Bribe
report reveals mainland Macau
envy By Muhammad Cohen
HONG KONG - One of the many mysteries
surrounding the enormous growth of Macau gaming
has been why Chinese authorities allow so many
mainland citizens to gamble so much there. A
Wall Street Journal article published
earlier this month may give the answer, while
raising many other questions.
The article
reports that Sands China received an offer from a
"high ranking" figure in Beijing to fix two of its
nagging issues in Macau for US$300 million. An
email to Sands China's then chief executive,
Steven Jacobs, from the company's Macau outside
counsel, Leonel Alves, in September 2009 said the
official reportedly could arrange permission,
previously denied by the Macau government, for
Sands China to sell its Four Seasons
luxury apartments, which
the company estimates could bring in $1 billion.
The official also offered to settle a
lawsuit brought against the company by Taiwan
businessman Shi Sheng Hao - also known as Marshall
Hao - over the breakup of their partnership to
seek a Macau gaming license more than a decade
ago. Las Vegas Sands (LVS), Sands China's parent
company, eventually partnered with successful
bidder Galaxy Entertainment Group.
Alves,
who also served as general counsel to Sands China,
and the company both deny that any bribes were
paid. But that's clear since the Four Seasons
apartments remain unsold and Hao is still suing,
now in Macau court for US$375 million.
Inka-dinka-doo There are some
holes in the story as reported, particularly how
paying a mainland official would change a Macau
government ruling. It's possible that the bribe
solicitor was really working on behalf of a Macau
official and the mainland connection was a
diversion. It's also pretty incredible that any
lawyer would commit such an offer to writing,
wherever it came from.
Nevertheless,
neither named party disputed the veracity of the
email, at least at first. Alves came closest,
telling a Macau radio station that the emails were
"totally out of context" and saying he had "a more
than pure conscience".
There is the
question of whether Sands China and LVS have a
pure legal record on the matter. Sands China may
have been obliged to report a bribe solicitation
under Macau law.
Article 13, section 4 of
the gaming concession contract, headlined
"Electronic surveillance and control equipment",
reads:
4. If the Concessionaire has
knowledge of any action or fact that constitutes
a crime or administrative offence and any action
or fact the Concessionaire deems as serious
offence, it shall report to the competent public
authorities as soon as possible.
A
Macau legal expert suggests that section could
apply to Sands China's situation, even if it
ignored the bribe offer.
Long
arm Since LVS holds a gaming license in the
US state of Nevada for its Las Vegas properties,
the company, including its subsidiaries, is
obliged to follow Nevada rules everywhere it does
business. Nevada's Gaming Control Board didn't
respond to inquiries about whether licensees are
obliged to disclose bribe solicitations. However,
an expert on gaming law believes that LVS would be
required to tell Nevada officials about the
incident.
That revelation could put Jacobs
on the hot seat, depending on whom he reported the
bribe to and when he did it. On the other hand,
the incident, if true, backs a key claim in
Jacobs' wrongful dismissal lawsuit against his
former bosses.
In the suit, Jacobs
contends that concerns over Sands China's
relationship with Alves became a bone of
contention between him and LVS (and Sands China)
chairman Sheldon Adelson. Jacobs tried to sever
the company's ties with Alves. The bribery story
would indicate that Jacobs' instincts about Alves
were on the mark.
Of greater concern for
LVS, the US Foreign Corrupt Practices Act
prohibits American companies, including their
overseas affiliates, from making payments to
government officials. Alves has worked for LVS in
as both general counsel and outside legal adviser
while serving as a member of Macau's Legislative
Assembly and Executive Council, an advisory board
to the chief executive. US authorities are
reportedly investigating a variety of allegations
raised in Jacobs' lawsuit.
Tantalizing
appetizer The bribery story raises issues
related to another global power. It's the first
public revelation of mainland China are seeking a
piece of the action in Macau, a topic that has
tantalized Macau watchers for a long time.
Ahead of Macau's 1999 handover, Beijing
declared that it would not seek a share in Macau's
gaming revenue. Mainland authorities specified
that no funds from Macau would be transferred to
the state treasury and that Chinese state
companies could not participate in Macau's casino
industry. While Macau has built a surplus
approaching $30 billion and casino concessionaires
have booked billions in profits, Beijing hasn't
gotten a penny.
Instead, the casinos are
believed to cost Beijing plenty of money. It's not
simply that more than half of all players and an
estimated 90% of so-called VIP high rollers come
from the mainland. There's widespread suspicion
that a lot of VIP bets are the fruit of corruption
in one form or another. Beijing got so upset with
the amount of state-funds that wound up on Macau
VIP tables that it restricted visa access to Macau
from mid-2008. That year, Macau's VIP revenue
totaled 73.8 billion patacas (US$9.2 billion). VIP
revenue last year was $24.5 billion, and the visa
restrictions are considered ancient history.
Moreover, casino revenue is just a small
part of the whole picture. Revenue represents how
much casinos win; for VIP revenue it's generally
less than 3% of the amount bet. Do the math and
that's an estimated $700 billion from the mainland
being wagered on Macau VIP tables, and
approximately $680 billion that the punters don't
lose.
One way flow Asked at last
month's Global Gaming Expo (G2E) Asia conference
in Macau how much of that money goes back to the
mainland, Ponte 16 casino resort deputy CEO and
VIP promotion executive Hoffman Ma replied, "I
don't think much goes back because it's so hard to
get things out. Look at Hong Kong: about 30% of
property transactions come from mainland China.
Once they get that money out, they want to keep it
out and invest it in things that will hold value
or increase in value."
So those funds
winds up in bank accounts and eventually other
investments in Macau, Hong Kong or further afield.
That huge outflow of funds has thinking
people scratching their heads about why the
Chinese authorities don't do more to stop it. Some
believe that outflow of money is a way of
controlling inflation in China by exporting it to,
say, Hong Kong's property market. Others think
that allowing people to gamble in Macau is some
kind of pressure control valve that helps preserve
social stability.
Those explanations are
not nearly as convincing as the one the Alves
email suggests - mainland officials are getting a
cut of Macau's gambling industry, or at least
trying to. Beyond bribery, there's suspicion of
hidden mainland partners with ties to Beijing's
leadership in various casino enterprises.
Website www.CasinoLeaks-Macau has promised
to document mainland links to Macau gaming. Given
the levels of corruption in China, the vast
amounts of mainland funds involved and the
enormous take for Macau and the concessionaires,
it would be most surprising if no one in the
mainland was getting something out of it.
Unlike Macau's other US casino operators
Wynn Macau and MGM China, which have focused on
Macau authorities, LVS and Sands China have
aggressively wooed Beijing. Court proceedings in
the lawsuit brought by Hong Kong businessman
Michael Suen against LVS documented the company's
lobbying effort in Beijing during 2001 as it
pursued a Macau gaming license. Efforts included a
meeting with then deputy prime minister Qian
Qichen, who suggested Beijing would ease travel
restrictions to Macau if LVS built a large casino
resort.
LVS also sponsored the Adelson
Center for US-China Enterprise in Beijing. The
center's stated goal was to direct US business new
to China to local firms for assistance. According
to US diplomatic cables published by WikiLeaks,
the center was shutdown after Beijing officials
raised questions about dispersal of its $100
million budget.
In his lawsuit, Jacobs
alleged that Adelson had pressured him to
investigate Macau officials to find embarrassing
facts to use as leverage. "They could have also
been looking for stuff on the mainland leadership
and their families," one industry expert said,
suggesting they may be tied to junket operators,
or even have hidden interests in casinos through
complex shareholding arrangements that each
licensee uses.
With all of these
suspicions lurking below the surface, the Alves
memo seems to be the tip of a potentially massive
iceberg. That alleged bribe solicitation matters
because without it, there'd be no evidence that
the iceberg is there at all.
Macau
Business magazine special correspondent and former
broadcast news producer Muhammad Cohen told
America's story to the world as a US diplomat and
is author of Hong
Kong On Air, a novel set during the 1997
handover about television news, love, betrayal,
financial crisis, and cheap lingerie. See his blog
and more at MuhammadCohen.com.
(
(Copyright 2012 Asia Times Online
(Holdings) Ltd. All rights reserved. Please
contact us about sales, syndication and
republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
, a novel set during the 1997
handover about television news, love, betrayal,
financial crisis, and cheap lingerie. See his blog
and more at 
