Judge rules Wynn properly redeemed Okada shares

Kazuo Okada encountered another setback in his legal battle with Wynn Resorts Ltd., losing a bid to vote his former shares at the Nov. 2 annual meeting.

Clark County District Judge Elizabeth Gonzalez ruled at a Tuesday hearing that the Wynn corporate structure appeared to permit the forced redemption in February of Okada's nearly 20 percent stake at a 30 percent discount to market value. This move followed the increasingly heated accusations of unethical or illegal conduct that Okada and CEO Steve Wynn have hurled against each other.

Okada, the Japanese gaming magnate who was once Wynn Resorts' largest shareholder, contended that he was specifically shielded from a redemption that applied to other shareholder by a contract going back a decade. He wanted to vote the shares for two directors he has nominated.

But whether Gonzalez's action will make for a relatively peaceful annual meeting remains to be seen. In a statement released later in the day, Aruze USA, the Okada-controlled entity that owned the shares, said the ruling halted "for the moment" the ability "to nominate and vote for independent directors willing to stand up to Steve Wynn and promote good corporate governance. ... We are carefully studying an appeal of the court's ruling."

Okada remains on Wynn Resorts' board but was stripped of the vice chairman's title last year. Wynn general counsel Kimmarie Sinatra said that a special shareholders meeting will likely be called at an unspecified date to remove Okada.

Because of the potential for not only reinstating Okada's stake but placing his allies on the board, James Pisanelli, one of the platoon of attorneys for Wynn, opened the hearing by saying, "I want to take the opportunity to win the prize for the understatement of the day. This is a big deal. This is a really big deal."

Later, he added, "They want to put this dangerous person back in a position of power and authority."

Okada attorney Paul Spagnoletti contended that the June 2002 contract governing Okada's stock position in the then-embryonic Wynn Resorts, known as the buy-sell agreement, specifically precluded a forced redemption.

Further, he called the company's public concern about whether Okada's allegedly improper conduct in dealing with Philippine gaming authorities could threaten Wynn's gaming license a ruse. The forced redemption turned Okada from a shareholder to a debtholder, which are viewed the same under Nevada gaming regulations, he said.

But Wynn attorney Donald Campbell pointed to several other sections of corporate documents reserving the right to redeem stock, which Gonzalez found more influential. This gave the Wynn board the leeway to redeem the stock as part of their judgment for the best way to run the company.

Pisanelli also deployed an empty-chair argument, noting that Steve Wynn and two others had testified in affidavits while Okada had not. Spagnoletti termed this line "unfair and a cheap" shot because the hearing centered on legal arguments, not conflicting evidence.

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