By Kate O’Keeffe
Of THE WALL STREET JOURNAL
HONG KONG (Dow Jones)–Las Vegas Sands Corp. (LVS) said it is being investigated by U.S. authorities over its compliance with antibribery laws in its operations in Macau, which has become a cornerstone of the casino company’s business and the gambling industry’s major source of growth.
Las Vegas Sands in its annual report filed Tuesday said it had received a subpoena from the U.S. Securities and Exchange Commission requesting that the company produce documents related to its compliance with the Foreign Corrupt Practices Act and that the Justice Department “is conducting a similar investigation.” The law prohibits U.S. companies from making payments to foreign officials to get or keep business.
Las Vegas Sands is expanding its presence in Asia as revenue from its Las Vegas operations remains stagnant. China’s Macau overtook the Las Vegas Strip as the biggest gambling market in the world in 2006 and last year raked in about four times the Strip’s revenue. Las Vegas Sands, which has three casinos in Macau, last year opened its first casino in Singapore.
The U.S., meanwhile, is stepping up enforcement of the Foreign Corrupt Practices Act. Eight of the top 10 largest settlements under the law occurred last year, according to a report by the Hogan Lovells law firm, which represents companies in FCPA matters.
Sands said it believed the subpoena stemmed from allegations in a wrongful-termination lawsuit filed in October against the company by its former head of Macau operations, Steve Jacobs.
Las Vegas Sands spokesman Ron Reese described the government investigations as “fact-finding inquiries” and denied the allegations made by Jacobs, the former chief executive of Sands China Ltd., as it did when he filed his lawsuit. Las Vegas Sands said it will cooperate with the investigations.
The SEC and the Justice Department declined to comment.
Jacobs, in a suit filed in Nevada, said he was wrongfully fired after refusing to carry out illegal demands by Las Vegas Chairman Sheldon Adelson.
Jacobs’s suit alleges that he was asked to use “improper leverage” against unnamed senior Macau government officials to help the company secure rights to sell apartments at its Four Seasons property. The lawsuit says he was asked to arrange “secret investigations” on the officials so that any negative information could be used against them. A representative for Macau’s government declined to comment when the suit was filed, but the city’s top gambling regulator said recently he was unconcerned by Jacobs’s allegations about the investigations.
Jacobs in his suit also says he was told to threaten to withhold business from unnamed major Chinese banks “unless they agreed to use influence with newly elected senior government officials of Macau” to get “favorable treatment.”
Jacobs declined to comment Tuesday.
Las Vegas Sands in July removed Jacobs as chief executive of Sand China. It subsequently said he had exceeded his authority and failed to keep the company’s board informed of important business decisions.
In filings related to the lawsuit, he has denied those allegations.
Analysts said the U.S. investigations likely would have a negative effect on Sands’s shares but that its operations probably wouldn’t be hurt substantially. Sterne Agee analyst David Bain said the chance that the investigations would hurt Sands’ attempts to enter additional markets, such as Japan, Taiwan, South Korea and Spain, was “a fairly remote possibility.” Sands’s shares were down 7.4% Tuesday afternoon on the New York Stock Exchange.
Jacobs had been appointed as CEO of Sands China in 2009 and oversaw the unit’s US$2.5 billion initial public offering of stock that November.
The Hong Kong Stock Exchange and Hong Kong’s Securities and Futures Commission declined to comment.
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