Backed into a Corner, Wynn Resorts Drops Litigation Against Kazuo Okada

Posted on: March 13, 2018, 09:00h. 

Last updated on: March 13, 2018, 09:13h.

Wynn Resorts on Monday dropped its six-year-long court battle with its former majority shareholder, the Japanese pachinko magnate Kazuo Okada.

Wynn Resorts stops suit against Kazuo Okada
Kazuo Okada filed to stay the dismissal of Universal Entertainment’s case against Wynn Resorts, claiming the Universal board had no authority to agree to a $2.6 billion settlement. The US casino giant had little choice but to drop action against Okada to free up the shares of its ex-CEO Steve Wynn. (Image: Globe and Mail)

The move comes just days after the embattled Las Vegas casino giant agreed to pay $2.6 billion to settle out of court with Universal Entertainment, a company Okada controlled until he was ousted last year.

“I cannot get back the last six years of my life, but now the world knows what I have known all along: I am innocent,” said Okada said in an official statement on Monday.

Wynn Resorts launched proceedings against Okada and Universal in 2012, accusing the Japanese billionaire of bribing a Philippine official to win approval for a casino resort project that became the Okada Manila. The allegations jeopardized Wynn Resort’s licensing and rendered Okada “unsuitable” as a shareholder, the company said.

Wynn Resorts forcibly redeemed the shares Okada owned through Universal, then worth $2.77 billion, at a 30 percent discount and booted him from the board.

Tangled Webs

Okada denied the bribery charges, claiming he had been ousted because Wynn Resort’s CEO Steve Wynn felt threatened by him because of his majority stake in the company. Wynn’s own stake had recently been weakened by a divorce settlement with Elaine Wynn, also a Wynn Resorts co-founder, in which the couple agreed to split their shares 50-50.

To complicate matters, when Universal counter-sued Wynn Resorts, the former Mrs. Wynn joined the suit, in an effort to regain control of her shares. She and her ex-husband had signed a shareholder’s agreement that prevented both parties from selling their equity in the company.

Mr. Wynn was forced to resign as Wynn Resorts CEO and chairman in early February amid mounting allegations that he had sexually harassed and assaulted staff at his casinos over several decades. He denies these allegations, blaming a smear campaign spearheaded by his ex-wife.

But suddenly Wynn was the one at risk of being deemed an “unsuitable” shareholder, as regulators launched investigations in three jurisdictions. The trouble was, he was unable to sell his shares, per the divorce settlement, until ongoing litigation was settled.

Okada Bites Back

Following the Universal settlement Thursday, lawyers for Wynn Resorts said that they intended to press ahead with the lawsuit against Okada but relented when Okada applied to stay the judge’s order to dismiss the case against Universal.

Okada argued that Universal’s board did not have the authority to approve the settlement because of an ongoing dispute about who controls the company. Okada founded Universal almost 50 years ago but was ousted from the board last summer over claims that he had misappropriated company funds.

He alleges he was the victim of a boardroom coup and will go to court in Tokyo next month in an attempt to wrestle back control. He owns 46 percent of Okada Holdings, which owns about two-thirds of Universal.

The developments over the past week demonstrate just how anxious Wynn Resorts is about its former CEO’s ownership stake and the impact it could have on its licenses. The man feted for reshaping the Las Vegas landscape in the nineties and noughties has become an embarrassing liability.