Las Vegas Sands Fought the Law and... to be Continued

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What strikes the most fear in the hearts of investors? Perhaps an SEC investigation of one of the stocks they own. A Department of Justice investigation makes the list, too.

Yesterday, Las Vegas Sands (NYSE: LVS  ) revealed that both agencies had (metaphorically) sent humorless government drones in dark suits to look into possible corrupt practices in Macau. (Possible corruption in Macau!? I don't believe it!)

This shouldn't come as a huge surprise to those who have followed Las Vegas Sands. Twice, people who allegedly helped the company get its Macau gaming license sued the company, and Macau isn't exactly known as a case study in ethical practices. It is known for back-office business deals and mob ties, so the possibility of a little back-alley transaction or use of "improper leverage" wouldn't be a huge surprise there.

It was a worry about those kinds of deals that forced MGM Resorts (NYSE: MGM  ) out of Atlantic City. Gaming officials in New Jersey didn't want anything to do with a company that was associated with gambling kingpin Stanley Ho's daughter Pansy Ho and possible mob ties.

So what does this mean for the future of Las Vegas Sands and Macau in general? All we really know is that this will be a cloud over shares for the foreseeable future. Even a worst-case scenario is hard to define, but most of these cases end in fines. The largest fine in such a case was an $800 million settlement by Siemens in 2008, so the sum could be significant.

Meanwhile, competitors Melco Crown (Nasdaq: MPEL  ) and Wynn Resorts (Nasdaq: WYNN  ) will sit back and watch while Las Vegas Sands and Stanley Ho's SJM deal with their own internal issues. As I always say: If you can't beat 'em, let them beat themselves.

Interested in reading more about Las Vegas Sands? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

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Fool contributor Travis Hoium is short MPEL put options. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Melco Crown Entertainment is a Motley Fool Global Gains selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (14) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 02, 2011, at 7:33 PM, Senescent wrote:

    "It is known for . . . mob ties". Is it? I'm a shareholder and would like to know nore about these mob ties. Would you please elaborate and cite sources for this knowledge of yours? Thank you.

  • Report this Comment On March 02, 2011, at 7:45 PM, Senescent wrote:

    My mistake - you covered yourself by saying that Macao is known for mob ties. I thought you said that LVS was known for mob ties. But of course, I misread it and you accomplished the effect of smearing the company. My grandfather was Italian and I've lived in Oak Brook Illiinois - I've also been to Macao - I guess that means I'm a mobster. Right?

  • Report this Comment On March 02, 2011, at 8:29 PM, tigerman2362 wrote:

    You are smarter than this surely? i forgot this is motley fool...for fools. Have you ever heard of disgruntled employees? Why do you insist on writing this diatribe about acting like judge and jury on this issue. Your negative bias to LVS is so apparent...therefore your article has no credibility. Present facts not hyperbole and speculation - leave that to trashy publications such as the national enquirer. Do you have any facts about these alledged claims of improprietary? NADA...just writing to write ...simply garbage.

  • Report this Comment On March 02, 2011, at 9:08 PM, camour wrote:

    It is structually impossible to have gambling business in Macao without strong in fact contractual associations with whart we call mob. There is very low limit of the amount of money one can take out from China. So gamblers use the credit of these associations to gamble in Macao. The debt is collected and paid to these associations in China. Enforcement to collect the debt is no different that the modus operandi used by the mob in US. That is the basis or the scenario under which Ho is accused of having connection with dark elements of society and that goes for Wynn, MGM, Mpel and Las Vegas.

  • Report this Comment On March 02, 2011, at 10:54 PM, Pkylie wrote:

    Fact : LVS is the biggest money launderer of any businesses, banks or casinos. LVS provided jets to ferry Zhenli Ye, the biggest drug trafficker and his drug money to Vegas where he lost $125 Mil at the Venetian. Adelson got off scot free because he controlled then prez Bush.

    Fact: LVS is the biggest money launderer out of Macau, Steve Jacobs had evidence during his tenure as CEO of SCL, LVS macau laundered some $90 Mil of the Mob money out of macau to Vegas.

    A little background on Adelson here.

    Fact : MGM lost out in NJersey because of Adelson's dirty tricks.

    Fact: LVS has a sorry regulatory record in gaming, including Fixing casino games. Go read at Nevada gaming website . In Macau, a gambler won big, once in a blue moon, and LVS's Mob which operated a VIP gaming room at Sands Macau put a contract hit on the winning gambler.

    Fact : LVS is up to her neck with mob ties in Macau. nevermind Adelson preaching otherwise.

  • Report this Comment On March 02, 2011, at 11:02 PM, Senescent wrote:

    I'm not seeing any facts P Kylie and I'm not at all persuaded by the link to the New Yorker article. Nothing here but assertions and smears.

  • Report this Comment On March 03, 2011, at 2:27 AM, eatmeee wrote:

    These analysts write about resort companies like LVS not because they have anything informative, but so thay can use stupid phrases like the one for this trash piece. Nothing this guy said was informative. Just lazy and arrogant in my view. You notice the genious did not mention the upgrades that came out the same day or the triple in profits in Macau.

    Ignore these know it all's, they get it wrong 90% of the time.

  • Report this Comment On March 03, 2011, at 10:10 AM, TMFFlushDraw wrote:


    Fact: The SEC and DOJ have open investigations against LVS. (not usually a good sign for investors)

    Fact: Two parties sued LVS because the company didn't pay for services they rendered in helping LVS get a Macau license. One party won in court ($60 million), the other settled out of court.

    If you want to follow analysts, go ahead. The upgrade was made before the investigations were revealed.

    If I got any facts wrong in the article please point them out. As you said, I didn't make a direct link between LVS and the mob.

    Travis Hoium

  • Report this Comment On March 03, 2011, at 10:46 AM, spokanimal wrote:

    The inquiry is happening because of Jacobs' allegations. COO Leven stated that the text of the inquiry reads almost the same as the complaints Jacobs submitted to the court in his wrongful termination suit.

    As such, the SEC/DOJ are obligated to follow up with an inquiry even though Macau has no such inquiry and considers it to be an employee dispute.

    So far, it's simply "he-said, they-said"... there is no hard evidence. The only paper trail anybody thought was present... the transfer of $75 million cash from Macau to Las Vegas was retracted by the LV Sun as un-substantiated.

    This is an inquiry into the allegations of a disgruntled employee. If any of Jacob's noodles stick to the wall, LVS will pay a fine in a few years from now....

    .... but at this juncture, there are no noodles on the wall... and Macau doesn't seem to care whether there are any or not.

    Re: MGM in NJ... LVS is not in NJ. LVS is in Nevada, where regulators had no problem with MGMs JV with Pansy Ho.


  • Report this Comment On March 03, 2011, at 10:50 AM, Senescent wrote:

    Travis, I don't follow analysts - if anything I tned to get worried when too many analysts are upgrading. And yes, I know that the SEC has an investigation based on allegations made by Steve Jacobs. The DOJ is piling on. I do know that the Obama administration seems to have an ax to grind when it comes to casinos. I also know that the SEC wants to look good after its repeated shameful negligence in situations that are typified by the Madoff affair. And I still think you are hiding behind a fig leaf by implying that LVS has mob connections.

  • Report this Comment On March 03, 2011, at 11:50 AM, Metrobank wrote:

    Travis...most of what is going on here is related to the Steve Jacobs firing. You are piling on with your article. This will likely take 6 months to 2 years to unravel but could go in a number of different directions. Sara Lee just received a subpoena from the DoJ today. Have that caused $3 billion in loss of value for them? I doubt it.

    It could be as simple as the DoJ and SEC have to look into it because of Jacobs or it could be that Eric Holder is being used by Obama to rough up an exec who isn't a big fan of Obama.

  • Report this Comment On March 03, 2011, at 12:44 PM, TMFFlushDraw wrote:

    Obviously everyone is very passionate about this on one side or the other. Before we get too worked up let me be clear about what I did and didn't say in this article.

    1. The SEC and DOJ are both investigative LVS. This is not a good thing no matter how you look at it. But it doesn't mean that there is some imminent threat to the very existence of LVS or that LVS is guilty of anything. I clearly stated at the end of the article that even a worst case scenario is probably a fine. And with Macau casino money, that could be a kick in the bucket for LVS (opinion).

    2. Macau has a shady history so it is not out of the realm of possibility that the SEC or DOJ may find something. Again, not saying that they will or have, right now it is just Jacobs v. Adelson (in essence), but it is plausible that LVS will have some repercussion.

    3. Nowhere did I say sell LVS, panic, run for the hills or anything similar. I used to own LVS and no longer do because of its valuation (see any number of my previous articles) but that doesn't mean I don't think it's a good company in the long term.

    Thanks for all the input, good discussion.

    Travis Hoium

  • Report this Comment On March 03, 2011, at 8:52 PM, twowan wrote:

    Here are some contents from Jacob's law suit, I thinks is just some kind of the wolf is coming:

    For instance, Mr Adelson allegedly ordered Mr Jacobs to “threaten to withhold Sands China business from prominent Chinese banks unless they agreed to use influence with newly elected senior government officials of Macau in order to … obtain favourable treatment with regards to labour quotas and table limits.”

    Allegedly, Mr Adelson also wanted “secret investigations [to] be performed regarding the business and financial affairs of various high-ranking members of the Macau government so that any negative information obtained could be used to exert ‘leverage’ in order to thwart government regulations/initiatives viewed as adverse” to Sands China’s interests.

    Another alleged conflict between Mr Jacobs and Mr Adelson was regarding the “use of the legal services of Macau attorney Leonel Alves”, who is also a legislator and member of Macau’s Executive Council.

    Mr Jacobs had concerns that Mr. Alves’ retention could pose “serious risks” linked to the US Foreign Corrupt Practices Act.

  • Report this Comment On March 04, 2011, at 11:51 AM, Pkylie wrote:

    FACT : LVS 's Macau laundered some $90 Mil by Wiring to Vegas Venetian not by physical transfer of cash. Get your facts straight, mr. bjspok.

    LVS is ground zero when it comes to criminal money laundering of dirty drug money and stolen money.

    google "Zhenli Ye and Venetian". LVS helped him laundered $125 Mil in drug trafficking money only for him to lose it all gambling at the Venetian vegas.

    No one sues Adelson without overwhelming and damning evidence. Adelson will counter sue just because he has the pockets to bankrupt you from legal fees.

    Jacobs was the CEO of SCL and refused to commit crimes just because Adelson wanted him to.

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