Japanese billionaire Kazuo Okada was facing a crisis: Work on his dream casino by the bay in Manila was going nowhere.
Instead of a world-class resort packed with Chinese high-rollers, Mr. Okada, 70, was sitting on a $300-million patchwork of reclaimed and undeveloped land next to the Manila airport that by the middle of 2009 was threatening to become a money pit, according to company records and people involved.
Crucial regulatory approvals were tied up in red tape. The provisional gaming licence was flawed. No one could tell the architect how high he could build the gold-toned towers without endangering incoming aircraft.
To realize Mr. Okada’s goal of making the Manila casino more profitable than rival operations in Macau or Las Vegas, the project needed to win an exemption from corporate taxes in the Philippines. It also needed a presidential order giving Mr. Okada’s company, Universal Entertainment Corp., the ability to own the resort outright as a foreign investor.
Universal executives believed Philippine officials had promised those concessions by the end of 2008 for a project expected to create more than 6,000 jobs. The Philippine gaming authority had given Mr. Okada a side letter to Universal’s provisional licence in August 2008 saying it would make its “best effort” to get those approvals from then-Philippines President Gloria Arroyo.
It would mean hundreds of millions of dollars in additional profit each year if the approvals came through, according to an analysis of Universal’s presentations to regulators and investors.
By June 2009, however, the project was more than six months behind schedule and Mr. Okada’s patience was wearing thin. When Ms. Arroyo came to visit Tokyo, Mr. Okada saw her in a meeting arranged by the head of Philippine gaming regulator, Efraim Genuino.
“Get clarity on how long it will take to solve these problems on the spot and extract a promise,” a note prepared for Mr. Okada in Japanese by Universal executives said.
Reuters examined hundreds of pages of documents from Universal and Philippine regulators and interviewed nearly two dozen people involved in the project in Japan and the Philippines in reconstructing how Universal tried to push through its casino deal in the Philippines in the final months of the Arroyo administration. That deal is now the subject of investigations there and in the United States.
The record shows Universal won concessions on three critical issues that had threatened the $2-billion project in late 2009 and early 2010.
First, the Philippine Amusement and Gaming Corporation (PAGCOR), the gaming regulator under Mr. Genuino, brokered a land swap in November 2009 that Universal needed to move ahead with construction.
Then in February 2010, Ms. Arroyo signed a presidential order making it possible for foreign investors such as Mr. Okada to have 100-per-cent ownership of casinos. Around the same time, Ms. Arroyo’s office approved an application for corporate tax relief from Universal’s land-holding company. Both measures were expected but the delays had frustrated Universal executives, records show.
Universal pushed hard to get its final gaming licence from Mr. Genuino – right up until June 29, 2010, a day before he left his post – but failed to get it.
As it raced to win final approval for its casino, Universal also funnelled a total of $40-million in payments to Rodolfo Soriano, an aide to Mr. Genuino and a former consultant to PAGCOR who had become central to Universal’s operations in the Philippines by late 2009.
Of the total $40-million in transfers to Mr. Soriano, $10-million was immediately returned to the Japanese company in May 2010 to avoid writing off a bad loan extended to another company not involved in the casino project, as Universal closed the books on its fiscal year, records show.
The payments to Mr. Soriano, now under investigation as potential bribery, were first reported by Reuters.
It is unclear what happened with the $30-million paid to Mr. Soriano that remained with him. Mr. Soriano, who came to be known to Universal executives by his nickname “Boysie,” has not commented on the payments and could not be reached. There is no evidence the money was transferred to officials in the Ms. Arroyo administration or to others.
Universal booked $7-million of the payments to Mr. Soriano as a “consulting fee,” citing his help in winning the order signed by Ms. Arroyo allowing foreign casino ownership as partial justification for the payment, according to company documents seen by Reuters.