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Wynn’s Boardroom Battle Royale

[There are two posts today]

Rarely does a company issue a press release accusing a director of Foreign Corrupt Practices Act violations.  But then again, rarely does a director file a lawsuit against the company alleging facts that could implicate the FCPA, which then sets into motion an SEC inquiry.

Welcome to Wynn Resorts boardroom battle royale.

As indicated in this prior post, in January, Wynn boardmember Kazuo Okada filed a civil lawsuit in Nevada alleging facts which could implicate the FCPA – a $135 million Wynn donation to the University of Macau.  As noted in the post, last week Wynn announced that the SEC has launched an inquiry requesting information relating to the donation, other donations made by the company and the company’s “casino or concession gaming licenses or renewals in Macau.”

Yesterday, in a Sunday press release (here), Wynn announced that its “Compliance  Committee has concluded a year-long investigation after receiving an  independent report detailing numerous apparent violations of the U.S.  Foreign Corrupt Practices Act (FCPA) by Aruze USA, Inc. [see here], its parent company Universal Entertainment Corporation [see here] and its principal shareholder, Kazuo Okada.”

Okada’s bio on Wynn’s website (here) states as follows.  “Mr. Okada founded Universal Lease Co. Ltd., which became Aruze Corp. in 1998, a company listed on the Japanese Association of Securities Dealers Automated Quotation Securities Exchange. In November 2009, Aruze Corp. changed its name to Universal Entertainment Corporation. Universal Entertainment Corporation a Japanese manufacturer of pachislot and pachinko machines, amusement machines, and video games for domestic sales. In 1983, Mr. Okada also founded Universal Distributing Nevada, Inc., which changed its name to Aruze Gaming America, Inc. in 2005. Aruze Gaming America, Inc. is a manufacturer and distributor of gaming machines and devices in the United States and is expanding its sales business in Asia, Australia and South Africa. Mr. Okada currently serves as director and Chairman of the board of Universal Entertainment Corporation, as director, President, Secretary and Treasurer of Aruze USA, Inc., which is a wholly owned subsidiary of Universal Entertainment Corporation, and as director, President, Secretary and Treasurer of Aruze Gaming America, Inc.”

In yesterday’s release, Wynn further stated as follows.  “The Compliance Committee, chaired by former Nevada Governor Robert Miller, engaged several investigators, including Freeh, Sporkin and Sullivan, LLP, led by Louis J. Freeh, the former Director of the U.S. Federal Bureau of Investigation, which conducted a thorough independent investigation. Freeh’s investigators uncovered and documented more than three dozen instances over a three-year period in which Mr. Okada and his associates engaged in improper activities for their own benefit in apparent violation of U.S. anti-corruption laws and gross disregard for the Company’s Code of Conduct. These troubling discoveries include cash payments and gifts totaling approximately$110,000 to foreign gaming      regulators.  “Mr. Okada and 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), who directly oversee and regulated Mr. Okada’s Provisional Licensing Agreement to operate in that country,” according to the Freeh Report. The report further stated that Mr. Okada and his associates have “consciously taken active measures to conceal both the nature and amount of these payments.””

Based on the Freeh Report, the Wynn releases states as follows.  “The Board has requested that Mr. Okada resign as a Director of Wynn Resorts. The Company will immediately inform the Board of Directors of its Hong Kong listed subsidiary, Wynn Macau, Limited, of its actions and will recommend that Mr. Okada be removed from the Wynn Macau Board.”  […] “The Freeh Report is the culmination of a year-long investigation by the Compliance Committee based on increasing concerns the Board had relating      to the activities of Mr. Okada and Aruze USA, Inc. in the Philippines and statements made by Mr. Okada to Wynn Resorts’ Directors that gifts to regulators are permissible in Asia. Mr. Okada is the only Director of Wynn Resorts who has continued to refuse to sign the Company’s Code of Conduct or participate in mandatory Foreign Corrupt Practices Act training for Directors.”

To learn more, see here from Reuters.

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