LAS VEGAS (CN) - A federal judge ordered Sheldon Adelson to produce financial records on his ownership of Las Vegas Sands shares in 2007 and 2008 for a securities class action that accuses him of lying to investors.
Lead plaintiff Frank J. Fosbre Jr. "set forth a plausible claim that Mr. Adelson refused to approve a public equity offering with respect to Las Vegas Sands in 2007 and 2008, when it was being recommended by Las Vegas Sands' other executive officers and financial advisors, because Mr. Adelson wanted to protect his majority ownership interest in the company," U.S. Magistrate Judge George Foley Jr. wrote in his Jan. 5 order.
"This claim is sufficient to place Mr. Adelson's financial condition during the 'class period' in issue for purposes of discovery."
Foley granted Fosbre's motion to compel Adelson and his family to provide financial documents concerning the purchase or ownership of equity in Las Vegas Sands, their ownership of convertible senior notes, the sale of company stock to them, and the ability, capacity, potential or possibility that Adelson or his family would financially support Las Vegas Sands, including their communications on such matters with outside parties.
Foley also ordered Adelson's "special assistant to the chairman" Yasmin Lukaz to produce relevant documents from the class period.
Fosbre said he is "not seeking tax returns, but balance sheet-type information that would show if Adelson had the ability to liquify his assets to contribute to a convertible debt offering during the time (spring/summer/fall of 2008) that he that he continued to refuse to approve its issuance." (Parentheses in order.)
Adelson opposed the request, saying the documents are irrelevant and the request is overly broad, would not lead to discovery of admissible evidence, and violates attorney-client privilege, work product doctrine, and other protections.
Fosbre claims that in 2008 Adelson owned more than half of Las Vegas Sands' stock and knew the Sands was running out of money and would have to stop several important construction projects, but he refused to do an equity offering because it would force him to contribute more of his own money to maintain his majority ownership.
Instead of selling more shares to raise capital in 2008, Fosbre says, Adelson lied to investors, telling them the company had the liquidity necessary to continue as planned.
Several months after claiming Las Vegas Sands had sufficient capital, Fosbre says, Adelson had to admit the company "had been facing a severe liquidity crisis for many months, had run out of money, would have to halt most of its ongoing construction projects and needed an emergency infusion of cash to avoid bankruptcy."
Fosbre says Las Vegas Sands had to stop work on its Las Vegas and Macau projects, and Adelson loaned $475 million to the company to keep it afloat, with an option to accept repayment in the form of Las Vegas Sands shares regardless of the share price, which had dropped when the company's financial condition became known.
Adelson later converted his $475 million loan into than 87 million shares of Las Vegas Sands stock at $5.50 a share, Foley said.
"As a result of this two-step financial engineering, Adelson was able to retain his controlling interest in Las Vegas Sands, even after the huge public equity offering that Adelson had previously told investors Las Vegas Sands did not need," Fosbre claimed.
Adelson said Fosbre's claims "are based on a distorted portrayal of evidence" and that he acted responsibly during a global financial crisis by providing the $475 million that kept the company afloat and had been reviewed independently and determined to be fair.
Fosbre filed the 122-page amended class action in 2010. Last June, U.S. District Judge Andrew Gordon granted Fosbre's motion expanding the class to all people who bought Las Vegas Sands shares from Aug. 2, 2007 through Nov. 5, 2008, when the share price plummeted by more than 90 percent.
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