Gaming Law International

Companies from Asia move into Las Vegas to cater to Chinese consumers abroad

Earlier this month Reuters published an article that Malaysian casino operator, Genting Bhd, closed a deal on the purchase of a 87-acre plot of land in Las Vegas, representing the largest investment in Las Vegas since at least 2008. The announcement follows on the heels of the announcement by China's largest property developer, China Vanke Co. Ltd., that it had formed a joint venture to develop two high-rise condominium towers in Las Vegas. Both projects are presumably aimed at targeting mainland Chinese consumers who prefer to purchase goods and services from Chinese companies when travelling abroad.

The deals are worth about US$1 billion combined. According to the article from Reuters, the transactions signal a move of Asian corporations away from investment into natural resources in the US or Canada and into services industries that cater to Chinese consumers abroad. 

The foray of these companies poses a risk to existing casino and entertainment establishments in Las Vegas because they will target Asian consumers who have been the principal generators of gambling revenues in Las Vegas since 2010.

"If you're smart, you start settig up places for Chinese people to stay and things for them to buy," Derek Scissors, an economist with the Heritage Foundation a Washington-based organization that advances free enterprise and limited government, told Reuters.

And smart is exactly what China Vanke Co., Ltd. and Genting Bhd appear to be by venturing into Las Vegas. 

California reintroduces bill to allow sports betting

Today, the California ] legislature reintroduced a bill to legalize sports betting at state racinos, casinos and other gaming establishments on professional and colleage sports events, except for college sports events in California. If the bill is passed, it would still need to be approved federally.

Nevada moves to legislate online poker

The Governor of Nevada, Brian Sandoval, in Tuesday asked the state legislature to approve a bill that would allow Nevada to enter into agreements with other states to offer online gambling, specifically poker, and that would also repeal an existing law prohibiting interstate gambling until such time as a federal law was enacted to address the issue. Nevada does not want to be left behind it the US moves to allow online poker. 

Mastermind behind casino card cheating scheme sentenced in US

Van Thu Tran, the mastermind behind one of the largest casino cheating rings in Canada and the US, was sentenced today in San Diego to 26 months in prison. For several years, Ms. Tran, together with several others, cheated the casinos out of US$7 million by various card false shuffling methods during blackjack and mini-Baccarat. Court documents also show that members of her organization bribed casino card dealers and supervisors to perform false shuffles, thereby creating “slugs,” or groups of unshuffled cards. After tracking the order of cards dealt in a card game, a member of the group would signal to the card dealer to perform a “false shuffle,” and other members of the group would then bet on the known order of cards when the slug appeared on the table. By doing so, they repeatedly won millions of dollars. They also used sophisticated mechanisms for tracking the order of cards during games, including hidden transmitter devices and specially created software that would predict the order in which cards would reappear during blackjack games. Tran was sentenced for, amon gother things, racketeering and money laundering. See earlier post here.

DoubleDown Casino lands in Las Vegas

International Game Technology (IGT) today announced a land-based partnership with the Hard Rock Hotel & Casino in Las Vegas for its DoubleDown casino application. The application will be hosted on the Hard Rock's website and will give gamblers a chance to compete online for virtual chips. First-time users of the appication will receive USD$1 million in virtual chips to start playing. DoubleDown casino is a free Internet-based gambling website, purported to be the world's largest online gambling website.

Nevada gambling commission said to be looking into junkets

According to a report in the Las Vegas Review-Journal, Nevada gaming regulators are increasing their scrutiny over the operation of junkets to Macau-based casinos that are owned or controlled by U.S. gambling companies amid allegations raised by U.S. gaming union officials that Macau-based junkets affect the integrity of U.S. gaming operations. 

There are approximately 200 junkets operating in Macau. They typically bring wealthy gamblers from areas such as China, and rent VIP rooms in Macau casinos for their clients to gamble. Junkets operators issue credit to their high-roller clients, and earn commissions from the funds gambled by their clients at casinos. 

Mark Lipparelli, Chairman of the Nevada Gaming Control Board, said in an interview this week that outside junket operators, which receive commissions from casinos for their work, are "becoming an area of increased attention for us."

Legalized gambling in the U.S. and Canada is premised on the preservation of the integrity of the gaming industry. In order to obtain and maintain a U.S. state gaming registration, casino operators have to operate their casinos in a way that will not negatively affect the integrity of the gaming industry as a whole. As a result any link, however small, to criminality with a casino operator affects the integrity of the operator and the industry. The concerns with criminality arise from the fact that there is an identified money laundering risk with junket operators because, among other things, there are gaps in controls and weak supervision of their operations. Junket operators control the movement of money to and from the casinos which can obscure the anti-money laundering process. 

Details of indictment against principals of PokerStars, Full Tilt Poker and Absolute Poker

The indictment in the U.S. against eleven persons associated with PokerStars, Full Tilt Poker and Absolute Poker, including Canadians Isai Scheinberg, Nelson Burtnick and Ryan Lang, has been made public. The indictment alleges as follows:

• The principals of PokerStars (Isai Scheinberg and Paul Tate), Absolute Poker (Scott Tom and Brent Beckley) and Full Tilt Poker (Raymond Bitar and Nelson Burtnick) deceived or directed others to deceive U.S. banks into processing billions of dollars in payments by disguising the funds as payments to fictitious merchants;
• Scheinberg, Bitar, Beckley, Burtnick and Tate paid certain payment processors, including Canadian Ryan Lang, to lie to U.S. banks about the nature of their business and the transactions processed through the U.S. financial system and to disguise the payments as non-gambling related proceeds;
• In order to continue to accept Visa and MasterCard payments from U.S. customers for online gambling, the defendants set up phony entities to be able to have credit card merchant numbers assigned to those entities that were not associated with online gambling to circumvent regulations implemented by Visa and MasterCard to deny all authorization requests from online gambling merchants. Because the risk control and anti-money laundering systems at the banks could frequently detect the activity associated with the phony merchants as illegal gambling activity, different phony entities were continually being created to obtain merchant codes to process payments;
• The defendants developed stored value cards (also called prepaid access) such as prepaid debit and phone cards that could be loaded with funds from a U.S. customer's Visa or MasterCard unassociated with a merchant code so that the cards could be used to transfer funds to the online poker sites and they also arranged for false e-check processing to facilitate gambling from U.S. customers; and
• The defendants invested in small local banks in the U.S. that were facing financial difficulty so that they could control their decisions with respect to the processing of gambling proceeds. In exchange, the banks or their officers, were given certain kick-backs from the funds processed.

Under U.S. anti-money laundering legislation, a person who launders proceeds of crime or participates in a money laundering transaction greater than US$10,000, is liable on conviction to a sentence of up to 20 years and a fine of twice the value of the funds laundered. The U.S. government estimates that billions of dollars were processed in the U.S. by PokerStars, Full Tilt Poker and Absolute Poker as described above between November 2006 and March 2011. The defendants are charged with, among other crimes, laundering proceeds of crime and participating in financial transactions knowing that the transactions involved criminal proceeds. A total of US$4.5 billion is being sought by civil forfeiture.  

3 Canadians affiliated with PokerStars, Full Tilt Poker and Absolute Poker indicted in U.S. on illegal gambling and anti-money laundering charges

The U.S. Attorney and the FBI today unsealed an indictment today charging 3 Canadians with money laundering, bank fraud and illegal gambling in connection with the operation of Internet gambling websites that provide online gambling services to U.S. residents. Eight other individuals, mostly residents of the U.S., were also indicted. The defendants include the founders of three of the largest Internet gambling sites - PokerStars, Full Tilt Poker and Absolute Poker.

The 3 Canadians indicted are:

• Isai Scheinberg, currently living in the Isle of Man;
• Nelson Burtnick, currently living in Ireland; and
• Ryan Lang, currently living in Canada.

The U.S. has sought the assistance of foreign law enforcement agencies for the arrests of Lang, Burtnick and Scheinberg.

The indictment alleges that the defendants fraudulently circumvented anti-money laundering laws and the Unlawful Internet Gambling Enforcement Act (UIGEA) by disguising payments from U.S. gamblers as payments to fictitious online merchants selling other goods and services, lied to banks about the nature of their businesses and set up fictitious corporations, in order to open bank accounts to accept bets from U.S. players. Scheinberg, one of the founders of PokerStars, is alleged to have acquired a 30% interest in a small bank in Utah called SunFirst Bank in exchange for the Bank agreeing to process payments for PokerStars.

The U.S. also filed a civil complaint against the individual defendants and the poker companies to recover US$3 billion in civil penalties for money laundering. Asset restraining orders were issued against more than 76 bank accounts in 14 countries, including Canada, to freeze the accounts on the basis that the funds are proceeds of crime.

Five Internet domain names used by the poker companies to host the online gambling sites were also seized.

The indictment by the U.S. Attorney General on anti-money laundering law violations is a clever legal manoeuvre that will allow them to prosecute the defendants, secure the extradition of foreign defendants and retain frozen assets with much greater success than if the indictment was based solely on violations of the UIGEA. Most foreign Internet gambling site operators have little to no understanding of international anti-money laundering laws.

The defendants face up to 20 years in prison on the money laundering charges alone.

Las Vegas Sands Corp. being investigated under Foreign Corrupt Practices Act

The Las Vegas Sands Corp. has announced that it received a subpoena from the Securities and Exchange Commission requesting that the it produce documents related to its compliance with the Foreign Corrupt Practices Act. The Department of Justice and the FBI have also advised the corporation that they are conducting similar investigations. 

Woman pleads guilty to cheating casinos in Canada and U.S.

The co-founder of a group known as the Tran Organization, Van Thru Tran, pleaded guilty in San Diego today to conspiring to cheat 29 casinos in the U.S. and Canada out of US$7 million, including Casino Rama in Ontario and the Monte Carlo in Las Vegas. Members of the organizations are alleged to have bribed casino card dealers and supervisors to perform false shuffles during card games, thereby creating “slugs” or groups of unshuffled cards. After tracking the order of cards dealt in a card game, a member of the organization would signal to the card dealer to perform a “false shuffle,” and members of the group would then bet on the known order of cards when the slug appeared on the table. By doing so, members of the conspiracy repeatedly won thousands of dollars during card games, including winning several hundred thousand dollars on one occasion. The members of the organization used sophisticated mechanisms for tracking the order of cards during games, including hidden transmitter devices and specially created software that would predict the order in which cards would reappear during blackjack games. Tran faces a maximum penalty of 20 years in prison, a $250,000 fine, forfeiture of certain assets, and payment of restitution to the victims.

Woman wanted on human trafficking charges arrested in casino

An Soon Kim, a suspected human trafficker, was arrested at the Mohegan Sun Casino in Connecticut following an anonymous tip to America's Most Wanted, which had recently featured Kim. Kim was wanted on charges that she operated a wide-ranging human trafficking ring in the northeast U.S. that brought in young girls from Korea and forced them to work as sex slaves in massage parlours.

Parents charged with child endangerment for allegedly leaving 1-year-old in car while they gambled

The parents of a 1-year-old and a 10-year-old were charged with child endangerment in Connecticut after police say they left their children alone in a car while they gambled at the Foxwoods Resort Casino for about an hour. Police said the couple's children were turned over to the Massachusetts Department of Children and Families. Almost every land-based casino reports a handful of similar incidents every year in which parents, grandparents or other caregivers, leave children in vehicles unattended while they gamble. Most gambling jurisdictions in Canada and the U.S. require surveillance cameras be installed in casino parking garages and entrances to monitor this type of activity. 

Pharmaceutical companies sued over drug allegedly tied to compulsive gambling

More than 100 people who claim they developed a gambling habit after taking drugs used to treat Parkinson’s disease have filed a class action lawsuit in Australia against Pfizer and Aspen Pharmacare. The claimants allege they lost hundreds of thousands of dollars and suffered family breakdowns because of compulsive gambling behaviour caused by the drugs. The drugs implicated are Cabaser, sold by Pfizer, and Permax, sold by Aspen. The class action suit claims Pfizer and Aspen failed to warn of increased risk of compulsive disorders. In 2008, a jury in Minnesota awarded US$8.2 million to a man who became a compulsive gambler after using Mirapex, a drug sold by Boehringer Ingelheim, to treat Parkinson’s disease.

Possibly the world's worst gambling addiction

Terrance Watanabe, the Omaha businessman who ran the Oriental Trading Company for many years, is in court defending criminal charges over a US$14.75 million gambling debt Harrah's alleges he owes them. In one year, Watanabe spent US$204 million gambling at the Rio and Caesars Palace - both Harrah's properties in Las Vegas. Watanabe paid back at least US$112 million. By all accounts, he likely holds the world's record for the largest sum of money ever gambled and lost in a commercial casino in a year. 

Canadian payment processor pleads guilty in U.S.

Douglas Rennick, the Alberta man who was accused of laundering US$350 million in illegal Internet gambling proceeds in the United States last year, pleaded guilty in a federal court in Manhattan to a lesser charge of one count of transmitting wagering information in the U.S. From 2007 to 2009, Rennick opened a number of bank accounts in the U.S. under various corporate entities to receive funds from foreign Internet gambling companies and disburse the funds to U.S. residents. Rennick received about US$350 million from bank accounts in Cyprus used by the offshore Internet gambling companies that he did business with. 

U.S. casino revenues fell 5.5% in 2009

Commercial casino industry revenues in the U.S. dropped for the second year in a row according to statistics released today by the American Gaming Association in its annual State of the States Report. Gambling revenue in 2009 was US$30.74 billion - a 5.5% decline from 2008. Some of the highlights from the AGA report - in 2009:

 

• consumer spending in Nevada declined 10.4% to US$10.393 billion
• consumer spending in New Jersey declined 13.3%
• Las Vegas remains the top gambling market in the U.S. with revenue of US$5.5 billion
• casino employment dropped 8.1% across the U.S.

The report also tracked gambling preferences and indicates that the popularity of poker continues to decline. Only 7% of gamblers in the U.S. ranked poker as their favourite game. Slot machines was the favourite game, preferred by 59% of U.S. gamblers. 

 

Portland man accused of gambling mother's life savings away

Richard Stone, a 52-year-old Portland, Oregon man, was charged this week with stealing his elderly mother's life savings to gamble. Stone's mother suffers from dementia and is in an adult foster home. Stone is alleged to have sold her house and used the proceeds to gamble, take trips and pay his bills. He is charged with criminal mistreatment and theft. You can read the story here. 

When gambling regulation works - how Macau casino operations are affecting American gaming regulators

The Las Vegas Sun has an excellent story that captures the connection between gambling operations in different jurisdiction by the same casino operator and the role of gambling regulators here. Reporter Liz Benston reports that the sometimes shady way in which casino VIP rooms are operated with the use of junkets in Macau will impact Atlantic City casino operators who also operate, or hope to operate, in Macau. That's because in order to maintain a U.S. state gaming registration, casino operators have to operate their casinos in a way that will not negatively affect the integrity of the gaming industry in that state. The smallest link to criminality with a casino operator will affect its integrity, and therefore the integrity of the state's control over the industry. The FATF has repeatedly expressed its concern over casino junkets as a potential vehicle for money laundering in Asia. 

Australian indicted for laundering US$500 million in Internet gambling proceeds

The US Attorney's Office announced today that an Australian foreign national, Daniel Tzvetkoff, was arrested in Las Vegas today on charges that he assisted illegal Internet gambling companies process about US$500 million in transactions for American gamblers. Tzvetkoff operated a payment processing company called Intabill Inc. Tzvetkoff was charged with gambling conspiracy, bank fraud conspiracy, money laundering conspiracy and one count of money laundering. The indictment was unsealed in Manhattan federal court today. It alleges that Tzvetkoff convinced banks to provide services through the Automated Clearing House System to offshore online gambling companies and that he disguised the recipients so banks would not know they were online gambling companies. 

In an e-mail, one of Tzvetkoff's alleged co-conspirators told him he had hired programmers to develop "unique" websites for the shell companies so that if someone was "checking the companies out there is absolutely no way to tie the companies together." Tzvetkoff replied that it was "perfect." If convicted, Tzvetkoff faces a term of imprisonment of up to 75 years.

Casino formerly owned by Frank Sinatra may be closing for good

The Cal Neva Casino, formerly owned by Frank Sinatra, may be closing permanently because of plunging numbers of gamblers. The Cal Neva was owned by Sinatra in the 1960s and flourished as a popular casino resort destination for Hollywood stars like Marilyn Monroe, Dean Martin and Sammy Davis Jr. It was where Marilyn Monroe spent her last weekend before her death from a drug overdose in Los Angeles in 1962. Sinatra lost the casino license in 1963 when FBI agents spotted mobster Sam Giancana on the premises. The Cal Neva Casino is owned by a real estate firm that is currently in discussions with several gambling operators to consider re-opening later this year. Gaming revenues for the past year were apparently about half what they were in the mid-1990s. The Cal Neva opened in 1928 and straddles the Nevada-California border on the north shore of Lake Tahoe.