Sweeping reforms miss casino giants:
Gaming firms already face tough scrutiny

August 06, 2002 - "If the rest of corporate America behaved as well as the gaming industry, we would be in good shape."

With investor confidence shattered by corporate corruption, President Bush signed into law last week the most sweeping reform bill since the Great Depression.

Gaming officials and analysts said, however, they see little impact on the critical local industry.

"If the rest of corporate America behaved as well as the gaming industry, we would be in good shape," said Glenn Schaeffer, president and chief financial officer of Mandalay Resort Group. "It's ironic, but Las Vegas should shine as a good example."

In an industry is already heavily scrutinized by federal regulators, there is little chance an Enron or WorldCom scenario could arise, gaming executives agreed.

"Our business is so highly, highly regulated, I don't think it will affect us at all," said George Maloof, whose family owns the The Palms Hotel and Casino, a private company. "Our business is based on revenue that happens day-to-day."

"I don't see any potential Enrons in the gaming industry. I think that would be next to impossible," he said.

Others echoed the thought.

"We don't anticipate any changes at all," said Gary Thompson, spokesman for Harrah's Entertainment. "We operate 25 casinos in 12 different states, and the regulatory agencies in those states all do their own audits."

Schaeffer agreed.

"It's an important issue in America, but in terms of Nevada, I don't see us being affected," he said. "We had the highest reporting standards before this happened. We pay the state off the top line - the revenue's top line."

The corporate reform bill stiffens penalties for white-collar crimes, making securities fraud punishable by 25 years in prison and making destruction of audit documents a felony, increasing the maximum fine for individuals and companies to $5 million and $25 million, respectively.

"Because we are probably the most highly regulated industry in the country, I think we will adapt more quickly," said Rob Stillwell, a spokesman for Boyd Gaming.

The bill also requires prompt corporate disclosure to the SEC of any information that may affect financial statements, restricts accounting firms ability to perform consulting services for the companies they audit and requires corporate officials to to personally certify the accuracy of company reports with the threat of civil or criminal penalties.

In addition, the bill bans corporate loans to executives and creates an oversight board to set standards and review public companies' audits.

Gaming firms, like Mandalay Resort Group, should be unaffected by corporate reform laws.

"It is more focused on larger firms which, in Nevada, are gaming companies," said Brian Gordon, principal with Applied Analysis.

"Nationally, it may make CEOs and CFOs think twice before reporting, but my guess it that there won't be a lot of change here."

Gaming giants may see the future make-up of their boards change in order to comply with future legislation concerning the impartiality in board members, Gordon said.

"Gaming companies will also have to use a different CPA from the one doing financial statement or external audit," Gordon explained. "This will mean some audit companies losing business and some picking it up, and that will ultimately cost the gaming companies more money because they'll have to retrain people."

Some of those in the industry said they aren't worried. Now it's the rest of corporate America that will be put at under the microscope that has examined gaming for so long, Thompson added.

"We already have our own internal auditors, but future legislation about the make-up of the board could affect gaming companies," Stillwell said.

"Gaming is more regulated than the pharmaceutical industry. It is regulated like the nuclear power industry," Thompson added. "Gaming is a cash industry. In all of our (earnings') reports, all of our numbers are there."

Harrah's also had a program in the works for its employees to report corruption or unethical business practices while remaining anonymous, he said. The federal bill prohibits retaliation against whistle-blowers.

At least one accounting firm is taking a wait-and-see approach.

"We believe the total package of reforms in this law can represent a step forward in restoring investor confidence," Paul Marinaccio, a national spokesman for Deloitte & Touche, said in a statement. "For the law's objectives to be met, it is important that the individuals appointed to the Public Company Accounting Oversight Board be of the highest caliber and have the needed expertise."

"While we have expressed reservations about the impact some aspects of the law may have on our profession, we are hopeful that the rule making to implement the law will proceed with appropriate care to avoid any effects that would be detrimental to the public good," he added.

Meanwhile, gaming could benefit from the bill, Stillwell said. "I think the gaming industry is probably one of the most transparent industries in the country, and that might have piqued investor interest," he said.

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Article Copyright ©: V. Miller, LV Business Press