Macau just might be house of cards

A year or more ago, a friend gave me an academic paper on Macau’s high-rollers and loan sharking to read.  The paper written by a Chinese academic, describes a crime controlled credit system; in the paper, a syndicate (or syndicates) loans money to unsuspecting Chinese gamblers a bit short on funds.  After their visit to the casinos syndicate members wait outside the casino for the money-borrowing gambler.  If the gambler can pay back the loan, with interest of course, than that is that – the gambler wends his/her merry way back home.  If the gambler cannot pay the loan back, they did not go home. Instead they get the monopoly card:  “Go directly to jail, do not pass go, do not collect $200.”

The gambler is taken to an apartment and given a cell phone – their own cell phone is taken from them – and told to call someone, anyone and get the money.  The door is locked and gambler left to stress, fret and call until he/she could gets the money.  “Call your wife, call your parents, call you boss, tell them to sell the house, the children anything but get the money or bad things will happen to you.”  When I read the paper I was stunned, how could this be, I thought.  Some of the casinos where the gamblers were losing that money belonged to American companies; companies with gaming licenses in Nevada and other U. S. jurisdictions.

If American regulators knew about this, won’t they do something, I reasoned?  Of course they would, I thought.  A person or company cannot have a license in Nevada, for example, unless they comply with Nevada minimum standards.   How could the regulators not know this? I never resolved the issue in my own mind and had pretty much forgotten it until I read a story in the Macau Daily Times.

The Times story is about just one such gambler – a woman, detained in Macau because of a debt, just a the academic paper described.  So, now the story is in the mainstream and not lost in academia.  The casinos are not accused of being complicit in any sense, not by the Times story or in the paper I read.  But, if the practice is at all common, how could they avoid catching wind of it.  And then, the question at the heart of the issue becomes: if the casino suspects such a thing, what can they, should they do?  Whatever that answer is, it generates the second question, what should Nevada (or any other state) do? But it is not a simple issue and this woman is not the only glimpse we have of the under belly of Macau.

It is only a coincidence that Wan Kuok-koi – “Broken Tooth” – was released from prison in the same week; he is a famous gangster and has been in prison for 14 years for extortion, loan sharking and murder.  Broken Tooth and the authorities say he will not go back to a life of crime. Both maintain things have changed a lot since he went to prison.

There was one more coincidental story that surfaced recently.  Chinese authorities arrested some junket representatives in a Macau casino – the incident happened in October but was not reported in the press until the end of November.  Those arrested were accused of being involved in a money laundering scheme, the source of the funds was the deposed communist leader Bo Xilai.  The combination of those three stories, indicate there is something amiss in the high-roller business in Macau.  There are of course, legitimeate junket operators in Macau.  One is publicly traded in the U. S., but this has not been a good year for it; Asia Entertainment is reporting that its revenues are down significantly.  Maybe they need to improve their collection system, or is it the gambler recruitment that is not up to standards?

I make light of  high-roller system, but it is the most important segment of the casino business in Macau.  The high-roller business represents over 75% of the gaming revenues in Macau.  That makes everyone a little sensitive about meddling with the process; worse, for the American companies operating in Macau, revenues from Macau also represent a major share of the company’s revenues.  No one can afford to lose those high-rollers, regardless of where they get their money or how the pay their bills.

The whole business model is build on shaky ground; Macau generates much more in gaming revenues than the Las Vegas Strip -in October Macau did over $3 billion in gaming revenue and the Strip had $580 million.  But the Strip gets more customers than Macau; Macau is expecting just over 30 million visitors this year, Las Vegas is expecting closer to 40 million tourists. Those high-rolling, money borrowing, money laundering Chinese gamblers are the difference.  But relying on them is very dangerous.  It sometimes looks like a house of cards to me, one strong gust of wind and it will all comes tumbling down.

The Judiciary Police cracked a false imprisonment case and freed a Hong Kong woman who was detained in a Taipa hotel for a HKD23.8million gaming debt. PJ said yesterday that the woman in her 30s borrowed the money, together with her friend, from a local casino in October and November, losing it all while gaming. The woman paid most of the debt later but was unable to clear the remaining HKD3m payment. She was illegally taken into custody when she visited Macau earlier this month, and was detained in a hotel in Taipa, where she was forced to sign a HKD23.8m debt acknowledgement. She secretly informed her relatives in HK who then reported the case to PJ. A HK man and a Macau woman were arrested and the police believe two other suspects related to the case are still at large.  Macau Daily Times, 12-7-12

 VIP room gaming promoter Asia Entertainment & Resources Ltd announced this week that its unaudited rolling chip turnover for November was down by 26 percent year-on-year, to $1.26 billion…The decline was attributed to the company’s self-directed tightening of credit to agents due to the slowing economy in the mainland.  AERL promotes four VIP gaming rooms. They are located in StarWorld, Galaxy Macau, Venetian Macao and City of Dreams. Macau Business, 12-7-12

 Macau has released the notorious gangster Wan “Broken Tooth” Kwok-koi from jail, stirring fears that he might muscle his way into the city’s lucrative casino industry. Wan, 57, on Saturday morning emerged from the high-security prison where he served 14 years for engaging in organized crime and money laundering… once audaciously produced a film glorifying his exploits…Before his arrest, Wan controlled a large network of “junket operators” – middlemen who receive commissions from casinos for bringing in high-rollers and collecting debt. One person close to his family said his two younger sisters and brother-in-law Chow Chi-man – known as “The Crow” – were all experienced junket operators. Enid Tsui, Financial Times, 11-30-12

 Bo Xilai, the former Communist Party chief in Chongqing, is being investigated for laundering an illicit fortune through Macau, The Times has reported.  Chinese prosecutors from mainland China are believed to have secretly rounded up a group of six men involved in the junket business late last month, according to a source with close links to the Macau police. Macau Business, 12-3-12


2 Responses to “Macau just might be house of cards”

  1. 1 rexdstock1 December 7, 2012 at 8:52 pm

    The whole thing stinks.  Sheldon stinks.  Wynn stinks.  Okada?  Stinks.


  2. 2 lynne rosner December 8, 2012 at 8:55 am

    I heard if you stink big enough you get to heaven holding the whole deck. Confucius say.

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