The Wynn vs Okada battle is really heating up now and those in the gaming industry are watching with keen interest.
After what appeared to be an amicable 12 year business relationship, Casino Mogul Steve Wynn has ceremoniously dumped Kazuo Okada from the board and forced a redemption of shares at a steep discount. Now the gloves are off. It is Wynn vs Okada and the accusations are flying.
Universal Entertainment released this statement:
“While Wynn Resorts has still not provided Universal with a copy of the “investigation” report, we believe the allegations leveled against Universal are motivated by self-interest and represent the results of an incomplete and otherwise flawed corporate governance process in breach of the Board’s fiduciary and other duties. Universal believes the entire process has been tainted by the desire to serve Steve Wynn’s predetermined goal of removing Aruze USA as the largest stockholder of the Company. Aruze USA intends to commence litigation, which includes seeking a temporary restraining order and preliminary injunction, to protect its interests in Wynn Resorts and prevent the redemption of its shares.”
Wynn Resorts fired back on 3-13 with this statement:
“Despite its enormous length and scurrilous allegations, the Okada response fails to contain any meaningful denial of the facts detailed in the Freeh Report or Governor Miller’s conference call on February 21, 2012. Wynn Resorts looks forward to having Mr. Okada’s actions and the Company’s response presented to and adjudicated in court.”
So how will the Wynn vs Okada saga play out? A little backgroud. After Wynn lost Mirage Resorts in a surprising involuntary takeover, he not so surprisingly bounced back with the help of his then billionaire friend Kazuo Okada. Okada, an engineer who started his career repairing jukeboxes has made much of his fortune manufacturing gaming machines for Japan’s pachinko parlors and is skilled at maneuvering through the Asian gambling industry. I remember first seeing the Pachinko demos at and I wondered then what the fascination was with the slot machine type of game combined with a pinball flipper. Honestly, the game on display seemed a little “cartoonish” to me however it is big business and a mainstay in the Japanese market. As of march 2012, Okada was estimated to be worth 1.8 billion by Forbes.
The result of these 2 combined mega forces and mega personalities was the creation of Wynn Resorts, with Mr. Okada eventually becoming the company’s biggest shareholder. To illustrate the strong bond, Wynn gushed during a May 2008 earning conference call, “I love Kazuo Okada as much as any man that I’ve ever met in my life”. What a difference nearly 3 years makes!
Now each side is accusing the other of questionable payments to officials in Asia and the fight is being played out both in Las Vegas, where Wynn Resorts is based, and in Macau the former Portuguese seaport colony that is now controlled by China where annual gambling revenue is approximately four times that of the Las Vegas Strip. Macau was the source of virtually all of Wynn Resorts’ $613.4 million in profit last year certainly offsetting its loses in the hard hit Nevada economy.
So how did all start? Rumors swirling about allege that it began in January when Okada filed a suit against Wynn for blocking access to financial documents related to a $135 million donation to the University of Macau by Wynn Resorts Macau. The Las Vegas Review Journal notes that Wynn Resorts allegedly made the donation while waiting for Chinese approval to build a new casino on the Cotai strip. Okada has said referring to Steve Wynn “His attitude changed because I became suspicious regarding the purpose and reason for the large donation made to the University of Macau, and I opposed it. Since then, Steve Wynn started trying to remove me.”
Another likely source of their clashing is that Mr. Okada is pursuing his own casino business in the Philippines, through a company Phillipine Amusement and Gaming Corporation (PAGCOR) separate from Wynn Resorts. Shortly after Wynn Resorts decided early last year that it would not follow Mr. Okada into the Philippine gambling the company allegedly commenced an investigation of Mr. Okada, conducted by a firm run by the well-respected and former F.B.I. director Louis J. Freeh. The Wynn Resorts board cited the report by the Freeh Group in explaining their actions.
Wynn’s allegation include giving a visiting Philippine gambling regulator and his entourage free use of the Wynn Macau casino-resort’s Villa 81, a luxurious 7,000-square-foot suite that normally rents for $6,000 a night and includes his and her bathrooms with showers built to accommodate six people at a time.
The two tycoons are both known in the industry as having very strong personalities with huge egos to match although Okada usually shies away from the media. He made an exception and spoke for 15 minutes in Japanese in a clip shown on the website of his firm Universal Entertainment, saying Universal has never done anything improper to obtain government approvals. You can watch the video subtitled in English here.
Now that both men are being investigated since it is illegal to bribe foreign officials to obtain a business advantage…it will be extremely interesting to see what else will come out in the wash. I’m sure the inner working of the Macau’s private gambling rooms operations will come out. I’ve actually been quite surprised that it hasn’t already. Although Las Vegas has its share of private, high roller and high limit gaming areas, they are controlled by the licensed casino company and therefore heavily regulated. In Macau the casino company basically “outsources” the VIP room operations to third parties known commonly as junket or gaming promoters. These “promoters” recruit high-roller customers to patronize a specific gambling room and arrange private loans to gamble in the private rooms.
You may remember when New Jersey regulators ruled Stanley Ho “unsuitable” largely because of these rooms structure. Reuters published a major story on Macau’s VIP operation. It appears that these “promoters” still might dominate the Macau gaming industry and certainly seem to operate in a shroud of secrecy so perhaps this investigation that is underway will shed more light on this practice including identifying and profiling some of the region’s biggest VIP and junket operators. It may come as a big surprise to see who is truly involved.
Perhaps Wynn will finally relocate his Corporate Headquarters to Macau as he threatened to do a couple of years ago. Let’s hope not since he has done so much for Las Vegas.
One thing for sure, this battle of Wynn vs Okada will be watched around the world