Class Action Against Sheldon Adelson ExpandedLAS VEGAS (CN) - A federal judge Monday allowed shareholders to expand a class action accusing Las Vegas Sands owner Sheldon Adelson of lying to them and defrauding them.
U.S. District Judge Andrew Gordon granted a motion to expand a class action accusing Las Vegas Sands Corp., owner and CEO Sheldon Adelson and COO William P. Wiedner of lying to investors to prevent a likely bankruptcy during the Great Recession.
Frank J. Fosbre Jr. filed a 122-page amended class action in 2010 accusing the defendants of violating the U.S. Exchange Act by using "devices, schemes, and artifices to defraud," omitting information and making "untrue statements" to commit "fraud and deceit upon purchaser of the company's common stock."
Fosbre originally requested that the class include all people who bought Las Vegas Sands shares from Aug. 2, 2007 through Nov. 5, 2008. He claimed Sands officials, including Adelson and Weidner, "made false and misleading public statements about its development plans, liquidity and equity offerings."
Adelson challenged the class certification, saying it should include only people who actually suffered losses and bought shares from Feb. 4, 2008 through Nov. 6, 2008, because that was when the alleged misrepresentations took place.
Fosbre agreed to limit the class to those who suffered actual losses, and Gordon dismissed the earlier class period of Aug. 2, 2007 through Feb. 3, 2008, due to Fosbre insufficient pleading, but was given leave to amend the complaint.
In the amended complaint, Fosbre claimed he sufficiently argued damages for those who bought shares from Aug. 2, 2007 through Feb. 3, 2008, and filed a motion to expand the class period.
Adelson countered by asking Gordon to decertify the entire class and questioned whether it was possible to calculate damages consistently on a class-wide basis.
Gordon ruled Monday that the U.S. Supreme Court ruling in Comcast Corp. v. Behrend, (133 S. Ct. 1426 (2013)) does not "require a method to determine damages on a class-wide basis as a prerequisite" and that a "long-standing rule" states that individual "damage calculations alone cannot defeat" class certification.
Gordon weighed whether there were "common questions capable of class-wide resolution." Those common questions involve whether Adelson and Las Vegas Sands made material misrepresentations or omitted information that led to class members buying shares in Las Vegas Sands and suffer losses.
The price of a publicly traded stock reflects "all public, material information - including material misstatements" and anyone who buys or sells stock at that price is considered to have relied on that information and misstatements, Gordon wrote.
In arguing for class certification, Fosbre submitted information provided by Steven P. Feinstein, a chartered financial analyst, professor of finance at Babson College, founder and president of Crowninshield Financial Research, and has a Ph.D. in economics from Yale.
Feinstein said Las Vegas Sands stock traded for $85.68 per share at the close of trading on Aug. 1, 2007, and dropped to $7.58 per share on Nov. 6, 2008 - a decline of 90.8 percent.
Las Vegas Sands' market capitalization also dropped by 90.8 percent, from $30.41 billion to $2.79 billion during the same period, Feinstein said.
Although Las Vegas Sands lost a great deal of capital, Fosbre said, Adelson claimed the company did not need to raise funds, though it could have gone bankrupt but for the sale of 200 million new shares of common stock and 10.4 million shares of preferred stock that generated more than $2 billion in capital.
Fosbre also said in the amended complaint that Las Vegas Sands and Adelson "continued to misrepresent the company's ability to fund its projects and the cost of those projects" and by the third quarter of 2008 was violating U.S. loan agreements and would be violating loan agreements for its Macau operations by 2009.
Those projects included development of casinos and other properties in Singapore, Macau and Las Vegas.
When Las Vegas Sands could not get permission from officials in Macau to sell apartments on the Cotai Strip, Fosbre says, Adelson "plotted and schemed to obtain illegal and improper leverage over Macao government officials in an effort to force them to allow the sale."
In light of the misrepresentation claims in the amended complaint, Gordon granted Fosbre's motion to expand the class action to those who bought Las Vegas Sands shares from Aug. 2, 2007 through Nov. 5, 2008. He denied a motion by Las Vegas Sands for oral argument regarding the class certification period.
Officials for Las Vegas Sands were not available for comment Tuesday.