Gaming | Wynn on winning streak in 5-year feud with former partners
Steve Wynn’s recent winning streak in court is not only positioning the casino mogul to consolidate control of his empire – it could help him expand into Japan.
Courts in Macau and Nevada last month handed Wynn key victories, dismissing a USD1 billion lawsuit by his former business partner Kazuo Okada and, according to Wynn’s lawyer, “beheading” the Japanese billionaire’s claims in Las Vegas. The two have been feuding since Wynn pushed him out of Wynn Resorts Ltd., alleging he bribed Philippine gaming officials.
Wynn has also gained the upper hand against his ex-wife, Elaine Wynn, who claims he orchestrated her ouster from the company’s board in 2015 in retaliation for her challenging the “tone at the top” and his “reckless mismanagement” of the casino operator.
Victories against both would make it harder for anyone to pursue an unsolicited offer for the business – a real concern for Wynn after he was forced to sell Mirage Resorts 17 years ago. And they could help persuade gaming regulators to grant him a license to open a casino in Japan.
“Steve Wynn is an incredible operator and for Japan he will be an asset,” Alan Silver, an industry veteran who teaches at Ohio University, said by phone. “But regulators will look at everything, and if there are any skeletons, you got to get them out of the closet.”
Wynn’s streak started in June, when Okada’s own company ousted him for misusing funds. Tokyo-based Universal Entertainment Corp. said it was investigating an unapproved HKD135 million ($17.3 million) loan Okada made from a subsidiary that largely wound up at Okada’s family holding company. He was also removed from the board of the casino he built in the Philippines.
The two men once called each other best friends, but according to Okada, things have been strained since 2010, when Wynn’s divorce cut his stake in the company in half and made Okada the largest shareholder. That resulted in Wynn ousting Okada as “unsuitable” and Okada in turn questioning the purpose of Wynn’s $135 million donation to the University of Macau Development Fund in 2011.
Wynn’s lawyers have seized on the Universal Entertainment news, saying it proves Wynn was right all along about Okada being an unsuitable shareholder of a gaming company and a potential threat to its gambling licenses.
“That was definitely a gift to the Wynn side,” said Matthew Close, a lawyer with O’Melveny & Myers LLP in Los Angeles who isn’t involved in the litigation. “If Okada’s side is not on the ropes yet, they are getting close to being on the ropes.”
The next victory came in July when a Macau judge dismissed a $1 billion lawsuit by Okada and his company, claiming Wynn Macau engaged in “contractual transactions contrary to the public order, common decency and the law.”
In that lawsuit, Okada had claimed Wynn Macau should be dissolved because it used illegal means to obtain permission to build a casino on Macau’s Cotai Strip. The judge dismissed the case and fined Okada for vexatious litigation because he’d brought a claim that wasn’t available under the law, according to testimony from Wynn Macau’s general counsel in Las Vegas last month.
That same month back in Nevada, Wynn scored another victory with a state supreme court ruling that limited the information Wynn Resorts’ board has to disclose to Okada about how it reached its decision to redeem his shares. That ruling makes it harder for Okada to argue the bribery allegations were a pretext to get rid of him. Okada continues to contest the forced redemption, saying he was shortchanged by $830 million when he was given a $1.9 billion promissory note that he can’t collect until 2022.
J. Stephen Peek, a lawyer for Okada in the Las Vegas lawsuit, declined to comment on the litigation. David Krakoff, a lawyer for Universal Entertainment, didn’t respond to requests for comment.
Winning the litigation in Nevada can’t hurt Wynn’s prospects in Japan. Wynn Resorts already has people on the ground there, doing conferences and media outreach to increase awareness and improve the image of casinos. Wynn Resorts President Matt Maddox spoke at a casino conference in Japan in May.
Open hearings began last week in Japan over recommended guidelines to govern major resorts in the country that will feature everything from blackjack tables to entertainment. The government is currently weighing regulations that could impose curbs on the gaming industry as more than half of the country’s residents oppose casinos.
Like other countries such as Singapore that have opened their doors in recent years to international casino businesses, Japan will look at Nevada as a model for how to regulate the industry and keep out organized crime, Silver said.
“It would certainly seem that if Wynn were successful in proving his allegations in Nevada, Japanese gaming regulators will pay attention to that,” said David Dalke, a lawyer with Winston & Strawn LLP in Los Angeles, who isn’t involved in the lawsuit.
A spokesman for Wynn Resorts said the company doesn’t think the Okada matter will have any bearing on the permitting process in Japan.
Elaine Wynn’s claims against her ex-husband may also falter if Okada’s allegations don’t hold up. Both have a similar narrative about how they were moved aside for posing a threat to Wynn’s control of his company and a jury might be persuaded more easily if they hear the same story from two otherwise adversarial parties.
Like Okada, Elaine Wynn contends she’s a victim of Steve Wynn’s autocratic ways. She portrays him as obsessed with keeping control of his empire because of his experience in 2000, when Kirk Kerkorian took over Mirage.
Her goal is to get out from under a shareholders’ agreement that gives her ex-husband control over the almost 10 percent stake in Wynn Resorts she was awarded in their divorce, currently worth about $1.3 billion. She’s not allowed to vote or sell her shares, except in small amounts.
She already was dealt a setback when a second set of lawyers was kicked off the case by the judge this year after it was revealed they were given improper access to the company’s proprietary information. She has also abandoned her whistle-blower claims against Wynn.
“A lot of the battle is framing the dispute in the way most favorable to your side,” Close of O’Melveny & Myers said. “Wynn has taken control of the narrative and Okada and Elaine Wynn have been restricted to fighting defensive battles.” Edvard Pettersson, Bloomberg
