5/18/12

Wynn Resorts says Okada improperly paid regulators, buys out his shares - VEGAS INC

Gaming:

Wynn Resorts says Okada improperly paid regulators, buys out his shares
By Steve Green (contact)
Sunday 19 February 2012 10 a.m. Updated 19 Feb. 2012 1:25 p.m.

Wynn Resorts Ltd. of Las Vegas said Sunday it moved to remove its largest shareholder from the company, saying it bought out the shares of billionaire Kazuo Okada for $1.9 billion after determining he had made improper payments to foreign gaming regulators. The casino-resort operator, in a rare Sunday announcement, said its board on Saturday had received an investigatory report on Okada. Based on that report it had "redeemed" the 24 million shares of Wynn stock held by Okadas company Aruze USA Inc. They were redeemed for what the company called "fair value," a $1.9 billion promissory note maturing in 2022 and carrying an annual interest rate of 2 percent. Okada may dispute whether this is "fair value" as the shares are worth some $2.7 billion based on Wynn's recent trading price. Wynn said the $1.9 billion note plan is based on Wynn Resorts' Articles of Incorporation. "Following a finding of 'unsuitability,' the articles provide for redemption at 'fair value' of the shares held by unsuitable persons to protect the company's gaming licenses. The company engaged an independent financial advisor to assist in the fair value calculation and concluded that a discount to the current trading price was appropriate because of restrictions on most of the shares, which are subject to the terms of an existing stockholder agreement," the company said without elaborating on that stockholder agreement. Wynn Resorts also said it asked Okada to resign from its board of directors and had filed a lawsuit against him in Clark County District Court in Las Vegas alleging breach of fiduciary duty and other counts. A copy of the lawsuit wasnt immediately available Sunday. A request for comment was placed with Aruzes public affairs team. Sundays moves by Wynn represent a dramatic escalation in the legal battle between Okada and Wynn, which erupted in January when Okada filed suit demanding Wynn open its books and records to him concerning certain transactions, including a pledge by Wynn's Macau subsidiary to donate $135 million to the University of Macau. That lawsuit led to the U.S. Securities and Exchange Commission opening an "informal inquiry" and asking Wynn Resorts to preserve information about the donation and other matters in Macau. A businessman well known in Japan, Hong Kong and elsewhere in Asia, Okada is a billionaire pachinko gambling machine maker whos also developing a casino resort in the Philippines a project Wynn claims is
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5/18/12

Wynn Resorts says Okada improperly paid regulators, buys out his shares - VEGAS INC

a conflict of interest as it would compete with Wynns business including its Macau casinos. Sundays statement by Wynn said its Compliance Committee had concluded a year-long investigation after receiving "an independent report detailing numerous apparent violations of the U.S. Foreign Corrupt Practices Act (FCPA) by Aruze USA Inc., its parent company Universal Entertainment Corp. and its principal shareholder," Okada. The Foreign Corrupt Practices Act is a law aimed at deterring U.S. companies from making bribes in foreign lands in order to win business in those countries. Wynn said its Compliance Committee, chaired by Wynn director and former Nevada Gov. Robert Miller, hired several investigators, including Freeh, Sporkin and Sullivan LLP, led by former FBI director Louis Freeh. "Freehs investigators uncovered and documented more than three dozen instances over a three-year period in which Mr. Okada and his associates engaged in improper activities for their own benefit in apparent violation of U.S. anti-corruption laws and gross disregard for the companys Code of Conduct. These troubling discoveries include cash payments and gifts totaling approximately $110,000 to foreign gaming regulators, Wynns statement on Sunday said. "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. Okadas Provisional Licensing Agreement to operate in that country, the company said, citing the Freeh Report. The report also alleged that Okada and his associates have "consciously taken active measures to conceal both the nature and amount of these payments." Based on the Freeh Report, the Wynn Board found that Aruze, its parent company Universal Entertainment and Okada are "unsuitable" under the provisions of the companys Articles of Incorporation. If the allegations are true, they would also appear to be violations of gaming regulations where Wynn operates in Nevada and Macau. "The board was unanimous (other than Mr. Okada) in its determination," Wynn said in Sundays statement. "The Compliance Committee and the entire Board are deeply disturbed by the behavior of Mr. Okada, and we have fulfilled our obligations to our stockholders, the state of Nevada and the Wynn community," Miller said in a statement issued by Wynn. "As directors of a gaming company privileged to hold licenses, we have a duty to uphold the highest ethical standards and comply with the laws and the terms of the licenses upon which our business depends. Unfortunately, it is very clear from the Freeh Report that Mr. Okada repeatedly flouted these requirements." Wynns statement also said there had been concern that Okada had told Wynn Resorts directors "that gifts to regulators are permissible in Asia." "Mr. Okada is the only director of Wynn Resorts who has continued to refuse to sign the Companys Code of Conduct or participate in mandatory Foreign Corrupt Practices Act training for directors," Wynn said in its statement. "The company intends to communicate with the appropriate regulatory agencies and government authorities on these matters," the statement said, hinting that Okada may face scrutiny from officials in the Philippines, Macau and in Nevada with the State Gaming Control Board and Nevada Gaming Commission as he and his companies are licensed by the state.
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5/18/12

Wynn Resorts says Okada improperly paid regulators, buys out his shares - VEGAS INC

Wynn's move to buy Okada's shares of the company would appear to make CEO Steve Wynn and his exwife, Elaine Wynn, the largest company shareholders. A March 2011 regulatory filing said each of the Wynns held about an 8 percent stake in the company vs. Okada's nearly 20 percent stake.

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