MGM Mirage loses (again) in CTR fiasco

Jun 17, 2008 7:03 PM

Gaming Insider by Phil Hevener | MGM Mirage continues feeling the sting of events that saw the company pay a record $5 million fine five years ago as the result of an employee’s failure to submit 14,903 of the cash transaction reports (CTRs) required by state and federal law.

Bob Kocienski, a former executive vice president in the Mirage Resorts half of the company who was blamed at the time for the company’s failure to satisfy paperwork requirements, has earned a $4.5 million judgment as the climax to a two-week district court trial.

The jury’s decision said, in effect, that Kocienski was wrongfully terminated. The eight-member jury deliberated about 45 minutes before coming back with its 8-0 decision. Kocienski was unavailable for comment but its essence was confirmed by sources familiar with the details of the long running saga.

What’s Kocienski doing now?

"Well I guess he’s going to Disneyland," was the tongue in cheek response from one of his friends.

Since leaving MGM Mirage Kocienski has worked with several other gaming companies and is currently chief financial officer in the new Tropicana Entertainment management team headed by Scott Butera.

The thrust of Kocienski’s argument was that he did his job by investigating the work of lower level employees who had allowed the CTRs to stack up unsent. His contention is that it was not his fault if he was lied to by one or more of the underlings who mysteriously failed to do their job. Kocienski was, in other words, a fall guy.

At least that was the picture drawn by his attorneys.

MGM officials took strong exception to the verdict making it clear that they expect to appeal. The company said, "We strongly disagree with the verdict. We do not believe it was supported by the evidence and we intend to vigorously pursue an appeal."

A Kocienski friend had another view. "What happened is the company was trying to show it had fixed the problem by dumping Bob."

The CTRs in question are the reports required by rules that were seen as an effective tool for dealing with money laundering at casinos.

The rules were first implemented in 1985 and have been tweaked a number of times since casinos were first required to report cash transactions that exceeded $10,000 in a 24-hour period.

So how did anyone manage to allow thousands of the reports to stack up as they did over a period of many months? The only explanations available now make it sound like it was one of those things no one planned, a desperate measure that got put of hand.

Mirage Resorts President Bobby Baldwin said at the time the problem got its first public airing in early 2003, that the person in charge of getting the reports boxed up and in the mail – not Kocienski – had somehow fallen behind for reasons that have never been explained publicly and didn’t know how to get caught up, figuring that putting so much paperwork in the mail would attract the kind of attention he did not want to face.

So the reports sat and they sat and attention was eventually what the situation got … a lot of it.

Mirage Regulation 6A compliance officer Christopher Marishita was subsequently convicted in state court of failing to properly handle the paperwork and given a three-year probated sentence. Nevada Regulaion 6A was enforced by state gaming regulators and intended to mirror similarly tough federal rules intended to deter financial crimes. It has since been scrapped and all casinos everywhere are now subject to the Treasury Department’s requirements for monitoring cash transactions.

State Gaming Control Board member Mark Clayton confirmed that the $5 million paid by MGM as the result of a negotiated settlement that was completed in June 2003 still stands as the largest fine paid by a licensee for any reason.

Kocienski’s Las Vegas attorney, Daniel Marks, was successful during the two weeks of the trial in painting high-powered Mirage attorney Frank Schreck as a "spin doctor" who put together a report on the incident that apparently provided the basis for the company’s decision to dump Kocienski.

The nearly 15,000 cash transaction reports covered a period from sometime in 2001 into 2003, when it all came to a head.