Could Sheldon Adelson Empire Be Toppled by Lawsuit?
J.J. Goldberg May 12, 2015
Sheldon Adelson, the Las Vegas casino billionaire and prodigious conservative donor, spent last week testifying in a court hearing that could determine the future of his empire.
Adelson’s testimony was part of a pre-trial hearing in a wrongful-termination lawsuit filed against his Las Vegas Sands Corp. by a former CEO of his lucrative operations in the Chinese enclave of Macau.
The former executive, Steven Jacobs (pictured above with Adelson at a 2010 press conference), claims he was fired in late 2010 for trying to end what he said were company payoffs to a Chinese elected official, illegal under U.S. law, as well as the company’s alleged ties to Chinese organized crime. Adelson, 81, says Jacobs was fired for incompetence. The current hearing is to determine whether the lawsuit should be tried in Nevada or Macau.
The court’s decision will have crucial influence far beyond the employment case itself. If the trial is held in the United States, as Jacobs’ attorneys demand, then evidence supporting Jacobs’ allegations of corruption and organized crime links — not admissible in a Macau courtroom — could bolster ongoing federal investigations into Adelson’s activities. It could also lead to Nevada stripping him of his casino licenses, the main source of his wealth. Forbes in 2015 lists Adelson as the 18th wealthiest person in the world and the 13th wealthiest in America, with assets totaling $31.4 billion. The magazine’s real-time wealth ticker, a relatively new feature, shows his assets as of May 12 to total $27.7 billion.
A government crackdown could prove devastating to numerous causes Adelson supports. In addition to his Republican campaign donations, which totaled more than $100 million in the 2012 cycle alone, Adelson has donated hundreds of millions to cancer and other medical research, gave some Sheldon Adelson with former Sands China CEO Steven Jacobs, 2010. Image by Getty Images
It’s not immediately clear what federal or state sanctions would do to the value of his holdings. At the same time, philanthropy experts have long noted that donors tend to cut back quickly on their giving when they see their wealth under threat and begin to feel poorer.
The British Guardian newspaper, in its in-depth daily coverage of Adelson’s weeklong testimony, depicted him as a combative, sarcastic witness who repeatedly dodged questions, mocked the opposing counsel, lectured the court about burden of proof, sneeringly dismissed earlier testimony by his own aides and even tangled with the judge.
At one point, The Guardian reported, Adelson contested Judge Elizabeth Gonzalez’s order that he answer a question. “Sir,” the judge replied, “you don’t get to argue with me.”
Questioned about Jacobs’ order to a company lawyer to look into the legality of the company’s lucrative contract with a Macau legislator, Adelson replied that Jacobs had studied hypnotism and probably “hypnotised [sic] the lawyer” into examining the relationship.
Contradicting a parade of aides who described Jacobs, 51, as a hard-driving executive who was in line to take over the company, Adelson said Jacobs “never became important until he squealed like a pig to the government authorities and made up stories.” At the same time, his contention that the case should be tried in China rests on the claim that the enormously successful Macau operation that Jacobs ran was substantially independent from Sands headquarters in Las Vegas.
Macau (also spelled Macao), a city of 600,000 on the south coast of China, is one of China’s two Special Administrative Regions, along with the much larger Hong Kong, 40 miles to its east. It was operated as a Portuguese colony from 1557 until 1999 when it was handed back to China, ending the last European colonial presence in Asia. At the time it was considered a seedy crime den, subsisting heavily on smuggling, prostitution and the gambling monopoly of local magnate Stanley Ho.
Most of the clientele consisted of wealthy mainland Chinese, who avoided the communist government’s gambling and currency rules by joining so-called junkets. These are all-included package trips in which clients pay a lump sum to the junket operator, who then covers the client’s gambling stakes in Macau. Much of the junket business was said to be controlled directly or indirectly by the triads, centuries-old Hong Kong crime syndicates with their convincing methods of collecting gamblers’ debts.
Adelson himself appeared to confirm the triads’ influence in unguarded comments during an unrelated 2013 court proceeding in Las Vegas, Business Insider reported at the time. He emphasized, however, that unlike some other operators his Sands casinos steered clear of the triads.
In 2002 the Chinese government decided to clean up Macau and turn it into an international tourism destination. Ho’s monopoly was ended and international gaming operators were invited to come in with bids to open in the 11-square-mile enclave.
Adelson, then a relatively minor operator on the Las Vegas Strip, came in first and biggest in 2004 with a proposal to create a glitzy, Vegas-style strip and convention center on landfill in Macau harbor. As described in this 2014 article in Inside Asian Gaming, Macau’s gambling business exploded, overtaking Las Vegas in 2006 as the world’s biggest gambling mecca. Revenues today are said to be around $45 billion a year, seven times the Las Vegas Strip’s annual $6.4 billion. Adelson’s Sands China Ltd. rapidly became the enclave’s biggest player and is now said to contribute some 60% of Las Vegas Sands Corporation’s global total of $14.6 billion.
Currently, Macau’s casinos do the biggest part of their business in so-called VIP rooms, private gambling parlors off the main floors reserved for high rollers. Most of them are said to be controlled under contract by the junket operators. The Guardian reported that while the junkets themselves are legal, many of them were found in a 2003 investigative report — commissioned by Las Vegas Sands and obtained by the Investigative Reporting Program of the University of California-Berkeley — to be heavily infiltrated by organized crime groups,
The Sands Corp. itself reportedly had a complex relationship for several years with a notorious alleged triad leader, Cheung Chi Tai of the Wo Hop To triad, who is barred from entering the United States because of ties to organized crime.
The alleged ties, along with the nature of the triad-junket-VIP room phenomenon, are described in lengthy, colorful detail in this 2012 New Yorker article by Evan Osnos, “The God of Gamblers: Why Las Vegas is moving to Macau.” A more succinct, businesslike account appears in this Guardian article from last Saturday, May 9.
According to The Guardian, Adelson told the court last week that Cheung was just a gambler and the company had “no direct relationship” with him. But documents described by The Guardian claim that Sands had a relationship with Cheung going back to 2005 when his Neptune junket company “began running” one of the VIP rooms at Sands Macau, and that he had a long line of credit and membership in the exclusive Chairman’s Club, usually based on a personal letter from Adelson. Sands’ alleged ties to Cheung were detailed in a 2010 Reuters report. Adelson’s No. 2, Robert Goldstein, told the Las Vegas court earlier this month that the “adverse publicity” from the Reuters report prompted the company to cut its ties to Cheung. That testimony came several days before Adelson’s own testimony that there was “no direct relationship.”
Whether any or all of this comes back to haunt Adelson — or the Republican presidential field, Netanyahu’s favorite newspaper, the ZOA, Birthright Israel or American and Israeli cancer research — will depend in large measure on what Judge Gonzalez decides in the coming days about the venue of the Jacobs lawsuit.
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