When confronted with a similar question a couple of years ago, New Jersey, a state that is no stranger to organized crime, balked — leading to MGM’s expected exit from Atlantic City.
But in Maryland, it is unclear what would happen.
Both MGM and the Peterson Cos., the developer of National Harbor, say they are confident that MGM won’t face similar resistance if they seek a gaming license in Maryland.
Among other things, they point out that four states, including Nevada, where most of MGM’s casinos are, have not taken similar actions as in New Jersey. But most everyone, including MGM, acknowledges that the company’s arrangement in Macau, China, would be heavily scrutinized in Maryland — with an outcome that is hard to predict, according to several experts.
“In New Jersey and Nevada, they looked at the same evidence and came to different conclusions,” said William R. Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada at Reno.
As part of a periodic review of MGM’s standing in New Jersey, officials balked at the co-ownership of its Macau property with Pansy Ho, the daughter of China casino magnate Stanley Ho.
“Numerous governmental and regulatory agencies have referenced Stanley Ho’s association with criminal enterprises, including permitting organized crime to operate and thrive within his casinos,” said a 74-page report by the New Jersey Division of Gaming Enforcement made public in 2010 after a multi-year investigation.
The report included allegations of use of VIP rooms in Stanley Ho’s casinos by crime groups known as triads to engage in activities including debt collection, drugs and prostitution. Stanley Ho is not listed as an owner of the MGM Grand Macau, and none of the alleged crime in the report was said to have occurred in that casino.
New Jersey officials did not accuse Pansy Ho of illegal activity but found her “unsuitable” as a business partner because of her financial dependence on her father, who provided 90 percent of the funds she contributed to the MGM casino in Macau, according to the report.
Rather than end its relationship with Pansy Ho, MGM agreed to a settlement with New Jersey to sell its interest in the Borgata Hotel Casino and Spa in Atlantic City.
Milton V. Peterson, chairman of the Peterson Cos., said he was aware of the situation in New Jersey when his company lined up MGM to operate the casino he envisions at his 300-acre mini-city on the Potomac River.
MGM is “one of the largest and most-respected operators in one of the most highly regulated industries in the nation,” Peterson said. “We . . . are confident that MGM will not have any difficulty in obtaining a gaming license from the state of Maryland.”
Spokesman Gordon Absher said MGM took issue with several aspects of the New Jersey report, which he argued “really identified the potential risk of the possibility of an improper influence on our business partner.”
“Now with almost five years of operating history [in Macau] and many changed circumstances, it is clear that these risks have not and will not materialize,” Absher said. “We are confident that we can address any questions that may be raised by [Maryland] regulators and look forward to that opportunity.”
Among the changed circumstances Absher cited was a shift in the ownership of the casino. When the New Jersey report was issued, MGM and Pansy Ho had a 50-50 stake, which required the partners to consent to all significant decisions. Since then, the casino’s holding company has publicly issued stock. MGM now has a controlling 51 percent, while Pansy Ho holds close to 27 percent.
Peterson said that with the new arrangement, “the issue raised in New Jersey should no longer be a factor.”
Eadington said MGM “generally has a very good reputation with the exception of the Pansy Ho case.”
In addition to Nevada, regulators in three other states where MGM operates — Mississippi, Illinois and Michigan — have not taken action based on the same objections about Macau.
As in New Jersey, casino operators in Maryland are subject to background checks that examine their “good character, honesty and integrity.”
Stephen Martino, director of the Maryland Lottery Agency, which oversees background checks on casino operators, declined to comment specifically on MGM, saying only that his agency “carefully and vigorously investigates the backgrounds of all casino license applicants.”
Maryland is new enough to the business that it does not yet have a well-established reputation regarding its level of scrutiny. But in one instance in which a license was awarded, Maryland officials showed a willingness to accommodate an applicant.
Last fall, the state lottery commission voted to relax a rule designed to keep people with past gambling transgressions from winning licenses. The action, taken the day before bids were due for a Baltimore slots casino, appeared to remove a hurdle for Dan Gilbert, the majority owner of the Cleveland Cavaliers basketball team, to participate in the project.
Gilbert was arrested in 1981 in connection with an alleged sports bookmaking operation. He was not convicted and his record was expunged, but the incident still could have disqualified his group, which includes Caesars Entertainment, under the rules at the time. The lottery commission voted to change the rules, in effect putting a statute of limitations on such out-of-state episodes. That license is expected to be awarded later this month.
If plans for a casino at National Harbor move forward, the licensing process is likely to become “pretty political,” Eadington said.
There are already signs of that. A reference to Macau appears in a new television ad sponsored by the Prince George’s County Contractors Association, a group opposing the casino.
“Why would the company which would run the casino forfeit its New Jersey license,” the ad asks, “rather than give up ties to organized crime?”