Adelson May Have to Answer Ex-Macau Chief’s Casino Firing Claims

Las Vegas Sands Corp. Chairman Sheldon Adelson
Billionaire Sheldon Adelson, chairman and chief executive officer of Las Vegas Sands Corp. Photographer: Tomohiro Ohsumi/Bloomberg

Sheldon Adelson will be confronted in court for the first time with allegations of wrongdoing by a man he fired five years ago as the head of his Macau casinos.

Adelson, the 81-year-old billionaire founder and chairman of Las Vegas Sands Corp., is among the casino operator’s top executives listed as witnesses for a hearing starting Monday in a lawsuit brought by Steven Jacobs, the former chief executive officer of the company’s Macau unit.

Jacobs hasn’t had a chance during the 4 1/2-year-old Nevada case to put his ex-boss on the witness stand. He claims he was fired for balking at what he says were illegal demands, including to dig up information about high-ranking Macau government officials that, according to a court filing, could be used to “exert leverage.”

“There’s going to be mudslinging,” said Greg Doll, a lawyer at Doll Amir & Eley LLP in Los Angeles who isn’t involved in the case. “You can bet your bottom dollar that Jacobs is going to bring up stuff that is uncomfortable for Sands China and for Adelson in particular.”

Adelson denies allegations he ordered secret investigations into the business and financial affairs of government officials, as well as Jacobs’s claim that he personally approved a strategy condoning prostitution at the Macau casinos. Sands has said in court filings that Jacobs was dismissed for working on unauthorized deals and violating company policy.

Corruption Campaign

Macau casinos saw their first drop in annual revenue last year as the Chinese economy slowed and President Xi Jinping expanded his battle to curb corruption in the ruling Communist Party. Xi’s campaign against illegal money transfers by gamblers, now in its third year, has hurt sales of luxury goods and kept away high rollers who helped the former Portuguese colony’s gambling industry grow to about seven times the size of the Las Vegas Strip.

Adelson called Jacobs’s allegations “outright lies and fabrications” in a statement reported by the Wall Street Journal, spurring Jacobs to add a defamation claim against him in the Nevada lawsuit. Las Vegas Sands said in a January court filing that Jacobs is using the lawsuit as a “platform to denigrate and defame” the company and its chairman. Ron Reese, a Sands spokesman, declined to comment before the hearing.

Adelson has said in court filings that the investigation of Macau officials, which Jacobs alleges Adelson requested, was actually commissioned by Jacobs and that he didn’t learn about it until after Jacobs had been fired.

Dossier’s Creation

“I never asked or authorized Jacobs to conduct a private investigation of or ‘create a dossier’ on Macanese officials,” Adelson said in a March 2013 declaration. “We believe unequivocally that Jacobs initiated the investigation on his own for his own purposes.”

Adelson, the world’s 25th richest person, has testified about his aversion to out-of-court settlements. The feud with Jacobs is playing out in state court in Las Vegas after Sands China Ltd. embarked on a “Never Settle” advertising campaign featuring former Manchester United and Real Madrid soccer superstar David Beckham.

Jacobs won court permission to cite as evidence the work of a Hong Kong-based risk consultant who looked at alleged ties between Sands China business associates and organized crime. According to court filings, one report, commissioned by the company, involved an alleged organized crime figure who was operating VIP rooms in casinos on the island. The second, also commissioned by the company, concerned a Hong Kong movie producer with alleged ties to a triad. The report on Macau officials was the third one, with Jacobs and Adelson disputing who commissioned it.

‘Serious’ Problems

Jacobs said in court filings, without disclosing the consultant’s findings, that the reports will expose the company to “serious political and legal problems.” He is seeking to enter them as evidence at the hearing.

The company has said Jacobs stole the reports and that they contain “extremely sensitive, highly confidential information.” In January, J. Randall Jones, a lawyer for Sands China, criticized Jacobs’s use of them in the lawsuit. “In some cases, they would call this blackmail,” Jones said.

Todd Bice, a lawyer for Jacobs, told the judge Sands wants to keep them out of the case because they are embarrassing and contradict Adelson’s public statements. Jacobs has said in court filings that he took the reports from the company when he left and returned the originals after Sands’ lawyers requested them.

Bice didn’t respond to phone and e-mail messages seeking comment before Monday’s hearing.

Jacobs Sued

Adelson sued Jacob for defamation in Florida, where Jacobs lives. Jacobs won dismissal of that case and Sands told the court last year it would appeal the ruling. Jacobs also defeated Sands’ attempt to remove Nevada District Court Judge Elizabeth Gonzalez from the case over claims she’s biased against the company.

Sands China sought the judge’s removal after she ruled the company won’t be allowed to call any witnesses at the hearing. She imposed that sanction in March over what she saw as its foot-dragging on sharing evidence with Jacobs. The Nevada Supreme Court rejected efforts to disqualify the judge.

Formally, the hearing will address the narrow legal question of whether Sands China, which is incorporated in the Cayman Islands and listed on the Hong Kong exchange, can be sued in Nevada. Jacobs says the reports, along with other evidence, will show Adelson and Las Vegas Sands controlled the Macau operations, including ordering the investigations there.

Sands China contends Jacobs shouldn’t be allowed to sue it in Nevada because the Macau unit doesn’t do business there.

Evidence Fight

The Nevada Supreme Court told Gonzalez in 2011 that the case couldn’t move forward until that question was resolved, leading to years of haggling over what evidence Jacobs could gather and use.

Keeping the claims against the Macau company in the U.S. is important for Jacobs because he’s trying to recover 2.5 million Sands China stock options, which would be harder to collect if he’s forced to bring a separate lawsuit overseas, Doll said. There’s no telling who will win the hearing because both sides have strong arguments on the jurisdiction issue, said Doll, who reviewed the court filings.

Jacobs seeks to show Sands China is directly run by the Las Vegas-based parent company and that his case belongs in Nevada state court. Jacobs lists e-mails and other documents he expects to use as evidence for his allegations that Adelson was calling the shots for the Macau casinos.

Sands Board

Jacobs claims Adelson prevented him in June 2010 from disclosing to Sands China’s board the consultant’s findings related to allegations that the company was involved with Chinese organized crime groups. He also sought to tell the board that Adelson wanted to rehire a Macau lawyer who had requested a $300 million payment for government officials in China, which created a risk under U.S. anti-bribery laws, according to court filings.

“Adelson reminded Jacobs that he was both the chairman and the controlling shareholder and that Jacobs should ‘do as I please,’” according to an amended complaint Jacobs filed last year. “Indeed, on a prior occasion when Jacobs had voiced his concern over how Nevada’s gaming regulators might view Adelson’s actions, Adelson scoffed at the suggestion, informing Jacobs that he, Adelson, controlled the regulators, not the other way around.”

In March Adelson became chief executive officer of Sands China. The casinos in Macau provide about two-thirds of Las Vegas Sands’ revenue.

Adelson’s Wealth

Adelson, a Boston native, has a net worth of $27.7 billion, according to the Bloomberg Billionaires Index. He currently owns 48 percent of Las Vegas Sands, the world’s biggest casino operator, which in turn is the majority owner of Sands China.

He’s been reluctant to settle lawsuits, testifying in a 2013 trial with a Hong Kong businessman, who claimed he wasn’t paid for helping Sands win a license to operate casinos in Macau, that there would be a line around the block with people suing him if he didn’t defend the claims.

Adelson lost that trial and is appealing the $101.6 million judgment against Sands. It was the second time the case went to a jury after the Nevada Supreme Court reversed an earlier $58.7 million judgment in favor of the businessman, Richard Suen.

Saved ‘Titanic

Jacobs said in his lawsuit that he “saved the Titanic” when Adelson hired him in 2009 to run Sands’ casinos in Macau by, among other things, repairing relations with local and national government officials who no longer would meet with Adelson “due to his obstreperous behavior.”

He claims that in his first year on the job, he started “Operation Clean Sweep” to rid the casino floor of loan sharks and prostitutes, only to be told by senior Las Vegas Sands executives that the existing “prostitution strategy” had been a success.

Sands said in a 2012 court filing that Jacobs’s allegation that Adelson approved a prostitution strategy is “demonstrably false.”

“Mr Adelson regards prostitution as morally abhorrent,” Sands said. “In his business, Mr. Adelson has consistently opposed allowing prostitution, regardless of any financial calculations.”

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

Before it's here, it's on the Bloomberg Terminal. LEARN MORE