The US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are investigating whether Las Vegas Sands Corp. violated the Foreign Corrupt Practices Act (FCPA) by planning to influence Chinese officials, according to a public filing by the company. Las Vegas Sands Corp. also disclosed in its annual report that it had received a subpoena from the SEC on February 9, 2011, demanding the production of documents relating to the FCPA allegations.
Given the potential for jail time, multimillion dollar fines, and the high priority the government is placing on FCPA enforcement, it is the kind of guest best avoided.
As discussed by William M. Bosch and Jonathan C. Drimmer in a four-part series on the FCPA and its requirements published by HotelNewsNow.com (see links below), it was just a matter of time before the government looked more closely at hospitality industry practices, including hotel development and operations.
At its core, the FCPA forbids giving “anything of value” to a foreign official to acquire an unjustified benefit. Foreign officials include all government personnel, from cabinet ministers to low-level bureaucrats. The list also includes private individuals performing state functions, and employees of private companies owned in part or controlled by a foreign government, although the precise contour of who is covered is currently being challenged in litigation. Payments to family members, close business associates of officials, political party officials, and candidates for political office are also covered. The FCPA applies to a wide scope of US and foreign entities and individuals – including all companies doing business in the US or listed on a US exchange and their employees, all US citizens and nationals, all non-US nationals who perform acts in the US, and others. In short, chances are you are subject to the FCPA, and if you have any contacts with foreign officials you need to understand what the FCPA prohibits.
The allegations against Las Vegas Sands Corp., which together with its subsidiaries owns and operates The Venetian Las Vegas and The Venetian Macao, appear to arise out of the company's on-going efforts to expand its presence in Asia. The company already has an ownership interest in The Four Seasons Macao, and is creating a master-planned development of integrated resort properties in Macao. Las Vegas Sands Corp. also owns and operates the Marina Bay Sands in Singapore.
Although the DOJ and SEC have not commented on the pending investigations, their interest may have been sparked by a wrongful termination lawsuit filed against the company by Steven C. Jacobs, former CEO of Sands China Ltd. According to allegations in the complaint filed by Jacobs in Nevada state court, he was fired in July 2010 after he spoke out against company actions that would expose the company to violations of the FCPA.
For the hospitality industry, the range of potential violations is limitless, including: securing development assistance and partnerships; obtaining building, food, or beverage permits; facilitating health or safety inspections; providing discounted rooms to government personnel; resolving tax matters; securing immigration visas for foreign workers; expediting goods through customs; advertising on state-owned or operated television or radio stations; and innumerable other activities. The form of a prohibited payment can be cash, but also includes gifts, vacations, job opportunities, meals and entertainment, charitable contributions, educational expenses, and any other “quid” given to get a government “quo.” Under the FCPA, the size of those payments matters little; the law covers minimal “tips” or incidental favors because the government measures the offense, and hence the penalty, by the amount of the benefit being obtained.
Regardless of how this investigation unfolds, it is certain to spark closer and broader scrutiny of the hospitality industry, as owners, operators, developers, and vendors all look to expand their reach abroad. In recent years, industry sweeps – in the oil and gas industry, in pharmaceuticals and medical devices, and most recently in financial services – have been a feature of FCPA enforcement.