Sands’ China Unit Is Investigated by Hong Kong Regulators

Sands China Says Under Investigation by Hong Kong Regulator
The sign for the Sands Macao hotel and casino is displayed behind Fisherman's Wharf in Macau. Photographer: Daniel J. Groshong/Bloomberg

Las Vegas Sands Corp.’s Sands China Ltd., said it’s being investigated by the Hong Kong Securities and Futures Commission for alleged breaches of regulations, following U.S. probes of the parent company.

Sands China, the Macau casino operator, slid the most in four weeks in Hong Kong today after saying in a statement that it was “requested to produce certain documents.” Las Vegas Sands fell in the U.S. The company said this month it is being investigated by the U.S. Securities and Exchange Commission and Justice Department, which have sought documents related to the Macau unit’s compliance with the Foreign Corrupt Practices Act.

Founder and Chief Executive Officer Sheldon Adelson said this week the company is cooperating with U.S. investigators and he is sure it will be cleared of wrongdoing in Macau. Adelson said the U.S. probes stem from allegations in a lawsuit filed by former Sands China CEO Steven Jacobs, who claims the company breached his employment contract.

“When the smoke clears, I am absolutely, not 100 percent, but 1,000 percent positive that there won’t be any fire below it,” Adelson said of the U.S. probes at a March 28 JPMorgan Chase & Co. conference. The investigation began about a week ago and attorneys say it will take four to six months, he said.

Ron Reese, a Las Vegas Sands spokesman, declined to comment, as did Jacqueline Wu, a spokeswoman for Sands Macau, and Ernest Kong, a spokesman for the Hong Kong regulator.

Shares Fall

Las Vegas Sands fell $1.96, or 4.5 percent, to $41.51 at 12:42 p.m. in New York Stock Exchange composite trading. Sands China fell 5.7 percent to HK$17.36 in Hong Kong, paring its gain over the past year to 41 percent.

“The incident is hurting investor sentiment,” said Gabriel Chan, a Credit Suisse Group AG analyst. “If the investigation is an extension to Steven Jacobs, it will not be a big issue in the short term. Now the issue is we need to find out is if there is anything new.”

The Foreign Corrupt Practices Act bars U.S. companies and their intermediaries from making improper payments to foreign officials to win or retain business.

“They want to get all my e-mails,” Adelson said at the conference, which was webcast. “I don’t have a computer. And I don’t use e-mails, I’m not an e-mail type of person,” he said.

Jacobs Lawsuit

Sands China said in July Jacobs was fired by the board, without saying why. Jacobs sued in October in Nevada, alleging breach of contract. Las Vegas Sands must face the lawsuit in Nevada, a judge ruled on March 15, rejecting the company’s request to dismiss the suit. Lawyers for the casino company argued the case should be heard in China.

Jacobs alleges in the complaint, among other things, that Las Vegas Sands demanded he use improper “leverage” to win government concessions, that he retain a lawyer who was part of the Macau government and that he mislead the board.

In his March 28 remarks, Adelson questioned the motivation behind Jacobs’s lawsuit, mentioning three Macau government leaders who aren’t named in the complaint.

“So I suppose that the attorney for Jacobs thinks he’s going to go over to Edmund Ho and say, did Adelson bribe you? And Edmund Ho’s going to say yes,” Adelson said. “And then he’ll go to Fernando Chui and to Francis Tam, say, Adelson bribe you? Oh, yes. He bribed me.”

Ho is the Macau special administrative region’s former CEO. Chui is CEO and Tam is economics and finance secretary.

‘Extraordinary’ Comments

“I found Mr. Adelson’s comments quite extraordinary and indeed most puzzling, because he is the only person that is linking the names of Edmund Ho, Fernando Chui and Mr. Tam with the allegation of bribery,” Don Campbell, Jacobs’s lawyer said in a March 29 phone interview. “No such allegation has ever, ever been made in our lawsuit, by Mr. Jacobs, by me, or anyone connected with our case.”

Adelson said on March 28 Jacobs’s lawsuit is “not a serious case.” A judge has required a settlement conference that will take place in April, he said.

“I’m not optimistic there’ll be a settlement, but we’ll go through the motions,” Adelson said.

The case is Jacobs v. Las Vegas Sands Corp., A-10-627691, Nevada District Court, Clark County (Las Vegas)

(Click here for an audio replay and transcript of Adelson’s March 28 discussion.)

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