Las Vegas Sands Says It Probably Broke Foreign-Practices Act

Sunday, 03 Mar 2013 03:37 PM

 

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Las Vegas Sands Corp., embroiled in two U.S. probes and a court battle with the former head of its Chinese casino business, said for the first time that it probably violated the U.S. Foreign Corrupt Practices Act.

“There were likely violations of the books and records and internal controls provisions of the FCPA,” Sands said in its annual report, citing an internal investigation by the audit committee of the Las Vegas-based casino company, which is controlled by billionaire Sheldon Adelson.

The findings signal repercussions for Sands from U.S. Securities and Exchange Commission and Department of Justice investigations of possible violations of the act, which prohibits improper business payments outside the U.S. Sands, which gets almost 60 percent of its revenue from China, said it expects no material financial impact from the panel’s findings, though it can’t predict the effect from continuing probes.

Ron Reese, a spokesman for Sands, declined to comment beyond the filing, made on March 1. The audit committee also found that the probable violations won’t lead to any financial restatements and don’t represent a weakness in current controls.

Sands previously held that its dealings in Macau, a former Portuguese colony and the only Chinese city where casinos are legal, were above-board. In an August interview, the chief executive officer of its Asian unit, Sands China Ltd., said Sands doesn’t engage in “crimes or illegal activities.”

“We not only abided by the rules in Macau, we also abided by the rules in Las Vegas,” CEO Edward Tracy said at the time.

Jacobs Lawsuit

The company has said that a lawsuit filed by former Sands China CEO Steven Jacobs probably triggered the government probes.

Jacobs sued Las Vegas Sands in 2010, alleging he was fired because he wouldn’t give in to the “illegal demands” of Adelson, who is chairman and CEO. Jacobs said Adelson directed him to secretly investigate Macau government officials and use “improper leverage” against them.

Adelson, 79, has an estimated net worth of $24.9 billion, making him the world’s 18th-wealthiest person, based on the Bloomberg Billionaires Index.

Following Jacobs’s allegations, the Justice Department and SEC opened FCPA-related investigations. The law prohibits companies with U.S. operations and their intermediaries from making improper payments to foreign officials to win or retain business.

Sands’ Defense

Las Vegas Sands has denied Jacobs’s allegations and has said it’s cooperating with the investigations. Lawyers for the company have said in court filings that Jacobs was dismissed for working on unauthorized deals and violating company policy.

A Nevada judge in September sanctioned Sands for not disclosing that evidence it said couldn’t be taken out of Macau was already in the U.S.

The company didn’t elaborate on the likely FCPA violations. It said it has improved its practices with respect to books and records and internal controls.

The audit committee probe, while ongoing, is largely completed, Sands said. It said it’s cooperating with the investigations, and that it “is currently unable to determine the probability of the outcome of this matter, the extent of materiality, or the range of reasonably possible loss, if any.”

Casino revenue in Macau, the world’s largest gambling hub, rose 14 percent to $38 billion in 2012.

Las Vegas Sands fell 0.4 percent to $51.31 on March 1 in New York. The shares have advanced 11 percent this year. Sands China fell 0.4 percent to HK$36.80 in Hong Kong and is up 8.4 percent in 2013.

Adelson Background

The company in November approved a special dividend to shareholders ahead of an increase in federal taxes this year. Adelson and his wife, Miriam, who regulatory filings show own about 51 percent of the stock, stood to collect about $1.2 billion. The couple contributed at least $87 million in last year’s failed effort to elect Republican Mitt Romney as U.S. president, according to the Center for Responsive Politics, a Washington-based research group.

In a December 2009 interview with Bloomberg Television, Adelson said billionaire Stanley Ho’s diminished share of Macau’s gambling business showed that Sands was succeeding.

Critics were saying “the Las Vegas model doesn’t work -- well how come it’s working?” Adelson said in the interview. “We’re the most successful casino in history.”

© Copyright 2014 Bloomberg News. All rights reserved.

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