Genuino 'bagman' got $5M for casino project.
According to an exclusive Reuters report, US gaming regulators are investigating millions of dollars paid by affiliates of Japanese billionaire Kazuo Okada's Universal Entertainment Corp. to Soriano around the time Okada's company was lobbying to win concessions for a $2-billion casino on Manila Bay.
A Universal subsidiary made a $5-million payment in May 2010 to Soriano, according to a Reuters examination of bank records, corporate filings, court documents and records prepared by Universal's staff.
The $5-million payment was made via a shell company in Hong Kong and was part of the $40 million in transfers made by Universal's US affiliate Aruze USA. The fund transfers are now a focus for US investigators.
The document trail connecting Soriano to the $5-million payment has not been previously reported. Soriano allegedly served as Genuino's bagman, according to an investigation report.
Reacting to the Reuters report, Pagcor legal counsel Jay Santiago said the new revelation "will help Pagcor further strengthen the plunder case filed against Genuino and his associates, including Soriano."
"We will refer this matter to Justice Secretary Leila de Lima and to the National Bureau of Investigation, and wait for their recommendations," Santiago added.
It's not clear, however, whether the 70-year-old Okada, ranked 18th among Japan's wealthiest by Forbes, personally approved the payments.
Universal, more than 66-percent of which is controlled by Okada and his son through Okada Holdings LLC, has filed a suit against three former employees, saying they acted without proper authorization in channeling $5 million 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 (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 US law--by paying some $110,000 in entertainment and other expenses for gaming regulators from the Philippines and South Korea.
The investigation of the much larger payments by Okada's company threatens to complicate Universal's attempt to get a US federal court to reverse Wynn's decision to redeem Okada's Wynn Resorts shares at a discount.
The probe 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.
"I don't have any illusions that it is going to be stopped, but there has to be accountability," said Bayan Muna Rep. Teddy Casino, who has urged the Philippine government to suspend the Universal project.
Universal referred questions to Yuki Arai, the lawyer who is representing the company in lawsuits against former employees. Arai's 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 there. She declined to say how Soriano could be reached. An attempt to reach Soriano at a Manila business operated by the family of his wife was also unsuccessful.
The Nevada Gaming Control Board has been looking into payments by Okada-controlled companies to Soriano, a consultant to Pagcor, which regulates gambling in the Philippines, according to 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, according to the source who asked not to be named as the process is going on. The source added 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 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 Federal Bureau of Investigation (FBI), according to people with knowledge of those talks. Any FBI investigation would be for a potential criminal case, separate from the regulatory probe. A spokesperson 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 Future Fortune'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 the $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 the Philippine President Gloria Macapagal-Arroyo.
Universal also sought to resolve road use issues that risked complicating its casino development, according to people involved in the project.
The remaining $35 million was paid in January-May 2010 to a firm called Subic Leisure and Management, according to records. 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 that Philippine investors own 60 percent of the venture, according to three former employees involved in the project.
Universal, which has a market value of around $1.7 billion, announced it won those concessions in April 2010, a few months before Arroyo left office. "The incumbent Pagcor management has no knowledge about the said transfer of funds," Pagcor said in an e-mailed response to questions from Reuters for this article.
Soriano, a confidante of then Pagcor chair Genuino, frequently visited Universal offices in Tokyo and hosted Okada on his visits to Manila, according to former associates.
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, according to people who worked with him.
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," Camacho said.
According to a Freeh investigation report posted on the website of the US Securities and Exchange Commission, Camacho also tagged Soriano as a "bagman" of Genuino.
Camacho, who also spoke to investigators, claims money he was paid by Universal was diverted by his former law partner, Genuino's son, Erwin, and sent as a payoff 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 has also argued 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 whom 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, the entertainment company claims Mitsuo Hida, 65, then president of Aruze USA's Japan branch, made an unauthorized 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 e-mail from a member of Universal's compliance unit shows the company staff sought guidance on how to account for the $40 million paid to Future Fortune in mid-2010.
Both Soriano, Genuino and 16 other former officials of Pagcor are facing plunder charges for alleged malversation of public funds and goods amounting to more than P100 million.
Among the charges listed by the Department of Justice were allegedly illegal cash advances amounting to P44 million that Pagcor donated to the Batas Iwas Droga Foundation where Genuino served as a board member.
Both Soriano and Genuino were also guests at Wynn resorts with their expenses paid for by Universal when Okada was a major Wynn shareholder and Genuino was Pagcor chair. The Freeh report first disclosed those payments.
Universal has acknowledged both men, and other officials from the Philippines and South Korea, were guests sponsored by the company. Universal has maintained the free lodging and expense payments did not violate the Foreign Corrupt Practices Act, a US law against paying bribes. For his part, Okada said that the arrangements were made by employees no longer with the company, and that 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 prompted the forcible redemption of Okada's 20-percent stake in Wynn Resorts for $1.9 billion, a 30-percent discount to the market value. Wynn Resorts, however, 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 traveled with Efraim Genuino to Wynn Macau where Universal covered their expenses of $2,974.70, including $25 for Soriano to watch a movie. Genuino resigned as Pagcor chair in June 2010 while Soriano quit as Pagcor consultant a day later. President Aquino then remarked that Genuino's resignation meant "one less problem for me."