SAN FRANCISCO/MACAU, China (Reuters) – It’s never good for the candidate when a big donor runs afoul of the law – as President Barack Obama learned this week: his campaign returned large donations from Chicago’s Cardona brothers after it was reported that a third brother is a fugitive from U.S. drug and fraud charges.

Some Republican candidates for president could find themselves similarly embarrassed if criminal investigations against casino mogul Sheldon Adelson’s Las Vegas Sands for violating the Foreign Corrupt Practices Act come to fruition before November.

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Probes by the Department of Justice and the Securities and Exchange Commissionfocus on the casino company’s operations in Macau, the world’s biggest gambling hub, court documents show. A former executive in Adelson’s empire, whose allegations are believed to be central to the probe, cites potential illegal dealings with a public official, as well as a tie to an organized crime figure.

Adelson and his wife single-handedly propped up Newt Gingrich’s campaign with $10 million Super PAC donations in January, and Adelson recently signaled he would write big checks to Mitt Romney, too, if he wins the nomination.

As he’s seized the role of kingmaker, press accounts of the normally reclusive Adelson have focused on his politics: He is a passionate supporter of Israel, his wife is Israeli, and he recently said his teenage son might return to the country to become a sniper in the Israel Defense Forces.

Far less notice has been paid to the fact that his company is the target of both a federal criminal investigation and a civil lawsuit by the former chief of China operations of Las Vegas Sands. He alleges improprieties at the global casino enterprise that has made Adelson, with about $22 billion, the world’s 16th richest man.

Steve Jacobs, the fired former head of Sands’ Macau operations, Sands China, filed a lawsuit in Nevada in 2010 for breach of contract, and is now working with the U.S. government on its corruption investigations. In a December 27 filing in the case, Jacob’s attorney said Jacobs was protected under whistleblower statutes for participating in SEC and DOJ criminal investigations into Sands.

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“The United States Government has two ongoing investigations against LVSC and Jacobs is entitled to certain protections as a person cooperating in those investigations,” the filing says.

“It is no secret that the United States Securities and Exchange Commission (‘SEC’) and the United States Department of Justice (‘DOJ’) are investigating Las Vegas Sands (and its various subsidiaries, including Sands China) related to alleged violations of the Foreign Corrupt Practices Act,” it adds.

The SEC and the Justice Department declined to comment.

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Sands China is now a separately traded company in which Las Vegas Sands has the majority stake. Adelson is chairman and chief executive of Las Vegas Sands and he and his family own 47 percent of the company.

In court documents in the case brought by Jacobs, Las Vegas Sands acknowledges having worked with a figure named in a Hong Kong court as an organized crime boss, who was said to be actively involved in running one of the lucrative VIP rooms at theSands Macau. In addition, Jacobs alleges that Sands put a Macau public official on its payroll, creating a potentially illegal conflict of interest under U.S. law. He also claims that the Sands investigated Macau government officials looking for dirt to use against them.

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Adelson has not been charged by federal investigators. Sands previously has said neither the SEC nor the Department of Justice has accused it of wrongdoing and described the SEC move as a “fact-finding inquiry.” The Jacobs lawsuit has a long way to go in Nevada court. And Adelson’s denial of all charges in that suit was characteristically blunt.

“When we win the case, we will go after him in a way that he won’t forget because none of what he says is true and he can’t prove it,” Macaubusiness.com quoted Adelson as saying last November. Adelson declined to be interviewed for this article, and a spokesman declined to comment beyond statements to the court.

BOSTON TO MACAU

Adelson rose from poverty in Boston to great wealth in Las Vegas by taking big risks. His first major score was to see that Las Vegas could be a convention center as well as a leisure destination. He started COMDEX, the first big tech convention, and built a private convention facility. Then he continued to expand his Sands company – now the most valuable publicly traded U.S. casino empire, worth about $42 billion – in the depth of the 2008-2009 recession.

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His next big gamble was Macau, a former Portuguese colony known for its seedy gambling halls and bloody gangster turf wars, an hour’s boat ride from Hong Kong. When China opened up its gambling sector to foreign casino operators in 2001, Adelson was quickest off the mark, building the Sands Macau and ushering in an era of staggering growth and Las Vegas glitz to a once stilted sector. Gambling-mad mainland Chinese punters poured into the city, and revenues skyrocketed beyond Las Vegas.

Adelson later made another big bet in the southern Chinese gambling hub, staking his fortune on the Venetian Macau, a massive resort casino on reclaimed former swampland, that his rivals initially scoffed at.

The Cotai Strip since has become a luxury destination, with five-star hotels, a convention center, and designer shops with some of the highest sales in the world, as rivals like Wynn and MGM continue to scramble to secure now highly prized plots in the area.

The Vegas-style renovation did not clear away Macau’s criminal past, though. Traditionally, junket operators, who deliver high rollers to the casinos and recover debts from punters, were controlled by organized crime groups known as triads.

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In State Department cables obtained by Wikileaks and released to Reuters through a third party, U.S. diplomats in 2009 reported the American casino companies’ “unease about the earnings power, influence on government, and organized crime connections of Macau’s junket operators. The junkets ‘manage’ players who account for approximately 70 percent of all casino betting volume in Macau.”

Macau’s chief gambling regulator, Manuel Joaquim das Neves, at the time told U.S. officials – according to the Wikileaks cables – “we forgive small crimes” when licensing junket operators. “If you make hard rules in the beginning, no one applies,” he said.

In an interview this week Neves told Reuters that his commission did not tolerate organized crime influence at casinos. But when asked specifically whether there was still some triad influence on junkets at American casinos, he said, “I don’t know, probably. We live in Macau.”

Moreover, as recently as last week Las Vegas Sands’ President of Global Gaming Operations, Rob Goldstein, told investors on a conference call, that they were pursuing junket business in China. “We’re doing better in the junket segment,” he said. “We got a lot of room to move there.” A Sands spokesman declined to comment on triad influence in junkets.

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The Sands company last year acknowledged in the civil lawsuit that it had done business with a man identified in Hong Kong court as a triad leader, Cheung Chi-tai. Sands said it investigated the alleged crime boss after the Reuters 2010 special report highlighted the tie, and that it then severed the relationship. Jacobs in court papers says Adelson himself was aware of the relationship before Sands’ investigation.

Cheung’s current whereabouts are unknown.

Jacobs has also claimed in that suit that Adelson told him to hire a Macau public official, Leonel Alves, who was listed as Sands China’s counsel for more than a year. Paying a public official in any capacity raises questions of bribery under the Foreign Corrupt Practices Act. Sands in court papers denied illegal activity. Michael Leven, now Las Vegas Sands President and Chief Operating Officer, acknowledged to the Macau Daily Times that Alves advised the government. “When we deal with an individual that is a Government official – Alves is also a member of the Executive Council, an advising body to the local government – we have to follow the rules of the U.S.. So we are working our way through that,” Leven said in 2010.

Jacobs further alleged that Adelson personally demanded secret investigations of Macau officials, “so that any negative information obtained could be used to exert ‘leverage’ in order to thwart government regulations/initiatives viewed as adverse to LVSC’s (Las Vegas Sands Corporation’s) interests.”

These investigations included current and past leaders of the Macau government -Edmund Ho, his successor Fernando Chui Sai-on, who is still the chief, and others – according to an August 2010 letter from Jacobs’ lawyer demanding that Sands save information on investigations into those people. The company described the investigation as a rogue move by Steve Jacobs, and Adelson has accused Jacobs of lying to extort payment from his former employer.

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Meanwhile, some political analysts say the size of the Adelson family’s checks to Republican candidates could make the Sands’ legal problems a campaign issue, if wrongdoing were proven. “It really now makes it imperative that no sign of scandal be traced back to the source of that large contribution,” said Henry Brady, head of thePublic Policy School at the University of California, Berkeley.

(Reporting By Peter Henderson and James Pomfret; Editing by Lee Aitken and Claudia Parsons)

Photo: Flickr user iotae.