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Wynn at War
Wynn Macau Ltd. has removed Japanese businessman Kazuo Okada from its board of directors but the Wynn Okada saga is just heating up Reports are a far cry from what has unfolded between Steve Wynn and former friend and business partner Kazuo Okada.
Some analysts say the show is just getting started. Others claim Wynn Resorts Ltd. may have breached Macau’s privacy laws by reporting Mr Okada’s activities.
The saga began unravelling in January (see report below) and continued last month when the board of Wynn Macau Ltd. voted to immediately remove Mr Okada as a non-executive director.
A few days earlier, the board of parent company Wynn Resorts forcibly bought out Mr Okada’s 19.7-percent stake at a steep discount. The shares were valued at 30 percent below the market price because, according to the company, they were restricted under the terms of an agreement between Mr Wynn, his former wife Elaine and Mr Okada that locked up their shareholdings and votes.
Wynn Resorts went ahead with the forcible buyout after accusing Mr Okada of making payments totalling US$110,000 (MOP880,000) to executives of the Philippines gaming regulator, Pagcor, breaching United States anti-corruption laws. It is alleged he offered gifts, free accommodation and dinners at Wynn’s properties in Macau and Las Vegas, Nevada. Wynn Resorts said it took back Mr Okada’s shares to protect the company’s gaming licenses.
Toxic gifts
A year-long inquiry by Wynn’s compliance committee, which is chaired by former Nevada governor Robert Miller and included former Federal Bureau of Intelligence director Louis Freeh among the investigators, found “Mr Okada and his associates and companies appear to have engaged in a longstanding practice of making payments and gifts to his two chief gaming regulators at the Philippines Amusement and Gaming Corporation (Pagcor), who directly oversee and regulated Mr Okada’s provisional licensing agreement to operate in that country”.
The Freeh report says Mr Okada and his associates have “consciously taken active measures to conceal both the nature and amount of these payments”.
Mr Okada was awarded a license in 2008 to operate a casino in what is now known as Entertainment City Manila, for which construction started in January. The Wynn Resorts board opposed Mr Okada’s decision to invest in gaming in the Philippines, which led to a split between both sides.
Returning fire, the Japanese businessman said the forcible buyout was an “outrageous” action by the board and that he would take legal action.
Although no longer on the board of directors at Wynn Macau, Mr Okada is on the Wynn Resorts board until he steps down or is voted out by shareholders at the company’s annual meeting, due to be held in May. The company has asked that he resign.
Meanwhile, and largely based on the findings of the Freeh report, Wynn Resorts has filed a lawsuit against Mr Okada in Las Vegas accusing him of breaching fiduciary duty and related offences.
Next moves
The Freeh report lists former Pagcor chairman Efraim Genuino and current chairman Cristino Naguiat having stayed at Wynn properties in Macau and Las Vegas. Disclosing that information may be a privacy breach, since Wynn Resorts made the report public in a filling.
The Macau law on personal data protection came into effect in 2006. It states that information can only be collected for specific and legitimate purposes and says that any information gathered can only be used within Macau. It can only be transferred to outside of the territory in special cases.
The Office for Personal Data Protection says that it is reviewing the Freeh report.
“[The office] is aware of this matter and has deep concerns over this case,” a spokesperson told Macau Business.
“The case is complicated and the Office for Personal Data Protection needs to study the available documents carefully before determining whether there is any evidence suggesting a possible breach of the Personal Data Protection Act in Macau.”
Macau’s gaming regulator too requested Wynn Macau for more information on the decision made by Wynn Resorts Ltd. to forcibly buy out Mr Okada. The head of the Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves said the regulator had been informed about the decision first hand but that more details were requested.
The quarrel between Wynn Resorts and Mr Okada should not have a direct impact on Wynn’s operations here since the Japanese businessman is not a direct shareholder of Wynn Macau, said Mr Neves.
Ripple effect
While authorities in Macau sit and watch, deciding whether or not actions need to be taken, financial advisors expect investigations to be carried out by the Nevada Gaming Commission “into what transpired between the two parties, and a ruling on how the matter is going to be decided,” says Yale Bock, president of Y H & C Investments, a registered investment advisor based in Las Vegas.
He says the “Securities and Exchange Commission and U.S. Department of Justice will probably investigate the details of the dispute, including all allegations of bribery.”
In regards to Macau, “one can only imagine how government officials in China view the public airing of dirty laundry, but certainly it cannot be considered a good thing for Wynn Resorts,” Mr Bock says.
For his part, Mr Okada says he will “vigorously” pursue his casino project in the Philippines.
“I intend to vigorously continue my US$2-billion [MOP16 billion] investment” in Entertainment City Manila, Mr Okada said in a statement read to Philippines legislators and quoted by Bloomberg.
“Rest assured that I will be able to prove that all of the accusations are baseless and are lies that have been blown out of proportion.”
Philippine President Benigno Aquino ordered an inquiry into allegations that the Pagcor chairman Mr Naguiat accepted illegal gifts from Mr Okada. Mr Naguiat has said he will not quit, as has been requested by some. He has denied any wrongdoing but confirmed staying at Wynn Macau and Las Vegas.
He said it was a standard industry courtesy and reciprocity. Other than complimentary accommodation, no gifts in cash or in kind were received by Pagcor officials during his tenure, Mr Naguiat added.
Philippine politicians want to ban Mr Wynn from doing business in the country, saying his allegations of bribe taking by the country’s gaming regulator have denigrated the country’s image.
Spotlight on varsity donation
Wynn Resorts Ltd. announced recently that the United States Securities and Exchange Commission (SEC) is launching an informal inquiry over its subsidiary Wynn Macau Ltd.’s MOP1.1 billion (US$135 million) donation to the University of Macau.
Wynn Resorts said in a regulatory filing that it had received a letter from the SEC requesting “the company preserve information relating to the donation to the University of Macau, any donations by the company to any other educational charitable institutions, including the University of Macau Development Foundation, and the company’s casino or concession gaming licenses or renewals in Macau.”
Wynn Resorts said it would comply fully.
The gaming operator said the letter follows the lawsuit filed against the company by Kazuo Okada. Mr Okada in January filed a lawsuit against Wynn Resorts alleging he was blocked from seeing the company’s financial records after he objected to the donation to the University of Macau.
This was the incident that appears to have triggered the feud between both parties that saw Wynn Resorts forcibly buy out Mr Okada’s 19.7-percent stake in the U.S.-based gaming operator.
In May last year, Wynn Macau made a commitment to the University of Macau Development Foundation consisting of a US$25 million payment and promises of additional donations of US$10 million a year from this year through to 2022.
Wynn Resorts is the second U.S.-based casino operator to face an SEC probe into its Macau operations. Las Vegas Sands Corp. said last year it faced an inquiry into compliance with US anti-bribery laws. Details of that case have been few and far between.
