Ties to junket operator questioned
It was only a preliminary hearing, to decide jurisdiction on a lawsuit. For Las Vegas Sands Chairman Sheldon Adelson, it could be a harbinger of big trouble with regulators in U.S. jurisdictions where LVS operates.
Adelson spent four days testifying in the preliminary hearing in Las Vegas for the wrongful termination lawsuit filed against him and LVS by former Sands China CEO Steven Jacobs. The hearing’s purpose was to determine whether the lawsuit should be heard in Las Vegas or, as Adelson attorneys argue, in Macau.
Jacobs lawyer Todd Bice argued that the case should be heard in Las Vegas because Adelson called all the shots for Sands China from there. Adelson’s position is that he trusted Sands China to Jacobs, and that Jacobs nearly sunk the entire corporation.
But through four days of grilling from Bice, Adelson gave testimony that may come back to bite him with respect to LVS licenses in U.S. jurisdictions. Most prominently, Adelson flatly denied under oath that LVS had ever had any dealings with Cheung Chi Tai, a Hong Kong-born leader of the Wo Hop To organized crime triad who controlled much of the junket business in Macau.
Referring to Cheung, Adelson testified, “We weren’t doing business with him,” at one point refusing to answer a question predicated on the notion that LVS ever dealt with Cheung. Yet, Adelson’s claim was contradicted by his own executives in separate testimony, as well as in several documents revealed in an article last week in The Guardian.
Robert Goldstein, former head of global gambling operations for LVS and now Adelson’s second in command, testified that the operator stopped doing business with Cheung after a 2010 article in Reuters identified him as a triad leader. That article was based on internal company documents obtained by the Investigative Reporting Program (IRP) at the University of California, Berkeley.
The Reuters report cited IRP research identifying Cheung’s triad links, and Hong Kong criminal trial records identifying him as “the person in charge” of one of Sands Macao’s VIP rooms. Testimony from that trial also claimed Cheung ordered the killing of a chip dealer suspected of cheating the Sands casino (the murder was not carried out).
Goldstein testified that LVS stopped “doing business” with Cheung after the Reuters report. “I was of the opinion that after the Reuters article and the other stuff, we should cease and desist doing business with Cheung Chi Tai.”
LVS dealings with Cheung are also evidenced by Hong Kong court records cited by The Guardian showing that Cheung was the major stakeholder in a junket company called Neptune which began running a VIP room at Sands Macau in 2005. Documents obtained by IRP also show that Venetian Macao extended $32 million in credit to Cheung’s junket company in 2008.
The IRP research cited by Jacobs’ attorneys revealed that the junket operators feeding high rollers to Macau casinos were tied to the Asian triads. Although junkets are a legal business enterprise, “The companies and individuals who operate the (VIP) rooms are either triads or fronts for the triads,” said the IRP report. “Put simply, triad groups operating the VIP rooms are effectively able to make 5 percent to 10 percent on every dollar of chips that customer purchases.
“In addition, triad societies are often employed by the room operators for protection and they also provide ancillary services such as drugs, prostitution and loan sharking to patrons of the rooms.”
The article in The Guardian cited other evidence of LV Sands’ dealings with Cheung. According to the report, Cheung’s business arrangement with Las Vegas Sands was cited in filings on the Hong Kong stock exchange in 2007, and a 2009 Las Vegas Sands document listing the top 10 junket companies in Macau included five controlled by “Tai Gor,” or “Big Brother Tai,” one of Cheung’s gang nicknames.
Adelson’s testimony denying LVS dealt with Cheung, and the evidence of ties to Cheung, figure to come up again in the main trial, particularly if the judge rules the case belongs in a U.S. court. The evidence supporting Jacobs’ allegations of corruption and organized crime links would not be admissible in a Macau courtroom, but it is admissible in the U.S., raising the specter that Adelson could be stripped of his U.S. gaming licenses.
Adelson also will have to answer to why LVS waited until after the Reuters report to cut ties with Cheung, and why the company dealt with him in the first place, considering a U.S. Senate report in 1992 had named him as a leader of the Wo Hop To triad.
If further documentation surfaces proving LVS ties with the triad figure, it could put LVS licenses in jeopardy in Nevada.
Jacobs has claimed he was trying to sever Sands China’s relationship with junket reps tied to organized crime. Adelson testified he was trying to intentionally destroy LVS by eliminating the junkets.
