Lessons from the Las Vegas Sands FCPA Violation Investigation

Las Vegas Sands

The filing from the Las Vegas Sands communicates that the company believes the investigation stems from allegations from the lawsuit they are currently involved in with former Sands China CEO, Steven Jacobs.

Another day, another investigation into alleged FCPA violations. Last week, Las Vegas Sands Corp. was another name added to the increasing list of companies under investigation for bribing foreign public officials to gain business. The SEC and DOJ have launched investigations into the company’s operations in Macau.  According to the article, “Bribery in Macao? Big Casino Owner Under SEC Investigation,” by Ashby Jones on the WSJ Law Blog, Macau became the largest gambling marketing in the world in 2006 – knocking the Vegas strip out of top spot. News of the investigation broke last Tuesday when the company filed its annual report.

The Allegations

The filing from the Las Vegas Sands communicates that the company believes the investigation stems from allegations from the lawsuit they are currently involved in with former Sands China CEO, Steven Jacobs. The Bloomberg article “Sands China Shares Slump as Parent Faces SEC, Justice Probes,” states:

“Jacobs’s complaint alleges, among other things, that Las Vegas Sands demanded that he use improper ‘leverage’ to win government concessions, that he retain a lawyer who was part of the Macau government and that he mislead the board.”

Jacobs filed a breach of contract/wrongful termination suit against the company last October. The Las Vegas Sands Corp. denies the allegations.

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Lessons Learned

When the news broke, stocks in the company dropped significantly – a common side effect when a company announces they are under investigation. Since there’s still a lot to find out in this case and the investigation is just beginning, guilt cannot be placed. Therefore, the “lessons learned” listed below are derived from the issues included in the allegations.

1. Cooperate with investigators

The Las Vegas Sands Corp. claims that it will work cooperatively with investigators throughout the case. As we all know, it’s much better to cooperate with investigators. As seen in major cases, such as the Siemens bribery case, cooperation with investigators often leads to reduced penalties and other benefits favoring the company in question. It will be interesting to see what becomes of the allegations and the investigation as the probe continues.

2. Don’t terminate someone without cause

The allegations against the Las Vegas Sands Corp. are believed to stem from what the company has referred to as a “disgruntled former employee”. In the Internal Investigations Blog article “No Line Yet on Las Vegas Sands in Macau,” James McGrath writes:

“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.”

Whether or not the company wrongfully terminated Jacobs, it’s important for employers to understand that there needs to be a lawful reason to terminate an employee. Document employee actions and keep performance reviews on file. Having these documents on hand will make it easier to prove that an employee was let go for appropriate reasons. Also, when an employee is terminated, tell them why. Limit the amount of room they have to speculate why they were let go.

3. FCPA compliance is necessary

The gambling industry is heavily regulated. In a number of corruption and bribery reports, results show that China is one of the countries that people find it hardest to do business in because of the amount of bribery that is necessary to get the job done. Because of this, some companies have vowed to stay away from engaging in business in that area. When your company has a global presence, you need to make sure that compliance with laws like the FCPA is reinforced.

As a rule of thumb, develop an anti-bribery policy and training program and introduce it throughout your organization. Hold overseas employees to the same rules as those at home offices, as they are still responsible for complying to the same laws. Make sure that policies and employees are kept up to date as laws are amended. Establish hotlines, web forms and other reporting mechanisms employees can use to report suspected fraud. Take every allegation seriously and conduct internal investigations when necessary.

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Article Published March 8, 2011

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