Friday, February 21, 2003
Copyright © Las Vegas Review-Journal

Sources: Aruze cleared of charges

Decision clears way for licensing hearing to restart

Kazuo Okada, left, and Wynn Resorts Chairman Steve Wynn attended the groundbreaking for the new Le Reve project earlier this year. Sources said a Japanese court cleared Aruze Corp., controlled by Okada of charges the company concealed income linked to a deal for a near-dormant Las Vegas slot machine business. REVIEW-JOURNAL FILE PHOTO

A company controlled by Steve Wynn's biggest investor was recently cleared by Japan's highest tax court on charges the business concealed $35 million in income connected to a deal for a near-dormant Las Vegas slot machine business, informed sources said.

After Tokyo-based Aruze Corp., controlled by Kazuo Okada, was cleared of the charges by the Japanese court, the Tokyo Regional Taxation Bureau declined to contest the ruling, ending the dispute in Aruze's favor, the gaming industry sources said.

The Japanese decision clears the way for Nevada gaming regulators to resume a licensing hearing the Gaming Control Board suspended in 2000, when Aruze tried to buy Okada's Nevada-licensed Universal Distributing of Nevada.

Control Board Chairman Dennis Neilander said Wednesday that regulators will communicate with Japanese law enforcement and tax authorities to verify the disposition of the Aruze case. If the tax matter is ended, control board investigators will resume their own Aruze investigation, he said.

"It's too early to stake out a timetable," Neilander said, adding that translation difficulties plagued Okada's most recent control board appearance and would likely slow a trans-Pacific investigation.

Okada has invested $380 million in Wynn Resorts, and he is the company's vice chairman. Okada and Wynn each own more than 30 percent of the gaming company now building the $2 billion Le Reve and preparing to begin work on a half-billion dollar casino resort in Macau.

Wynn Resorts Chairman and Chief Executive Officer Steve Wynn said Okada is glad to have the tax matter behind him.

"He thought he'd be cleared," Wynn said of Okada. "He was very confident."

The Japanese tax court decision removes some uncertainties about Okada's ability to keep a Nevada gaming license, McDonald Investments casino industry analyst Dennis Forst said.

Le Reve is slated to open in spring 2005, and Okada and other key Wynn Resorts investors and officers face licensing investigations before then.

"(The Japanese tax court) decision could put to bed concerns about Steve's equity partner," Forst said. "The decision is a sizeable positive."

The world's largest manufacturer of video slot machines in the early '90s, Universal lost much of its market share after the Nevada Gaming Commission prohibited its software, which programmed near misses to appear on their machines' pay lines.

When the control board questioned Okada more than two years ago, then-Chairman Steve DuCharme questioned Okada on the value of Universal, and suggested he was concerned that Aruze shareholders would be subsidizing Okada with the proposed purchase.

Both DuCharme and Neilander at the time questioned a series of software development expenditures made by a Aruze subsidiary which benefited Universal. They suggested the transactions inflated Universal's value.

Plagued by translation difficulties, Okada was unable to persuade the board the transactions made sense from a business standpoint, and the board voted to send Aruze's license application back to staff for further investigation.

Universal is now nearly dormant, Neilander said, while Aruze is one of Japan's largest gaming-device makers.