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Las Vegas Sands Subpoenaed by SEC

2 March 2011 by admin

Securities_and_Exchange_CommissionOn Tuesday, the Las Vegas Sands Corporation released its annual report and in that report was a bombshell that could impact investors, customers, employees and the entire gambling industry. The company revealed that it is being investigated by the U.S. Securities and Exchange Commission (SEC) and the Department of Justice.

Immediately upon the news, shares of the company fell 2.6% to $45.42 in morning trading. In its annual regulatory filing, the Sands stated that it received a subpoena from the SEC on February 9, 2011 requesting documents relating to compliance with the Foreign Corrupt Practices Act. The corporation believes that the investigation stems from allegations recently made by a fired employee.

LASVEGASSANDS/The Foreign Corrupt Practices Act, which was passed by the U.S. Congress in 1977, is most known for being an anti-bribery law. It makes it illegal for businesses to make payments to officials of foreign governments in order to assist in obtaining or retaining business. In essence, it makes bribing foreign governments for business purposes illegal, and the bribery doesn’t have to involve money. Anything of “value” that is given or promised, either directly or indirectly, to a foreign government official in order to influence that official and obtain an improper advantage over other interests violates the law. The law also bans using extortion or blackmail for the same purposes (though both of those techniques are already illegal under other laws).

Spokesmen for the Las Vegas Sands Corporation, as you might imagine, deny that they have violated the Foreign Corrupt Practices Act or committed any other SEC violation. The Justice Department investigation has not been revealed at this time, but it is said to be related to the SEC investigation. The Sands says that they believe it is all because of a man named Steve Jacobs.

Mr. Jacobs was the CEO of Sands China until his dismissal in July 2010. According to the Las Vegas Sands, he was fired for legitimate reasons that included not keeping the board of directors informed about important business and exceeding the authority of his position. Jacobs disagreed, suing his former employer in October for breach of contract and saying in the lawsuit that he was fired because he refused to carry out illegal actions ordered by Chairman Sheldon Adelson.

According to Jacobs, those orders included gaining “improper leverage” on government officials in Macau, where the Sands has three casinos. Jacobs alleges that he was told to arrange “secret investigations” on government officials so any negative information that is found can be used to blackmail them. Jacobs also alleges that Adelson told him to extort major banks in China into influencing the government officials by threatening to withhold business from those banks if they refuse.

The Las Vegas Sands denies any wrongdoing and says that the SEC investigation is simply a “fact-finding inquiry.” It certainly makes sense for the government to look into serious allegations made by a former executive. The corporation, however, doesn’t appear to be worried and representatives from the gaming regulators in Macau said that they were not concerned with Jacobs’s allegations.

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