Billionaire Steve Wynn and other directors of Wynn Resorts Ltd. (WYNN) won dismissal of a shareholder lawsuit alleging a $135 million donation to the University of Macau breached fiduciary duties and wasted company assets.
The accusations by a Louisiana police retirement fund resembled those of Wynn Resorts director Kazuo Okada, who sued the casino operator over the gift in January 2012. The 2011 donation burdened Wynn Resorts with costs to fight government investigations and potential penalties and fines, while a later buyback of Okada’s stock wasted assets by saddling the company with a $1.9 billion promissory note, the pension fund said.
U.S. District Judge James Mahan in Las Vegas said the investor didn’t convincingly show that Wynn and his directors had done anything wrong. Lawsuits that don’t demonstrate that their allegations are “plausible,” as opposed to being “conceivable,” must be dismissed, he said.
“Plaintiffs’ complaint fails to sufficiently allege that defendants knew that the Macau donation was improper,” the judge said in a Feb. 1 ruling that allows the shareholders to amend the complaint.
Amanda Lawrence and Ann Box, lawyers for the Louisiana Municipal Police Employees’ Retirement System at the firm Scott & Scott LLP, didn’t immediately respond to e-mails seeking comment on the ruling.
Last week, Wynn Resorts reported an 18 percent drop in fourth-quarter profit as its Macau business fell and competitors on the Chinese city’s Cotai Strip expanded to draw away customers in the world’s largest gambling hub.
In May 2011, Steve Wynn and almost all of Wynn Resorts’ board approved the gift to the University of Macau’s Development Foundation. Last May, Macau’s government approved the Las Vegas- based company’s plan to build a $4 billion resort on a 51-acre site on the Cotai Strip.
Okada sued partly to seek access to documents related to the Macau donation. Wynn Resorts has said it is cooperating with a separate U.S. Securities and Exchange Commission request that it preserve all documents and information connected with donations and gaming licenses in Macau.
The SEC’s Salt Lake City regional office told Wynn Resorts a year ago it was making an “informal” inquiry into the Macau donation and asked the company to keep the information, the company said in a regulatory filing at the time.
Alexandra LaManna, a spokeswoman for Wynn, declined to comment on the status of the SEC probe.
Wynn Resorts last year forcibly redeemed Okada’s 20 percent stake in the company for a $1.9 billion promissory note payable in 10 years, saying his own company’s improper payments to Philippine gaming regulators made him unsuitable.
Okada, the chairman of Universal Entertainment Corp. (6425), is fighting the redemption and demanding an investigation into Wynn Resorts’ use of corporate funds. In a Jan. 24 letter to the company’s board, filed in federal court in Las Vegas, he asked directors to investigate Steve Wynn’s actions in getting the concession for a new casino in Macau.
The casino company yesterday said it was “deeply gratified” by the dismissal of the shareholders’ suit and accused Okada of pursuing a “smear campaign” against Wynn and the company. The company has asked shareholders to vote Okada off its board at a special Feb. 22 meeting.
The Nevada Gaming Control Board concluded its own probe into the Macau donation and “determined that Okada’s allegations are unfounded,” Wynn Resorts said in yesterday’s statement.
The case is Louisiana Municipal Employees’ Retirement System v. Wynn, 2:12-cv-00509, U.S. District Court, District of Nevada (Las Vegas).