BY IAN MYLCHREEST -- PricewaterhouseCoopers has quit as auditors for Las Vegas Sands, and the resignation has a drawn the curiosity of a number of gaming and business reporters.
There are just a handful of auditing companies big enough to handle Las Vegas Sands and it’s rare for a company like PricewaterhouseCoopers to resign, especially from multinational corporations like Sands. Even more surprising: Sands CEO Sheldon Adelson had been a client for 25 years.
While experts can only speculate here, that hasn’t prevented some notable luminaries from throwing out theories. JP Morgan gaming analyst Joe Greff told the Review-Journal he thinks the move is the result of infighting within two parts of PricewaterhouseCoopers—the part of the company that conducts audits and the part that consults with gaming companies. And the gamers won out, Greff says, because they can get much bigger fees.
The Sarbanes-Oxley reforms (remember those?) were designed to eliminate conflicts of interest at big accounting firms that perform annual audits. Back when Enron collapsed at the end of the dot com boom, the company’s accounting firm, Arthur Andersen, took a lot of heat because it had such a cozy relationship with Enron’s senior management. So if PricewaterhouseCoopers wants big fees for its casino consultants, it will have to skip the audit work.
A more interesting reading of the Sands/PricewaterhouseCoopers split comes from Forbes’ accounting columnist Francine McKenna. She cites an anonymous source in the Wall Street Journal who claims
[T]he legal and regulatory scrutiny of Sands was the overriding issue.
That’s a reference to scrutiny from U.S. Department of Justice, which has been investigating whether Sands breached the Foreign Corrupt Practices Act when it was courting Macau officials to expand its casino business. (FCPA was passed in the 1970s to outlaw companies paying bribes to foreign officials to get business.) PricewaterhouseCoopers, says McKenna, usually recommends playing nice with these investigations but Sands is aggressively defending itself. It did have to admit in an SEC filing, though, that
… the Audit Committee advised the Company and its independent accountants that it had reached certain preliminary findings, including that there were likely violations of the books and records and internal controls provisions of the FCPA …
McKenna suggests that now might me a good time for Sands to hire a Chinese firm as its principal auditor. That would put some serious roadblocks in the way of the SEC and Justice Department because China does not allow local accounting firms to co-operate with foreign investigators.
The American subsidiary would audit Sands’ U.S. operations and send the report to the principal auditors in Hong Kong. That would be another step closer to basing the company in China and, corporately at least, leaving Las Vegas.