In a wrongful termination lawsuit, the former head of Sands operations in Macau has accused billionaire gambling mogul and Republican supporter Sheldon Adelson of links to organized crime, approving prostitution in his casinos, and making questionable payments to Chinese government officials. Adelson strongly denies any wrongdoing. NBC News' Ian Williams reports.
By Ian Williams, NBC News
Updated at 2:51 a.m. ET on Nov. 13: MACAU -- There is a scene in the 1952 black-and-white movie "Macao" where Robert Mitchum is welcomed by a border guard as he enters the then-Portuguese colony. The guard tells him: "It is our fine hope that all visitors to Macau should feel as untroubled here as Adam in the Garden of Eden." To which Mitchum replies gruffly, "'Untroubled’ -- that ain't the way I heard it."
While billionaire Sheldon Adelson is no Robert Mitchum, he is now discovering that a city that has been a goldmine for his gaming company can quickly become a source of unwelcome problems.
In the 2012 campaign, Adelson was the Republican Party's biggest contributor -- by some estimates the largest political donor ever. He donated millions to Mitt Romney’s campaign -- a political gamble that did not pay off.
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One side effect, Adelson himself believes, has been to put Macau, the "Casablanca of the East", under sharp scrutiny.
The election may be over, having cost Adelson tens of millions of dollars, but his business activities here continue to face serious allegations of wrongdoing.
‘Without casinos, Macau is nothing’
Tiny Macau (population 555,000) has tended to be overshadowed by Hong Kong, its bigger, brasher neighbor an hour's ferry ride away across the mouth of the Pearl River. But over the last few years it has overtaken Las Vegas as the gaming capital of the world, and its revenues are now five times those of Sin City.
"Without casinos, Macau is nothing," a taxi driver said. "Casinos are everything here."
Joao Pinto, the news and program controller at local television station TDM , added: "Casinos are the blood of this city. They are a huge machine printing money, every hour, every minute, every second."
Adelson's Las Vegas Sands owns three vast casinos here, including a gargantuan version of his flagship Las Vegas Venetian.
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He was in Macau in April for the opening of the first phase of his latest venture, Sands Cotai Central, which the company has described as "arguably the largest and most ambitious development in the history of the hospitality and gaming industry."
Macau accounts for more than half of Sands' revenues and profits.
Before Macau was returned to China in 1999 after 400 years of Portuguese rule, gaming had been a monopoly run by a Hong Kong-based billionaire named Stanley Ho.
One of the first things the Chinese did was to break that monopoly, and Sands led the charge through the newly opened door, though several U.S. casinos are now here too, including Wynn Resorts and MGM.
Takings before the handover were a paltry $2 billion; last year Macau's casinos took in $33.5 billion.
A different atmosphere - and culture
Most of that is Chinese money. Macau is the only place in China were gambling is legal, and the American gaming companies quickly concluded that the market was potentially enormous.
"Gambling is part of Chinese culture," Pinto said. "It always has been."
But the atmosphere is very different from Las Vegas.
Walk across the vast casino floor of the Venetian in Macau -- the biggest gaming floor in the world -- and there is a hushed intensity, even when it is crowded. The stillness is only punctuated by the occasional cheering of a lucky winner, who will immediately attract a host of followers, looking to emulate his or her luck.
Luck and fatalism play a big role.
"People don't come to Macau to enjoy themselves," David Green, who advises the Macau government on gaming regulation, said. "People seriously see it as a potential way of changing their lives."
Yet most of the action takes place away from the casino floor in what are called "VIP rooms," the private spaces for the really high rollers who account for most the takings and the profits.
How would Pinto, the Macau journalist, define a Chinese VIP?
"People with (a) huge amount of cash, who don't mind gambling it away," he said.
In China, that usually means rich businessmen and government officials -- which are frequently one and the same thing.
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"To my understanding from having monitored the situation carefully, the bulk -- 60 percent -- of the profits of the western casinos appears to be associated with the VIP room operations," said Steve Vickers, who once headed Hong Kong's Criminal Intelligence Bureau and now runs his own corporate intelligence company, Steve Vickers & Associates.
"Macau is a complicated place, a very complicated place," he said.
Part of the reason for that are tight controls -- in theory -- on the amount of money that can be taken out of mainland China, and no official system for collecting gambling debts in the country. Companies known as junkets fill this void, organizing trips to Macau, extending credit and enforcing the collection of debts.
Many of the junkets are reputable companies, but others are heavily influenced by organized Chinese crime groups, the triads.
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"I'm not saying that all the junket operators are triad-related," Vickers said. "But I would say that nearly all the Chinese junket operators that I have had a look at, while they may not themselves by owned and controlled by triad societies, have some connection with them. That's the nature of the beast."
Amid the uncertainly ahead of the 1999 handover, Macau was gripped by a triad war, with gangster-like executions and bombings, as rival gangs fought for control of the junket trade and the VIP rooms.
More recently, there has been relative peace, possibly because the size of the economic cake has been growing so fast -- up to 40 per cent a year. (It has showed signs of slowing, however.)
A recent spate of violence has raised fears, as has the expected release from prison later this year of a man knows as "Broken Tooth" Wan, a notorious triad leader who was at the center of the earlier wars.
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Lurid accusations
Adelson's problems began with the sacking in July 2010 of Steve Jacobs, the head of Sands' Macau operations. He launched an unfair termination lawsuit in October that year, alleging that he was asked to do improper things.
That in turn seems to have triggered in early 2011 the SEC and Justice Department investigations under the Foreign Corrupt Practices Act.
As Jacobs’ case has ground its way through Nevada courts, his allegations have become increasingly lurid -- claiming that Adelson personally approved a "prostitution strategy" for his casinos, had triad links, and made questionable payments to Chinese government officials. The latter accusation related to the employment by Sands of a well-connected local official.
Adelson has strongly denied the claims.
"When the smoke clears, I am absolutely-- not 100 percent, but 1,000 percent -- positive that there won't be any fire below it," he said at an industry conference last year. He has also described Jacobs' suit as "pure threatening, blackmail and extortion."
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When I contacted Ron Reese, Sands vice president for public relations, he told me that the company takes the SEC and Justice Department investigation very seriously.
"We cooperate fully, but others are exploiting the situation for political or personal gain. We are looking to find a resolution of these issues," he said.
Sen. John McCain hardly helped matters when he suggested in an interview that Adelson's reliance on profits from foreign (and in particular Chinese) casinos provided a route for foreign money to enter the election campaign.
"Obviously, maybe in a roundabout way, foreign money is coming into an American campaign," he told PBS.
Sands clearly feels that in an election year the whole thing has become highly politicized, but that was probably inevitable once Adelson emerged as the Republican Party's biggest contributor.
He is clearly hoping that attention now moves elsewhere and he can continue unhindered with what he believes is a perfectly legitimate business
But there is no doubt that America's most expensive election ever has put tiny Macau under the spotlight like never before.
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