Tuesday, Feb. 25, 2003 | 11:08 a.m.
The Mirage faces a hefty fine because of a failure to file required financial information with federal and state authorities.
Company spokesman Alan Feldman said Monday that the Strip casino failed to file "months worth" of currency transaction reports, and that the casino deals with hundreds of the reports each month.
Federal and state law requires Nevada casinos to file currency transaction reports, commonly called CTRs, every time a player has a cash transaction of $10,000 or more.
The casino collected the information but simply failed to mail the reports, Feldman said.
Feldman said "several" employees have been fired as a result of the transgressions, but he declined to identify the individuals or their titles. He also declined to specify how many people lost their jobs.
Feldman said MGM MIRAGE, the casino's parent company, is cooperating with federal and state gaming regulators. Feldman said he is confident that the company will stave off most of the potential fines, and local experts agreed with that assessment.
The federal civil penalty for failing to file CTRs with the Internal Revenue Service is up to $100,000 per violation.
The state can also levy a $25,000 fine for each violation, said state Gaming Control Board Chairman Dennis Neilander. Federal criminal penalties can be $250,000 per violation and a five-year jail sentence.
Feldman said the criminal penalties should not apply in this situation.
"I'm relatively confident that all of this would be taken as a group as they consider the appropriate response," he said. "I am also absolutely certain that there will be a fine.
"If you were to take each of these individually, I'm sure it adds up to an astonishing amount of money," he said, but said the problem was "the same mistake repeated over and over again.
"Last but not least, there appears to have at no time been any kind of criminal intent."
Feldman called the matter an "administrative" one.
"We had a serious situation develop, one which is an administrative issue but nonetheless is serious," he said. "For reasons we still haven't gotten to the bottom of, they weren't being sent in. They just weren't being put in the mail.
"It is just mind-boggling. It is almost inexplicable, but nonetheless it happened. We're working with gaming right now to make sure they are satisfied, that the reports now are filed properly.
"We're still trying to get to the bottom of it."
Both Feldman and Neilander, saying the issue is still under investigation, declined to discuss the failure to file the reports in detail, including the length of the time that the reports were not being filed and how many reports ultimately were not submitted.
Neilander said he expects the state investigation to conclude within two weeks.
The company voluntarily reported the problem to the Gaming Control Board earlier this month, Neilander said. The company's alert followed a notice from the state agency that an audit of compliance with federal and state rules was coming, he said.
The Mirage was the only casino in the company that had the problem, Feldman said. MGM MIRAGE also owns the Bellagio, Treasure Island, the Golden Nugget, the MGM Grand, New York-New York, the Boardwalk, and 50 percent of the Monte Carlo in Las Vegas.
The company also owns properties in Laughlin, Primm, Mississippi and Michigan. It is a partner in the Borgata resort scheduled to open later this year in Atlantic City.
MGM MIRAGE stock traded down 53 cents, or 2 percent, this morning -- not an unusually large decline. Other gaming stocks also fell slightly on a generally weak morning for the stock market.
The CTR system is designed to alert federal authorities to potential violations involving money laundering or income tax evasion.
The state used to receive the reports and pass them on to the federal government until the system was reformed in 1997, Neilander said.
Since then, the federal Treasury Department, parent of the IRS, has received the reports -- dubbed Form 8362s in bureaucratic shorthand -- so state gaming control officials would not immediately be aware of the problem when the reports stopped coming, Neilander said.
Bill Brunson, spokesman for the IRS's regional offices in Phoenix, declined comment on the issue. He said his agency cannot reveal details of an investigation into tax filings.
University of Nevada, Las Vegas professor and gaming expert Bill Thompson said somebody, somewhere should have realized that something was amiss before the audit was announced.
"It seems to me that they are in a lot of trouble it if went beyond a month," Thompson said. "There should be a red flag when thousands of these reports don't come in."
He said that the failure to account for the reports, in a worst-case scenario, would threaten the state's autonomy to regulate the financial side of the casino industry.
"We are allowed to do it because we do not want IRS people on our gaming floors," Thompson said. "We do not want them snooping into tips, putting their eyes over our shoulders.
"If we have too many of these things, the IRS could say, 'hey, that agreement we have, we're going to throw that out.' It would be bad for our philosophy of states' rights."
The number of cases similar to the one now under investigation appears to be limited. Neilander said he has not had a similar case during his tenure on the gaming board, which began in 1998.
Thompson said the last case he recalls was in 1993, when Binion's Horseshoe was cited by state regulators for failure to file the reports. The gaming control board ultimately determined that the Horseshoe failed to file the reports but did not have any criminal intent.
The Horseshoe was fined $1 million.
Thompson said he expects a similar outcome in the Mirage investigation.
"They'll get a 'slap fine' of a couple of million," he predicted. "Enough of a fine that they won't do it again, but there's probably nothing here to say it's a crooked organization.
"For a big casino, which has a very, very good reputation, such sloppiness is definitely out of character."
How long the violations occurred, why they went undetected and who failed to report the information are all factors that can influence the size of the federal fine, said Shannon Bybee, executive director of the International Gaming Institute at the University of Nevada, Las Vegas and a former state gaming regulator.
Such violations can carry steep fines because the IRS generally treats such violations as intentional, regardless of whether carelessness was involved, Bybee said.
Still, violations aren't unusual, he said.
Several companies have been fined by the state on the basis of sting operations conducted by gaming board agents, he said.
A sting might call for an undercover board agent to enter a casino and try to exchange a large amount of cash for other denominations, for example, he said.
In such cases, the rank and file employees -- not upper-level managers -- generally aren't processing cash correctly because they haven't been trained properly rather than because they are conspiring with customers to help them avoid reporting transactions to the IRS, he said.
The Sun's Liz Benston
contributed to this report.
archive
