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HOME > NEWS > Investor News > Inside Gaming: Fattest fines have come in a flurry

Inside Gaming: Fattest fines have come in a flurry

25 March 2014

By Howard Stutz

LAS VEGAS -- Million-dollar fines for violating Nevada gaming law used to be rare.

But in the past 15 months, state casino regulators have accepted three separate seven-figure payments from gaming companies to settle Nevada State Gaming Control Board Gaming Commission disciplinary complaints. That’s the same number of seven-figure fines the state had issued in all of the previous 28 years.

Regulators in December and again last week also settled six-figure fines.

In total, the Nevada Gaming Commission has settled more than $8 million in fines since January 2013.

One complaint is pending, and there may be more.

Gaming Control Board Chairman A.G. Burnett said the regulatory agency has not turned into some Gestapolike police force. It’s just doing its job when a licensee operates unsuitably.

“We’re not hunting or going after people and we’re not in a mindset of trying to be adversarial with the industry,” Burnett said of the investigations that have taken as a long as 18 months to complete before a complaint is filed.

“But these events have happened, it seems, one after another,” Burnett said.

In January, sports book operator CG Technology (formerly Cantor Gaming) paid an industry-record $5.5 million fine for allowing one of the company’s key executives to run an illegal sports wagering operation.

In February, the Peppermill Resort Spa Casino Reno was fined $1 million when one of its corporate employees was caught using a slot machine reset key to steal proprietary information from rivals.

The two seven-figure penalties came a year after The Palms Casino Resort paid a $1 million fine after investigators uncovered rampant drug sales and prostitution at clubs in the off-Strip casino.

The action against the Palms was the first seven-figure penalty handed down by gaming regulators in 10 years.

In 2003, MGM Mirage, now MGM Resorts International, paid $5 million to settle a 92-count complaint that The Mirage failed to file some 15,000 Internal Revenue Service currency transaction records over two years.

Owners of the Stardust paid $3 million in 1984 to settle a complaint over allegations the now-imploded Strip hotel-casino’s former owners failed to prevent mob-related skimming of gaming revenues.

The only other seven-figure fine came in 1988. Ralph Engelstad, the late owner of the Imperial Palace, paid $1.5 million after he damaged Nevada’s reputation by holding Adolf Hitler birthday parties at the casino.

Crimes have changed. But not the reason regulators hand down punishment.

“It’s about sending a message to the industry,” Burnett said.

The control board “doesn’t see one dime” from the fines, which go directly to state’s general fund, Burnett said.

Settlement negotiations are handled by the attorney general’s office and board members offer input.

But Burnett, who was once a trial attorney, isn’t afraid of litigating a complaint.

This is something that could concern MGM Resorts.

On Thursday, the company’s Mandalay Bay Resort & Casino agreed to pay a $500,000 fine after an investigation found House of Blues Foundation Room employees provided cocaine, Ecstasy and prostitutes to undercover officers four times over two months.

However, MGM Resorts is challenging a separate two-count complaint filed in February against Aria Resort & Casino in which a casino supervisor was accused of blocking gaming agents trying to observe a customer’s play in the high-limit gaming area. The company could be on the hook for as much as another $500,000 in fines.

A hearing in front of the gaming commission might answer several questions, such as who the customer was and why the agents wanted to watch. More than a dozen disciplinary matters have been settled by gaming regulators since 2013, most on a smaller scale.

Golden Gaming, Inc.’s slot route subsidiary paid $20,000 in September after neglecting to report a change in the number of games at a tavern. The Sedona Lounge on Flamingo Road — owned partly by retired tennis star Andre Agassi — paid $15,000 in August for misreporting ownership changes.

The Searchlight Nugget Casino paid a $12,000 fine in September over bookkeeping and slot machine accounting errors.

In December, Bally Technologies, Inc. paid a $125,000 fine for not properly registering employees.

It appears gaming regulators have moved past issuing blanket “warning notices’ over matters such as guarding against illicit activity in nightclubs and day clubs and preventing underage gambling and alcohol consumption.

Last year’s shooting and multicar wreck on the Strip, which started at a Strip nightclub and left three people dead in the street, prompted such an industrywide notice from Burnett and Clark County Sheriff Doug Gillespie, who told hotel-casino operators to keep a close watch on nightclubs and pool parties or face disciplinary action for any illegal activity.

Resort leaders are responsible for any criminal conduct in their venues, even if a nightclub, ultralounge or day club is operated by a third-party vendor. Planet Hollywood Resort & Casino, for example, paid a $750,000 fine in July 2009 after admitting that resort officials were lax in policing illegal activity in the now-defunct Privé nightclub.

The Palms and Mandalay fines signal a new attitude and gaming insiders wonder whether state regulators will also crack down on companies that have drawn attention from federal authorities.

Las Vegas Sands Corp. in August reached a deal with federal prosecutors to pay the U.S. government more than $47.4 million to avoid criminal charges over alleged money laundering activities at The Venetian Resort-Hotel-Casino. The company agreed that it failed to alert authorities when a high-stakes gambler, who was later linked to international drug trafficking, made numerous large and suspicious deposits at the casino in 2006 and 2007.

Does that constitute “operating in an unsuitable manner”? Some would like to know.


Copyright GamingWire. All rights reserved.

 
Howard Stutz
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