By Zach Arnold | April 15, 2016
There has always been one critical question about UFC’s purchase of PRIDE’s assets: why did the Nevada Gaming Commission allow the deal to happen?
The Nevada Gaming Commission is extremely tough on business dealings involving questionable individuals and walking acts of moral turpitude. We knew the Fertitta family had extraordinary power but even they aren’t the biggest fish in Nevada.
One of the nagging sub-questions about that asset purchase was this: UFC hired Spectrum Gaming to cover their ass on the issue of “due diligence” with PRIDE. In other words, legal cover for dealing with Nobuyuki Sakakibara and company. When Spectrum Gaming gave cover to UFC for the PRIDE asset purchase, I couldn’t believe it. Why would these entities risk their reputation for that guy even at UFC’s benefit?
Paul Gift’s report at Bloody Elbow details some extremely interesting findings if you followed the timeline of PRIDE’s implosion:
- According to court filings, Sakakibara was looking to unload PRIDE in February of 2006. This is significant because it shows that Sakakibara, knew the end was coming with Fuji TV after Shukan Gendai’s negative campaign. The cat was out of the bag. They were looking for an exit strategy.
- The final purchase price to buy off Sakakibara alone was $3.7 million USD + $9 million (non-compete) + $1.5 million. A $14.2 million USD pay-off to prevent Sakakibara from being their Japanese rival.
- UFC allegedly used the Spectrum Gaming due diligence report to stop the flow of cash. In other words, UFC knew exactly what caused PRIDE to implode, got Sakakibara out of the business, and then turned around and told him to get lost.
- Spectrum Gaming knew all about Shukan Gendai’s negative campaign and couldn’t supposedly produce evidence to their liking from Sakakibara himself to clear his name that had been tarnished in the tabloids, including the allegations regarding “vendor” companies.
The 38-page Spectrum Gaming report on Sakakibara & Dream Stage Entertainment is an amusing read. Some bullet points:
- Spectrum got nowhere when contacting DSE vendors. “Although Spectrum investigators managed to speak to some staff at various Vendors to advise them of our role in the Due Diligence process, none was willing to cooperate. In fact, most Vendors contacted were non-cooperative to the point to refusing to take Spectrum’s calls, or in one case, even threatening legal action.
- UFC agreed to “lower” their due diligence standards with Spectrum by having Spectrum only do online media & Internet research. I’m glad they read Fight Opinion.
- DSE’s accountant allegedly “resigned” after Spectrum started investigating, only for that accountant to show up with Sakakibara during investigative hearings.
- In April 2006, Sakakibara obtained a 10-year loan with an individual named Nobuo Kawagami at an annual interest rate of 10%. Spectrum claimed that Sakakibara did not want to reveal details about the loan or the person issuing the loan. Mr. Kawagami has a cell phone company called Dowango.
- One of the major financial backers when Dream Stage Entertainment was formed was a printing company called Nishikawa Communications, based in Nagoya. Just like Nobuyuki Sakakibara was based in Nagoya for Tokai TV. The first PRIDE event under the DSE umbrella was PRIDE 5, Nobuhiko Takada vs. Mark Coleman at Nagoya Rainbow Hall. Sakakibara bought out shares in DSE from Naoto Morishita’s widow, Nishikawa Communications, and a company called Planet.
- Spectrum claimed that Sakakibara’s right-hand men, including Sotaro Shinoda and public relations flack Keiichi Sasahara (who later went to be a face of DREAM) were non-cooperative.
- Spectrum wrote this bombshell: “Reports have been provided on the five Tier 3 Vendors, and four of the five companies have been found to have links to organized crime entities, and this is not suitable to do business with the new DSE company.”
- Spectrum found out that the Nevada State Athletic Commission sued Dream Stage Entertainment for allegedly being deadbeats on paying the TV tax for a Las Vegas event.
- Spectrum summary on Nobuyuki Sakakibara: “While Spectrum cannot speculate about their precise motives in not wishing to cooperate with the investigation, it is clear that a number of the Directors, especially Sakakibara and Kato, had much to hide, including major conflicts of interest through their personal interests in various DSE vendor companies, opaque financing and possible links to organized crime. Although none of the Directors was known to Japanese law enforcement to be a Yakuza member, media information alleges possible organized crime connections regarding DSE operations and Sakakibara. It should be pointed out that the use of “front companies” or companies that are “one step removed”, such as the Vendor companies, is a traditional method used by Yakuza Organized Crime Families in Japan to hide their association or involvement in high profile companies such as DSE.”
- Spectrum confirmed the long-standing open rumor that Sakakibara was living the high-life at Roppongi Hills in Tokyo, an 18-story condo building. “The utlities for room were subsequently found to be contracted under the name [redacted], whereas the registered owner is Hiroo Kurokawa.”
- Spectrum discovered that Ed Fishman, who tried to buy the PRIDE assets from Nobuyuki Sakakibara, filed a lawsuit against DSE for breach of contract in helping Sakakibara with the PRIDE Las Vegas events.
- Spectrum’s interview with Sakakibara revealed that his claims of filing criminal and civil actions against Shukan Gendai for their negative campaign was all a bluff.
- DSE was under investigation by the Japanese tax authorities for several years.
- Sakakibara told Spectrum that he knew the mysterious Mr. I (Takashi Ishizaka), claiming he knew Ishizaka from the 90s and that Ishizaka is both a manager of celebrities and tied to a real estate company named Aoyama Mainland. However, Sakakibara denied doing business with Ishizaka.
Bottom line? Everyone knew “the truth” going into the business deal. They were all trying to fight each other *after* the deal.
Which raises the primary question we asked a decade ago: Why did the Nevada Gaming Commission allow this transaction to happen and allow a due diligence background check happen *after* the transaction?
Sakakibara sued Spectrum Gaming and UFC. They reached a settlement. He got paid. Everybody got what they wanted. Everybody knew what they were getting into. The regulators didn’t stop the transaction from happening. None of this is earth-shattering information but it does confirm the majority of suspicions you had about what exactly went down and why.