July 25 (Bloomberg) -- Las Vegas Sands Corp. is stalling a wrongful termination lawsuit by its former Macau casino chief that could expose billionaire Sheldon Adelson’s company to “serious legal and political problems,” the fired executive said in court papers.
Steven Jacobs, who sued Sands in 2010 after he was fired as chief executive officer of the casino operator’s Sands China Ltd. unit, said in a filing this week in the Nevada Supreme Court that he has three investigative reports commissioned by the company “on foreign government officials, as well as individuals with whom they were doing business that were suspected of having ties to Chinese organized crime.”
Sands was sanctioned last year by the Las Vegas trial judge presiding over the lawsuit for not disclosing that it was sitting on a trove of documents in Nevada that Jacobs sought as evidence and which the company had claimed couldn’t legally be removed from Macau. The company, which is now appealing three other rulings by the judge to Nevada’s highest court, last month won a postponement of a hearing on whether the claims against Sands China belong in Nevada.
“LVSC and Sands China believe they are above the law; too big, too important, and too influential to play by the rules,” Jacobs said in the filing. “It is with this attitude that they ground this action to a standstill. It is a defendant’s dream.”
Sands China fell 2.1 percent to HK$41.90 at 1:47 p.m. in trading on the Hong Kong Stock Exchange.
The company said Jacobs’s allegations that it’s trying to stall the lawsuit are “baseless” and accused him and his attorneys of making “increasingly shrill claims” about concealment of documents and sabotage of evidence-sharing in the case, according to a July 23 filing with the Nevada Supreme Court.
As for Jacobs’s specific claim that Sands is trying to delay the Nevada jurisdiction hearing, “the facts don’t support that premise,” Ron Reese, a company spokesman, said yesterday in a phone interview.
Jacobs alleged he was fired after he had conflicts with Adelson, who is Sands’s majority owner and chairman, including fights over what he said were illegal demands that secret investigations be performed of Macau government officials for information that could be used as leverage to thwart adverse regulation.
Following Jacobs’s allegations, the U.S. Justice Department and Securities and Exchange Commission opened investigations into whether Adelson’s company violated the Foreign Corrupt Practices Act. That law prohibits companies with U.S. operations and their intermediaries from making improper payments to foreign officials to win or retain business.
While Sands has denied Jacobs’s allegations, it said in March that it found likely violations of the books and records and internal control provisions of the FCPA.
Nevada District Judge Elizabeth Gonzalez ruled last month that Jacobs could use documents that Sands claimed are “privileged,” or exempt from disclosure, at a hearing on whether Nevada courts have proper jurisdiction over Sands China to continue the litigation in Las Vegas. The six-day hearing was scheduled to start July 16 and Gonzalez pulled it from her calendar after the Nevada Supreme Court put it on hold.
The documents are part of about 40 gigabytes of information that Sands said Jacobs “surreptitiously” took when he was fired in 2010.
Sands alleged Jacobs “stole” three reports prepared by Steve Vickers of International Risk Ltd. The reports detail the investigation of “certain Macau government officials” and others, according to letters by Sands’ lawyers to Jacobs’s lawyers seeking the return of the documents.
These are the “same tired and false accusations Mr. Jacobs has been trotting out for months,” Reese said about Jacobs’s claims the investigation of Macau government officials was commissioned as part of a leverage strategy.
Adelson said in a March 8 declaration filed in Nevada state court in Las Vegas that the investigation had been commissioned by Jacobs, not by the company, and that he didn’t learn about until after Jacobs had been fired.
“I never asked or authorized Jacobs to conduct a private investigation of or ‘create a dossier’ on Macanese officials,” Adelson said in his declaration. “We believe unequivocally that Jacobs initiated the investigation on his own for his own purposes.”
Sands said other documents should be off-limits to Jacobs because they are confidential communications with the company’s lawyers, including a report on “prostitution activities at the Macau Venetian Resort” and e-mails from an unidentified sender about corruption investigations, according to court filings.
In an appeal to the Nevada Supreme Court to overrule Gonzalez on documents she said are fair game, Sands said a fired executive doesn’t have the right to possess corporate property.
The trial judge’s ruling gives Jacobs a free pass “to load the corporation’s privileged documents into the digital equivalent of several semi-trucks upon his departure, and then haul those files away to use them against the company,” Sands said in a June 21 filing. “The district court’s ruling turns the concepts of fiduciary duty and loyalty upside down.”
The company also argued that Jacobs hasn’t shown that any of the disputed documents are relevant to the question of whether Sands China can be sued in Nevada.
The Nevada Supreme Court has agreed to consider all three of Sands’s petitions challenging rulings by Gonzalez over disclosure of documents.
When Gonzalez ruled in September that the company had “deceived” her about documents that it was refusing to provide to Jacobs, she said she would no longer allow Sands to rely on Macau privacy laws as grounds for withholding evidence. As an additional sanction, she ordered Las Vegas Sands and Sands China to contribute $25,000 to the Legal Aid Center of Southern Nevada and pay some of Jacobs’s attorneys’ fees.
The Nevada Supreme Court two years ago said the Jacobs lawsuit can’t proceed until Gonzalez decides the jurisdiction issue. Hong Kong-listed Sands China, which is majority owned by Las Vegas Sands, argues that it doesn’t do business in Nevada, has no presence there, and can’t be sued by Jacobs in Las Vegas.
Sands said in a July 23 filing to the state’s high court that the rulings by Gonzalez it’s challenging raise “serious questions about efficient case management.”
“Nearly two years after this court directed the trial judge to conduct a hearing on the singular issue of whether SCL is subject to jurisdiction in Clark County, Nevada, defendants have incurred millions of dollars in discovery-related expenses for a jurisdictional hearing that has yet to occur,” Sands said in the filing.
The lower-court case is Jacobs v. Las Vegas Sands, 10-A-627691, Clark County, Nevada, District Court (Las Vegas). The state supreme court case is Las Vegas Sands Corp. v. Clark County District Court, 63444, Nevada Supreme Court.
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