View from the top: John McManus, MGM

Simon Planzer: John, you’re the Chief Legal and Administrative Officer and Secretary for MGM Resorts International, to give you your full title. What does your job comprise and what are the most satisfying aspects of your position?

John McManus: I suppose the most satisfying aspect is that I get to do an enormously wide variety of things. I work an extremely varied day and I never know from one day to the next what to expect. I also get to work on a great many diverse topics, some exciting, some stressful, but there really is no average day. We have experienced highly publicized incidents, we had a tragic shooting, we have our share of litigation regulatory crises and significant M&A activity. So my days are never boring.

A big part of my role is as problem solver and counsellor where challenges in the business arise. I help identify the various moving parts, pinpoint where we might have an exposure or where we have opportunities, and I help craft solutions to the challenges. Some days a crisis may develop and we need to issue communications to shareholders or the public. I make sure that when we do that, we’re being thoughtful about how we represent ourselves and that we properly consider facts and consequences. There will be other days when there’s a team working on a transaction and I may need to weigh in to help resolve an issue to get to the finish line. Those are the exciting parts and at the end everyone’s happy when we succeed. Some days are easy but there are others where I’m stressed out.

My career has permitted me to engage across such a varied number of issues. I used to think I was quite proficient in a few areas, but now the scope of the role is so broad that I feel I know a little about a lot of things. That has forced me to become a good delegator and to build a great team around me. I work with some great people, and I also get to develop some younger lawyers. I have had to learn how to manage issues rather than be the one that works them myself.

SP: MGM’s roots were as a Las Vegas land-based casino business. Today, the company has evolved into a global gaming brand with a presence across the world as well as online operations through BetMGM and the respective joint venture with Entain. What have been the main legal and regulatory challenges of that transformation and how have you managed them?

JM: Historically, you’re right, we’ve been a land-based casino company, and that is a very important part of the business. Recently we have moved heavily into the digital space with joint ventures with Entain, and acquisitions overseas. Going from being a US land-based operation to an international digital business has really changed our focus and there are probably two parts to that. The first is geographic. When we enter new jurisdictions, we have to be mindful of different sensitivities in different places. There are legal differences of course, and I lean heavily on local in-house lawyers and external counsel in those markets. But there are also cultural differences that we have to understand and work with.

The second part concerns the differences between land-based and digital businesses. when you have a heavy land-based presence you have to have a great deal of legal certainty. If you’re investing several billion dollars into a resort, you need things to be pretty black and white and that leads to a tendency to be quite conservative. Historically, in the online space, there has been a lot of uncertainty with regards to the law and companies have had to navigate that, making judgements as best they could. That means online operators will typically have a higher tolerance of risk and there’s nothing wrong with that. The winds of regulation change, things are interpreted in a different way, and you have to respond, sometimes in quite dramatic ways.

You may have to shut down or completely change how your product is offered, but that is accepted as normal. In the landbased business things are more absolute and rigid and we have to make sure we’re above criticism. That’s not just a clash of cultures, it’s the reality of being successful in each of two quite different spaces.

When we put those two spaces together, we have to find a balance where we’re protecting our valuable land-based licences on the one hand, without preventing our online business from seeking and exploiting opportunities on the other. Sometimes that means asking our online teams to be more conservative so as not pose a risk to the land-based business. That’s especially important as US regulators tend to judge you based on what you’re doing worldwide. Similarly, you shouldn’t rule out sound opportunities simply because you may be criticized.

Everyone understands the concept of the black market and we know that’s not where we want to be. Where that starts to get challenging is when you think you have a viable legal position and then the rules change. We see this especially in Europe where there are supposed to be protections for commerce that should apply across borders. Then it seems there is also the ability to pass laws related to gaming. That’s not a situation the US is used to dealing with.

These are not just questions of whether or not it’s legal to operate. For example, thinking about Europe’s more aggressive approach to responsible gaming. How does that translate into a US land-based environment? The corporate governance requirements and making it all fi t together well for the business really are a challenge.

SP: That’s been a big change for the business but what transformation has it meant for you in your role?

JM: I’ve had to learn ways of finding a balance between the competing interests of different lines of business; to ensure that we’re not setting too conservative a tone but we’re also not exposing ourselves. It’s searching for the right risk profile to advocate for in the business and making sure both sides of the business understand that. For the online teams, they have to know they’re now part of a bigger enterprise that faces these other risks that we have to be cautious about.

SP: You mentioned that you see cultural differences around the world and have to lean on your local in-house lawyers and external counsel. Is it just about everyone being professional or are there more profound differences that you have observed?

JM: With external counsel, there really are differences in how legal advice is given and what you as the client can expect. There are big differences between countries and the level of comfort outside counsel has with giving advice. There are some jurisdictions where the outside counsel feel they’re really part of the business team and they’re giving advice and guidance. In other places, they are inclined just to give you the law and leave the business people to make the judgement. Some see their role as just to set out the law rather than applying it to your situation.

You have to be mindful that the legal advice you are given in Japan, for example, is very different from what you would get in the United States. Then, of course, there are also big differences between legal systems. There are code-based systems versus common law systems, and you just have to adapt to the jurisdiction you’re in. As in-house counsel, I try to know my limitations. I’m pretty proficient in the US but much less so elsewhere, so I’m much more deferential to outside counsel in places where I’m not competent. I also rely on our in-house lawyers in those jurisdictions.

SP: We see regulators, in Europe especially, imposing fines on companies for violations that predate acquisitions. How do you mitigate against such risks and conduct effective due diligence?

JM: Unfortunately, that’s just one of the costs of trying to grow your business. You have to take some level of risk. You generally can’t do asset acquisitions; you buy companies and they come with a set of liabilities. You try to find out as much as you can through the diligence process and then make a judgement about whether that’s an acceptable level of risk.

Other industries like chemical manufacturers have made acquisitions where they’re now facing mass class actions over incidents that predate their ownership. On a relative basis, the risk of a potential fi ne for a prior action is something you can manage. It’s just important to do thorough and thoughtful due diligence and rely on local gaming counsel to understand the landscape and the kind of exposure you could be open to.

Typically, the lawyer’s risk tolerance is lower than that of the business people. If it’s purely a financial exposure rather than something that threatens your license, then in the end, it’s an economic decision.

SP: European data protection laws seem very strict and regulators have imposed high fines following data breaches. Does this approach cause companies like MGM to tighten up their processes and is this a development you also expect to occur in the US in the near future?

JM: I t’s a different system in the US, but there is still very significant exposure. More commonly, we face actions from state attorney generals, enforcement following a data incident or class actions from private attorneys, and the FTC can issue fines as well. With our entry into the European online market, we certainly have plenty of risk and we also have data risk in the US. We try to do our best to be compliant, manage our data correctly and cooperate with the authorities when there is an incident. This is an area where everyone is focused right now. We had a well-publicized cyber event in the fall of last year. It was not an enjoyable experience, but I felt we were well prepared for it.

SP: With some of the big main US players moving into cash positivity, how do you see that changing the industry worldwide in terms of consolidation and investibility?

JM: BetMGM is separate a JV with Entain so I’m not speaking for them. But if we look at others in the US, I wouldn’t be surprised to see them trying to grow outside their home market, and obviously FanDuel is already part of Flutter. That’s what we’re doing too with LeoVegas and other interests in Europe. Companies that want a digital business are looking for places to grow so there is a natural desire to look to other places to expand. At ths stage I don’t see that transforming the online digital market but it certainly has the potential to introduce new competition

SP: IMGL general members are typically practising attorneys. What value does external counsel bring to you as head of inhouse legal, when do you decide to bring in outside counsel, and what can these counsels do to support General Counsels even better?

JM: In US, a gaming specialty is becoming less common which can be a problem. As companies grow, they develop ever-larger in-house staff and US regulators will often say they want to hear more from the company than their lawyers. That does mean that we’re in danger of losing expertise. The depth of experience and expertise you build up by representing just one company is much less than you get from handling multiple matters for multiple clients.

I like to use outside counsel when we’re in a new jurisdiction to better understand local issues and navigate the licensing process. I also rely on them when we have a difficult issue or one which means we have to be more adversarial with regulators. In terms of what I value from outside counsel, being responsive is one. I appreciate those that take the time to learn about the company and its issues and be proactive in giving advice. In general, I like outside counsel to give me as much advice they are comfortable giving. It’s then up to the in-house counsel to make a judgement on what to use. We have to make the ultimate decision on what to recommend to our internal clients, but more information is definitely good.

SP: IMGL is very supportive of students of gaming law as the next generation of gaming attorneys. You studied at Vanderbilt University and the University of Miami School of Law. What are the skills and assets that you learned there and that remain relevant for your daily work. What advice do you have for those just starting out?

JM: I had a double major when I was at Vanderbilt and one of those was in philosophy. Philosophy teaches you about how to make logical arguments which was helpful at the time and has stayed with me. At Miami my traditional legal education was good and various things I learned still apply in the work that I do every day.

What I think I would advise those starting out is not to get stuck in one area of the law that you focus on exclusively, even if that’s within the gaming discipline. Learn as much as you can about the subject because you really don’t know what’s coming next and where things might lead. I’ll give you an example. Early in my career at MGM I volunteered to work on a residential condominium project even though I didn’t have any experience in that area. It turned out to be a springboard to a number of other opportunities and gave me the exposure to senior management that probably got me to where I am today. So, it’s about being open, raising your hand and trying new things. Do that and things will probably go well.