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Captivated by Wynn Resort's dirty laundry

The breakup between casino impresario Steve Wynn and Kazuo Okada, his original partner in Wynn Resorts, is more titillating than Wynn's split with his wife.

January 18, 2012|Michael Hiltzik
  • "I love Kazuo Okada as much as any man that Ive ever met in my life," Wynn Resorts Chief Executive says of the man who is suing the company for access to its financial records.
"I love Kazuo Okada as much as any man that Ive ever met in my life,"… (Mike Clarke, AFP / Getty…)

Over the centuries, the great literary masters have taught us almost everything we need to know about the virtues of love and matrimony. But casino impresario Steve Wynn could probably write a book on the pitfalls of divorce.

I'm not referring to his 2009 split with his wife, Elaine. That was gaudy enough to be covered on the gossip pages and resulted in her owning half his shares in Wynn Resorts, the publicly traded parent company of the Wynn and Encore casino-hotels on the Las Vegas Strip.

I'm talking about the much more intriguing breakup between Wynn and Kazuo Okada, his original partner in Wynn Resorts.

Okada made his fortune in pachinko machines, which are a Japanese version of slot machines. He says he was instrumental in financing Wynn's move into the fiendishly lucrative gaming market in Macao, a former Portuguese colony that, like its neighbor Hong Kong, is now a Chinese protectorate.

Thanks to the divorce-related division of the Wynn family assets, Okada is the largest single shareholder of Wynn Resorts, with nearly 20%. He's also a member of its board, on which he served until recently as vice chairman.

But last week Okada fired a broadside at Wynn Resorts, asking a Nevada court to order the company to give him access to books and records to which he says he's entitled as a director. We'll skip over the legal technicalities for a moment and focus on the most striking aspect of this lawsuit: the hint that the company's $135-million donation to the University of Macao was motivated by its desire to get his gaming license renewed.

You have to read between the lines to reach that conclusion. But here are the lines: Okada observes that the donation to the university, which is a public institution occupying government-owned land, will be spread out in annual pieces through 2022 — which happens to be the year when foreign licenses to operate casinos in Macao come up for renewal.

This is no modest or routine disbursement. Okada, who voted against the donation as a board member of both Wynn Resorts and Wynn Macao, the Hong Kong-listed subsidiary through which it was made, says it was "unprecedented in the annals of that university." At the time it was disclosed, news reports in the Far East described it as the largest single donation ever made by a Hong Kong-listed company.

In terms of the resources of Wynn Macao, it was so large that it turned what would have been a healthy increase in quarterly earnings for Wynn Macao into a drop for the second quarter of 2011, when the value of the donation was charged against revenue. It also cut the profit of Wynn Resorts nearly in half that quarter.

Upon presenting the first check of $25 million at a Macao ceremony in May, Wynn called it a sign of his company's dedication "to the education of the people of Macao."

Intrigued by this evidence of Wynn's eleemosynary interest in the education of youth, I asked his company for information about other charitable donations he or the company has made, say to the University of Nevada, Las Vegas, which once gave Wynn an honorary degree. They refused to provide any. I did turn up about $1.2 million in contributions made by Wynn's personal foundation to a dropout prevention group called Communities in Schools. Elaine Wynn sits on its board.

Maybe the charitable needs of university youth in Macao are more pressing. Or maybe some other need is involved.

The gaming industry has long contended that its skeevy ethical record was relegated to history's dustbin when mob-connected figures yielded ownership of Las Vegas casinos to upstanding publicly traded corporations, such as Hilton and MGM Mirage.

Macao, on the other hand, looks more like an ethical black hole. After the Chinese government acquired Macao from the Portuguese in 1999 it opened its gambling market, which was then monopolized by the family of Stanley Ho, to outside bidders. Of the three U.S. corporations that ended up with gaming concessions, two have faced legal problems over their involvement in the place.

Las Vegas Sands Corp., which operates what is now the largest casino in Macao, is under investigation by the U.S. Securities and Exchange Commission, the Justice Department and Nevada gaming authorities over whether it has violated the federal anti-bribery Foreign Corrupt Practices Act in Macao. Sands says it thinks the probes have something to do with allegations made by its former top Macao executive in a wrongful-termination lawsuit.

Sands also got hit in 2008 with a judgment of more than $43 million in a Nevada suit brought by Richard Suen, a Hong Kong middleman who said he set up meetings for Sands Chairman Sheldon Adelson with Chinese officials to grease the way for the Macao license, only to get stiffed on his fee. Suen's judgment has been overturned by the Nevada Supreme Court, which has ordered a new trial.

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