Sands China Inc has been in business for a very long time. It is the leading gaming hotels and resorts developers in Macau. Macau is the leading gambling centers of the world along with Las Vegas. Only six companies have license to operate casinos in Macau and Sands is one of them. The company also has a subsidiary working in Las Vegas which operates the gaming resorts and hotels in the United States of America.
Very recently, Sands China has come under investigation by the Hong Kong financial regulators upon allegation of possible breach and complaints against the company from the United States. The company’s Las Vegas operations are also being investigated by the US Securities and Exchange Commission as well as the US Justice Department. The company has also obtained subpoena from the Justice Department as part of the Jacobs case for wrongful termination.
The main reason for the investigation is supposedly the allegation of improper payments to foreign officials by the company. This is prohibited by the Foreign Corrupt Practices Act. This is in lieu of the lawsuit filed by former CEO of Sands China Steven Jacobs, who was fired by the company in the month of July 2010. Jacobs alleges that he was wrongfully fired upon refusing to use leverage to gain concessions from the government.
Jacobs also said that Mr. Adelson, the chairman of the board of directors, asked him to conduct secret investigations on government officials of Macau to find out some information that could be held against them and then used to the advantage of the company.
These investigations are likely to take four to six months and therefore the company will be under the microscope till then. But, the real reason for the Hong Kong investigation is not clear and the connection to the US case is just speculation on the part of the media and statements made by Adelson. It is only in the past few years that Hong Kong has tightened their regulations regarding market misconduct.
Adelson, in a statement to the press, claims that if the whole investigation is based on Jacobs’ allegations, it would blow away quickly. He has completely brushed off the Jacobs event as “nothing serious” and even went so far to state that no government official is going to admit to bribery. According to him, once the investigators got a chance to check all the documents they have requested for including email correspondence of Adelson, it will be clear that no wrongdoing took place.
When the news of the investigation broke out, there was an instant fall in the share value of the company in the New York Stock Exchange as well as Hong Kong stock exchange. Experts feel that as long as Jacobs’ lawsuit stands and the investigation is under way, the company is going to suffer substantially in goodwill as well as share value. In fact, some say that it will also affect the casino earning in the future.