Wynn Resorts says Okada improperly paid regulators, buys out his shares
AP Photo/Nevada Appeal, Cathleen Allison
19 February 2012
19 Feb. 2012 1:25 p.m.
VEGAS INC and Sun archives
- Wynn exec Okada sues to see company’s books in spending dispute (Jan. 11, 2012)
- Wynn joining forces with Okada (June 25, 2002)
- More gaming news
Source: Wynn probe of Okada covers S. Korea, Filipino regulatorsThe Wynn Resorts’ investigation of board member Kazuo Okada disclosed Sunday suggests his conduct in Las Vegas, South Korea and the Philippines caused alarm among his fellow board members.
The investigatory report by former FBI director Louis Freeh’s company hasn’t been made public, but a person who has seen it told the Sun and VEGAS INC on Sunday that it asserted these findings:
• Okada’s casino-resort development in the Philippines appears to have been arranged in violation of Filipino constitutional provisions requiring such projects to be 60 percent owned by Filipinos.
• During times when Okada was trying to arrange for development of the Philippines resort, he or his associates and companies covered expenses for Filipino regulators at both Wynn Las Vegas and Wynn Macau.
• Cristino Naguiat, the chief gaming regulator in the Philippines whose company is also investing in the Okada resort there, visited Wynn Macau in September 2010 with his friends and associates. Okada and his associates tried unsuccessfully to have resort officials keep the visit incognito and also to cover some of the expenses of the visitors. Wynn learned of this because some of their expenses were covered by an Okada account at the resort. The purpose of the visit ostensibly was for Naguiat to learn more about the casino business.
• Okada, his associates or companies also may be linked to improper conduct involving a gaming official in South Korea, something that requires further investigation.
• The activities of Okada, his associates and companies "constitute a substantial ongoing risk to Wynn Resorts and to its board of directors."
• Okada, who was recently interviewed for the Freeh report, told investigators one employee had been fired and another resigned because of problems with his companies paying excessive amounts to cover some of the expenses of the gaming regulators.
• Okada denied saying he feels payments to casino regulators in Asia are appropriate and he recalls seeing the Wynn policy that all directors receive training in Foreign Corrupt Practices Act compliance. Okada told investigators he referred that policy directive to his attorneys.
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 Okada’s 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 wasn’t immediately available Sunday. A request for comment was placed with Aruze’s public affairs team.
Sunday’s 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.
A businessman well known in Japan, Hong Kong and elsewhere in Asia, Okada is a billionaire pachinko gambling machine maker who’s also developing a casino resort in the Philippines — a project Wynn claims is a conflict of interest as it would compete with Wynn’s business including its Macau casinos.
Sunday’s 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.
"Freeh’s 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 company’s Code of Conduct. These troubling discoveries include cash payments and gifts totaling approximately $110,000 to foreign gaming regulators,” Wynn’s 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. Okada’s 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 company’s 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 Sunday’s 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."
Wynn’s 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 Company’s 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.
Wynn's move to buy Okada's shares of the company would appear to make CEO Steve Wynn and his ex-wife, 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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