U.S. Casinos Get Litigious in China's Macau Region

In addition to the glitzy modern casinos Americans have brought to China’s Macau region, they have also imported the corporate lawsuit.

“This can be a startling development for a country, like China, that at one point eliminated all of its lawyers,” said law professor I. Nelson Rose, who runs the website gamblingandthelaw.com.

A global legal expert on gambling, Rose is currently on faculty at Whittier Law School in southern California and teaches gaming law as a visiting professor at the University of Macau. Next week he will be panelist at the annual International Masters of Gaming Law conference in Scottsdale, Arizona, speaking on state vs. federal regulation of Internet gambling.

Rose writes about how U.S. casinos brought lawsuits to Macau in a column for the May issue of Casino Enterprise Management magazine. Like Hong Kong, Macau is one of two special administrative regions in China and has its own legal system.

Rose writes, “The most common suit is by individuals who claim that they should be given a share of what has become a successful company.”

As an example, he cites a suit against Las Vegas Sands Corp. CEO Sheldon Adelson, filed in Nevada in 2008 by a Hong Kong businessman. The man claimed he had introduced Adelson to high-ranking officials in China and paved the way for Adelson’s “concession,” a form of gambling license, in Macau.

The Chinese businessman initially won, but the Nevada Supreme Court overturned the judgment in 2010. The case is set for retrial next year.

And a high-profile case against Wynn Resorts, Limited, has been making headlines recently. It involves ousted Wynn vice chairman Kazuo Okada and his other companies, Aruze USA Inc. and Universal Entertainment Corp.

As part of his suit in January, Okada claims that CEO Steve Wynn gave some $135 million to the University of Macau last fall in hopes of currying favor with the Chinese.

A shareholder derivatives suit soon followed. Rose writes, “We can expect more investigations from the Department of Justice, the Securities and Exchange Commission, and Hong Kong securities regulators.”

Other Macau-related casino suits spotlighted by Rose include:

• In January, Asian American Entertainment sued the Sands, saying the two companies had an agreement to bid for a Macau concession together, according to Rose. The suit claims the Sands breached the contract, and the Asian firm seeks some $375 million damages.
• After Steve Jacobs was fired from running the Sands’ Macau operations in 2010, he filed suit claiming wrongful termination. Jacobs alleged he was fired for refusing to use a Macau attorney who was involved with the government.

Rose writes that the involvement raised “serious questions” about possible violations of the U.S. Foreign Corrupt Practices Act, which forbids corporate payments to government officials in return for favorable treatment. The suit is pending.