by Chris McGreal in Portland, Oregon, with Lowell Bergman and Zachary Stauffer, The Guardian, 7/22/2015

China feared that casinos in Macau owned by the billionaire gambling magnate and Republican party funder Sheldon Adelson were used by US intelligence agents to entrap and blackmail Chinese officials, according to a “highly confidential” report for the gambling industry.

The report, by a private investigator in 2010, said that Beijing believed US-owned establishments in the former Portuguese colony were working in league with the CIA.

“Many of the (Chinese) officials we contacted were of the view that US intelligence agencies are very active in Macao and that they have penetrated and utilised the US casinos to support their operations,” it said.

The investigation was commissioned by the Macau branch of Adelson’s company, SandsChina, amid concern that the enclave’s government was increasingly hostile to the gambling industry in general and Sands in particular.

The report, dated 25 June 2010 and marked with a warning that it was not to be introduced to mainland China, was uncovered by the Investigative Reporting Program at the University of California, Berkeley. It was among a collection of Sands documents filed with a Las Vegas court which is hearing a civil action by the former head of its Macau casinos, who is suing for wrongful dismissal.

The report, citing well-placed sources in Beijing, said Sands Macau “is the primary subject” of claims by Chinese officials of collusion with the American intelligence services.

In rejecting the claims made in the report, Las Vegas Sands made reference to a legal attempt this month by the Guardian and the Campaign for Accountability to have a Nevada judge hearing Jacobs’ claim unseal a document, which it was said in court may show links between the company’s Macau casinos and organised crime. Adelson has denied any such links. The judge ordered that the document, known as the Vickers report, remained sealed.

“A reliable source has reported that central Chinese government officials firmly believe that Sands has permitted CIA/FBI agents to operate from within its facilities. These agents apparently ‘monitor mainland government officials’ who gamble in the casinos,” the report said.

“This source also reported that several PRC (Peoples Republic of China) government bodies have reported ‘evidence’ of ‘US agents’, operating from Sands, ‘luring’ and entrapping mainland government officials, involved in gaming, to force them to cooperate with US government interests.”

The report does not say that Sands was complicit in US intelligence activity, only that Chinese officials believed it.

The corporate investigator, who is not named in the report, said his information is based on influential sources, including three people in the Beijing office responsible for overseeing Macau and Hong Kong affairs, two Chinese foreign ministry sources and powerful Chinese businessmen with close ties to Beijing.

It is not known if American agents targeted the casinos.

Sands described the report as “a collection of meaningless speculation”.

“As for the document’s narrative that Sands is a front for US intelligence efforts, well that sounds like an idea for a movie script,” said Ron Reese, the company’s senior vice-president for global communications and corporate affairs.

Macau’s hugely profitable gambling industry, with its wealthy high rollers, stream of foreign players and ties to organised crime, has long had an air of international intrigue.

Speculation and rumour that the casinos were fertile ground for spies from the major intelligence agencies seeking to exploit human weaknesses, including China itself, were rife in the former Portuguese colony.

China had grown increasingly disturbed at the scale of gambling by its mainland residents travelling to Macau, particularly government officials, the report said.

“A source of considerable concern is, according to a well-placed Beijing government contact, an internal Central Government agency report that estimates some US$2 billion is annually gambled away by serving Chinese government officials visiting Macao,” the report said.

Beijing had reason to be concerned that gambling fueled corruption because most officials would not have earned the kind of salaries to be able to play the casinos. In addition, it was illegal for mainland Chinese to transfer more than $50,000 a year to Macau to gamble.

A year ago, a government crackdown on corruption in Macau included strict enforcement of a longstanding ban on travel to the gambling haven by public officials and high-spending punters, hitting casino profits.

But in light of the investigators’ report, it appears Beijing had a further source for anxiety: that officials who gambled, and particularly those who lost and ran up debts, would be open to pressure and inducements by foreign intelligence agencies.

The Chinese saw this as part of an effort by the US to influence events in Macau. According to the report, Beijing refused to allow the US to open a consulate in the territory because it regarded it as an American attempt to interfere in local politics.

“There was, within Chinese government circles, a suspicion that the US would become more involved in local Macao politics if it were granted a diplomatic presence in the [region]. According to our other sources, some of the PRC (Peoples Republic of China) officials involved strongly suspected that Sands was behind the US diplomatic initiative,” the report said.

It said US-owned casinos in Macau are viewed in some quarters in China as part of a broader push for American influence and “interference”.

Chinese suspicions of US intentions in the territory were not new. The report said that Beijing balked at American pressure after 9/11 to tighten regulation of Macau banks to combat money laundering, seeing it as “unwarranted intervention” in the enclave’s affairs.

“Chinese officials viewed these requests as being akin to submission to ‘US government inspection’ of Chinese sovereign interests,” it said.

But it was a single event several years later that raised Chinese suspicions about the role of the casinos. The report said Beijing was “shocked” and “stunned” at the detail and accuracy of a 2005 US government report which identified Macau as a key connection in money laundering by North Korea.

The US investigation into banking in Macau is also likely to have included electronic monitoring. But the report’s claims about Chinese official views reflect Beijing’s acute sensitivity to American intervention.

“There is a widely held perception amongst officials that Sands serves the interests of the US government in Macao,” the report concluded.

Sands commissioned the report at a time when Adelson, according to his own court testimony, was deeply concerned about increasing restrictions on the growth of the gambling industry in Macau and difficulties he was running into selling property.

The company wanted the investigator to gather information on Macau’s chief executive, Fernando Chui, his reputation and his attitude toward Sands and the casino industry. It also sought to “identify any weakness which might compromise his ability to function or his loyalty to the [Communist] Party”.

At the time, Sands casinos in Macau were headed by Steven Jacobs, who is now suing the company and Adelson for wrongful dismissal.

Jacobs has alleged in court documents that Adelson demanded he use “improper leverage” against senior government officials in Macau to promote the company’s business interests. He also alleges that the billionaire casino magnate demanded he commission “secret investigations of high ranking Macau officials”. Adelson, in court testimony earlier this year, strongly denied any improper conduct in the running of his Macau casinos.

As it turned out, the private investigator’s report concluded that Chui is a widely respected man who was raised in one of the richest and most politically connected families in Macau. He was also well regarded within the Chinese government and remains the enclave’s chief executive. The report said: “It is most unlikely that any form of scandal or allegation made against him would stick.”

The report – which was discovered by the Investigative Reporting Program among documents produced by Sands as part of the Las Vegas court case against Jacobs – said that the casino industry’s problems were in part the result of a desire by the Macau and mainland Chinese authorities to reduce the enclave’s dependency on gambling. But it also suggested that Sands and Adelson’s particularly fractious relations with the Chinese were in part of their own making.

“Another reliable source reported that historically Sands had made use of a ‘middleman’ to develop PRC government relationships. This Beijing source believes that this middleman had apparently ‘opened the PRC door’ for Sands through the late 1990s. According to this source Sands, however, reportedly failed to pay a previously agreed fee to this individual. Furious with this snub, this middleman began actively lobbying against Sands after 2004,” the report said.

It also said Adelson alienated officials when he made an “assertive and provocative statement” in which he boasted that the expansion of his casino would change Macau’s development and elevate the territory to a new level. The report said Chinese officials interpreted this as an attempt to compete with their authority.

“Mr Adelson’s apparent remarks were subsequently and directly quoted during a number of internal conclaves and meetings. This ‘incident’ is reported to have made him ‘infamous’ amongst some mainland officials and departments,” the report said.

In his legal claim against Adelson, Jacobs described what he called the billionaire’s “erratic behaviour” toward Macau officials who then refused to meet him. He describes the billionaire as having “burned many bridges” with Chinese officials and as having “alienated outsiders”.

In rejecting the claims made in the report, Las Vegas Sands made reference to a legal attempt this month by the Guardian and the Campaign for Accountability to have a Nevada judge hearing Jacobs’ claim unseal a document, which it was said in court may show links between the company’s Macau casinos and organised crime. Adelson has denied any such links. The judge ordered that the document, known as the Vickers report, remained sealed.

“After politically motivated organisations, including the Guardian, made preposterous claims in an effort to obtain the so-called Vickers report, a copy has now been obtained through leak or court error,” said Reese. “Unfortunately for conspiracy theorists, what has emerged, as the company has maintained all along, is a document that Steve Jacobs actually ordered for his own personal purposes and is simply a collection of meaningless speculation. In essence, it is much ado about nothing.”

However, the document the Guardian applied to have unsealed and the June 2010 report into alleged intelligence activity and relations with intelligence officials are not one and the same.

Originally appeared in The Guardian, 7/22/2015
by Chris McGreal in Portland, Oregon, with Lowell Bergman and Zachary Stauffer