|A very good piece. |
It may take years, but there will be a settlement.
The NYT covered the same territory as Bloomberg:
Builders of Casino Empire Split, and the Bitter Accusations Fly
By KEITH BRADSHER
New York Times
March 2, 2012
MACAO — For more than a decade, they were the odd couple of gambling.
In the early going, Stephen A. Wynn, the Las Vegas magnate with a thousand-watt smile, was on the rebound after his casino and resorts empire, Mirage Resorts, fell prey to a hostile takeover in 2000.
To bankroll his comeback, he turned to a Japanese billionaire, Kazuo Okada, who had made much of his fortune manufacturing gaming machines for Japan’s notorious pachinko parlors — and who was adept at the wild ways of the mushrooming Asian gambling industry.
Together they formed Wynn Resorts, with Mr. Okada eventually becoming the company’s biggest shareholder.
“I love Kazuo Okada as much as any man that I’ve ever met in my life,” Mr. Wynn effused during an earnings conference call in May 2008.
The love affair is over. Mr. Wynn and Mr. Okada are now embroiled in a nasty corporate divorce, in one of the most rancorous public feuds the international gambling industry has ever seen.
With each side accusing the other of questionable payments to public officials in Asia, many gambling executives fear collateral damage. They worry that the accusations could prompt government investigations into any number of ethically questionable business practices in gambling, where Asian regulators have often looked the other way.
“It’s like two gunslingers shooting it out,” said a longtime industry official, who insisted on anonymity because he knew both men and wanted to protect the relationships. “And what I’m wondering is whether they’ll both kill each other.”
The fight is playing out in Las Vegas, where Wynn Resorts is based, and here in Macao, the former Portuguese seaport colony now controlled by China, where annual gambling revenue is four times that of the Las Vegas Strip. Macao (often spelled Macau) was the source of all of Wynn Resorts’ $613.4 million in profit last year — more than offsetting its money-losing properties in the moribund Nevada economy.
Despite the partners’ joint success in playing the gambling game by Macao’s lax house rules, Mr. Wynn’s allies on the company’s board are now accusing Mr. Okada of violating American foreign-corruption laws.
These allegations of missteps include giving a visiting Philippine gambling regulator and his entourage free use of the Wynn Macau casino-resort’s Villa 81 — a 7,000-square-foot pleasure palace that normally rents for $6,000 a night and has amenities including his-and-hers bathrooms with showers built to accommodate six people at a time.
Mr. Okada’s camp, in turn, is questioning the propriety of a $135 million donation that Wynn Resorts made last year to the University of Macau — its chancellor is also the head of Macao’s government, with ultimate oversight of gambling. Mr. Okada’s litigation has prompted an inquiry by the United States.
Both sides deny wrongdoing. Mr. Wynn and Mr. Okada declined to be interviewed.
One source of friction is that Mr. Okada is pursuing his own casino business in the Philippines, through a company separate from Wynn Resorts. Mr. Okada’s going it alone originally had Mr. Wynn’s public blessing.
But shortly after Wynn Resorts decided early last year that it would not follow Mr. Okada into the Philippine gambling industry — whose reputation is questionable even by Asian gaming standards — the company started an investigation of Mr. Okada, conducted by a firm run by the former F.B.I. director Louis J. Freeh.
The Wynn Resorts board cited the reporting by the Freeh Group last week in explaining that Mr. Okada’s suspected blandishments to Philippine gaming officials, through use of Wynn hotels in Macao and Las Vegas, were grounds for drastic action: forcing Mr. Okada to leave the company and to sell back his nearly 20 percent stake at a 30 percent discount to the current stock price.
It may eventually be left to courts to decide whether either side has actually broken any laws, and whether — as Mr. Okada’s camp contends — Mr. Wynn is seeking to jettison the Japanese executive over behavior he has long abided because he no longer needs Mr. Okada’s money.
Macao casino regulators have asked Wynn Resorts for “detailed information” about the various accusations. The Macao officials also want to know more about the company’s forced buyout of Mr. Okada and his ouster from the board of its Wynn Macau subsidiary.
The president of the Philippines, Benigno S. Aquino III, has ordered an investigation. The United States Securities and Exchange Commission has begun an informal inquiry into the university donation.
And Nevada regulators are watching the Wynn-Okada fight. “We are looking at it, and will evaluate it and come to our own conclusions,” said Mark A. Lipparelli, the chairman of the Nevada Gaming Control Board, in a telephone interview.
The Nevada board’s interest is more than idle curiosity. Under its relatively taut regulations, allegations of corruption raise the risk that a person or company can be declared unsuitable, lose their licenses and be barred from the gambling industry.
“Our license would be put under a cloud if we were to not take action, waiting for someone else to do so,” said Robert Miller, the chairman of Wynn Resorts’ compliance committee, in a conference call with reporters on Feb. 21.
But experts on Nevada regulations say that Wynn Resorts might have been overstating its case in implying that Mr. Okada’s suspected transgressions threatened the company’s very existence.
The company’s stock price has recently risen on news of the company’s discounted buyback of Mr. Okada’s shares. But it is still down 18.8 percent from its peak of $156.70 last July, with much of the decline coming last autumn after the Macao government delayed a decision on whether to let the company build a second casino and resort on land it had already leased. (On Friday, the company’s shares gyrated as it initially sent a filing to the S.E.C. claiming progress on the second casino application, but later rescinded the filing, saying it was a clerical error. The shares rose 4.3 percent for the day, ending at $127.27.)
By the time Wynn Resorts began its own investigation of Mr. Okada’s business activities last year rather than asking Nevada regulators to review them — partly because Nevada’s rules require companies to self-police — tensions had already reached the point that he resigned as the company’s vice chairman in October.
By that time, too, the board was pressuring Mr. Okada to sign an antibribery compliance agreement — which he dismissed as a set of restrictions better suited to keeping a croupier on the up and up than governing the activities of an international supplier of gambling equipment.
But it was not until Feb. 18, three days after investigators from the Freeh Group interviewed Mr. Okada for the first time, that the board voted to force him to sell back his stake to the company.
Mr. Okada and his lawyers have for months been pursuing their own grievances against Wynn Resorts. After coming last year to the donations ceremony, he now questions the $135 million donation — the largest in the university’s 31 years, and payable over 11 years — asking what the company would get in return. Mr. Okada’s lawyers have asked a Nevada court to force the company to hand over documents related to the gift.
When they first teamed up in 2000, Mr. Wynn was looking to reinvest part of the $500 million he took away after losing control of Mirage Resorts to the buyout billionaire Kirk Kerkorian’s MGM Grand. Mr. Okada, for his part, had a $4.7 billion personal fortune built largely on selling pachinko machines — a cross between pinball tables and slot machines used in gambling parlors in Japan that have long been accused of links to organized crime.
Almost from the start, their partnership was dogged by controversy. Mr. Okada, who had been Japan’s largest individual taxpayer the year before, was engaged in a series of tax disputes with Japanese authorities.
At a 2004 regulatory hearing, a Nevada official told Mr. Okada that Mr. Wynn was putting his reputation on the line in allying himself with someone from the Japanese pachinko industry, even if regulators had never found ties between Mr. Okada and crime rings.
But Mr. Wynn made a show of being seen with his Japanese business partner, whether at Los Angeles Lakers basketball games, charity events or Nevada regulatory hearings.
Mr. Okada proved a valuable resource when Wynn Resorts opened its first casino and hotel complex in Macao in 2005, providing a deep knowledge of the Asian gambling scene. And in that 2008 financial conference call, when asked about Mr. Okada’s planned Philippines foray, Mr. Wynn professed his support and counsel on the project. “He’s my partner and friend,” Mr. Wynn said, “and there is hardly anything that I won’t do for him.”
Now, though, people on both sides of the feud question whether the two men were ever really close or whether they were simply maintaining appearances to help win regulatory approval for their projects in the United States and abroad. Skeptics now wonder aloud how simpatico the supposed buddies could have really been, given that Mr. Okada speaks little English, while Mr. Wynn understands virtually no Japanese.
“Steve told me, ‘We live 10,000 miles apart; we don’t speak the same language,’ ” said a person who knows Mr. Wynn and insisted on anonymity because of the likelihood of litigation between Mr. Wynn and Mr. Okada. Whether it was a true friendship or just a business alliance, Mr. Wynn had clearly hedged his bets.
During one of Mr. Okada’s tax disputes, in 2000 Mr. Wynn flew to Tokyo to negotiate an unusual arrangement. Mr. Okada was forced to accept a series of restrictions on his holdings in the company, including a provision that might eventually give Mr. Wynn the discretion to declare him an unsuitable investor and force Mr. Okada to sell his stake back to the company in exchange for a 10-year promissory note.
The board invoked that provision Feb. 18 in forcing the sale of Mr. Okada’s 19.7 percent stake in Wynn Resorts back to the company, which went public in October 2002. (Mr. Wynn now owns 8 percent of the company’s stock — only half the stake he and his first wife, Elaine P. Wynn, jointly held before their divorce settlement in January a year ago.)
The company’s investigative report accuses Mr. Wynn’s erstwhile partner of providing Philippine regulators with a series of benefits worth a total of $110,000.
Many of the favors came in the form of free lodging at Wynn hotels, in Las Vegas and Macao. The most notable might be the four free nights at the Villa 81 here in September 2010 by an entourage led by the chairman of the Philippines Amusement and Gaming Corporation, a government-owned enterprise that is both the regulator and main operator of Philippine casinos. The Freeh Group said he checked in incognito, suggesting someone wanted to hide his stay, but was recognized by hotel staffers.
Besides its showers for six, the Villa 81 amenities include a massage parlor, hair salon and media room with a 100-inch flat-panel TV. For paying customers, usually casino high-rollers, the boarding bill alone would have come to $24,000.
The Philippine chairman, Cristino Naguiat, acknowledged in a statement that he accepted the free lodging, but denied there was anything wrong with it. “Any insinuation that the complimentary accommodations extended to me and my family, who subsequently joined me for the weekend, were a bribe is untrue and just plain wrong,” he said.