| SAN FRANCISCO
SAN FRANCISCO Aug 13 Nevada regulators are
investigating whether casino powerhouse Las Vegas Sands Corp
broke bribery laws through its dealings in mainland
China, adding to a growing number of inquiries into the empire
of Sheldon Adelson.
The Nevada Gaming Control Board's probe, disclosed by two
sources familiar with the matter, comes on top of reviews by the
U.S. Department of Justice and the Securities and Exchange
Commission, which the company confirmed in a March filing.
All three inquiries may have their roots in a
breach-of-contract suit brought in Nevada by Steve Jacobs,
former chief executive of Sands China Ltd, Sands'
largest subsidiary. He is now cooperating with U.S. officials
who are following up on his claims, according to records and
In that suit, Jacobs alleges he was fired after repeatedly
clashing with Adelson over "Adelson's illegal demands". High on
the list of disagreements was whether to hire a Macau official
as a local legal counsel, which Jacobs said raised the risk of
breaking U.S. anti-corruption law. Sands has denied illegal
activity from the beginning, and Adelson has been quoted as
saying "none of what he says is true and he can't prove it."
The probes have expanded beyond Jacobs' core claims that
Sands' payments to the Macau legislator could have been
improper. Jacobs' suit did not mention the new round of issues
involving actions in the Chinese mainland. His attorney couldn't
be reached for comment.
Macau is the only place in China where casinos are legal,
and Sands properties there provide the majority of its revenue.
Corruption has been an historic problem in Macau, which like
Hong Kong is a special administrative region of the world's most
The probe into Sands' mainland China dealings is the latest
look by regulators into one of the largest casino operators in
the world, which is also the source of wealth of Adelson, who
has sprung into the vanguard of Republican presidential
supporters this season. Adelson and his family are the
controlling shareholders of Las Vegas Sands, which said it would
not comment on the developments because they involved ongoing
In the latest matter, the Nevada authorities recently
obtained a detailed but preliminary report by an outside law
firm for the Sands board's audit committee, which concluded that
under previous management, the company's controls on executive
actions were too weak, according to the two people familiar with
The document, first described Friday by the Wall Street
Journal, did not find conclusive evidence of corrupt payments
but questioned a series of deals on the mainland dating from
before Jacobs' stint at the company.
Among other issues, it highlighted tens of millions of
dollars spent through intermediaries to secure space for the
Adelson Center for U.S.-China Enterprise, a nonprofit Beijing
project intended as a resource for American companies pursuing
ventures in China that was later shelved. It is unclear where
all of that money ended up.
Sands declined to comment on the board's report or Nevada
NO FORMAL COMPLAINT, YET
The Gaming Control Board has yet to reach the stage where it
would consider making a formal complaint against Sands. In
theory, a complaint could accuse the company of being unsuitable
to operate casinos in Nevada due to suspected violations of the
law or other grounds.
A complaint would require the unanimous backing of the
three-member panel, and the casino would then get a chance to
argue its case or say that it had made changes to correct past
If a complaint is not resolved at that point, the two sides
would square off before the state's Gaming Commission, which has
the power to revoke a casino license, but seldom goes that far.
The Gaming Control Board declined to confirm or discuss any
Adelson has not been accused of any crimes by state or
federal investigators. Sands previously has said neither the SEC
nor the Department of Justice had accused it of wrongdoing and
described an SEC subpoena for documents as part of a
Adelson has drawn extra attention in the past year because
of his financial support for Republican presidential candidates
and support of Israel's conservative Likud party.
He is expected to be among the largest sponsors of
advertisements against President Barack Obama's reelection.
Both the previously disclosed issues in Macau, the gambling
capital of the world, and the new ones in mainland China,
involve its majority-owned but publicly traded Sands China.
Another development last week, however, pointed to issues in
the United States.
In a quarterly filing with the U.S. Securities and Exchange
Commission, Las Vegas Sands said it received subpoenas on Aug. 1
from federal prosecutors seeking documents "relating to two
A person familiar with that case said that the two former
customers are Mexican national Zhenli Ye Gon, a pharmaceutical
company owner now awaiting extradition to Mexico on drug
charges, and American Ausaf Umar Siddiqui, a onetime vice
president at Fry's Electronics convicted of taking kickbacks
from that chain's suppliers.
Under post-9/11 reporting rules, casinos are required to
report when they have reason to suspect that patrons' funds may
have derived from illegal activity. Those reports are
commonplace and confidential, and they are reviewed on a nearly
daily basis by tax, drug-enforcement and other agencies.
Sands did not file such reports on Ye Gon and Siddiqui, the
person said. Ye Gon lost more than $125 million gambling at Las
Vegas casinos including Sands properties between 2004 and 2007,
according to an affidavit from a U.S. Drug Enforcement
Administration special agent filed in a U.S. case against Ye Gon
that was dimissed. Ye Gon's lawyers denied he was laundering
money and said he was not involved in the illegal drug trade.
Siddiqui, meanwhile, transfered $121 million to Sands and
MGM Resorts International casinos while earning only
$225,000 from Fry's, prosecutors said in filings against
Siddiqui. Siddiqui attorney Paul Meltzer wrote that Siddiqui was
addicted to gambling and that the casinos courted him with
private jet trips and stays in luxury suites valued at more than
$25,000 per night.
Meltzer did not return phone calls, and Siddiqui's federal
prosecutors declined to comment on the casinos' role. Sands also
declined to comment.
While failing to file suspicious-activity reports can result
in criminal charges, they are very rarely brought. In the
best-known case, an MGM manager was arrested for failing to file
any reports for more than a year, and the casino company itself
paid $5 million to settle related claims by Nevada regulators.
More commonly, the U.S. Financial Crimes Enforcement
Network, an arm of the Treasury Department that collects and
distributes the electronic filings from casinos, banks and other
businesses, levies smaller civil penalties against smaller
casinos accused of procedural violations or deliberately looking
the other way.