INSIDE ASIAN GAMING | December 2012 2 Inside Asian Gaming is published by Must Read Publications Ltd 8J Ed. Comercial Si Toi 619 Avenida da Praia Grande Macau Tel: (853) 2832 9980 For subscription enquiries, please email
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[email protected] Reforming the reformers You’d be hard-pressed to find a law anywhere that packs the power of the US Foreign Corrupt Practices Act to project one nation’s criminal justice system into every corner of the globe. Which explains why we hear so much about it in Macau. How important this turns out to be for Wynn Resorts and Las Vegas Sands, which are under FCPA-related investigations stemming in part from their substantial China businesses, only time will tell. One legal expert in the States says these things are almost always a mystery since the Justice Department and the Securities and Exchange Commission, which jointly enforce the Act, almost never comment. A company can spend two to four years sweating out an investigation, in some cases longer. “It’s kind of a guessing game,” he says. As for the authorities in Macau, whereWynn and LVS represent a fair chunk of the local economy, they can’t be happy about having to guess along, especially with a new sheriff in town in the PRC. It’s no wonder that official interest is on the rise these days on both sides of the border in the enormous sums of money regularly flowing into Macau’s casinos through the mainland’s vast underground banking system, some of which is believed to have originated with none other than Bo Xilai. Cash reporting requirements in the VIP rooms are getting stricter as part of a new emphasis on bringing some transparency to a notoriously opaque system, and several junket operatives, including partners in one of the largest networks, recently were taken into custody for questioning. In the States, interestingly enough, things may be going the other way. Bear in mind, the FCPA mostly had been collecting dust before Barack Obama came into the picture. Jimmy Carter, an unabashed reformer and the first Democrat to occupy the White House in the post-Vietnam era, signed it into law his first year in office. Yet during his administration only one enforcement action was brought under its provisions. Prior to 2007, the average was a little over two cases a year. Then in 2007, suddenly there were 19; in 2008, 23. Under Mr Obama more than 90 have been initiated. The Wall Street Journal reports that in fiscal 2010, FCPA fines generated half of all penalties collected by the Justice Department’s Criminal Division. Active investigations that year totaled more than 130. Not surprisingly, business groups are pushing back. They say the Act casts too wide a net and lacks judicial oversight. Mike Koehler, an American law professor who blogs regularly on the subject, notes the emergence in the last couple of years of “a very active FCPA reform movement”. This is in response to calls from a private sector frustrated with the obstacles the Act is throwing in the path of overseas opportunities—at least $1 billion annually in lost US exports, according to a 2009 report by the non-partisan Congressional Research Service. “The [Department of Justice] effectively serves as both prosecutor and judge in the FCPA context, because it both brings FCPA charges and effectively controls the disposition of the FCPA cases it initiates,” the US Chamber of Commerce, a powerful and outspoken critic, argued in 2010 in proposing a number of amendments. The chamber wants to see the addition of a compliance defense, which the Act currently lacks. They also want to see proofs tightened so that it has to be shown that a corporate violation was “willful,” and they want limitations on corporate liability for violations committed by subsidiaries. Not long after the Republican Party reclaimed the House of Representatives in January 2011, their cause was taken up on Capitol Hill. Hearings were held in June of that year before the House Judiciary Committee’s Subcommittee on Crime, Terrorism and Homeland Security, and with the GOP still in the control of the House, it’s likely the chamber’s views will be translated into legislation in the months ahead. Ultimately, this is good news for US entities looking to further their interests in China, where the FCPA is colliding head-on with the avid pursuit of those personal connections that characterize the age-old culture of guangxi and largely determine one’s ability to advance in society and successfully conduct business. In a highly publicized FCPA case earlier this year, guangxi actually was cited by the defense in a plea for leniency for Garth Peterson, a US citizen and former high- flyer with Morgan Stanley in Singapore who admitted to conspiracy to evade the bank’s internal controls in connection with a real estate deal that netted several millions for himself and the head of a state-owned property investment company in Shanghai. The latter, a long-time friend and mentor of Mr Peterson’s, was “in many ways a father figure to him,” his lawyers said. Not that federal prosecutors were having any of it. “Corrupting a Chinese official in the course of stealing an interest in a building cannot be dismissed as a symptom of Peterson’s affinity for China or its culture,” they shot back. “If anything, his actions demonstrate quite the opposite.” He got nine months in prison and was assessed US$3.7 million in fines and penalties. EDITORIAL