1   China Macau Tolerance Spreadsheets with astonishing forecasts can only tell so much about China’s economic miracle. The sole path to believing, or at least comprehending, the scale of the country’s development is to see it. And so it is with any attempt to grasp Macau’s transformation from a Portuguese trading outpost to the Middle Kingdom’s gambling and entertainment hub. Each year, this territory of about 30 square km a one-hour ferry ride from Hong Kong creates the equivalent of one new Las Vegas in gross gambling revenue. Millions of Chinese mainlanders aspire to visit – not just high- rollers but regular punters and even families. Macau will occupy an important role in China’s cultural and economic future. What’s questionable is whether investors will ever access Macau’s riches to the degree once deemed possible. How can you be both bullish on Macau and bearish on its investment prospects? Simple: like all things China-related, the primary risk factor is the state, or more aptly China’s Communist Party. And when it comes to gambling, which is illegal in China, it is particularly hard to square Beijing’s goals with a business model where billions of dollars of wealth is transferred into the pockets of a few tycoons in the United States and Hong Kong. This is not to diminish the scale of ambition and execution taking place on the spit of land first lent to the Portuguese in 1557, which was handed back to China in 1999. While Macau granted the first official gambling monopoly in 1962, it expanded the system to six licensees in 2002, including three American-led groups, Wynn Resorts, Las Vegas Sands and MGM Mirage; and three locals, Melco Crown Entertainment, SJM Holdings (the original monopoly) and Galaxy Entertainment. All have listed their Macau operations on the Hong Kong Stock Exchange. In the past eight years Macau gambling revenue has surged from less than $10 billion to around $50 billion this year. And there’s more to come. Some $40 billion of capital has been devoted to 14 new developments, largely on the Cotai Strip, a stretch of reclaimed land south of the old colony that is a maelstrom of cranes, construction and Maybachs. Extraordinary efforts to remove transportation bottlenecks to Macau will ensure the new casinos and hotels are occupied. In 2017, a 50-kilometer bridge will connect Hong Kong’s airport – with its projected 70 million yearly visitors – to Macau and Zhuhai, the city of 1.6 million just over the Chinese border. Pylons of the bridge, which will whisk visitors to Macau   2   in the time it takes to reach the center of Hong Kong from the airport, can be seen poking out of the Pearl River Estuary. Over the next four years, CLSA projects the authorities will permit the opening of 2,000 new gaming tables in the Cotai casinos, helping push gross gambling revenue above the $66 billion generated in 2013 by all U.S. casinos, to $90 billion in 2018 – and $18 billion ...

1. 1
China Macau Tolerance
Spreadsheets with astonishing forecasts can only tell so much
about
China’s economic miracle. The sole path to believing, or at
least
comprehending, the scale of the country’s development is to see
it. And so
it is with any attempt to grasp Macau’s transformation from a
Portuguese
trading outpost to the Middle Kingdom’s gambling and
entertainment hub.
Each year, this territory of about 30 square km a one-hour ferry
ride from
Hong Kong creates the equivalent of one new Las Vegas in
gross gambling
revenue. Millions of Chinese mainlanders aspire to visit – not
just high-
rollers but regular punters and even families. Macau will
occupy an
important role in China’s cultural and economic future. What’s
questionable
is whether investors will ever access Macau’s riches to the
degree once
deemed possible.
How can you be both bullish on Macau and bearish on its
investment
prospects? Simple: like all things China-related, the primary
risk factor is

2. the state, or more aptly China’s Communist Party. And when it
comes to
gambling, which is illegal in China, it is particularly hard to
square Beijing’s
goals with a business model where billions of dollars of wealth
is
transferred into the pockets of a few tycoons in the United
States and Hong
Kong.
This is not to diminish the scale of ambition and execution
taking place on
the spit of land first lent to the Portuguese in 1557, which was
handed back
to China in 1999. While Macau granted the first official
gambling monopoly
in 1962, it expanded the system to six licensees in 2002,
including three
American-led groups, Wynn Resorts, Las Vegas Sands and
MGM Mirage;
and three locals, Melco Crown Entertainment, SJM Holdings
(the original
monopoly) and Galaxy Entertainment. All have listed their
Macau
operations on the Hong Kong Stock Exchange.
In the past eight years Macau gambling revenue has surged from
less than
$10 billion to around $50 billion this year. And there’s more to
come. Some
$40 billion of capital has been devoted to 14 new developments,
largely on
the Cotai Strip, a stretch of reclaimed land south of the old
colony that is a
maelstrom of cranes, construction and Maybachs.
Extraordinary efforts to remove transportation bottlenecks to
Macau will
ensure the new casinos and hotels are occupied. In 2017, a 50-

3. kilometer
bridge will connect Hong Kong’s airport – with its projected 70
million yearly
visitors – to Macau and Zhuhai, the city of 1.6 million just over
the Chinese border. Pylons of the bridge, which will whisk
visitors to Macau
2
in the time it takes to reach the center of Hong Kong from the
airport, can
be seen poking out of the Pearl River Estuary.
Over the next four years, CLSA projects the authorities will
permit the
opening of 2,000 new gaming tables in the Cotai casinos,
helping push
gross gambling revenue above the $66 billion generated in 2013
by all U.S.
casinos, to $90 billion in 2018 – and $18 billion of net profit.
By that logic,
the broker estimates the Macau gambling sector’s market cap
can double
to nearly $350 billion.
Visiting Macau, it is easy to buy this bull case. The Chinese
cultural affinity
for gambling is hard to overstate. Underpinning the activity is
an
extraordinary ambition to become wealthy, which has driven the
country’s
economic success since Deng Xiaoping expounded on the
glories of
getting rich. Gaming goes back farther, with archaeological

4. evidence of
dice from 600 BC.
The Chinese also hold a strong belief in the powers of good
fortune and a
fascination with numerology. These come together perfectly on
the tables
of a casino, specifically in games like baccarat where luck is the
sole
determinant of success, and turnover is most intense. The game
dominates
the floors of Macau’s casinos. Indeed, it is harder to find a
blackjack or
poker table at a Chinese casino than it is to circumvent China’s
capital
controls.
Which brings us to the risks: Gambling is still a crime in China.
Mao
Zedong considered it a societal ill and enshrined its prohibition
in Article
303 of the Criminal Law of the People’s Republic. China
charged
nearly 350,000 citizens with gambling violations in 2012 alone,
according to
OnlineBetting.com.
Squaring this with the idea that Beijing will forever allow
casino operators
free rein to fleece ordinary Chinese, who will make up the bulk
of future
visitors to Macau, is hard to fathom. It may not happen for
years – the
concessions are under review in about five years – but China
will
eventually exercise greater rights over the winnings at Macau’s
houses.
Glimmers of such intervention are already apparent. Chinese
visitors are

5. only permitted to take $3,200 a day in cash out of the country.
To
circumvent this, many purchase expensive watches and gifts
from Macau’s
pawnshops or jewelers in transactions through Chinese credit-
card issuer
UnionPay and then convert the goods into cash. A May
crackdown on
some of these purchases may point to a general change of
attitude.
Similarly, this week Macau said it will reduce from seven to
five the number
3
of days that Chinese visitors with transit visas can stay in the
city.
Macau’s supporters argue it offers a “release valve” of sorts, a
place where
some erosion of capital controls and illicit behavior is tolerated.
That made
sense when Macau’s visitors were primarily high-rollers, even
senior
officials, whose trips to Macau could be monitored and
catalogued.
It’s harder to accomplish when the new visitor is a family
coming in on the
high-speed train from Wuhan five hours away. The father may
want to
gamble $20,000 on sic bo, the Chinese dice game, at the Grand
Lisboa
while the mother shops at the Galaxy’s boutiques and their

6. daughter
wakes up to a “Shrekfast” in her Venetian hotel room. Perhaps
they will
take in a Canto-pop show as well.
The expansion of this mass market, which is more profitable for
casinos
because it eliminates middle men known as junket operators,
changes the
game for Macau and for China. It makes it harder to support a
wholesale
transfer of wealth to billionaires like Steve Wynn, Pansy Ho or
Sheldon
Adelson, the Sands mogul who pledged $100 million to Mitt
Romney’s U.S.
presidential campaign - during which the candidate criticized
Barack
Obama for not labeling China a currency manipulator.
It won’t happen overnight. And some semblance of the rule of
law
precludes a Latin American-style expropriation. But a betting
man would
find favored odds on a long-term erosion of the status quo in
Macau for
global investors. In the meantime, though, the place will only
grow bigger,
more garish and more lucrative for some. The trick will be in
knowing when
to fold.
HMD 101

7. 1
Susan Wolfla
Executive Chef
Mandalay Bay Resort
Educational Background
Purdue University - Bachelor of Science in
Biology with Specialization in Cell and
Developmental Biology
Culinary Institute of America - Associates
Degree in Culinary Arts
HMD 101
2
Career Progression
Executive Chef - Mandalay Bay
Executive Sous Chef - Mandalay Bay
Chef de Cuisine - Venetian Resort
Chef de Cuisine - Wild Truffles Catering
Executive Sous Chef - Atlantis Paradise Island
Chef Tournant Garde Manger - Venetian
Chef Tournant - Caesars Palace
Executive Chef - Benvenuti Restaurant
Portfolio of an Executive Chef
Restaurants with many concepts
Room service and hospitality suites

8. Pool and cabana service
Employee dining food service
Catering in exhibit halls
Receptions and cocktail parties
Banquet food service
HMD 101
3
Banquet Business Process
Menu development and design
Request for proposal (RFP)
Pre arrival meetings
Banquet event orders (BEOs)
Guarantee deadlines
Logistics and execution
Follow up analysis
Mini Oven Baking Stations
Evo Action Grilling Stations
Ramen Shop Action Stations
Street Taco Station
Crispy Duck Confit Station
Tagine Station
Action Station Concept
HMD 101
4

9. Themed Breaks
Chocolate and Caffeine
The Walk in the Park
The Tutti Fruitti
Let’s Go to the Movies
Game Time
Brain Food
Color Breaks
The Red Delicions
The Blue Berry
The Orange Crush
HMD 101
5
Lunch Buffets
Izzabella
Olivia
Hanna
Sophia
Hayley
Gabriella
Sustainability Initiatives - Food
Fresh herbs grown in property greenhouse
Seafood varieties abundant, well managed and
caught/farmed in environmentally friendly ways
Meets - steroid, antibiotic, hormone free
Beef tenderloin - free range, grass-fed cattle

10. HMD 101
6
Sustainability Initiatives - Non Food
Source improved food/beverage packaging
Disposables - recyclable and green initiatives
Box lunches - 100% recycled craft card board
Bamboo products
Picks, cutlery, bowls, plates, small wares
Renewable, sustainable, biodegradable
1
Singapore Gaming Industry
Singapore launched its first casinos in 2010 in a bold bet that it
could bolster its
economy without attracting social ills, such as organized crime
and gambling
addiction, that have plagued other casino capitals.
Today, its two new casinos—Las Vegas Sands Corp.'s LVS
+0.14% Marina Bay
Sands and Genting Singapore PLC's Resorts World Sentosa—are
financial winners,
generating about US$6 billion in gross gambling revenue in
2011. But the social
experiment has yielded mixed results, pressuring authorities to
do more to contain
gambling ills even as the global slowdown and rising
competition threaten growth in

11. the country's fledgling casino industry.
To be sure, the feared rise in organized crime never
materialized, and gambling
overall in the city-state has actually declined. But government
leaders are concerned
about surveys that indicate more low-income residents are
betting larger sums and
frequent gamblers are playing more often, while more people
are seeking counseling
for gambling troubles. Anecdotal reports of problem gamblers
in the local media—
some of whom have turned to crime to fund their gambling
addictions—have also
alarmed people.
In response, the government is upping the ante. Authorities
recently expanded a
program that prohibits locals who are bankrupt or reliant on
government aid from going
into the casinos, with about 43,000 people now barred. In July,
the government
proposed significantly increasing disciplinary penalties for
casino operators that don't
follow Singapore's casino-control laws, which include taxing
locals S$100 (US$80) a
day or S$2,000 annually to enter the casinos and tough limits on
gamblers' ability to
get credit in them. More steps are in the works, such as limiting
the frequency of
casino visits by some local gamblers.
Singapore already had some of the strictest casino rules in Asia,
with restrictions that
prohibit casino advertising targeting locals and limits on the
presence of junket
operators—the middlemen who bring high-spending gamblers to
the tables, issue
credit and collect on debts in exchange for commissions. They

12. are the linchpin of the
world's largest gambling hub by revenue, Macau, but they also
have been linked to
organized crime and have largely been blocked from operating
in Singapore so far.
The results of Singapore's experiment are being watched closely
across the world.
Lawmakers in Japan, backed by gambling interests like U.S.
billionaire Sheldon
Adelson's Las Vegas Sands, have stepped up calls for casino
legalization to help
revitalize the country's economy. Taiwan and Mongolia have
flirted with the idea, as
have U.S. markets like Miami. Wealthy private backers,
including Japanese pachinko
magnate Kazuo Okada, are pushing ahead with projects in the
Philippines and
Vietnam, with more potentially to come.
It still isn't clear how well policies like the ones enforced in
Singapore work—or
whether they can be sustained in the long run, especially as
casino revenue growth
there slows and other countries launch competitors.
"Singapore's regulatory approach is a good approach in
principle [but] the evidence
would indicate that these policies have actually had a relatively
minor impact in
2
Singapore," said Robert Williams, a professor at Canada's
University of Lethbridge

13. and researcher at the Alberta Gambling Research Institute.
Others disagree, saying
the rules have helped to prevent trouble.
The data are somewhat inconclusive. The casinos say visits by
citizens and
permanent residents—estimated to account for about 20% to
30% of all visitors—
declined in 2011 from the previous year. The overall gambling
rate among locals age
18 and above—which includes any participants in horse-racing,
sports betting and
lotteries— fell to 47% in 2011 from 54% in 2008, according to
a survey published by
the National Council on Problem Gambling in February.
The crime rate in Singapore fell 5.3% last year from 2010 to a
20-year low, while
casino-related crime—mainly cases of theft, cheating and
counterfeiting—has
remained stable at less than 2% of total crime in 2010 and 2011,
according to police
data.
But more low-income players are betting large sums while
frequent gamblers are
playing more often, the latest NCPG survey found.
"We note from [the NCPG survey] that problem gambling issues
in Singapore are
largely contained," Singapore's Ministry of Community
Development, Youth and
Sports said. "However, we prefer to be proactive" in tackling
gambling-related social
problems. "The experience from other jurisdictions tells us that
it usually takes three to
five years for the situation to stabilize."
Official data collated from counseling centers point to rising
numbers of people
seeking help for gambling problems. One such center, the

14. National Addictions
Management Service, logged 398 cases in the financial year
ended March 2011, up
from 88 in the year ended March 2008. Cases at another center,
the Tanjong Pagar
Family Services Center, rose to 132 last year, up from 105 in
2010 and 86 in 2009.
Anecdotal examples of problem gambling have also spread. In
December, a local
court sentenced an audio-equipment salesman to six years in jail
for defrauding
employers and acquaintances of more than S$1 million to pay
off debts and fund his
gambling addiction, which included trips to Marina Bay Sands
and lottery outlets,
according to the man's defense counsel, Mervyn Tan.
As part of its recent tightening, the government proposes to
increase maximum
disciplinary fines on casinos to as much as 10% of their gross
gambling revenue,
which could push fines into the hundreds of millions of dollars,
up from the current cap
of S$1 million. Among those who will be locked out of the
casinos are some citizens
and permanent residents who are in arrears on rental payments.
Another issue, albeit more difficult to measure, is the wider
social impact of the
casinos, which critics say have encouraged more conspicuous
displays of wealth while
failing to help lift wages for low-income workers.
"The casinos pander to particular lifestyles of conspicuous
consumption, and some of
the measures banning the poor fuels the perception that we're
stratifying society on
the basis of wealth—it's worrying, and not something we should
be proud of as a

15. community," said Vincent Wijeysingha, treasurer of the
opposition Singapore
Democratic Party.
3
The government argues that the casinos—which hire about
22,000 people—have
helped citizens' economic well-being, even though some
positions have gone to
foreigners.
Singapore's move to tighten casino regulations hasn't met much
resistance from
casino operators so far. Las Vegas Sands' Mr. Adelson said in
July that his company
isn't concerned by Singapore's moves and doesn't expect the
tighter rules to
significantly hurt its business. "We don't have a problem if
[Singapore] wants to put a
limitation on either visitation or the exclusion of very poor
people," he told analysts in
an earnings call. "We don't see the future coming out of poor,
unfortunate, very
vulnerable people."
But underscoring the pressures casinos may feel to open their
doors to more
gamblers, both Marina Bay Sands and Genting Singapore
reported weaker second-
quarter earnings, citing declines in business volumes.
For Singapore, the longer-term question is whether future
governments will be
tempted to ease controls if growth in casino revenue plateaus.

16. Analysts expect
Singapore's casino market to expand at a slower pace in the next
few years, with
revenue growth likely slipping into the high single digits amid
greater competition from
other Asian markets.
A battleground could be junket operators—the most potent
potential growth booster for
now, as Singapore is legally bound to not add new casinos until
March 2017. While
experts say Singapore doesn't intend to let junkets dominate its
gambling scene as they
do in Macau, some analysts say authorities may be compelled to
license more of them if
revenues wilt. Regulators here have licensed just two small
outfits so far, and are
planning tougher rules that could crimp operators' profitability.
1
Pachinko in Japan
NAGOYA, Japan — Part pinball and part roulette, with the lure
of quick cash winnings
and little silver balls ricocheting off pins and bumpers, the
Japanese game of pachinko
once seemed a permanent feature of the nation’s postwar
landscape, its arcade-style
sounds and lights providing a blinking, cacophonous backdrop
to life in Japan during the
boom years.

17. In recent years, though, one pachinko hall after another has shut
its doors as legions of
loyal fans aged and passed away, the industry was tainted by
mob ties and — perhaps
the biggest turnoff for Japanese youth — the game acquired the
musty scent of an
artifact of their parents’ generation.
Now, like Japan itself, pachinko is attempting a comeback.
With new halls that are bigger, cleaner, more luxurious and
friendlier than ever, the
pachinko industry is trying to reinvent itself by appealing to
new customers, mainly
younger Japanese who grew up playing video and computer
games, and by cleaning up
its image, much as casino operators made Las Vegas more
family friendly by driving out
the mob.
The most ambitious of these new stores opened in April here in
the central industrial city
of Nagoya: the $100 million Zent Nagoya Kita, billed as the
biggest pachinko parlor in
Japan with more than 1,200 machines.
On a recent weekday afternoon, a deafening roar filled the
cavernous parlor as mostly
middle-aged and older men sat smoking cigarettes and shooting
the little silver balls,
machine gun-style, through thickets of metal pins in what
looked like vertical pinball
machines without flippers. They used dials to adjust the balls’
trajectories and drop them
into strategically positioned holes; the more balls go in, the
bigger the prize.
Pachinko machines were originally simple mechanical affairs,
but now they are fitted
with flashy, sometimes outlandish electronics to appeal to the
digital-gaming generation.

18. Those in Zent Nagoya Kita have liquid-crystal displays that
show images from
Hollywood movies, animated chorus lines of dancing sea turtles
and smiling whales or
clips of one of Japan’s teenage starlets disrobing into a bikini.
A staff of deeply bowing young women dressed like flight
attendants work the floor,
greeting patrons and handing out prizes. Another feature less
visible to visitors:
cameras at every entrance that use face-recognition software to
spot known gangsters,
who are then asked to leave.
“The only way for pachinko to survive is to step out of the
shadows and become a
respectable member of society,” said Tetsuya Makino, a former
pachinko hall worker
who is now director of the Pachinko Museum in suburban
Tokyo.
But to appeal to Japan’s shrinking population of young people,
many say the industry
must do more to shed its reputation as a haven for yakuza
gangsters and North Korean
sympathizers, and modernize the game itself to attract tech-
savvy youth who prefer
online alternatives. And they say pachinko must do this quickly,
before the arrival of
casino and resort-operating companies that may soon enter
Japan if full-fledged
gambling is legalized.
2

19. But just as Prime Minister Shinzo Abe has vowed to restore
growth in Japan, there are
many who see hope for a revival of pachinko, which first took
off after Japan’s defeat in
World War II using ball bearings from destroyed armament
plants. The game offered a
rare source of entertainment for a prostrated nation, and then
during the heady decades
of postwar economic rebirth, it flourished as a socially tolerated
form of gambling for
Japan’s hard-toiling office and factory workers.
Still, according to Mr. Makino and others, pachinko has long
been seen as operating on
the social margins because most of the original hall operators
were Koreans who had
immigrated after Japan colonized their homeland in the early
20th century. With most
doors shut by discrimination, pachinko provided one of the few
avenues for economic
advancement for the ethnic minority. Even today, about three-
quarters of pachinko hall
owners are ethnic Koreans.
The game also acquired an outlaw image from the yakuza,
Japan’s large organized
crime syndicates, which were drawn to the industry by a legal
subterfuge that permitted
pachinko to thrive despite laws prohibiting gambling. The
police turned a blind eye as
patrons received prizes like cigarette cartons or tiny pieces of
gold, which they could
take to a small window in a nearby building and exchange for
money. Pachinko hall
owners were legally barred from operating the cash windows,
which often fell under the
control of organized crime.

20. The game’s image also suffered because some of the hall
owners sent their earnings
back to families in what is now North Korea, turning pachinko
into a source of hard
currency for that isolated nation. During pachinko’s peak in the
1990s, hundreds of
millions of dollars may have flowed into North Korea every
year, though the industry
says recent economic sanctions have largely cut off that
financing.
Despite the image problems, pachinko remains a huge business,
with $180 billion in
sales last year. Japan’s 12,000 pachinko halls are ubiquitous,
found in front of most
train stations and even in the most remote rural villages, where
the glow of their lights
can be seen for miles at night. But the industry is also clearly in
crisis. From a peak of
30 million in the early 1990s, the number of people who report
having played pachinko
at least once during the preceding year fell to barely more than
10 million last year,
according to the Japan Productivity Center, a market research
company based in
Tokyo.
To combat the decline, Yoshio Tsuzuki, the president of Zent
Company, which owns
Zent Nagoya Kita, borrowed an idea from Mr. Abe’s growth
policies by saying the
industry must do more to appeal to women, which Mr. Tsuzuki
called the largest
untapped pool of potential new customers.
To lure more women, the parlor features a smoke-free, women-
only lounge, and
luxurious bathrooms with tall mirrors, designer wallpaper and
chandeliers. Besides the

21. game hall, there is a miniature shopping mall, with a
convenience store, ramen noodle
restaurant, coffee shop, laundromat, flower shop, children’s day
care center, wine cellar
and even a small art gallery.
“We are hoping that people who have never done pachinko
before might come here to
3
do their laundry, use the day care for their children, eat a bowl
of ramen, admire a
painting — and maybe also stay to give pachinko a try,” said
Mr. Tsuzuki, 40, whose
father founded Zent Company.
He said about a fifth of the store’s patrons were women, about
twice the industry
average. However, on a recent night, only a few young women
could be seen. One of
them, Rina Motoi, 26, who had come with a friend after getting
off her job at a bank,
said that while she felt comfortable in this store, pachinko as a
whole still seemed
shady.
“Pachinko still has the same bad, old image as horse racing,”
Ms. Motoi said. “Most my
friends would rather play on the net at home.”

22. Growth of Gaming Entertainment in Asia
In the Philippines, a $4-billion casino will soon rise from
reclaimed land on Manila Bay.
In South Korea, foreign investors are expected to break ground
next year on a clutch of
casino resorts offshore. And on the eastern edge of Russia,
authorities plan a resort
zone aimed at drawing Chinese high-rollers.
The projects are part of a casino building boom rolling across
Asia, where governments
are trying to develop their tourism markets to capture
increasingly affluent Asians with a
penchant for gambling. They're building glitzy, upscale Las
Vegas-style resorts in a bid
to copy the runaway success of Asian gambling hubs Macau,
which rapidly became the
world's biggest casino market after ending a monopoly, and
Singapore, where the city-
state's first two casinos raked in an estimated $6 billion a year
after their 2010 openings.
The casino boom highlights how the gambling industry is being
propelled by the region's
rapid economic growth, with millions entering the middle class
thanks to rising incomes
that allow them to spend more on travel and leisure pursuits.
But it has also intensified
debate over the social ills and perceived economic benefits of
the gambling industry.
"Definitely, the success of Macau has set off a chain reaction in
what is happening in
the region," said Francis Lui, vice chairman of Macau casino
operator Galaxy
Entertainment Group. "After the success of Macau and
Singapore, of course you see
more countries now assessing the pros and cons of having
gaming as a driving engine

23. for bigger economic growth."
"In the future the region is going to have more casinos."
The fortunes to be made are immense. After Macau ended a
four-decade monopoly and
allowed in foreign operators such as Las Vegas Sands Corp.,
Wynn Resorts and MGM
Resorts International, the former Portuguese colony on the
southern edge of China
quickly overtook the Las Vegas Strip as the world's biggest
gambling market. The
foreign operators helped supercharge growth in Macau -
previously known for its aging,
seedy, no-frills casinos - by building flashy gambling palaces
drawing wealthy mainland
Chinese. Last year the city of just 500,000 people raked in
$33.5 billion in gambling
revenue.
In Singapore, the Marina Bay Sands and Resorts World Sentosa,
which together cost
more than $10 billion, have put the city on track to becoming
the world's second-biggest
gambling market.
By 2015, consultants PricewaterhouseCoopers predict the surge
in Asian casino
revenues will have "fundamentally reshaped the landscape of
the global industry" and
help Asia edge out the United States as the world's biggest
regional market.
PWC forecasts that the Asia-Pacific gambling market will more
than double from $34.3
billion in 2010 to $79.3 billion in 2015, surpassing the U.S.,
which is estimated to grow
from $57.5 billion to $73.3 billion in the same period.
A number of projects planned or under way across the region
are helping to fulfill that
prediction.

24. Cambodian operator Nagacorp, which runs the only casino in
the Southeast Asian city's
capital, Phnom Penh, plans to open a $369 million expansion
including hotels and
shopping later this year. The company operates buses equipped
with massage chairs to
pick up punters from neighboring Vietnam.
Vietnam will get its first casino-resort next year. Canadian
company Asian Coast
Development is set to open a five-star MGM-branded beachfront
complex in the
southeast. It's part of a $4.2 billion tourist development aimed
at drawing foreign
visitors.
Both countries bar their own citizens from entering casinos.
Even the neglected Russian Pacific port city of Vladivostok,
perhaps best known as the
eastern terminus for the famed Trans-Siberian Railway, plans to
get in on the action.
Authorities announced plans in May to invite foreign investors
to help develop an
entertainment zone with no less than 12 casinos aimed at
attracting Chinese and other
North Asian visitors. When completed, annual revenues could
reach $5.2 billion,
according to a forecast by consultants.
In Japan, where legalization has been debated for years,
lawmakers have been inching
closer to approving casinos as a way to stimulate the economy
and boost tourism
following last year's devastating tsunami and nuclear disaster.
But not everyone is convinced it's a gamble that will
economically benefit Japan, which

25. already allows gambling on horse, boat and bicycle racing as
well as slots.
"If we get casinos in Japan, that will destroy the nation," said
Ken Wakamiya, an author
and anti-gambling activist.
He pointed out that pachinko, a slot machine-like game, is one
of the country's most
popular forms of gambling. But he said it's played widely by
poor people and as a result
made them even poorer.
"Introducing casinos is a plan to rip off our own people. It is an
act of madness," he said.
A similar debate has played out in Taiwan, which will get its
first casino after residents
on the island of Matsu voted in favor in July. Casinos are
banned in Taiwan except on
outlying islands, where approval in a referendum is needed.
Some countries are looking to Singapore as a model for how to
bring in gambling
without the side-effects. The country, which authorized two big
casino-resorts as part of
an effort turn the Southeast Asian city-state into a gambling and
tourism magnet, is
tightening what are already some of the strictest measures in
Asia to control organized
crime and gambling addiction.
Junket operators - middlemen that bring in wealthy high-rollers
but which have also
been linked to organized crime - are almost completely banned.
Regulators also plan a
big hike in the amount casino operators can be fined for
breaking regulations that
include charging locals 100 Singapore dollars ($81) a day to
enter. The government
also expanded a program banning people who are bankrupt or
receiving welfare from

26. entering casinos, raising the number to 43,000.
Despite the measures, more low income players are betting
bigger amounts, according
to a 2011 survey by the National Council on Problem Gambling,
while the Samaritans
counseling hotline reports receiving an increasing number of
calls involving problem
gambling.
"The gambling industry is not a sector that creates value-added
products or services
and therefore will have little impact on the development of the
future economy," said
Vincent Wijeysingha, treasurer of the opposition Singapore
Democratic Party. "It does
not contribute to the deepening of economic capacity or the
introduction of new or
innovative services or industrial techniques."
In the Philippines, church leaders have spoken out against a $4
billion project that the
government hopes will turn a site on Manila Bay into the
country's version of the Las
Vegas Strip. Casinos have been legal since 1977 but many are
small and run-down.
Foreign investors including Macau's Melco Crown
Entertainment, Japanese pachinko
tycoon Kazuo Okada's Universal Entertainment and Malaysia's
Genting Bhd. are
working separately with local partners on the project, which
will include hotels,
restaurants, museums, a marina and boardwalk and a monorail.
The project, dubbed Entertainment City, is aimed at drawing
wealthy foreign gamblers
but church leaders say it would promote "a culture of gambling"

27. in the conservative,
majority Roman Catholic Philippines.
Gambling "foments addiction, foments indolence, foments a
mentality of chance and it
destroys families," said Retired Archbishop Oscar Cruz.
In South Korea, Universal and two other companies plan to
build resorts in a special
economic zone near Incheon Airport on Yeongjong Island. The
companies, which also
include Caesar's Entertainment Corp. of the U.S. and South
Korea's Paradise Group,
are scheduled to break ground in September 2013, said Lee
Woo-hyung, director of
tourism and culture department at the Incheon Free Economic
Zone Authority.
Some are skeptical that the projects can rival the profits made in
Macau, which has
benefited from a seemingly endless stream of mainland Chinese
gamblers.
Beijing has been happy to let its wealthy gamble their fortunes
away in Macau, a special
administrative region of China. But it might start clamping
down on exit permissions to
prevent citizens from boosting a regional rival's gambling tax
coffers if geopolitical
tensions flare.
That risk is most acute in the Philippines, which has sparred
with Beijing over a disputed
shoal, said Grant Govertsen, managing partner of Union Gaming
Research Macau.
"You're entirely dependent on the good graces of Beijing to be
successful," said
Govertsen. "And I don't like those odds."

28. 1
Macau’s Casino Industry
Most people still think of the U.S. gambling industry as
anchored in Las Vegas. They
might think of vestiges of the mob, or the town's ill-advised
flirtation with family-friendly
branding in the 1990s.
But they would be wrong.
The center of the gambling world has shifted 16 time zones
away to a tiny spit of land
on the southern tip of East Asia.
An hour's ferry ride from Hong Kong and an afternoon flight
from half the world's
population, Macau is the only place in China where casino
gambling is legal.
Each month, 2.5 million tourists flood the glitzy boomtown to
try their luck in neon-
drenched casinos that collect more winnings than the entire U.S.
gambling industry. The
exploding ranks of the Chinese nuevo riche sip tea and speak in
hushed tones as they
play at baccarat, a fast-moving game where gamblers are dealt
two cards and predict
whether they will beat the banker.
The textile factories that stood shoulder to shoulder with small-
time gambling halls as
recently as the early 2000s have given way to hulking
American-run enterprises larger
than anything found in the states. The gangs, prostitutes and
money-launderers that
once operated openly in this town half the size of Manhattan

29. have at least receded from
public eye.
"It was a swamp," said Sheldon Adelson, CEO of Las Vegas
Sands, as he looked back
on his early, risky venture in the forgotten colonial outpost.
"They wanted to change the face of Macau from the gambling
dens to that of
conventions and resorts," he added during recent testimony,
flashing a jack-o-lantern
grin and boasting that it would have taken a genius to imagine
the profits that he could
reap there.
Macau now powers three of the four largest American casino
companies. Sands, Wynn
Resorts Ltd and MGM Resorts International rode out the
recession thanks to the
gambling appetite of a region where notions of luck and fate are
baked into the culture,
and there is no religious taboo on games of chance.
But as U.S. corporations have remade Macau, Macau has
remade them.
The town's criminal undercurrent has resurrected the specter of
corruption the industry
worked for so long to escape. MGM has lost its license to
operate in Atlantic City, while
Sands and Wynn are under federal investigation for violations
of a touchstone anti-
corporate bribery law.
The quest for Asian riches is changing Las Vegas as well.
Casino bosses are tweaking
their flagship casinos to look and operate more like Macau-style
properties. As they
succeed, hints of organized crime are returning to Sin City, this
time in the form of
Chinese gangs.
But the moguls are undeterred, increasing their investment at

30. every opportunity.
"This industry is supply driven, like the movie Field of Dreams:
'Built it and they will
2
come.' I believe that,'" Adelson, racing ahead of his attorney on
the witness stand in Las
Vegas, where he is being investigated for bribing Macau
lawmakers and collaborating
with the Chinese mafia. "Nobody wanted it. Everybody thought
that I was crazy."
At 80 and greatly enriched now by his growing field of five
Macau casinos, the
diminutive GOP super donor adopted a professorial tone and
explained that in 2003,
Macau officials gave him a plot of land far from what passed at
the time for a main drag.
They encouraged him to fill in the surrounding bay.
"I thought, 'Do they want us to fail?'" Adelson asked, patting
the ring of brown hair
arranged across his round head.
When China reassumed sovereignty of Macau from Portugal in
1999 and abolished a
longstanding gambling monopoly, U.S. companies rushed in to
try their luck. Since then,
annual revenue in the former backwater has grown tenfold,
stacking up to $38 billion;
four times that of Las Vegas and Atlantic City combined.
Wynn Las Vegas now makes nearly three quarters of its profits
in Macau. CEO Steve
Wynn, dubbed the "King of Las Vegas" for his role in shaping

31. the contours of the Strip,
stirred a minor scandal in 2010 when he said he might ditch Sin
City and move his
corporate headquarters to China.
Sands, which owns the Venetian and Palazzo on the Las Vegas
Strip, earns two thirds
of its revenue in Macau. Adelson's first casino opening there
caused a stampede that
ripped doors off their hinges. He now describes Sands as "an
Asian company with a
presence in Las Vegas and the U.S."
When regulatory troubles forced MGM Resorts to pick between
Macau and New Jersey,
the choice was obvious.
"The Macau market is now larger than the entire U.S. gaming
market. Unfortunately for
Atlantic City, it's gone the other way. It's smaller now than
when we entered it. The
fortunes of the two couldn't be more different," MGM CEO Jim
Murren said.
Macau is in the midst of one of the greatest gambling booms the
world has ever known.
To rival it, Las Vegas would have to attract six times as many
visitors; essentially every
man, woman and child in America.
But like early Las Vegas, Macau has a long history of ties to
crime syndicates, in this
case sinister brotherhoods that first came into being on the
mainland more than a
century ago called triads. The magnate who controlled gambling
in Macau for four
decades, Stanly Ho, did little to discourage gang warfare on the
peninsula.
Sleepy town squares became incongruous backdrops for
machine-gun shoot-outs,
bombings and even assassinations of top-level government

32. officials. In the late 1990s, a
senior police official tried to reassure tourists by saying that
Macau had "professional
killers who don't miss their targets."
The history and regulations governing the enclave continue to
make it tricky for modern
casinos to avoid gangs, illegal money transfers, and at least the
appearance of bribery.
"There are some countries where you either have to pay to play
and break the law, or
you have to not do business there. I think the jury's still out on
Macau," said Steve
3
Norton, an Atlantic City veteran who now runs a casino
consulting firm in Indiana.
Adelson himself seemed to confirm this point on the stand this
spring, when he casually
mentioned that Sands had forgone a partnership with a
successful Hong Kong-based
casino operator because of a disagreement about organized
crime.
"They had expressed their judgment that they were going to do
business with either
reputed, or-- triad people, and we couldn't do that," Adelson
said, sipping from an
oversized coffee cup.
Local policies are partly to blame. China bans its citizens from
transferring more than
$50,000 off the mainland each year; a pittance at many high
roller tables, and nowhere

33. near enough to account for the towers of chips that change
hands in Macau. It also
bans casinos from pursuing gambling debts.
Partly as a result, a thriving junket system has sprung up, with
supercharged travel
agents whisking VIPs to the gambling tables, lending them
money, and then settling up
on the mainland.
Junket operators sometimes work on commission, but more
often assume management
of a private VIP room. Casinos provide the gleaming marble
facilities, dealers, and chips
in return for a cut of the profits. Two-thirds of Macau gambling
revenue is won from
baccarat played in VIP rooms.
The informal banking and debt collection system provides a veil
and an impetus for
criminal activity, according to experts and diplomatic cables.
Junkets "allegedly work closely with organized crime groups in
mainland China to
identify customers and collect debts" and "work directly with
Macau casinos to buy
gaming chips at discounted rates, allowing players to avoid
identification," according to
a memo posted by Wikileaks.
The memo, which was apparently sent from the American
Consulate in Hong Kong in
2009, continues, "Government efforts to regulate junket
operators in Macau have been
aimed at limiting competition, rather than combating illicit
activities."
Operating off the books, junkets pay out winnings in Hong
Kong dollars, which players
can then funnel to another location. As a result, Macau is seen
as a conduit for money
flowing out of China, with wealthy individuals and corrupt

34. officials suspected of moving
funds abroad. At least 15 government officials have been
executed for pillaging public
funds and taking the money to Macau.
The enclave has also seen a spate of killings and kidnappings
associated with debt
collection, including one grizzly case last year in which two
men were stabbed to death
in their four-star hotel room, discovered by a friend who had
come to give lend them the
money they needed.
And while many of the approximately 200 junkets active in
Macau are law-abiding,
some have documented ties to organized crime.
The case of Cheung Chi-tai, a major investor in the publically
traded junket operator
Neptune Group, is a prime example.
In 2011, a Hong Kong appeals court judgment said Cheung was
a "triad leader" who
4
ordered the death of a casino dealer at Sands Macau. He had
previously been identified
as high-ranking gang figure in a 1992 U.S. Senate report on
Asian organized crime.
A witness testified that Cheung was "the person in charge" of
one of the VIP rooms at
the Sands Macau, the oldest of the Adelson's Macau casinos.
He wasn't charged in the case, but a subordinate was sentenced
for conspiracy to
commit murder.

35. "There's no way you can do business over there without having
allegations made
against you, most of them are untrue," said Bill Weidner, who
was president of Sands
until 2008.
Casino bosses are now working to lure their Macau customers to
Las Vegas, in part
because Nevada imposes one fifth of China's 39 percent tax on
winnings. The biggest
casinos on the Strip have imported baccarat, now Nevada's
biggest moneymaker, Asian
pop sensations and Chinese delicacies. They've outfitting their
hallways in red, and set
up Macau-style VIP rooms that employ junkets and cater to high
rollers.
"The Las Vegas casinos are adopting that new Macau look,
trying to appeal to the high-
end Asian gambler. They can make a lot more money from a big
gambler here," said
David Schwarz, director of the Center for Gaming Research at
the University of Nevada
Las Vegas.
Asian visitors now account for 9 percent of tourists to the desert
metropolis, up from 2
percent in 2008. And the Strip is preparing to welcome its first
Asian-owned casino; a $5
billion Chinese-themed extravaganza called Resorts World,
complete with pandas and
pagodas.
But some of the crime associated with Chinese gambling halls
may be migrating to the
Strip as well.
Last year, the Treasury's Financial Crimes Enforcement
Network warned casinos to
monitor junkets operators and report "all available information"
on any suspicious

36. activity.
Sands reportedly allowed a junket operator named as a triad
member in the 1992
Congressional report to move a $100,000 gambling credit from
Las Vegas to one of its
Macau casinos.
Las Vegas is also beginning to see occasional outbursts of triad
violence.
In March, 26 year-old Xiao Ye Bai began serving a life term for
stabbing a man to death
in a crowded karaoke bar near the Strip. Prosecutors said Bai
was a martial-arts trained
enforcer for the Taiwan-based triad United Bamboo, sent to
collect a $10,000 gambling
debt.
Unlike some other states, Las Vegas allows junket operators to
work in casinos without
the full background checks required for virtually every other
employee, from blackjack
dealers to CEOs.
Some of Hong Kong operators licensed in Nevada have been
found unsuitable by other
jurisdictions, including Singapore.
5
Steve Vickers, who spent 18 years in the Royal Hong Kong
Police Force and
commanded the its criminal intelligence bureau, believes that
nearly all junkets that
cater to Chinese tourists must tangle with organized crime.
"You won't find the triad names listed as the junket operators,

37. but they are behind it,
because who is it that can reach into China and enforce the
debts, move the money?
Only one kind of person can do that," he said.
Authorities in Nevada, New Jersey and Washington DC are
investigating all three of the
U.S. companies with properties in Macau.
- New Jersey regulators objected when MGM teamed up with
Stanley Ho's daughter,
Pansy, because of the senior Ho's triad links. The state found
the partnership
"unsuitable" in a blistering 2010 report, and forced MGM to sell
its stake in the Borgata
casino in Atlantic City. MGM and the family of Pansy Ho deny
the allegations.
Nevada, where casino revenue provides about half of the state's
general fund,
examined the MGM partnership and found it acceptable.
Mississippi and Michigan also
approved. This year, New Jersey allowed MGM to re-apply for a
license.
- Wynn is under investigation for donating $135 million to the
University of Macau in
2011. A former board member says the payment was a bribe and
a violation of the
Foreign Corrupt Practice Act. In a footnote in a March legal
filing, U.S. prosecutors
revealed they were looking into the donation, but did not
elaborate.
Established in 1977 as part of a series of reforms intended to
restore the nation's
standing after the Watergate scandal, the Foreign Corrupt
Practice Act bars U.S.
companies from paying off officials to win business, though it
makes an exception for
small administrative payments that do not confer unfair

38. advantage.
The Department of Justice has recently stepped up its
enforcement of the act. As the
business world becomes more globalized and other countries
adopt similar laws, U.S.
companies can no longer argue that enforcing the ban gives an
edge to rivals.
In recent years, the act has been used to take on the
pharmaceutical company Pfizer
(for payments to foreign doctors), Rupert Murdoch's News
Corp. (for paying British
police officers for information) and Wal-Mart (for an ongoing
Mexican bribery scandal).
The law was most famously deployed in the "bananagate"
scandal, in which a U.S. fruit
company was charged with bribing the Honduran president for
favorable tax rates. The
uproar ultimately precipitated a government overthrow.
But Macau regulators draw fewer bright lines around corporate
gift-giving than their
American counterparts, according to I. Nelson Rose, a professor
at Whittier Law School
in California who writes a blog called Gambling and the Law.
What might look like a
bribe on American soil is a routine part of the culture in Macau,
he said.
Wynn says it acted properly. Nevada regulators looked into the
donation before the
federal investigation was made public and found no
wrongdoing.
-A long list of agencies, including the Department of Justice,
the Securities and
Exchange Commission and the FBI, are investigating Sands.
Those inquiries stem from
a 2010 lawsuit brought by former Sands executive Steve Jacobs.
In an ongoing

39. 6
wrongful termination suit, Jacobs says Sands' China subsidiary
allowed triad boss to run
one of the company's VIP rooms, tacitly condoned prostitution,
and made inappropriate
payments to a Macau lawmaker, among other "outrageous"
misdeeds.
Sands has denied all claims, but recently said in a Securities
and Exchange
Commission filing that an internal audit had found possible
breaches of the Foreign
Corrupt Practice Act.
The law contains two parts: it prohibits bribing a foreign
official to win patronage and it
requires that public companies file proper financial statements
and maintain a system of
internal controls. Sands admitted to likely violations of the
second, more bureaucratic,
provision.
"There were likely violations of the books and records and
internal controls provisions of
the FCPA," the company said in an annual report filed in March.
In April, the auditor for Sands' China subsidiary resigned.
Both Sands and Wynn are facing related lawsuits from
individual shareholders who
claim mismanagement has damaged the company.
It sounds bad. But is it?
Probably not, according to Fitch ratings analyst Michael
Paladino. At worst, the
companies could get fined.

40. "They can handle that," he said.
He noted that the largest fine paid in modern corporate history-
imposed on German
engineering giant Siemans A.G. for bribery- amounted to about
$1 billion. That's
equivalent to one month's profits for Sands.
Justice Department spokesman Michael Passman declined to
comment.
Wall Street seems to share Paladino's confidence. Not one
analyst or investor raised
the issue of corruption charges during recent conference calls
held by the three
companies to discuss earnings.
"For the average person going to a casino, they're not going to
stop going because the
company that owns the facility is implicated in some kind of
corruption scandal," said
Peggy Holloway, vice president and senior credit officer at
Moody's.
States also have the power to impose fines, and can revoke
licenses.
Nevada regulations prohibit casino companies from doing
anything anywhere in the
world that could "reflect discredit upon the State of Nevada or
the gaming industry."
Similar statutes exist in New Jersey, Pennsylvania, Mississippi,
Michigan, Illinois and
Connecticut, where the companies with properties in Macau
operate.
In the 1980s, these rules helped push out the mob bosses that
had taken refuge in the
casino industry and usher in its modern corporate era, though
the FBI and other federal
agencies did the heavy lifting.
A Congressional report issued in 1999 found that American
gambling was finally free

41. from the taint of organized crime.
7
That was the same year China opened Macau to U.S.
investment.
State regulators have so far refrained from public action,
preferring to stay out of federal
investigations until a conclusion is reached, Nevada Gaming
Board Chairman AG
Burnett said. But that does not mean they are sitting idle.
"I think there's an impression out there that the control board
doesn't hammer
companies, but the truth is that a lot of what goes on is dialogue
between the board and
the companies that the public doesn't necessarily see," he said.
While the regulators occasionally file complaints for egregious
violations- for instance,
the Palms hotel-casino paid a $1 million fine this winter for
abetting prostitution and drug
dealing - they prefer to handle things quietly, partly of concern
for the industry they
police.
"When you're dealing with a publicly traded company, the sheer
fact of an investigation
being made public may be damaging. And if at the end of the
day if we find that there's
no violation, then unfortunately, we may have harmed the
company," Burnett said. "It
increases our ability to work with the companies more fluidly
and have more of a
dialogue. While we work against the industry sometimes, it's

42. helpful if we can work with
them."
Conventional wisdom is that no casinos will lose their licenses
over the Macau
allegations, even if they prove true.
And in any case, Sands, Wynn and MGM have already put their
China operations into
subsidiaries which could eventually be spun off entirely.
"If I were one of these operators, I might start tallying up how
much my U.S. operations
are worth and how much my Macau operations are worth and
thinking about moving,"
said Vickers, the former intelligence officer, who now consults
about risk management
in Hong Kong.
The balance of power between casinos and regulators has
shifted as gambling
companies have achieved their own version of outsourcing,
according to Rose, the
professor.
"Macau forced the casinos to see that they could become like
other large U.S.
corporations; set up their plants and operations in other nations
and make far more than
they can being stuck just in Las Vegas," he said, speaking from
his hotel room near
Macau University, where he teaches a summer course.
It helps that public officials aren't exactly clamoring for justice.
Among the ranks of the unconcerned is former Las Vegas mayor
Oscar Goodman, who
famously demanded an apology from Barack Obama after the
president cautioned
against blowing "a bunch of cash in Vegas when you're trying to
save for college."
Sitting in the living room of his five-bedroom home among
dozens of bobble head dolls

43. cast in his image, Goodman, whose wife is now mayor, said he
doesn't worry about
Macau because Americans are not paying attention to the murky
allegations there.
"If it brought discredit to us, of course I would become
concerned, defensive, and try to
rectify the station. But the average person could care less about
this," he said,
8
straightening his pinstripe suit, an affectation left over from his
days as a nationally-
famous mob lawyer.
"You ask people who Sheldon Adelson is, if 10 out of 50
recognize the name, I'd be
surprised. If they associated him with the Venetian and the
Palazzo, I'd be even more
surprised. People are busy."
Of course, within the industry, Adelson is an object of
fascination. As the casino titan sat
in a courtroom among a phalanx of employees, security and
family members this spring,
a former rival was following along from his home 500 miles to
the north in Reno,
Nevada's second, shabbier gambling town.
While Wynn, MGM and Sands have taken off, the industry's'
fourth major player,
Caesars Entertainment International, has been left behind.
China issued a finite number gambling licenses in the early
2000s, and Caesars did not
apply for fear of upsetting domestic regulators. The company's

44. former head now calls
that an overcautious mistake.
Phil Satre, who was CEO in 2003, when Caesars was called
Harrah's Entertainment,
said that at the time, the gambling industry had at last gained a
legitimacy and mundane
familiarity that was unthinkable in the 1980s. Many executives
thought American
regulators wouldn't countenance any dalliances with criminal
elements in Asia.
"There are some things that still have to play out, but when I
look back and think about
the opportunity to go back in Macau, I'd probably take a
different posture," he said.