Strict new accounting rules that public companies must follow under the Sarbanes-Oxley Act of 2002, passed in response to Enron and other corporate fraud scandals on Wall Street, will have little effect on casino firms, which have been operating by those rules for years, gaming executives said last week.
"We are highly scrutinized relative to other industries in this country," Glenn Schaeffer, chief financial officer of Mandalay Resort Group, said during a panel discussion on the law in Las Vegas last week, sponsored by the Nevada Society of CPAs. "We were already in compliance with Sarbanes-Oxley."
"In this industry, I don’t see it changing much," said Dan Lee, chief executive officer of Pinnacle Entertainment. "It’s a whole lot of nothing. When you sort it out, it’s basically ”˜don’t lie.’"
"We thought we were transparent before Sarbanes-Oxley, and we think we are still transparent," said Tim Wilmott, chief operating officer of Harrah’s Entertainment. "It’s really no big deal for our industry."
Sarbanes-Oxley sets new mandatory guidelines for public companies to follow under the Securities and Exchange Commission. The law creates an independent national board with subpoena power, to monitor the accounting industry, imposes guidelines to prevent stock analysts from conflicts of interest, and increases criminal and civil penalties for corporate fraud.
Public companies are required to give employees the chance to report instances of alleged accounting fraud or unsound auditing practices by the company on a confidential basis. Company chief executive officers will have to certify and sign financial statements as correct. Those certifying false reports face prison sentences of up to 20 years.
But gaming executives in the panel said the casino industry is used to being under the watchful eye of regulators. It played no part in the accounting and stock frauds that former public firms like Enron and WorldCom indulged in to deceive investors and inflate their stock prices several years ago, they said
"Sarbanes-Oxley was not done for gaming companies," Schaeffer said. "It was for companies making up their financials. We’re (Mandalay) in it for the long term, not for next quarter’s stock price."
Lee said that the new law would raise fees companies like Pinnacle will have to pay to perform audits, which he said would become a "serious cost issue."
"It’s infuriating because it’s really money spent on paperwork and not on the business," Lee said.
"My biggest concern is keeping it from being too distracting" to company employees, he added.