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StumbleLas Vegas Sands directors hit with shareholder lawsuit
Published Wednesday, Jan. 28, 2009 | 2:10 a.m.
Updated Wednesday, Jan. 28, 2009 | 9:29 a.m.
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Beyond the Sun
Veteran securities fraud attorney Marc Henzel has filed a lawsuit against Sheldon Adelson and the other Las Vegas Sands Corp. directors, alleging they failed to properly oversee the casino-resort giant and are responsible for a huge decline in the value of its stock.
Henzel, who is based in Pennsylvania, teamed with Las Vegas attorneys G. Mark Albright and Martin Muckleroy to file the suit Jan. 16 in Clark County District Court on behalf of shareholder Caleb Hartmann against the board of directors: Adelson (chairman of the board and chief executive), Irwin Chafetz, Charles Forman, George Koo, Michael Leven, James Purcell, Irwin Siegel and William Weidner.
This is a "derivative" lawsuit in which the attorneys are seeking approval to have Hartmann sue on behalf of Las Vegas Sands Corp. against its own directors.
A spokesman for Las Vegas Sands said the company would have no comment on the lawsuit.
But in a Jan. 16 response to a similar lawsuit filed in November by Albright, Muckleroy and several New York law firms, attorneys for Las Vegas Sands and the directors denied the allegations.
That response, filed by Las Vegas attorneys Steve Morris and Akke Levin and a Chicago law firm, said the plaintiffs' November lawsuit was improper because the plaintiffs had failed to first make a proper demand of the board of directors before suing.
The response also said: "Plaintiffs' complaint contains no particularized allegation of any 'intentional misconduct, fraud or a knowing violation of the law.'"
"Indeed, plaintiffs themselves repeatedly allege how the board responded to the unprecedented crisis in the financial markets and the gaming industry during 2008 by cutting short-term expenses and arranging for debt financing and equity infusions and taking action to enhance Las Vegas Sands' corporate governance policies,'' the response said.
The response also pointed that Las Vegas Sands was not alone in experiencing problems in 2008.
"This opportunistic lawsuit comes in the midst of a global recession that has deprived businesses worldwide of patrons and access to funds for operations and expansion,'' the response said.
Citing news reports and Las Vegas Sands regulatory filings since November, the suit recites several issues at Las Vegas Sands that caused its stock to fall from more than $125 per share in November 2007 to less than $7 per share in November 2008. The stock closed Tuesday at $5.66, well off its 52-week high of $95.26.
"Plaintiff, derivatively on behalf of Las Vegas Sands, therefore brings this action seeking redress for the damages sustained, and to be sustained by Las Vegas Sands, against director defendants, for unlawful actions and/or inactions that violated state law, including breaches of fiduciary duties, abuse of control, gross mismanagement and waste of corporate assets," the suit says. "This action is brought to recover for the company its potential losses from its exposure to and grossly imprudent risk-taking in spreading the company too thin with numerous and simultaneous casino construction projects in Macau, Singapore, Pennsylvania and Las Vegas, an exposure to which director defendants (in particular, director defendant Adelson) improvidently subjected the company."
The suit claims the defendants failed to prevent a cash crunch, resulting in the need to suspend unfinished construction projects.
The directors are accused of failing to "sufficiently control a company so clearly dominated by its majority shareholder, director defendant Adelson" and their actions have "called into question the financial solvency of a once successful and sound company, and massively diluted the value of Las Vegas Sands shares for its current shareholders by having to raise significant amounts of new capital."
The suit says Adelson’s ownership of more than 50 percent of the company’s common stock and his ability to elect the entire board makes Las Vegas Sands a "controlled company" and that his "longstanding personal and professional entanglements and relationships with other board members, including Messrs. Chafetz and Forman ... have prevented them from acting independently to fulfill the fiduciary duties owed to Las Vegas Sands and its shareholders."
The suit seeks an order requiring the defendants to pay unspecified monetary damages to the plaintiff, on behalf of Las Vegas Sands, to cover damages sustained by Las Vegas Sands because of the directors’ alleged "breaches of fiduciary duties, abuse of control, gross mismanagement and waste of corporate assets." The suit also seeks to have each director reimburse Las Vegas Sands for all profits, benefits and other compensation paid to them.
Henzel’s Web site lists dozens of securities fraud cases his firm has been involved with and names Las Vegas Sands as a company "under review." Concerning Las Vegas Sands, it says: "If you are a current shareholder and would like to discuss your options of exercising your rights as a
shareholder, please contact us. Please submit ... information so we can determine if you qualify for the suit. If you don’t know all the specific details, partial information is also acceptable."
Based in Las Vegas, Las Vegas Sands owns the Venetian and the Palazzo resorts on the Las Vegas Strip along with the adjacent Sands Expo and Convention Center on Sands Avenue. In China, it owns the Sands Macao and the Venetian Macao in Macau and is developing the Cotai Strip of resort casino properties in Macau.
Its other projects are in Singapore and Pennsylvania.
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Gee, I guess that all the money spend by Adelson's Freedom Watch on the terrible ads against democratic office seekers is now biting him big time in the backside. Karma does bite.
"...they failed to properly oversee the casino-resort giant and are responsible for a huge decline in the value of its stock."
Clearly that is the case. You can tell because all the other casino corporations and owners up and down the Strip are all doing so well compared to the Sands properties.
Waaa! Waaa! Waaa! You never told me we might lose money!!!
Of course you assume risk when you invest, john, but I think the gist here is that when Mr. Adelson, a.k.a. Sands, takes the public's investment dollars he has a responsibility to act on their behalf as well as his own.
Clearly, as a result of the financial meltdown, we are finding out that(shockingly!) in practice, this is rarely the case. Big Business, run by Bigger Egos. Unquenchable greed has killed the goose that was laying the golden eggs.
Now I guess we are gonna pony up some more public dough in hopes that the greedy piggies can put the proverbial Humpty dumpty back together again. Good luck with that.
This is not about waaa,waaa it is about the lack of fiduciary responsibility on the part of the Sands. It sounds as if John has in for anyone who can invest. Waa, waa John.
It is common knowledge that most directors are simply well-paid serfs for the largest shareholders. In fact, they should be called "coatholders" for what little they do. As my old Superintendent used to say "They'd stamp your di*k for the right price." The problem is these casino companies start massive projects without any full financing commitments. Look at Boyd, who fell flat on their face. MGM, who sold their soul to Dubai, and are still short of complete financing. And Sheldon, who seemed to be in a race with Steve Wynn. Steve must be smiling like a cat now.
The lawsuit is all about the boards foresight or lack there of for the spending they've done on projects like the Sands Macau, Venetian Macau, Palazzo and some other investments not the money Sheldon Aldeson has spent out of his own pocket for the Republican cause.
Biased people look very un-informed and agenda based...
It all comes down to whether the board of Sands should have reasonably foreseen the economic downturn, whether they violated equity laws, frivolously spent on projects outside of real costs, committed fraud/embezzlement and/or purposely devalued the company through their actions.
I find it hard to believe this lawsuit will get very far. Aldeson has spent billions of his own money propping the company up and his competitors are in very similar spots. It just seems to be a lot of buyers remorse"
I feel bad for anyone who invested in some of the hardest hit companies over the last several years. Having said that though... it really is up to the stock purchaser to do their homework regarding a company, it's financials, as well as the directors and management involved. It's very easy in this day and age to blame someone else for a persons lack of research and/or action. Sometimes though it boils down to admitting a bad stock choice and moving on.
I personally sold my Sands stock around $70 when it became apparent that the industry was in for a rough go of it, and severaly overextended. I am by no means an expert or even that intelligent for that matter. But in my opinion, it didn't take a ton of smarts to see what was going on. I suspect that the people that Mr. Henzel represents were fairly late to the party, and are saddled with some substantial losses. While I do feel bad for them, sometimes there isn't any negligence on anyones part and you have to chalk it up to experience. I'm not aware of Sheldon begging anyone to hold onto their stock... nor am I aware of Sands doing anything differently than any of the other casino companys. I too don't see this lawsuit getting very far.