Hos Over Average Joes: MGM Mirage Abandons Atlantic City

Last Updated Mar 18, 2010 9:45 PM EDT

MGM Mirage put up their 50 percent share of the Borgata Casino and Spa for sale after New Jersey regulators called Macau partner Pansy Ho "unsuitable" and alleged that her father has links to Chinese organized crime. Rather than giving up their lucrative partnership with her, MGM decided to drop its ties with New Jersey -- which was just a way to cut their losses. MGM has considered cutting ties to Atlantic City since January when regulators were already questioning Ho's suitability as a partner -- because MGM has no intention of losing out on a $1 billion IPO on its Macao businesses.

The New Jersey Department of Gambling Enforcement claimed that Pansy Ho was dependent on her father, Stanley Ho, who is rumored to be involved in Chinese organized crime. Neither has faced criminal arrest or charges.

Pansy Ho declined to comment on the New Jersey report, while Mr Ho has consistently denied any connections with Macao or Hong Kong criminal gangs, or triads.

"The DGE's report acknowledges there is no evidence that Pansy Ho has engaged in any wrongdoing or been accused of any illegal activity," Jim Murren, MGM Mirage chief executive, said in a statement.

However, the DGE's report lays bare the company's efforts to enter Macao and harshly criticises its due diligence procedures.

The DGE also details Pansy Ho's financial dependence on her father, who has had at least 17 children by four wives and partners. According to the report, Mr Ho established a special "Petunia Trust" on his daughter's behalf, which she used to fund her investment in the joint venture with MGM Mirage. In addition, Ms Ho borrowed money from Goldman Sachs, HSBC and UBS.

The patriarch's largesse also extends to Pansy's younger sister, Daisy, who the report says receives a monthly "allowance" of $25,000 from her father.

This is in addition to the considerable salaries, expense accounts and share benefits both women enjoy as senior executives and directors at their father's holding company, Sociedade de Turismo de Macau, and Hong Kong-listed conglomerate Shun Tak Holdings.

MGM must have sensed that New Jersey regulators weren't going to approve the partnership because it began divesting in Borgata in February, either attempting to get out of a losing proposition or as an attempt to call the board's bluff.

The New Jersey Casino Control Commission signed off on the 50 percent Borgata sale Friday in a 15-minute, 5-0 meeting.

"Is this the perfect solution?" asked commission chair Linda Kassekert. "No compromise is, but so long as the commission is satisfied that the essential purposes and policies of the [New Jersey Casino Control] Act are not offended by the practicalities that this outcome affords, I, as one commissioner, believe that we may proceed. . . ."
While several states, including Nevada, Illinois and Michigan, already approved the partnership, New Jersey has stubbornly refused. For whatever reason, New Jersey is taking a hard line against Pansy Ho. I think what's good enough for Las Vegas should be good enough for Atlantic City, especially when it's in danger of losing business with an established casino operator, but apparently Jersey has deemed her unfit to join the ranks in Atlantic City. (Yes, I'm a bit skeptical as well.)
While there is no evidence that Mr Ho is personally connected to the Asian underworld, his casinos' long established practice of sub-contracting so-called "VIP rooms" to outside operators has given an unsavoury cast of characters entrée to Macao's gaming market.

"You would have to be living under a rock not to know about Stanley Ho and what the [negative] perception of Stanley Ho is," Terry Lanni, MGM Mirage's former chairman and chief executive, told the DGE. "There was no way of clearing Stanley Ho in the eyes of regulators." [Journalist note: Lanni retired early in November 2008 just before the Wall Street Journal released a story that he inflated his education credentials.]
MGM Mirage therefore turned its attention to forming a 50-50 joint venture with Pansy, in the hope that she would be seen as sufficiently independent from her controversial father.

MGM won't be crying over this loss, since Atlantic City has been losing money and business steadily to other areas in the mid-Atlantic, such as Pennsylvania. Instead, it will be concentrating on its future $1 billion IPO with partner... Pansy Ho. Don't you love happy endings?

Photo: iirraa