Wynn Says Okada Fight Over Share Purchase May Cut ProfitLinda Sandler
Wynn Resorts Ltd., the casino operator run by billionaire Steve Wynn, said profit may be reduced if former director Kazuo Okada wins a lawsuit challenging the company’s purchase of his shares.
Okada, the Japanese billionaire who helped found Wynn Resorts, resigned before a shareholder vote he was certain to lose, the company said last month. Okada, chairman of pachinko machine maker Universal Entertainment Corp., said he will continue his fight with Wynn, the company’s chief executive officer, to recover his stock in the Las Vegas-based company. He is also demanding unspecified damages.
“An adverse judgment or settlement resulting from the related litigation could reduce our profits or limit our ability to operate our business,” the company said in its annual report filed March 1 with the U.S. Securities and Exchange Commission. The suit’s risk was disclosed in a discussion of potential legal liabilities.
Wynn Resorts seized Okada’s 20 percent stake at a 30 percent discount a year ago, handing him a $1.9 billion promissory note. The fight broke into public view earlier when Okada questioned a $135 million donation the company made to a Macau university foundation. Wynn Resorts accused Okada, who denied the allegations, of extending gifts and cash to Asian casino regulators in violation of the U.S. Foreign Corrupt Practices Act.
Beyond an “informal” SEC inquiry disclosed earlier, Wynn Resorts isn’t under investigation for the Macau donation, according to the filing. At the same time, the company said “regulators could pursue separate investigations into the company’s compliance with applicable laws” as a result of the SEC inquiry or Okada’s allegations of impropriety in lawsuits.
While the company believes it did nothing wrong, “any such investigations could result in actions by regulators against the company,” according to the filing. “Any determination that we have violated the FCPA could have a material adverse effect on our business and financial condition,” said Wynn Resorts.
A successful challenge of the $1.9 billion redemption note used to buy Okada’s shares could also “significantly impact our results of operations,” Wynn Resorts said. Okada is contesting the valuation, which the company determined is the “fair value of the shares held by unsuitable persons,” it said in the filing.
Wynn Resorts’ $4 billion Macau project might add to the company’s $5.8 billion in debt, it said.
“As our project budget is an estimate only as of the date of this report, we may require additional financing to complete construction of our Cotai project,” it said.
The Wynn Macau company expanded its secured bank line in July to $2.3 billion, including $1.5 billion in revolving loans and $750 million in term loans, with access to an additional $200 million, the company said.
The Macau gift spurred four federal lawsuits and two state suits in the U.S., now combined into just two actions, in addition to Okada’s litigation in the U.S. and Japan, according to the filing. A Louisiana police retirement fund said last week it would try to renew a shareholder lawsuit in federal court alleging the $135 million donation to the University of Macau breached fiduciary duties and wasted company assets.
A preliminary vote count before the special shareholder meeting showed almost all of the votes being cast backed Okada’s removal, Wynn Resorts said. Okada’s resignation followed a failed bid to persuade a federal judge to halt the meeting, where his ouster from the board was the only item to be addressed.
On Feb. 22, 85.7 percent of the shares entitled to be voted at the special meeting favored the former director’s removal, Wynn Resorts said.
The 70-year-old Okada is chairman of Tokyo-based Universal Entertainment. He helped Steve Wynn finance the casino operator that went public in October 2002 and was its largest individual shareholder until last February.
Wynn, 71, and his ex-wife Elaine, control almost 20 percent of the company after Okada’s stake was redeemed, according to data compiled by Bloomberg. Elaine Wynn has asked a judge to let her sell her shares.
Okada has said Wynn wanted him out because he opposed the university gift.
The case is Okada v. Wynn Resorts Ltd., 13-00136, U.S. District Court, District of Nevada (Las Vegas).
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.