Hao vs LVS | Witness says claim is exaggerated, plaintiff rejects report
A witness for the defense in the Asian American Entertainment Corporation’s (AAEC) case against Las Vegas Sands Corporation (LVS), has given evidence supporting the assertion – already made by another defense witness – that the AAEC’s claim for compensation is exaggerated and unjustified.
AAEC, which is owned by Taiwan businessman Marshal Hao, brought the case against local units of LVS after LVS abandoned the partnership for a concession license tender. AAEC seeks compensation for breach of contract.
An employee of the consulting firm NERA Economic Consulting, Inc. (NERA), named Wang, was called by the defense to give testimony at the First Instance Court (TJB). Wang said that the plaintiff’s calculations for the compensation claim only took into account the profits reported by the LVS to the Gaming Inspection and Coordination Bureau (DICJ) and did not take into account investments made over time by the operator.
Questioned by the defense lawyer Luís Cavaleiro de Ferreira, Wang explained that there are two main reasons why the consulting company disagrees with the AAEC’s claims. Firstly, even if the contract had not been breached, AAEC would not be able to support the tender for a concession. Secondly, Wang claims that Hao’s compensation case has many incoherencies and absurdities.
According to Wang, not only did the plaintiff base his claims only on the reports delivered to DICJ, the claim was calculated based entirely on balance sheets for years when a profit was recorded, disregarding years when investment exceeded the profit. Furthermore, Wang stated that AAEC also ignored LVS’ expenses for construction, financing, and taxation.
Finally, the NERA report shows that AAEC’s potential investment amounted to only MOP8.8 billion, that is, 14 times less than the MOP120 billion investment allegedly made by the LVS between 2002 and 2020. Wang considered this factor as decisive in calculating the proportionality between the parties.
In this regard, the report from NERA also concludes that after the breach of contract, AAEC did not try to invest in the local gaming market through other avenues, such as participating in the various gaming companies.
Wang said that this fact led NERA to infer that AAEC had “no financial capacity or will to invest in Macau gaming market” beyond the initial stated investment of MOP8.8 billion noted on the letter of intentions signed with LVS.
Questioned by Cavaleiro de Ferreira, Wang said, “in my opinion [compensation claims] should be based on the investment concretely done or officially stated,” referring to the letter of intentions.
AAEC disagrees with NERA’s concept of “profit”
The plaintiff, represented by lawyer Jorge Menezes, has rejected the conclusions reached by the NERA report, criticizing it on several points, specifically on the report’s concept of “profit”.
Menezes argues that the court cannot agree with the report’s assertion that the plaintiff’s claim contains many serious errors and absurdities, and even hinted that the report may be biased.
The lawyer argued that the report signed by Wang on behalf of NERA contains analysis that does not make mathematical sense.
“How can the court can accept that [according to the definition of profit made by the consultant] LVS had hardly any profits in most of the years of operation, yet, in many years the same company made big dividend payouts to their partners,” Menezes said. He noted the example of one year in which the company distributed almost MOP22 billion in dividend payouts to its partners, as shown by official reports.
The TJB judge presiding over the sessions agreed with Menezes on this point, noting that “dividends do indicate that there are profits to be shared.”
According to the analysis in the NERA report, up to the end of 2020, AAEC is not entitled to claim more than MOP400 million in compensation. The report adds that due to the poor performance in 2021, in which extra investments were made by the gaming concessionaire, the amount at the end of this year should be even lower.
The defense also asked Wang to make some calculations based on the criteria, showing that the sum LVS hypothetically owes AAEC could even amount to a negative figure.
Refusing to make such a calculation, the witness reaffirmed that the most important fact in calculating any potential compensation would be the difference in the amount invested by AAEC and LVS, which he also admitted will need additional adjustment as the local gaming operator Venetian Macau Limited continues to make further investments.
The case is now reaching its final stage. Wang’s appearance at yesterday’s double session was scheduled to be the final testimony in the case.
Hao is seeking damages equal to 72.5% of LVS’s subsidiary companies’ profits in Macau, estimated at around MOP96 billion (USD12 billion).
