Yesterday, the Las Vegas Sands Corporation revealed in its annual Form 10-K filing that the company had received a document subpoena from the SEC on February 9, 2011 regarding its FCPA compliance efforts. It also acknowledged that LVSC was under investigation by the DOJ and that both inquiries were believed to be an outgrowth of litigation currently pending in a Nevada state court. If it is the inspiration for those investigations, the wrongful termination suit by former Sands China Ltd. CEO Steven C. Jacobs illustrates the danger of collateral FCPA damage posed by private tort litigation. Before recently stepped-up FCPA enforcement, what were the odds on that?
After having helped rehabilitate Sands’ operations in Macau, Jacobs was made CEO of Sands China on August 6, 2009. He received positive performance reviews and bonuses until a clash with LVSC head Sheldon G. Adelson that ultimately led to his termination on July 23, 2010. On October 20, 2010, Jacobs filed a wrongful termination suit against LVSC, Sands China, Ltd., and unidentified individuals and corporations, in Clark County District Court. The Complaint, which could double as a script for AMC’s Biography series, contains a set of allegations with FCPA implications.
At Paragraph 26, Jacobs has alleged that LVSC and Adelson demanded that he (a) use improper “leverage” against Macau officials to assist the company in gaining title to an apartment complex there, (b) withhold Sands China business from Macau banks unless they use their influence to assist in that same effort, (c) conduct secret investigations of Macau officials so that negative information could be used as “leverage” against them, (d) employ local counsel who posed serious FCPA risks, and (e) withhold truthful information from the Sands China board.
It is likely the case that the SEC and DOJ did not fortuitously happen upon the Complaint and become inspired enough to open their inquiries. Jacobs has not alleged that he reported the improprieties alleged in Paragraph 26 to the company hotline or to authorities, although one might want to wager that a dime was dropped on the company at some point. Nevertheless, it is significant that investigations would be predicated upon as-yet unsupported allegations contained in pleadings. Particularly since pleadings are intended to be broad and elastic enough to cover all theories of liability, they are normally shotgun efforts that are privileged from liability for libel. In other words, they commonly throw in the proverbial kitchen sink in order to cover all of the bases. The chips of judgment fall where they may.
That seems to be a lot for the SEC and the DOJ to take a flyer on, but then again, LVSC reported net revenues of just over $6.8 billion for 2010. That is a lot of potential fines and disgorgement for the government to ignore, as alluded to in an earlier posting, “Julie McCoy, Cruise Director and FCPA Violator.”
In the first race today at Aqueduct, Larry’s Forty Two is going off at 50 to 1. The SEC and the DOJ hammering LVSC may be less of a long shot.
