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SEC lets Adelson off with a slap on the wrist . . . again




SEC decision to settle with Adelson is unfortunate and sends the wrong message to the gambling industry.

On April 7th the SEC settled with The Sands Las Vegas for $9 million for the SEC's case regarding Sands wrongdoings in Macau while securing a gambling license in the Chinese protectorate. The Sands also agreed to hire an independent compliance consultant for two years as part of the settlement. The Sands has been under investigation for violating the federal Foreign Corrupt Practices Act by failing to properly authorize or document more than $62 million of payments to a consultant for the company in Macau between 2006 and 2011. The consultant, known within the company as "the beard", was hired to help garner concessions within the Chinese government and to help with efforts to lure Chinese customers to the casino.

To anyone unfamiliar with the word "beard", it is a term in the sports betting industry that identifies someone who places bets on behalf of someone else because the person that is actually doing the betting doesn't want to be identified personally. For example, John Doe is a massive gambler who bets millions every week but he doesn't want the casinos knowing it's he that is placing the bets. He thus hires Jane Smith to place the bets for him. To the casinos they'll only know about Jane Smith because John Doe is never identified in any transactions. In fact, some big bettors will use several beards if they want to scatter bets across different casinos and sportsbooks so they don't get flagged, or more importantly because they are trying to exceed the posted limits. As well some big bettors use beards for tax reasons. For that reason, the term "beard" is actually a very appropriate name for the consultant the Sands hired because Sheldon Adelson and his staff wanted it to appear that the Las Vegas Sands had nothing to do with any questionable transactions in Macau in its attempts to get a license for a casino.

According to documentation released by the SEC, the Las Vegas Sands started its questionable actions shortly after it met with an unidentified consultant in 2006 claiming to be a former Chinese government official. This official is actually well known as a result of all the information that came out in the Steven Jacobs wrongful dismissal case, but since he was not explicitly identified in the SEC documents he has only been referred to as "the beard". The SEC claims that in 2007 The Sands used "the beard" to conceal its purchase of a Chinese basketball team that was to play in an arena close to one of the Sands casinos. The hope was that patrons to the arena would then go to the casino to lose money. Apparently this purchase had to be made by "the beard" and not the company itself because the Chinese Basketball Association forbids gambling companies from owning any franchises. The SEC also claimed these purchases were hidden in the books and were recorded as bank charges and loans.

Around the same time, the Sands used "the beard" to buy a large building in Beijing that was supposed to be turned into a business center with a "gentleman's club" in the basement. The Sands planned to name the center the Adelson Centre and it would be open it in time for the Summer Olympics that were held in Beijing in August 2008. In fact, Sheldon Adelson invited several individuals including the President of the United States to the ribbon cutting ceremony. And like the purchase of the basketball team, the payments for the center were misrepresented and payments to "the beard" were classified as fees for property management and arts and crafts. The Adelson Centre was never built.

In its statement, Las Vegas Sands acknowledged the consultant worked with company executives who weren't "sufficiently monitored," about the situation.

Upon being told of the $9 million fine and the requirement to hire an outside compliance consultant, Adelson, the Sands CEO released the following statement:

"We understand that running an industry-leading compliance operation takes time, resources and the full support of senior management. I'm proud to say our company has exactly that,"

While it's nice to see Adelson finally being held accountable for seedy actions, the truth is the settlement is far too little and probably ill-advised at the present time at least until the case with Steven Jacobs is settled. No doubt a lot more information will come out as that case progresses and it will be interesting to see what other transgressions the Sands may have been involved in. And more importantly Adelson's own comments just a year ago in the Jacobs case shows how truly indifferent he is to all the charges. As many will recall from the Steven Jacobs case, Adelson was not the least bit remorseful for the decisions that the company undertook to get a license in Macau and in fact effectively claimed he would do it again. When it was revealed that Steven Jacobs went to company lawyers indicating that he was concerned that some of their actions could be viewed as being in violation of SEC rules Adelson's only response was:

"This Jacobs never became important unSheldon Adeslson SEC violationstil he squealed like a pig to the government authorities and made up stories."

And when Jacobs tried to right a wrong by cutting out junkets tied to criminals, Adelson's only response was:

"He wanted to throw out 50%, 60% of the income by throwing out the junkets. This was insanity. He purposely tried to kill the company."

And several other of Adelson's comments have shown that to him all this is business as usual and he has no regrets. The gambling industry, particularly in Las Vegas has come a long way since the days of Bugsy Siegel. It has taken decades for the industry to finally show skeptics that the gambling industry are controlled by large companies that are not tied to criminals and are simply legitimate businesses only looking out for the shareholders. And many of the businesses give back to the communities with good paying jobs and philanthropic endeavors. Caesars, MGM and Wynne are prime examples. But Adelson and his company are doing nothing to help tame the skeptics and convince the public and politicians that gambling isn't evil or corrupt. Aside from all the shenanigans that the Sands employed in an effort to get a casino in Macau, which the SEC mentioned in its report (and which none of the other casinos in Macau have been charged with), the Sands has also paid a fine to settle a money laundering case involving a Mexican drug cartel and has been accused of illegally extending credit across country lines in Asia. Effectively, the company went out of its way to hide its wrongdoings and fired anyone who objected to these efforts.

And one also can't overlook the huge political contributions Adelson makes to particular politicians many who to no one's surprise are now working on his behalf to pass a bill that will make online gambling illegal. And to anyone that has followed the progress of RAWA it's clear that these politicians aren't supporting RAWA because they believe in the bill, but rather because they don't want to lose the multi-billionaire's favors. And don't forget the only reason Adelson asked for RAWA to be introduced in the first place is that he is worried that online gambling will eat into his land based casino profits and he knows he'd probably be a bit player online.

The SEC had a great opportunity here to really send a message to the Sands and indicate that they are not prepared to allow influence peddling, racketeering and cavorting with criminals solely for the effort to win a casino bid. It would have sent a message to Adelson and the Sands that 1950s tactics won't be tolerated in this day and age and it would have sent a message to any other casinos that had similar notions to stop those plans in their tracks. While an actual suspension of the Sands license wasn't a realistic expectation, a more fitting punishment would have been for the SEC to issue a probationary license with strict requirements they had to adhere to and report on regularly. And the fine should have been hefty. Instead the SEC gave the Sands a slap on the wrist. The $9 million fine is peanuts as Adelson probably keeps that in his wallet and the 2-year requirement for the independent consultant means nothing if there are no strict guidelines for the company to follow. The fine should have been at least what the Sands spent in obtaining the Macau license which would have been in the hundreds of millions of dollars.

I personally have nothing against The Las Vegas Sands itself. The Venetian and Palazzo are beautiful hotels and casinos, but I do have an issue with any businessman who feels they have the right to be involved in dirty dealings. It cheapens the industry and gives all of gambling a bad name.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!