A Louisiana law firm has commenced an investigation into Wynn Resorts Ltd and whether the board breached their fiduciary duties to company shareholders or violated state or federal laws in relation to allegations of long-running sexual misconduct by former Chairman and CEO Steve Wynn.
Kahn Swick & Foti LLC (KSF), led by partner and former Attorney General of Louisiana, Charles C Foti Jr, announced over the weekend that it had officially begun investigating Wynn Resorts, stating that, “The actions of its executives and board members have exposed the company to significant negative publicity, a rating downgrade by Morgan Stanley, ongoing investigations by gaming regulatory bodies in Massachusetts, Nevada and Macau (China), and recently a securities class action lawsuit for failing to disclose material information to investors, violating federal securities laws.”
KSF pointed to certain recent events as being central to its investigation, including a court decision that reversed its prior ruling blocking a lawsuit brought against Wynn Resorts by former board member Kazuo Okada. Okada and Wynn will now face off in court in April over the forced redemption of Okada’s almost 20% stake in Wynn Resorts, worth US$2.7 billion, in 2012. Wynn Resorts claimed at the time that Okada and his then holding company Aruze USA was unfit to be a major shareholder in the company due to allegations he had provided improper hospitality at Wynn properties to Philippine gaming officials to the tune of US$110,000.
KSF also cited Wynn Resorts’ hiring of an independent law firm on 2 February 2018 to investigate the company’s handling of sexual misconduct allegations against Wynn, only to halt the review following Wynn’s departure and later hire another law firm “with longstanding ties to the company to conduct the probe.”
KSF has called for Wynn Resorts shareholders to contact them to discuss their legal rights. The company describes itself as “a law firm focused on securities, antitrust and consumer class actions, along with merger and acquisition and breach of fiduciary litigation against publicly traded companies on behalf of shareholders.” It has offices in New York, California and Louisiana.
News of the investigation comes just days after Wynn’s attempt to have a shareholder agreement between he, ex-wife Elaine Wynn and former business partner Okada terminated was rejected by the Nevada District Court.
In a Friday ruling that could have significant consequences for Wynn, Judge Elizabeth Gonzalez said she was rejecting the motion to dismiss because the 2010 Stockholders Agreement was “central” to ongoing litigation between the trio.
Wynn, who stepped down from the Wynn Resorts board on 6 February after an explosive Wall Street Journal report alleging the 76-year-old had pressured female employees into performing sex acts, filed the motion to dismiss the agreement last month after agreeing to relinquish control of his ex-wife’s 9.4% stake in the company, Wynn stated at the time that he no longer contests Ms Wynn’s judicial claim that the 2010 Stockholders Agreement is invalid and unenforceable.
Steve Wynn, Elaine Wynn and Okada had entered into the agreement in 2010 which gave Mr Wynn control over the trio’s shares in an attempt to ward off any potential takeover bids.
Despite opposing the validity of the agreement, Ms Wynn joined Aruze USA in opposing Wynn’s motion, citing her desire to have all of her claims fulfilled in court rather than only those conceded by her former husband.
The court’s latest ruling could have greater consequences for Wynn if Nevada regulators rule he must reduce his stake in Wynn Resorts, with the impending court case and upholding of the agreement potentially preventing him from selling any shares. Wynn has denied all allegations against him.