Hao vs LVS | Court finds link between AAEC and LVS unproven at the time of swap for Galaxy

A local court has found that there is no proof that an agreement between the Asian American Entertainment Company (AAEC) and the Las Vegas Sands Corporation (LVS) was valid at the time that LVS decided to swap AAEC for Galaxy Entertainment Group (GEG) as its partner in bidding for a gaming license concession in 2002.

The decision was heard yesterday at the Court of First Instance (TJB) during a session of the trial in the case brought against the company owned by Taiwanese businessman Marshall Hao and the local subsidiaries of LVS in Macau.

In a session dedicated to hearing the court’s decision regarding facts proven and unproven in the case, the decision of the TJB in considering whether there are no grounds to admit the possibility that the Letter of Intent (LOI) was valid beyond the expiration date of January 15, 2002, or whether there were any other documents that might replace the LOI after that date, the judge determined that there was no proof of a breach of contract between LVS and AAEC when they first joined forces with GEG.

For the court, although LVS admitted the negotiation might have started at an earlier stage, all documentary evidence shows that such a partnership only occurred on February 1, 2002 — two weeks after the LOI had expired.

This decision scuppers Hao’s request to be granted hefty compensation for alleged damages caused to AAEC due to the breach of such an agreement that led to his company not obtaining the gaming license in Macau.

AAEC is seeking compensation amounting to around MOP60 billion after amending, based on experts’ reports, an initial compensation claim in the amount of MOP96 billion.

The judge said that the decision was based on the content of the LOI as well as witness testimonies and documentary evidence gathered.

In addition to the LOI, two other documents considered very important by the plaintiff were submitted to the court: a Memorandum of Understanding (MOU) and a Declaration of Relationship between the two sides, which the plaintiff claimed had been allegedly delivered to the Macau Gaming Commission as part of the tender process of the AAEC-LVS consortium.

According to court diligence close to the Gaming Inspection and Coordination Bureau (DICJ), this declaration was never delivered to the Gaming Commission and was never part of the tender.

In reference to the MOU, the defense maintained the document was a forgery and had never existed, and this claim was corroborated by the lawyer who allegedly wrote and signed the document, who said they were unaware of its existence.

Being unwilling to make a decision one way or the other on the veracity of the documents, the court decided to simply ignore them, justifying this decision with the fact that they were never signed or part of the tender process, meaning they were considered irrelevant.

Nonetheless, the judge noted from analysis of the document that it contains information that seemed unrelated or “unusual” when compared to what was learned by the court regarding the relationship of the parties in the process.

During the examination of witnesses, lawyer David Friedman, who represented LVS at the time, told the court in written testimony that the reason the declaration of relationship was not signed by the AAEC was Hao’s refusal to sign. During the closing remarks of the trial, this was used by defense lawyer Luís Cavaleiro de Ferreira to argue that it was AAEC who severed ties with LVS and not the other way around.

At the start of yesterday’s session, the judge also explained why the court had admitted the testimony of Friedman, against the plaintiff’s arguments that the court should disregard his testimony because he was a professional employee hired by LVS.

In the explanation, the judge noted that because he was directly involved and had produced many of the documents for the consortium being used in the courtroom as evidence, Friedman has significant knowledge that the court could not disregard, in addition to the fact that he had not been working with LVS for some time. 

No damages worth compensation

An essential component of addressing the matter regarding damages is determining the amount of compensation claimed. The judge noted that, according to the court analysis based on documentary evidence and testimony of the members of the Gaming Commission, as well as the consulting company hired by them to evaluate candidates’ experience in the gaming industry, AAEC would still not have gotten enough points to win one of the licenses being tendered.

For the court, this means that the fact that LVS decided to run in the tender with another partner did not cause significant damage to AAEC, since, if they would have run together, AAEC would not have been granted a license, and would be in a similar situation to that which occurred after LVS swapped consortium partners.

Following this, and considering the calculations of different specialists on the case, the judge noted that the claim starts from the assumption that AAEC would have won one of the licenses if they had run together with LVS, a fact that the court said was not proven and in fact goes against the existing evidence.

Similarities in bids might come from an earlier stage

Another matter in the hands of the court was the accusation by the plaintiff that the bid submitted by the LVS-GEG consortium was a replica of the one initially submitted by AAEC-LVS, claiming that this indicates LVS had passed GEG confidential information.

At the court, the judge said that, after careful analysis, it was clear that there are some similarities between the two bids.

Nonetheless, he also explained that, according to the court’s document analysis, there were different explanations for this besides the claims of the plaintiff.

In addition to the alleged unlawful passing of confidential information to a competitor, the judge also mentioned a document from October 2001 titled Expression of Intent (EOI), in which the general information of the intentions of LVS for the investment project were clearly stated, similar to that in the executive summary and other parts of the final bid that AAEC’s lawyer Jorge Menezes had claimed to be copied.

According to the judge, the EOI had been produced by LVS or LVS staff members under orders of the company, noting that, the bid from AAEC itself could therefore also not be an original but a version from that same EOI that might have later been reused by LVS in the new partnership. Either way, the court decided that the matter is not conclusive, which means that AAEC could not prove intellectual property rights over the document.

The court will reconvene once more later this week to hear from the legal representatives of both sides on the decisions of the court to ensure that there are no objections on factual matters before the court issues the final ruling.