LAS VEGAS--()--Universal Entertainment Corp., and its subsidiary, Aruze USA, Inc., asked a judge today to immediately restore Aruze USA’s rights as the largest shareholder of Wynn Resorts (Nasdaq: WYNN), effectively halting a punitive and unlawful bid by CEO Stephen Wynn to consolidate his power and remove a dissenting voice on his board, Kazuo Okada.
The motion for preliminary injunction filed in U.S. District Court in Nevada seeks to preserve Aruze USA’s voting rights, which were unlawfully stripped in February by Wynn and a complicit Board of Directors to punish and silence Aruze USA because Mr. Okada has raised questions concerning the company’s $135 million donation last year to a university foundation with ties to Macau gaming regulators.
An amended counterclaim was also filed today against Mr. Wynn, Kim Sinatra, general counsel of Wynn Resorts, and individual members of the Board, asserting that Steve Wynn has indulged in fraud, deception, theft and betrayal to maintain control of his gaming enterprises, and that deceptive events as early as 2002 took place to perpetuate Wynn Resorts’ and Mr. Wynn’s improper attempt to redeem Aruze USA’s stock at a vast discount to enrich Mr. Wynn and his Board allies.
“This motion for preliminary injunction and our amended counterclaim seeks to protect our investment and restore independent judgment and sound corporate governance to the Wynn Resorts Board,” Universal Entertainment and Aruze USA said of the legal filings.
Mr. Okada also commented on the action taken by Universal Entertainment and Aruze USA, saying: “Steve Wynn’s betrayal of my trust and friendship, and the unconscionable course of conduct he engineered to suppress dissenting views and defame critics, all to maintain absolute control, must be challenged to protect the interests of all shareholders. Sadly, this is not the first time Mr. Wynn has shown his true colors; nor do I believe it will be the last time based on a disturbing pattern that clearly places one person first – Steve Wynn himself – above all others.’’
This motion for preliminary injunction seeks to prohibit Wynn Resorts from depriving Aruze USA of any of its rights as a stockholder of Wynn Resorts until the federal lawsuit between the Wynn Resorts parties and the Universal Entertainment parties is adjudicated.
The motion contends Mr. Wynn and Wynn Resorts sought to “quell dissent and consolidate power” by relying on an unsubstantiated and faulty Compliance Committee investigation that is riddled with inaccuracies questioning Mr. Okada’s suitability to remain on the Board. The Wynn Resorts Board has attempted to strip Aruze USA of its stock and sued Aruze USA and Mr. Okada based on the distorted and erroneous investigation. Wynn Resorts has also threatened to call a shareholder meeting to remove Mr. Okada as a director of the company.
“Aruze USA and Universal categorically deny any wrongdoing, but more to the point, nothing that they have been accused of doing could pose a legitimate and imminent danger to Wynn Resorts’ gaming licenses. These allegations are mere pretext for actions taken to entrench and enrich Steve Wynn, the Board, and the management of Wynn Resorts,’’ the filing in support of the motion said.
Beyond the flawed, incomplete and so-called “independent” Freeh Sporkin & Sullivan report commissioned by the Compliance Committee, Wynn Resorts and the Board violated public policy, overstepped contractual obligations, and breached their fiduciary duties in their “lawless actions,” which the motion asserts were motivated, in part, to deprive Aruze USA’s and Mr. Okada’s ability to pursue changes to the Board that would weaken Steve Wynn’s control of the Company in violation of any sensible corporate governance standards.
The Freeh Report was prepared after only one interview with Mr. Okada and was completed just three days thereafter. Although promised, Mr. Okada was not afforded any opportunity to provide any documents, explanations or corrections to address the numerous errors and false accusations in the report. In fact, Mr. Okada was not provided with a copy of the report until after it had become publicly available, despite the fact that Wynn Resorts had furnished it to members of the media well in advance.
“In one fell swoop, Mr. Wynn and his Board thus acted to quell dissent and consolidate power at Wynn Resorts by disenfranchising the company’s largest shareholder,’’ the motion said.
The motion asks the judge to:
- Prohibit Wynn Resorts and its officers, directors, agents, employees, attorneys, and anyone else acting on its behalf from barring or preventing Aruze USA from exercising its right to vote its shares of Wynn Resorts common stock.
- Prohibit Wynn Resorts and its officers, directors, agents, employees, attorneys, and anyone else acting on its behalf from acting in any other manner to deprive Aruze USA of any of its rights as a stockholder of Wynn Resorts.
Mr. Okada, who is chairman of the board of Universal Entertainment, has been crucial to the financial success of Wynn Resorts since 2000, when Universal Entertainment, through Aruze USA, provided financial assistance to Mr. Wynn following Mr. Wynn’s dismissal from MGM Grand, Inc. Aruze USA invested $260 million as seed capital for development of the company that is now Wynn Resorts.
In May, a Nevada judge approved a renewed request by Mr. Okada to review Wynn Resorts’ records and documents regarding Wynn Resorts’ donation to a university foundation with ties to Macau gaming, additional documents from 2000 to 2002 regarding Mr. Wynn’s entertainment of and contacts with Macau officials, and documents explaining Wynn Resorts’ use of $120 million Aruze USA invested with Mr. Wynn in 2002.
Mr. Okada’s original requests as a director for the information were rejected by Wynn Resorts, forcing Mr. Okada to go to court, and spurring Mr. Wynn to begin “an increasingly punitive series of steps intended to restore and maintain his own unopposed control over Wynn Resorts,’’ according to the preliminary injunction motion filed today.
The U.S. Securities and Exchange Commission, meanwhile, has launched its own investigation into the University of Macau Foundation donation by Wynn Resorts.
The amended counterclaim filed today, meanwhile, contends that Mr. Wynn, humiliated by his public ouster from MGM Grand, Inc., based on allegations that he misappropriated company funds, set a course to build a new company and turned to Universal Entertainment and Mr. Okada for support. At that time, contribution and shareholder agreements formalized the relationship among the parties and their respective rights and interests.
But in September 2002, Mr. Wynn unilaterally amended the Company’s Articles of Incorporation to include a provision allowing the redemption of stock at the Board’s discretion for any persons it determined to be “unsuitable’’ – a change that could not apply to Aruze USA’s previously purchased shares of Wynn Resorts’ stock.
Mr. Wynn and Wynn Resorts failed to disclose their intent to apply the new provision under Wynn Resorts’ Articles of Incorporation to Aruze USA’s shares, which would impose “substantial financial risk on Aruze USA’s shares of Wynn Resorts stock by providing Wynn Resorts’ Board – which was controlled by Mr. Wynn – purported discretion to redeem Aruze USA’s stock on potentially onerous terms,” the amended counterclaim says. Had that information been disclosed, “Aruze USA would not have entered into the Contribution Agreement.”
According to the amended counterclaim, just days before the Board attempted to strip Aruze USA of its shares and the Freeh report was leaked to the public, Mr. Wynn, through intermediaries, communicated to Aruze USA that he “would be willing to buy Aruze USA’s stock for his benefit at a significant discount. A sale to Mr. Wynn was presented as an alternative to the embarrassment and regulatory issues attendant to possible disclosure of the Freeh Sporkin report.’’ Aruze USA refused.
About Universal Entertainment:
Universal Entertainment Corp. is a Japanese company that manufactures and sells gaming machines. Mr. Okada is chairman of the board of Universal. Universal is registered with the Nevada Gaming Commission as 100 percent shareholder of Aruze USA Inc. Aruze USA, a company organized under Nevada state law, is a founding investor in Wynn Resorts and the largest single owner of outstanding stock in the company.