Sheldon Adelson Violated Foreign Corrupt Practices Act
The gambling mogul is self-reporting violations of the law against bribing foreign officials.
Sheldon Adelson, the gambling mogul who became famous by backing lunatics with his fortune last election cycle, is self-reporting violations of the law against bribing foreign officials.
NYT (“In Filing, Casino Operator Admits Likely Violation of an Antibribery Law“):
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.
In its annual regulatory report published by the commission on Friday, the Sands reported that its audit committee and independent accountants had determined that “there were likely violations of the books and records and internal controls provisions” of the Foreign Corrupt Practices Act.
The disclosure comes amid an investigation by the Securities and Exchange Commission as well as the Department of Justice and the Federal Bureau of Investigation into the company’s business activities in China.
It is the company’s first public acknowledgment of possible wrongdoing. Ron Reese, a spokesman for the Sands, declined to comment further.
The company’s activities in mainland China, including an attempt to set up a trade center in Beijing and create a sponsored basketball team, as well as tens of millions of dollars in payments the Sands made through a Chinese intermediary, had become a focus of the federal investigation, according to reporting by The New York Times and The Wall Street Journal in August.
In its filing, the Sands said that it did not believe the findings would have material impact on its financial statements, or that they warranted revisions in its past statements. The company said that it was too early to determine whether the investigation would result in any losses. “The company is cooperating with all investigations,” the statement said.
The Sands’ activities in China came under the scrutiny of federal investigators after 2010, when Steven C. Jacobs, the former president of the company’s operations in Macau, filed a wrongful-termination lawsuit in which he charged that he had been pressured to exercise improper leverage against government officials. He also accused the company of turning a blind eye toward Chinese organized crime figures operating in its casinos.
Mr. Adelson began his push into China over a decade ago, after the authorities began offering a limited number of gambling licenses in Macau, a semiautonomous archipelago in the Pearl River Delta that is the only place in the country where casino gambling is legal.
But as with many lucrative business spheres in China, the gambling industry on Macau is laced with corruption. Companies must rely on the good will of Chinese officials to secure licenses and contracts. Officials control even the flow of visitors, many of whom come on government-run junkets from the mainland.
As he maneuvered to enter Macau’s gambling market, Mr. Adelson, who is well known in the United States for his financial and political clout, became enmeshed in often intertwining political and business dealings. At one point he reportedly intervened on behalf of the Chinese government to help stall a House resolution condemning the country’s bid for the 2008 Summer Olympics on the basis of its human rights record.
The FCPA, which Jimmy Carter signed into law in 1977, is well-intentioned. As Transparency International explains,
Corruption destroys lives and communities, and undermines countries and institutions. It generates popular anger that threatens to further destabilise societies and exacerbate violent conflicts.
The Corruption Perceptions Index scores countries on a scale from 0 (highly corrupt) to 100 (very clean). While no country has a perfect score, two-thirds of countries score below 50, indicating a serious corruption problem.
Corruption translates into human suffering, with poor families being extorted for bribes to see doctors or to get access to clean drinking water. It leads to failure in the delivery of basic services like education or healthcare. It derails the building of essential infrastructure, as corrupt leaders skim funds.
Corruption amounts to a dirty tax, and the poor and most vulnerable are its primary victims.
Additionally, not only do American businesses bribing foreign officials potentially compromise US government interests but they create an unlevel playing field for their American competitors; much like steroids in sports, it essentially forces everybody to cheat.
Alas, what we consider “corruption” is simply the cost of doing business in so many countries. Low level officials, especially, often expect payoffs in much the same way low level service employees in the United States expect tips. So, FCPA not only swims against local tide but puts US businesses at a competitive disadvantage against non-US competitors not so constrained. Which, naturally, encourages them to find creative ways to play the local game without technical violation of FCPA.
Transparency International publishes an annual Corruption Perceptions Index. Here’s the world map view:
An interactive version is available at their site. The United States is the 19th least corrupt country in the survey, ranking just below the United Kingdom and just above Chile.
Additionally, while our system is by no means corrupt in an world comparative sense, it’s rather amusing that Adelson is allowed to spend unlimited funds influencing US public policy through lobbying and direct contributions to political campaigns but could potentially face criminal sanctions for greasing the palms of officials in China.
Sometimes it’s the cost of doing business overseas.
My only problem with Adelson is that he’s an America and that he operates his businesses primarily in America..
That’s a cute blog headline Why not go full liberal, however, and increase the dissonance and agenda level to 11? Something like “Sheldon Adelson, major donor to conservative Republicans, personally violated federal anti-corruption law?” Speaking of which, I was trying to think of an analogy for that headline dissonance, but it was difficult. “Warren Buffett Violates Tax Laws” was too inside business, because you’d have to know about Berkshire Hathaway’s long-term IRS disputes. So I came up with somewhat of a more colloquial, pop culture media analogy: “Ted Turner Displays Racism with Firing of Soledad O’Brien”.
FYI, majority shareholders of multinational corporations don’t literally and personally control every detail of the company’s operations, even when they serve as board chairmen and chief executive officers. You’re not that loopy and ignorant, are you? If the company was bribing local Chinese officials it’s possible, if not likely, if not probable, it was being done by someone who could’ve gone entire quarters if not years without directly speaking to Adelson much less acting at his behest, and there easily could’ve been multiple executive levels of people between whomever paid the bribes and the company’s senior executives, much less Adelson.
Ultimately the investigation will determine all of that. But don’t you realize if Adelson even was in the slightest way personally involved he’d long ago have lawyered up and this already would have been a 24/7 high dudgeon mode media story? Geez.
CEOs are like presidents and governors and cabinet heads, in the senses that they’re responsible only figuratively and in the courts of public perception for what their people do.
Not that details matter. And of course on the Internet most of the audience in any case wouldn’t know corporate audit disclosure from autism. C’est la vie.
Maybe I read too many spy novels but when Adelson was giving a ton of cash to Gingrich, I wondered then why the combination of money, gambling, Chinese government, access to influential US politicians and officials would not ring a lot of warning bells to Gingrich or anyone else. Couldn’t anybody spell compromised?
Interesting statement James. I thought you said it was an exercise of free speech. Now we come to find out it is little better than bribery in your mind. Who’da thunk it?
@OzarkHillbilly: Bribery = freedom
@Tsar Nicholas:
Dude, this deal in China was ‘make or break’ for Sheldon. He was either going to be rich or broke.
He chose ‘rich’ and likely sought to cover his ass via ‘regulatory capture’, by attempting to purchase business friendly politicos. This is another gamble he lost.
The pity is that his company is unlikely to lose every cent it earns for the deal, which I think should be the price for bribery. But at least we can hope for some jail time. In Sheldon’s case that could effectively be a life sentence.
@Timothy Watson:
DOH! (face palm)
@Tsar Nicholas:
Tsar is responsible only figuratively and in the courts of public perception for what he says.
As ‘Deep Throat’ told Woodward & Bernstein, “Follow the money.” Mr Adelson, it turns out was not a committed free market conservative?! Amazing!
@OzarkHillbilly: I’ve long made it clear that the issue is complicated. On the one hand, there’s little doubt that someone who’s a huge donor to a party or a campaign is going to have undue access and influence. I don’t think it’s bribery, in the sense that they’re likely “buying” officials who already agree with them and trying to get them into positions of power rather than using money to get officials to vote against their own instincts.
At the same time, there’s little doubt that buying television advertising—which is incredibly expensive—is the primary means of exercising free speech in US politics today. Adelson should have every right to buy ads to advocate causes he believes in, whether it’s de-regulating casinos or explaining why Newt Gingrich should be president.
@Tsar Nicholas: Sheldon Adelson is the reason this story is interesting. Nobody has heard of his casino company. Nor is he a figurehead chairman; it’s his firm.
Thanks for that.
It’s good to start off a Monday with a laugh.
“who became famous by backing lunatics with his fortune last election cycle”
An interesting description of Gingrich and Romney.
Doesn’t the US gov’t do this all the time in Iraq and Afghanistan. Paying off the Sons of Iraq and local Sheikhs so they would stop bombing us. Hell, that was what CERP (Commander’s Emergency Response Program) really was.
@James Joyner:
Not to argue James because we will never agree on this, but it is not complicated at all. Some are more equal than others.
@ James Joyner
“At the same time, there’s little doubt that buying television advertising—which is incredibly expensive—is the primary means of exercising free speech in US politics today.”
“Bought” Speech does not equal FREE SPEECH. While I accept it as our current reality, I reject it as an inevitability. The instant you start to “value-in-dollars” speech, it is no longer FREE.
This is a central problem in our country. Until we can rid ourselves of this ridiculous BOUGHT = FREE concept we are doomed to a repeated inundation of misleading advertising during way-to-long election cycles, and elections that produce entrenched politicians who are beholden to their “Sugar Daddy” Donors.
This “Bought = Free” concept is why we have the Congress we have now.
Certainly somewhere in the Equal Protection Clause of the Constitution there must be some answer to this dilemma.
Americans have to be smarter than this.
@Mr. Replica:
Yeah, well we can hope he gets jail time even though his lawyers will keep things bundled up and he’ll likely die long before the legal issues catch up with him.
Why… surely you don’t mean to say that this upstanding job creator didn’t earn his vast fortune simply via merit? He… he might’ve… cheated a bit? SAY IT AIN’T SO!
…
Actually, I think the steroids analogy is a good one. At least until recently, if you weren’t juicing you were probably putting yourself at a competitive disadvantage. Now, with the testing, at least there is downside risk to juicing – balancing the scales (of course, this is only so if the testing keeps up with the drugs and typically it’s a step or 2 behind. Still, it’s an improvement).
Is it bribery if you provide underage Dominican prosititutes to U.S. Senators?
Oops, I forgot that we don’t talk about that around here. My bad.
Payments to officials to perform the routine functions of their position are specifically excepted by the FCPA. In fact not only is that legal, you’re allowed to take a tax deduction for it. It only becomes bribery when you’re trying to get them to do something that’s not a normal function of their job, like steering contracts to you inappropriately.
@OzarkHillbilly: Who was it that said – A free press is a wonderful thing for the man who owns one.
@Scott: The allegations of bribery in China were known during the campaign. I saw speculation at the time that what Adelson was trying to buy with all his contributions to Republicans was a friendlier Justice Department.
@Tsar Nicholas:
Tsar has already conducted the investigation in his mind and found his hero innocent. I guess we can close the books on this one!
@gVOR08: Well, I was thinking more along the lines of Chinese intelligence services getting something on Adelson and using him against the US. Like a said, too many novels.
@Cal American:
Sec. Kerry might disagree with you 🙂
Tsar shows his partisan hypocrisy…
Adelson is a figurehead of a bureaucracy with no direct control over anything that happens within his own firm.
Obama on the other hand…Fast and Furious. And Benghazi!!!!
Anyone suprised?
@James Joyner:
That strikes me as a distinction without a difference – the end result is exactly the same.
Care to flesh that out a bit?
@Cal American:
This can not be overstated.
@Stormy Dragon:
Thanks for injecting some actual knowledge into the discussion.
Even outside this legal exception, in practice there is a de minimis exception to the FCPA. For one example, bribery can take the form of steering contracts for labor and supplies to local businesses which have connections to the government officials who, say, assess your taxes. So long as the payments under such contracts are not disproportionate and otherwise do not throw up a red flag, it’s very hard to prove a violation.
@Mr. Replica: Adleson won’t see any jail time but some of his employees certainly could.
I know of one individual working in S. America who got almost five years for “greasing palms”.
@Stormy Dragon:
I think there are both customs officials and customs brokers who would disagree.
I guess I simply disagree with the characterization that this was “self reported”. Sure, the company “self reported” what the violations were going to be after the federal investigation had already begun.
@Scott F.:
What James is saying is that the proper way to asses the situation is to look in the the heart of the person being given money, and if in your heart, you feel that the person wasn’t being affected by a giant pile of cash, it’s wrong for anyone to accuse otherwise.
Remember how James was judging Romney by what he thought was truly in his heart, and not by the things he was actually saying and doing? Same principle. It makes judging situations so much easier, because you don’t have to research the facts of what people actually do, you just use your super conservative white man powers to read people’s minds.
Perhaps it was Mr. Adelson’s belief that if Romney, or some other Republican, won the election, the investigations would quietly go away.
Of course, since Jon Corzine got off scot free for his role in MF Global stealing investors money, the only fair outcome here is that Sheldon Adelson get off scot free for bribery. To expect any other outcome would be rank partisanship.
Also, they are wealthy, and we cannot really expect the wealthy to follow the laws like little people.
@Septimius:
http://www.businessinsider.com/sheldon-adelson-denies-prostitution-strategy-macau-casinos-2012-7
@ Septimius…
If you have any proof of that you should certainly contact the FBI…because they found no indication it was true.
Otherwise…you should let it go…it’s just one more thing you are wrong about. You should be used to it by now.
http://www.washingtonpost.com/politics/fbi-probing-allegations-sen-menendez-patronized-prostitutes-in-dominican/2013/02/15/49b64e7c-77c5-11e2-8f84-3e4b513b1a13_story.html
Who you going to believe?
Septimius, or a Dominican hooker?
http://www.washingtonpost.com/politics/escort-says-menendez-prostitution-claims-were-made-up/2013/03/04/31299fe2-8514-11e2-999e-5f8e0410cb9d_story.html
@Tsar Nicholas: Tsar, it’s easy to see that you are NOT a lawyer….falling afoul of the FCPA is one of the standard problems that companies that work internationally have to worry about (because it’s not just the US company but its local subsidiaries as well) and no, it isn’t considered just a “technical violation” for the CEO if it happens.
Adelson-backed candidates Gingrich and Romney finished 1st and 3rd and carried 66% of the GOP primary vote. The candidates who finished 2nd–Santorum (20%) and 4th–Ron Paul (11%) are also lunatics. That’s not even counting Trump, Palin, Cain, and Bachmann, lunatics who pretended to run for publicity.
The entire GOP is filled with lunatics.
@David D. from Philly: As long as the payments are to speed up something that is going to happen anyway, that’s ok. It’s when you are using payments to gain access or contracts that it gets problematical.
Overzealous staffer
I knew it!
As soon as I found out he was funneling a ton of money to Romney and Romney supporters back in 2012, I immediately thought, "Well, duh – he's hoping to buy himself a Presidential Pardon when they inevitably catch him for violating the FCPA in Macau." And it's true!
Seriously, though, I don't blame him entirely. China's business environment is corrupt, and you have to grease the palms of some princeling or another to get into the lucrative businesses.
@Brett: Who was forcing him to “get into the lucrative businesses?” Is greed an excuse?
@James Joyner: Look, both Gingrich and Romney took substantial contributions from Adelson, knowing that he and his company were the subject of ongoing Federal investigations of possible criminal and civil violations. I was astonished at the time that this didn’t become the source of a major outcry from the media and the Democrats–in an earlier era, this would have led to demands that contributions be returned.