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Wynn director could face Macau bribery charges

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image Wynn Macau is set to remove its director Kazuo Okada, who could face bribery charges after a probe claims he made allegedly improper payments to Philippine gaming officials

Wynn Macau director Kazuo Okada may face bribery charges after a probe by the casino operator’s mother company uncovered alleged improper payments to Philippine gaming officials.
US-based Wynn Resorts bought out its largest shareholder, asked him to quit the board and filed a lawsuit in Nevada State against Okada and two of his companies for breach of fiduciary duty and related offenses.
After a year-long investigation led by former Nevada governor Robert Miller and Louis Freeh, the ex-director of the Federal Bureau of Investigation, Wynn Resorts said it found “more than three dozen instances over a three-year period in which Mr. Okada and his associates engaged in improper activities (…) in apparent violation of U.S. anti-corruption laws”.
Sources told Macau Daily Times the probe was carried out on the ground by a local company linked to the gaming industry and that the report’s conclusions have been sent to the US judicial bodies.
The investigation uncovered cash payments and gifts valued at about USD 110,000 to “the two chief gaming regulators” in the Philippines, Wynn Resorts said in a statement late Sunday.
Okada may have breached Macau laws as well. According to sources and documents quoted by international media, Philippine Amusement and Gaming Corporation past and current executives and their families received travel to the Beijing Olympics, as well as dinners, Chanel bags, suites and credit for gaming at local hotel-casino Wynn Macau.
Okada and his associates consciously took actions to conceal “the nature and amount of these payments,” the company added. The statement also said Okada had told Wynn Resorts’ directors “that gifts to regulators are permissible in Asia”.

‘More than three dozen instances over a three-year period in which Mr. Okada and his associates engaged in improper activities (…) in apparent violation of U.S. anti-corruption laws’ - Wynn Resorts

Board vote

According to Wall Street Journal, Okada told the investigators he was not aware of the payments, which he claimed were made by his employees. One employee was fired and another resigned over the incident, he added.
The Japanese businessman also said he had launched an investigation and would ask the Filipino officials to return the payments and gifts, the US newspaper said, quoting the investigation report.
A public relations firm working for Wynn Resorts confirmed that the company would recommend that the Wynn Macau board also “votes to remove Mr. Okada for cause”. The board of the local operator will meet “soon” to discuss the possible dismissal of the pachinko tycoon who is currently a non-executive director, the spokesperson added.
“It’s a very unfortunate event,” Allan Zeman, vice chairman of Wynn Macau, told Bloomberg. “This will not change the nature of the company,” he said. “Mr. Okada is a partner but he is not involved in the day-to-day business.” Zeman declined to give a date for naming Okada’s replacement.
However, according to the local Commercial Code, Wynn Macau can only remove a director through a shareholder vote, a legal expert told MDTimes. The spokesperson has a different opinion: “the board of directors of Wynn Macau can vote to remove a director for cause”.
In addition, Wynn Macau is also required to inform the local gaming regulator of any board change or “any circumstances that might affect its normal operations, such as (…) the existence of any legal suit against itself or any of its administrators”.
The Gaming Inspection and Coordination Bureau (DICJ) confirmed to MDTimes that it was informed of the incident by Wynn Macau even before Wynn Resorts made a public statement.
“We have already asked for more information and our legal advisors will look into these allegations and whether there was any breach of Macau laws, gaming licenses or concession contracts,” DICJ director Manuel Joaquim das Neves said.
Wynn Macau has assured the gaming regulator that the decision and the ongoing legal dispute with Okada “will in no way affect the normal operation of the company,” he added.

‘We have already asked for more information and our legal advisors will look into these allegations’ - Manuel Joaquim das Neves

Lawsuit filed

The company said it filed its own lawsuit on Sunday in Nevada against Okada, Aruze USA and Universal Entertainment for breach of fiduciary duty and related offenses. The filing couldn’t be confirmed independently through electronic court records.
Wynn Resorts will hold a conference call tomorrow. However, it’s unlikely Okada will voluntarily step down as a director of both Wynn Resorts and Wynn Macau. One of his companies, Universal Entertainment, said it would “take all legal actions necessary to protect its investment in Wynn,” the pachinko machine maker said yesterday.
“The decision by the Wynn board, which followed a rushed investigation that lacks absolute findings, to redeem Universal Entertainment’s nearly 20 percent holdings in Wynn Resorts based on its project in the Philippines is outrageous,” Universal said in the statement. “We have not even been provided with the opportunity to review” the report by Wynn’s investigation committee, the company said.
“Mr. Okada probably doesn’t have a lot of options but to follow through on litigation as well and to defend his position,” said Christopher Jones, a senior gaming analyst at Telsey Advisory Group in New York. “I will not expect for the legal headlines to cease with this move by Wynn.”
The company should actually expect further scrutiny, Michael Koehler, assistant professor of business law at Butler University, who writes a blog about the US Foreign Corrupt Practices Act (FCPA), told South China Morning Post.
“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?” he asked.

‘The decision by the Wynn board, which followed a rushed investigation that lacks absolute findings, (…) is outrageous’ - Universal Entertainment

‘Fair value’

Wynn Resorts said it redeemed the 24 million shares held by Aruze USA, a slot-machine company controlled by Okada’s Universal Entertainment, and issued a 10-year USD 1.9 billion promissory note for the stock.
At Friday’s closing price of USD 112.69 in New York, a stake that size – about 20 percent of the shares in Las Vegas-based Wynn – would be worth much more, around USD 2.76 billion.
Wynn Resorts said that, to protect the company’s gambling licenses, it can redeem shares for “fair value” from a person found “unsuitable” under its articles of incorporation. An independent financial consultant helped calculate the fair value, and Okada’s stake was redeemed at a discount because of restrictions on the shares, Wynn said in the statement.
A 10-year promissory note would allow the company to only pay Okada in 2022, thus maintaining a healthy balance sheet to finance the construction of its resort in Cotai, which is still awaiting the Macau government’s green-light.
Last May the chief executive officer of Wynn Macau, Stephen Wynn, said the Cotai project was expected to cost over MOP 20 billion. In October the company announced it had agreed to pay a MOP 1.55 billion government premium for the plot of land, along with a yearly rent of MOP 6.17 million.
Sunday’s move escalates a dispute between Stephen Wynn and Okada, who helped bankroll the company starting 12 years ago.
Okada was stripped of his vice-chairman role last year after alleging improprieties in a donation to the University of Macau that’s the subject of a lawsuit and a U.S. regulatory inquiry.
Last month, Okada sued Wynn Resorts in state court in Nevada State to force the company to produce spending records. That case is pending. Okada opposed Wynn Resorts’ HKD 1 billion pledge to the University of Macau Development Foundation (UMDF).

Donation controversy

The US Securities and Exchange Commission (SEC) has requested information about Wynn’s donation to the university foundation. Wynn was asked in an informal SEC inquiry on February 8 to preserve information about the commitment.
The Macau pledge was consistent with Wynn’s practice of supporting institutions in markets where it operates, the company said. Wynn Resorts said that it will comply with the SEC request and that the stated objection of Okada, who cast the lone dissenting vote among Wynn and Wynn Macau directors, concerned the length of time over which the donation would occur, not its propriety.
In May last year Wynn Macau donated MOP 200 million to UMDF. The company has committed to donating MOP 80 million to UMDF every year until 2022, the same year when its gaming license comes up for renewal.
In his suit, Okada hinted that the pledge was an attempt to ensure the license is renewed.
Wynn Resorts has said the dispute stemmed from Okada’s decision to compete by pursuing projects in the Philippines. Okada was removed as vice chairman after admonishments from the board over the plan, Wynn Resorts said.
Freeh’s probe puts Okada’s activities in the Philippines under the microscope as well.
“Shareholders definitely would prefer none of this to have occurred,” Telsey analyst Christopher Jones told Bloomberg in a telephone interview. “However, if there is actual fact that Mr. Okada did engage in illegal activity, then Mr. Wynn has certainly done the right thing in the eyes of the shareholders.”

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