Wynn Resorts Ltd. on Tuesday won dismissal of one piece of the case brought by former largest shareholder Kazuo Okada, as the all-out legal war between the two starts to come out of hibernation.
The latest version of countercomplaint by Okada, the Japanese gaming tycoon whose investments helped start the company, included a contention that Chairman and CEO Steve Wynn and general counsel Kimmarie Sinatra had engaged in civil extortion to force him to sell his nearly 20 percent stake at a steep discount.
Clark County District Judge Elizabeth Gonzalez tossed it out as not “cognizable” under Nevada law. However, she left open the possibility that the same basic argument could return under the heading of civil conspiracy committed by extortion, as promised by Okada attorney Charles McCrea Jr. In the meantime, the 19 other counts covering topics such as breach of contract, fraud and violating the company’s bylaws remain in place.
In May, Gonzalez granted federal prosecutors a six-month freeze preventing all sides from gathering evidence in the case while they looked into possible criminal law violations. That period ends on Monday, with Gonzalez ruling out any extension.
For example, Elaine Wynn’s request for an exemption was turned down in August by Gonzalez. Her attorneys argued that her quest to end certain legal restrictions included in her divorce with Steve Wynn and be allowed to sell her stake in the company did not touch on the Department of Justice investigation.
Her 9.6 percent stake in the company is worth $1.6 billion at the current stock price.
The extortion claim, encompassed in six of the 377 paragraphs outlining Okada’s case, is based on two meetings that occurred as the once-close relationship between Okada and Steve Wynn unraveled.
On Sept. 30, 2011, attorneys for Wynn’s side said the board of directors would be told about Okada’s alleged improper influence of Philippine gaming regulators to win approval for a casino on Manila Bay and asked to forcibly buy back his shares. To avoid this, according the the Okada court papers, he had to resign from the board and sign control of his 19.7 percent stake in Wynn Resorts to Steve Wynn.
On Feb. 15, 2012, the Okada version said Wynn’s intermediaries demanded that he sell his shares at a “significant discount” or they would release the report by the investigative firm Freeh Sporkin & Sullivan detailing Okada’s alleged unethical or illegal conduct in the Philippines. If Okada complied, the report would never come to light, according to the Okada rendition.
When the talks went nowhere, the company on Feb. 18 forcibly bought back Okada’s stock for $1.9 billion, $800 million less than the market value at the time.
Wynn attorney James Pisanelli depicted this part of the case as more about publicity than law.
“Extortion,” he said. “Certainly none of us will deny it’s word that grabs headlines.”
Both sides have ensured that media outlets hear about their latest punches or setbacks absorbed by the other side.
Even accepting Okada’s version at face value, Pisanelli said that the company did nothing wrong.
“They (attorneys at the September meeting) let Mr. Okada know that the jig was up and it was in the best interests of everyone to see if we could get this thing resolved,” he said.
Steve Wynn, he added, had just “tried to settle this nasty dispute early.”
Contact reporter Tim O’Reiley at email@example.com or at 702-387-5290.