Oct. 3 (Bloomberg) -- Kazuo Okada, whose 20 percent stake in Wynn Resorts Ltd. was forcibly redeemed in February, lost a bid for a court order letting him vote the 25 million shares at an annual Wynn shareholders’ meeting scheduled for Nov. 2.
Nevada state court Judge Elizabeth Gonzalez yesterday rejected Okada’s request at a hearing in Las Vegas. She said the Japanese billionaire, who made his fortune in pachinko, didn’t convince her that he was likely to overcome Wynn’s argument that the board’s business judgment validated the redemption.
The hearing is part of Okada’s legal fight with the casino operator’s chairman and chief executive officer, Steve Wynn, to get back the shares the board redeemed for a 10-year promissory note worth $1.9 billion, which Okada says is a 30 percent discount from their market value.
“We are disappointed by this decision, which for the moment denies Aruze USA of its rights to nominate and vote for independent directors willing to stand up to Steve Wynn and promote good corporate governance that puts the interests of shareholders first,” Okada’s holding company said in an e-mailed statement. The ruling “does not speak to the merits of Wynn Resorts’ claims against Aruze and Mr. Okada, and Mr. Okada’s counterclaim against Wynn Resorts, Mr. Wynn, and the other Wynn directors.”
Gonzalez’s ruling allows Okada to file a new request. Okada won a court order allowing him more access to the company’s books and records about its operations in Macau.
Okada, who described himself in an Aug. 31 court filing as “the lone voice of dissent against Steve Wynn on the board,” has proposed two nominees. The Nov. 2 agenda includes election of four directors.
Wynn Resorts said in a Sept. 18 statement that because Okada was ejected in February as a shareholder, he “has absolutely no rights as a shareholder to nominate directors.” The company had said in March it would call a special stockholders meeting to vote Okada off the board. That isn’t on the agenda for Nov. 2.
Kim Sinatra, Wynn’s general counsel, said after today’s hearing that one reason stockholders won’t be asked to remove Okada next month is that there are still “lots of investigations.” She declined to provide details.
Wynn said in a separate statement after the hearing that it is the company’s “understanding” that law enforcement and regulators in the U.S. and Asia have initiated investigations following its findings that Okada made illegal payments to Philippine regulators.
The investigations relate to “close business connections and common shareholding in a Hong Kong entity” by Okada, an unidentified person who consulted for Philippine gaming regulators and a third unidentified person associated with a Japanese organized crime group, according to the statement.
“Additionally, evidence has surfaced suggesting improper payments in the Philippines of up to tens of millions of dollars in connection with Aruze’s investment there,” Wynn said.
Steve Getzug, a spokesman for Aruze USA, had no immediate comment on Wynn’s additional allegations.
Okada and Wynn have given conflicting accounts of the reasons behind their feud.
Okada said in court filings that Steve Wynn wanted to oust him because he questioned and voted against a $135 million donation to the University of Macau last year. The company said it redeemed Okada’s shares because an independent investigation found that he and his associates made illegal payments to Philippine gaming officials.
Wynn’s “allegations are mere pretext for actions taken to oust a dissenting board member and entrench and enrich Steve Wynn, the board and the management of Wynn Resorts,” Okada said in an Aug. 31 court filing.
Okada challenged Wynn’s argument that it needed to protect its Nevada gaming license by removing Okada as an “unsuitable” shareholder. The promissory note issued in the redemption makes Okada a creditor, and Nevada regulators can also investigate a casino operator with an allegedly unsuitable creditor, Okada said in the filing.
Wynn Resorts contends Okada was angry since at least February of last year about the board’s refusal to get involved with the casino project he’s developing in the Philippines, according to the breach-of-fiduciary-duty lawsuit the company filed against Okada on Feb. 19. The board was concerned about “deeply ingrained” corruption in the Philippines, according to the Wynn Resorts complaint.
Okada and his company, Tokyo-based Universal Entertainment Corp., are building a Manila Bay resort to lure “high-limit, VIP gamblers from China,” in direct competition with Wynn Macau, according to the complaint.
“I personally had concerns about Mr. Okada since at least 2010 when I learned that he was trading on Wynn Resorts’ reputation as part of his plan to build a gaming resort in the Philippines -- a plan the Wynn Resorts board told Mr. Okada it wanted no part of in February 2011,” Steve Wynn said in an affidavit filed Sept. 20.
Steve Wynn also said in the filing that Okada was wrong to argue that his shares were exempt from the company’s redemption provision. The redemption rules were specifically created in 2002, at the request of lenders, to address gaming license issues that might arise regarding Okada’s ownership of Wynn Resorts’ shares, according to Wynn’s filing.
The Wynn Resorts CEO dismissed Okada’s suggestion that he wanted to get rid of his former business partner because the divorce from his ex-wife Elaine Wynn left him with only half of his stake and Okada as the largest shareholder.
With the redemption of Okada’s shares, which Steve Wynn controlled under their stockholders’ agreement, he controls about 20 percent of Wynn’s shares, including those held by Elaine Wynn, instead of the 36 percent he controlled before the redemption, Steve Wynn said.
At today’s hearing, the judge heard arguments on the “reasonableness” of Okada’s request, as a company director, to get access to Wynn Resorts’ books and records regarding the donation to University of Macau as well as other records going back as far as 2000 about the company’s dealings with Macau government officials when it obtained its license to open a casino in the Chinese territory.
Charles McCrea, a lawyer for Okada, said at the hearing that his client became suspicious about Wynn’s involvement in Macau after the donation last year and wanted access at the books to see how the company had spent money in Macau in the past when it was seeking a gaming license.
McCrea said Okada was deposed by Wynn’s lawyers for almost nine hours last month about the purpose of his request.
James Pisanelli, a lawyer for Wynn, told the judge that Okada said at his deposition that he’s no longer performing any duty as a fiduciary of Wynn because he’s in litigation. Okada also told Wynn’s lawyers that he has “important information” and refused to discuss it, citing the litigation, Pisanelli said.
“The evidence that Mr. Okada is a dissident is overwhelming,” Pisanelli said.
Wynn’s lawyers have said Okada’s request for the books and records wasn’t made in the interest of the company. Instead, it was an effort to find any possible evidence of wrongdoing by Wynn in Macau to distract from Wynn’s allegations that Okada made illegal payments to Philippine regulators, the lawyers said.
Robert Shapiro, a lawyer for Wynn, said after the hearing that the books and records aren’t “an issue” and that the company would comply with the judge’s order. Shapiro declined to speculate how many documents were covered by the order.
The breach-of-fiduciary-duty lawsuit is Wynn Resorts v. Okada, A-12-656710-B, Clark County District Court, Nevada (Las Vegas). The petition for books and records is Okada v. Wynn Resorts, A-12-654522-B, Clark County District Court, Nevada (Las Vegas).
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