Wynn Sued by Okada Over $800 Million Redemption Discount
Stock Chart for Wynn Resorts Ltd (WYNN)
Japanese billionaire Kazuo Okada, saying Wynn Resorts Ltd. (WYNN) is run by Chairman Steve Wynn as a “personal fiefdom,” is challenging the redemption of his own 20 percent stake in the company at an $800 million discount.
Aruze USA, through which Okada invested in Wynn Resorts, disputes that any redemption occurred because Wynn is legally barred from redeeming the securities, lawyers for Okada and the holding company said in a counterclaim filed yesterday in federal court in Las Vegas.
Okada’s shares, which Wynn Resorts last month said it had redeemed at a 30 percent discount because Okada was “unsuitable,” were never subject to the redemption provision in the company’s articles of incorporation, according to the filing. Okada agreed to purchase Wynn Resorts stock before the redemption provision became effective, according to the filing.
“Wynn Resorts, for all its accomplishments, is not a corporation in any ordinary sense,” Okada’s lawyers said. “Rather, Wynn Resorts’ flamboyant chairman, Mr. Wynn, has run Wynn Resorts as a personal fiefdom, packing the board with friends who do his personal bidding, and paying key executives exorbitant amounts for their unwavering fealty.”
Wynn Resorts called the allegations “scurrilous” in a statement today.
Yesterday’s filing is the latest in an escalating clash between Steve Wynn and Okada, the man who helped bankroll Wynn Resorts starting 12 years ago. Wynn Resorts accused Okada of making improper payments to Philippines gaming officials leading the board to declare Okada and certain affiliates “unsuitable persons” for the company.
Okada accuses Wynn Resorts of breach of contract and its chairman of racketeering, among other allegations. He seeks a court order voiding the redemption of his shares, and unspecified compensatory and punitive damages.
Wynn announced the redemption in February after releasing a report by former Federal Bureau of Investigation director Louis Freeh alleging that Okada, his associates and companies made three dozen improper payments to gambling officials. In a conference call to explain the decision to oust Okada, Wynn Resorts executives, including compliance committee head Robert Miller, a former Nevada governor, said they needed to limit the company’s risk of losing its gaming licenses.
No ‘Meaningful Denial’
“The Okada response fails to contain any meaningful denial of the facts detailed in the Freeh Report or Governor Miller’s conference call,” Wynn Resorts said in today’s statement. “Wynn Resorts looks forward to having Mr. Okada’s actions and the company’s response presented to and adjudicated in court.”
Wynn Resorts forcibly redeemed the stake held by Okada and his Tokyo-based Universal Entertainment Corp. (6425) at a 30 percent discount to its then market price, the casino operator said last month. Wynn has called for a special meeting of shareholders to remove Okada as a director of Wynn.
Wynn filed its complaint against Okada Feb. 19, alleging that Okada is developing two casinos and three hotels in Manila and that he seeks to lure “high-limit, VIP gamblers” from China in direct competition with Wynn’s casino in Macau. Construction on the Manila Bay casino resort started Jan. 26, Wynn said in its complaint.
In a videotaped statement posted on Universal Entertainment’s website, Okada said Steve Wynn started questioning Universal’s project in the Philippines last year, suggesting that there must be something “inappropriate” about it because he believed the Philippines is a corrupt country.
“I became suspicious when Steve Wynn suddenly changed his attitude to question Universal’s investment in the Philippines after he had long been supporting it behind the scenes,” Okada said. “His attitude changed because I became suspicious regarding the purpose and reason for the large donation made to the University of Macau.”
Okada said he started to investigate his dealings with Wynn including trying to find out how $120 million he provided for a Macau gaming license in 2002 was used, alleging that the use had been unclear and that no detailed records of it were kept.
Wynn’s lawsuit was filed in Nevada state court and removed to federal court in Las Vegas, where Okada filed his answer and counterclaims.
In his filing, Okada says that Steve Wynn knew about his Philippines project as far back as 2007 and didn’t voice any concerns about it.
The Las Vegas-based casino company has accused Okada of giving more than $110,000 in payments and gifts to Philippines officials, including chief gambling regulator Cristino Naguiat. Okada said in the videotaped statement that it wasn’t correct that these were gifts and that the Wynn board didn’t give him the opportunity to explain before declaring him “unsuitable.”
Okada, the former vice chairman at Wynn Resorts, had filed a petition in state court in Clark County, Nevada, in January for access to financial records. Okada opposed the company’s HK$1 billion ($129 million) pledge in July 2011 to the University of Macau Development Foundation.
In yesterday’s filing, Okada’s lawyer said “it was unclear how the University of Macau would use the funds.”
“Mr. Okada wondered why a wealthy university that sits on government land and largely caters to non-Macau residents might need or want such a large donation,” according to the filing. “Mr. Okada, who is himself a significant philanthropist, wondered whether such a donation actually benefits the people who live in Macau.”
Nevada state court Judge Elizabeth Gonzalez at a hearing March 8 in Las Vegas said Okada should get two additional pages regarding the University of Macau donation. The judge rejected a request to order Wynn to produce more papers from before the company went public or documents regarding an amended stockholder agreement that resulted from Steve Wynn’s divorce.
Okada said that the divorce cut Steve Wynn’s stake in Wynn Resorts in half, making Okada the largest single shareholder.
The case is Wynn Resorts v. Kazuo Okada, 12-00400, U.S. District Court, District of Nevada (Las Vegas.)
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