This was the question posed by Japanese billionaire Kazuo Okada as he sued Stephen Wynn, the chairman of the board of Wynn Resorts, Limited before the District Court of Las Vegas in Nevada to “produce certain books and records” of Wynn Resorts, Limited, where Okada has a majority 19.66 percent ownership stakes.
After Okada, who is building a multi-billion dollar casino resorts in the reclaimed area of Manila Bay abutting Ninoy Aquino International Airport, filed the suit, Mr. Wynn and the other independent directors of Wynn Resorts asked Mr. Okada to resign from the board for being “unsuitable” under the provisions of the Company’s Articles of Incorporation.
At the same time, Wynn and the board “redeemed” Okada’s Aruze, USA Inc.’s 24 million shares with Wynn Resorts at 30 percent discount by issuing a 10-year $1.9 billion promissory note in redemption shares that mature on Feb. 18, 2022, bearing an interest of 2 percent per annum.
Okada is likely going to get back the 30 percent discount as there is no such discount provided for by Wynn Resorts Articles of Incorporation.
His emoval from Wynn Resorts board and the stripping of his ownership stakes from the Las Vegas-based Wynn Resorts came in the heels of the report of former Director of the Federal Bureau of Investigation Louis J. Freeh, who deposed Mr. Okada in Tokyo.
Freeh reported that Okada bribed Filipino gaming officials by as much as US$110,636 so he can be under the good graces of the Philippine government while he is building the 30-hectare (74-acre) US$2.3-billion Manila bay casino resort in violation of the U.S. Foreign Corrupt Practices Act and the Wynn Resorts’ Code of Conduct and other policies.
FLAWED CORPORATE GOVERNANCE
In a press statement from Universal Entertainment Corporation, the Tokyo, Japan-based parent company of Aruze, USA Inc., Jun Fujimoto, Representative Director and President of Universal, said, “While Wynn Resorts has still not provided Universal with a copy of the “investigation” report (from Mr. Freeh), we believe the allegations leveled against Universal are motivated by self-interest and represent the results of an incomplete and otherwise flawed corporate governance process in breach of the Board’s fiduciary and other duties.
“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. Aruze USA intends to commence litigation, which includes seeking a temporary restraining order and preliminary injunction, to protect its interests in Wynn Resorts and prevent the redemption of its shares.”
In a petition for writ of mandamus, provided this reporter by Mr. Okada’s lawyer Paul R. Hejmanowski, Mr. Okada said as a director and biggest stockholder of Wynn Resorts, he has “an irrefutable right to review the books and records of the Company. Yet, despite several written demands, Wynn Resorts insists on keeping its books and records hidden from its Director’s scrutiny.”
Okada said in October 2000, his Universal’s U.S. subsidiary, Aruze, USA, Inc., a Nevada company he indirectly controls, invested $260-million in the predecessor organization to Wynn Resorts. In April 2002, Aruze USA invested an additional $120-milion in the predecessor organization of Wynn Resorts at the request of Stephen A. Wynn, chair and chief executive officer, including a $30-million to develop the casino project in Macau Special Administrative Region of the People’s Republic of China.
MISAPPROPRIATED DONATION TO GOVERNMENT UNIVERSITY
Okada’s lawsuit follows the pledge of Wynn Resorts to donate HK$1-billion (US$135-million) to the University of Macau (UM) to which Mr. Okada had objected because the “large gift” is unprecedented and the length of period of payment over ten years may not be “an appropriate use of corporate funds.” The UM sets on a government property.
When Okada sought the records of the US$135-million donation and the use of his Aruze USA’s $30-million investment, a “request (that) summarily (was) denied but, shockingly did not occur,” this prompted Mr. Okada to file the lawsuit.
Okada, a resident of Hong Kong and citizen of Japan, founded Universal Lease Co. Ltd., which is now known as Universal Entertainment Corporation, and is its majority owner and Chairman.
Okada, who made millions by making “pachislot” and “pachinko” gaming machines, is also the Director, President, Secretary and Treasurer of Aruze USA Inc., which owns 24,549,222 shares of Wynn Resort or 19.66 shares. He has been found suitable by the Nevada Gaming Commission as stockholder and controlling stockholder of Universal.
In Oct. 25, 2002, Wynn Resorts went public on the NASDAQ at $13 per share. After the initial public offering, and other subsequent dilution, .Okada and Wynn each owned approximately 20 percent of the common stock.
In March 2009, Mr. Wynn and his wife, Elaine, filed for divorce in Las Vegas. In a Jan. 6, 2010 filing with the Securities and Exchange Commission, the Wynns split their shares, leaving Mr. Wynn with 11,076,708 shares, while Aruze USA holds its 24,549,222 shares or double than that of Mr. Wynn.
When Mr. Okada asked to inspect the books, he was rebuffed each time.
This prompted Mr. Okada to ask the court to let him inspect Wynn Resorts’ financial report and make copies of books and records of the company and be awarded costs, including reasonable attorneys’ fees. (email@example.com)