MGM Mirage Ordered to Cut Macau Joint Venture with Pansy Ho

 

Gaming law enforcement authorities in New Jersey are asking that MGM Mirage be forced to cut ties with its China joint venture partner Pansy Ho due to allegations that her father is tied to organized crime.

That could mean the Las Vegas-based casino giant must choose between abandoning the lucrative gambling market in the Chinese enclave of Macau or walking away from its investment in Atlantic City, where it owns half of the Borgata Hotel Casino & Spa, the city’s most popular and highest-grossing casino.

MGM Mirage revealed the report from New Jersey’s Division of Gaming Enforcement in a federal regulatory filing Tuesday. The confidential investigative report recommends that Ho be seen as an “unsuitable” business partner, MGM Mirage told the U.S. Securities and Exchange Commission.

“At the conclusion of the report, the DGE recommended, among other things, that the Company’s Macau joint venture partner be found to be unsuitable,” according to the filing.

The state body also recommended that “the Company be directed to disengage itself from any business association with its Macau joint venture partner … and the New Jersey Commission hold a hearing to address the report,” according to MGM Mirage.

The case now goes to New Jersey’s Casino Control Commission.

Commission chairwoman Linda Kassekert told The Associated Press that the state report cites suspicion among international law enforcement authorities that Stanley Ho is tied to organized crime as the reason MGM Mirage should not do business with his daughter.

Stanley Ho has not been charged with a crime in the case.

MGM Mirage said in a statement that it has fully cooperated with the New Jersey investigation, which started in 2005.

“While we disagree with the recommendation of the DGE, we look forward to presenting our position at the hearing,” the company said.

Company spokesman Gordon Absher would not say which market MGM Mirage would pick if forced to choose between China and Atlantic City.

Nevada regulators qualified Pansy Ho to be associated with American casino companies in 2007 after hearings in which she said she operates independently of her father.

An e-mail seeking comment that was sent to Ho’s Hong Kong company was not immediately answered.

JPMorgan analyst Joseph Greff questioned MGM Mirage’s “very vague statement” in which it said it did not expect to be materially affected by the New Jersey action.

“Does that mean MGM will sell its 50 percent joint venture interest in MGM Grand Macau (or) keep Macau and sell Borgata so that MGM has Macau market exposure?” the analyst wrote in a client note.

Greff said the best outcome for MGM Mirage would be that nothing happens and the casino operator “perhaps just suffers loss of face.”

The worst case scenario would be that MGM Mirage has to sell the Borgata or its Macau interest, he added.

New Jersey’s Casino Control Commission hasn’t scheduled a meeting on the case.

5/19/2009 1:40 PM WAYNE PARRY Associated Press Writer ATLANTIC CITY, N.J.