State investigators recommended Monday that MGM Resorts be declared fit to operate a casino, capping a 10-month investigation into the background of the only remaining contender for the sole Western Massachusetts license.
The recommendation came with several conditions, including that MGM explain its business practices in Macau, China, and its association with a former board member convicted of illegal wiretapping and conspiracy. MGM executives, who won the support of Springfield voters in July, answered the investigators’ questions at an all-day hearing Monday before the state gambling commission.
The investigators’ recommendation, however, is not binding on the commissioners, who are expected to issue a final decision on whether the company is suitable to hold a license in coming days. The commissioners did not convey which way they were leaning during the hearing, although their questioning was not overly aggressive.
The commission has said it intends to complete its approval process by awarding the resort licenses in the spring.
Monday’s hearing also was critical for an emerging gambling industry that has been rocked by rejections at the hands of Massachusetts voters and that faces a petition to repeal the 2011 law that legalized Las Vegas-style gambling in Massachusetts.
Repeal proponents learned Monday they had cleared an initial hurdle: State election officials certified 72,901 signatures on a petition to put the repeal on the statewide ballot next year, surpassing the 68,911 signatures required. The next stop is the Supreme Judicial Court, where casino opponents are challenging a ruling by Attorney General Martha Coakley that the petition is unconstitutional.
Through much of 2012 and the beginning of this year, the western region was the most hotly contested casino zone in the state, but the competition has withered. Ameristar folded up its plans for a Springfield resort; Hard Rock failed to strike a deal in Holyoke or Springfield and then lost a referendum in West Springfield; Penn National Gaming was outbid by MGM in downtown Springfield, and then moved on to compete for a slot machine parlor license in Plainville; and Mohegan Sun lost a referendum in Palmer.
MGM owns 99 percent of the Springfield casino venture, and Springfield businessman Paul Picknelly owns 1 percent.
Last week, MGM chief executive Jim Murren told the Boston College Chief Executive’s Club that the company plans to hire 3,000 permanent workers and another 2,000 to build the $800 million gambling and entertainment resort in downtown Springfield.
On Monday, the commission released the findings of its Investigations and Enforcement Bureau background check, in a 500-page report. MGM executives spent most of Monday in a public hearing responding to the findings.
Commission investigators raised questions about the company’s interaction with Terry Christensen, who spent 18 years on the MGM board until he was indicted in 2006. He was later convicted of illegal wiretapping and conspiracy charges.
“Despite his indictment, resignation from the board, and ultimate conviction, Christensen was allowed to engage, on a repeated and prolonged basis, in certain sensitive and nonpublic corporate matters,” the commission’s investigators wrote.
Top company executives, aware of Christensen’s involvement at the time, have “subsequently admitted they made mistakes in allowing this to happen,” investigators wrote in their report.
“I would view my own actions as inferior to the standards I hold myself to,” Murren told the commission.
MGM has since changed its internal procedures to address concerns from regulators over the company’s involvement with Christensen.
The commission also pressed MGM on its operation in Macau, due to a state law that requires all applicants to maintain “responsible business practices” in any place they run a casino.
Much of the testimony focused on the widespread practice in Macau, the most profitable gambling market in the world, of using “gaming promoters” to recruit patrons to play at the casinos. Macau casinos pay the promoters commissions or a share of gambling revenue, according to the report.
“A paramount benefit offered by gaming promoters is the ability to extend credit to mainland Chinese players, which the casino will not do because gambling debts are not legally enforceable in China,” the report states.
One concern for regulators is how the promoters or their subcontractors collect debt and whether they use force or threats.
“Under this system, MGM Macau has no corporate knowledge of what interest rate, if any, is charged or the manner in which debt collection is undertaken,’’ the report states.
Investigators also focused on the company’s relationship in Macau with businesswoman Pansy Ho, daughter of a Macau gambling mogul linked to organized crime, Stanley Ho. MGM’s relationship raised red flags with New Jersey regulators, who in 2009 issued a report recommending that Pansy Ho be found unsuitable, “mainly out of concerns that she was acting as a front for her father,” the report states.
Massachusetts investigators concluded: “There is no dispute about the fact that when MGM was negotiating the 2004 partnership deal with Pansy Ho, MGM did not conduct any investigation into her source of funds for the project; nor did MGM conduct any investigation into whether she was acting independently from her father.”
Massachusetts investigators interviewed Pansy Ho June 19. She told them she pursued the partnership independent of her father.
Her comments contradict a 2009 report by New Jersey investigators that said that Stanley Ho had told two MGM officials that his daughter represented him, according to the Massachusetts report.
Other US casino jurisdictions reviewed the relationship without objection, including Nevada, Michigan, Mississippi, and Maryland, the report states.