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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Inside gaming column: Testimony may leave lasting ache for Sands

28 April 2008

LAS VEGAS, Nevada -- Whether Las Vegas Sands Corp. ever pays a dollar to a Hong Kong businessman who is suing the company, testimony in Clark County District Court last week could cost the casino operator millions in damaged reputation and potential shareholder action.

Chairman and Chief Executive Officer Sheldon Adelson and President Bill Weidner were the first witnesses in Richard Suen's lawsuit, where he's seeking compensation for helping Las Vegas Sands win a lucrative Macau gambling license in 2002. Adelson and Weidner testified that Suen played no role in the efforts.

However, their testimony aired some dirty laundry.

Adelson, 74, and the world's 12th richest man according to Forbes magazine, told jurors he has a debilitating rare neurological disorder and in 2001 was dependent on pain medication that left him "asleep" and absent from the company's dealings that year. It was never publicized to the investment community.

During testimony, Adelson said Weidner might have breached his fiduciary responsibilities; a few hours later, he tried to clarify those comments.

Weidner committed his own faux pas. While attorneys argued over whether an internal company document could be entered into evidence, he said Las Vegas Sands was projecting "$312 million less than was forecasted in 2008" while discussing the contents with Judge Michelle Leavitt.

That slip, said James Cox, a Duke University corporate securities law professor, may cause the most trouble. Cox, who reviewed coverage of the trial, said the document, which adjusts the company's financial outlook for 2008, "can't just be brushed aside."

Cox said Las Vegas Sands may have been obligated to release the forecast to shareholders as soon as it was produced.

"If you issue a forecast and have reason to believe it's influencing investor behavior, and then you come to a realization you might not be able to meet that forecast, you have a duty to update shareholders," Cox said.

Las Vegas Sands is releasing its first-quarter earnings this week. Cox said any discussion of the projections might be enough to avoid legal actions.

"Maybe they were trying to figure out the magnitude, but you can't delay the release forever," Cox said.

Cox said other revelations, such as Adelson's health, aren't as problematic. Securities law is vague on disclosure of a CEO's medical issues.

***

Indian casinos in California could land 8,000 more slot machines, thanks to a bill winding its way through the state Legislature. The figure is in addition to 17,000 slot machines California voters approved in February.

California has 63,000 slot machines, the most of any Indian gaming state. Nevada, by comparison, has 201,000 slot machines.