Local media are reporting that Macau’s Court of Second Instance has determined that Las Vegas Sands Corp (NYSE: LVS) must go to trial to defend an alleged breach of contract related to their 2002 gaming concession in Macau. After years of appeals and counter-appeals in the U.S. and Macau, the case has been moved to the Court of First Instance, which means a trial will ensue, and appeals and counter-appeals will be put on hold until the trial’s conclusion.
Asian American Entertainment Corporation (AAEC) contends that after inviting the then cash-strapped LVS to join them in a bid for a Macau gaming license, they were abandoned in favor of a partnership with Hong Kong’s Galaxy Entertainment Group (GEG).
Largely as a result of the partnership, LVS and GEG are now the first and third largest gaming companies in the world with combined gross revenues of nearly $20 billion per year for their separate companies. In 2001 LVS reported total gross revenues of a little more than half a billion dollars. LVS gross income after cost of goods, depreciation, and amortization expenses was $4.42 billion for Fy2016.
According to a report in the Macau Daily Times, at issue is whether AAEC’s joint-venture (JV) with LVS, in which AAEC held a 70% stake, had expired or had been renewed when Sands “merged” with Galaxy and received a sub-concession to begin gaming in Macau. The JV had an expiration date soon after the tender was supposed to conclude but concessions were handed out after the target date.
Taiwanese businessman Marshall Hao is seeking compensation for breach of contract and wants to be paid for the 70% stake his company held in the joint venture before LVS jumped ship in the middle of the concession tender process.
What may seem on its surface to be just another multi-billionaire corporation exerting its power to avoid a trial for over a decade and to defend its stake in the world’s most lucrative business market, may be more, according to sources familiar with the matter who spoke to a Times reporter.
The report suggests that secrets involving Las Vegas Sands, other gaming concessionaires, the local government, and even Beijing could come to light in a court trial with the plaintiff’s lawyers probing for facts related to concession tender negotiations in 2001 and 2002.
According to the report, former Macau chief executive Edmund Ho has been requested by the prosecution to be a witness but asked to testify in writing rather than in person. Current chief executive Chui Sai On has barred Ho from reporting to the trial.
The trial will reportedly not begin until next year at the earliest and the issue will most likely face another gamut of appeals and counter appeals in the Macau court system before being settled or decided.
Sands China’s 20-year sub-concession with Galaxy expires in 2022 but could be extended in increments for 2 years longer.