The FBI and Philippine investigators probing potential bribery related to Universal Entertainment Corp's bid to build a casino in Manila have zeroed in on a $25 million payment the Japanese company now says should never have been made.
Rodolfo Soriano, a consultant with ties to the former head of the gaming regulator in the Philippines, received the fee in 2010 to secure land rights for the $2 billion casino, Universal had said. But records reviewed by Reuters show those rights were obtained for free in 2009.
The FBI is involved because the payment originated from a Universal subsidiary based in Nevada. Both the FBI and the Philippine National Bureau of Investigation (NBI) have been looking into a total of $40 million in transfers to Soriano as a possible bribery case since last year.
In a closed-door, three-day hearing with the Nevada Gaming Control Board that concluded on Friday, Universal directors, including the company's billionaire founder Kazuo Okada, were questioned about the payment, a source familiar with those proceedings said.
In a statement issued to Reuters as that hearing ended, Universal said it now believed the $25 million payment to Soriano should not have been made.
Universal said its board had not been aware that the land rights problem had been resolved without any money changing hands between Universal and the owner of those rights in late 2009.
It blamed three former employees for the mistaken payment and said one of them had withheld information from the board that could have prevented the transfer.
Universal sued the three Japanese men last year, claiming they were to blame for $15 million in payments to Soriano without proper authorization. It offered no evidence to support its additional claim they were also responsible for the $25 million it has now disavowed and said its investigation into the matter was still ongoing.
The three former employees declined to comment. They have challenged the company's previous claims in filings to the Tokyo District Court.
Soriano could not be reached for comment and his whereabouts are unknown.
Universal generates the bulk of its profits from pachinko machines - a cross between slots and pinball -- in Japan. The Philippines marks its first independent foray into casino operations and is a key plank of its push to expand overseas.
It has said it conducted its business in the Philippines lawfully, and in December announced a defamation suit against Reuters for its reporting on the payments to Soriano.
Universal said it was still investigating how the $25 million payment to Soriano was used.
"We have no information at this time that this money was used to pay any government officials," the company said in a written statement to Reuters.
When Universal paid $300 million for reclaimed land for its Manila Bay casino project in 2008 it failed to secure the rights to develop more than a dozen "road lots", representing about a quarter of the site of a luxury complex it hopes to open in 2014. The titles to the lots were held by local developer Asiaworld Properties Philippine Corp, records show.
Universal turned to the Philippine Amusement and Gaming Corporation (PAGCOR), the industry regulator, to find a solution to the road problem, according to the people with knowledge of the matter. PAGCOR declined to comment on its involvement.
A PAGCOR lawyer assigned to the case helped broker an agreement in November 2009 under which Asiaworld gave Eagle I Landholdings Inc, a Universal affiliate, a free hand to consolidate and develop the road lots as it saw fit.
Eagle I agreed to bear the cost of building an equivalent area of roads and open space, after which it would turn the land over to Paranaque City, the local municipality. The move relieved Asiaworld of its legal duty to develop the lots and donate them to Paranaque.
There was no financial transaction written into the agreement, a certified copy obtained by Reuters shows.
Paranaque Mayor Florencio Bernabe told Reuters that FBI agents visited him in January to ask about the agreement, which he signed, and related documents.
Asiaworld did not have the funds to develop the roads and was happy to authorize Eagle I to shoulder that cost, a lawyer for the developer said. "For us it was a welcome development," said Arcel Fetizanan, noting the move also eliminated its tax liabilities. "It was a simple agreement. No cash involved."
The FBI declined to comment on the existence of a probe into the Soriano payments, citing its media policy. Philippine Justice Secretary Leila de Lima said an investigation by the NBI into the transfers to Soriano had been extended, but did not comment on specifics of the case.
Universal initially accounted for $35 million paid to Soriano with an invoice and a corresponding contract indicating his firm be paid $28 million for solving the road problem and $7 million as a consultant fee, copies of the documents seen by Reuters show.
Last month, Universal determined that $10 million was improperly routed through Soriano and back to the company, and revised its accounting for the payments. At the time it stood by the $25 million outlay as an investment in its Philippine project.
A panel of experts hired by Universal to look into the payments determined the $25 million had been properly authorized but it has yet to pass judgment on whether the consulting fee was justified based on the services provided by Soriano.
Universal's acknowledgement that the $25 million was unnecessary raises the prospect of another accounting revision. The Osaka Securities Exchange, which oversees its stock listing, had given Universal until Monday to present evidence justifying the payment, people familiar with the exchange's probe said.
(Additional reporting by Rosemarie Francisco in Manila, and Taro Fuse and Kevin Krolicki in Tokyo; Editing by Ian Geoghegan and Dean Yates)