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Inside Vegas - Steve Miller

Steve Miller is a former Las Vegas City Councilman. In 1991, the readers of the Las Vegas Review Journal voted him the "Most Effective Public Official" in Southern Nevada. Visit his website at:

Skim City
The Strip is packed with tourists,
but casinos are pleading poverty

The political timing is ripe for skimming Las Vegas

INSIDE VEGAS by Steve Miller
August 23, 2010

LAS VEGAS - When it comes to the knowledge of how to skim cash to avoid paying taxes, Vegas wrote the book. Cash has always been king in this town because cash is almost impossible to verify.

For the past two years, operators of most Strip hotels have been complaining of decreased gambling revenues, and all have cut back on their work force which has contributed to the highest unemployment in the nation.

However, when it comes to the numbers of tourists passing through McCarran International Airport, the 4.3% increase in visitor volume over this time last year does not jive with the dismal gaming numbers.

It's true that the lay offs have cast a major blow to neighborhood businesses, but something else is happening on Las Vegas Boulevard South better known as the Strip.

The sidewalks, shops, restaurants, pools, and -- believe it or not -- casinos are more packed than ever. And the folks who are flooding into our resort areas act anything but poor.

Several of the Strip, Flamingo Road, and Paradise Road hotels have opened high tech clubs and pools that charge $400 for a bottle of Grey Goose, $3,000 for a magnum of Dom Pérignon, and offer booths or private pool cabanas at $3,000 for several hours use. These venues are famous for prostitution and drugs, and you can imagine how much unreported cash is changing hands every day and night in these places.

All of this is happening right under the eyes of the Secretary of the United States Treasury, and U.S. Attorney General who have turned their backs on the new Las Vegas and what I believe are billions per year in reported cash transactions taking place here.

Somebody's not watching the till!

Meanwhile, Nevada has the highest unemployment rate in America, and our schools are ranked number 44 in education funding per student according to the US Department of Education.

For the past several months I've been taking my own survey of sorts, evaluating just how the national recession has hit our tourist business. To do so, I've been eating lunch or dinner in some of the most expensive restaurants on the Strip, Paradise Road, and in Downtown.

Food prices are not being discounted. The clientele in most Strip cafes are casually dressed, many are from Europe and Asia, and many have their kids in tow, but few it seems are looking for bargains other than in hotel room rates which are the lowest in decades.

Las Vegas is built on cheap accommodations which give visitors incentive to gamble the savings. So nothing's new about bargain room prices in this town. It's part of the formula.

There are still cheap buffets and fast food, but try to get a table in one of our finer Strip area restaurants without a reservation, and you'll see what I mean.

For my survey, I picked Monday evenings to go cafe hopping thinking that business would be slow. I was completely wrong. The restaurant bars on or near the Strip are overflowing with people paying $10 to $15 for a glass of Chardonnay while waiting for tables to open up. Meanwhile, the adjacent casinos are anything but empty.

So where are the dismal gaming revenue figures coming from? The casinos themselves. The State of Nevada gaming authorities take the casino's word for it. Otherwise, there's no checks or balances to guarantee whether casino bosses are telling the truth.

After living in "Skim City" for over half a century, something familiar seems to be happening, and if my hunch is correct, our local residents are paying a hefty price for the actions of certain street savvy casino bosses.

In the early 1970's, several Strip hotels claimed to be going broke and declared Chapter 11 bankruptcy. However, as sales manager for my late father's hotel supply business, most of my casino clients were doing just fine.

Under Chapter 11 protection with a phony trustee supposedly running the operation, casinos can skim more with little or no detection.

As an example, during the 1970's, the Dunes was purportedly struggling to stay open. Its new operator was bankruptcy artist Morris Shenker, one-time lawyer for Jimmy Hoffa. The Teamsters Central States Pension Fund loaned Shenker money to gain control of the Dunes while mobsters in Providence, R.I. called the shots.

Other Strip and Downtown hotels also had out of state bosses, many located in Miami, Chicago, and New York who received suitcases of cash on a regular basis. Some of the "bag men" who transported the cash in the 70's and 80's have since become solid Vegas citizens after the advent of money laundering, off shore accounts, and computer banking rendered their talents unneeded.

In the old days, immediately upon Shenker's entry on the Strip, the Dunes declared Chapter 11 bankruptcy while high rollers continued to flock to its casino. During the next several years while it was in receivership and being managed by a very questionable court appointed trustee, the Dunes casino and restaurants appeared more prosperous than ever.

The skim was on!

Other Strip properties followed Shenker's lead, and the skim -- something that many thought had gone the way of Bugsy Siegel -- was back in full force.

The only salvation was that former casino owners gave generously to local charities and the university. But they did so voluntarily because they and their families lived here at the time. Nowadays, very few casino owners actually live in Las Vegas, so our schools and other infrastructure are suffering from a shortage of tax revenue.

Following the Shenker years, money laundering became the crime of choice in several casinos, and under increased IRS scrutiny, skimming became less popular.

But in the past two years, I believe the skimming has returned to certain casino properties.

Today, several casinos that recently appeared to be doing a booming business have declared bankruptcy. One company in Chapter 11 stiffed all its suppliers; fired half its work force; canceled its union contracts; and continues doing what appears to a booming business while in receivership. Then something amazing happened! Last week the supposedly bankrupt former owners formed a new corporation and made the highest bid, buying back their properties at auction for pennies on the dollar.

The feds didn't blink an eye.

What happened to the local suppliers and fired employees? The unpaid suppliers were forced to eat their losses, and lines got longer at the local unemployment office.

The direct results are evident in many neighborhood shopping centers with 90% vacancy rates, and home prices diving to record lows due to foreclosures.

I have a number of friends who still work in Strip hotel casinos and restaurants. They tell me that they're working overtime or double shifts. Some even complain of exhaustion, but stop complaining when they talk about bigger than ever cash tips.

These service workers believe they're the best in the business, and describe their employers weeding out dead weight workers under the excuse they might be forced to declare bankruptcy. Then the employers kept only their most productive workers while not having to worry about the unions or National Labor Relations Board taking action.

Of late, some of our most vocal casino executives have taken on Washington, D.C. saying the government is doing Vegas wrong. Many have expressed fear of higher corporate taxes coming soon, and scold the administration for bailing out banks with no strings attached.

In other words, I would not be surprised if several top level casino guys are less than enthusiastic about paying taxes in this political environment.

I remember the years 1961 to 1964 when Robert Kennedy was the U.S. Attorney General. His first target was the skimming then taking place in Vegas.

With the help of the-then U.S. Treasury Secretary who directs the IRS, Kennedy brought many Vegas skimmers to their knees, and his actions were the beginning of the first deep recession I can recall taking hold in this town.

Soon, the mob decided to go elsewhere, and Howard Hughes began buying their properties. Under Hughes, the skim all but stopped, and so did the presence of high rollers. But the town came back to life when new family friendly attractions opened, and with the exception of the 1973 Arab Oil Embargo, the 1976 Culinary Union strike, the 1980 MGM fire, and 9/11, Las Vegas tourism has continued to thrive, and "whales" from around the world make it a regular stop.

I believe this formula for prosperity continued until 2008 and the appointments of Secretary of the Treasury Timothy Geithner and Attorney General Eric Holder. Geithner and Holder together with Nevada's U.S. Senator Harry Reid make the perfect combination of ineptitude to invite what now appears to be a resurgence of skimming on the Strip.

In the meantime, the rest of the town and state are taking a major hit because casinos are supposed to be paying local and state gaming taxes.

It's not anticipated any time soon that the current Secretary of the Treasury or Attorney General will replicate Robert Kennedy's skimming crack down, especially under the watchful eye of our nation's Senate Majority Leader who is beholden to Strip gaming interests.

The political timing is ripe for the skimming of Las Vegas, and it doesn't take someone with a Harvard MBA to see what's happening.

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