PRESS RELEASE Hill+Knowlton Strategies Asia
Tokyo, Japan – March 12, 2012 – Universal Entertainment Corporation, and its subsidiary Aruze USA, Inc., today filed a Counterclaim against Steve Wynn, Wynn Resorts (NASDAQ: WYNN), an officer of Wynn Resorts, and the individual members of the Wynn Resorts Board, to prevent the unjust and improper redemption of shares owned by Aruze USA, Inc., at a 30 percent discount, and to seek damages, punitive damages and treble damages. Universal Entertainment is seeking a permanent injunction, declaratory relief and multiple claims for damages caused by the actions of Mr. Wynn and the Wynn Resorts Board.
The Counterclaim contends that Wynn Resorts’ purported redemption violates the express language of multiple agreements between Steve Wynn and Aruze USA, and among Steve Wynn, Elaine Wynn, Wynn Resorts and Aruze USA. Further, by means of the purported redemption, Mr. Wynn and the other members of the Board seek to profit from their illegal acts in a process that was corrupt and unfair, causing Universal Entertainment and Aruze USA irreparable damages based on an unproven pretext.
Kazuo Okada, Chairman of the Board of Directors of Universal Entertainment, said, “We are taking this action to protect our investment from what we believe to be an unconscionable course of conduct perpetrated by Steve Wynn and the Wynn Resorts Board of Directors to facilitate Mr. Wynn’s agenda of maintaining his absolute control over Wynn Resorts and in order to enrich himself. Our lawsuit contends that after having lost control of his previous ventures in Las Vegas, Mr. Wynn has undertaken this campaign to suppress dissenting views on the Wynn Resorts Board, particularly with regard to Wynn Resorts’ unprecedented, inadequately explained and wasteful $135 million donation to the University of Macau, so that this venture would not end with the same result.”
Mr. Okada added, “Our Counterclaim highlights that the Wynn Resorts Board did not exercise any independent judgment or otherwise act in a manner consistent with sound corporate governance principles. Rather, the Wynn Resorts Board fell in line behind Mr. Wynn and authorized the illegal redemption of Aruze USA’s shares following a hurried and incomplete investigation that lacked sufficient findings and any form of due process in accordance with appropriate governance principles and standards. We are confident in the strength of our claims and look forward to bringing them before the Court.”
No Legal Basis for Redemption
Universal Entertainment’s Counterclaim contains allegations, among others, that:
· No redemption has occurred and that there is no legal basis for the redemption.
· The stock held by Aruze USA is subject to transfer restrictions in a stockholders agreement, which preclude any redemption of Aruze USA’s stock.
· Unlike most Wynn Resorts shares, Aruze USA’s shares were never subject to the redemption provision of the Wynn Resorts Articles of Incorporation, as Aruze USA acquired its interest before the redemption provisions became effective.
No Basis for Finding “Unsuitability”
The Counterclaim asserts that, even assuming that the provisions of the Wynn Resorts Articles of Incorporation were applicable to the shares held by Aruze USA (which Universal Entertainment argues they do not), the Board of Directors could not have in good faith determined that the standard was met for a finding that Mr. Okada, Universal or Aruze USA is “unsuitable.” Mr. Okada denies that there is basis for the finding by the Wynn Board of Directors that he is “unsuitable”. He says, “Universal Entertainment is a public company in Japan with its own Compliance Committee, which adheres to rules relating to business entertainment so that such entertainment is within industry practices and applicable laws. If we become aware that an employee has violated our rules, we impose discipline.”
Universal notes that its subsidiary in the Philippines has a provisional gaming license and that the final license will be granted on the condition that the construction of the casino project is completed. The license comes from building a casino within the designated economic zone for casinos.
Universal also notes that the Articles of Incorporation of Wynn Resorts require that the Board believe the person whose conduct is in question is “likely to jeopardize” Wynn Resorts’ applications for, or existing, gaming licenses. This would simply not be the case, as there is no basis under applicable gaming laws for any gaming authority to terminate or withdraw any gaming license or any pending application of Wynn Resorts or its subsidiaries based on the alleged wrongdoings.
Steve Wynn, Driven by Desire to Maintain Control and Enrich Himself, Violates Nevada RICO Statutes
The Counterclaim states that Mr. Wynn has run Wynn Resorts as a personal fiefdom, packing the Board with friends who do his bidding and paying key executives exorbitant amounts for their unwavering personal fealty to Mr. Wynn, all so that Mr. Wynn is able to continue to dominate and control the company. The Counterclaim states that, consistent with this goal, Mr. Wynn, along with Kim Sinatra, Wynn Resorts’ General Counsel, executed on a scheme of fraud and defamation which Universal Entertainment believe violates Nevada’s RICO statutes.
As outlined in the Counterclaim, on numerous occasions Mr. Wynn, Ms. Sinatra and other Wynn representatives misrepresented their intentions in an effort to deceive and steal from Aruze USA, and to enable Mr. Wynn to secure and maintain control of Wynn Resorts through a series of fraudulent and deceptive acts. Notably, they also attempted to force Aruze USA to sell its shares directly to Mr. Wynn at a massive discount and to intimidate Mr. Okada into resigning from the Wynn Resorts Board.
Wynn Resorts Board Breached Fiduciary Duties
Universal Entertainment believes the Wynn Resorts Board acted hastily and without a good faith attempt to understand the true facts before voting for the entirely unnecessary and improper redemption. The Counterclaim contends that, through their misconduct and by failing to abide by basic rules of corporate governance, Mr. Wynn and the Wynn Board of Directors breached their fiduciary duties and various contractual and other obligations to Mr. Okada, Universal Entertainment and Aruze USA.
Universal Entertainment contends that:
· Mr. Wynn breached his fiduciary duties by attempting to force Mr. Okada off the Wynn Resorts Board, threatening redemption, and engaging the Wynn Resorts Board of Directors to further his efforts.
· The Board members breached their fiduciary duties by abusing their discretion in finding Aruze USA, Universal and Mr. Okada “unsuitable”, and determining the outcome of the investigation prior to engaging an independent investigator.
· Notwithstanding promises by its agents to the contrary, the Board also deprived Mr. Okada of an opportunity to review the findings of the report or to present any information to address the claims against him and Universal Entertainment prior to the purported redemption.
Furthermore, Universal Entertainment’s Counterclaim alleges that the Board timed its actions to divert attention away from questions Mr. Okada raised regarding the Wynn Resorts donation in Macau, which resulted in a U.S. Securities and Exchange Commission inquiry of the company.
Freeh Report: Providing a Pretext without Due Process
The Counterclaim contends that the report prepared by Freeh Sporkin & Sullivan, LLP, a law firm hired by Wynn Resorts to investigate Mr. Okada, constitutes an effort to create a pretext to carry out the predetermined judgment of Mr. Wynn by providing a rationale for unjustly attempting to take Aruze USA’s shares in Wynn Resorts at a severe discount.
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.
Universal Entertainment believes the facts demonstrate that the result was preordained and is seeking to prevent the Wynn Resorts Board from unfairly acting based on this rushed, flawed and inequitable investigation.
No Basis For Discount to Aruze USA Shares
Finally, Universal Entertainment alleges in its lawsuit that nothing in the Wynn Resorts Articles of Incorporation or Bylaws, or the stockholder agreement among Mr. Okada, Mr. Wynn and Elaine Wynn, provides for or otherwise would justify a 30 percent discount to the value of Aruze USA’s investment. According to Wynn Resorts, the valuation was justified based only on the opinion of one of Steve Wynn’s long-standing financial advisors.
Universal Entertainment also filed a response to the claims brought by Wynn Resorts, denying the material aspects of the allegations brought by Wynn Resorts, and filed a removal notice to move the case to federal court. The filings have been made in the United States District Court for the District of Nevada.
RelatedPosts
