Okada Says Wynn’s Donation Questionable; He Files RICO, insider Trading Violations vs. Wynn & Co.

by Joseph G. Lariosa

CHICAGO (jGLi) – Kazuo Okada, the Japanese casino billionaire, came out swinging on Monday (March 12), claiming that when Stephen A. Wynn, chairman of Wynn Resorts, pledged a donation of HK$1-billion (US$135-million) to the University of Macau Development Foundation, Okada wondered how a “wealthy university that sets on government land and largely caters to non-Macau residents might need or want such a large donation.”

In a 75-page counterclaim and answer, his parent Tokyo, Japan-based Universal Entertainment Corporation and Universal’s subsidiary Las Vegas, Nevada-based Aruze USA, Inc.  “removed” to the United States District Court in Las Vegas, Nevada and accused Mr. Wynn, Wynn Resorts General Counsel Kimmarie Sinatra for committing a series of “predicate acts of racketeering, which included fraud, acquiring property under false pretenses, acquiring signatures under false pretenses and other similar wrongful activities” aimed to “defraud, defame, and steal from Aruze USA and its President, Mr. Okada, Aruze USA’s “interest in Wynn Resorts, for the purpose of illegally placing and maintaining the control of Wynn Resorts in a single man – Mr. Wynn.”

Okada’s Las Vegas-based lawyers Samuel S. Lionel and Paul R. Hejmanowski of Lionel Sawyer & Collins and William F. Sullivan of Paul Hastings, LLP based in Los Angeles, California filed a “notice of removal” before the U.S. District Court of Las Vegas of his case from Department XI of the Eight Judicial District of the State of Nevada in and for the County of Clark because “a state-created cause of action can be deemed to arise under the federal law, where federal law completely preempts state law, where the claim is necessarily federal in character, or where the right to relief depends on the resolution of a substantial, disputed federal question.”

Last Feb. 19, Mr. Wynn filed a case before the Eight Judicial District against Okada, Aruze USA and Universal for breach of fiduciary duty by engaging “in unlawful activities with foreign (Philippine) government officials” at Mr. Wynn’s properties in violation of the U.S. Foreign Corrupt Practices Act (FCPA).


Mr. Wynn also sought “declaratory relief against Mr. Okada, Aruze USA and Universal for an order that Mr. Wynn and Wynn Resorts acted lawfully in finding Aruze USA was not “suitable” as a Wynn Resorts stockholder for violation of FCPA.

Okada said his relations with Mr. Wynn might have soured when he objected during an April, 2011 board meeting of Wynn Resorts and voted against the $135-million donation to University of Macau Development Foundation (UMDF) as “unprecedented size and duration (10-year) of the commitment.” Despite his objection as the biggest stockholder (19.66%) of Wynn Resorts, the two boards (Wynn Resorts and Wynn Resorts’ subsidiary Wynn Macau) in Macau approved the donation at the joint meeting of the board.

Because the donation consists of a $25-M in May 2011 and $10-M each year, Mr. Okada said the “lack of deliberation” of the donation raised suspicion that Wynn Macau’s current gaming concession that covers the same 10- year period that expires in June 2022 could be tied to Wynn Macau and Wynn Resorts’ effort to develop rights to a third casino in Cotai, Macau.

Because Mr. Okada does not want Wynn Macau and Wynn Resorts to be appearing as “paying for benefits” for its donation, he objected because the chancellor of UM is also the head of Macau’s government, who has ultimate oversight over gaming matters.

Okada was never told during the joint board meeting discussing the $135-M donation that UM’s Chancellor Fernando Chui Sai On is also the Chief Executive of Macau.

In addition, Okada denied the report of former Director of Federal Bureau of Investigation Louis J. Freeh, retained by Wynn, 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-hecare (74-acre) U.S.$2.3-billion Manila Bay casino resort in violation of FCPA.

Freeh reported that last September, Okada provided officials of the Philippine Amusement and Gaming Corporation (PAGCOR), headed by Cristino L. Naguiat, Jr. US$50,000 shopping money during a junket hospitality trip and expensive hotel  accommodation to sample Wynn Macau’s hospitality. Naguiat had denied receiving any shopping money.


Okada is also seeking punitive (more than treble) damages against Mr. Wynn and Wynn Resorts and Ms. Sinatra for “redeeming” (forced selling) Aruze USA’s majority 24,549,222 shares or 19.66 percent of Wynn Resorts stock worth $2.7-billion at a discount of 30 percent in violation of the N.R.S. (Nevada Revised Statutes) Sec. 90.570 and Wynn Resorts’ Articles of Incorporation thru “fraudulent and deceptive” schemes, “false, incomplete and/or misleading factual allegations made in the Freeh report.”

Okada also accused Mr. Wynn and Ms. Sinatra of making false and misleading statements on May 16, 2011 that Wynn Resorts has the ability to loan money to Aruze with shares backed by Wynn Resorts although this was in violation of the restriction of the Sec. 402 of the Sarbanes-Oxley (SOX) Act of 2002. Okada planned to use the loan for his casino project in the Philippines.

Sinatra is a secretary, senior vice president of Wynn Resorts and a resident of Nevada, who owns 40,887 shares of Wynn Resorts while Wynn owns 10,026,708 shares of Wynn Resorts’ common stock.

Wynn developed Mirage Resorts, Inc., a casino conglomerate that owned and operated Mirage, Treasurer Island and Bellagio. On May 31, 2000, MGM Grand, Inc. completed a merger with Mirage Resorts. In June 2000, after a bruising boardroom battle, which centered on allegations that Mr. Wynn misappropriated company funds, MGM Grand Inc. ousted Mr. Wynn as CEO of Mirage Resorts.

According to court filings, humiliated by his public ouster, Mr. Wynn was anxious to re-enter casino business and rebuild his reputation and standing in Las Vegas.

Wynn purchased the old Desert Inn casino and planned to build a new one. Because Mr. Wynn lacked the capital to fund the casino, after extensive search for investors, because he was shunned by others, he called Mr. Okada, who became the means of Mr. Wynn to get back on his feet.

Okada is a successful Japanese entrepreneur and a pioneer in the gaming industry, who attended electronics trade school. He produced pachinko, a gaming machine, and created one of the first video poker machines. Mr. Wynn met Mr. Okada when one of Mr. Okada’s affiliated companies, Aruze Gaming America, was selling electronic gaming machine in Nevada.


Mr. Wynn formed Valvino Lamore, LLC, a holding entity for his new Desert Inn casino project. After discussion, Mr. Okada contributed US$260-million in cash to Valvino in exchange for a 50% membership interest in Valvino on Nov. 30, 2000. It became the seed capital that allowed for the development of what is now Wynn Resorts. Valvino is what Mr. Wynn referred to as Wynn Resorts “predecessor.”

In April 2002, Aruze made two additional contributions, totaling US$120-Million to Valvino. Mr. Wynn told Mr. Okada that $30-Million was related to Macau. But Mr. Wynn did not explain to Mr. Okada how Mr. Wynn actually spent the money if “for his personal benefit and/or for other inappropriate purposes.” Mr. Okada also contributed US$90-Million.

On April 11, 2002, the three owners of Valvino – Mr. Wynn, Aruze USA and Baron Assets Fund – filed a Stockholders Agreement that does not allow Mr. Wynn “to buy or take or redeem the securities” of Aruze. Although the agreement provides that Mr. Wynn can nominate “a bare majority of directors” and Aruze all the remaining directors, Mr. Wynn never allowed Aruze to nominate its directors.

At the same time, Mr. Wynn “secretly and unilaterally changed Wynn Resorts Articles of Incorporation that included a provision that purportedly allows Wynn Resorts to redeem stocks held by stockholders under certain circumstances” and for the board to declare a security owner “unsuitable and subject to redemption by the corporation,” a determination that rests on the Gaming Authority, not a corporation.

Mr. Okada found out the secret when Wynn Resorts used the “redemption provision to redeem Aruze shares in 2012 for a fraction of their true value.”

In 2007, Mr. Okada told Mr. Wynn his interest in pursuing a casino project in the Philippines. But Mr. Wynn “voiced no concerns at all.” Thereafter, Mr. Okada kept Mr. Wynn informed of the project’s progress. Mr. Wynn joined Mr. Okada in visiting Manila on June 14, 2010.

Okada also accused Wynn Resorts of trading on inside information by filing Form 8-K on March 2, 2012, disclosing positive news regarding Wynn Resorts’ effort to receive certain land concessions related to Cotai, spiking 6% on its stock, only to file a corrective Form 8-K, denying filing “by mistake by the Company’s agent.”

Aruze and Universal asked the court to rule against Wynn Resorts, Mr. Wynn, Ms. Sinatra, and other Wynn directors for “general damages in excess of US$100,000, consequential damages, treble and statutory damages, for punitive damages three times the amount of compensatory damages, disgorgement of profits, construct trust and unjust enrichment, injunctive and declaratory relief, for costs and expense of this action, prejudgment and post judgment interest, reasonable attorneys’ fees, and all such other and further equitable and legal relief this Court deems just and proper.” (lariosa_jos@sbcglobal.net)

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