Las Vegas Sands Corp. agreed Thursday to pay a $9 million penalty to settle charges that it violated the Foreign Corrupt Practices Act by failing to properly authorize or document millions of dollars in payments to a consultant hired to help it do business in China and Macau.
An SEC investigation found that Las Vegas Sands Corp. (LVS) spent more than $62 million on a consultant. But the payments often lacked supporting documentation or proper approvals and weren’t accurately recorded in the books and records.
The consultant acted as an intermediary to hide the company’s role in the purchases of a basketball team and a building in China, where casino gambling isn’t permitted.
At one point, LVS couldn’t account for more than $700,000 transferred to the consultant for team expenses. But the company continued to transfer millions of dollars to him.
The SEC settled the enforcement action wth an internal administrative order and didn’t go to court.
Billionaire Sheldon Adelson founded LVS in 1988 and still runs it.
The SEC’s order found that LVS violated the internal controls and books and records provisions of the FCPA.
LVS consented to the SEC’s order without admitting or denying the findings.
According to the SEC,
- LVS transferred $6 million to a consultant internally referred to as a “beard” to buy a team to play in the Chinese Basketball Association, which did not permit gaming companies to own a team. The company transferred an additional $8 million to the consultant to cover the costs of operating the team without any documentation of those costs.
- LVS used the same consultant as a beard to buy a building in Beijing from a Chinese state-owned-entity, ostensibly to develop a business center for U.S. companies seeking to do business in China. Despite concerns by some employees that the real estate purchase was solely for political purposes, $43 million in payments were made to the consultant without research, analysis, or proper approval by any LVS employee authorized to approve the amounts paid.
- About $900,000 paid to an entity controlled by the consultant was recorded in company books and records as “property management fees” when no property management services were actually performed. About $1.4 million was recorded as “arts and crafts” when the entity never actually obtained any artwork for the building.
- LVS failed to prevent employees from circumventing policies and procedures for purchases, reimbursements to outside counsel, and comps to customers. One employee obtained a cash advance of $28,000 and a cash reimbursement of $86,000 without proper authorization. An outside counsel asked for reimbursement of $25,000 for expenses incurred on a business trip but provided no documentation, and later admitted he requested the funds for a friend. In its casinos in Macau, LVS employees didn’t track which customers received comps to ensure they weren’t providing improper gifts to government officials.
In addition to the $9 million penalty, LVS agreed to retain an independent consultant for two years to review its FCPA-related internal controls, recordkeeping, and financial reporting policies and procedures and its ethics and compliance functions.
Andrew J. Ceresney, head of the SEC’s enforcement division, said, “Las Vegas Sands failed to implement controls to prevent tens of millions of dollars from being paid out without appropriate documentation or authorization.”
In the administrative order, the SEC said LVS cooperated with the investigation.
[T]he LVSC Audit Committee retained outside counsel to conduct an internal investigation. The LVSC Audit Committee provided significant cooperation with the Commission’s investigation by sharing in real-time the facts discovered during the course of its internal investigation and provided information that may not have been otherwise available to the Staff; facilitating the interviews of certain key foreign witnesses; voluntarily producing translations of key documents; and producing large volumes of business, financial, and accounting documents in response to requests.
LVS hired a new general counsel and new heads of internal audit and compliance, the SEC said.
The company set up a new board of directors compliance committee and increased the compliance and accounting budgets.
It updated its code of business conduct, anti-corruption policy, guidelines regarding comps for government officials, and expense reimbursement policy.
LVS put in place “enhanced anti-corruption training and an electronic procurement and contract management system,” the SEC said.
It also started enhanced screening of third parties and new hires.
The SEC said it had help in its investigation from the DOJ, the FBI, and the Nevada Gaming Control Board.
LVS trades on the New York Stock Exchange under the symbol LVS.
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The SEC’s Securities Exchange Act of 1934 Release No. 77555 and Administrative Proceeding File No. 3-17204 (both dated April 7, 2016) In the Matter of Las Vegas Sands Corp. are here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.