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Japanese billionaire Kazuo Okada’s Universal Entertainment Corp. funnelled at least $30-million (U.S.) to an ex-consultant for the Philippines gaming authority who is now at the centre of a bribery investigation, according to sources and company records.ROMEO RANOCO/Reuters

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.

Bribery investigation

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.

Mr. Okada broke ground on construction of the casino in January 2012, but PAGCOR under its new chairman has threatened to strip Universal of its licence if evidence of bribery is found.

Universal said it conducted its business in the Philippines lawfully. Its lawyer, Yuki Arai, declined to comment further.

Mr. Genuino has been charged with misuse of public funds during his time at PAGCOR for allegations unrelated to the Universal payments to Mr. Soriano. He could not be reached for comment.

Ms. Arroyo has been under hospital arrest for charges related to alleged electoral fraud and misuse of public funds during her presidency. Her spokeswoman, Elena Bautista-Horn, did not return calls seeking comment.

Universal has sued three former employees claiming that $15-million transferred to Mr. Soriano – including the $10-million that was immediately returned – was unauthorized.

In early December, Mr. Okada and Universal announced they had filed a libel action against Reuters in Tokyo for reporting on the payments to Mr. Soriano in November.

Up from hardship

Mr. Okada, one of Japan's most successful entrepreneurs, had risen through hardship and trusted his gut when it came to the biggest decisions.

His father died when he was in elementary school, a loss he said helped make him self-reliant. He made his first fortune fixing and selling American jukeboxes in the 1960s. He became a billionaire selling pachinko machines, a Japanese form of legal gambling.

By the late 1990s, the pachinko market had peaked and Universal began to look for ways to diversify.

Mr. Okada met casino impresario Steve Wynn in 2000. The two had to rely on a translator – Mr. Okada speaks little English – but both said they began a strong friendship. On a handshake, Mr. Okada became Mr. Wynn's major investor.

"I got lucky," Mr. Wynn, 70, told Nevada gaming regulators in 2004. "At first I could hardly believe it, but then $250-million came 'zwinging' in."

Mr. Okada staked Mr. Wynn for a total of $380-million. That jump-started construction of the Wynn Las Vegas resort that opened on the site of the old Desert Inn in 2005, and the even more profitable Wynn Macau in 2006. By 2010, Mr. Okada's investment had increased in value almost eight times and returned just over $600-million in dividends.

Macau in particular has produced stunning results. By 2011, the Macau market was bringing in almost $34-billion a year, making it more than five times larger than Las Vegas.

When Mr. Genuino visited Tokyo in 2007 to drum up interest in a $15-billion resort and casino complex PAGCOR wanted to develop, Mr. Okada jumped at the chance to invest, people involved said.

A year later, on the cusp of global recession, Universal paid just over $300-million for 30 hectares on Manila Bay. In August 2008, PAGCOR granted a provisional licence to its casino operating company, Tiger Resorts, Leisure and Entertainment.

But Mr. Okada later realized the initial licence fell short of what the company had sought, records show. Universal did not want to have to hire employees, including dealers, through PAGCOR and pay fees to the regulator as a placement service, according to letters sent from Universal to PAGCOR.

Universal also pressed PAGCOR to allow high-rollers coming on trips organized by junket operators to come into the casino without reporting their names to the regulator. Junket operators combine concierge and credit services for rich Chinese and have been central to the growth of gambling in Macau.

By early 2012, Mr. Wynn and Mr. Okada had split and begun a legal fight over Mr. Okada's continued investment in Mr. Wynn's company that is playing out in courthouses in the United States, Japan and the Philippines.

A Wynn investigation found Universal had paid $110,000 to entertain gaming regulators from Korea and the Philippines. The Wynn camp alleges that showed Mr. Okada was an unfit partner. Mr. Okada has said Universal entertains officials in line with its internal policy and denies any wrongdoing. The guest list included Mr. Soriano, Mr. Genuino and Mike Arroyo, the husband of then-President Gloria Arroyo.

Mr. Wynn told Okada and other directors in 2011 that he did not think it would be possible to operate in the Philippines, consistently ranked as one of the most corrupt economies in Asia, according to a legal claim filed by Universal in Nevada.

"All of us are of one mind," Mr. Wynn told Reuters. "We cannot be related to activities in the Philippines."

Las Vegas in Manila

When Mr. Okada and the Universal board approved the Manila project in August 2008, they projected it would be a cornerstone of a string of resorts around the rapidly growing Asian market. They expected Universal would become a $9-billion company by 2014 with a listing on the Hong Kong stock exchange, according to notes from the board meeting.

Casino gambling revenues in the Asia-Pacific region have more than tripled since 2007, according to PricewaterhouseCoopers. The region is set to overtake the U.S. market as largest in the world next year when gambling revenues reach $67-billion from $58-billion in 2012.

Universal's first designs were based on the Wynn casinos, featuring two wings in reflective gold glass. Plans included $150-million to build one of Asia's largest aquariums and a "Kidzania" playland, with another $70-million for the "Manila Eye," a massive Ferris Wheel.

But Mr. Okada's plans for a "six-star" resort were immediately tested by a litany of problems. Engineers discovered 10 hectares of its site was reserved for road use and held by another developer, making building impossible.

After months of delays, Universal called in Mr. Genuino to negotiate a land swap between Universal, the local city of Paranaque and developer Asiaworld Properties Philippine Corporation.

Around that time, Universal also rebuilt its legal strategy around Mr. Soriano in what was described in an internal memo as a "shift to Boysie."

That meant reworking a structure that allowed it to circumvent the requirement that the landholding company behind the casino be at least 60-per-cent owned by Filipinos.

Records reviewed by Reuters show Universal had bankrolled the original investment meant to satisfy that foreign ownership requirement. This was done by depositing $4.4-million in a Banco De Oro account in 2008. That money secured a loan to a firm called Lex Development Corp., a shell company established by SyCip. Lex used the money to make its investment in the project. Universal covered interest on the loan, records show.

The holding was transferred in 2009 to Platinum Gaming and Entertainment, a Soriano-affiliated firm, records show.

Okada in charge

Mr. Okada remained in charge of key decisions involving Universal and the Manila project, current and former employees said. A transition began that put greater focus on a quicker return from a downsized project. Plans for the Ferris Wheel and other attractions that had promised to turn the casino into a tourist magnet were dropped or scaled back, people involved said.

The $40-million in payments from Universal began moving to Mr. Soriano on Jan. 14, 2010 with an initial instalment of $10-million transferred to the bank account of Subic Leisure and Management, a Soriano-controlled company registered in the British Virgin Islands. Another $15-million was transferred to Subic Leisure on March 3, 2010, internal records show.

Then in late April and early May 2010 Universal recycled another $10-million payment through the same Subic Leisure route.

The final $5-million was paid to a Hong Kong shell company of which Mr. Soriano was the sole shareholder.

Universal has filed two lawsuits against three former employees claiming the final $5-million and the $10-million that came back to Universal were not authorized. In rebuttals to the Universal lawsuits, two former executives said they had been following orders in making the payments.

In comes Aquino

At the end of June 2010, Mr. Genuino stepped down after a controversy erupted over his "midnight" reappointment by Ms. Arroyo. The election of President Benigno Aquino the month before posed potential complications for Universal.

Mr. Okada went to Manila to meet the new PAGCOR chief, Christino Naguiat, in August 2010. A month later, he hosted Mr. Naguiat at the Wynn Macau casino and covered $50,523 of expenses during a four-day stay. Mr. Naguiat has said there was nothing inappropriate about his stay.

Mr. Okada's ambition to build casinos around Asia hinges in part on how the investigation of the Manila payments is resolved. The payments to Mr. Soriano are the subject of a Philippine Department of Justice investigation and two separate congressional hearings in the Philippines.

The Nevada Gaming Control Board said last month its investigation was progressing. Possible sanctions include a suspension of Universal's gaming licence.

Earlier this month, Universal signed a deal giving Philippine property firm Robinsons Land Corp. a minority stake in its casino operating company and a majority stake in its Manila landholding company.

The Manila project – now known as Manila Bay Resorts after initially being dubbed "Okada Resort Manila Bay" – is scheduled to open in 2014, four years behind initial projections.

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