Macau and Why Politics is Bad for Business
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Things are getting ugly for Sheldon Adelson and his Las Vegas Sands (NYSE: LVS). The company is currently involved in a lawsuit brought by former Sands China chief executive, Steven Jacobs, and some fairly unsavory revelations are being brought to light. It also doesn't help much that Mr. Adelson is a massive GOP donor and the presidential campaign is panning out to get pretty messy. The lawsuit stems partly from what Mr. Jacobs claims to be wrongful termination after he didn't toe the company line and get behind retaining a particularly well-connected lawyer by the name of Leonel Alves.
The very busy Mr. Alves is an FCPA (Foreign Corrupt Practices Act) prosecutor's dream as he holds not one, not two, but three, political positions in China. According to a July 16 NPR interview with investigative reporter Lowell Bergman, those include "one with a national consultant of Congress, another as a legislator, and another as part of the inner circle or the executive advisory board of the chief executive of Macau." Bergman further explained, "At the same time, [Mr. Alves] is an attorney, so in that capacity he represents them in a number of outside issues including discussions with the government."
Mr. Jacobs alleges he objected to $700,000 in payments made to Mr. Alves, personally insisted upon by Sheldon Adelson himself. The payments, made over the course of four months, were intended to help mend relations between the somewhat cantankerous Adelson and the Macau authorities (one story recounts when Adelson slapped the table in anger in front of the Macau chief executive, a serious no-no). Through Alves' private law firm, LVS was able to work with the Macau government to grease the government skids, as is common in China and Macau. Alves' firm specifically helped LVS keep their crucial ferry routes and also obtain the necessary government approvals so they could sell off Macau assets and list Sands China publicly; the proceeds from which would be used to continue development.
The strife at LVS came when Mr. Alves submitted his bill. In typical lawyer fashion, it was a bit higher than initially agreed upon. Sheldon Adelson and the president of LVS, Michael Leven, both instructed to pay Alves' fees and "close out the matter." Al Gonzalez-Pita (LVS General Counsel) and Steven Jacobs disagreed, citing a possible FCPA violation. Guess who won? Jacobs and Gonzalez-Pita are now gone and Alves is still LVS' outside counsel in Macau.
LVS' problems pale in comparison to the possible $50 million Wynn (NASDAQ: WYNN) paid to a mysterious colleague of the aforementioned Macau chief executive that Mr. Adelson angered. $700,000 over four months is steep, but is it criminal? Leonel Alves is a private attorney that knew the ins and outs of the byzantine Macau government. Every foreigner in China who isn't a moron hires a fixer to help them navigate unfamiliar territory. Mr. Alves was able to charge more than the other firms employed by LVS because of his connections. Connections in China are crucial and Alves capitalized on his; besides who are we as a country to apply our own ethics to that of an entirely different culture? Nevertheless, according to a report on ProPublica "Mr. Alves said his office had “been scrutinized by the Chinese and American authorities like few have in Macau, and no authority has ever had any suspicion."
The investigation smacks of partisanship. Is it possible that because of Sheldon Adelson's multi-million dollar Republican contributions he has become a target of the feds? Let's hope not. Once this clears up and LVS is cleared of wrongdoing, the market should see the amazing potential of LVS and their newly approved Cotai property.
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