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Special report: High-rollers, triads and a Las Vegas giant
(Reuters) -
Late last autumn, a Hong Kong jury convicted four men of a
conspiracy to commit bodily harm and a fifth of soliciting a
murder.
World
At first, the men had been ordered to break the arms and legs of
a dealer at Sands Macau suspected of helping a patron cheat
millions of dollars from the business. Later, a call went out to
murder the dealer, court records show. But then one of the
gangsters balked and reported the plans to authorities.
The plot's mastermind, according to testimony in previously
undisclosed court transcripts obtained by Reuters, was Cheung
Chi-tai. At trial a witness identified Cheung as a leader of the Wo
Hop To -- one of the organized crime groups in the region known as
triads. Another witness, a senior inspector with the Hong Kong
police called to testify because he is an expert on the triads,
identified Cheung by name as someone who would commit crimes for
money. Cheung's organized crime affiliation was corroborated in
interviews for this article with law enforcement and security
officials intimately familiar with the gaming industry in
Macau.
The murder-for-hire case sheds light on the links between
China's secretive triad societies and Macau's booming gambling
industry. It also raises potentially troubling questions about one
of the world's largest gaming companies, Las Vegas Sands, which
plans to open a $5.5 billion Singapore casino resort in late
April.
Cheung was not just named as a triad member but also, according
to a regular casino patron testifying in the trial, "the person in
charge" of one of the VIP rooms at the Sands Macau, the first of
three casinos run here by Las Vegas Sands. In addition, Cheung has
been a major investor in the Neptune Group, a publicly traded
company involved in casino junkets -- the middlemen who bring
wealthy clients to Macau's gambling halls. Documents show that his
investment allowed him a share in the profits from a VIP gambling
room at the casino.
An examination of Hong Kong court records, U.S. depositions from
the former president of Sands, and interviews with law enforcement
and security officials in both the U.S. and Macau, reveals a
connection between Las Vegas Sands and Cheung -- ties that could
potentially put Sands in violation of Nevada gaming laws.
The Reuters investigation is a collaboration with the
Investigative Reporting Program at University of California,
Berkeley.
U.S. casinos operating in Macau are all headquartered in Nevada
and must comply with that state's laws which prohibit "unsuitable"
associations that "discredit" its gaming industry. Those laws are
meant to keep organized crime figures out of the casinos.
Leading up to its public offering in Hong Kong last November,
Sands China, a subsidiary of Las Vegas Sands, acknowledged the
risks of working with gaming promoters -- another term for junkets:
"If we are unable to ensure high standards of probity and integrity
of our Gaming Promoters with whom we are associated, our reputation
may suffer or we may be subject to sanctions, including the loss of
(Sands' Macau gaming license,)" the company wrote in a public
filing.
Randall Sayre, a member of the Nevada Gaming Control Board that
monitors casino compliance, declined to comment specifically on
Sands Macau, writing in an email that the state "takes no public
position on suitability ... without a full investigative
work-up."
A gaming official, who insisted upon anonymity, said: "This
relationship (with Cheung) would be of concern to Nevada
authorities. You're talking about direct ties to bad guys." Another
said the agency is monitoring the situation.
Las Vegas Sands issued a statement saying, "to our knowledge,
Mr. Cheung Chi Tai is not listed as a director or shareholder" with
any of the gaming promoters the company uses in Macau, but declined
to comment further.
Sands was the first U.S. operator to cash in on the Chinese
passion for gambling when it entered Macau in 2004 after the
government opened the casino market to outsiders.
Since reverting to China in 1999, Macau, an hour away from Hong
Kong by ferry, has flourished as one of the world's wealthiest
cities. The territory's economy has soared in recent years -- much
of the wealth generated by the enclave's casinos.
Indeed, the former Portuguese colony has become a playground for
China's nouveau riche. And the gleaming neon red lights of the
Sands Macau casino are the first sights a visitor takes in as the
ferry approaches Macau.
THE JUNKETS
The link between Macau's gambling industry and organized crime
may be an open secret, but it has come under increasing scrutiny
lately. Within the last two weeks, MGM Mirage said it would give up
its holdings in New Jersey in response to pressure from the New
Jersey Division of Gaming Enforcement. The state agency had said
that Pansy Ho, MGM Mirage's partner in Macau and the daughter of
casino tycoon Stanley Ho, was an "unsuitable" associate, an
assertion stemming from the agency's belief that her father has
links to organized crime.
The involvement of the triads in Macau's casinos is centered on
the murky and highly profitable junket business. The VIP sector
brought in $9.9 billion last year, two-thirds of the enclave's
total gambling revenues.
Macau has about 187 licensed junket operators, said Manuel
Joaquim das Neves, director of Macau's Gaming Inspection and
Coordination Bureau.
The junkets are crucial because they ensure the flow of capital
by extending credit to gamblers, often millions of dollars on a
visit. They assume responsibility for collecting on their loans --
at times indelicately, authorities say.
They also often assume management of the private VIP rooms. And
while many law-abiding junkets are active in Macau, experts say the
industry is highly susceptible to criminal influence given the
extra-legal functions and opaque environments in which they
work.
In an interview, Dan Grove, a former agent for the FBI who
oversaw security for Sands Macau in the first few years after its
opening -- and before the casino became involved in junkets --
characterized pressure from triads to work with the casino as
"immense."
When known crime figures applied directly for contracts,
blocking them was easy, Grove says. But if legitimate professionals
submit applications and then sub-contract the work to the triads,
detecting such ties was more difficult if not impossible.
JUMBO BOOM
Cheung Chi-tai's ties to Sands Macau came through such a
multi-tiered arrangement. His solely owned company, Jumbo Boom
Holdings, provided capital for another firm, now called Neptune
Group, to acquire a stake in Hou Wan, a junket operator. Hou Wan
was entitled to profits from Sands Macau's Chengdu VIP room.
Cheung owned more than 8 percent of Neptune Group in 2008,
according to public filings with the Hong Kong stock exchange. That
made him a substantial shareholder when the call for the dealer's
murder went out.
When asked about Cheung, Nicholas Niglio, Neptune's chief
operating officer, said: "I'm not familiar with him at all."
After a reporter showed him Neptune's 2008 annual report listing
the firm's substantial shareholders, including Cheung, Niglio
declined to respond specifically. Cheung does not appear in
Neptune's 2009 annual report.
Niglio said Neptune wasn't a junket itself but invests in VIP
junkets that operate at the Sands Macau, the Venetian Macau and
Galaxy Entertainment's StarWorld casinos. He said Neptune now had a
20 percent stake in Hou Wan, a junket operator that runs around 20
VIP tables at the Sands Macau.
In Neptune's public filings three years ago, Cheung was
described as a "merchant in Hong Kong" whose company "generally
does not engage in underwriting business and has no underwriting
experience as at the date of this announcement."
While Niglio described Neptune merely as an "investor" in
junkets, trial testimony placed Cheung inside the casino's private
room.
According to testimony by Siu Yun-ping, aka the "God of
Gambling", who won about HK$100 million ($12.9 million) between
August 2007 and January 2008 at various casinos, Cheung was "the
person in charge" of the Chengdu Hall, one of the VIP rooms that
Siu frequented.
Las Vegas Sands, however, has said it maintains management of
all its VIP rooms, though it acknowledges working with gaming
promoters to attract customers.
FRIGHTENED AWAY FROM THE SANDS
A triad member turned informant named Lau Ming-yee testified
that he, and the five men who would be convicted of engaging in
triad activities, referred to Cheung as "the boss."
Cheung, however, didn't appear in court and was not charged.
Hong Kong police declined to answer detailed inquiries on why this
was so. In an emailed response, authorities acknowledged only that
a 49-year-old man surnamed Cheung was arrested in connection with
the case but "released after legal advice was sought due to
insufficient evidence."
Attempts to determine Cheung's current whereabouts with the Hong
Kong police and U.S. gambling industry sources in Macau were
unsuccessful.
The judge in last year's murder-for-hire case, Madame Verina
Bokhary, said in passing sentence that, "I bear in mind of course
that, behind the scenes, there is a person or are persons even more
blameworthy than any of them."
In the summaries of the trial called "particulars of offense"
the judge identified Cheung by his Cantonese nickname, "Tsang Pau,"
or "explosive money maker."
Siu, the "God of Gambling" suspected of colluding with the
dealer at the Sands Macau, testified that he had been attacked, his
house had been set aflame and that his son had received threatening
phone calls. "As a result of Tsang Pau (Cheung), he (the witness)
was frightened away from the Sands Casino," according to the
judge's summary.
Macau's regulator Neves acknowledges that the junket business in
Macau has links to organized crime, though he says it is less
prevalent and more under control than in the past.
"This kind of business certainly involves people related to
organized crime," he said. "That's why we established the license
for just a year. Every year, they (the junket operators) must renew
the license."
Asked specifically about whether Macau will strip the license
from a casino operator if the regulators discover that it is hiring
a junket operator with links to organized crime, Neves said: "It's
separate. In principle, it doesn't affect the concessionaires."
Neves said he was informed by police of Cheung's alleged role in
the murder-for-hire case. But he described the accusations against
Cheung as "rumors" and said without formal charges being brought
against him, he would be free to continue to operate in Macau.
"If he (was) condemned by the Hong Kong court ... if he was
arrested and condemned ... we wouldn't allow him to run the
junket," he said. "In this kind of case we must deal very carefully
... Sometimes if we use this (rumor) to deny the license, he can
put us in court."
Unlike Las Vegas, where casinos tend to have direct
relationships with their VIP customers, Macau's casinos rely on
junket operators to bring them the majority of their high rollers,
who might easily lose US$1 million in an evening.
THE $64,000 BET
On a late Friday night in February, gamblers were exchanging
wads of golden one thousand Hong Kong dollar banknotes ($130) for
expensive chips in the exclusive and restricted VIP gaming rooms of
the Sands Macau.
The labyrinth of rooms -- decorated with classical Greek
columns, Italian marble and chandeliers -- were largely filled with
mainland Chinese clients at high-stakes Baccarat tables.
The atmosphere was smoky, hushed and privileged, as casino
employees kept watch. The rooms seemed a world removed from the
mass market gaming floors below.
At the "Luoyang" room, named after a gritty Chinese city, most
gamblers were Mandarin-speaking mainland Chinese, who constitute
more than half of Macau's VIP gamblers. As two Reuters reporters
looked on, a middle-aged woman with diamond bracelets staked a
single HK$500,000 ($64,440) bet -- and shrugged off the loss.
A supervisor of the VIP floor and several employees said the
Chengdu hall - the room that Cheung Chi-tai ran, according to the
court testimony -- has been renamed.
Most VIP gambling in Macau is leveraged: gamblers usually bet
more than their cash on hand. This is particularly true of mainland
Chinese high-rollers who, because of Beijing's strict capital
controls, are limited to carrying the equivalent of US$5,000 in
renminbi per trip when they leave China. Macau's six publicly
listed casino operators lend to only a small minority of their
patrons, according to company filings. That is because collection
of gambling debt is illegal in China and Macau forbids casinos from
writing off their bad or uncollectible debts.
Concerned that junkets with possible links to organized crime
could harm their businesses, some U.S. casino executives were
reluctant to enter Macau. Harrah's Entertainment Inc , the world's
largest casino operator, decided not to bid for a gaming concession
there. Michael Chen, Harrah's president for Asia, said in an
interview with Reuters last year that the company worried that its
regulators around the world would not permit it to run casinos in
Macau.
That issue was front and center in the official report released
by New Jersey gaming regulators in mid-March regarding MGM Mirage's
partnership with Pansy Ho. Regulators cited the junket influence
within her father's VIP rooms as a prime concern. "The VIP rooms in
(Stanley Ho's) casinos provided organized crime the entry into the
Macau gaming market that it had previously lacked," the report
said.
When Sands first won a license in Macau in 2002, it was paired
with Hong Kong-based casino operator Galaxy Entertainment Group,
but the U.S. company ultimately ended the arrangement. William
Weidner, the former president of Sands, in a deposition for an
unrelated Nevada court case in 2007, cited Galaxy's intent to run
the VIP rooms in the traditional Macau style as one of the reasons
for the split.
"These guys want to do VIP rooms the way they ... do them in
Macau where the ... triad guys run them because they're the only
ones that can grant and collect credit in mainland China, and they
smuggle the renminbi across the border," he said. "I can't do that
business. That's the way they want to do it, so I can't do it."
Sands' major competitor, Wynn Resorts, said the company would
decline its Macau gaming concession if it was barred from extending
credit and collecting debts directly in an effort to avoid the
junket system, according to company filings.
But the U.S. companies realized soon enough that they could not
compete with local casinos without junkets.
China's high rollers tend to prefer the personal, informal
relationships of the junkets, experts say, and often demand a level
of anonymity incompatible with the credit applications required by
the casinos.
LOWER PROFILE
While triads remain active in Hong Kong, the gangs have burrowed
deeper into mainland China including cities like Chongqing and
retain a strong imprint in Macau. The triads are believed to have
originated as a rebel grouping in the early Qing Dynasty formed to
help overthrow the Manchu regime.
Ko-lin Chin, a professor at Rutgers University and one of the
foremost experts on Asian organized crime, disputes the regulator's
contention that the triads are less prevalent in Macau. But he said
they do keep a lower profile than before internationally owned
casinos entered the market and revenues grew from $2.26 billion to
$15 billion today.
Even if crime groups are involved in the junket business, he
says, with the casinos making so much money, the government reaping
huge taxes, and the citizens of Macau enjoying full employment,
there is scant political will to remove them.
"No one wants to crash the party," he said. "This is a feel-good
story."
(Reporting by Reuters in Macau and Hong Hong and Matt Isaacs in
San Francisco and Las Vegas; editing by Lowell Bergman, Jim Impoco
and Claudia
Parsons)
http://www.reuters.com/article/idUSTRE62S34020100329