Las Vegas Sands Corp. may be in sound financial condition today, but some shareholders are still trying to recover losses from a steep decline in the company’s stock price in late 2008.
Attorneys for one of the investors, Ernest Kleinschmidt, filed suit Friday in Clark County District Court against a group of current and former Las Vegas Sands directors and officers, including Chairman and CEO Sheldon Adelson.
Like at least five other lawsuits filed earlier, Friday’s complaint says investors were damaged when Las Vegas Sands’ “stock price cratered from $36.11 per share on Oct. 1, 2008, to $7.85 per share on Nov. 6, 2008, a 78 percent decrease.”
The plunge was part of a broader decline in the stock price from $144 in 2007 to $1.38 per share in early 2009 as Las Vegas Sands worked through a liquidity crunch.
Friday's lawsuit blames the stock price decline on breaches of fiduciary duty by management and the board that related to concerns over whether Las Vegas Sands could come up with $20 billion needed to build casino resorts planned in Macau, Singapore and the United States.
Las Vegas Sands has repeatedly denied wrongdoing and says its liquidity issues in 2008 were related to the global economic meltdown, not mismanagement.
Suing shareholders disagree.
''Defendants issued a series of materially false and misleading statements that failed to disclose that Las Vegas Sands was facing a liquidity crisis so severe it threatened to crater the company because Las Vegas Sands lacked the cash and funding sources that would enable it to continue most of its multibillion-dollar ongoing or planned construction projects,'' Friday's lawsuit said. ''False statements were designed and intended to buy them enough time to find a palatable solution to the company’s liquidity crisis, but the clock ran out on defendants long before they anticipated it would, when the economic tsunami of the fall of 2008 hit.''
Shareholders suffered in October and November 2008 when the directors ''effectively conceded that Las Vegas Sands had been facing a liquidity crisis for many months, that Las Vegas Sands had no liquidity, that it would have to halt most of its ongoing construction projects and that it required an emergency infusion of cash in order to avoid bankruptcy," the lawsuit said.
The concerns were eventually resolved when Adelson pumped more than $1 billion of his personal cash into the company, but shareholders claim that by then the damage was done to them.
Friday’s lawsuit is similar to a group of three Las Vegas Sands lawsuits that were dismissed by a judge in the same court in November 2009.
In the suits dismissed in 2009, Judge Allan Earl ruled the shareholders failed to show mismanagement by board members or that they breached their fiduciary duties.
A key difference between the 2009 lawsuits and the one brought by Kleinschmidt involved whether — prior to suing — the shareholders had made a demand upon the Las Vegas Sands board.
In the earlier suits, shareholders said that would have been a waste of time, since Adelson controls the board. Earl disagreed and found the shareholders didn’t show Adelson exerted undue influence on the other board members.
But in Friday’s lawsuit, attorneys for Kleinschmidt said that in June 2010, he demanded that the board — on behalf of the company — take action against certain current and former directors and executive officers so the company could recover its damages. That demand was promptly rejected, the lawsuit said.
''Clearly, the board’s failure to properly respond to the demand and conduct a good faith, reasonable investigation is improper and demonstrates the board’s lack of diligence and good faith,'' the lawsuit said.
Kleinschmidt seeks judgment ''in favor of the company for the amount of damages sustained by the company as a result of defendants’ breaches of fiduciary duties'' and other unspecified damages. He is represented in the lawsuit by four law firms accustomed to filing shareholder lawsuits: Aldrich Law Firm Ltd. in Las Vegas; The Weiser Law Firm P.C. in Berwyn, Pa.; Ryan & Maniskas LLP in Wayne, Pa.; and The Shuman Law Firm in Boulder, Colo.
Friday’s suit is on top of two class-action suits filed by shareholders over the same issues and that are pending in federal court.
U.S. District Judge Kent Dawson in Las Vegas refused last year to dismiss those two combined lawsuits, but said in his order keeping them alive that he ''has doubts about the ultimate viability of the allegations.''
The group of lawsuits over the 2008 liquidity issues is separate from a group of shareholder lawsuits related to Las Vegas Sands Corp.’s compliance with the Foreign Corrupt Practices Act — a topic under scrutiny by the Securities and Exchange Commission.
Having overcome its liquidity issues, Las Vegas Sands is now considered to be among the strongest financially in the casino industry thanks to strong results from its Asia casinos.
The company is making so much money — $320.1 million in the fourth quarter — that it announced in February it would pay out a portion of its profits to shareholders in the form of an annual dividend of $1 per share.