Ho, MGM Mirage Deal Should Pass Regulators

When Macau opened up its casino market to foreign investors, no one would have guessed that a Nevada casino operator would end up dealing with casino kingpin Stanley Ho, whose casinos were regarded as a snakepit teeming with violent Chinese organized crime figures and brazen loan sharks and prostitutes.

Three years later, the state's biggest casino operator is partnering with Ho's daughter after buying rights to build a casino from Ho himself.

Most gaming industry leaders and observers expect MGM Mirage's partnership with Pansy Ho, daughter of Asia's leading casino mogul, to stand up to Nevada's regulatory scrutiny.

Experts say the deal between the Las Vegas-based casino company and Pansy Ho would be looked upon favorably because regulators have been assured that Stanley Ho would not be associated with the venture.

In an interview with the Sun, Pansy Ho said the ventures she oversees in Macau involve tourism enterprises associated with the city's casinos -- boat transportation, the area's only golf course, the city's primary convention center, the municipal airport and the Macau Tower tourist attraction among them.

Pansy Ho is managing director of Shun Tak Holdings Ltd., an umbrella company for several tourism enterprises, but Shun Tak is not associated with the MGM Mirage deal.

"I really don't have that much experience with gaming because my company works primarily in transportation, food and beverage and entertainment," she said.

Pansy Ho was in Las Vegas last week with a contingent of tourism and government leaders from Macau to introduce Las Vegas to some of the special administrative region's cultural highlights.

Pansy has been designated as the heir of her 84-year-old father's empire. Hong Kong media have tagged her as a party girl-turned-serious businesswoman who has a business degree from the University of Santa Clara in California. She says the "party girl" label is a misconception; she says she organizes parties as part of her responsibilities with Shun Tak, but she's not a participant.

While her father's company is acknowledged as the largest fish in the Asian gaming pond, Pansy said her father has no role in the partnership with MGM Mirage.

Stanley Ho's Sociedade de Jogos de Macau -- known in the region as SJM -- controls 80 percent of Macau's five-star hotel rooms and includes the largest casino in the city, the Lisboa, and one of the newest properties, the Casino New Century-Greek Mythology on the island of Taipa.

Ho continues to hold a tight grip on the high-roller action of Macau, but some critics say his casinos allow interaction with organized crime figures -- an allegation boosters of the region say is part of Macau's notorious past.

Ho held a 40-year monopoly on gaming in Macau, but that changed in 1999 when the city became a special administrative region that, like Hong Kong, was turned over to Chinese control. The new government in 2003 granted three gaming concessions, one to Ho, one to Wynn Resorts Ltd. and one to a partnership that included Las Vegas Sands Inc.

Although MGM Mirage was shut out of the initial list of concessionaires, Nevada's biggest operator able to enter the market through a subconcession from Ho to MGM Grand Paradise Ltd., a 50-50 partnership between Ho's eldest daughter and the Las Vegas company.

MGM Mirage put $180 million in equity into the deal while Pansy Ho put $80 million into it. MGM Mirage also has the responsibility to deliver a $100 million interest-bearing loan to the partnership.

Third-party financing is being sought to fund the remaining costs of the project, which is expected to open in late 2007.

MGM Mirage has not disclosed how much was paid to Stanley Ho for the subconcession, but Hong Kong media reports said it was about $200 million.

Terry Lanni, chief executive of MGM Mirage, said the MGM Grand Macau project, which broke ground in June is now pegged to cost $1 billion after initially being projected at $975 million.

He said while Pansy Ho is not a key figure in her father's casino empire that she understands the business and probably was being modest in her role.

"She's extremely bright and has a great deal of experience with various travel and tourism operations," Lanni said. "She may not have a direct background in gaming, but she'll learn from our people more about some of the vagaries of the industry. She'll be very involved and will have a significant role. She was tremendously valuable in selecting an architect and a contractor for our project there. She's the managing director, but decisions are made jointly."

Lanni said he can understand how Pansy can keep her distance from her father.

"I have a number of friends in a variety of businesses who don't want their children involved in their industry for a number of reasons," Lanni said. "I can attest to the fact that she is rather unfamiliar with some of the specifics of the gaming industry. But she has a number of other strengths."

Marc Falcone, a Deutsche Bank gaming analyst who has watched American casino companies emerge as competition has unfolded in Macau, said MGM Mirage executives have been very diligent in making sure Nevada regulators are apprised of their dealings with Pansy Ho and her role in the venture.

"She has a strong reputation as an intelligent business woman and that's most important to her participation with the joint venture," Falcone said. "She's been the managing director, but she doesn't directly handle the day-to-day operation.

"All the Nevada operators (in Macau) have been very diligent about working within the Nevada regulatory environment to remain in compliance with their licensing," Falcone said. "MGM doesn't view her as a liability."

Dennis Neilander, chairman of the state Gaming Control Board, said investigators are still gathering information about Pansy Ho and her association with MGM Mirage and that it would be premature for him to comment directly on her role.

Neilander said foreign operators don't have to be licensed to engage in partnerships with local casinos abroad. Only one state -- Mississippi -- requires board approval on such deals and it has endorsed MGM Mirage's association with Pansy Ho.

Neilander explained that the board would evaluate investigative findings to determine if Pansy Ho is a suitable partner for MGM Mirage. State regulators could ask her to file a detailed application if board members can't reconcile specific issues.

There's no timeline in place for the board to consider Pansy Ho's suitability.

A frequent critic of the casino industry says he thinks regulators shouldn't try to delve into the Ho family's history of associations.

Bill Thompson, a professor of public administration at the University of Nevada, Las Vegas, and a frequent critic of the industry, said gaming regulators would find themselves in "a quagmire" if they sought out all of Stanley Ho's associations.

Instead, he would hope that investigators would focus primarily on Pansy Ho's record.

"They should say, 'OK, we're monitoring things from this day forward,' and not try to scrape the barrel for all these associations," Thompson said.

Thompson said Stanley Ho has been a successful operator and a supporter of the region's culture and charitable causes. He said he was able to build his empire by making numerous contacts in China and noted that Wynn and Las Vegas Sands may also need to reach into China for future partnerships.

Stanley Ho has denied any connection to organized crime in the region. But his estranged sister, Winnie Ho, vows that her brother has associated with criminals involved in loan sharking, prostitution and illegal gambling.

An executive with one of MGM Mirage's rivals in the Macau market, Las Vegas Sands President Bill Weidner, has been quoted in local media as saying that his company wouldn't partner with Stanley or Pansy Ho. And he said he believes that the father controls his daughter's businesses.

Weidner was traveling and could not be reached for comment.

Pansy Ho said many things changed in Macau when the area was turned over to Chinese control.

Edmund Ho -- a former banker who is no relation to Stanley or Pansy -- became chief executive of Macau and vowed to make the control of crime a priority.

Pansy Ho said the Chinese government had a greater ability to enforce the law than the Portuguese administrators who were formerly in place, even stationing 1,000 troops in Macau to get tough with gangsters known as the "Triad."

The government convicted and executed some of the gangsters and, just before the handover to the Chinese, authorities "caught the most troublesome guy."

Wan Kuok-koi, known in the region as "Broken Tooth," was given a 15-year sentence in November 1999 after a trial that Pansy Ho said was a turning point for the gaming industry because it signaled a tougher regulatory environment.

Lanni also applauded Edmund Ho's emergence as an effective administrator and said the environment in Macau has some interesting parallels to Las Vegas' notorious past.

"Ben Siegel was a handsome guy that was one of the founding fathers of the industry as we know it today," Lanni said. "But over time, people like Grant Sawyer, Harry Reid, Howard Hughes and many others helped turn it into a very legitimate business with significant background checks and regulatory safeguards.

"Our history has a lot in common with theirs."