March 31, 2011 / 7:26 AM / 9 years ago

Macau's Sands China under investigation by HK regulator

HONG KONG (Reuters) - Sands China Ltd, the Macau unit of billionaire Sheldon Adelson’s Las Vegas Sands Corp, said on Thursday it is being investigated by the Hong Kong Securities and Futures Commission for alleged regulatory breaches, the latest twist in a case that involves allegations of corruption and bribery.

Sands China, one of six casino companies licensed to operate in the world’s biggest gambling market, said it has been asked to provide certain documents to the SFC.

The announcement comes nearly a month after U.S. anti-corruption agencies launched an investigation into its Las Vegas parent.

A company spokeswoman told Reuters on Thursday she was not in a position to comment.

Hong Kong-listed shares of the $19 billion gambling company fell 6 percent in afternoon trading on Thursday. Analysts said it was too early to say what the impact of the investigation will be, given the limited information available.

“It’s always going to be an overhang because this issue is going to go on for a little while and there is no certainty. The stock will react every time something comes out, but it is obviously not good news,” said Huei Suen Ng, analyst at CLSA in Hong Kong.

Casino mogul Adelson’s firm is being sued for breach of contract in Nevada courts by his former Sands China chief executive, Steve Jacobs. Jacobs has accused the company of, among other things, seeking to use “improper leverage” against senior Macau government officials.

Lawyers said the SFC case in Hong Kong was likely to be a disclosure issue related to the U.S. investigation and the Foreign Corrupt Practices Act (FCPA).

“It’s most likely to relate to Sands China not having properly disclosed price sensitive information. The SFC has been focusing very hard on disclosure issues recently,” said one Hong Kong-based lawyer who specializes in litigation.

“Given the FCPA investigation, it may be that they haven’t fully met their obligations with regards to what and when they should have told their shareholders or broader issues relating to problems with the board’s governance.”

Sands China, operator of The Venetian complex in Macau, competes in the former Portuguese colony with MGM Resorts International and Wynn Macau Ltd, a unit of Steve Wynn’s, Wynn Resorts Ltd.

MACAU MARKET

Sands has an about 20 percent share of Macau’s lucrative gambling market, where revenue streams are at least four times higher than those in Las Vegas. The share is second only to the 30 percent share held by tycoon Stanley Ho’s SJM Holdings Ltd.

Macau has been a center for smuggling and crime throughout its history, but in recent years has sought to upgrade its rough-edged image with a frenzy of neon lights and Playboy bunnies, bolstered by mainland gamblers that flock to China’s only legal casino gambling destination.

Analysts said the investigation by Hong Kong regulators was to be expected.

“If it is just Steve Jacobs again, I don’t think it is a big issue. The SFC has to respond to the FBI and the SEC in the States, so if it is not really new news, I am not that worried about it,” said Gabriel Chan, an analyst at Credit Suisse in Hong Kong.

An investigative report by Reuters earlier in March disclosed that while Jacobs, a 47-year-old Harvard graduate, played a key role in the success of Sands China, he clashed with Adelson over several issues, including whether to hire more so-called junket operators.

Junket companies are known in many cases to be connected to Macau’s triad underworld and are the middlemen who bring high-rolling VIPs from the mainland to gamble in Macau. The operators offer them legal debt payment services to avoid China’s strict debt collection laws.

Adelson has lashed out at his former employee over the past week, publicly saying Jacobs’ case is not serious.

“It is pure threatening, blackmail and extortion. That is what it is all about,” he was quoted as saying by Macau media.

Editing by Matt Driskill

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