Canada money launderer shows holes in Vegas casinos

By Dan Whitcomb and Deena Beasley

LOS ANGELES (Reuters) - Las Vegas has cleaned up since its days as a magnet for ill-gotten mobster gains, but a Canadian insider trading scam has exposed the smaller-scale money laundering still going on in the desert city's casinos.

Canadian Stanko Grmovsek admitted in a Toronto court earlier this year to making $9 million with a law school buddy in a 14-year illegal scheme. Court documents show he said he laundered some of it by gambling wads of cash on games like blackjack in Vegas's world-famous casino strip.

His confession was a flashback to an era when Las Vegas's "Sin City" image made it a playground for gangsters offloading their loot in glittering gambling parlors.

But strict controls have slashed financial crime in Vegas casinos to a fraction of what it once was, and most organized criminals use less scrutinized industries to convert illegal profits into clean money, experts say.

"In a currency intensive industry it's virtually impossible to eliminate entry points for money laundering," said Paul Camacho, special agent in charge for the Las Vegas Field Office of the Internal Revenue Service's criminal investigation arm.

But he said regulators and police were keeping financial crime to a minimum. "We work hand-in-hand with the casinos. We want legitimate folks coming here and having a good time. Nobody promotes this as a den of thieves."

Grmovsek's admission that he laundered chunks of money in Las Vegas came despite efforts to keep gambling parlors clean with strict controls by casinos and authorities.

Many Las Vegas casinos are publicly listed and, with their licenses at stake, they watch closely for any shenanigans at the tables. Internal Revenue Service regulations requiring cash transactions involving more than $10,000 to be reported make large-scale crime difficult.

Criminal gangs can launder money more cheaply and less conspicuously in cash-rich small businesses like used-car lots and family restaurants, yet the Grmovsek case shows casinos can still work for sums small enough to pass under the radar.

"In theory, if you employed numerous people and broke down the transactions into much smaller amounts," laundering can be done, said David Salas, deputy chief of enforcement at the Nevada Gaming Control Board.

RED FLAGS

Grmovsek said he and his friend Gil Cornblum, a Toronto lawyer, made their money from Grmovsek buying stocks based on acquisition tip-offs from Cornblum, who committed suicide as the case was pending.

After cooperating with investigators, Cornblum jumped off a highway bridge and Grmovsek faces three years in jail after pleading guilty to conspiracy to commit securities fraud.

Grmovsek said he transferred profits from offshore accounts to casinos in Las Vegas and the Bahamas where he would bet on sporting events or play blackjack and cash in piles of chips.

Experts say that in a typical scheme, a money launderer approaches the cashier's cage with cash and converts it into chips using a players card to establish his identity.

He later returns without his card to exchange the chips for cash, leaving no named record of the transaction and creating the impression he has gambled away thousands of dollars.

The scheme works in reverse if he takes out a small amount of chips, establishing his identity with a players card, and returns with a large stack, withdrawn anonymously, that he claims to have won at the tables.

David Stewart, an attorney with Ropes & Gray LLP who advises casinos on money laundering, says such behavior is a red flag.

"The biggest suspicious activity you can engage in is if you go to a casino, present a fair amount of money and you don't gamble," he said. "These are publicly traded companies. No single gambler is worth losing their license."

SMALL FRY

Commercial casinos in the United States, not including those run by Indian tribes, took in $32.8 billion in gaming revenue last year, the American Gaming Association says.

Commercial and Indian casinos filed nearly 500,000 reports of currency transactions of $10,000 or above in 2008 and some 11,000 reports of suspicious activity, according to the Treasury Department's Financial Crimes Enforcement Network.

That marks a rise from 6,000 reports in 2004 but is a small fraction of the hundreds of thousands of annual transactions.

Casinos are required to file such reports for transactions totaling at least $5,000 when there is suspicion the funds were acquired illegally, the intention is money laundering or that the casino is being used to facilitate criminal activity.

Camacho said casinos tend to be scrupulous about these reports as weeding out illicit activity is in their interest.

"If a casino willfully avoids these forms it can be subject to criminal fines, so there is a huge penalty. Not only a financial penalty but also somebody can go to jail," he said.

Global intelligence consultancy Stratfor still sees money laundering in casinos as small fry compared to the billions of dollars organized crime gangs pass through small businesses, especially along the border with Mexico.

"There's pretty good oversight generally at the U.S. casinos," said Stratfor expert Fred Burton. "I don't see this being any major shift or trend of Vegas being at the center of gravity for money laundering."

Another scheme used by small-time money launders involves betting money on both sides of a sporting event. If the gambler needs to document a source of income, he shows only the winning ticket, appearing to have won big on the game. If he needs to document a loss, he offers up only the losing ticket.

"I'll be honest, it's a challenge policing the financial highways of Vegas," said Camacho. "People involved in criminal activity ... usually don't save their money. They want to go spend it, they want to live large, and one of their goals is to go live large in Las Vegas."

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Crispin Porter's Gap Ad Leads to Boycott for Not Using the Word "Christmas," Even Though It Does

By Kyle Munzenrieder in Flotsam

​It's almost time for the Holidays, which means it's time to cover your house in lights, find a present for your weird uncle Adolfo, and, oh right, the annual War on Christmas.

The American Family Association kicked things off early this year by calling for a two month boycott on Gap Inc.

"The Gap is censoring the word Christmas, pure and simple. Yet the company wants all the people who celebrate Christmas to do their shopping at its stores? Until Gap proves it recognizes Christmas by using it in their newspaper, radio, television advertising or in-store signage, the boycott will be promoted," reads their website (which also has a page on how Nazis started the War on Christmas).

But Gap's Ad this year, done by our favorite Coconut Grove-based Ad Agency Crispin Porter + Bogusky actually does use the word Christmas, as in "Go Christmas, Go Channuka, Go Kwanza, Go Solstice."

Though, we'll never understand why some groups absolutely insist on making sure their religions are exploited for commercial gain. If it makes the AFA feel any better, Gap also sells these "Merry Christmas" boxers, so you can, uh, celebrate the Birth of Christ in your pants.

Meanwhile, we're boycotting Gap's sister brand Old Navy because of their stupid Super Modelquins commercials. I swear, if I hear the phrase "party cardi" one more time...

Techmeme's Gabe Rivera makes news aggregation profitable

Gabe Rivera, founder of news aggregator Techmeme. Credit: Mark Milian/Los Angeles Times.

Don't tell News Corp.'s Rupert Murdoch, but technology news aggregator Techmeme is raking in profits.

Rather than visiting the front pages of every newspaper or choosing a few out of brand loyalty, as Murdoch hopes consumers will do, aggregators put all of the Web's big headlines of the moment onto one page.

There's no shortage in news aggregation. General news readers might go to Google News, a computer-generated engine that pulls in more than 25,000 newspaper websites and authoritative blogs. Left-leaning political consumers might visit the Huffington Post; right-leaning ones might go to Drudge Report.

For tech news, Techmeme, with its smart computer algorithm for culling interesting links, is at the top. A space once dominated by sites like Slashdot and Digg, Techmeme is now the undisputed top influence for the Bay Area tech elite.

Today Techmeme launched a mobile site that's formatted for smart phones to appease news junkies on the go.

It sounds almost laughable that a 4-year-old property, being such a powerful voice in tech, took this long to build a phone-optimized interface. But Techmeme founder Gabe Rivera is not trying to build a trendy, cutting-edge site with its own comment system and social media share features.

Rivera is, to an extent, mimicking the medium that loudly whines about his breed of aggregation. "It feels like a newspaper," Rivera said over lunch last week in San Francisco. "It feels like something you can rely on."

Techmeme became even more newspaper-like last year when Rivera hired his first editor. Fans groaned at the idea of trusting a human to select news in a fair and balanced way. But the site is doing just fine. Better, Rivera argues.

Now, Techmeme has three full-time editors -- including Los Angeles-based Rich DeMuro, a former Cnet reporter -- with contributions from Rivera and a part-timer. "We have people who mostly cover, at least during the week, all 24 hours," Rivera said.

However, Rivera's algorithm is still the backbone. It's the secret sauce that allows small, no-name blogs to reach the top of the pile every once in a blue moon. It does so based on a formula that takes into account who's linking to a page and how influential those sources are, Rivera vaguely explained.

But rather than code in small tweaks to the system in order to fix mistakes, as he had been doing for years, Rivera went with the human touch. He realized that "the most cost-effective thing would be to hire an editor," he said.

"The algorithmic changes continue," Rivera said. "But then once we started that, we discovered new opportunities for the two to work in tandem."

Rivera has similar projects covering politics, celebrity gossip and baseball. But Techmeme is the flagship.

"Techmeme is the product that is the most valuable, that I'm most proud of, that pays bills," Rivera said. Indeed, it's profitable and has never accepted an outside investor.

But Rivera predicts that Memeorandum, "the unfortunately named political site," as he calls it, could be the next big thing. Watch out, Google News.

-- Mark Milian

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