What happens in Vegas, stays in Macau - Defeating Organised crime in the casino cities
The Asian Crime Century briefing 49
Organised crime has been associated with casino gambling since the business started, but can be forced out if the authorities have the will and a strategy to do so. Organised crime groups were forced out of Las Vegas in the 1970s and 1980s after east coast Jewish and Italian gangs established themselves from the 1940s.
Organised crime groups, and Triads in particular, have not yet been forced out of the casino gambling business in the Macau Special Administrative Region of China, despite some enforcement action in the past several years, and some have become regional criminal enterprises that have benefitted from the massive money laundering by “junkets” in Macau casinos. There are lessons from the history of the Mob in Las Vegas that can be applied to Macau if the city is to prosper without organised crime at its core in the future.
The Mob and leaving Las Vegas
Las Vegas started to grow quickly as a city after the construction of the Hoover Dam from 1931 which led to a population of around 25,000 mostly men involved in construction who wanted entertainment during their time off. There were several gambling halls in Las Vegas during the 1930s, but the arrival of Benjamin “Bugsy” Siegel in the city in the 1940s was the start of organised crime in casinos.
Bugsy Siegel, originally Benjamin Siegelbaum, was from New York and came from a background in horse racing bookmaking, although he had a reputation for violence which was reflected in his nickname – “Bugsy” referred to his violent temper that associates said made him as crazy as a bedbug. In New York he was closely associated with Italian gangster Charles “Lucky” Luciano as well as other mobsters involved in the “Murder Incorporated” network that was a part of Luciano’s syndicate.
Siegel took over construction of the Flamingo hotel and casino in Las Vegas in 1945, but mismanaged the project and lost control of the costs. On 20 June 1947, Bugsy Siegel was killed after shots were fired into his girlfriend’s Beverly Hills home. Only minutes later, associates of Meyer Lansky, the long term friend and business partner of Bugsy Siegel, entered the Flamingo and took over.
Meyer Lansky, originally Maier Suchowlansky when he emigrated from Russia in 1911, worked with Bugsy Siegel from the 1920s to establish a partnership with Lucky Luciano, profitable for those involved as it created a peaceful collaboration between these Italian and Jewish gangs in New York. They made huge profits during the Prohibition era from bootlegging hard liquor, and augmented this with violence in their robbery, protection, gambling and loansharking businesses. Together they formed “The Syndicate”, headed by Luciano and Lansky, which included “Murder Incorporated” that dealt with enforcement for the group. Luciano was later deported to Italy, leaving Meyer Lansky as the “Chairman” of The Syndicate and operator of the Flamingo hotel and casino.
During the 1950s, more casino properties were funded and developed by Lansky’s Syndicate which led to three decades of Mob control of casinos in Las Vegas. The Mob links to Las Vegas extended to business interests in casinos in Cuba prior to the revolution, illegal gambling across the US, and reportedly led Lansky to brag in one Syndicate meeting that their businesses were “bigger than United States Steel.”
Meyer Lansky and The Syndicate invested in and built the casino business in Las Vegas, but it was boosted further by the eccentric and reclusive tycoon Howard Hughes who in 1966 moved into the Desert Inn hotel and casino as he only lived in penthouse hotel suites. Hughes refused to leave the hotel, and then purchased the Desert Inn in 1967 so that he could stay there permanently. Hughes continued to invest over $300 million in Las Vegas hotel casinos, including Castaways, New Frontier, the Landmark, the Sands, and the Silver Flipper casino that he allegedly purchased so that he could move the neon sign that was keeping him awake at night. The investments by Hughes were the start of the corporatisation of Las Vegas casinos, which played a part in reducing the influence of the Mob.
However, corporate investment alone was not enough to drive the Mob out of Las Vegas – Long term law enforcement action, in particular by the FBI, was key to reducing organised crime influence. By the 1980s, crime in Las Vegas was reportedly open to all of the 26 Mafia families. Frank “Lefty” Rosenthal was operating four casinos without a state gaming license (required for persons involved in casino management). Lefty Rosenthal was a notorious sports illegal bookmaker who had been accused of match fixing, but in Las Vegas ran casinos for the ‘Chicago Outfit’, a major Mafia syndicate. Whilst Rosenthal managed the casinos, his associate Anthony “Tony the Ant” Spilotro managed the ‘skimming’ operations for the Chicago Outfit.
From 1977 Harry Reid was chairman of the Nevada Gaming Commission and added numerous Mob associates to the “Black Book”, the Nevada list of persons banned from entering casinos. Included in the Black Book were Lefty Rosenthal and Tony Spilotro (both represented in the Martin Scorsese movie ‘Casino’). Harry Reid set the tone for facing down the Mob, and was backed up by prosecutors from the Department of Justice and investigators from the FBI.
The coordinated efforts of the political establishment, federal prosecutors, and the FBI forced the Mob our of casino operations and denied them the huge profits that they made from skimming. From the end of 1980s, the Mob in Las Vegas returned to lower level criminal enterprises such as loan sharking, extortion, drug trafficking, robbery, and illegal gambling.
Triads Staying in Macau
Macau casinos date back to the Portuguese colonial era from 1557 to 1999. In 1810, Macau introduced a charitable lottery. In 1846, the colonial government legalized Fan Tan (a game involving a random number of counters placed under a bowl with people gambling on how many will remain as four at a time are removed), and in 1847 Pai Gow (a Chinese tile game). The Macau government introduced gambling house franchises for both games, which became a source of revenue. In 1930, the Macau government launched a monopoly system for gambling houses and by 1961 the Governor declared that Macau was a “permanent gambling region.” This led to a public tender for the monopoly casino operating license, which in 1961 was won by Stanley Ho and his Sociedade de Turismo e Diversões de Macau (“STDM”) company.
Stanley Ho brought huge growth to Macau and transformed the city into the only Chinese gambling center for Chinese customers, who came from the mainland, Hong Kong, and the wider Chinese diaspora to gamble. STDM operated eight casinos in Macau, as well as a horse racing track, greyhound racing, and the only ferry service between Hong Kong and Macau. This monopoly made Stanley Ho and his associates astoundingly rich, but the involvement of organized crime groups caused doubt regarding the sustainability of the gambling business after Triad societies (criminal syndicates) came into violent conflict in 1997. Stanley Ho allowed Triads to thrive in Macau by subcontracting VIP rooms in STDM casinos to various groups, allowing them to have an income and maintain peace between competing Triad groups.
However, violent conflict between Triad societies broke out in 1997 and illustrated how extensive they had become in the casino gambling industry and how powerless both the Portuguese authorities as well as the monopoly gambling operator were to control them.
In 1997, the Macau 14K and the Wo On Lok Triad societies were in open violent conflict, leading in the first five months of the year to over a dozen murders, following 21 murders in 1996. Wan Kuok Kui destabilized the balance of power in the Macau underworld and caused the conflict by trying to capture market share from rival Triad factions. The violent conflict only ended when the Portuguese led Macau Judiciary Police arrested Wan Kuok Kui in May 1998, leading to his conviction on charges of criminal association, loan sharking, and illegal gambling, which resulted in a 15-year prison sentence.
STDM’s long established monopoly over the Macau gambling industry ended in 2002 when the local authorities allowed U.S. and other overseas corporate gambling operators to enter the market. However, organized crime involvement in the gambling business did not end, but instead criminal groups increased their revenue as they expanded their gambling marketing, money laundering, and debt collection activities into Mainland China. The US gambling operators quickly learned that they could not legally either conduct marketing to customers in Mainland China or collect gambling debts, which are not legally enforceable in Mainland China. The result has been over 20 years of massive revenue for those Triad groups that transformed themselves into “junket operators” to bring Mainland Chinese to Macau to gamble in casinos.
2002 was what could be called the “Howard Hughes moment” for Macau, as US operators granted casino licenses changed the commercial landscape, similar to how Howard Hughes had opened up Las Vegas to commercial investment in the 1960s. However, whilst Macau allowed US and international investment into the casino business it did not pursue Triads to fully exclude them. The Triad groups that had operated VIP rooms in casinos during Stanley Ho’s STDM monopoly were allowed to transition to become “junkets” that facilitated customers from Mainland China to have credit for gambling in Macau that could be collected as debts in China.
The junkets thrived, and so did the Triad members who were involved in this business. The past 20 years has been a golden period for Macau casino junkets and the Triads involved in this business, allowing them to become so cash rich that they have expanded across Asia into new businesses and also funded other criminal enterprises.
Some junket operators have diversified their businesses internationally into other sectors such as financial (lending, investment, securities, asset management), equine (e.g. Eliza Park stud farm in Australia), mining, property and manufacturing. Others sought to expand their gambling business to countries with lax regulatory controls such as Saipan and Vanuatu. This allowed some junkets operators to try to legitimise their business model by buying companies to form a conglomerate structure.
The scale of the Macau junket problem was such that they were effectively major underground banks that moved money for customers between cities in the region where other casinos are located (Da Nang, Manila, Phnom Penh, Melbourne, Sydney, Vladivostok). This enabled Triads to become global money launderers.
The Chinese authorities have cracked down on illegal betting and gambling since 2018 and the Macau junket operators have been a target of this action. However, only several junket operators were subject to criminal charges, in Wenzhou by the Public Security Bureau and in Macau by the Judicial Police. The lesson for the Chinese authorities to take from Macau is that the efforts to exclude the gambling industry of organised crime must be continual. It took decades for the FBI and other US authorities to combat the Mob in Las Vegas and exclude them from the most profitable business line, casino skimming.
The problem in Macau, and for China more widely, is that Triads operating junkets are now well established in the money laundering and underground banking business and it will be harder to degrade their operations because of their regional spread. Removing them from front line casino business is a good start, but law enforcement and prosecution efforts against the multiple criminal business lines of Triads involved in betting and gambling need to be continual. What happens in Macau must stay in Macau, and not continue to expand as a regional and even a global criminal justice problem.