A Macau company filed a federal lawsuit in Las Vegas Monday against Las Vegas Sands, Venetian Venture Development, Venetian President Bill Weidner and LVS board assistant David Friedman. The suit alleges Macau officials rigged the 2001 bidding process in favor of Sands and that the latter dropped a Taiwan bank from the deal to appease Communist officials.
Those officials are accused of thwarting the efforts of a Taiwanese bank to take ownership of Asian American Entertainment Corp. (AAECL), which partnered with Las Vegas Sands in 2001 to pursue a Macau casino concession. AAECL is seeking monetary damages from Sands, and alleges the Las Vegas operator received special treatment by Macau officials involved in the casino license-bidding process.
The suit charges that Weidner and Friedman misappropriated internal AAECL information, delivered that information to a business competitor and eventually terminated Sands’ relationship with AAECL at the behest of Macau’s government.
According to the suit, a letter of agreement to pursue a joint venture was signed by AAECL Chairman Dr. Shi Sheng Hao and Weidner on Oct. 18, 2001.
“The Letter Agreement provided that AAECL would work to obtain a gaming license in Macau, and thereafter, AAECL and Venetian would jointly operate a casino, hotel, and other related facilities. AAECL, as the developer of the proposed Macau Venetian resort, was to obtain a gaming license from the Macau government,” AAECL’s complaint reads.
According to the agreement, AAECL agreed to purchase a license to use the Venetian brand on any Macau casino, reimbursing LVS to the tune of 2 percent of the future casino’s gross annual revenue and 10 percent of its cash flow. The letter also provided that “AAECL would grant Venetian the option to purchase up to 27.5 percent of its stock upon the execution of these agreements, an amount that was explicitly agreed upon by Sheldon G. Adelson.”
Also according to the complaint, AAECL had exclusive negotiating rights with Sands, which provided that neither company could negotiate with a competitive bidder for one of Macau’s gaming licenses. The suit alleges that this agreement was terminated abruptly Feb. 6, 2002.
By then, AAECL had been before Macau’s Public Tender Committee of Gaming Concessions (PTC), which analyzed and approved all bids, a few times. At its first appearance, in December 2001, AAECL revealed a plan to spend USD 1.1 billion to build the joint project with Sands. An additional USD 700 million was pledged toward non-gaming infrastructure-related projects in Macau. It was also revealed that China Development Industrial Bank of Taiwan would be backing the project.
That same month, according to the complaint, Friedman and Weidner became directors of AAECL, “assuming a fiduciary position” with the company.
More than 20 companies provided Macau’s tender committee with proposals seeking one of three gaming licenses. The PTC killed three bids after a preliminary review and asked the remaining bidders to prepare more extensive ones. Around Jan. 4, 2002, AAECL presented a more detailed plan, this time accompanied by Weidner and Michael Jen, China Development Industrial’s executive vice president. According to the suit, the group told PTC members about their plans to first build a temporary casino, operate it while the Venetian Macau was under construction, as well as discussing CDIB’s financial backing.
AAECL, along with eight other companies, were invited back by for a third round of PTC presentations. AAECL made another presentation on Jan. 15.
It was at this time that Adelson agreed to extend his agreement with AAECL another month, according to court records.
On Jan. 22, PTC members announced a nine-day period in which competing companies could merge, thereby ensuring more bidders would profit from the concessions. Sands had not yet purchased any part of AAECL and thus could not restructure. On Jan. 25, 2002, according to the suit, Weidner sent a fax to Hao, reiterating Sands’ commitment, but also adding that the company, in its guise as Venetian Venture Development, needed one share of AAECL in order to take advantage of the nine-day restructuring period. AAECL refused, as selling a share to LVS was not part of the agreement.
“The PTC’s announcement that tenderers could merge, thereby combining their proposals, set off a flurry of activity,” the suit states. “Venetian Venture Development, on information and belief, contacted a number of Las Vegas casinos which had themselves submitted tenders to the PTC.”
On Jan. 30, AAECL started discussions with Galaxy Entertainment Group for purposes of merging, revealing as much to Sands officials. But the two companies could not come to an agreement and, on Jan. 31, the deadline for restructuring submissions expired.
On Jan. 31, “while AAECL and Galaxy were negotiating a deal to merge, two of AAECL’s board members, defendants Weidner and Friedman, were engaging in separate, secret negotiations against AAECL’s interests, seeking to merge Venetian Venture Development and Galaxy, and to exclude AAECL from the merger,” the suit alleges.
On Feb. 1, 2002, Galaxy and Sands submitted documents to the PTC, purporting to show that Venetian Venture had acquired part of Galaxy, something the company could not say about AAECL, the suit alleges.
The suit goes on to accuse Macau officials, concerned that a Taiwanese bank would eventually control AAECL, of asking Sands to drop AAECL as a partner. “On Feb. 5, 2002, representatives of AAECL contacted defendant Weidner, who admitted that he had spoken with a senior governmental official in Macau, who allegedly wanted Venetian Venture Development to abandon AAECL’s tender submission entirely and merge with another group.”
Also during this conversation, according to the lawsuit, Weidner twice refused to terminate the letter of agreement with AAECL. The next day a fax to Hao voided the agreement, and announced Weidner and Friedman’s resignation as directors of AAECL.
The suit states, “this method of resignation with respect to defendant Weidner was not in accordance with Macau (Special Administrative Region) law. As of the date of the commencement of this action, defendant Weidner has not taken any appropriate legal steps to resign as a director of AAECL.”
The morning of Feb. 8, the day PTC members were to name the winning bidders, an emergency meeting was held. The fax from Friedman was used to show that LVS had severed ties with AAECL. “Plainly, the PTC desired that the entity affiliated with the Venetian be awarded a gaming license and it allowed Venetian to join Galaxy’s tender submission,” the suit reads.
Later on Feb. 8, Galaxy, although it had not been among the nine companies allowed to resubmit bids after Jan. 4, won a gaming license. Galaxy had been given leave to offer a new bid, one that AAECL claims bore a remarkable resemblance to its own, the details of which would have been known to Weidner and Friedman.
Adelson was allowed to begin construction on a temporary casino, the Sands Macao. AAECL appealed and asked, as a remedy, to be allowed to buy a 50 percent stake in Galaxy and “be permitted to reap the benefits and profits of its plans for development, which were misappropriated by the Venetian-Galaxy Group.”
The lawsuit alleges that Hao and AAECL received assurances, in person and via letter, from Edmund Ho, Macau’s chief executive, that it would receive a subconcession. None was forthcoming.
AAECL is seeking extensive damages from Sands, which also later dissolved its relationship with Galaxy.
Attorneys representing both parties could not be reached for comment.