Wynn Redeems Okada’s Stake After Bribery Probe

Wynn Resorts Redeems Okada’s Stake After Freeh Bribery Probe
Bloomberg
By Dan Hart and Yi Tian
(Updates with analyst’s comment in fourth paragraph.)

Feb. 19 (Bloomberg) -- Wynn Resorts Ltd. bought out its largest shareholder at a 31 percent discount and asked him to quit the board after a probe by the casino operator uncovered allegedly improper payments to Philippine gambling officials.

Former Nevada Governor Robert Miller and Louis Freeh, the ex-director of the Federal Bureau of Investigation, investigated claims that Kazuo Okada violated U.S. anti-corruption laws and uncovered cash payments and gifts valued at about $110,000 to gambling regulators, Las Vegas-based Wynn Resorts said today in a statement.

The move escalates a dispute between Chairman and Chief Executive Officer Stephen Wynn and Okada, who helped bankroll the company starting 12 years ago. Okada was stripped of his vice-chairman role last year after alleging improprieties in a Macau university donation that’s the subject of a lawsuit and a U.S. regulatory inquiry. Freeh’s probe puts Okada’s activities in the Philippines under the microscope as well.

“Shareholders definitely would prefer none of this to have occurred,” Christopher Jones, a senior gaming analyst at Telsey Advisory Group in New York, said in a telephone interview. “However, if there is actual fact that Mr. Okada did engage in illegal activity, then Mr. Wynn has certainly done the right thing in the eyes of the shareholders.” Jones doesn’t have a rating on Wynn shares.

Okada Stake

Wynn Resorts said it redeemed the 24 million shares held by Aruze USA Inc., a slot-machine company controlled by Okada’s Universal Entertainment Corp., and issued a 10-year $1.9 billion promissory note for the stock. At the Feb. 17 closing price of $112.69 in New York, a stake that size -- about 20 percent of the shares in Las Vegas-based Wynn -- would be worth $2.76 billion.

Last month, Okada sued Wynn Resorts in state court in Clark County, Nevada, to force the company to produce spending records. That case is pending. Okada opposed Wynn Resorts’ HK$1 billion ($129 million) pledge in July 2011 to the University of Macau Development Foundation.

Wynn Resorts has said the dispute stemmed from Okada’s decision to compete by pursuing projects in the Philippines. Okada was removed as vice chairman after admonishments from the board over the plan, Wynn Resorts said. The company said today that it will recommend that he be dropped from the board of Wynn Macau Ltd. as well.

Lawsuit Filed

The company said it filed its own lawsuit today in Clark County against Okada, Aruze USA and Universal Entertainment for breach of fiduciary duty and related offenses. The filing couldn’t be confirmed independently through electronic court records.

Okada couldn’t be reached at his headquarters in Tokyo outside of business hours for comment on the redemption announcement. Gidon Caine, an attorney for Okada, didn’t return a voice-mail seeking comment.

The U.S. Securities and Exchange Commission has requested information about Wynn’s donation to the university foundation. Wynn was asked in an informal inquiry by the SEC’s Salt Lake City office on Feb. 8 to preserve information about the commitment, the company said in a Feb. 13 regulatory filing.

The Macau pledge was consistent with Wynn’s practice of supporting institutions in markets where it operates, the company said. Wynn Resorts said that it will comply with the SEC request and that the stated objection of Okada, who cast the lone dissenting vote among Wynn and Wynn Macau directors, concerned the length of time over which the donation would occur, not its propriety.

‘Fair Value’

Wynn Resorts said today that, to protect the company’s gambling licenses, it can redeem shares for “fair value” from a person found “unsuitable” under its articles of incorporation. An independent financial consultant helped calculate the fair value, and Okada’s stake was redeemed at a discount because of restrictions on the shares, Wynn said in the statement.

“Mr. Okada probably doesn’t have a lot of options but to follow through on litigation as well and to defend his position,” said Jones, the analyst at Telsey. “I will not expect for the legal headlines to cease with this move by Wynn.”

The earlier case is Okada v. Wynn Resorts Ltd., A-12- 654522-B, District Court, Clark County, Nevada (Las Vegas).

--Editors: Andrew Dunn, Anthony Palazzo


Wynn Resorts buys out biggest stakeholder Okada, asks him to resign after payments probe
By Associated Press

NEW YORK — Wynn Resorts Ltd. is looking to sever ties with its biggest stakeholder and one-time ally.

The Las Vegas casino operator said Sunday that it forcibly bought back all the shares controlled by Kazuo Okada after finding the Japanese tycoon made improper payments to overseas gambling regulators. The company also filed a lawsuit against Okada for breach of fiduciary duty and asked him resign from its board.

The announcement marked the latest deterioration of Okada’s relationship with Steve Wynn, founder of Wynn Resorts.

Okada is the founder of casino game maker Universal Entertainment Corp., which held an almost 20 percent stake in Wynn Resorts through its privately held subsidiary Aruze USA Inc.

Aruze’s 24 million shares were worth about $2.7 billion based on Friday’s closing price and were acquired for the discounted price of about $1.9 billion.

The actions by Wynn Resorts stem from a separate casino resort project Okada is undertaking in the Philippines.

After a year-long investigation, Wynn Resorts said it found more than three dozen instances over a three-year period in which Okada and his associates engaged in “improper activities for their own benefit.”

That included cash payments and gifts totaling about $110,000 to foreign gaming regulators, the company said. Wynn Resorts said the actions were in violation of U.S. anti-corruption law.

The investigation, which was led by a former FBI director Louis Freeh, also found Okada and his associates consciously took actions to conceal “the nature and amount of these payments,” Wynn said.

Based on the report, Wynn Resorts said its board found that Okada is “unsuitable.” The company’s articles of incorporation provide for redemption at “fair value” of the shares held by unsuitable individuals.

The company issued a 10-year, $1.9 billion promissory note in redemption of the shares. The notes bear an interest rate of 2 percent.

Wynn said it will also immediately recommend that Okada be removed from the board of its Hong Kong subsidiary, Wynn Macau Limited.

An email sent to Aruze seeking comment from Okada was not immediately returned.

Since 2000, Okada has invested $380 million in Wynn Resorts. But last month, Okada filed a lawsuit against the company to seek financial documents regarding Wynn’s $135 million donation to the University of Macau; its 2010 amendment to a shareholders agreement among Okada, company founder Steve Wynn and Wynn’s ex-wife, Elaine Wynn; and the use of $30 million that Okada gave to Wynn Resorts in 2002 to help develop a Macau casino project.

During a conference call with investors earlier this month, Steve Wynn addressed the company’s “sharp disagreement” with Okada over his dealings in the Philippines.

Wynn said that the company had taken “a very strong opinion about not wanting to give the impression that Wynn Resorts was the developer of the land that (Okada) acquired in the Philippines.”

Wynn said that Okada was free to go into business in the country, but that he did so “without the organizational support or financial support of the company that he is an investor in at the moment.”

In Las Vegas, Wynn Resorts Ltd. owns the Wynn Las Vegas and Encore Las Vegas resorts. The company also owns Wynn Macau and Wynn Encore Macau in China.