Legal dispute between Wynn, Okada put on hold for another six months

The legal feud between Wynn Resorts Ltd. and former largest shareholder Kazuo Okada went into hibernation for another six months on Thursday amid concerns about the safety of witnesses in a parallel criminal inquiry by federal prosecutors.

In ruling, Clark County District Judge Elizabeth Gonzalez reversed her stance in May when she imposed the original six-month freeze, due to end on Monday, on attorneys in the business dispute to prevent them from interviewing witnesses and having to divulge documents. At the time, she warned prosecutors that if they requested an extension, “(I)t ain’t happening.”

After reading a confidential summary of the criminal inquiry prepared by the U.S. Department of Justice, Gonzalez concluded, “Reluctantly, I am forced to grant the U.S. government’s motion because of the personal safety issues disclosed” in the document that remained under seal.

Attorney Joey Lipton, the Washington, D.C.-based attorney in the department’s fraud section, did elaborate further. The previous request focused on the allegedly corrupt conduct by Okada, the Japanese gaming tycoon who was once Wynn’s largest shareholder, in wooing Philippine gaming officials to approve a casino project in Manila Bay. The papers also included a footnote that Wynn was under scrutiny for its $135 million donation to the University of Macau, but the company has since said all inquiries have ended.

The freeze included a small exception for Elaine Wynn, allowing her attorneys access to certain documents outlining the terms of what she can do with her 9.6 percent stake in the company. She wants to lift restrictions written into the stock agreement, part of her 2010 divorce from Chairman and CEO Steve Wynn, and sell shares worth $1.6 billion at current market prices.

After reading on the bench the confidential summary of the criminal case, Gonzalez said it confirmed her fears about the federal government moving at a very plodding pace.

“There’s really not much that has been done in six months,” she said. Later she, added, “At the pace you are currently moving, my guess would be two years before you are ready for a prosecution.”

By contrast, the state set up a business court to resolve commercial disputes at a much quicker pace.

“I disagree, your honor,” Lipton said. “I think that we are going to be in a position to decide on the position where we are at much more quickly… . A two-year horizon, it just isn’t in our mind at all.”

He acknowledged that federal cases often move slowly, especially with an international scope. But he said prosecutors had taken unspecified steps to move more quickly that are not done in “90-plus percent of the cases.”

Okada attorney Charles McCrea opposed any freeze, arguing that his client came out the loser in any delay. Rising stock prices had boosted Steve Wynn’s 9.9 percent stake in the company to $1.7 billion, almost as much as the $1.9 billion note Okada was given when his 20 percent stake was forcibly repurchased by the company in February 2012.

Okada claims that the buyback was illegal. Wynn has justified it based on an investigation by the firm Freeh Sporking & Sullivan that alleged corrupt activities by Okada in the Philippines, imperiling the company’s gaming licenses.

Wynn and Okada had also clashed over whether the Manila project would hurt the company’s investments in Macau.

Gonzalez on Thursday initially decided to allow document production to proceed; the government had asked for only a partial freeze on the business case, but admitted it could not draw clear boundaries on what did or did not interfere with the criminal investigation.

But as attorneys started to talk about what would be allowed, Wynn attorney James Pisanelli argued that allowing pieces of the business case to proceed could allow attorneys to figure out the identities of the criminal witnesses.

Gonzalez ultimately decide to shut down everything except evidence requests that were already in the pipeline in May, namely the documents wanted by Elaine Wynn.

Contact reporter Tim O’Reiley at toreiley@reviewjournal.com or at 702-387-5290.