middlemen in bringing midmarket to high-end casino customers to various Macau casinos, were corrupt.

“They believe the operators are directly or indirectly involved with organized crime in Macau and the Mainland,” Donovan wrote in a classified cable. “Macau’s gaming executives criticized Macau’s government as unsophisticated, opaque in its decision making and hamstrung by a recent corruption scandal.”

The Wikileaks website has made headlines worldwide and caused consternation in diplomatic circles with a steady drip feed of hundreds of thousands of classified U.S. documents, particularly detailed and often intimate messages from State Department officials in foreign capitals to Washington, D.C.

While a few have breached national security, the cables have given a rare peek behind the curtain of international relations, often confirming events that are the subject of rumors and speculation but never spoken about in public.

The revelations in some of the leaked communications concerning Macau included the following:

■ The Beijing government imposed restrictions on visits to Macau by mainland Chinese residents in 2008 and 2009 to “stem the rise of organized crime” by the junket operators.

According to Donovan, a senior U.S. gaming executive said “provincial officials in the Mainland increasingly provide sweetheart deals to junket operators … in exchange for bank deposits or cash sums paid to officials upon arrival in Macau.”

In the 2008 memo, Donovan said junket operators were paid approximately $2.1 billion in 2007 by casinos, roughly 35 percent of the gaming revenues generated by their players.

A executive with the casinos operated by Hong Kong billionaire Stanley Ho asserted “all of the junket operators are directly or indirectly involved with the (organized crime) triads.”

In a cable dated September 2009, acting Counsel General Christopher Marut told the State Department that casino executives didn’t think caps placed on what junket operators earned would solve problems.

“(Former) Sands China President Steve Jacobs told us the caps will be routinely violated,” Marut wrote. One reason Jacobs gave was that “junket operators maintain significant economic and political influence in Macau.”

Executives from Las Vegas Sands and MGM Resorts expressed frustration with the Macau Gaming Inspection and Coordination Bureau, saying the regulatory agency ignored “widespread illegal practices” and didn’t enforce its own reporting requirements on junket operators.

Junket operators continue to do business in Macau in 2011.


Filed under: 52 Unacceptable Practices, Beijing Consensus, Chinese Model, Corruption, Culture, Domestic Growth, Economics, Gambling, Influence, Lifestyle, Macau, Social, Tourism

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