As gold fever hits Macau, Ho's still in the money

The prohibitionist cult in America that has wreaked havoc on foreign gambling companies recently turned its guns on one of America’s own – casino behemoth MGM Mirage, the second largest gambling company in the world.

The Unlawful Internet Gambling Enforcement Act (UIGEA), which was snuck onto an unrelated port security bill in the dead of night by conservative former Senate majority leader Bill Frist last September, has yet even to take effect – and it won’t until June of this year.

The Department of Justice (DOJ) nonetheless has expended considerable resources attacking foreign-based online gambling companies and their business affiliates through various older, mafia-oriented statutes covering wire fraud, racketeering and money laundering. This week's developments notwithstanding, the aggressive approach comes with a veneer of national security concern laminated to it, and has generally been received with derision outside of the DOJ itself.

Much as the narco-traffickers of the recent past have been repackaged for the post- 9/11 media as narco-terrorists, in spite of the fact that their behaviors and business models remain identical to what they were before, the DOJ has tried, among other things, to tar the online gambling companies as vehicles for terrorist financing and money laundering.

Since the DOJ has spent most of its time and resources flailing around at publicly listed companies, which are subject to stringent – not to mention public - auditing procedures, and whose every wager is accounted for electronically, the accusations have largely rung hollow.

Although it’s true that traditional, cash-based casinos can be excellent laundering venues, the electronic transactions of the online companies are easier to track and far less susceptible to manipulation than the large cash transactions of a “bricks and mortar” casino. So why go online to launder money when you can clean it up the fun way, over a couple drinks with old fashioned cash?

In fact, the casinos of Macau, the hottest gambling jurisdiction on the planet right now, have long been used for just that, and a recently formed American evangelical anti-gambling group has made it its mission to utilize that shabby history to scuttle a massive joint venture between the MGM Mirage and its well connected Macanese partner.

Priests, pirates and prostitutes

Macau is popularly known as the land of priests, pirates and prostitutes. Russian prostitutes run out of Vladivostok by one time KGB agents turned gangsters are the preferred delicacy of the Macanese elite.

The history of casinos in Macau, however, is inextricably intertwined with a web of companies controlled by Stanley Ho, the richest man in Macau, and one of the richest in all of Asia. Hong Kong, where Ho resides, did not prohibit polygamy until 1971, and the spoils of that financial empire have been split among Ho, his three wives, and his seventeen children.

As recently as 2002, Ho-connected companies accounted for an astounding two-thirds of Macau’s GDP.

He was born into a once-wealthy Eurasian family in Hong Kong with deep roots in the opium trade, but fled almost penniless to neutral Macau in 1941 after the Japanese took control of Hong Kong. As legend has it, he made his first million by fighting off a pirate attack on the Pearl River delta while transporting contraband between Hong Kong and Macau, as a kind of reward for his heroic service.

He made his move in 1961. In a twist that would both launch his career and come to haunt him decades later, he and his business partners, which at the time included Yip Hon, an alleged triad leader and heroin trafficker, borrowed the seed money from his sister Winnie Ho to take control of Macau’s casino monopoly.

He controlled Macau’s casino concession for nearly 40 years thereafter.

According to a formerly confidential 309 page dossier on Ho prepared for an American state gambling commission - and recently published online by a new, anti-gambling American evangelical organization calling itself the Family Focus Coalition - Ho’s had quite a run.

This astonishing set of documents, which includes both confidential intelligence reports and news clippings, details decades worth of business dealings. Ho, who has never been charged with a crime, is accused of involvement in everything from laundering money to funding the North Korean nuclear project to good old-fashioned stock fraud.

Shunned in his attempts to extend his casino holdings to other jurisdictions like Canada and Australia, Ho invested $30m in 1999 to build the money-losing Casino Pyongyang, and his close relationship to Kim Jong Il even led him to act rather bizarrely as an intermediary in the run up to the Iraq War.

The Times of India reported at the time that Ho claimed that "high level North Korean officials have offered Saddam and his family 11th hour sanctuary in a mountain in North Korea." Ho went on to say that Kim "told me that there really was a chance to revent a war and they said that Saddam Hussein could step down before the US and the British start to bomb Iraq and he could call democratic elections." According to Ho, "one of the conditions of those elections would be that none of the candidates would be allowed funding from the US, ensuring that there would be no US interference in a future democratic Iraqi state. Anyone who did accept money from the US would be shot."

According to Ho, the North Korean leader, in his unaccustomed role as peacemaker, offered Saddam's family an entire mountain of their own. No dice.

Ho’s bank, the Seng Heng, has repeatedly been accused of acting as a major money laundering point for the North Korean government. In 2005, after considerable investigation by the American government for involvement in passing North Korean counterfeit money, as well as money laundering, it narrowly avoided being blacklisted from the international financial system by the Treasury Department under section 311 of the Patriot Act. Ho's longstanding relations with North Korea date to his smuggling days, when he circumvented the UN embargo to bring Chinese goods to North Korea during the Korean War.