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Wynn Macau set to vote Okada removal

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image The board of local gaming operator Wynn Macau will meet today or tomorrow to vote on the removal of non-executive director Kazuo Okada

The board of gaming operator Wynn Macau Ltd will meet today or tomorrow to vote on the removal of director Kazuo Okada, involved in a messy legal dispute with mother company Wynn Resorts.
A public relations firm working for US-based Wynn Resorts has confirmed to Macau Daily Times that a board meeting will take place this week to discuss the possible dismissal of the non-executive director.
In a statement released Sunday, Wynn Resorts said it would recommend that the Wynn Macau board also “votes to remove Mr. Okada for cause,” after buying out the Japanese  businessman and asking him to quit the board.
On Monday Allan Zeman, vice chairman of Wynn Macau, also told Bloomberg the meeting would take place “soon” but assured that any decision “will not change the nature of the company”.
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”.
On Monday, the Gaming Inspection and Coordination Bureau director Manuel Joaquim das Neves confirmed to MDTimes it had “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”.

Wynn’s lawyers accused Okada of paying for trips by South Korean officials (…) to boost his effort to build a gambling resort at the Incheon Free Economic Zone

Korea link

Wynn Resorts filed a lawsuit in Nevada State against Okada and two of his companies for breach of fiduciary duty and related offenses, after an internal probe uncovered alleged improper payments to Philippine gaming officials.
The company wants the courts to confirm that it acted lawfully in redeeming Okada’s nearly 20 percent stake for USD 1.9 billion, a 30 percent discount from their USD 2.7 billion value on Friday.
The discount, determined by an independent financial advisor, “was appropriate because of various restrictions on most of the shares under the terms of an existing stockholder agreement,” said Wynn Resorts chief financial officer Matt Maddox during a conference call late Tuesday.
The suit also seeks unspecified damages including punitive damages.
Wynn’s lawyers accused Okada of paying for trips by South Korean officials to Wynn properties to boost his effort to build a gambling resort at the Incheon Free Economic Zone.
The 47-page Wynn report concludes that Okada, his company and associates “appear to have engaged” in violations of the U.S. Foreign Corrupt Practices Act (FCPA) in the Philippines and may also have done so in South Korea. The FCPA bars corrupt payments to government officials for obtaining or retaining business.
The lawsuit, quoted by Las Vegas Review-Journal, said Wynn decided in 2010 that investing with Okada in the Philippines would be too risky because “official corruption in the Philippine gaming industry is deeply ingrained”.
“Mr. Okada, his associates and companies appear to have engaged in a longstanding practice of making payments and gifts to his two chief gaming regulators at the Philippines Amusement and Gaming Corporation (Pagcor),” the lawsuit said.

Philippines ‘gifts’

It named former Pagcor chairman Efraim Genuino and current Chairman Cristino Naguiat, and their families, as the main recipients of the payoffs and gifts. Okada paid for Genuino’s trip to the 2008 Beijing Olympics, Wynn said.
The investigation report attached to the suit cited mostly free stays and dinners at Wynn resorts in Las Vegas and Macau for the officials, their families, and the husband of former Philippines president Gloria Macapagal-Arroyo.
The suit mentions a four-day stay by a Filipino regulator, Cristino Naguiat Jr., in the most expensive room at Wynn Macau, which usually costs about USD 6,000 (MOP 48,000) a day. Okada’s associates obtained USD 20,000 (MOP 160,000) from the resort’s cash cage as advances for Naguiat and his family, according to the report.
There was “nothing inappropriate” about the accommodations, Naguiat told Bloomberg in a phone interview. “It is industry practice that if there are casino executives in town, we offer cars, security and rooms as a courtesy, as a form of reciprocity. This practice also happens in the airline industry.”
“I never received USD 20,000; we didn’t receive any cash,” Naguiat said. “I was told that the amount wasn’t supposed to be charged to our rooms. It was a mischarge.”
The report details a Wynn Resorts board meeting in February 2011, when Okada said words to the effect of “in Asia, it is okay to give gifts to government officials,” and “I wouldn’t bribe someone but would have someone else bribe that person.”
“It was frankly a shock as expressed by many of the board members to hear someone suggest that that would be acceptable or even legal behaviour,” said former Nevada governor Robert Miller during the conference call.
In a February 15 interview with investigators led by Louis Freeh, the ex-director of the US Federal Bureau of Investigation, Okada denied making those statements.

‘It would potentially jeopardize not only our existing licenses [in Las Vegas and Macau] but clearly could be utilized as a sign of our unsuitability for prospective licenses in any other jurisdiction’

- Robert Miller

‘Tainted’ process

One of Okada’s companies, Universal Entertainment, said in a statement that while it hadn’t been provided with a copy of the report, “we believe the allegations levelled against Universal are motivated by self-interest and represent the results of an incomplete and otherwise flawed corporate governance process.”
“Universal believes the entire process has been tainted by the desire to serve Steve Wynn’s predetermined goal of removing Aruze USA as the largest stockholder of the company,” it added.
Universal said its subsidiary Aruze USA would seek a court order to prevent the redemption of the shares. But during the conference call Wynn Resorts senior vice-president Kim Sinatra said such a move would be pointless.
“The action and redemption occurred on Saturday. The shares have been cancelled. And so whatever action would be appropriate would probably not include an injunction because of the action authority occurred,” she said.
The decision to push out Okada was inevitable, added Miller, who was also involved in the investigation. “Since we have the tool to take action, our license would be put under a cloud if we were to not to take action, waiting for someone else to do so,” he said.
“It would potentially jeopardize not only our existing licenses [in Las Vegas and Macau] but clearly could be utilized as a sign of our unsuitability for prospective licenses in any other jurisdiction,” the Wynn Resorts board member said.
But analysts stressed that doubts remain over the impact of the legal dispute on a stockholders agreement signed between Okada, Steve Wynn and ex-wife Elaine Wynn that followed the couple’s divorce in 2009.
They also warned that a long-term litigation is on the horizon. “The cleanest outcome is for a cash settlement somewhere between the USD 1.9 billion redemption and Friday’s USD 2.7 billion market value,” wrote Nomura in a note quoted by Wall Street Journal.
However, with the company set to only pay Okada in 2022, analysts believe it will easily finance the construction of its resort in Cotai, which is still awaiting the Macau government’s green-light.
Lawyers on both sides are back in court today in Nevada for a hearing on Okada’s request for access to Wynn financial records over the use of funds, which include a HKD 1 billion donation to the University of Macau.

(with agencies)

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