Published Tuesday, May 19, 2009 | 8:22 a.m.
Updated Tuesday, May 19, 2009 | 6:36 p.m.
Regulators in Nevada and Mississippi cleared MGM Mirage's partnership with the Ho sisters for their Macau casino -- but New Jersey regulators don't see it that way and are recommending rejection of the deal.
MGM Mirage said today the New Jersey Division of Gaming Enforcement has found its joint venture partner in Macau to be unsuitable and it's recommending that if MGM Mirage wants to continue to do business in New Jersey with its half-owned Borgata resort in Atlantic City, it "be directed to disengage itself from any business association with its Macau joint venture partner."
MGM Mirage today said the issue will not have a material adverse effect on its finances. Its stock initially rose today, but fell to close at $8.34, down 40 cents. And an analyst called the statement about no material adverse effect vague.
JPMorgan's Joseph Greff said in a client note: "Does that mean MGM will sell its 50 percent joint venture interest in MGM Grand Macau, keep Macau and sell Borgata so that MGM has Macau market exposure? Will MGM be required to do nothing and hope that other state gaming regulators do not act on it?"
Greff predicted that the best outcome for MGM would be that nothing happens and it "perhaps just suffers loss of face." The worst case scenario would be that MGM has to sell the Borgata or its Macau interest, he added.
At the heart of the issue is Pansy Ho, daughter of longtime Macau casino operator Stanley Ho, who for years has fought allegations that his gaming operations have been tainted by organized crime.
Pansy Ho and her sister, business associate Daisy Ho, have said some of their initial investment in the Macau joint venture with MGM Mirage came from their father -- but insist he doesn't overly influence their business operations.
MGM Mirage today said: "On May 18, 2009, the DGE (Division of Gaming Enforcement) issued a report to the New Jersey Commission on its investigation. While the report itself is confidential, at the conclusion of the report, the DGE recommended, among other things, that: (i) the Company’s Macau joint venture partner be found to be unsuitable; (ii) the Company be directed to disengage itself from any business association with its Macau joint venture partner; (iii) the Company’s due diligence/compliance efforts be found to be deficient; and (iv) the New Jersey Commission hold a hearing to address the report."
"However, the report is merely a recommendation and is not binding on the New Jersey Commission, which has sole responsibility and authority for deciding all regulatory and licensing matters. The New Jersey Commission has not yet taken any action with respect to the report, including whether or when a hearing should be scheduled," the company said.
MGM Mirage said the report "is still being reviewed by the company and may be the subject of a hearing by the New Jersey Commission; therefore, no assurance can be given as to the ultimate impact of the report."
MGM Mirage spokeswoman Yvette Monet said Tuesday that the company has “fully cooperated” with New Jersey regulators investigating the Pansy Ho relationship.
The company disagrees with the DGE’s recommendation but anticipates the opportunity to present its position at a public hearing before the New Jersey Casino Control Commission, she said.
A report in the Star-Ledger newspaper of New Jersey last year spelled out some of the troubling information about Stanley Ho, though the Ho sisters continued to insist they are not influenced by their father.
The information came from an initial public stock offering by Stanley Ho's casino interests.
It included statements that Ho's company could not assure that the activities of the promoters or their patrons in its VIP rooms comply with "applicable laws and regulations, such as usury or anti-money laundering laws or regulations."
The filing noted Macau's casino industry is "prone to potential money laundering and other illegal activities" and that Stanley Ho has a stake in a casino in North Korea, a nation constantly under fire by the international community for its nuclear program.
The Associated Press contributed to this report.