Wynn learns risks in Asian market

As he prepared to address what promised to be an adoring audience Tuesday at the Global Gaming Expo, casino king Steve Wynn was a man at the top of his game.

Not only is the Wynn Resorts chairman’s name synonymous with the best the gambling resort industry has to offer, but he’s personally worth $3.5 billion, according to the latest Forbes rankings. He’s also just managed to wow skeptics in Massachusetts and win a coveted approval to build a pleasure palace in the lucrative Boston area.

With company stock hovering around the $180-per-share mark and a Macau casino venture generating enormous profits, Wynn is second only to fellow Las Vegas billionaire Sheldon Adelson in enjoying the rewards of doing business in the gargantuan Asian gaming market.

But with those rewards come risks. A man few would consider risk averse, Wynn in 2012 embarked on a $4 billion Wynn Palace casino resort venture in Macau’s dazzling Cotai strip. The linchpin for the project was a choice piece of real estate, for which the casino company paid $50 million to an obscure Macau outfit called Tien Chiao Entertainment and Investment Co. to secure “certain rights with respect to its business interests” in the real estate.

For his part, Wynn is already on the record about the land acquisition. In a 2012 interview with The Wall Street Journal’s Kate O’Keeffe, Wynn recalled that interest in the land began with a suggestion from Edmund Ho, then Macau’s chief executive. With Ho’s introduction to a businessman named Ho Ho, the land sale eventually came together.

But as with so many things in Macau, nothing is ever as simple as it seems. The identity of at least one of the businessmen in question in the deal, Clifford Cheong, is known. He is a business associate of Edmund Ho. (Cheong testified in a civil case in Clark County that he served as Ho’s representative to Las Vegas Sands back when the company was seeking a Macau gaming approval worth billions.)

What’s less clear, according to an investigator representing the International Union of Operating Engineers, is what actual ownership role Tien Chiao had in the deal. The identity of the company’s officials also has come into question.

In its June 2014 Form 10-Q on file with the Securities and Exchange Commission, the company acknowledged the ongoing inquiry in a single sentence: “Wynn Resorts (Macau) S.A., an indirect subsidiary of Wynn Macau Limited, was contacted by the Macau Commission Against Corruption of Macau (“CCAC”) requesting certain information related to its land in the Cotai area of Macau. Wynn Resorts (Macau) S.A. is cooperating with CCAC’s request.”

The Wall Street Journal in July reported the land deal was under investigation by Macau corruption officials after receiving information from the International Union of Operating Engineers, which has been keeping tabs on the burgeoning casino mecca.

On the Strip, the Operating Engineers Union is attempting to organize at Wynn Las Vegas.

In a Sept. 9 article in the Macau Business Daily, the union’s Jeffrey Fiedler asserted, “The Macau Government should provide an explanation about how this group from Beijing acquired this initial commitment for the land in Cotai. Frankly, it strikes us as deeply unfair to Wynn Resorts that they were required to negotiate with and ultimately pay a substantial sum to a group from Beijing with no documented rights to that land. All the more so because we believe that certain members of the Tien Chiao group were conducting business under aliases.”

At the very least Wynn Resorts’ due diligence was being questioned in a place with a notorious history of corrupt business practices and Triad organized crime influence.

Wynn’s response was brief. In May the casino company issued a statement calling Fiedler a “a bitter, unsuccessful union boss who lost representation of employees in Mr. Wynn’s prior company, Mirage Resorts.”

The company added that the labor organization has been “unable to persuade our Las Vegas employees to support their union” and Fiedler’s accusations “lack any credibility and are unworthy of further response.”

From the casino company’s most recent statement: “As explained in our 10-Q reporting statement from 2012 … Wynn made a one-time payment of $50 million for Tien Chaio to relinquish their rights to the land in Cotai. Concession approval was published in May 2012. The land concession from the government is for 25 years (renewable). Construction began in the first quarter of 2013 and all work on the site has been conducted with the appropriate governmental approvals.”

In other words, it was business as usual.

While the inquiries by Macau’s corruption office and the SEC are open, the $50 million question remains unanswered. Its existence certainly didn’t dissuade Massachusetts authorities from welcoming a Wynn casino to the Boston area.

But if the union’s Fiedler is grinding an ax with Wynn Resorts, it would appear the blade is getting awfully sharp.

John L. Smith’s column appears Sunday, Tuesday, Wednesday, Friday and Saturday. E-mail him at jsmith@reviewjournal.com or call (702) 383-0295.