MANILA, Philippines – Wynn Resorts Ltd. announced on Monday (Manila time) that it has kicked out its Japanese investor, Kazuo Okada, from its board for giving cash and gifts worth $110,000 to Philippine Amusement and Gaming Corp. (Pagcor) officials.
In a statement, the gaming empire of Steve Wynn said it has bought back 20 percent of Okada’s stake in the company, which is equivalent to 24 million shares held by Aruze USA Inc., after a year-long investigation yielded that Okada was “unsuitable” to be a director of Wynn Resorts Ltd. and of Wynn Macau Ltd.
As provided for under the company’s Articles of Incorporation, the redemption is done at “fair value” of the shares held by unsuitable persons to protect the company’s gaming licenses.
Wynn Resorts had engaged an independent financial advisor to assist in the fair value calculation. Pursuant to this, the gaming firm issued a 10-year, $1.9-billion promissory note maturing on February 18, 2022 and bears interest at the rate of 2 percent per annum to redeem the shares.
The report received by Wynn Resorts’ Compliance Committee chaired by former Nevada Governor Robert Miller detailed “numerous apparent violations” of the US Foreign Corrupt Practice Act by Aruze USA, its parent company Universal Entertainment Corp. and its principal shareholder, Okada.
Universal Entertainment’s local unit, Tiger Resorts Leisure and Entertainment Inc., has just started constructing Manila Bay Resorts, a casino complex within Pagcor’s Bagong Nayong Pilipino Entertainment Complex in Paranaque City.
The compliance committee that investigated Okada hired several investigators, including several investigators, including Freeh, Sporkin and Sullivan, LLP, led by Louis J. Freeh, the former Director of the U.S. Federal Bureau of Investigation, which conducted a thorough independent scrutiny of Okada’s business transactions.
Concealing payments to Pagcor
According to Wynn Resorts, Freeh’s investigators uncovered and documented more than three dozen instances over a three-year period in which Okada and his associates engaged in “improper activities for their own benefit” in apparent violation of US anti-corruption laws and gross disregard for the company’s code of conduct.
Wynn Resorts said these “troubling discoveries” include cash payments and gifts totaling approximately $110,000 to foreign gaming regulators.
“Mr. Okada and his associates and companies appear to have engaged in a longstanding practice of making payments and gifts to his two chief gaming regulators at the Philippines Amusement and Gaming Corporation, who directly oversee and regulated Mr. Okada’s Provisional Licensing Agreement to operate in that country,” the Freeh Report said.
The report also stated that Mr. Okada and his associates have “consciously taken active measures to conceal both the nature and amount of these payments.” The investigation on Okada was prompted by the “increasing concerns” the Wynn Resorts board had in relation to his and Aruze USA, Inc.’s transactions in the Philippines and statements made by Okada to Wynn Resorts’ directors that gifts to regulators are permissible in Asia.
Okada is the only Director of Wynn Resorts who has continued to refuse to sign the company’s Code of Conduct or participate in mandatory Foreign Corrupt Practices Act training for Directors.
Two year before, Aruze’s name was dragged into the graft and corruption case of former Pagcor chairman Efraim Genuino, who allegedly used the 300 metric tons of rice the Japanese firm donated to typhoon victims in 2008 for the mayoral candidacies of his sons in Makati and Los Banos, Laguna.
Lawsuit
Under the provisions of the Wynn Resorts’ articles of incorporation, Okada was deemed unsuitable after the board received the Freeh Report and was unanimous in its determination. It has asked for Okada’s resignation from the board of Wynn Resorts Ltd. and that of Wynn Macau.
“The Compliance Committee and the entire Board are deeply disturbed by the behavior of Mr. Okada, and we have fulfilled our obligations to our stockholders, the State of Nevada and the Wynn community,” former Governor Miller said.
“As Directors of a gaming company privileged to hold licenses, we have a duty to uphold the highest ethical standards and comply with the laws and the terms of the licenses upon which our business depends. Unfortunately, it is very clear from the Freeh Report that Mr. Okada repeatedly flouted these requirements.”
Wynn Resorts said it filed a lawsuit on Monday against Okada, Aruze USA, Inc. and Universal Entertainment Corporation in Nevada District Court, Clark County for breach of fiduciary duty and related offenses.
The company intends to communicate with the appropriate regulatory agencies and government authorities on these matters.
Tiger Resorts has yet to issue a statement regarding the matter.
Pagcor explains
Reacting to the controversy swirling around Okada, Pagcor issued a statement later on Monday, saying Pagcor under the current management had only made three overseas visits where accommodations–nothing more–were provided for by Wynn Resorts, explaining that this has always been an industry practice worldwide.
Pagcor itself hosts gaming executives flying into Manila. As for any questioned expenses Okada’s group may have made on Pagcor’s behalf between 2008 and June 2010, when there was a change in government and a subsequent change in Pagcor management, the current chief said it is best to leave it to the previous Pagcor administration to explain the matter.
Following is Pagcor’s full statement: “On the heels of the shareholder dispute between Wynn Resorts co-founders Steve Wynn and Kazuo Okada arising from their disagreement in pursuing a casino development in the Philippines, the latter visited the Philippine Amusement and Gaming Corporation (PAGCOR) office in Manila today apologizing for the inclusion of the state-run gaming agency and its officials in what appears to be one of the shareholder battles in Las Vegas history.
In 2008, Okada’s company was granted by the previous PAGCOR management a provisional license to operate an integrated resort and casino in the proposed Entertainment City Manila.
PAGCOR Chairman and CEO Cristino Naguiat, Jr. said that Mr. Okada explained that the alleged US$110,000 cash gifts to PAGCOR officials mentioned in the press releases from Wynn Resorts are inaccurate. That based on records of Okada’s group, the US$110,000 represented various accommodations granted to Okada’s business associates not only from the Philippines but from other countries as well from 2008 to 2011.
For PAGCOR’s part, Naguiat readily admitted that as part of standard industry courtesy and reciprocity, complimentary accommodations are granted to casino executives from other gaming destinations. He added that PAGCOR extends the same courtesy to visiting casino executives whenever they visit the Philippines.
According to Naguiat, this was the case as stated by Mr. Okada. Naguiat, however, emphasized that other than complimentary accommodations granted, no gifts in cash or in kind were received by PAGCOR officials during his tenure.
“Although admittedly PAGCOR officials received complimentary accommodations from Wynn Resorts, it is highly unlikely that the same amounted to US$110,000 from July 2010 up to the present considering that there were only at least three official visits by PAGCOR executives in Macau and Las Vegas combined. As for the period from 2008 to June 2010 only the previous management of PAGCOR can answer that,” he said.
