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Las Vegas Sands Reporting – Not The Media’s Finest FCPA Moment

Las Vegas Sands has been the subject of much FCPA scrutiny since October 2010 when Steven Jacobs (the former President of the company’s Macau operations) filed a civil cause against the company in Nevada State court alleging various causes of action, including facts implicating the Foreign Corrupt Practices Act.  (See here [1] for the 2010 post highlighting the action).

This [2] post from September 2012 highlighted various reporting of the Las Vegas Sands (“LVS”) FCPA scrutiny,and that of its CEO Sheldon Adelson, in ProPublica, the Wall Street Journal and the New York Times.

Last Friday, LVS disclosed in an SEC filing [3], in pertinent part, as follows.

“On February 9, 2011, LVSC received a subpoena from the Securities and Exchange Commission (the “SEC”) requesting that the Company produce documents relating to its compliance with the Foreign Corrupt Practices Act (the “FCPA”). The Company has also been advised by the Department of Justice (the “DOJ”) that it is conducting a similar investigation. It is the Company’s belief that the subpoena may have emanated from the lawsuit filed by Steven C. Jacobs described above. After the Company’s receipt of the subpoena from the SEC on February 9, 2011, the Board of Directors delegated to the Audit Committee, comprised of three independent members of the Board of Directors, the authority to investigate the matters raised in the SEC subpoena and related inquiry of the DOJ. As part of the annual audit of the Company’s financial statements, the Audit Committee advised the Company and its independent accountants that it had reached certain preliminary findings, including that there were likely violations of the books and records and internal controls provisions of the FCPA and that in recent years, the Company has improved its practices with respect to books and records and internal controls.” (emphasis added).

Given the intense prior media coverage of LVS’s  FCPA scrutiny, the recent disclosure spread like wild-fire this past weekend.  However, the reporting was not the media’s finest FCPA moment.

As is clear from a basic reading of the FCPA, the law has two provisions.  The FCPA’s anti-bribery provisions and the books and records and internal control provisions.  These later provisions are among the most generic substantive legal provisions one can find and are often implicated in situations that have nothing to do with bribery and corruption.

It is also clear from a basic reading of the LVS’s disclosure that it says “likely violations of the books and records and internal controls provisions.”

Notwithstanding the above, the Wall Steet Journal’s lead paragraph [4]stated as follows.

“Las Vegas Sands Corp. told the Securities and Exchange Commission that an internal review found the casino operator had likely violated the Foreign Corrupt Practices Act, a federal law that bans bribing public officials abroad.”

The New York Times’s lead paragraph [5] stated as follows.

“The Las Vegas Sands Corporation, an international gambling empire controlled by the billionaire Sheldon G. Adelson, has informed the Securities and Exchange Commission that it likely violated a federal law against bribing foreign officials.”

ProPublica’s lead paragraph [6] stated as follows.

“Last week’s admission by Sheldon Adelson’s casino company that it had “likely” violated provisions of the federal law barring U.S. companies from bribing foreign officials raises some intriguing questions.”

The media of course plays an important role in our modern society.  However, with that role comes a duty to get things right, particularly so in this day and age when reporting by high-profile media outlets spread like wild-fire on the internet.

The recent reporting of LVS’s latest disclosure (and several other examples could also be cited in the FCPA context) was not the media’s finest FCPA moment.

Thus, LVS was justified in its Sunday press release [7] titled “LVS Fires Back at Misleading and Sensationalistic Reporting of Company’s Most Recent Financial Disclosure” which stated as follows.

“Las Vegas Sands Corp. today fired back at various media headlines and press reports that have suggested that the company violated any of the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).  The company did not report any violations of the anti-bribery provisions of the FCPA and it said news reports stating otherwise, such as the headline in today’s New York Times which described the matter by saying “Casino Says it Likely Cheated,” are both inflammatory and defamatory. The company said it will vigorously defend itself against that type of uninformed and misleading reporting. In the company’s 10-K disclosure filed with the Securities and Exchange Commission(SEC) last Friday it made no such statement and insists no violations of the anti-bribery provisions of the FCPA have occurred. Instead, the company said that in its preliminary findings the company’s Audit Committee had advised that there were “likely violations” of the books and records and internal controls provisions (i.e. “accounting provisions”) of the FCPA. A potential violation of the accounting provisions could range anywhere from a single transaction recorded incorrectly to other errors in the accounting records. Additionally, the company’s independent auditors — who have been auditing the company for more than a decade — issued an unqualified opinion on the financial statements for the year ended December 31, 2012. Those financial statements also included the disclosure that any violations of the accounting provisions have not had a material impact on the financial statements of the company and did not warrant any restatement of its past financial statements.”