It’s a Brawl. China’s Gamblers Are the Prize.
LOOKING like a giant, twinkling Fabergé egg, and topped by a 52-story hotel tower in the shape of a soaring lotus flower, the new Grand Lisboa casino here caters to tens of thousands of tourists, mostly Chinese. They crowd around 170 baccarat tables and yank levers on hundreds of slot machines in a round-the-clock gambling frenzy, making it quite clear why this tiny territory west of Hong Kong is known as “Asia’s Las Vegas.”
The Grand Lisboa is also the crown jewel of a casino empire controlled by Stanley Ho, the strong-willed and secretive billionaire who for 40 years held the city’s only gambling license. Mr. Ho maintained a lock on the gambling trade here despite longstanding allegations by government authorities worldwide that his casinos had ties to organized crime and were engaged in money laundering, loan sharking and prostitution (allegations that his competitors have been more than happy to keep in play).
Today, five years after Mr. Ho’s gambling monopoly expired, his casinos are under assault from a group of ambitious Las Vegas tycoons who are investing billions of dollars in a city that recently passed the Las Vegas Strip as the world’s biggest gambling destination.
Enthused by the prospect of operating in China, home to the world’s most fanatic gamblers, the Americans plan to transform this sleepy, former Portuguese colony into a glitzy wagerer’s paradise, replete with luxury hotels, upscale shopping malls and, of course, lots of casinos. They also hope to bury Stanley Ho’s old casino empire, a collection of smoky ballrooms that thrived for decades by offering no-frills gambling.
“Stanley Ho’s not going to do very well,” boasts Sheldon G. Adelson, chairman of the Las Vegas Sands Corporation and one of the big new investors here. “He’s always been a monopolist. He’s never had to compete in a real market.”
This tiny city, one of the most densely populated places on the planet, already looks like a enormous construction zone. The Wynn Macao hotel and casino, from the Vegas heavyweight Steve Wynn, opened last September. The MGM Mirage has a huge project going up next door. And Las Vegas Sands is building the world’s biggest casino and convention center — the nucleus of a mammoth, $12 billion development staged on a parcel of land reclaimed from the sea and rebranded as the “Cotai Strip.”
To counter this foreign invasion, Mr. Ho, 85, has announced a clutch of his own outsized projects, which include the Grand Lisboa, a pair of huge real estate and casino developments named Oceanus and Ponte 16, and a giant theme park called Fisherman’s Wharf.
Mr. Ho declined repeated interview requests for this article, but a spokesman for his company, Sociedade de Jogos de Macao, or SJM, said Mr. Ho is confident he can meet the competitive threats posed by outsiders staking claims to the gambling boom. In other interviews, Mr. Ho has struck an equally confident tone.
“Let me put it this way: We are the only gaming concessionaire which is rooted in Macao. Being a local enterprise, all the money I made I put it back and invest it in Macao,” he said in an interview last month with Macao Closer, a local magazine. “But the Americans, they make a lot of money, and it all goes back to Las Vegas.”
Last year, 22 million tourists visited Macao — up from about 7 million in 1999. Most visit the casinos. While Chinese workers make less than $150 a month, on average, many of them still have a remarkable propensity to gamble.
Consider this: the average table in Macao earns three times more than a comparable table in Las Vegas, according to C.L.S.A. Asia-Pacific Markets, the investment bank. And some of China’s high rollers are placing $200,000 bets in exclusive V.I.P. rooms, which is one reason that Macao posted $6.9 billion in gambling revenue last year, outpacing Las Vegas.
That’s also why Mr. Ho is one of the world’s biggest casino operators. His gambling company, according to regulatory filings, reported $4.3 billion in revenue in 2005, the most recent year for which that data is available. Harrah’s is the only other gambling company that raked in more money.
BUT the circuslike atmosphere here has only deepened the mystery surrounding Mr. Ho, whose long career is a touchstone for all the financial torrents that have washed across Macao — and China as a whole — in recent decades. Mr. Ho is a swashbuckling entrepreneur and state-sponsored gambling impresario who has had four wives and 17 children and now oversees a global empire that stretches from Brazil and Canada to Portugal and Iran. Although gambling remains the centerpiece of his holdings, he also owns Macao’s biggest department store and its second-largest bank and has a stake in its budget airline.
His friends point out that he has won accolades from the Vatican and has been pictured with George H. W. Bush, Bill Clinton and Queen Elizabeth. His detractors point out that he has also befriended the North Korean leader Kim Jong-il. (Mr. Ho opened a casino in Pyongyang several years ago.)
Here in Macao, Mr. Ho is a legend — the man whose wealth helped build the city’s roads, bridges and a 1,109-foot-tall landmark tower, as well as the city’s ferry terminal and its international airport. For years, his supporters point out, his gambling concession accounted for nearly 70 percent of the city’s tax revenue.
“He’s the one who brought in the hydrofoils and connected Hong Kong to Macao. Before the boat took four and a half hours; now it’s 50 minutes,” says the Rev. Lancelot Rodrigues, 83, a retired Catholic priest who says he has known Mr. Ho for 40 years. “He’s the one who put Macao on the map.”
Stanley Ho was born in 1921, into one of Hong Kong’s wealthiest and most prominent families. His grandfather, who was of Chinese and European descent, was a comprador, or go-between, for Jardine Matheson, the legendary British trading house and power broker that once dominated the colony’s maritime trade as well as its opium trade. Mr. Ho’s uncle helped finance Sun Yat-sen, who led the overthrow of the Qing Dynasty in 1911 and founded the Chinese Republic. And his father was a comprador for the powerful Sassoon trading house.
But in the 1930s, amid a global depression, Mr. Ho’s father went broke and fled to Vietnam, leaving the family penniless. In 1941, after the Japanese occupied Hong Kong, Mr. Ho dropped out of college and fled with other refugees to Macao. There, he made his first fortune by helping to run a trading company that swapped goods with the Japanese in exchange for food to feed Macao’s starving population, according to an account he gave to a local magazine here.
After the war, according to that account, Mr. Ho returned to Hong Kong a wealthy man. He built upon that success in 1962, when he helped form an investor group that won the exclusive right to run all of Macao’s gambling operations. Mr. Ho had promised to bolster tourism by modernizing Macao and upgrading its infrastructure. But the main business of the original company — Sociedade de Turismo e Diversões de Macao, or STDM — was gambling, which was legalized in Macao in 1847 after Hong Kong unseated the Portuguese colony as the region’s major trading port.
Although gambling has deep roots here, it didn’t really flourish until the late 1980s, after China’s economic reforms created a class of wealthy Hong Kong entrepreneurs eager to gamble at Mr. Ho’s flagship, Casino Lisboa, known for its smoky gambling dens and a lobby teeming with prostitutes.
According to gambling historians here, the bulk of Mr. Ho’s gambling revenue came from V.I.P. rooms he subcontracted out to groups that lured Asia’s high rollers to Macao; the subcontractors shared the gambling profits with Mr. Ho’s casinos.
Law enforcement officials and gambling analysts say that many of the V.I.P. room operators had links to Chinese organized crime groups known as triads.
Mr. Ho said in a statement that he cooperated with the authorities in fighting organized-crime and triad activities.
Gambling experts say that Mr. Ho’s subcontracting of the V.I.P. rooms was an inspired business move because it required little investment on his part. It also essentially outsourced the collection of huge gambling debts. By subcontracting the V.I.P. rooms, Mr. Ho’s casinos had only to provide the rooms, chips and dealers; the casino did not have to search for big customers, do background checks or ensure that the high rollers paid their debts.
“This was a useful way to maximize profits,” says Davis Fong, a gambling expert at the University of Macao, about Mr. Ho’s relationship with the V.I.P. room operators. “He didn’t need to invest a lot, just rely on the middleman and increase revenue. He could just sit there and make money.” That cash spigot came under threat in 1999, when Portugal returned Macao to Chinese control after more than 440 years of colonial rule, and again in 2002, when Mr. Ho’s license to retain a monopoly hold on gambling in the former colony was set to expire. On both occasions, Mr. Ho scrambled to soften the impact of the shifts. Worried about a Communist takeover in the late ’90s, he continued to diversify his holdings, which came to include shipping, entertainment and real estate, while also relocating some of his investments offshore.
He also tried to retain his control of Macao’s gambling business by getting his monopoly license extended, but the fate of that effort was probably sealed when rival gangs fought for control of his V.I.P. rooms before China took control of the colony. A rash of shootings, stabbings and bombings occurred near Macao’s casinos. An official working for Mr. Ho was murdered in Victoria Park in Hong Kong, and a senior Portuguese official who came to the city to help calm things down was shot in the face. Press accounts were filled with stories of gangsters terrorizing the city. The bloodletting ceased only after China took control of Macao and deployed its army to end gang warfare.
Law enforcement officials never publicly accused Mr. Ho of being an organized-crime figure, but even Mr. Ho himself never denied that organized-crime figures operated in his casinos. In a written response delivered through his spokeswoman last week, Mr. Ho said: “During the period before the liberalization and the crackdowns on organized crime, anyone involved in gaming was vulnerable to such accusations” of having links to organized crime. He added that in his case, “There has been no concrete evidence to back up such accusations.”
Others say Mr. Ho has navigated complex relationships for years. “Stanley Ho was involved in a lot of things,” says Bertil Lintner, author of “Blood Brothers,” a book that chronicles the world of organized crime in Asia and Macao. “It was impossible to run a casino in Macao without getting involved with the triads.”
AT the time of the handover, there was already a sense among some people here that Mr. Ho’s casino empire had grown too powerful. As a joke of the time went, Macao was not a territory with a casino company, but a casino company with a territory.
“The biggest concern at the time was the unsavory atmosphere” in Macao, said Professor Fong at the University of Macao. “There were so many criminal activities. So the city’s new chief executive, one day after the handover, he said we’d like to use competition to clean up the market.”
And so, in 2001, Macao began to open itself up to a new era of casino competition, setting the stage for a phenomenal tourism and gambling boom. With China’s economy soaring and its residents being given more freedom to travel, millions of wealthy Chinese entrepreneurs flooded Macao.
That’s why 21 casino operators from around the world bid for a gambling license here a few years ago. Although Mr. Ho lost his monopoly in 2002, he still managed to secure one of just three major gambling concessions Macao awarded that year, pitting him against seasoned American casino operators like Mr. Wynn and Mr. Adelson.
Yet Mr. Ho is used to operating in a Macao that once catered only to hard-core gamblers locked up in V.I.P. rooms, who chain-smoked and placed huge bets. Macao had no showgirls, no cabarets and few five-star hotels.
The newly opened Wynn Macao is spectacularly plush; the $1 billion MGM Grand Macao will open at the end of this year, featuring a 600-room hotel and casino. And Mr. Adelson, of Las Vegas Sands, plans to bring Venice to Macao with an outsized hotel and casino called the Venetian; it will offer 500,000 square feet of gambling space and 6,000 slot machines.
Partly because of his ambitious plans for Macao, the company that Mr. Adelson took public in 2004 now has a stock market capitalization of $32 billion, making it the world’s most valuable gambling concern. When his Sands casino opened here in 2004, people broke doorways as they stampeded to enter. The Venetian represents an effort to take further advantage of that demand. “This is just the tip of the iceberg,” Mr. Adelson boasts.
Still, analysts are hesitant to count out Mr. Ho. “He’s the kind of guy who won’t accept defeat,” says Ricardo Pinto, publisher of the Macao Closer magazine. “This is a guy who was kidnapped by a gambler, held hostage in a casino. He was also threatened by the people that went into the gold trade. And he tried to grab that, too.”
MR. HO — a dapper billionaire with a penchant for ballroom dancing — has been quietly plotting his counterattack and making deals everywhere, putting the chips in place to ensure that the Ho family dominates Macao for years to come.
In a series of corporate maneuvers, Mr. Ho first placed his son, Lawrence Ho, 30, at the helm of a Hong Kong-listed company he controlled. Then he helped that company, Melco International Development, form a joint venture with Publishing & Broadcasting Ltd., one of Australia’s biggest media and entertainment companies. The new joint venture, Melco PBL, is building several large casinos and hotels in the city. It went public in the United States last year and already carries a stock market valuation of $6.8 billion.
In another move, Mr. Ho’s daughter Pansy, 44, who helped him manage his Shun Tak conglomerate, formed a joint venture with MGM Mirage, giving her a 50 percent stake in a company that is building some of Macao’s biggest casinos.
Mr. Ho is also fortifying his own casino giant, SJM, by investing in dozens of real estate and casino projects around Macao, including the $800 million Oceanus casino, which is designed in the shape of a silvery ship. His latest show of strength, the opening of the Grand Lisboa to huge crowds over the Chinese New Year holiday, attracted about 500,000 visitors in 10 days, according to SJM.
But to succeed, he must cope with something his competitors are not facing: a relentless series of attacks on his career and the means by which he amassed a privately held fortune that analysts estimate to be worth several billion dollars.
With regulators scrutinizing his every move, Mr. Ho resigned from Melco, allowing his son to take over. And according to his business advisers at SJM, Mr. Ho has effectively broken the company into two casino operators — one company controlled by Mr. Ho’s longtime managers and another group headed by Frank McFadden, who recently worked for Mr. Adelson at Las Vegas Sands.
“After a 40-year monopoly, there is inertia,” Mr. McFadden said in an interview. “We need to bring modern practices.”
BUT Mr. Ho’s past continues to haunt efforts to revitalize his casino empire. Though Mr. Ho has never been charged with a crime, gambling regulators in Canada, Australia, the Philippines and Singapore have repeatedly investigated Mr. Ho’s background and have often blocked or discouraged his entry into their gambling markets.
Last month, Nevada regulators approved the MGM Mirage deal with Pansy Ho, but not without hinting at the sensitivity surrounding the Ho legacy.
“There are volumes of controversy surrounding Dr. Stanley Ho, both historic and present,” one Nevada regulator told The Associated Press last month. “From my perspective, he operates in an environment that is less transparent than I am comfortable with.”
In a civil court case in Hong Kong involving a group of Chinese bank officials who were accused of fleeing to the United States from China with hundreds of millions of dollars, evidence has surfaced that some of the money was laundered through Mr. Ho’s casinos.
Mr. Ho’s spokeswoman said the company has cooperated with Macao authorities to combat organized crime and that gambling activity in the city is strictly regulated.
Elsewhere in the United States, New Jersey casino regulators are examining Pansy Ho’s deal with MGM Mirage. Assemblyman Richard A. Merkt, a former gaming regulator, called on state regulators to investigate Mr. Ho because of his concerns about Mr. Ho’s possible organized-crime ties. Pansy Ho declined to comment for this article.
For its part, the Justice Department said in a March 2006 report on narcotics control and money laundering that because of the old monopoly framework in Macao, “organized crime groups were, and continue to be, associated with the gaming industry through their control of V.I.P. gaming rooms and activities such as racketeering, loan sharking and prostitution.”
Turmoil is also brewing closer to home. Although Mr. Ho has announced plans to take SJM public in an offering that analysts say could raise $2 billion, the public offering has been mired in a legal battle with Winnie Ho, his sister.
Winnie Ho has contended in a lawsuit filed in Macao that she actually provided most of the initial capital for the original company, S.T.D.M., in 1962, then helped run the company until 2001. But over the years, she says, her brother cheated her out of her shares and cheated investors out of $3.9 billion in dividends over four decades.
Mr. Ho declined to comment on the lawsuit for this article but in court has disputed many of his sister’s allegations. Ms. Ho declined to comment about the dispute.
Despite the opposition he faces on many fronts — from gambling regulators, from new competitors in Macao and from his own family — Mr. Ho appears undeterred. In his interview with Macao Closer, he talked brashly about his past and his future, saying he battled pirates during World War II and weathered death threats when he opened his first casinos.
And now, he says, he can battle the Vegas giants because his casino company is the toughest.
“You see, the word ‘no’ never appears in my dictionary,” he said. “All my life, I love challenges and never accept the answer ‘no’ so easily.”
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