* State report finds Pansy Ho “unsuitable”
* Regulators question MGM’s conduct
* MGM shares fall 0.3 pct
(Adds background, byline, updates share price)
By Deena Beasley
LOS ANGELES, March 17 (Reuters) - MGM Mirage (MGM.N), accused by New Jersey authorities of links to the Chinese mob, has sealed a plan to exit the weakened Atlantic City market in favor of the booming Chinese gambling center of Macau.
New Jersey’s Division of Gaming Enforcement had accused the company last year of questionable conduct in associating with Pansy Ho, the daughter of Macau gambling tycoon Stanley Ho, who they said is linked to Chinese organized crime.
Pansy Ho is a 50-percent partner with MGM in its MGM Grand Macau casino.
MGM’s plan to sell its stake in the Atlantic City Borgata casino and give up its New Jersey gambling license, first proposed in February, was approved on Wednesday by state regulators.
“From the beginning of its efforts to enter Macau, MGM pursued partnerships with persons that it knew were associated with those aspects of gaming in Macau most heavily penetrated by organized crime,” the enforcement division said in a previously confidential report released on Wednesday.
The former Portuguese colony’s transformation from a seedy gambling haven into a Las Vegas-style entertainment paradise since 2002 has meant stiff competition for the elder Ho, although he still controls one of six gambling licenses in Macau.
Sometimes known as the godfather of gambling, Stanley Ho, a patriarch of mixed European and Chinese parentage, heads an extended clan of 17 children born to his four wives.
The report from the New Jersey enforcement division cites documents such as 1992 testimony at a U.S. Senate Subcommittee hearing stating that Stanley Ho had direct associations with known members of Chinese triads.
It concluded that Pansy Ho’s relationship and financial ties to her father, as well as “her associations with persons alleged to be associated with organized crime render her susceptible to influence by unsuitable persons.”
The report also said Las Vegas-based MGM’s conduct in pursuing and consummating the Macau joint venture “raises concerns about its commitment to corporate regulatory integrity.”
The gaming enforcement division said MGM’s due diligence and compliance efforts were deficient.
MGM is laying the groundwork for an initial public offering of shares in the joint venture.
Gambling revenue in Macau, which overtook Las Vegas several years ago to become the world’s No. 1 gambling center, rose nearly 70 percent in the first two months of this year. In Atlantic City, hurt by new competition from surrounding states like Pennsylvania as well as the recession, gambling revenue fell 25 percent between 2006 and 2009.
MGM once had plans to build a multi-tower project on 55 acres of land it owns adjacent to the Borgata, but those plans were put on hold several years ago.
“The DGE’s (Division of Gaming Enforcement) report acknowledges there is no evidence that Pansy Ho has engaged in any wrongdoing or been accused of any illegal activity,” MGM Chief Executive Jim Murren said in a statement.
The company owns the Borgata through a 50-50 joint venture with Boyd Gaming Corp (BYD.N).
MGM said it will place its interest in the Borgata and related leased land in a divestiture trust. The settlement mandates the sale of the trust property within a 30-month period.
If the company has not found a buyer within 18 months, the trustee would then take over the sales process, having another 12 months to conclude a deal.
Shares of MGM fell 4 cents to close at $12.26 on the New York Stock Exchange.
Reporting by Deena Beasley; Editing by John Wallace and Richard Chang