Bob Kraft's Entangled Partner

Thursday, March 29, 2012
Civil War Raging at Wynn Resorts
By NICK DIVITO

LAS VEGAS (CN) - Wynn Resorts shareholders say in a derivative complaint that Steve Wynn violated anti-bribery laws by donating $135 million to the University of Macau Development Foundation in exchange for land and casino concessions in the Chinese city.

The federal complaint is the latest salvo in a legal war being waged between Wynn and his former CEO Kazuo Okada. In the new complaint, the Louisiana Municipal Police Employees Retirement System claims Wynn and his board and top officers, including Okada, have wasted corporate assets and violated the Foreign Corrupt Practices Act "from at least 2009 to the present."

"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," the pension fund says in a Prologue to its 43-page complaint.

The pension fund claims that Wynn Macau Ltd.'s $135 million "gift" to the university is suspicious because "the chancellor of the University of Macau is also the head of Macau's government, with ultimate oversight of gaming matters."

The donation "has aroused suspicion that this was not a charitable gift," the complaint states. "Rather, it was an indirect attempt by the board to improperly influence the procurement of a casino license."

Shareholders say it's not Wynn's first lavish gift to the Macau government, that Wynn Macau donated a $10.1 million Ming Dynasty vase to the Macau Museum in December 2006.

"Beyond the donation of $135 million to the University of Macau, Wynn Resorts has admitted in a recently filed litigation that according to its own investigation, Kazuo Okada ('Okada'), its vice chairman of the board, has, for the past several years, used accounts at Wynn Resorts to attempt to allegedly improperly influence gaming regulators in the Philippines for a casino project. Wynn described Okada's activities as prima facie violations of the FCPA [Foreign Corrupt Practices Act]. Okada could not, however, have used these accounts without the knowledge and approval of the board of Wynn Resorts."

Okada and Wynn are fighting a separate, but related, legal battle according to the complaint: "Okada has now accused the Wynn Resorts Board of improprieties and has alleged that the Board has breached its fiduciary duties to the company. (See Wynn Resorts, Limited v. Okada ... [also in Las Vegas Federal Court]) Okada alleges that in addition to defendants' improper donation to the University of Macau - for which he was the only member of the Wynn Resorts Board to vote against - defendants have also acted in a manner contrary to the best interests of Wynn Resorts by having the company engage in a reckless, improper internal investigation of Okada that was designed to: (1) force Okada out of his role as vice chairman of Wynn Resorts; and (2) allow for the forcible redemption of the nearly 20 percent of common shares in Wynn Resorts controlled by Okada through Aruze USA, Inc. ('Aruze USA') at a substantial 30 percent discount to its true value. According to Okada, the Stephen Wynn (sometimes referred to herein as 'Mr. Wynn')-controlled Board engaged in this behavior to allow Wynn to retain unfettered control of Wynn Resorts, which - following defendant Stephen Wynn's divorce from his wife, defendant Elaine Wynn, and the splitting of their assets - was at risk."

The pension plan claims that Wynn's buyout of Okada-in which Wynn Resorts allegedly bought ought Okada's $2.8 billion stake in the company, with a 10-year promissory note for $1.9 billion-was done so that "by getting rid of Okada, it allows him to maintain virtually absolute control over the company he founded."

Wynn and Okada have been lobbing lawsuits at each other over alleged wrongdoing in the development of the Chinese casino resort, and Okada's investment in a casino development in the Philippines.

"Regardless of who ultimately prevails in the Wynn Resorts boardroom battle, it is the company that has, and will, lose the most," the pension plan claims.

"Allegations of corruption are particularly damaging in the highly regulated casino industry, and the company may be particularly vulnerable since the accusations are being made at a time when U.S. regulators are pursuing a record-breaking number of corruption allegations."

The Louisiana police retirees' system also sued Las Vegas Sands Corp., last year, in Federal Court.

In the new lawsuit, the pension plan wants Wynn Resorts board members to pay unspecified damages, and to block the $135 million donation to the university.Plaintiffs are represented by John Aldrich