Inside Asian Gaming

inside asian gaming April 2016 32 The question some LVS investors are asking is how wise it was for LVS to fight Steve Jacobs’ request for a reported US$7 million compensation after he was sacked as CEO of Sands China in July last year. By the company’s own assessment, the dispute with Mr Jacobs has led directly to regulatory and criminal investigations. The company said in its annual report: “It is the Company’s belief that the [SEC] subpoena may have emanated from allegations contained in the lawsuit filed by Steven C. Jacobs.” Those investigations at the very least risk negatively affecting local goodwill toward LVS—in a Macau casino market worth US$27.2 billion in gross revenue in 2010. Mr Adelson claimsMr Jacobs’ legal action is “threatening, blackmail and extortion” and says corruption allegations made by Mr Jacobs against LVS and Sands China are “lies”. Mr Jacobs has not responded to Mr Adelson’s statement, but clearly feels he has been unfairly treated by LVS. When positions become hardened in this way it’s hard to reach a compromise without recourse to law—whether the civil or criminal kind. But even if some LVS shareholders are alarmed enough by the situation to question Mr Adelson’s position, it appears unassailable, not least because he and his family own a majority of the LVS stock. The end game for a casino operator facing any serious regulatory investigation into its business practices is that it can lose its licence. Law 16/2001—the Macau legislation establishing the framework for a post-monopoly market—gives specific grounds on which a casino operator’s concession (or sub-concession in the case of LVS) can be withdrawn. Article 47 of Law 16/2001 headed ‘Withdrawal due to failure in fulfilling obligation’ states: “1) If the concessionaire failed to fulfil the obligations as required by related laws or contracts, the government can withdraw the concession. 2) Especially any of the following will lead to withdrawal. A) the concessionaire gave up running or stopped running the business without appropriate reasons. B) Violations of this law or other contracts related to its concession. Partial or entire transfer of its operation in interim terms or permanent basis.” Article 48 of Law 16/2001 headed ‘Withdrawal due to public interest’ adds: “1) Whether the concessionaire has fulfilled any of its legal obligations or not, the government has the right to withdraw the concession based on the ground of public interest. 2) In the event of withdrawal on the grounds of public interest, the concession has the right to seek compensation, of which the amount should be based on the remaining time before the expiration of the concession and the investment the concessionaire has already made.” No one is seriously suggesting Sands China and LVS face the withdrawal of its Macau operating licence because of these events. But the fact LVS—in common with a number of other Macau casino operators— has exposure to several casino markets across the world, makes investors fret that regulatory complications in one market could have implications in others. In the case of LVS, that’s Nevada, Pennsylvania and Singapore. MGM MIRAGE (now MGM Resorts International) has already found out how regulatory issues in one market (New Jersey) can have an impact in another (Macau and the company’s joint venture with Pansy Ho at MGM Macau). And multiple US federal investigations into criminal allegations are hardly something to advertise in lights on the side of your Asian casino properties. In the first quarter of this year, Resorts World Sentosa, Genting’s casino resort in Singapore, reportedly established a significant lead in terms of volume of VIP roll over LVS’s Singapore resort, Marina Bay Sands—US$20 billion per quarter for RWS versus US$10 billion for MBS. In previous quarters, the properties had been roughly neck and neck in the high roller segment. The sudden lead of RWS could be a function of more aggressive pricing on VIP rolling chip commissions. A Powerful line up —four bodies investigating LVS business in Macau Happy ending —IBM’s shares went up after settling Foreign Corrupt Practices Act allegations Blast from the Past April 2011