Adelson: Yes, we did! Wait, no, we didn’t! Well, OK, sorta … but not really!

“On the U.S. side … we view the State of Nevada as having uninspiring oversight of activities occurring in Macau. For every gap of oversight that exists from the Nevada Gaming Control Board or Nevada Gaming Commission, the U.S. Federal Government may fill it … If the Nevada Gaming Control Board and Commission were to continue showing tame oversight of activities that occur in Macau, then those governmental entities risk losing their own legitimacy as the industry continues to globalize. The U.S. federal government will most certainly fill any illegitimacy of Nevada’s regulatory activities, just as it did in the 1970’s and early 1980’s when [it] was forced to purge organized crime out of Nevada when it became evident that the State of Nevada was having difficulty in doing so itself.” — Jonathan Galaviz, from a summarized version of a recent Galaviz & Co. research report.

When Mr. Galaviz published those words, last month, they may have seemed alarmist. After reading a news story like this, they sound chillingly prophetic. If the states can’t handle rogue elephants like Las Vegas Sands, are we going to have to whistle in the feds? In defense of Nevada regulators, a string of gubernatorial administrations — both Democratic and Republican — has starved the NGCB of funding, even as the casino industry ballooned to undreamt-of dimensions. Nevada regulators have to ride herd on a 21st century industry using a budget predicated on the pre-Steve Wynn era. Outsourcing the testing of games to private labs may free up some money for extra auditors and inspectors, but it’s only a step in the right direction.

Galaviz calls Nevada regulation “uninspiring,” “tame” and borderline illegitimate. For those of us who cover it regularly, “supine,” “toothless” and “willfully blind” would be closer to the truth. (Mr. Galaviz is being exquisitely diplomatic and admirably gentlemanly in his choice of words.) Silver State regulators don’t speak truth to power: They cower before it. There will be Winter Olympics in Hell before an operator of consequence loses his license, no matter how great the provocation.

In the case of Sands and its misadventures in China, the company’s March 1 10-K filing is a veritable all-you-can-eat buffet of investigations and lawsuits. Many of these will probably prove fruitless but Sands ought to be embarrassed just the same. This does not appear to be the case. The filing including this less-than-reassuring admission: “… the Audit Committee advised the Company and its independent accountants that it had reached certain preliminary findings, including that there were likely violations of the books and records and internal controls provisions of the [Foreign Corrupt Practices Act] and that in recent years, the Company has improved its practices with respect to books and records and internal controls.” Sands then goes on to to give itself a clean bill of health. Now these could be ticky-tack fouls to which Sands is admitting — sloppy paperwork and such. They certainly won’t dampen the CEO’s popularity on the fundraising circuit. As that famous, filmic sleuth Det. Charlie Chan observed, “When money talks, few are deaf.”

Perhaps a human sacrifice, in the form of some cashiered number-cruncher will be made. Or we could be looking at something more serious. The 10-K’s wording is forgivingly vague. Now, if I had “likely” violated a federal law, I would “likely” be visualizing myself in an orange jumpsuit. Or, to be more realistic, paying a colossal fine. That’s how the Department of Justice likes to settle the hash of gambling operators (especially Internet ones) who go off the reservation. If CEO Sheldon Adelson isn’t making or can’t make a material provision for DoJ fine, is he meeting his fiduciary duty to the shareholders? The question, I suppose, is academic as the only shareholder CEO Adelson must please is 53% owner Adelson — who is highly unlikely to call for his own resignation. That’d make a helluva news story, wouldn’t it?

Taking a day off from his newest battlefront (by way of a Hong Kong courtroom; forum-shopping, anyone?), the Wall Street Journal, Adelson blew his stack at the New York Times for pole-vaulting to the conclusion that “likely violations … of the internal controls” equaled committing bribery. As loathsome as Adelson can be, when’s he right, he’s right. (Alison Frankel gives a partial, but chilling, chronicle of his war on the media. Let’s not forget Sands’ courtroom jihad against the late Jeff Simpson, either.) In the present instance, the Grey Lady was careless and Sheldon spanked her mercilessly.

There’s a universe of wiggle room in Sands’ quasi-admission to the SEC of quasi-wrongdoing that quasi-might have quasi-occurred … theoretically. Of course, we’d all dearly love to know just what in “the books and records” has put Adelson’s own, superannuated posterior under close U.S. and Chinese scrutiny. Macquarie Securities analyst Chad Beynon warns of a potential, high-six-figure fine from the DoJ. That’d be their style. Beynon further predicts likely “further probing,” meaning that Sands had probably better brace itself for a rectal exam. While Nevada proctology seems highly improbable, Galaviz makes a generic case which — if applied to Sands’ 10-K confessional — would place the company at risk of being found to have committed a three-count violation just of the “Prohibited Practices” section of Nevada Revised Statute 263.720.

More concretely, it will louden the steady chant of “Yankee, go home” that has been coming out of Spain, where Adelson’s 1,850-acre, $22 billion EuroVegas is getting a 95% property-tax reduction, not to mention immunity from “defrauding gamblers, hiring staff with criminal records or ignoring certain anti-money-laundering provisions.” This Madrid-issued license to commit crime en masse, born of financial desperation (26% unemployment nationwide), would stick in the Nevada Legislature‘s craw like a whale bone, were it proposed here. We have some standards in the Silver State, unlike Spain.

In a not-unrelated development, outgoing American Gaming Association President Frank Fahrenkopf has made a rare and remarkable statement, urging New Jersey to ixnay a casino license for The Rational Group, the parent company of PokerStars. (Since the AGA takes a hands-off attitude toward intrå-state regulation, the significance of Fahrenkopf’s intervention is deafening.) The latter’s owner is making a play for the Atlantic Club, and political and economic pressure is on to green-light the deal — estimated at $50 million, far above market value for an Atlantic City casino, especially one that became almost worthless under Colony Capital‘s ownership. In an “unprecedented” amicus curiae brief, the AGA denounces PokerStars as having “operated a business with a history of intentional, uninterrupted criminal violations.” Rational Group says it’s all sour grapes on the AGA’s part and that the latter is trying to preserve New Jersey‘s nascent Internet-gambling market for its U.S.-based clients. The latter is probably very well true. But it doesn’t diminish the accuracy and aptness of Fahrenkopf’s fatwa. PokerStars is forbidden by law from even applying for a Nevada license. It has a $731 million DoJ settlement on the books. In short, it’s got a scummy background. If the Garden State approves Rational Group’s purchase, it’s open season on Boardwalk casinos for anybody with a rap sheet and 50 million smackeroos, let alone Stanley Ho. Let the bidding commence!

Non-deal of the year: Memo from Z Capital Partners to Nevada regulators, regarding its attempt to purchase Whiskey Pete’s and other crown jewels of Primm … “Y’know that deal we’ve been trying to cut with Affinity Gaming and making big, self-important noises about? Uh, well, never mind.” Given Z’s propensity to run its private-equity yap, seemingly issuing a press release every time a fund manager used the company washroom, small wonder that Affinity “could not successfully negotiate confidentiality and standstill agreements …”