According to a report from the Wall Street Journal, Wynn Resorts is being investigated by the U.S. District Attorney’s office, the Internal Revenue Service and the Drug Enforcement Association.  According to the story, the IRS sent Wynn’s lawyer a letter in August requesting information on the sports book’s biggest gamblers both here and overseas as well as employees of the casino.  The resort claims no knowledge of an investigation at this point.

Is this normal?

Wynn is the third casino to recently be asked to provide information of this type.  Just because a company is asked to provide this information does not mean that they are guilty of any wrong doing, and Steve Wynn said as much in a statement to CNBC today. 

After working in multiple casinos for more than three years, I can tell you this is EXACTLY what the IRS, the DEA and even Homeland Security are supposed to do. There are many rules in place that prevent terrorists, international drug dealers and organized crime rings from laundering money, among other things.

The casinos provide this information to the investigators so that plots like this can be stopped. If we are talking about the biggest players in the resort, these are going to be people that the government already typically has tabs on to begin with. If new names start to appear on W-2G’s, the red flags are thrown up and yes, investigations take place.  

The U.S District Attorney’s office won’t even comment at this point in time because before they can even begin an investigation, information has to be gathered first. Casino employees who deal with this kind of cash on a regular basis are also kept track of, so that information would be helpful to the agencies as well.  This really is a non-story right now.

How hard would it be to pull off money laundering?

Every time a player cashes in a winning ticket at a sports book for more than $1,200, the player needs to fill out a W-2G form.  For the biggest players in the house, the casino already has all of their information on file to save time for the guest to begin with. 

Any time a bet is taken at a table/sports book, wire transfer or a chip exchange at the cage is completed larger than $3,000 a Currency Transaction Report (CTR) needs to be filled out by the casino employee.  All of these transactions are recorded and reviewed by management.  All the CTRs are kept until requested.  So in order for this to happen, it would involve so many working parts at the casino level, it would be too tough to manage.

More than likely this is taking place somewhere before the money enters the casino and the government is just requesting information from the casinos to verify amounts, dates of transfers, etc.

What will this effect?

Upon this information going public, Wynn Resorts stock dropped two percent. That's pathetic, because essentially it is just a bad public relations day and the stock took a walloping.  Depending on how hard the media wants to beat this up, it could be a disaster for the Wynn empire. 

Wynn, who is already taking a bit of a beating in Macau, could lose more in the public eye, but that is small potatoes compared to losing the whales.

The second most valuable information in a casino, right behind its information, is its whales.  Whales are big players that have at their disposal large sums of money to spend (and typically lose) at a casino. If the whales start to worry about what is going on at Wynn, they might go somewhere else where there aren't as many government agency people poking around. This is a very big problem for a high-end resort like Wynn, especially at a time when the competition on the strip is salivating for new, bigger players.

The best that Mr. Wynn can do right now is to make sure he is in compliance and then push out aggressive crisis management marketing to the public, especially his big fish.