Two Way Hard Three | Las Vegas Casino & Design Blog

January 11, 2012

UPDATED: Who Will Wynn?

Posted by Hunter

Disclaimer: I really have no idea what I'm talking about. For all I know, Okada is a lunatic and Wynn Resorts are protecting themselves from a madman with some sort of hidden agenda. Still, for the purposes of this post, let's assume he's a reasonable, successful businessman that's a bit weirded out that a company he owns 20% of is being secretive about their finances.

Well, I guess he's not gonna be chairman anytime soon.

Today we learned that Kazuo Okada, the largest individual shareholder in Wynn Resorts and a board member, is suing the company (SEC document). Why? He questioned a few of the company's large financial transactions and wanted to examine the books. The company said no. He believes that his shares, and probably more importantly his place on the board, gives him the fiduciary bonafides he needs to get that access.

The way the suit reads, Okada was against a $135 million donation to the University of Macau. He objected. The board didn't listen and went ahead anyway and from what I can tell, that set him off.

He wants the details on that transaction, wants to know where a $120 million he invested in the company in 2002 went (supposedly earmarked for Macau development ; the company at first claimed they didn't know he invested it - not confidence inspiring) and additional details on the amended shareholder agreement that went through after Steve and Elaine Wynn divorced in 2010 (the agreement split the ownership but effectively left the voting control with Steve).

What would one find if they examined the books of the pre-public company? Well, we have no idea... but I don't think it would be a surprise to see some lavish spending on executive travel to Macau, office suites and the like. Maybe something more juicy? Maybe, uh, 'gifts' to government officials in China? Without any details, we can't judge but something about that time period has Okada at least curious... Maybe there's some potential for embarrassment if some of this comes out? Who knows.

As far as the Macau University donation goes, given the term of the payments and them coinciding with the current expiration of Wynn's concession in 2022, I can't help but wonder if this 'civic good' is at least partially motivated by that renewal process. From what we're told in these documents, a donation of that size was unprecedented... and as far as I know, none of Wynn's kids want to go to school there (the Steve Wynn Center for Gaming Research? Paging Dr. Dave).

Why would the company say no? Either there's something in there they don't want to share or they simply don't believe the request is legitimate... but given that it's now a public spectacle, there has to be more to it. Perhaps the relationship between Okada and Wynn has completely broken down?

For Okada to go to court against a company where his investment is worth over a billion dollars, he had to be really pissed. How could this impact future gaming expansion in Japan, where Okada's partnership was seen as giving Wynn Resorts a powerful leg up? One thing for sure: this will be something to watch.

Update: Wynn Resorts responded today with a strongly worded press release suggesting that Okada's request was without merit and pointed to a potential falling out between Okada and the board over his participation in a casino project in the Philippines.


Read archived comments (9 so far)
January 11, 2012 7:00 PM Posted by detroit1051

In Hunter's words, Okada must be really pissed. Okada is burning his bridges behind him:
"Mr. Wynn had a track record of planning and opening casino and resort projects such as the Golden Nugget, the Mirage, Treasure Island, and Bellagio. He lost control of these ventures, however, to MGM. In 2000, Mr. Wynn purchased the former Desert Inn in Las Vegas and tried to develop it. He was having trouble finding investors, until he met Mr. Okada."

"On November 9, the Company sent a letter indicating that it could not locate the $30 million transferred to it by Aruze USA in April 2002."

This will get interesting unless Wynn moves to settle in some way to stop public disclosure.

January 11, 2012 7:20 PM Posted by Brian Fey

Okada is really if a hard spot here. He can't totally trash the company, as he'd lose hundreds of millions in stock value losses. Pretty odd. But most things surrounding Wynn are. :)

January 11, 2012 7:51 PM Posted by JamesAt15

I wonder if this is at all related to the recent Olympus scandal? After Olympus' board just got ousted because of payoffs to shady groups being hidden in company acquisitions, maybe Okuda and his people decided to do some due diligence and ensure nothing similar was going on in their own projects.

Maybe there is nothing untoward going on at Wynn, but Okada may need to be able to prove to people that he looked into it and didn't find anything.

January 12, 2012 5:20 AM Posted by doc_al

First, I would imagine "no" is the standard response of any privattely held company when asked for a look at their books, followed closely by "hell no". That part makes sense to me.

Second, if I read the article right, without the amended shareholder agreement, Wynn is no longer holds the most shares, Okada does. He has a legitimate beef there.

Then there's the matter of the size of the bribe, er, civic donation. Again, a legitimate beef if you didn't get buyoff from your largest shareholder on that.

Hope Steve got better at damage control post-MGM.

January 12, 2012 7:48 AM Posted by JohnD

Might this all be a mistake? Wynn Resorts does have a history of the right hand not knowing what the left hand is doing, an unfortunate symptom of such a collegial organization.

January 12, 2012 8:48 AM Posted by parchedearth

I think there are some key pieces missing from what we know. Based solely on the complaint, it sounds like Okada has a good case that Steve is illegally shutting him out. However, for that to be true, at least a half-dozen others would need to be complicit in potentially illegal acts (including the CFO, COO, other board members, compliance officer, and outside auditors). Even if this is just a result of ego and/or senility, there are too many people whose careers are at stake to be hiding any wrongdoing for long.

January 12, 2012 2:57 PM Posted by bigdaddyj

Given the cult of personality around Steve Wynn, I don't really think it's far-fetched to believe others in the corporation would align with him to freeze Okada out. Sounds to me like Wynn wanted a silent partner with deep pockets in Okada and probably after years of trademark Wynn arrogance Mr. Okada finally had enough of the Steve treating him like a nuisance when in reality he owns the biggest stake in the company, a company that would most likely not exist (or at least have had the resources it did in the beginning) without Mr. Okada in the first place.

January 12, 2012 5:51 PM Posted by Jeff in OKC

This reminds me of the scene in one of my favorite movies "Thirteen Days" where 1960"s US Secretary of Defense Robert McNamara is saying that President Kennedy and Soviet Premier Kruschev are communicating in a "new kind of language" through their activities and posturing in the Cuban Missile Crisis. I think every word issued by Okada and Wynn has an important meaning, and someday, all will be revealed.

January 13, 2012 8:19 AM Posted by

How long til Okada restaurant is re-named? Between that and Stratta, there's two places at Wynncore that feature names of past close associates. Okada could really cause some problems for Wynn. What an interesting situation.