In a week in which Goldman Sachs executives were hauled over the coals for allegedly structuring a deal that they expected to fail, angry members of a US senate committee invoked a city that had little to do with the bank but everything to do with negative public attitudes towards Wall Street.
Goldman, which has argued throughout that it did nothing wrong, “had less oversight than a pit boss in Las Vegas”, said Claire McCaskill, a Democratic member of the committee. Mark Pryor, a fellow Democrat, was more damning. “You’re marketmakers but you’re also playing in that market,” he told the Goldman executives. “In-stead of Wall Street, it looks like Las Vegas.” America’s gambling mecca is known for many things: garish buildings, excessive behaviour, Elvis Presley and all-you-can-eat buffet breakfasts. But the people who live in the city and work in gambling resent the comparison to Wall Street’s latest fraud case.
“It’s very offensive,” said Shelley Berkley, a Democratic congresswoman whose district covers the city’s gaming strip and casinos ranging from the luxurious Bellagio to the rather down at heel Binion’s Gambling Hall & Hotel.
“Las Vegas casinos might not have clocks but we have rules, we have regulations, we have odds for sports betting,” she said. “Everyone knows what the rules are and no one is getting ripped off.”
The regulatory framework for casinos in Nevada was established in 1959 – mainly to keep gangsters and the mafia out of what had become a booming industry. Nevada at that time was the only place in the US to allow gambling, and organised crime wanted its cut.
Robert Faiss, a lawyer with Lionel Sawyer & Collins, a Nevada firm, helped frame those regulations and went on to work in the Nevada Gaming Commission and the White House, where he served in the Lyndon Johnson administration.
“You don’t get to be regulated [in Las Vegas] unless you successfully complete an examination that may take years to complete,” he said. “Every aspect of the applicant’s life is examined and there are minimal internal control standards [within each company], which are exhaustive.”
The checks and balances within the system have helped build an industry that has shed its past associations with organised crime, he said. There have been no examples of executive greed in the Nevada industry that have resulted in “violations of the law or fiduciary obligations”.
Mr Faiss pointed to a spate of accounting scandals that rocked corporate America at the turn of the decade. “You won’t find any gaming companies among them,” he said.
Gamblers who feel they have been the victim of fraud in a casino can make an immediate appeal to the Nevada Gaming Control Board which, together with the Nevada Gaming Commission, is the main regulatory agency for Las Vegas casinos. The commission wields considerable power in the state: Harry Reid, the Senate majority leader, is a former chairman.
“The reality is the gaming industry is very well regulated,” said Ms Berkley. “What happened on Wall Street would never have happened in a Las Vegas casino . . . it’s the most well regulated industry on the planet.”
That sentiment is echoed by gamblers interviewed by the Financial Times this week. Most said they were aware of the risks involved when they gambled.
“When you come to Las Vegas you know you’ll lose some money,” said Cheryl Westland, who was visiting from California and playing slots in the Tropicana. “What I’m not prepared to do is lose half the income on Wall Street that I’ve spent my life saving – but that’s what happened.”
Rob Clegghorn, president of a carbon stainless steel company in Ontario, was making his yearly trip to Las Vegas. He enjoyed a drink while playing a slot machine in the Mandalay Bay casino, one of the largest in the city. “The odds are pretty slim and if you win it’s a bonus,” he said. But I know the rules here and they don’t change.
“With the guys at Goldman, just when you think you’ve scored a goal it turns out they’ve moved the posts on you.”