Friday 28 August 2009

Gambling ‘whale’ says US$110m casino debts are really loans

A Japanese-American gambler who lost more than US$110 million in Las Vegas casinos is waging a Nevada court battle, the outcome of which could affect Hong Kong legal judgments against such high-rollers.

2 comments:

Guanyu said...

Gambling ‘whale’ says US$110m casino debts are really loans

Neil Gough
27 August 2009

A Japanese-American gambler who lost more than US$110 million in Las Vegas casinos is waging a Nevada court battle, the outcome of which could affect Hong Kong legal judgments against such high-rollers.

Terrance “Terry” Watanabe, who lost the money in casinos owned by Harrah’s Entertainment, is asking a Las Vegas court to throw out charges that he defaulted on gambling debts. He alleges the casinos plied him with alcohol and prescription drugs to keep him intoxicated while playing.

He also claims that under the casinos’ system for granting credit to high-rollers, his “markers” were, in essence, loans and that he should be given greater leeway in paying them.

The Clark county district court has scheduled a hearing today to consider motions filed by the Nebraska philanthropist, who once ran a direct marketing business importing toys and novelty items from the mainland and Hong Kong. He is asking the court to dismiss a grand jury indictment against him for writing 38 bad cheques to pay gambling debts of US$14.7 million.

If successful, Mr. Watanabe’s move could prompt a rethink of the way that Las Vegas casinos have, for decades, enforced gambling debts via the courts. It is a system that has been recognised repeatedly over the years in Hong Kong legal judgments against local, Macau and mainland high-rollers.

By all accounts, Mr. Watanabe, 52, was a “whale”, or a gambler of epic proportions. His lawyers estimate his play at Harrah’s Caesars Palace and Rio casinos in Las Vegas accounted for around 20 per cent of revenue at both properties in 2006 and 2007.

Harrah’s - the world’s largest gaming company by revenue - created a unique “chairman” level in its customer loyalty programme, issuing Mr. Watanabe a membership card signed by Harrah’s chairman and chief executive Gary Loveman.

Mr. Watanabe’s gaming history statement for 2007, issued by Harrah’s and filed with the court, shows he lost US$112.01 million gambling at seven of the company’s casinos that year. About half of that amount was from playing slot machines.

“Terry Watanabe was among the most noteworthy gamblers in the history of Las Vegas,” court documents filed by his lawyers said.

Spokesmen for Harrah’s did not reply to an e-mail and a phone call seeking comment.

In the 1980s and 1990s, while running his family’s Oriental Trading Company, which he sold to a private equity group in 2000, Mr. Watanabe made about 20 trips a year to Hong Kong and the mainland. He would occasionally bet on horse races at the Hong Kong Jockey Club or visit casinos in Macau, but nothing on the scale of his recent Las Vegas activity, a source close to him said.

Mr. Watanabe was indicted by a Clark county grand jury in April on felony charges of theft. The judge in the case is scheduled to hold a hearing today on motions filed by Mr. Watanabe’s lawyers seeking to throw out the charges. Mr. Watanabe’s lawyers claim Harrah’s Caesars Palace and Rio casinos plied him with alcohol and prescription painkillers over the course of several months in late 2007. While visiting the casinos during this period Mr. Watanabe was “significantly and visibly intoxicated”, to the point that his speech was slurred, according to filings by his legal team. He walked into doors and took naps at the tables while gambling, the filings said.

Gaming watchdogs can take disciplinary action against casinos who allow visibly intoxicated people to gamble or supply them alcohol.

But perhaps the bigger legal challenge being mounted by Mr. Watanabe’s lawyers is to the Nevada casino industry’s system of issuing credit and collecting debt.

Guanyu said...

High-rollers visiting Las Vegas usually sign credit agreements with casinos specifying a maximum amount of credit that can be issued. Each time a player draws down funds against the credit line he signs a specific “marker” for the amount, which is paid in chips. If the player loses and doesn’t pay, casinos can then deposit the markers with the bad cheque unit of the local district attorney’s office, which, under Nevada law, is empowered to take legal action to reclaim the debt on behalf of the casinos.

Since at least the early 1990s, Nevada casinos have used Hong Kong courts to enforce gambling debts incurred in Las Vegas by punters from the city, Macau and the mainland.

While casinos are illegal in Hong Kong, there are multiple precedents for local courts accepting the Nevada laws governing casino credit agreements. They allow Las Vegas creditors to enforce a debt against a punter’s Hong Kong assets.

High-profile cases have included that of Macau legislator, junket operator and developer David Chow Kam-fai. In 2000, he was sued in Hong Kong for nearly US$5 million in gambling debts related to a 1995 credit agreement he signed at the Sheraton Desert Inn in Las Vegas, which was subsequently acquired by casino developer Steve Wynn. Mr. Chow and Mr. Wynn settled out of court in 2004.

This month, a High Court judge ruled that high-roller Henry Mong Hengli must pay US$3 million in casino debts to Mr. Wynn’s Wynn Las Vegas, which he ran up last year.

Mr. Watanabe’s lawyers are seeking to dismiss the charges partly on the grounds that the credit markers he signed should not have been treated by Nevada authorities as “bad cheques” that were repayable on demand. His lawyers contends that he had a standing agreement with Harrah’s that allowed him at least 60 days to repay markers - terms which made them more akin to loans.

Should the judge agree with that argument, it could have a far-reaching impact on how courts in Nevada, and, in turn, Hong Kong handle casino debt cases. While Mr. Watanabe may be one of the biggest whales in the pond, other high-rollers will no doubt be watching.