Monday, February 1, 2010

Is MGM Mirage Ready to Leave Jersey?

One would think that the home of "Jersey Shore" and "The Real Housewives of New Jersey" would have no problem with whatever casinos want to do business in Atlantic City. But apparently, MGM Mirage is running into some trouble out there.

Why? Oh, just one of Macau's worst kept secrets...

When New Jersey casino regulators said last year that MGM Mirage needed to cut ties with an “unsuitable” business partner in China, the casino giant said it would defend itself against allegations raised in New Jersey, where MGM Mirage owns a 50 percent stake in the Borgata resort.

For the past eight months, both sides — with reputations and track records to uphold — have been gearing up for battle. Or reconciliation. [...]

Regulators red-flagged MGM Mirage’s 2004 deal with Pansy Ho because she is the daughter of controversial Macau casino boss Stanley Ho, who has reputed ties to Asian organized crime.

Nevada gaming regulators signed off on the partnership in 2007, saying that MGM Mirage had structured the Ho partnership in such a way that her father would not be able to exert his influence on the business. Nevada regulators said Ho, who ran a ferry and tourism company founded by her father, is a suitable partner because she is a successful and ethical businesswoman in her own right.

Because Ho didn’t need a Nevada casino license to do business with the company in Macau, MGM Mirage didn’t have to prove to Nevada regulators that she was a suitable partner. In passing judgment on Ho, Nevada regulators said they had no reason to believe she wouldn’t act ethically and that her father’s alleged associations — while distasteful — were not enough to harm Nevada.

It’s a different ballgame in New Jersey, where companies must renew their casino licenses every five years. Casino companies must prove their worthiness, and those of partners, at each renewal hearing as if they are obtaining licenses for the first time.

It's no secret that Nevada's gaming regulators are quite lax compared to New Jersey gaming authorities. If New Jersey regulators catch just one whiff of "organized crime influence", you're out and you're out for good. After all, why do you think Steve Wynn was forced out of Atlantic City in 1987? And why so many other big gaming industry players in Nevada are kept out of Jersey?

And now, the Pansy Ho connection may be enough to force MGM Mirage out of The Garden State. For all we know, Pansy Ho may really be a legitimate businesswoman and have no interest in her father's shadier operations in Southeast Asia. But in New Jersey, even family ties can be enough to lower the guillotine on a casino project.

So most likely, MGM Mirage will have two choices. Either they will have to abandon the MGM Grand Macau deal with Pansy Ho or they will have to end their partnership with Boyd Gaming on Borgata Atlantic City. Seriously, which one do you think MGM Mirage will stick with?

Macau's continually being touted as "the next big thing". The Asian gaming market continues to rise. Casino operators fight brutally over the very few gaming licenses the Chinese government permits.

And Atlantic City? Not so hot any more.

The Wall Street Journal is already reporting that MGM Mirage is ready to sell its 50% stake in Borgata, so I think we're starting to see where MGM really wants to go next.

1 comment:

  1. MGM-Mirage made the correct decision leaving New Jersey as the state is clearly too overly-regulated, overtaxed and obviously doesn’t understand nor have the unique working relationship gaming has with regulators as it does in Nevada. New Jersey’s short-sighted and narrow view of gaming has inhibited its citizens the many needed jobs the state could likely use provided by new gaming projects.