U.S. Casinos' Reign In Macau Facing Instability, Uncertainty

March 24, 2022
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Three U.S. gaming companies continue to rake in billions from their casinos in Macau, but recent actions by the Chinese and American governments and union-linked interests suggest this golden era may be coming to an end.

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Three U.S. gaming companies continue to rake in billions from their casinos in Macau, but recent actions by the Chinese and American governments and union-linked interests suggest this golden era may be coming to an end.

Amid a fumbling recovery from coronavirus pandemic disruption and Beijing's crushing of junkets, Sino-U.S. animosity, tougher legislation and trade union activism threaten to compound pressure on Macau's American operators, leaving U.S. casinos with no place to hide if bilateral relations flatline.

Relations between Washington and Beijing are deteriorating further after Beijing sided with Russia over its invasion of Ukraine, and because the administration of President Joe Biden is maintaining President Donald Trump's tough policy on China trade.

Democratic Senator Bob Casey has introduced legislation called the National Critical Capabilities Defense Act to screen outbound investments and the "offshoring" of critical capacities and supply chains to foreign adversaries such as China and Russia.

"We're in an economic war, whether we want to use that language [or not]," Casey said in a February 19 article published by Politico.

The primary targets are American businesses which can help China advance its technology, which the U.S. government views as a growing threat.

Senator John Cornyn of Texas is the leading Republican co-sponsor of Casey's bill, which is opposed by the U.S. Chamber of Commerce and U.S.-China Business Council.

Five other senators, including three Democrats and two Republicans, are co-sponsoring the bill.

Casey's bill is not aimed at U.S. operators in Macau, according to Jeffrey Fiedler, a member of the U.S.-China Economic and Security Commission (USCC) and retired union campaigner who has long antagonized U.S. operators in Macau.

Even so, with all Macau casino concessions expiring at the end of this year after a six-month extension, U.S. companies are delicately placed as they prepare new tender bids amid U.S. and Chinese retaliation against each other's corporations.

Beijing, for example, continues to favor Chinese companies, while cracking down on U.S. and European businesses and failing to protect their intellectual property.

Fiedler, whose former project work with the International Union of Operating Engineers (IUOE) attacked U.S. operators in Macau, said he thinks the crackdown will eventually reach the casinos.

"I have no reason to believe that U.S. gaming companies will get preferential treatment while everyone else is getting mistreated," he told VIXIO GamblingCompliance in a phone interview.

Fiedler claims the Macau subsidiaries of Las Vegas Sands, MGM Resorts International and Wynn Resorts continue to make money from gamblers who exceed cross-border capital controls under Chinese law.

The tightening of such controls has been a priority for Beijing in recent times amid a massive outflow of capital via Hong Kong and Macau.

"I have an ever-increasing wonder about why the Chinese allow the Americans to make so much money in Macau, especially in the current environment," he said.

But Fiedler likely answered his own question when acknowledging Macau's fiscal reliance on U.S. operators.

Chinese regulators have been lax in enforcing their rules on gambling companies in Macau for the last two decades because its casinos simply made too much money, he said.

"About 80 percent of Macau's government budget operates off the casinos' taxes," Fielder added.

Still, the rise in stature of Chinese President Xi Jinping has brought a less pragmatic and more hard-nosed view of bilateral relations, as well as a much more brutal application of power domestically, including in Hong Kong and Macau.

This change means Macau is producing less political dissidence, more slavish accommodation of Beijing policy by local elites and near silence by casino operators on any remotely sensitive matter.

No better example of this silence was the three companies' mute public response to recent draft amendments for Macau's casino concession law, despite its proposal to introduce unprecedented and invasive elements that compromise corporate independence and potentially politicize casino operations.

Union Pressure

Adding to the pressures at this time of heightened sensitivity for U.S. operators, the IUOE, which represents hundreds of casino employees in the U.S., appears to have reignited a dormant campaign against operations in Macau.

In a letter to the U.S. Secretary of State, Department of Justice, the Treasury, the White House National Security Council and a Senate subcommittee, the union called for probes into the influence of alleged organized criminal activity in U.S. casinos through the dethroned Macau junket Suncity.

"[IUOE branch] Local 501 is engaging with U.S. federal authorities because state-run gambling regulators have proven either unwilling or incapable of regulating VIP-junket activity and its interplay with U.S. casino companies operating abroad," according to the union's statement on February 8.

Suncity boss Alvin Chau was arrested in November on suspicion of money laundering and "illegal gambling", including operation of a live web-betting platform in the Philippines targeting the illegal China market.

Two months later, Tak Chun junket mogul Levo Chan, who had also been pivoting to land-based assets, was arrested in Macau on similar charges and faces severe punishment.

Despite these blows to the once all-powerful VIP segment, Fiedler said the impact of triads associated with the junket industry remains worthy of investigation, but at the federal level.

"The only way that American [casino] companies' activities [in China] can be affected is through Congress because the states — whether it be Massachusetts, Nevada or wherever these operators also operate — are failing to enforce their own laws," he said.

For more than a decade, as a former union operative, Fiedler criticized regulators in Nevada and other U.S. states for turning what he sees as a blind eye to the business activities of their foreign subsidiaries and junket partners.

He first came to attention to the wider gambling industry in 2012 as the face of CasinoLeaks-Macau, an IUOE-funded website that briefly published a large number of documents on Macau's junkets, its owners, operations, financing and alleged criminal ties, including material that VIXIO sources said was not publicly available.

The four-month online operation, which called for regulatory action in the U.S. but whose ultimate mission and motives were never spelled out, unsettled industry figures but was publicly ignored by the Macau government and its gaming regulator.

Fiedler and his team moved on to operate other name-and-shame websites targeting U.S. operators or would-be U.S. operators in Macau, all briefly online, but with differing impacts.

The union's "Caesars Insider" website seemingly made little headway.

But the tandem "CotaiLandDeal" and "Macau Gaming Watch" websites, which in 2015 targeted Wynn Macau and its opaque acquisition of land for its Wynn Palace resort, was quickly followed by a Macau Commission Against Corruption investigation into the Wynn deal.

The commission's report was eventually completed but shelved without explanation, VIXIO sources have said.

The USCC is an independent agency that reports annually on national security ramifications of the trade and economic relationship between the U.S. and China.

In its 2021 report, the commission called for more Congress oversight of U.S. corporate activity in China amid devolving Sino-U.S. relations.

After VIXIO broke the story in 2012 on Fiedler's overlapping work between the USCC and his union, then-USCC chairman Dennis Shea told VIXIO that Fiedler's work on Macau and casino companies was "entirely his own business" and that the commission "does not have a position on this matter".

MGM and Wynn Resorts did not respond to requests for comment, while Las Vegas Sands spokesman Ron Reese declined to comment on Fiedler's comments or the junket arrests.

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