February 19, 2012 / 4:16 PM / 6 years ago

Wynn accuses top shareholder, buys out his stake

NEW YORK (Reuters) - Wynn Resorts Ltd Chief Executive Steve Wynn upped the ante in his fight against former business partner Kazuo Okada, accusing the Japanese gaming mogul of improper payments to foreign gaming regulators and forcibly buying back his 20 percent stake in the casino company at a deep discount.

A spokesman for Okada was not immediately available to comment on the developments.

Wynn Resorts said on Sunday its board had decided Okada was “unsuitable” after reviewing a report presented to the Wynn board on Saturday that found more than three dozen instances over a three-year period in which Okada and his associates allegedly engaged in “improper activities for their own benefit in apparent violation of U.S. anti-corruption laws.”

The report came after a year-long investigation by several outside investigators, including a former director of the Federal Bureau of Investigation, hired by a company compliance committee to scrutinize Okada and his associates.

The company accused Okada and his associates of making improper cash payments and gifts totaling about $110,000 to foreign gaming regulators, including in the Philippines.

Okada is chairman of Universal Entertainment Corp and made his fortune off pachinko machines, a cross between pinball and slots, popular in Asia. He and Steve Wynn, the company’s founder and also a self-made billionaire, were close friends and business partners for 12 years before their relationship turned sour.

Wynn, who owned a smaller stake in his eponymous casino company than Okada did, last year stripped Okada of his vice chairman title. Last month, Okada sued Wynn for denying him financial information related to a $135 million donation the company made to the University of Macau, which he had termed “inappropriate.”

The U.S. Securities and Exchange Commission is now looking into the donation.

“This is tit for tat,” said Michael Koehler, assistant professor of business law at Butler University, who writes a blog about the U.S. Foreign Corrupt Practices Act (FCPA).

“This may be Wynn’s way of getting in the good graces of the enforcement attorneys ... but it isn’t going to make his own SEC scrutiny go away,” Koehler added. In fact, it could possibly increase the scrutiny, he said. “If Wynn had on its corporate board a person like this, who Wynn itself is alleging to have violated FCPA, what else do I need to look at?”

Wynn Resorts said it had bought back Okada’s 24 million shares held by Aruze USA Inc, worth $2.7 billion based on Friday’s closing price of $112.69. Okada was the casino company’s largest shareholder.

It promised to pay him $1.9 billion in 10 years via a promissory note paying annual interest of 2 percent.

Okada was also asked to resign as a director of Wynn Resorts, the company said, adding that it will also recommend that he be removed as a director from the board of its Hong Kong subsidiary, Wynn Macau Ltd.

GIFTS IN THE PHILIPPINES

The falling out between the longtime friends surprised many in the casino industry. Okada had helped pull Wynn back from the brink after he unloaded his Mirage casino to MGM Grand a decade ago, and helping to transform Las Vegas into a family-friendly destination.

Their friendship was so close that Wynn had proclaimed in 2008: “I love Kazuo Okada as much as any man that I’ve ever met in my life. He’s my partner and my friend. And there is hardly anything that I won’t do for him.”

However, Wynn had become increasingly concerned over Okada’s plans to open a casino in the Philippines, which would put them in competition with one another.

Wynn Resorts said on Sunday its probe stemmed from concerns the Wynn board had about Okada’s activities in the Philippines and statements he had allegedly made to Wynn directors that gifts to regulators are permissible in Asia.

The company said the investigation, led by Louis J. Freeh, a former director of the FBI, found numerous violations of the FCPA by Okada.

A source familiar with the matter said the report alleged that Filipino regulators had received dinners, Chanel bags and suites at the Wynn Macau, all courtesy of Okada.

Wynn Resorts had previously said it denied Okada information about its donation to the University of Macau for competitive reasons. Okada has said that Wynn’s donation was inappropriate, in part because the last installment of the donation is due in 2022 - the same year that Wynn Macau’s gaming concession expires.

The next hearing in the case is scheduled for February 23.

Wynn Resorts also filed a lawsuit against Okada and his company in Nevada District Court, Clark County, for breach of fiduciary duty and related offenses. The company said it also plans to communicate with the appropriate regulatory agencies and government authorities on these matters.

Reporting by Martinne Geller in New York; editing by Maureen Bavdek, Gary Crosse

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