UPDATE 3-In split from SocGen, TCW's fortunes seen set to rise
By Greg Roumeliotis and Jessica Toonkel and Jennifer Ablan
TOKYO Nov 16 U.S. gaming regulators are investigating millions of dollars paid by affiliates of Japanese billionaire Kazuo Okada's Universal Entertainment Corp to a former consultant for the Philippine gaming authority around the time the company was lobbying to win concessions for a $2 billion Manila casino.
A Universal subsidiary made a $5 million payment in May 2010 to Rodolfo Soriano, a close associate of the former head of the Philippine gaming regulator, according to a Reuters examination of bank records, corporate filings, court documents and records prepared by Universal staff. The payment was made via a shell company in Hong Kong and was part of $40 million in transfers made by Universal's U.S. affiliate Aruze USA that are now a focus for investigators.
The document trail connecting Soriano to the $5 million payment has not been previously reported.
It's not clear whether Okada, 70 and ranked 18th among Japan's wealthiest by Forbes, personally approved the payments. Universal, more than two-thirds controlled by Okada and his son through Okada Holdings LLC, has filed suit against three ex-employees saying they acted without proper authorization in channeling $15 million of the total through Hong Kong-registered Future Fortune Ltd.
The revelation of the contested payments is the latest twist in a bitter falling out between Okada, who made his fortune making and marketing pachinko machines - a mix of slot and pinball machines - and Las Vegas casino magnate Steve Wynn. Okada was Wynn's partner and largest investor until Wynn charged this year that Okada had broken compliance rules - and possibly U.S. law - by paying some $110,000 in entertainment and other expenses for gaming regulators from the Philippines and Korea.
The investigation of the much larger payments by Okada's company threatens to complicate Universal's attempt to get a U.S. federal court to reverse Wynn's decision to redeem Okada's Wynn Resorts shares at a discount. It could also complicate Universal's push to complete the casino on Manila Bay that it began building in January and has promoted as a VIP-destination resort for China's newly rich, some critics say.
"I don't have any illusions that it is going to be stopped, but there has to be accountability," said Teodoro Casino, a Philippine congressman who has urged the government to suspend the Universal project.
Universal referred questions to Yuki Arai, the lawyer who is representing the company in lawsuits against former employees. His office had no comment as of Friday.
Soriano could not be reached for comment. A woman at his home in Manila said he no longer lived at that address. She declined to say how he could be reached. An attempt to reach him at a Manila business operated by the family of his wife was also unsuccessful.
DISCUSSED WITH FBI
The Nevada Gaming Control Board has been looking into payments by Okada-controlled companies to Soriano, a consultant to the Philippine Amusement and Gaming Corporation (PAGCOR), which regulates gambling in the Philippines, said a person with knowledge of the matter. The Control Board has sent agents to Japan and elsewhere to investigate claims that potentially improper payments were made to Soriano, said the person, who asked not to be named as the process is ongoing, adding the payments were also part of an audit by Nevada authorities of Universal in Japan that began in August.
If Nevada authorities determine there is evidence of wrongdoing, state gaming regulators can limit or restrict gaming licenses or impose other sanctions. Universal, which also makes slot machines, is one of two public Japanese companies, along with Konami Corp, that are registered with and report to the Nevada Gaming Commission.
At least two former Universal employees have discussed the payments to Soriano with the FBI, said people with knowledge of those talks. Any FBI investigation would be for a potential criminal case, separate from the regulatory probe. A spokesman for the FBI office in Las Vegas, which handled the interviews, declined to comment.
The disclosures deepen questions about compliance and controls at Universal at a time when those issues are already under scrutiny because of revelations it paid to entertain Philippine and Korean gaming officials at the Wynn casino resort in Macau and the Wynn resort in Las Vegas. Those revelations were first made public by Wynn after he commissioned an investigation by former FBI director Louis Freeh.
Records reviewed by Reuters show the $5 million transferred from Nevada-incorporated Aruze USA was sent first to Future Fortune, which was set up in Hong Kong in 2008 and run by a succession of Universal employees. From that firm's HSBC bank account, the money was sent to People's Technology Holding Ltd, a firm established in 2009 and wholly-owned by Soriano.
The payment was part of $40 million that moved from Aruze USA's accounts through Future Fortune in the first half of 2010, just as Universal sought tax and ownership-related concessions in the final months of the administration of former Philippines President Gloria Macapagal Arroyo. It also sought to resolve road use issues that risked complicating its casino development, people involved in the project say.
The remaining $35 million was paid in January-May 2010 to a firm called Subic Leisure and Management, records show. Subic Leisure was registered in the British Virgin Islands in September 2008, weeks after Universal acquired reclaimed land on Manila Bay and announced plans to build Asia's largest aquarium, a Ferris wheel and a 2,050-room hotel and casino.
Under corporate laws in the British Virgin Islands, Subic Leisure does not have to disclose its directors or investors. HSBC said it had no comment.
Universal has looked to Asia for growth to offset a decline in its home market for pachinko. It won a provisional license to operate a casino in the Philippines when it paid about $300 million for land as part of the Manila Bay project.
But Universal continued to lobby for its casino to be exempt from corporate tax and for an exception to rules requiring Philippine investors own 60 percent of the venture, three former employees involved in the project said. Universal, which has a market value of around $1.7 billion, announced it won those concessions in April 2010. Arroyo left office in June 2010.
"The incumbent PAGCOR management has no knowledge about the said transfer of funds," the regulator said in an emailed response to questions from Reuters for this article.
Soriano, a confidante of former PAGCOR chairman Efraim Genuino, frequently visited Universal offices in Tokyo and hosted Okada on his visits to Manila, former associates say. Widely known by his nickname "Boysee," Soriano operated at the nexus of business and politics in Manila and often networked over rounds of golf at the Wack Wack Country Club, one of the country's oldest golf courses, people who worked with him say.
Manuel Camacho, 79, a Manila-based lawyer who formerly represented Universal in the Philippines, said it was understood that Soriano was an agent for Okada on the Manila casino project even as he worked for PAGCOR as a consultant. "This guy Soriano - that is Okada himself. He is acting for Okada," he said.
Camacho, who also spoke to Freeh investigators, claims money he was paid by Universal was diverted by his former law partner, Genuino's son, Erwin, and sent as a pay-off to local officials to win clearance for road building. Erwin, his father Efraim and their lawyers could not be reached for comment.
Okada has defended himself against accusations of misconduct in the Wynn case in part by saying he was not directly involved in running Universal. He also argues he was pushed out as a Wynn shareholder for raising concerns as a director about a $135 million donation approved to a foundation aligned with the University of Macau. Okada told Reuters in an interview in Hong Kong last month he would also file lawsuits against former Universal employees he accused of negligence that contributed to the crisis for his company in its relations with Wynn.
"Once we started looking back at things in 2011, I realized I had been deceived all along," Okada said. "To be honest, I feel like an idiot for trusting people."
At the time of that interview, the payments to Soriano had not come to light.
CHAIN OF COMMAND
In a lawsuit filed by Universal on Aug. 20 in Tokyo District Court, Universal claims Mitsuo Hida, 65, then president of Aruze USA's Japan branch, made an unauthorised debit of $5 million from the company's Bank of Tokyo-Mitsubishi UFJ account in May 2010. Records show the money was transferred via Future Fortune, where Hida was a director, to Soriano's People's Technology.
In his rebuttal to the lawsuit, Hida, who led the effort to win concessions for Universal's Manila casino from the Arroyo administration, says he was operating under Okada. "Kazuo Okada is the president of Aruze USA in its entirety," he wrote in his statement filed with the court. "I was operating under his chain of command in conducting business."
Hida declined to comment further when contacted by Reuters. His lawyer also declined comment, citing the pending legal case.
A second lawsuit accuses three former Universal employees, including Hida, of acting without authorization in sending $10 million to Subic Leisure and Management. That lawsuit has been filed with a Tokyo court, but remains partly sealed.
Internal Universal documents reviewed by Reuters describe the series of payments to Future Fortune as both "consulting fees" and, in one case, an "increase in capital." The $5 million payment to Soriano's People's Technology was described as an "advance payment" in one internal document.
It was not immediately clear how the payments were treated in quarterly financial reports or in mandatory disclosures to Nevada gaming regulators. An email from a member of Universal's compliance unit shows staff sought guidance on how to account for the $40 million paid to Future Fortune in mid-2010.
Both Soriano and Genuino, who left his post in June 2010, face separate charges of bribery and corruption lodged by Philippine officials over payments from the gaming authority to candidates in May 2010 elections in the Philippines. Both were also guests at Wynn resorts with their expenses paid for by Universal when Okada was a major Wynn shareholder and Genuino was the chief gaming regulator for the Philippines. The Freeh report first disclosed those payments.
Universal has acknowledged both men, and other officials from the Philippines and Korea, were guests it sponsored. It maintains the free lodging and expense payments did not violate the Foreign Corrupt Practices Act, a U.S. law against paying bribes. Okada said the arrangements were made by employees no longer with the company, and he was not aware of the payments.
Wynn said the payments uncovered by Freeh were evidence that Okada was "unsuitable" to serve as a director of the Las Vegas-based company, and forced the redemption of Okada's 20 percent stake in Wynn Resorts for $1.9 billion, a 30 percent discount to the market value. Wynn Resorts had no comment about the $5 million payment to Soriano when asked by Reuters.
Soriano and his wife stayed free at Wynn resorts five times between 2008 and 2010, records show. On a June 2010 trip, Soriano travelled with Efraim Genuino to Wynn Macau where Universal covered their expenses of $2,974.70, including $25 for Soriano to watch a movie.
Genuino checked out on June 10. Soriano left a day later. Within the week, Genuino announced his resignation as PAGCOR chief, a move that incoming Philippine President Benigno Aquino said meant "one less problem for me." (Reporting by Nathan Layne, Taro Fuse, Kevin Krolicki, Teppei Kasai, Fumika Inoue and Mayumi Negishi in Tokyo; Farah Master in Hong Kong; Sue Zeidler in Los Angeles; Joseph Menn in San Francisco and Rosemarie Francisco and Manuel Mogato in Manila; Writing by Kevin Krolicki; Editing by Ian Geoghegan)
By Greg Roumeliotis and Jessica Toonkel and Jennifer Ablan
* Defendant's federal conviction was overturned in February
* Alternatives to Libor to be found for some contracts