Exclusive: Japan exchange probes accounting of Universal's Philippine payments - sources

Mon Feb 4, 2013 4:23pm EST
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By Nathan Layne

TOKYO (Reuters) - The Osaka Securities Exchange is investigating how Universal Entertainment Corp 6425.OS accounted for millions of dollars paid in 2010 to advance the Japanese firm's casino project on Manila Bay, people with direct knowledge of the inquiry said.

The exchange's involvement is the first time the payments have drawn the attention of Japanese regulators. The FBI and Philippine authorities have been investigating $40 million in payments to a politically-connected consultant in Manila since last year.

The exchange, which oversees Universal's Jasdaq stock listing, has asked the company to explain how the payments were treated in Universal's financial statements for the fiscal year to March 2010, said people with knowledge of the request, who didn't want to be named as the investigation is ongoing.

Universal has said it carried out its business in the Philippines lawfully. The company, which also makes pachinko machines, announced in December it filed a defamation lawsuit against Reuters for reporting on its payments to Rodolfo Soriano, a former consultant to the gaming regulator in the Philippines. Universal declined to answer specific questions about its accounting.

In a statement last month, Universal said there was a "need to verify the suitability of accounting procedures", and it would revise its accounting if directed to do so by a panel of three outside experts it has commissioned to look into the payments.

One of the issues examined by the Osaka exchange involves a $10 million payment that was wired to Soriano from a Universal affiliate in Hong Kong and immediately circulated back to Universal by a former employee in May 2010, as the company was preparing to release its financial statements that June, said the people with knowledge of the investigation.

The exchange is focused on whether Universal improperly booked part of the payment as an asset on its balance sheet, inflating its profits, the people said.

A spokesman for the Japan Exchange Group, the OSE's holding company, said it did not comment on any investigation underway at a specific company. Soriano could not be reached for comment.   Continued...

The headquarters of Universal Entertainment Corp is pictured in Tokyo November 30, 2012. REUTERS/Toru Hanai