By Nathan Layne and Manuel Mogato
TOKYO/MANILA, March 17 The FBI and Philippine
investigators probing potential bribery related to Universal
Entertainment Corp's bid to build a casino in Manila
have zeroed in on a $25 million payment the Japanese company now
says should never have been made.
Rodolfo Soriano, a consultant with ties to the former head
of the gaming regulator in the Philippines, received the fee in
2010 to secure land rights for the $2 billion casino, Universal
had said. But records reviewed by Reuters show those rights were
obtained for free in 2009.
The FBI is involved because the payment originated from a
Universal subsidiary based in Nevada. Both the FBI and the
Philippine National Bureau of Investigation (NBI) have been
looking into a total of $40 million in transfers to Soriano as a
possible bribery case since last year.
In a closed-door, three-day hearing with the Nevada Gaming
Control Board that concluded on Friday, Universal directors,
including the company's billionaire founder Kazuo Okada, were
questioned about the payment, a source familiar with those
In a statement issued to Reuters as that hearing ended,
Universal said it now believed the $25 million payment to
Soriano should not have been made.
Universal said its board had not been aware that the land
rights problem had been resolved without any money changing
hands between Universal and the owner of those rights in late
It blamed three former employees for the mistaken payment
and said one of them had withheld information from the board
that could have prevented the transfer.
Universal sued the three Japanese men last year, claiming
they were to blame for $15 million in payments to Soriano
without proper authorization. It offered no evidence to support
its additionoal claim they were also responsible for the $25
million it has now disavowed and said its investigation into the
matter was still ongoing.
The three former employees declined to comment. They have
challenged the company's previous claims in filings to the Tokyo
Soriano could not be reached for comment and his whereabouts
Universal generates the bulk of its profits from pachinko
machines - a cross between slots and pinball -- in Japan. The
Philippines marks its first independent foray into casino
operations and is a key plank of its push to expand overseas.
It has said it conducted its business in the Philippines
lawfully, and in December announced a defamation suit against
Reuters for its reporting on the payments to Soriano.
Universal said it was still investigating how the $25
million payment to Soriano was used.
"We have no information at this time that this money was
used to pay any government officials," the company said in a
written statement to Reuters.
When Universal paid $300 million for reclaimed land for its
Manila Bay casino project in 2008 it failed to secure the rights
to develop more than a dozen "road lots", representing about a
quarter of the site of a luxury complex it hopes to open in
2014. The titles to the lots were held by local developer
Asiaworld Properties Philippine Corp, records show.
Universal turned to the Philippine Amusement and Gaming
Corporation (PAGCOR), the industry regulator, to find a solution
to the road problem, according to the people with knowledge of
the matter. PAGCOR declined to comment on its involvement.
A PAGCOR lawyer assigned to the case helped broker an
agreement in November 2009 under which Asiaworld gave Eagle I
Landholdings Inc, a Universal affiliate, a free hand to
consolidate and develop the road lots as it saw fit.
Eagle I agreed to bear the cost of building an equivalent
area of roads and open space, after which it would turn the land
over to Paranaque City, the local municipality. The move
relieved Asiaworld of its legal duty to develop the lots and
donate them to Paranaque.
There was no financial transaction written into the
agreement, a certified copy obtained by Reuters shows.
Paranaque Mayor Florencio Bernabe told Reuters that FBI
agents visited him in January to ask about the agreement, which
he signed, and related documents.
Asiaworld did not have the funds to develop the roads and
was happy to authorize Eagle I to shoulder that cost, a lawyer
for the developer said. "For us it was a welcome development,"
said Arcel Fetizanan, noting the move also eliminated its tax
liabilities. "It was a simple agreement. No cash involved."
The FBI declined to comment on the existence of a probe into
the Soriano payments, citing its media policy. Philippine
Justice Secretary Leila de Lima said an investigation by the NBI
into the transfers to Soriano had been extended, but did not
comment on specifics of the case.
Universal initially accounted for $35 million paid to
Soriano with an invoice and a corresponding contract indicating
his firm be paid $28 million for solving the road problem and $7
million as a consultant fee, copies of the documents seen by
Last month, Universal determined that $10 million was
improperly routed through Soriano and back to the company, and
revised its accounting for the payments. At the time it stood by
the $25 million outlay as an investment in its Philippine
A panel of experts hired by Universal to look into the
payments determined the $25 million had been properly authorized
but it has yet to pass judgment on whether the consulting fee
was justified based on the services provided by Soriano.
Universal's acknowledgement that the $25 million was
unnecessary raises the prospect of another accounting revision.
The Osaka Securities Exchange, which oversees its stock listing,
had given Universal until Monday to present evidence justifying
the payment, people familiar with the exchange's probe said.