Wynn Resorts Ltd said Sunday its board asked a director to resign and already redeemed his 20% stake in the company after an internal investigation found numerous violations by him of the Foreign Corrupt Practices Act.
Las Vegas-based Wynn said Kazuo Okada bribed gaming regulators in the Philippines more than three dozen times during a three-year period. The bribes included cash and gifts of $110,000.
Okada, Wynn said, was the only director who refused ‘to sign the company’s code of conduct or participate in mandatory Foreign Corrupt Practices Act training for directors.’
Wynn hired Louis Freeh, the former federal judge and FBI director, to conduct the investigation. He reported to the board’s compliance committee.
Based on Freeh’s report, Wynn’s board found Okada and two of his companies, Aruze USA, Inc. and Universal Entertainment Corporation, “unsuitable” for any association with Wynn.
Freeh’s year-long investigation, Wynn said, was triggered by statements Okada made to Wynn Resorts’ directors ‘that gifts to regulators are permissible in Asia.’
Okada, 68, was vice chairman of Wynn Resorts’ board from 2002 until last year and served as a director of Wynn Macau Limited. He was Wynn Resort’s biggest shareholder. The Nevada Gaming Commission had approved his suitability. Okada’s companies make pachinko machines and video games. He was ranked 26th on Forbes’ 2010 list of Japan’s richest people.
Based on Freeh’s findings, Wynn said it had already redeemed Aruze USA, Inc.’s 24 million Wynn Resorts’ shares. The action was allowed by Wynn’s Articles of Incorporation. The company said:
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.
Wynn said it issued to Okada a 10-year $1.9 billion promissory note with interest at 2%. Based on Friday’s closing price, his shares were worth $2.7 billion.
Bloomberg reported that in Monday morning trading Okada’s Universal Entertainment Corp. ‘fell by a record in Tokyo . . . after Wynn Resorts Ltd. redeemed Universal’s 20 percent stake at a 31 percent discount and accused Okada of improper payments.’
Wynn said its majority-owned Hong Kong listed subsidiary, Wynn Macau, will also remove Okada from its board of directors.
In its release Sunday, Wynn said Okada had a ‘longstanding practice’ of making payments and gifts to two chief gaming regulators at the Philippines Amusement and Gaming Corporation responsible for overseeing Okada’s operating license. Freeh’s report, Wynn said, showed that Okada had ‘consciously taken active measures to conceal both the nature and amount of these payments.’
Wynn’s compliance committee was chaired by former Nevada Governor Robert Miller. His statement said Wynn’s board had fulfilled its ‘obligations to our stockholders, the State of Nevada and the Wynn community.’
‘As directors of a gaming company privileged to hold licenses,’ Miller said, ‘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.’
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Reuters’ Martinne Geller said Wynn Resorts stripped Okada of his vice chairman role last year. Wynn became concerned about Okada’s plans to open a casino in the Philippines, Geller reported, putting him in competition with Wynn.
In January, Okada sued Wynn in Nevada seeking information about a $135 million donation to the University of Macau, among other things. Okada called the donation inappropriate because the final installment is due in ten years, when Wynn Macau’s gaming license is set to expire.
Charitible contributions can violate the FCPA if they benefit government officials and are intended to obtain or retain business or gain an unfair advantage.
Wynn said in a recent SEC filing the pledge was considered by the directors of both Wynn Resorts and Wynn Macau and ‘approved by 15 of the 16 directors who serve on those boards. The sole dissenting vote was Mr. Kazuo Okada whose stated objection was to the length of time over which the donation would occur, not its propriety.’
The SEC’s Salt Lake Regional Office sent Wynn a letter this month ‘requesting that, in connection with an informal inquiry by the SEC, 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 said it was cooperating with the SEC.
Wynn said yesterday it filed a lawsuit against Okada and his companies in Nevada state court for breach of fiduciary duty and related offenses.
Wynn Resorts Ltd. trades on NASDAQ under the symbol WYNN.