Connections between the Asian American Entertainment Corporation (AAEC) and the local subsidiaries of Las Vegas Sands Corporation (LVS), set up to bid for the 2001-2002 gaming concessions public tender, were broken by the AAEC, not LVS, the legal representative of LVS told a Macau court yesterday.
The lawyer, Luís Cavaleiro de Ferreira, was making closing remarks for the defense before the court reaches a final judgment in the case of AAEC vs LVS. AAEC is led by the Taiwanese businessman Marshal Hao.
Ferreira told the court that the AAEC demand is unreasonable, not only because of the amount of compensation sought (over MOP60 billion) but because of the circumstances under which the partnership was severed. In the defense’s view the failure to conclude the deal and the replacement of AAEC with Galaxy Entertainment Group (GEG) at a later stage of the tender process was motivated by AAEC’s refusal to accept the agreed conditions that would have resulted in the renewal of a document [Letter of Intent] (LOI), thereafter alleged to have expired.
According to the legal representative of LVS, the company was compelled to seek other partners to run the gaming concession since “Hao and CDIB [China Development Industrial Bank] refused to sign the necessary documents requested by the Gaming Commission to establish proof of the relationship between the two stakeholders.”
“The LOI expired on January 15, 2002, as was not renewed because Mr. Hao refused to do so, although such was always the intention of Venetian [Venture Development] (one of the subsidiaries of LVS). We tried until the very end to convince them [to renew the LOI].”
Cavaleiro de Ferreira also said that this is the reason why communications continued between LVS and AAEC beyond the date of January 15, “not because the agreement was still valid, as the plaintiff previously said, but because we were trying to reach a new agreement,” he noted.
Expanding on the claim that the LOI had expired on January 15, Cavaleiro de Ferreira denied that the agreement with AAEC was still valid at the time of the closing of the tender. He also argued that, since the LOI had expired, the clauses of the document stating that both parties were impeded from negotiating with other potential partners had also been lifted. Therefore, Ferreira concluded, the agreement reached with GEG was not in breach of any contract between AAEC and LVS.
LVS’ legal representative also told the court that AAEC was well aware of the expiration of the agreement and, furthermore, that AAEC was the first party to attempt to find a partner to replace Venetian, allegedly initiating conversations with GEG and others.
At stake is an updated amount ranging between MOP57.9 billion and MOP62.2 billion (USD7.4 billion to 7.8 billion) in compensation. Hao is claiming damages resulting from the breach of contract which allegedly ended AAEC’s chances of securing a gaming license.
LVS refutes claims
of copied bid
Another of the claims made by AAEC lawyer Jorge Menezes in his final remarks to the court on Friday was that the proposal submitted to the gaming commission by the consortium formed by LVS with GEG (after LVS severed ties with AAEC) was “almost a complete copy” of the one previously submitted by AAEC.
Yesterday, Cavaleiro de Ferreira refuted the accusation, stating that the LVS-GEG proposal had several sections which were practically identical to the LVS-AAEC proposal, because those sections had been written by LVS.
“We did not submit a copied proposal; we submitted our proposal. Concerning the gaming section, the entire proposal submitted by AAEC was ours. It was composed by LVS staff or people hired by LVS. It was written according to our business model and the model we had been following in Las Vegas since 1999,” he said. Ferreira added specifically that the executive summary, previously mentioned by Menezes, had been written by the LVS lawyer David Friedman using a document titled “Expression of Interest” which sets out the LVS’ vision for the gaming industry and the Integrated Resort model.
AAEC would not
have won with LVS
One of the major pillars of AAEC’s case is the accusation that LVS had been granted a license in partnership with AAEC – just as it was later granted one with GEG – because the company’s experience of the gaming sector counted the most. Cavaleiro de Ferreira denies this assertion.
The defense lawyer cited the final tender report in which AAEC was ranked in last position of the 18 bidders, to calculate hypothetically what the ranking of AAEC would have been if it had scored all LVS’ points.
In this hypothetical, AAEC-LVS would score 5,348 points, that is, almost 1,000 points below the third position, and last winning bid, from Sociedade de Jogos de Macau (SJM). According to Cavaleiro de Ferreira’s calculations, a consortium between AAEC-LVS would have been classified in the seventh position leaving both firms without licenses.
The lawyer used this argument to try to convince the court that, contrary to what the plaintiff has argued, the AAEC proposal was not the same as the Galaxy and the result would not have been the same either.
“AAEC would not see a license granted [either way] because their proposal was bad. It was not sufficient when compared to the highest bidders, and this had nothing to do with Venetian. It [concerns] their responsibility,” Cavaleiro de Ferreira concluded.
The plaintiff had argued otherwise, claiming that the gaming commission had a “discretionary power” to evaluate the candidates and the proposals according to the criteria and as a whole, saying that it is their belief that if the consortium between AAEC-LVS had operated together it would have scored higher than a simple sum of the scores of each firm independently.
Menezes cited the example of the amends made by the commission after the evaluation by the consultancy company Arthur Andersen LLC, namely that the score for the SJM that had won one of the concessions due to these significant amendments.
Cavaleiro de Ferreira disagreed and said that the commission’s discretionary power was limited by the relevant laws having the sides not been able to prove otherwise.
