Death by Junketer: Promotional Chips
An outside Asian junketer approaches the director of marketing at a major casino that is interested in gaining a share of the regional Asian gambling market. The junketer promises that he can bring “thousands of dollars” into the casino if the casino marketing department will offer his players a “small incentive.” His terms are:
Asian customers will put $25,000 on deposit.
The casino will give each customer depositing $25,000 10 percent of their deposit in promotional chips that play “one time.”
Customers will be required to play through two baccarat shoes with a minimum bet of $500 per wager.
The Asian junketer claims he can bring in at least $500,000 in deposited front money the first weekend. The director of marketing is ecstatic. His general manager has been pressuring him to increase Asian play to accommodate their two new baccarat tables. Does this sound like a great promotion?
Actually, it’s a bad promotion. The junketer has used a technique known as “social engineering” to manipulate a casino into accepting promotional terms that can be used to line the junketer’s pockets with money. If the director of marketing would have taken the time to put pencil to paper, he would see the program doesn’t “pencil out.” The promotional chips, 10 percent of $25,000 or $2,500 in single play chips, cost the casino roughly $1,187.50 in incentive cost ($2,500 X 0.475 = $1,187.50). The amount of money that the casino will win if the customer follows the minimum requirement of the program is $920.00 ($500 X 1.15 percent H/A X 160 hands = $920.00). The junketer’s customer will split a $267.50 take with the junketer, and the casino will be out approximately $53,500 if every depositor plays the game by the junketer-dictated minimum requirements.
What is Social Engineering?
Social engineering is the art of manipulating people into divulging confidential information (in the case of computer hacking), performing an action or agreeing to an arrangement that is not in their better interest. Social engineering is an act of psychological manipulation that is associated with the social sciences but more recently has been used to commit acts of fraud. This technique is based on specific attributes of human decision making known as cognitive biases. These biases, sometimes called “bugs in the human hardware,” are exploited in various combinations to create attack techniques (Wikipedia 2012). There’s an old adage that covers this situation: “If it looks too good to be true, normally it is too good to be true.”
In the previous example, the junketer used a combination of tools such as the director of marketing’s greed and the junketer’s ability to deceive the director using numbers and dollars. He baited the director with “thousands of dollars in new Asian business” and the use of a “small incentive.” In addition, he probably increased the director’s acceptance of this “fraudulent program” by stating that he had done the same program before at other casinos, and if the director didn’t accept this proposal soon, he would offer it to another casino that would “jump” at this offer. The following situations are examples of other recent uses of social engineering in order to beat the casino.
Manipulating Discount-of-Loss Terms
You probably read about high-limit gambler Don Johnson winning in excess of $15 million from Atlantic City casinos last year. Johnson was exceptionally lucky, but he also padded his chances nicely through his own form of social engineering. Johnson approached a casino in Atlantic City and negotiated a deal to play blackjack at that casino. Johnson’s requirements were that the casino change its discount of loss policy so that he could receive a discount on his table losses after every trip if he lost in excess of $500,000. Johnson could also end his “trip” at any time, but could start a new trip after five days of inactivity. Johnson also asked for an increase in his betting limit. He wanted to be able to wager as much as $100,000 per hand. After the casino agreed to these demands, Johnson threw in a final request: make a slight change to the existing game rules. In for a penny, in for a pound, the casino agreed to that request as well.
With those terms, Johnson reversed the odds on the casino, turning the table to his favor. Although the casino executives didn’t see it, Johnson’s social engineering techniques placed him in a position where the discount terms, the controlled trip durations and the low blackjack house advantage gave him the advantage over the short term. The advantage was as high as 1 percent at times but, even after 1,000 hands, it still gave him a slight advantage.
Once he had obtained these terms for one casino, he approached other Boardwalk casinos with the same offer. His engineering technique? “If you want my play at your casino, then give me the same terms as the XYZ casino did.”Johnson found three more casinos that were eager to do business his way, all paying the ultimate price. He used the casinos’ greed and inability to correctly calculate the cost of discounting gambling loss to help win a nice portion of the $15 million. Could this have been prevented?
The Argentinean Dice Play
A group of dice players from South America approached a Las Vegas Strip casino with an interesting proposal: “Let us play dice, but leave us alone.” The dice players were willing to put a large amount of money on deposit if the casino would meet three requirements. First, let them roll the dice on a private table where no other people can play. Second, raise the limit on the pass line and allowable-odds bet. Lastly, don’t interfere with the way they throw the dice. The players explained to marketing that they were tired of dealers constantly telling them that the dice have to hit the back wall of the table. If a dice roll is short, so what? “If you leave us alone, we will play here; if not, we will go someplace else.”
With a private game, higher limits and, most importantly, hands off on telling them how to throw the dice, the players started to win money. Why? They knew how to alter the casino’s advantage by “sliding” one of the dice during their throw. By sliding a die, the players change the odds from 36 possible combinations to only six possible combinations. The Argentinean dice players greatly increased their chances of winning, which was evident with their wins in excess of $500,000. Again, as with Don Johnson, once one casino agreed to the arrangement, others would follow suit. This “fraudulent” situation continued until management of one savvy casino finally put a stop to it.
Playing Baccarat the “Macau Way”
This example of social engineering is my favorite. A group of Asian baccarat customers approached marketing at one of the major Las Vegas casinos and offered to put $1 million dollars in front money in the cage if the casino would accommodate the group’s desire to play baccarat using the “Macau way.” “What is the Macau way?” casino marketing asked. The group’s answer was the Macau way is when the dealer turns up the cards in a specific manner during play on a mini baccarat game (the dealer only touches the playing cards). The players explained that they are very superstitious gamblers and that they preferred the method used to turn over cards in Macau casinos. They then described the Macau way as lifting a card so the players could see it, and then allowing the players to instruct the dealer to either turn the card end-over-end or from the side. Since it doesn’t change the way the game is played, marketing agreed to the change and had floor operations comply.
What management didn’t realize is that their cards had back-pattern problems known as “sorts.” The card-turning process requested by the players allowed them, through the dealer, to sort the back patterns into two groups: 6s through 9s one direction, 0 through 5s the other. By having the dealer turn and “sort” the cards, the players were actually using the back pattern shortcoming to “mark” the deck.
The players didn’t stop there. Once they were able to engineer management into sorting the cards, they also managed to engineer them into changing the moment when they could place their bets. The players insisted that to play “true Macau way,” the casino needed to change their wagering procedure and allow them to place bets after the cards were removed from the shoe, but while they were face down and unexposed on the table. Again, marketing justified that “in for a penny, in for a pound” mindset and allowed the baccarat customers to wager after the first two player cards and the first two banker cards were face down on the layout. After approximately 10 months of play at a number of casinos, and after several million dollars in losses, one savvy casino surveillance director realized the problem and put a stop to it.
Note: I know of no such procedure as the “Macau way.” Some Macau casinos allow players a peek at the cards before they are turned up, but to my knowledge no casinos allow them to request directional turning of the cards.
Under the right circumstance, anyone can be socially engineered by someone who knows how to play the correct technique. Presently, due to the competitive nature of the gaming industry, there is a great urgency by management and casino marketing to attract more casino customers to their properties. This urgency provides a dangerous point of access for social engineering. Following are a few suggestions that should help prevent situations similar to the previously described scenarios from occurring.
Before offering any promotion, take the time to put pencil to paper and see that it makes mathematical sense. If the promotion does not break even at the very minimum, strongly consider revising or eliminating it.
Don’t change an established procedure based on a customer’s request. Minor changes like leaving a double-down card face down in a face up shoe game are fine. Allowing a customer to wager after the cards are withdrawn from the shoe is dangerous.
Remember that casino marketing’s goal is to bring players in the door and that marketers don’t always consider issues surrounding game protection. Don’t allow a non-casino operations department to dictate procedural changes or policy. At the same time, don’t shut out their requests. Procedural changes to accommodate a customer need to be agreed upon by both marketing and operations.
One problem that plagues the gaming industry is the continual use of “monkey see, monkey do.” If some other casino offers certain promotions, terms or procedures, they must be good. This does not hold true in many situations and has been the genesis of many major losses in our industry. Again, put pencil to paper and think things out for yourselves before deciding on any promotion or procedure changes.
Remember the adage, “If it looks too good to be true, normally it is too good to be true.” If it looks too good to be true, please look at it several more times before accepting the terms.