Wynn says largest shareholder’s claims aren’t true

Wynn Resorts Ltd. has strongly denied charges in a lawsuit filed by the gaming company's largest shareholder, who questions company spending and alleges he is being denied key information about finances.

"The lawsuit filed by Kazuo Okada, which seeks access to the company's confidential business records, is preposterous and without merit," a Wynn Resorts statement said Thursday. "The company will defend it vigorously."

Okada, 68, said in his Clark County District Court lawsuit that despite several written demands, Wynn Resorts "insists on keeping its books and records hidden" from him. He argues that he "has the right and obligation to be informed concerning the company's business so that he may ensure that it is being managed properly for the benefit of all the shareholders."

Okada, who lives in Hong Kong, owns 19.66 percent of the company. He is particularly interested in details about a
$135 million donation Wynn Resorts has pledged to the University of Macau Development Foundation. The university is on land owned by the Chinese government.

Okada said that among the other documents he sought in a Nov. 2 request is a 2010 amendment to a shareholders agreement among Okada, company founder Steve Wynn and Wynn's ex-wife, Elaine Wynn. Okada also wants to know how
$30 million he invested in Wynn Resorts in 2002 to help develop a Macau casino project was used.

"Steve Wynn and the Wynn Resorts board of directors continues to prefer secrecy over transparency. Despite the court petition and repeated requests by Mr. Okada to inspect the company's books and records, the Steve Wynn-controlled board still refuses to comply,'' Okada's company said in a statement Thursday. "Significant questions remain regarding the company's use of Aruze USA's and other shareholders' investments. Mr. Okada believes as a member of the board and the largest single shareholder that Wynn Resorts should openly and directly answer these questions."

The shareholder agreement gives Steve Wynn voting rights associated with stock held by Okada and Elaine Wynn, giving him control of about 40 percent of the company.

In its statement, Wynn Resorts said Okada, who also controls slot machine manufacturer Aruze USA through his Universal Entertainment company, had received details about the donation.

"The sources and uses of all pre-IPO capital contributions are detailed in publicly available information and Okada received the same information as all directors with respect to charitable contributions made by the company," Wynn Resorts said.

The Las Vegas-based company described the lawsuit as an attempt to "deflect attention from a dispute between Okada and the board of directors of Wynn Resorts related to Okada's decision to directly compete with the company by pursuing a project in the Philippines despite repeated admonishments from the board."

Universal Entertainment plans a Manila Bay casino, but construction has not begun. Wynn Resorts has not announced any plan to enter the Philippines market.

In a statement, Okada's representatives said that "Mr. Okada, as a 20 percent owner of Wynn Resorts, has always acted in the best interests of all shareholders. Mr. Wynn's allegations regarding Mr. Okada's conduct as a director of the company are baseless. Mr. Okada initially sought to pursue a project in the Philippines with Wynn Resorts, and made a trip with Mr. Wynn to Manila in 2010 to explore that possibility. After Wynn Resorts declared that it was not interested in pursuing a venture in the Philippines, Mr. Okada decided to pursue it on his own.''

Wynn Resorts also has said Okada was removed as vice chairman of the company in October. However, the company has not filed notice of Okada's dismissal with the U.S. Securities and Exchange Commission.

Wynn is chairman of the board, and Okada was still listed Thursday as a director, according to information posted on the company's website. Other members of the Wynn Resorts board are Russell Goldsmith, Linda Chen, Dr. Ray R. Irani, Robert J. Miller, John A. Moran, Alvin V. Shoemaker, D. Boone Wayson, Elaine P. Wynn, Allan Zeman and Marc D. Schorr.

In court papers filed Wednesday, Okada lists $380 million that he has invested in Wynn Resorts since 2000. The lawsuit comes as Wynn Resorts prepares to issue its annual report for 2011. District Court Judge Elizabeth Gonzalez has scheduled a Feb. 9 hearing on the issue.

Analysts surveyed by Yahoo Finance expect the company to report earnings of $1.30 a share for the fourth quarter and $5.35 a share for 2011. Revenue estimates for Wynn Resorts for the fourth quarter are $1.36 billion, while revenue for 2011 is expected to reach $5.29 billion.

Analysts cautioned Thursday that biggest impact could be on the company's stock price.

Shares of Wynn Resorts lost $2.09, 1.87 percent, to close Thursday at $109.80 on heavy volume of 6.95 million shares traded on the Nasdaq Global Select Market. Wynn Resorts shares have traded from a low of $101.01 to a high of $172.58 over the past 52 weeks.

Gaming industry analysts on Thursday were still working to understand the ramifications of the lawsuit.

Macquarie Capital Securities Ltd. analyst Gary Pinge said the filing "seems unusual" given his view that Wynn and Okada "had a strong relationship."

"We are unsure of the reason for the filing of the petition and the obvious question is why Okada wants to inspect the books," Pinge said. "However, given the positions that Okada holds, one reason to be concerned with the petition would be if it created any boardroom instability ahead of Wynn Macau's decision to invest in Cotai."

Wynn Resorts is awaiting final approval to start construction of a resort on Macau's Cotai Strip.

In a note to clients, Bank of America research analyst Shaun Kelley questioned why Okada would "make these allegations public, and in doing so possibly open the door to investigations by other agencies about the use of funds. ... The motivation is not yet clear."

Kelley declined to elaborate on his comment about investigations by other agencies.

Contact reporter Chris Sieroty at
csieroty@reviewjournal.com
or 702-477-3893.