April 11 (Bloomberg) -- Universal Entertainment Corp. Chairman Kazuo Okada faces a U.S. criminal investigation related to his Philippine casino project, sending the gambling company’s shares down as much as 18 percent yesterday.
The U.S. asked to intervene in a lawsuit brought by Wynn Resorts Ltd., which accused Okada of making improper payments to Philippine gambling regulators. The Justice Department said in an April 8 filing in state court in Las Vegas that it doesn’t want the civil case to disrupt its criminal investigation into the same underlying allegations.
Okada has pushed to expand in the Philippines where the government is setting up a casino center that would compete with Macau, where Wynn Resorts gets most of its revenue. Okada, who became a billionaire selling machines for Japanese pachinko parlors, won one of four provisional gaming licenses awarded for the Manila hub in 2008.
New resorts could help the Southeast Asian nation’s gambling market expand fivefold to $10 billion by 2017, its chief regulator estimates.
Wynn Resorts last year forcibly redeemed Okada’s 20 percent stake in the Las Vegas-based company and sued him for breach of fiduciary duty. Okada, who resigned as a director of Wynn Resorts in February, was being probed by the U.S. Federal Bureau of Investigation regarding his Philippine casino permit, the Asian country’s gambling authority said in January.
Wynn Resorts gets more than 71 percent of its annual revenue from Macau, the world’s largest gambling hub.
The possible violations of the U.S. Foreign Corrupt Practices Act by a controlling shareholder could threaten Wynn Resorts’ gaming license in Nevada and other jurisdictions, the casino operator has said in court filings.
The Justice Department said in its filing that it contacted lawyers for Okada and Wynn Resorts about its request to halt evidence gathering related to Okada’s activities in the Philippines.
Okada’s lawyers have said they would probably oppose the request “in whole or in part,” according to the filing. Wynn Resorts won’t oppose its request, the Justice Department said.
"The company group will from this point on offer its full cooperation with the U.S. government investigation," Universal Entertainment said in a statement yesterday.
The U.S. request to stay the case with regard to any overlap with its investigation is scheduled to be considered April 16 by Clark County District Judge Elizabeth Gonzalez, according to the court’s docket.
Universal Entertainment fell as much as 18 percent yesterday in Tokyo and closed down 16 percent at 1,666 yen. The stock rose as much as 4.8 percent to 1,746 yen today before trading at 1,690 as of 10:31 a.m. Tokyo time.
The company has been denying the wrongdoing, “so it hadn’t been fully reflected in the stock price,” Kenichi Hirano, general manager at Tachibana Securities Co. in Tokyo, said in a phone interview. The report on the investigation caused the stock to plummet yesterday, he said.
The Justice Department said in a footnote to its April 8 filing that it also has been conducting a criminal investigation into Wynn Macau Ltd.’s $135 million donation to the University of Macau Development Foundation.
Okada has said Steve Wynn, chairman and chief executive officer for Wynn Resorts and the Hong Kong-listed Macau unit, forced him out because he questioned the propriety of the donation. Okada linked it with Wynn Macau’s efforts to obtain permission to build a new casino in the former Portuguese colony.
Wynn Resorts said in a Feb. 4 statement that the Nevada Gaming Control Board investigated Okada’s allegations regarding the allegedly improper donation and concluded that they were unfounded.
Wynn Resorts spokesman Michael Weaver said the company would cooperate with any investigation.
Universal Entertainment is cooperating fully with all investigations, according to Eric Andrus, a spokesman for Okada who works for RLM Finsbury in New York.
Michael Passman, a Justice Department spokesman, declined to comment on the government’s filing.
The FCPA bars companies or individuals regulated or based in the U.S. from paying bribes to foreign officials to win business. Foreign companies and nationals also can be prosecuted if their corrupt acts were committed in the U.S.
Universal Entertainment, based in Tokyo, said Feb. 5 that a third-party committee was investigating payments made through its U.S. unit, Aruze USA Inc., in the Philippines. The committee was looking at $40 million in payments, according to the statement.
The FBI is examining Okada’s pursuit of his Philippine gaming license, any tax benefits he received and the flow of funds involved, Cristino Naguiat, chairman and chief executive of the Philippine Amusement & Gaming Corp., the local regulator, said in January.
The case is Wynn Resorts v. Okada, A-12-656710-B, Clark County District Court, Nevada (Las Vegas).