Hao vs LVS | Asian American establishes final compensation amount claim

Asian American Entertainment Corporation (AAEC) has reduced its compensation amount claimed in the court case against Las Vegas Sands Corporation (LVS). The legal representative of AAEC, Jorge Menezes, told this to the court on Friday during his final allegations in the case.

According to Menezes, the plaintiff is now relying on two financial reports from two different experts in the field who recalculated the amount of potential loss for AAEC. The losses are attributable to the fact that LVS, through three subsidiaries in Macau, decided to replace AAEC with the Galaxy Entertainment Group (GEG) at the last minute in the gaming licensing tender held by the government back in 2002.

Initially, the AAEC filed the case with the courts seeking compensation in excess of MOP96 billion (USD12 billion). This amount was based on the American company’s stated profits after amortizations and tax over the past 20 years and until the expiry of the license.

Menezes told the court that AAEC has now taken into consideration two independent reports by Dino Mauricio from Ducker Research and Consulting Inc. and a local economist and university Professor José Isaac Duarte. Both reports recalculated the amount in the claim and have been submitted to the court.

According to those reports, the AAEC should be awarded compensation ranging between MOP57.9 billion and MOP62.2 billion (USD7.4 billion to 7.8 billion).

During his closing arguments, Menezes noted that the changed amount reflects the AAEC’s decision to move from a maximum ceiling to a minimum ceiling as the basis of the claimed amount.

“In the beginning, we were calling for compensation of USD12 billion, which was based on a maximum amount. After the experts’ reports, which take a conservative approach, we decided to use these as a basis for a minimum ceiling instead. We are asking the court to decide how much we are entitled to from the expert reports as well as whatever [profits] come until the end of the license,” the lawyer said, adding “plus damages mentioned but not calculated by the experts to be awarded by the courts on fairness and discretion grounds.”

Menezes heavily criticized the report – signed by Lucy Allen – presented during the witness hearing stage by NERA Economic Consulting Inc., which he described to the court “as a mere stunt.”

According to Menezes, the report had no credibility given that the staff member of the company who testified in court, surnamed Wang, could not even explain what financial analysis criteria were used to calculate the AAEC’s losses and, further, that the report disregarded the accounting methods used in Macau and internationally.

At that time, the NERA report tried to establish a compensation value based on the amount that AAEC stated it was willing to invest in the first stage (USD1.1 billion). According to Wang, that amount was 14 times lower than what LVS actually invested over 20 years and so the profits would arguably have to follow this ratio too. However, both Menezes and the financial experts quoted by him stated that this approach did not follow an approved methodology.

“The court is not here to judge on intentions. Intentions do not matter,” Menezes said. Instead, the role of the experts such as Mauricio and Duarte was to analyze facts, and that was also the job of the court. “Facts, not intentions,” Menezes added.

Among many other flaws, Menezes said that the NERA report confused “expenses” with “costs,” an “elementary mistake that a serious financial analyst would never commit,” he remarked. He recalled that the law provides that the calculation of damages and losses are always made in order to restore the parties to the position they would have been had the breach or event causing the loss not occurred. In this case, the relevant breach was the agreement between LVS and AAEC on the consortium formed to apply for a gaming license in Macau.

Agreement breach was a malicious act

Attempting to convince the judges of the AAEC’s rights in this case, Menezes devoted the most time in the closing submissions to presenting the plaintiff’s argument that there was an indisputable agreement between AAEC and LVS, and furthermore, that even before this agreement was officially terminated by LVS representatives, it had been breached through the actions of legal representatives of LVS’s subsidiaries by acting on their behalf to initiate negotiations with GEG to replace AAEC in the consortium. In doing so, they disclosed confidential information to them that they then used to submit the winning proposal to the tender.

Menezes noted that several documents, emails, letters and faxes proved that the AAEC was running for the licensing tender and that they did not know until one day before the tender closed that LVS was planning to replace them and had submitted a new bid in partnership with GEG.

In an emotional speech, Menezes described the act as “malicious,” “intentional,” “lacking any human values,” and one which could only be explained by pure greed.

The AAEC lawyer emphasized that the partnership between AAEC and LVS was valid and undeniable, as a proposal was submitted by the consortium to the Gaming Committee along with many other documents, and forms of communication proved the ongoing involvement between the parties.  

Terms like “partners,” “engage,” “have agreed” and “it is agreed between partners” were widely used in the AAEC-LVS’ tender submission, as well as in many other documents submitted by the LVS to the committee in preparation for the tender.

Menezes noted that a clause of the letter of intent provided that the agreement between the parties was valid until expiration at end of the tender, or until one of the parties notified the other of this intention in written form.

The lawyer noted the LVS lawyers only did so on February 6, less than 24 hours before the tender closed and via a fax sent to an office in Taiwan and not the head office of AAEC in Macau. These facts, he claimed, constituted sufficient proof of a premeditated intention to harm AAEC and stop them from negotiating another proposal with a different partner.

While Menezes did not know for sure, a letter found and submitted as part of the process suggested that the same lawyers had submitted evidence of an alleged termination of the deal with AAEC to the Gaming Committee, in order to be able to submit a new bid with GEG on February 1 (that is, five days before they fulfilled that intention). If the committee did receive and take that document into consideration, the content within it constitutes false declarations to the Macau government that allowed LVS to win a license in the tender, and is a very serious matter.

Bid submitted by LVS-GEG is a copy of AAEC-LVS one

The AAEC lawyer’s theory that the letter of intent’s terms were breached long before the agreement was terminated was supported by the fact that the proposal submitted by the new consortium formed by LVS with GEG was “almost a complete copy” of the one between LVS and AAEC, the lawyer said in the courtroom.

The lawyer explained that with the exception of a few words, the proposal was the same, even regarding the investment amounts and the percentages of ownership to attribute to LVS in the consortium, which also remained unchanged from the original proposal.

Since closing remarks by the plaintiff took a full day of the court on Friday, the judge presiding the trial rescheduled the defense’s closing remarks.

On January 26 (Wednesday) the court will resume, hearing the closing remarks from Luís Cavaleiro de Ferreira, the lawyer representing LVS in the case.

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