June 8, 2017 / 11:51 PM / 2 years ago

Japan's Universal accuses founder Okada of improper loan

(Reuters) - Universal Entertainment Corp (6425.T), a Japanese maker of slot machines, said on Thursday it was investigating what it suspects was an improper transfer of funds by Kazuo Okada, its founder and chairman, to a company he controls.

FILE PHOTO -- Kazuo Okada, chairman of Tiger Resort, Leisure and Entertainment Inc. listens at the press launch of 65th annual Miss Universe competition on January 30, 2017 to be held in the Philippines, during a news conference in Makati city, Metro Manila, Philippines November 16, 2016. REUTERS/Erik De Castro/File Photo

In a statement on Universal’s website issued under the name of the company’s president, Universal said it had found the possibility of “fraudulent acts” related to a 2015 loan of HK$135 million ($17.31 million) to an unnamed third party.

The statement says that all but HK$5 million of the loan was subsequently transferred to Okada Holdings Limited, a company controlled by Okada and his son, and that the purpose of the loan was “to achieve personal benefit for Chairman Okada.”

Okada Holdings holds a majority stake in Universal, whose shares fell 6.1 percent to 3,250 yen Friday morning in Tokyo.

The statement says the transfer was carried out by Okada and another director, Yoshinao Negishi. A week earlier, the company said both men would not be reappointed to the board at its annual shareholder meeting this month.

Okada could not be reached for comment. David Krakoff, a lawyer who is representing Okada and Universal Entertainment in an unrelated U.S. civil legal proceeding, did not respond to an email or phone call requesting comment.

Negishi did not respond to messages to a social media account seeking comment.

No one at Universal could be reached. The statement was released in the evening Tokyo time after normal working hours. The company’s president, Jun Fujimoto, could not be reached for comment.

Universal Entertainment said it has established an investigative panel composed of three external lawyers to further probe the transfer of funds, with an interim report expected to be completed around the end of June.

Okada, who founded the predecessor of Universal in 1969 and ranks among Japan’s wealthiest people, has focused much of his time recently on a $2.4 billion casino resort that opened earlier this year in the Philippines. Okada has billed the ambitious project as a way to tap into the growth of Asian gaming and to diversify Universal’s revenues beyond its mainstay business of selling machines for pachinko, a mix of slot and pinball that is the dominant form of gambling in Japan.

It is not the first boardroom drama involving Okada, who was ousted as a director of U.S. casino operator Wynn Resorts (WYNN.O) in 2012 based on allegations by Wynn’s board that he had wined and dined Philippine gaming officials in possible violation of U.S. anti-bribery laws. Okada has denied these allegations and is fighting Wynn in a civil lawsuit in Nevada alleging his ouster was wrongful.

Separate from the boardroom battles, Okada and his companies remain under investigation by the FBI over a $40 million payment to a Manila-based consultant in 2010. The FBI’s probe is focused on whether the payment was aimed at helping Universal gain tax and ownership concessions for the casino from the Philippine government, according to people with knowledge of the matter.

Universal and Okada have denied any wrongdoing and filed a defamation lawsuit against Reuters in 2012 for its reporting on the payments. The Tokyo District Court ruled in 2015 that Universal’s case was without merit. Last year the Tokyo High Court upheld that ruling, dismissing Universal’s appeal. Universal has appealed to the Supreme Court of Japan.

Reporting by Nathan Layne in Washington and Emi Emoto in Tokyo; Editing by Amy Stevens

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