Macau sex ring bust shows China expanding crackdown on graft

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Xi Jinping, China's president, said this week that there will be no let-up in his “fierce and enduring” battle against corruption, which has already taken down thousands of senior officials including the country’s former security chief. Xi Jinping, China's president, said this week that there will be no let-up in his “fierce and enduring” battle against corruption, which has already taken down thousands of senior officials including the country’s former security chief.

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The arrest of a prominent Macau executive in the largest prostitution bust in the city’s history shows China’s President Xi Jinping is broadening his crackdown on corruption to restrict even long-tolerated vices.
Police in the former Portuguese colony arrested Alan Ho, handcuffing him and covering his head with a black hood, for allegedly operating a prostitution ring out of the casino complex of his uncle, Stanley Ho. The elder Ho held a monopoly on gambling in Macau for four decades and SJM Holdings Ltd. (880), the company he founded, is still Asia’s biggest casino operator.
The authorities’ latest target of the sex industry comes as Xi wages the most sweeping campaign in decades against bribery, embezzlement and other kinds of corruption in an effort to bolster the legitimacy of the ruling Communist Party. Macau casinos that suffered last year from the fallout of Xi’s crackdown are likely feeling the noose tighten further, particularly on junket operators, middlemen who bring in high-stakes gamblers from the mainland.
“There is undoubtedly a new sheriff in town,” said Steve Vickers, a political risk consultant in Hong Kong. “This is consistent with President Xi’s call for Macau authorities to show ‘greater courage and wisdom’ and to ‘strengthen and improve regulation and supervision over the gaming industry’.”
No let-up
Xi, who visited Macau last month for the 15th anniversary of its handover to China, said this week that there will be no let-up in his “fierce and enduring” battle against corruption, which has already taken down thousands of senior officials including the country’s former security chief.

Alan Ho, center, Executive Director of Hotel Lisboa Macau and the nephew of Stanley Ho, is escorted by police officers after being arrested on suspicion of managing a prostitution ring in Macau, China, on Jan. 12, 2015.
Actions including restrictions on illicit fund flows have prompted mainland VIPs to avoid Macau, putting some junkets out of business. The David Group, a top 10 Macau junket operator, is in the process of shutting its VIP rooms throughout the city, Nomura analysts led by Stella Xing wrote yesterday.
Macau is seeking to curb money flows because of concerns illegal funds are being taken out of the mainland into the territory through junket operators which provide credit to high-end players to gamble in the city.
Alan Ho was among the six people arrested for running the vice ring out of the Hotel Lisboa. Last weekend’s operation was the city’s biggest forced prostitution case since its 1999 handover to China, the Macau Daily News reported. It involved 2,400 suspected sex workers and about 400 million patacas ($50 million) in illicit gains, according to the Macau Judiciary Police.
Alan Ho didn’t respond to queries sent to his work e-mail address.
Entry fee
The vice ring collected fees from women in return for allowing them to solicit men in a hotel, according to a statement from the police. The ladies, some of them recruited on the Internet, paid 150,000 yuan as an “entry fee” and a monthly protection fee of more than 10,000 patacas, they said. The city’s security chief Wong Sio Chak promised to step up police enforcement on the sex trade in Macau after the bust, according to a report in the Macao Daily News on Jan. 14.
Macau has long tolerated the sex trade, a natural outgrowth of a casino-focused tourism city, said Carlos Siu, an associate professor at Macao Polytechnic Institute.
“It’s happened to my friends visiting Macau; sometimes pimps will approach men asking if they need such services,” Siu said. “If it’s night, the women might hide in some dark corner pretending to play slot machines, come out and approach you.”
Illegal brothels
Wynn Macau Ltd. led declines in most casino shares in Hong Kong trading today, falling as much as 2.1 percent to HK$20.90 as of 9.40 a.m. SJM Holdings declined as much as 1.5 percent to HK$11.64, while Melco Crown Entertainment Ltd.’s Hong Kong-listed stock fell 1 percent to HK$61.20. Galaxy Entertainment Group Ltd. (27) lost as much as 1.3 percent to HK$39.65. The benchmark Hang Seng Index was down 0.5 percent.
Macau authorities conducted 34 sex trafficking investigations in 2013, compared with 15 a year earlier, the U.S. State Department’s Trafficking in Persons Report published last June showed. Victims, predominantly from mainland China, “are sometimes confined in massage parlors and illegal brothels, where they are closely monitored, forced to work long hours, have their identity documents confiscated and are threatened with violence,” it said.
The State Department ranks Macau Tier 2 , for territories which do not fully comply with minimum standards in the Victims of Trafficking and Violence Protection Act “but are making significant efforts to bring themselves into compliance”.
Staff from Association for Reach Out (Macau) found little evidence of the usually rampant sex trade when they visited Hotel Lisboa and another casino hotel to give out condoms and health information flyers on Wednesday, four days after the bust, said Kendy Yim, executive director of the non-governmental organization providing support for sex workers in Macau.
Nightclubs and saunas
These sex workers usually ply their trade in places ranging from casinos to nightclubs and saunas, receiving little social and government support, said Yim, adding there are no concrete statistics on the size of the industry because of the hushed nature of the profession and lack of accurate surveys.
“Often these are young, female migrant workers with little local support,” said Yim. “They are very much marginalized and may face all sorts of dangers; violence is one of them, and unsafe sex and exploitation from their employers is another.”
The police sting on a high-profile location like the Hotel Lisboa, and the arrest of a member of the powerful Ho family, heralds of more clean-up operations to come, said Lok Wai Kin, vice president of Macau’s Law Reform Consultative Committee which advises the government on legal matters.
“Macau’s government wants to make the gaming industry a more regulated and lawful one,” said Lok, a law professor at the University of Macau. “You can’t have rampant and in-your-face prostitution in a world-class entertainment destination right?”

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