MGM & Stanley Ho: The consequences of desperation

Contrary to the confident prediction of Las Vegas Review-Journal Publisher Sherman Frederick, the ramifications of the report of the New Jersey Division of Gaming Enforcement on the relationship between MGM Mirage, Pansy Ho and father Stanley Ho have been as “explosive” as waterlogged dynamite. Both Las Vegas newspapers yawned and figuratively turned the page, while Nevada Gaming Control Board Chairman Dennis Neilander says, in essence, that if they had to do it all over, the NGCB would arrive at the same conclusion. (One might contend that this is what happens when a company gets so large it can take the regulatory process hostage … but I digress.)

To read a truly in-depth précis — if that’s not a contradiction in terms — of the DGE’s findings, one has to cross the ocean and pick up the Macau Daily Times. Its story is a doozy and not only reflects harshly on the prudence (or lack thereof) exhibited by then-MGM CEO J. Terrence Lanni, it also explains the circumstances behind former General Counsel Gary Jacobs‘ precipitate exit from MGM’s employ. As a company executive puts it, MGM was “desperate” to penetrate the ultra-lucrative Macao market. I’ve no reason to doubt current CEO Jim Murren‘s contention that he has “a very positive working relationship with Pansy Ho and … a spotless operating record at MGM Grand Macau,” although if Murren said anything in Lanni’s defense it didn’t make print.

Aside from whatever it’s lost by waiting two or three years too long to put its Atlantic City holdings on the market, MGM looks to come through this unscathed. If anything, it’s deemed to accelerate the company’s Hong Kong IPO, a desirable outcome for MGM and investors alike. The main effect of the DGE report is confirm Stanley Ho’s unsavory reputation and provoke a now-rare public statement from the aging kingpin. The closest thing to a detonation found anywhere in the news reports is a passing remark by Boyd Gaming CEO Keith Smith that makes it pretty clear he won’t be bidding on MGM’s half of Borgata. Regardless of whether Smith is just playing hard-to-get, it’s a further depressant to the resale value of MGM’s Marina District holdings.