Universal Entertainment Corporation: Independent Review Finds the Freeh Report on Allegations against Kazuo Okada “Deeply

  Universal Entertainment Corporation: Independent Review Finds the Freeh
  Report on Allegations against Kazuo Okada “Deeply Flawed”

    Michael Chertoff, Former Homeland Security Secretary, Says Louis Freeh
Report’s Legal Analysis is “Superficial and Inflammatory” and its Conclusions
                                “Not Credible”

Business Wire

LAS VEGAS -- April 22, 2013

Universal Entertainment Corporation announced today that Judge Michael
Chertoff, the former U.S. Department of Homeland Security Secretary, has
issued an assessment castigating last year’s report by Former FBI Director
Louis J. Freeh concerning the affairs of Japanese gaming entrepreneur Kazuo
Okada and his affiliated companies. According to Judge Chertoff, the Freeh
report was “structurally deficient, one-sided, and seemingly advocacy-driven.”
Moreover, its conclusions, “simply are not credible.” Instead, Judge Chertoff
found Freeh’s report to be “deeply flawed” and “lack[ing] basic indicia of a
credible investigation.”

Freeh’s report was prepared on February 18, 2012 at the behest of Wynn
Resorts, Limited (NASDAQ: WYNN). At the direction of Steve Wynn, Wynn Resorts
turned around and used the report that same day to rationalize the forcible
redemption of 24,549,222 shares of Wynn Resorts held by Aruze USA, Inc., a
company whose ultimate majority owner is Mr. Okada. At the time, Aruze USA was
the largest single shareholder in Wynn Resorts, owning close to 20% of Wynn
Resorts’ outstanding stock.

Although Aruze USA’s shareholdings had a market value of at least 2.7 billion
U.S. dollars at the time, Wynn Resorts provided Aruze USA with just a
non-transferrable, fully subordinated, $1.9 billion, ten-year note in
exchange. Wynn Resorts’ stock price rose $6.71, or 5.9%, per share the next
day, providing tremendous financial gains to Steve Wynn and the other Wynn
Resorts Directors who had just stripped Aruze USA of its shareholdings based
on the Freeh report.

Judge Chertoff has now found that the Freeh report’s conclusions were “based
on an incomplete legal analysis; a failure to collect evidence concerning most
of the allegations; a disregard of evidence tending to undermine [Freeh’s]
assumptions; and a failure to investigate plausible alternate explanations.”

In addition to serving as Homeland Security Secretary, Judge Chertoff has also
served as a judge on the U.S. Court of Appeals for the Third Circuit,
Assistant Attorney General in charge of the Criminal Division at the U.S.
Department of Justice, and U.S. Attorney for New Jersey. In making his
assessment, Judge Chertoff reviewed the entirety of the Freeh report,
including all of the investigatory material referenced by Freeh in his
report’s appendices, and found the Freeh investigation “deeply flawed.”

The Freeh report’s “factual findings and inferences lack objectivity and lack
factual support,” Judge Chertoff explained. Freeh’s law firm “viewed itself as
an advocate first and an impartial investigator second” in preparing the Freeh
report. Freeh and his colleagues “cherry-picked evidence and stretched to
reach conclusions that would be helpful to the Wynn Resorts Board.”

“[T]he end result is a lopsided report that lacks even the appearance of
objectivity,” according to Judge Chertoff.

Judge Chertoff prepared his assessment of the Freeh report with assistance
from his law firm, Covington & Burling LLP, where he has served as Senior of
Counsel since 2009. In particular, Judge Chertoff was supported by Steven
Fagell, who is co-chair of the Covington & Burling’s Global Anti-Corruption
practice group.

In a summary of the analysis released today, Judge Chertoff and his team
explained that the Freeh report failed to adequately support its conclusions
and did not meet the basic requirements of a thorough, objective and credible
investigation. Specifically, Judge Chertoff and his colleagues found:

  *The Freeh report was tainted by the timing and circumstances of its
    creation because the Wynn Board moved within days to act on its content
    and redeem Aruze USA’s 20 percent stake in the company without providing
    him the opportunity to respond to its allegations;
  *The Freeh report’s factual findings and inferences lacked objectivity and
    factual support;
  *The Freeh report was “based on unreliable accounts of interested witnesses
    and implausible inferences”;
  *The Freeh report’s legal analysis was superficial and inflammatory; and
  *Freeh’s investigative process was insufficiently documented and revealed a
    number of gaps.

Among other findings, Judge Chertoff and his team concluded that the Freeh
report treated Mr. Okada dismissively by “relegating [Mr. Okada’s] interview
to an afterthought, making a sweeping and largely unexplained credibility
determination against him, and neglecting to follow up on objectively
verifiable claims that might support his account.”

Statement from Kazuo Okada

In response to the independent analysis provided by Judge Chertoff, Universal
Entertainment founder and Chairman Kazuo Okada said, “This confirms what I
have maintained since the day the Freeh report was issued and the Wynn Board
moved to strip us of our stake in a company we helped found – that the Freeh
report was prepared carelessly and improperly, and contains a number of clear
errors. It’s obvious that this biased report was part of Steve Wynn’s campaign
to eliminate me as a rival to his power within Wynn Resorts.’”

According to the summary, the Freeh report’s most significant shortcomings

  *Timing that implies that Wynn Resorts commissioned the report for a clear
    purpose: to justify ousting Mr. Okada from the Board and redeeming Aruze
    USA’s 20 percent stake in the company at a substantial discount;
  *Consistently pairing grave and far-reaching conclusions with scant and
    unreliable supporting evidence and incomplete investigation and analysis,
    including broadly alleging a “practice and pattern” of Foreign Corrupt
    Practices Act (FCPA) violations without sufficient detail to meaningfully
    evaluate these incidents;
  *Reaching legal conclusions through deficient legal analysis, including
    asserting a bad faith, possibly criminal violation of Philippine law while
    ignoring key aspects of the legal analysis Wynn Resorts commissioned from
    a local law firm; and,
  *Failing to provide any meaningful explanation of its process and citing
    documents that are of dubious provenance or otherwise unreliable, as well
    as relying on potentially biased interviewees.

Judge Chertoff also noted that even Mr. Freeh likened his report to a “brief”
– i.e., an advocacy piece, not an objective document that is intended to
impartially present the facts.

Note to Editors and Reporters: Copies of a redacted version of the Chertoff
assessment can be obtained by emailing okadamedia@rlmfinsbury.com.
Unfortunately, only a redacted version can be made available at this time
because Wynn Resorts has refused to allow public access to the exhibits
underlying the Freeh report. Thus, although the vast majority of the Chertoff
assessment can be released to the public, those portions of the Chertoff
assessment related to the exhibits to the Freeh report must be redacted and
cannot be publicly released, at the insistence of Wynn Resorts.


Media contacts:
RLM Finsbury
Kirsti McCabe or Chris Mumma
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