What happens in Vegas…SEC investigates Sands Hotel and Casino

In 2006 through to at least 2011, the Las Vegas Sands hotel and casino corporation transferred funds totaling more than $62 million to a “consultant” in China to promote their interests.

Lacking supporting documentation for appropriate authorization and identity, the money trail raised a red flag for the Department of Justice (DOJ) in the United States. This led to an investigation under the authority of Foreign Corrupt Practices Act (FCPA), as well as an investigation carried out by the U.S. Securities and Exchange Commission (SEC), since the Sands is traded on the New York Stock Exchange.

Since the Sands management could not account for the funds transferred to the consultant, bribery was inferred. This lack of controls extended to other transactions, including gifts and entertainment to foreign officials, employee and vendor expense reimbursement, and customer complimentary services.

The SEC administrative proceeding confirmed that the Sands, headquartered in the United States, was in violation of U.S. law. .The improper payments, or bribes, were likely paid to unnamed Chinese Government Officials.

The administrative investigation by the SEC also found misconduct being carried out by various subsidiaries of the Sands, including Sands China Ltd., Venetian Macao Ltd. and Beijing Asia Travel Alliance Business Consulting Co.

The net result of the lengthy investigation was a government administrative proceeding and Agreement between the SEC and the Sands released April 7, 2016. Surprisingly, the proceedings showed that The Sands:

  • agreed to a cease and desist order, without confirming or denying the allegations contained therein
  • accepted a civil fine of $9 million, as well as orders to hire an independent monitor for a term of two years, and to improve internal “books and records” compliance programs and standards
  • co-operated with the order to retain outside counsel via their audit committee to conduct an internal investigation
  • updated its Code of Business Conduct, its anti-corruption policy, and guidelines for providing complimentary goods, gifts, and services to government officials in foreign jurisdictions.
  • accepted 18 formal undertakings ordered by the SEC, including the appointment of an Independent Consultant, or “monitor,” for each of certain prescribed valuation, assessment, and auditing functions.

Ultimately, the investigation did not result in a criminal conviction against the Sands, its subsidiaries, or for its officers or directors. While this SEC administrative proceeding involving the Sands made headlines, it is unlikely that it will deter the guests at the Sands in Las Vegas at the blackjack tables. However, it is clear from this investigation that not everything that happens in Vegas stays in Vegas!

 

Norm Keith

Norm Keith

Mr. Keith is a senior partner and member of the White Collar Defence practice group in the Toronto office of Fasken Martineau and the author of 12 books, including Insider Trading in Canada (Lexis Nexis, 2012). Contact him at +1 416 868 7824 or nkeith@fasken.com.