Wynn scores interim win in legal struggle with Okada

AP Photo/Nevada Appeal, Cathleen Allison

Las Vegas casino mogul Steve Wynn, right, talks with Kazuo Okada during a Gaming Commission hearing Thursday, June 17, 2004, in Carson City, where Okada received approval for a license for his Japanese Aruze Corporation to manufacture and sell slot machines in Nevada.

A federal judge on Thursday rejected an effort by Wynn Resorts Ltd. board member Kazuo Okada to make a U.S. anti-bribery law a key issue in the litigation between he and the company.

After Wynn Resorts forcibly redeemed Okada's $2.7 billion in shares in the company and moved to remove him from the board for providing benefits to Filipino casino regulators, among other things, Wynn Resorts sued Okada and his companies in state court in Las Vegas alleging he had breached his duties as a director and wasn't a suitable person under Nevada gaming regulations.

Okada's companies then moved that lawsuit to federal court, saying Wynn Resorts had accused Okada of violating the federal anti-bribery law, the Foreign Corrupt Practices Act (FCPA). Okada attorneys said the federal court needed to handle the case since the FCPA was at issue and there are so many ambiguities in the FCPA that even the American Gaming Association has called for its clarification.

The law is aimed at blocking U.S. companies from paying bribes to greedy foreign officials.

Wynn Resorts fought the transfer of the lawsuit to federal court, and on Thursday U.S. District Judge Larry Hicks sent it back to state court.

''This is a state law claim. It's not dependent on if the FCPA was violated," Hicks said from the bench after a hearing.

The judge did allow Okada attorneys to file briefs requesting that a counterclaim against Wynn Resorts alleging federal securities law violations remain in his court.

Hicks' ruling means there will be two Wynn-Okada lawsuits under way this summer before Judge Elizabeth Gonzalez in Clark County District Court.

In one, the case sent back to state court Thursday, Wynn is suing Okada. Board member Elaine Wynn has joined the fray in that case, asking that she be freed from a stockholders' agreement so she can sell an unspecified part of her $1 billion stake in the company.

In the second suit, Okada is asking Gonzalez to require Wynn Resorts to turn over to him records related to the company potentially entertaining and providing benefits to gaming regulators in the Chinese district of Macau, where it has a lucrative gaming license. Wynn Resorts has denied such conduct. Okada also is questioning the $135 million donation pledge by Wynn Resorts to the University of Macau — a gift Wynn has said is appropriate.

While Hicks in his ruling from the bench Thursday didn't reach the merits of the claims Okada and Wynn Resorts are leveling against each other, his decision was at least an interim legal victory for the Wynn legal team that includes attorney Paul Rowe of the New York City law firm Wachtell Lipton Rosen & Katz.

In oral arguments Thursday, Rowe said the Wynn Resorts' lawsuit against Okada was a simple case in which a director and significant shareholder was found to be an unsuitable person by the board under the company's charter and that his continued involvement with the company jeopardized its gaming license in Nevada.

"The gaming license is the lifeblood of the company," he said, emphasizing the Nevada gaming regulatory system was created by the state and had nothing to do with federal law — meaning licensure issues are a state rather than federal court issue.

For Wynn Resorts and fellow Macau gaming operator Las Vegas Sands Corp., issues with the FCPA will likely continue for some time. The U.S. Securities and Exchange Commission is looking into Wynn Resorts' compliance with the law while the SEC and the Justice Department have similarly been looking into Las Vegas Sands' actions in Macau. Like Wynn Resorts, Las Vegas Sands is tied up in litigation where the FCPA has come up — and shareholders have hit both companies with suits complaining about FCPA issues and asserting other grievances.

Attorneys for Okada's companies Aruze USA Inc. and Universal Entertainment Corp. now may continue to focus their efforts in the short term on reversing the Wynn Resorts' forced redemption of Okada's $2.7 billion in stock and blocking a threatened move by Wynn Resorts to have a shareholders' meeting so shareholders can remove Okada from the company board.

''The judge’s ruling today addresses only the question of where the case should be heard, not the merits of the case. While we respectfully disagree with the court’s decision, we’re quite confident that a jury, no matter where it is seated, will agree that Wynn Resorts CEO Steve Wynn and his dutiful Board of Directors unlawfully stripped Aruze USA of its leadership stake in the company without any legitimate justification and to silence a vocal critic,'' Aruze USA spokesman Steve Getzug said after the hearing.

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