By Michael Penn
Akihabara News (Tokyo) — The Nagasaki Prefectural Government is facing a remarkable set of accusations over how it conducted its Request for Proposal (RFP) selection process to build an Integrated Resort (IR) including a casino at the Huis Ten Bosch theme park.
The first public rumblings emerged on August 6 when Oshidori International Development fired off a strongly worded press release to some media outlets claiming that “the restrictive and unreasonable rules imposed by Nagasaki Prefecture make it impossible for Oshidori to conduct business in a prudent and efficient manner.” It added, “Oshidori has encountered several incidents that make it question whether there have been serious ethical irregularities in the RFP process, and it is only interested in participating in a process that has the highest integrity, and that is professional, transparent, and based on merit.”
While the title of the press release was “Oshidori International Development withdraws from participation in the RFP process for Nagasaki IR,” the firm has not, in fact, left the Nagasaki IR race.
Several days later, Casinos Austria International was granted the priority rights to negotiate a basic agreement with the prefecture. According to the information released by the authorities, Casinos Austria’s bid scored 697 points under its evaluation system, trailed by Oshidori with 683 points and the Niki Chyau Fwu (Parkview) Group with 667 points.
In response to questions posed to it by Akihabara News, however, Oshidori has now stepped up its accusations against the Nagasaki Prefectural Government. It has three basic complaints.
First, the company states that it received requests from the prefecture beginning in May to halt all public marketing activities.
For a while, Oshidori had been the most active operator consortium in the local public sphere, forming an official partnership agreement with V-Varen Nagasaki, a Japanese J2 League football club, in February, and also setting up the Kyushu Oshidori Children’s Foundation to highlight its potential social contributions. The firm says that the prefecture wanted such efforts to win over the local public to immediately end.
Oshidori comments, “There is no basis in Japanese law or in the RFP rules for denying such marketing activities. Clearly, the prefecture didn’t want anyone to have a competitive advantage over Casinos Austria.”
Its second charge is that, “using the pretext of a fabricated background investigation, the prefecture requested that we withdraw before the presentation in front of the judges.”
Again, Oshidori believes that the process was fixed, stating, “clearly the prefecture didn’t want the judges to see our presentation. Could it be because they knew that both our proposed design and our experience are significantly superior to that of Casinos Austria, and the decision was already made to select Casinos Austria before any of the presentations were seen by the judges?”
Its third charge is even more explosive.
Many journalists who cover Japan’s IR race, including the author of this article, have been receiving “tips” by email inviting us to investigate alleged ethical problems about Oshidori’s bid. In our case, the first tip arrived on July 7 and the most recent on August 2, all of them from different sources.
The first set of accusations were aimed directly at Alex Yemenidjian, the CEO of Oshidori, inviting publication of reports on his links to the (perfectly legal) marijuana business in Nevada.
The latter emails, unlike the first set, appeared to be written by an anonymous Japanese person, with the simple message, “This is who wants to operate IR in Japan!”
Attached to the email were an extremely complex flowchart and some Hong Kong legal documents. There did not seem to be any specific and central accusation, but the general implication was that various people involved with the company have been involved in various legal actions and have been accused of misconduct in the past.
When we asked them about this matter, Oshidori’s response was unequivocal: “We know for a fact that the prefecture was behind the smear campaign, all designed to weaken the Oshidori proposal and organization in favor of Casinos Austria.”
While it might be possible to view Oshidori’s red hot accusations against the prefectural government in the light of its disappointment about losing out on a multi-billion dollar business opportunity, the fact is that similarly dramatic accusations are also flowing from the consortium that the prefecture has ranked in third place, the Niki Chyau Fwu consortium.
In response to our inquiries, a high-level source within the Niki Chyau Fwu consortium told us point blank, “We were threatened… They were saying that if you do not withdraw, we will disclose the integrity report.”
This consortium of Taiwanese and Japanese firms was the last to enter the Nagasaki IR race, announcing their bid only in January of this year. However, it has only now become understood that one of the world’s largest casino operators was hiding within this consortium—Melco Resorts & Entertainment.
While declining to specifically name Melco in our interview, our consortium source stated, “Our casino operator is a Tier One operator, so it has a great amount of experience all over the world.”
According to their account, the Niki Chyau Fwu consortium, and especially the Melco leadership, has been stunned and mystified by the prefecture’s behavior.
Melco had only been persuaded to complete in the Nagasaki process because of personal appeals to do so from Nagasaki Vice-Governor Ken Hirata, and at first the situation appeared to be a happy one.
But, our source continues, “because of the very bad treatment by Nagasaki Prefecture, [Melco] was so shocked. The attitude of Nagasaki Prefecture really damaged their pride… They felt like, ‘What the hell?’ you know. ‘We have to be treated like this? How can we cooperate with this kind of prefecture?’ They were so upset.”
The Niki Chyau Fwu consortium is still scratching its head trying to figure out why, after the vice-governor himself had practically begged them to enter the Nagasaki RFP process, the official attitudes then changed so radically.
“We feel that something is happening behind [the scenes],” the source continues. “Is the Nagasaki government corrupted? We really do not know.”
However, the Niki Chyau Fwu consortium did conduct its own deep research on its business rivals, and it suspects that high-level political intervention is at the root of the matter. Its internal research even hints at possible Japanese organized crime links to a senior executive at Casinos Austria.
Casinos Austria did briefly respond to our inquiries about the selection controversy, but only to say that since they now possess the priority rights to negotiate with the prefecture, they will make no public statements at this juncture—though they might be more open to talk after the basic agreement has been negotiated and signed.
The Integrated Resort Promotion Division of the Nagasaki Prefectural Government also provided some answers to Akihabara News inquiries.
It categorically rejected one of the key accusations being leveled against them: “The prefecture did not ask any of the applicants to withdraw their applications during the RFP procedure.”
It added that “all of the participants were surveyed according to the same rigorous standards.” Each consortium was scored based on five broad categories: the attractiveness of their concepts; their facility development plans; their past financial and operational results; countermeasures to deal with items of concern; and expected returns to the region.
Casinos Austria was “highly evaluated for its efforts to address concerns,” and it was primarily on this basis that it outperformed its two rival consortiums.
There seems to be no dispute between the prefectural authorities and its accusers on one key fact—it was mainly on the basis of the integrity surveys that Casinos Austria was given the top ranking (although Oshidori and the Niki Chyau Fwu group fiercely contend that the integrity surveys were conducted in an unfair manner).
Where the matter stands at present is that Casinos Austria is the priority rights holder for negotiations with the prefecture, and there is no current indication from the officials that they plan to alter their course. As it told Akihabara News, “In the future, we will give necessary explanations to the Diet and to the government regarding the integrity of the preferential negotiation rights holder.”
For their part, both Oshidori and the Niki Chyau Fwu group say that they haven’t given up the fight.
In Oshidori’s words, “we have tried to discuss these issues with Nagasaki Prefecture, but they have not been able to listen to us. For the time being, we have already made a request for information disclosure to the Nagasaki Prefectural Government.”
Our source within the Niki Chyau Fwu consortium states that their group has sent a letter to the Nagasaki Prefectural Government requesting that the selection process be conducted a second time.
“We would like to be treated properly and fairly and transparently. It was really terrible the way that they treated our very important casino operator when we had a discussion with the IR section.”
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