In the latest high-profile case of questionable activity in a major Strip resort, Fontainebleau is under investigation. News of the investigation was leaked by none other than the Nevada Gaming Commission, during a meeting to review the license application of Maurice Wooden, president of Fontainebleau. Wooden was asked about the granting of credit to a specific customer. Wooden was caught off guard and said he had no knowledge of the subject. The chairman of the Control Board interrupted and said, “I don’t want to go any deeper into this matter until the Board has an opportunity to review it and, of course, speak with the licensee.”
Wooden was granted a license, but only a temporary for two years. The Gaming Control Board will continue its investigation, then determine if Wooden bears any responsibility in this case or any other that surfaces in the investigation.
The issue falls under the broad category of money laundering, which the federal Bank Secrecy Act deems a high priority. Nevada takes the Act seriously; the last thing the Silver State wants is federal intervention in its number-one industry.
According to the Research Division of the Nevada Legislative Counsel Bureau, gambling in Nevada is a big deal and very important to the state. The report states: The legislature has declared that “the gaming industry is vitally important to the economy of the state and the general welfare of the inhabitants.” Due to that importance and the threat of federal intervention, Nevada has developed a comprehensive system designed to regulate all aspects of gaming. The Nevada Revised Statutes set forth the state’s policy concerning gaming, stressing strict regulation by means of licensing, controlling, and assisting activities related to gaming.
Regulation 3.090 states: “No license shall be granted unless and until the applicant has satisfied the Commission that the applicant: a) Is a person of good character, honest, and integrity; b) Is a person whose background, reputation, and associations will not result in adverse publicity for the State of Nevada and its gaming industry…” Still, some things slip past the regulators and are only discovered later.
In May 2024, the Nevada Independent published a piece by Howard Stutz titled, “Is Nevada’s ‘gold standard’ of gaming regulation in jeopardy after money-laundering cases? Howard describes the 1961 crisis when the then-U.S. Attorney General Bobby Kennedy was threatening to shut down the gaming industry in Nevada. From Grant Sawyer’s oral history, Hang Tough, Stutz quotes former Governor Sawyer as saying Kennedy believed that “everybody who lived in or came to Nevada was corrupt.”
Governor Sawyer fought back and held off Kennedy, in part with Kennedy’s brother’s help. Under Sawyer’s guidance and later by his example, Nevada began to tighten and improve its regulation. After collecting the taxes, licensing has been the key focus of regulation. Subsequently, proper accounting methods, “internal controls,” also became very important. A routine accounting audit found the questionable credit activity at Fontainebleau. After the Bank Secrecy Act passed in 1970, procedures to track money exchanges were added. The state has continued to add and refine the regulations, leading Nevada’s regulation to earn the label, “Gold Standard of Gaming Regulation.” But as Howard Stutz points out, that could be in question.
The reason is simple: the number of cases of money laundering, illegal betting, and unauthorized agents that have occurred. Harrah’s, MGM, Wynn, and Resorts World are among the resorts that have been investigated and fined. In Wynn’s case, it forfeited $130 million to settle with the U.S. Justice Department and paid $5.1 million to the state of Nevada. Resorts World’s involvement with the Control Board is more complicated and it led to a restructuring of the resort and new management and an oversight board dedicated to compliance with all regulations. All the cases were high profile and received a great deal of national media attention. Not good for Nevada’s reputation.
Up to this point, individuals have been held responsible and some have lost their gaming license. Corporations have been fined, but none has lost its license. But it could happen. The Nevada regulatory system is very good, but it is not foolproof. And rogue individuals do manage to circumvent the law and profit through illegal practices. The state’s reputation suffers and punishing an individual and fining a corporation may not be enough.
Eventually, when Nevada, its officers, and agents are sufficiently embarrassed, some corporation will have to pay the ultimate price. It has happened elsewhere. Remember, it is against the law to create “adverse publicity for the state of Nevada and its gaming industry.”
