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Carri Geer Thevenot

Judge weighing sanctions against Las Vegas Sands subsidiary in termination lawsuit

11 February 2015

LAS VEGAS -- A Las Vegas judge is taking testimony to help determine what, if any, sanctions to impose on Sands China Ltd. for redacting personal information from about 2,600 documents the company produced in 2013 as part of an ongoing lawsuit.

District Judge Elizabeth Gonzalez is conducting the evidentiary hearing in connection with a 2010 lawsuit filed by Steven Jacobs, the fired former president of Sands Macau.

Gonzalez previously ruled that Sands China violated her September 2012 order in the case by redacting the documents.

Jacobs sued Las Vegas Sands Corp. and Sands China for breach of contract related to his termination and had asked the defendants to turn over about 100,000 emails and other documents. He sought the emails and documents to show that decisions made in Las Vegas controlled Sands China on many subjects. Included in the list was the allegation that Las Vegas Sands Chairman and CEO Sheldon Adelson had personally approved a “prostitution strategy” for Macau, which Adelson and the company deny.

In her 2012 order, Gonzalez ruled that neither defendant could raise the Macau Personal Data Protection Act as an objection to disclosure of any documents.

She made the ruling after learning that “significant amounts of data from Macau related to Jacobs was transported to the United States” and reviewed by in-house counsel for Las Vegas Sands and outside counsel. The judge also determined that the transferred data were relevant to the ongoing question of whether the Nevada court has jurisdiction over Sands China.

The defendants concealed the existence of the transferred data from the court until June 2012, according to the judge’s order, which required the defendants to make a $25,000 contribution to the Legal Aid Center of Southern Nevada.

Gonzalez also ordered the defendants to cover Jacobs’ legal bills for nine “needless” hearings that involved issues related to the Macau Personal Data Protection Act.

The judge ruled in March 2013 that Sands China had violated her previous order by redacting documents based on the Macau law. She scheduled this week’s hearing to determine whether the company’s disobedience was willful and whether the plaintiff’s case has been prejudiced by the violation.

David Fleming, general counsel for Sands China, testified Monday from Macau and Tuesday from Hong Kong with the use of videoconference equipment.

Fleming told Gonzalez that he made the decision to hire Macanese lawyers to redact the documents.

“I had no choice but to redact personal information from the documents we were producing,” he said.

Violating Macau’s data protection law carried the risk of civil and criminal penalties, including possible imprisonment for the company’s officers and directors, Fleming said.

The witness said Macanese officials “were furious” about the prior release of data from the region.

“At the end of the day, I came to the conclusion that I could not, under any circumstances, breach Macau law,” Fleming said.

He said he wanted to comply with Gonzalez’s order but found himself in a position where he could not.

“It was a very difficult decision, your honor,” Fleming told the judge.

Lawyers for Sands China argued in one court document that punishing the company for complying with Macanese law “would fly in the face of the Macanese government’s strongly held views about data privacy.”

According to the same document, Sands China spent $2.4 million on procedures related to the document redaction.

Jacobs’ lawyers have argued that Sands China should face “substantial evidentiary and monetary sanctions.”

“Sands China’s failure to introduce the best and strongest evidence available entitles this court to presume that the missing witnesses and evidence would be adverse to Sands China,” they wrote in a recent brief.

Jacobs’ lawyers further argued that “substantial evidentiary and monetary sanctions” are needed to preserve the integrity of the court’s orders and the judicial system.

The sanctions hearing is expected to continue through Thursday.