Japanese Casino Operator Bets on Manila

Japanese billionaire Kazuo Okada was facing a crisis: perform on his dream casino by the bay in Manila was going nowhere.

Rather of a world-class resort packed with Chinese high-rollers, Okada, 70, was sitting on a $300-million patchwork of reclaimed and undeveloped land next to the Manila airport that from the middle of 2009 was threatening to become a dollars pit, in line with corporation records and people involved.

Essential regulatory approvals had been tied up in red tape. The provisional gaming license was flawed. Nobody could tell the architect how high he could construct the gold-toned towers without having endangering incoming aircraft.

To comprehend Okada’s target of generating the Manila casino much more lucrative than rival operations in Macau or Las Vegas, the project needed to win an exemption from corporate taxes in the Philippines. Furthermore, it necessary a presidential order giving Okada’s firm, Universal Entertainment, the capability to own the resort outright as a foreign investor.

Universal executives believed Philippine officials had promised those concessions by the end of 2008 for a project expected to create more than six,000 jobs. The Philippine gaming authority had offered Okada a side letter to Universal’s provisional license in August 2008 saying it would make its “best effort” to have those approvals from then-Philippines President Gloria Arroyo.

It would imply hundreds of millions of dollars in additional profit each year when the approvals came via, based on an analysis of Universal’s presentations to regulators and investors.

By June 2009, nevertheless, the project was more than six months behind schedule and Okada’s patience was wearing thin. When Arroyo came to stop by Tokyo, Okada saw her in a meeting arranged by the head of Philippine gaming regulator, Efraim Genuino.

“Get clarity on how lengthy it’s going to take to solve these difficulties on the spot and extract a promise,” a note prepared for Okada in Japanese by Universal executives mentioned. It was not clear what was discussed within the personal meeting.

Reuters examined a huge selection of pages of documents from Universal and Philippine regulators and interviewed almost two dozen persons involved in the project in Japan along with the Philippines in reconstructing how Universal tried to push via its casino deal within the Philippines inside the final months with the Arroyo administration. That deal is now the topic of investigations there and inside the United states of america.

The record shows Universal won concessions on 3 crucial issues that had threatened the $2-billion project in late 2009 and early 2010.

1st, the Philippine Amusement and Gaming Corporation (PAGCOR), the gaming regulator beneath Genuino, brokered a land swap in November 2009 that Universal required to move ahead with construction.

Then in February 2010, Arroyo signed a presidential order making it attainable for foreign investors like Okada to have 100-percent ownership of casinos. Around the same time, Arroyo’s workplace authorized an application for corporate tax relief from Universal’s land-holding firm. Both measures were expected however the delays had frustrated Universal executives, records show.

Universal pushed difficult to obtain its final gaming license from Genuino – correct up until June 29, 2010, every day before he left his post – but failed to acquire it.

Because it raced to win final approval for its casino, Universal also funneled a total of $40 million in payments to Rodolfo Soriano, an aide to Genuino and also a former consultant to PAGCOR who had become central to Universal’s operations inside the Philippines by late 2009.

In the total $40 million in transfers to Soriano, $10 million was instantly returned towards the Japanese business in May well 2010 to prevent writing off a terrible loan extended to yet another firm not involved inside the casino project, as Universal closed the books on its fiscal year, records show.

The payments to Soriano, now below investigation as possible bribery, were first reported by Reuters.

It is actually unclear what occurred together with the $30 million paid to Soriano that remained with him. Soriano, who came to be identified to Universal executives by his nickname “Boysie”, has not commented on the payments and couldn’t be reached. There’s no evidence the money was transferred to officials in the Arroyo administration or to other people.

Universal booked $7 million in the payments to Soriano as a “consulting fee,” citing his assist in winning the order signed by Arroyo enabling foreign casino ownership as partial justification for the payment, in accordance with enterprise documents seen by Reuters.

Okada broke ground on construction of your casino in January 2012, but PAGCOR beneath its new chairman has threatened to strip Universal of its license if evidence of bribery is identified.

Universal mentioned it performed its business within the Philippines lawfully. Its attorney, Yuki Arai, declined to comment further.

Genuino has been charged with misuse of public funds through his time at PAGCOR for allegations unrelated for the Universal payments to Soriano. He couldn’t be reached for comment.

Arroyo has been underneath hospital arrest for charges connected to alleged electoral fraud and misuse of public funds during her presidency. Her spokeswoman, Elena Bautista-Horn, did not return calls in search of comment.

Universal has sued three former personnel claiming that $15 million transferred to Soriano – which includes the $10 million that was promptly returned – was unauthorized.

In early December, Okada and Universal announced they had filed a libel action against Reuters in Tokyo for reporting on the payments to Soriano in November.

Okada, certainly one of Japan’s most successful entrepreneurs, had risen via hardship and trusted his gut when it came towards the biggest decisions.

His father died when he was in elementary school, a loss he said aided make him self-reliant. He produced his initially fortune fixing and selling American jukeboxes in the 1960s. He became a billionaire selling pachinko machines, a Japanese type of legal gambling.

From the late 1990s, the pachinko market place had peaked and Universal started to try to find techniques to diversify.

Okada met casino impresario Steve Wynn in 2000. The two had to rely on a translator – Okada speaks tiny English – but both mentioned they began a sturdy friendship. On a handshake, Okada became Wynn’s big investor.

“I got fortunate,” Wynn, 70, told Nevada gaming regulators in 2004. “At initial I could hardly believe it, but then $250 million came ‘zwinging’ in.” Wynn also said then he believed Okada to be a man of deep integrity. “Take the high road. Do the appropriate issue,” he recalled Okada telling him.

Okada staked Wynn to get a total of $380 million. That jump-started construction from the Wynn Las Vegas resort that opened on the website on the old Desert Inn in 2005, as well as the much more lucrative Wynn Macau in 2006. By 2010, Okada’s investment had enhanced in value almost eight occasions and returned just more than $600 million in dividends.

Macau in distinct has created beautiful results. By 2011, the Macau marketplace was bringing in practically $34 billion a year, making it greater than five instances more substantial than Las Vegas.

When Genuino visited Tokyo in 2007 to drum up interest inside a $15-billion resort and casino complex PAGCOR wanted to create, Okada jumped in the probability to invest, people involved said.

A year later, on the cusp of international recession, Universal paid just over $300 million for 30 hectares (74 acres) on Manila Bay. In August 2008, PAGCOR granted a provisional license to its casino operating business, Tiger Resorts, Leisure and Entertainment.

But Okada later realized the initial license fell short of what the enterprise had sought, records show. Universal did not desire to have to employ employees, which includes dealers, by way of PAGCOR and pay costs towards the regulator as a placement service, in line with letters sent from Universal to PAGCOR.

Universal also pressed PAGCOR to permit high-rollers coming on trips organized by junket operators to come into the casino without reporting their names to the regulator. Junket operators mix concierge and credit solutions for wealthy Chinese and have already been central for the development of gambling in Macau.

To promote Manila as an option to Macau, Universal wanted to produce it a marketplace exactly where the winnings of Chinese gamblers could be “free of supervision,” in line with a corporation presentation.

There was also some uncertainty about whether or not Wynn would join the Okada project. Okada stated he wanted to bring Wynn in as a partner by means of late 2010. “At that time I trusted him. I showed him every thing,” Okada told Reuters in October.

Wynn, nevertheless, was always skeptical about carrying out enterprise within the Philippines, an individual acquainted with his thinking mentioned. When Okada asked him to take a look at Manila in June 2010, he agreed to a briefing from Genuino. But he turned up in a polo shirt when everybody else wore company attire, a sign he saw himself as a spectator, the individual mentioned.

By early 2012, Wynn and Okada had split and begun a legal fight over Okada’s continued investment in Wynn’s company that is certainly playing out in courthouses in the United states of america, Japan and also the Philippines.

A Wynn investigation discovered Universal had paid $110,000 to entertain gaming regulators from Korea along with the Philippines. The Wynn camp alleges that Okada was an unfit partner. Okada has mentioned Universal entertains officials in line with its internal policy and denies any wrongdoing. The guest list that drew the attention of Wynn included Soriano, Genuino and Mike Arroyo, the husband of then-President Gloria Arroyo.

Wynn told Okada as well as other directors in 2011 that he did not think it could be possible to operate in the Philippines, regularly ranked as among the list of most corrupt economies in Asia, according to a legal claim filed by Universal in Nevada.

“All of us are of a single thoughts,” Wynn told Reuters. “We cannot be associated to activities in the Philippines.”

When Okada along with the Universal board authorized the Manila project in August 2008, they projected it will be a cornerstone of a string of resorts around the swiftly increasing Asian market place. They expected Universal would turn out to be a $9 billion corporation by 2014 with a listing on the Hong Kong stock exchange, in line with notes from the board meeting.

Casino gambling revenues in the Asia-Pacific area have greater than tripled because 2007, based on PricewaterhouseCoopers. The area is set to overtake the US marketplace as biggest in the world subsequent year when gambling revenues reach $67 billion from $58 billion in 2012.

Universal’s 1st designs were according to the Wynn casinos, featuring two wings in reflective gold glass. Plans integrated $150 million to create certainly one of Asia’s biggest aquariums along with a “Kidzania” playland, with a different $70 million for the “Manila Eye,” a huge Ferris Wheel.

But Okada’s plans for any “six-star” resort had been straight away tested by a litany of troubles on the ground in Manila. Engineers found 10 hectares (24 acres) of its internet site was reserved for road use and held by another developer, making making impossible.

It had been overlooked inside the original acquire. “We did not realize in the time that we had the road issue,” a memo from June 2009 mentioned. “Our land was crisscrossed by these roads like wormholes.”

Universal’s Manila employees worried there was no straightforward repair. Immediately after months of delays, Universal termed in Genuino to negotiate a land swap in between Universal, the nearby city of Parañaque and developer Asiaworld Properties Philippine Corporation.

“The appropriate answer would be to ask PAGCOR Chairman (Genuino) to be our public face in this matter,” the memo stated.

Over the summer time, Universal pushed for a lot more frequent speak to with Genuino. It set up a video conferencing facility so the two sides could talk much more on a regular basis. Universal also sought to generate Genuino the conduit for passing on key documents to Arroyo’s presidential office, company documents show.

About that time, Universal was also aiming to break with Philippine law firm SyCip Salazar Hernandez and Gatmaitan, which it felt was charging also significantly and moving too slowly, based on company memos. As it ready to ditch SyCip, Universal rebuilt its method around Soriano in what was described in an internal memo as a “shift to Boysie.”

In a statement, SyCip partner Imelda Manguiat, who handled the Universal account, mentioned all transactions the law firm worked on had been reputable and lawful. She declined to comment further.

Shifting to Soriano meant reworking a structure that allowed it to circumvent the requirement that the landholding business behind the casino be at the least 60 % owned by Filipinos.

Records reviewed by Reuters show Universal had bankrolled the original investment meant to satisfy that foreign ownership requirement. This was accomplished by depositing $4.four million in a Banco De Oro account in 2008. That money secured a loan to a firm named Lex Development Corp., a shell company established by SyCip. Lex employed the money to make its investment inside the project. Universal covered interest on the loan, records show.

The holding was transferred in 2009 to Platinum Gaming and Entertainment, a Soriano-affiliated firm, records show.

Okada remained in charge of key choices involving Universal along with the Manila project, current and former workers mentioned. On some mornings, workers would wait a lot more than an hour to speak to him. Any cost over $36,000 had to be authorized by the strategy board for the Manila project, records show.

Often Okada’s hands-on style grated on his people. In one December 2009 meeting, Okada and Toshihiko Nishigaki, a hotel market veteran brought in to oversee the Manila project, got into a heated discussion about responsibility for the project, based on 3 people today in the space. Nishigaki asked Okada to step into the corridor along with a shouting match ensued.

Within weeks, Nishigaki was gone. His departure was the begin of a transition that place greater concentrate on a faster return from a downsized project. Plans for the Ferris Wheel along with other attractions that had promised to turn the casino into a tourist magnet had been dropped or scaled back, individuals involved stated.

Nishigaki didn’t respond to a letter searching for comment.

In November 2009, Okada hosted a PAGCOR delegation, which includes Soriano, in Las Vegas to watch Philippine national hero Manny Pacquiao retain his title inside a welterweight championship fight. Universal picked up the tab for Soriano along with the PAGCOR delegation at Wynn Las Vegas at a price of $14,412, records show.

Then in January 2010, Okada led a delegation of Universal executives from Tokyo towards the wedding of Genuino’s son, Anthony, at the Sofitel hotel in Manila. Okada sat in the same table as former Philippines Very first Lady Imelda Marcos. Executives who accompanied Okada said the intent was to show his assistance for Genuino and his politically ambitious family members.

PAGCOR filed corruption complaints against Efraim Genuino and also other former PAGCOR officials in 2011 alleging they diverted funds to assist favored candidates for public office, which includes Genuino’s children.

In aspect, Genuino is accused of diverting rice Okada had donated to help typhoon victims in 2008 to assistance the candidacy of his sons, two years later. The rice was delivered to potential voters in bags with pictures of Anthony and Erwin, in accordance with the charges.

Anthony was elected mayor of the city of Los Baños, when Erwin ran unsuccessfully within the May well 2010 elections.

The Division of Justice not too long ago stated it wouldn’t pursue charges against Anthony and Erwin due to a lack of evidence. Neither in the sons may be reached for comment.

The $40 million in payments from Universal began moving to Soriano on January 14, 2010 with an initial installment of $10 million transferred for the bank account of Subic Leisure and Management, a Soriano-controlled enterprise registered in the British Virgin Islands. A different $15 million was transferred to Subic Leisure on March 3, 2010, internal records show.

Then in late April and early May possibly 2010 Universal recycled another $10 million payment by means of the exact same Subic Leisure route. Records show Universal brought the cash back to its own accounts inside a move aimed at covering a loan to a enterprise referred to as AZ Games International Corp. that had gone sour, based on corporation records and folks involved in the transaction. AZ Games was registered in the British Virgin Islands and operated with small oversight as a result. It had been dissolved months ahead of, records show.

The final $5 million was paid to a Hong Kong shell corporation named People’s Technologies Holding Ltd., of which Soriano was the sole shareholder. It was paid 4 days right after Soriano met Okada and also other Universal executives at a Chinese restaurant in central Tokyo to press for the transfer, people with understanding from the meeting stated.

Universal has filed two lawsuits against three former workers claiming the final $5 million as well as the $10 million that came back to Universal were not authorized. In rebuttals towards the Universal lawsuits, two former executives – Mitsuo Hida and Takafumi Nakano – mentioned they had been following orders in making the payments. Nakano mentioned he was thinking of becoming a whistleblower underneath Japan’s anti-bribery law.

At the finish of June 2010, Genuino stepped down soon after a controversy erupted over his “midnight” reappointment by Arroyo. The election of President Benigno Aquino III the month just before posed potential complications for Universal.

Okada went to Manila to meet the new PAGCOR chief, Christino Naguiat, in August 2010. A month later, he hosted Naguiat in the Wynn Macau casino and covered $50,523 of expenses in the course of a four-day keep. Universal doesn’t contest it covered hotel rooms and also other expenses for government officials but maintains no laws had been broken. Naguiat has said there was nothing at all inappropriate about his stay.

A memo from Okada’s August 2010 check out to Manila notes he was “trying to maintain a fantastic partnership with and really feel comfortable with all the new government.” However it also contained harsh words for his Manila-based staff.

“I think you must have made a prediction what would happen resulting from change of government and ought to have made vital preparations,” Okada was quoted as saying.

Okada’s ambition to develop casinos around Asia hinges in portion on how the investigation of your Manila payments is resolved. The payments to Soriano would be the topic of a Philippine Division of Justice investigation and two separate congressional hearings inside the Philippines.

The Nevada Gaming Manage Board mentioned final month its investigation was progressing. Doable sanctions contain a suspension of Universal’s gaming license.

Earlier this month, Universal signed a deal giving Philippine property firm Robinsons Land Corp. a minority stake in its casino operating firm along with a majority stake in its Manila landholding business.

The Manila project – now recognized as Manila Bay Resorts after initially being dubbed “Okada Resort Manila Bay” – is scheduled to open in 2014, 4 years behind initial projections.

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