Judge: Las Vegas Sands shareholder lawsuit can continue

Las Vegas Sands Corp. shareholders suing over the near-collapse of Sands’ stock price beginning in 2007 won a tactical victory in their suit Wednesday when a judge refused to dismiss most of the complaint.

But Las Vegas Sands, a big casino owner in the United States and Asia, also received a boost when U.S. District Judge Kent Dawson in Las Vegas expressed skepticism about whether the shareholders can ultimately succeed in their suit against the company, Chairman and CEO Sheldon Adelson and former president and board member William Weidner.

At issue are two suits filed in 2010 that have been combined and claim the defendants made false statements about the company’s business and prospects, allegedly inflating the stock price before it fell.

Shareholders ultimately sustained significant losses as the stock price fell from $144 in 2007 to $1.38 per share in early 2009 as Las Vegas Sands worked through a liquidity crunch.

For instance, the suit charges that in 2007 and 2008 the company was "facing a severe liquidity crisis that threatened to bring down the company because it lacked the cash and funding sources that would enable it to continue most of its multi-billion dollar ongoing or planned construction projects in the United States, Singapore and Macau" -- and these facts weren't disclosed to investors.

"Rather than reveal this serious liquidity crisis and inform the market that Las Vegas Sands had to halt most of its Macau and U.S. development projects, defendants publicly represented that everything was fine with the ongoing business plan, that any economic recession was not seriously impacting Las Vegas Sands, that it had the funding needed to continue with the ongoing construction projects, that any future funding was not an issue and that those projects were progressing as planned and would be essentially completed on schedule. Ultimately, defendants were forced to slowly reveal to the public that Las Vegas Sands had been facing a liquidity crisis for many months, that it had run out of money, that it would have to halt most of ongoing construction projects and that it needed an emergency infusion of cash in order to avoid bankruptcy," the suit alleges.

Las Vegas Sands, however, says the global economic turmoil beginning in 2007 was responsible for the share price decline.

The stock price has rebounded to the $43 range as business is booming for the company in Macau and Singapore and it’s on stronger financial ground thanks to an infusion of capital by Adelson and other moves.

The company reported a profit of $367.6 million during the second quarter of 2011 on net revenue of $2.35 billion, a revenue increase of 47 percent from the year-ago quarter.

Dawson, in ruling on dismissal motions in the federal class-action securities lawsuit, wrote in Wednesday’s order: ` While the court has doubts about the ultimate viability of the allegations in the amended complaint, for purposes of this motion to dismiss, the amended complaint sufficiently alleges false statements of material fact, or omissions of material fact that render other statements misleading.’’

Dawson specifically allowed the shareholders to continue their suit charging:

• Adelson and the other defendants had understated by $4 billion some $16 billion in development costs in Macau.

• The defendants made false representations about liquidity, cash flow and funding available to Las Vegas Sands to continue its Macau construction projects.

• The defendants didn’t disclose actual operating conditions in Macau.

• The defendants’ statements and actions caused the shareholder losses.

• The defendants "recklessly or fraudulently made misstatements or omissions.’’

On that point, Dawson wrote: "The court has doubts about whether the (fraud) inferences of the amended complaint will survive a more stringent standard of review.’’

In the one clear-cut victory for Las Vegas Sands in the ruling, Dawson found "forward-looking statements are not actionable’’ under U.S. securities law.

Which statements were forward-looking and which were factual or historical are likely to be further litigated in the case.

Certain statements "are not protected by the safe harbor because their truth or falsity could be determined at the time they were spoken and therefore, they are not forward looking,’’ Dawson’s ruling said.

Dawson’s ruling puts the case on track for discovery and potentially a trial unless it’s settled.

Just as likely, Las Vegas Sands may file motions seeking a ruling in its favor on a summary judgment basis.

Las Vegas Sands does not comment on litigation.

But shareholders’ attorney Spencer Burkholz said Thursday: "We are pleased with the court's ruling upholding the vast majority of our case and look forward to the discovery process and the opportunity to prove our case in court on behalf of purchasers of LVS stock during the relevant time period".

That time period is Aug. 2, 2007, to Nov. 6, 2008, Dawson’s ruling said.

Burkholz is an attorney in San Diego with the law firm Robbins Geller Rudman & Dowd LLP, which specializes in securities litigation.

The federal lawsuits were filed after some Las Vegas Sands shareholders unsuccessfully sued over similar issues in Clark County District Court.

Allan Earl, a judge in the state court, in 2009 ruled the shareholders failed to show mismanagement by Las Vegas Sands board members or that they breached their fiduciary duties.

The case Dawson ruled on Wednesday is separate from five more Las Vegas Sands shareholder lawsuits filed this year in state and federal court in Las Vegas charging the company has exposed itself to investigations and potential penalties involving a federal anti-bribery law.

Those suits relate to charges by fired Sands Macau CEO Steven Jacobs, who says in a lawsuit he was let go in 2010 after he refused to go along with demands that he engage in improper activity.

Las Vegas Sands has denied those allegations and says Jacobs was fired for violating company policy.

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