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Tim O'Reiley

Witness details growth of Macau properties owned by Sands

18 April 2013

LAS VEGAS -- The expert accountant for former consultant Richard Suen justified the $328 million fee that Suen claims Las Vegas Sands Corp. owes him but lavished the company with kindness Wednesday.

Citing internal projections Las Vegas Sands provided for Suen’s lawsuit, Walter Bratic, a managing partner of OverMont Consulting in Houston, testified that net revenues for the company’s four Macau properties would grow by roughly 25 percent annually through 2018.

“I have been working with a lot of companies over my career, big and small,” said Bratic, an accountant with more than three decades of experience. “This is remarkable growth. Obviously, they know what they are doing. They know how to run casinos. They do a fabulous job of it.”

But the bottom line for the jury was this: Las Vegas Sands’ net revenues in Macau would be $50.2 billion for the 18 years starting in 2004, when the Sands Macau opened, until the company’s subconcession to operate in the former Portuguese colony expires in June 2022. Net profits, Bratic estimated, would hit $15.3 billion.

Bratic based the estimate on a mix of company numbers and his own projections.

The numbers were adjusted to reflect that Las Vegas Sands owns only 70 percent of its Sands China Ltd. affiliate that holds the Macau resorts. Also, the future numbers include a 13 percent discount rate, typically used by accountants to show that dollars earned in the future are worth less than those today.

Based on this complex calculation, the $5 million upfront payment plus 2 percent of future action that Suen claims was promised him — there was no signed contract — for helping to win Sands’ foothold in Macau adds up to $328 million. This includes $98 million through March, $213 million through 2022 and $17 million for an indefinite period afterward.

To downplay the outwardly big number for Suen, one slide shown to the jury depicted his request as a thin line compared with the much taller revenue and profit bars.

From a simpler perspective with no adjustments for ownership splits and discount rates, Bratic said the company numbers showed that five Macau properties would generate net revenues of $64.7 billion for the five years through 2018 and operating income would total $18.1 billion. The results encompass not only the Sands Macau, The Venetian Macau, the Four Seasons Macau and the Cotai Central, but also the $2.7 billion Parisian Macau, set to open in less than three years.

To try to bolster what he considered conservative projections, Bratic said Las Vegas Sands’ internal projection for net revenues in 2011 and 2012 of $10.4 billion came in short of the actual $11.2 billion.

Las Vegas Sands attorney Lawrence Robbins, on cross-examination, tried to chip away at Bratic’s credibility. Several times he questioned whether Bratic’s busy schedule as an expert witness, testifying in more than 100 court cases or depositions in the past four years plus preparing numerous reports, “gets in the way of (your) credibility.”

In particular, Robbins homed in on a mistake in the original report that stated that a tax holiday for Las Vegas Sands in Macau would last longer than it did. This would have the effect of boosting profits and Suen’s claimed fee.

Robbins also brought up a 2007 report Bratic compiled in which he overestimated profits for Las Vegas Sands’ Macau properties in 2008 and 2009 by as much as 50 percent. Bratic attributed that to the recession and Las Vegas Sands’ inexperience in the market, but Robbins used this to question the reliability of his projections.

Bratic took the witness stand after former Las Vegas Sands President and Chief Operating Officer William Weidner finished a week of testimony that included fielding more than a dozen written questions from jurors.