BOSTON — Few Massachusetts residents may be familiar with Macau, but the Chinese administrative region that has become the most lucrative gambling market in the world has caught the eye of state regulators as they complete background checks on two casino companies.
The Massachusetts Gaming Commission is considering whether MGM Resorts International and Wynn Resorts are suitable casino businesses for the state. The Gaming Commission has scheduled a hearing for MGM on Monday and for Wynn Resorts on Dec. 16.
The two companies have already won approval from their host communities — Wynn in Everett in June and MGM in Springfield in July. Their operations in Macau also have been scrutinized by New Jersey or U.S. regulatory agencies in instances unrelated to Massachusetts.
But as American companies have rushed to capitalize in Macau — where total gambling revenues are expected to easily top $40 billion this year, more than six times that of the Las Vegas Strip — regulators in the U.S. have raised questions about these businesses' compliance with the Foreign Corrupt Practices Act.
"It says U.S. companies have to act like they are in America when they are dealing in foreign countries," said Steve Norton, an Indiana-based gambling consultant and former casino executive.
Norton said the Massachusetts commission will have to decide how any issues it might find in a company's Macau operations would relate to casino operations in the state, but he doubts the regulators will find either Wynn or MGM unsuitable.
"If there is a major problem, then I think the commission would go to them and say, 'This is an issue. You have to get rid of it,'" Norton said.
The two companies were the first resort casino developers in Massachusetts to win approval from their host communities. The background checks, by the commission's investigative arm, and the panel's "suitability" decision are among the final hurdles for the few casino applicants that remain viable in Massachusetts.
The panel has already spent considerable time debating the issue: It convened a meeting that focused on Macau in October and discussed the Foreign Corrupt Practices Act at an informational session last week.
In New Jersey, regulators in 2010 found MGM's partnership with Pansy Ho in Macau unsuitable. Ho is the daughter of a gambling kingpin with alleged ties to Chinese gangs, and MGM was forced to divest its stake in an Atlantic City casino.
The company denied doing anything inappropriate and continues its relationship with Ho, though she is now a minority stakeholder in the Macau casino. Meanwhile, New Jersey has agreed to consider allowing MGM to re-enter Atlantic City.
In Massachusetts, MGM is confident of clearing its background check.
"We are looking forward to that suitability hearing on Monday. I have every reason to expect that we will be found suitable," MGM Chief Executive James Murren said in an emailed statement.
Wynn officials told the commission in October that the company's Macau casino has more than a dozen so-called junket operators, all licensed and all subject to criminal background checks by the government, along with additional background investigations by the company.
Junket operators recruit well-heeled gamblers from the mainland for Baccarat in VIP rooms in Macau casinos, often providing credit to players. In general, they have gotten the attention of regulators because of alleged connections to organized crime.
But Steve Wynn, chief executive of Wynn Resorts, cautioned the commission against overzealous regulation. He told the panel at the October meeting that he was in compliance with all rules in Macau and that the firm should not be penalized for overseas operations.
In July, the U.S. Securities and Exchange Commission said it was concluding an investigation into a $135 million donation Wynn Resorts made to a university in Macau, without pursuing enforcement action. A former business partner who had a falling out with Wynn had suggested the donation may have been an attempt to curry favor with government officials.