Caesars Says Grand Jury Probes Possible Bank Law Violations

Caesars Entertainment Corp. said U.S. regulators and a grand jury are investigating alleged Bank Secrecy Act violations at its flagship Las Vegas casino. Nevada gaming officials are also involved.

Desert Palace Inc., owner of Caesars Palace, was told on Oct. 11 that the Treasury Department’s Financial Crimes Enforcement Network is investigating whether to assess a civil penalty and take enforcement action, the Las Vegas-based company said today in a filing. A U.S. grand jury is investigating, Caesars said. The casino company declined further comment.

Over the past four days, investors in Caesars, the biggest operator of U.S. casinos, learned the company was under the scrutiny of federal regulators and two states. Caesars pulled out of a project in Boston and ended a licensing deal for a hotel in Las Vegas, after Massachusetts investigators recommended the company’s permit be denied. Today, Caesars disclosed the money-laundering probe and said officials also raised questions about the head of its online gaming business.

“If federal laws have been violated, that could very well lead to disciplinary action based upon Nevada gaming laws,” A.G. Burnett, chairman of the Nevada Gaming Control Board, said in an e-mail. The state is investigating matters regarding Caesars Palace and is working with U.S. regulators, he said.

Caesars, the largest owner of U.S. casinos, fell 4.8 percent to $17.81 at the close in New York. Caesars’ 10 percent notes maturing in December 2018 declined 0.8 cent on the dollar to 47 cents, increasing the yield to more than 31 percent.

The company said it’s cooperating with federal investigators.

Banking Probe

“Governmental authorities have been increasingly focused on anti-money laundering policies and procedures, with a particular focus on the gaming industry,” Caesars said in today’s filing.

Caesars left the Boston project on Oct. 18 over concerns raised by state officials. They cited one of the parties involved in the Las Vegas hotel project, past jobs held by the head of its interactive unit and the parent company’s $23 billion in debt.

Massachusetts officials recommended the company not be licensed, Chairman and Chief Executive Officer Gary Loveman said in an Oct. 19 telephone interview.

Caesars signed an agreement with Gansevoort Hotel Group to rebrand Bill’s Gamblin’ Hall & Saloon on the Las Vegas Strip into a boutique hotel. Arik Kislin, an investor in Gansevoort, was identified in German court filings as allegedly having ties to organized crime in Russia, according to a 2012 report in the New York Post.

Massachusetts Report

Gansevoort agreed to end its role in Las Vegas to minimize any controversy for Caesars, Nancy Friedman, a spokeswoman for the hotel, said in an e-mailed statement. Kislin’s lawyer, Lisa Cohen, told the Post at the time that he had “no recollection” about the company with the alleged mob ties.

The report by Massachusetts gaming investigators also noted matters related to the CEO of Caesars Acquisition Co., a unit of the company that is selling shares to the public, and his work at public companies in the gaming industry prior to his employment with Caesars, the company said in today’s filing.

Mitch Garber, the CEO of Caesars Acquisition, served in the same position at PartyGaming Plc starting in April 2006, as the U.S. began cracking down on illegal online betting.

Garber halted U.S. online gambling operations five months after arriving. PartyGaming entered into a non-prosecution agreement with the U.S. Attorney in New York in 2009, forfeiting $105 million as part of the deal.

Caesars has offered shareholders the opportunity to buy stock in Caesars Acquisition in a transaction that is expected to close Nov. 18. The new company will have a stake in Caesars Interactive, which operates online.

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