MANILA, Philippines – Las Vegas resort-casino operator Wynn Resorts ousted its main shareholder over findings that cash payments and gifts valued at about $110,000 were made to Philippine officials for an upcoming casino project in Manila Bay.
On Sunday, February 19, Wynn Resorts issued a statement that it has forcibly redeemed the shares of Japanese billionaire Kazuo Okada who holds almost 20% in Wynn through subsidiary Aruze USA Inc. Wynn also required that he immediately step down from the company’s board.
Okada is the head of giant gaming device maker Universal Entertainment Corp. and one of Asia’s richest.
Universal Entertainment called these moves “outrageous” in a statement to the Tokyo Exchange on Monday morning, February 20.
Okada personally visited the Manila office of the Philippine Amusement and Gaming Corporation (PAGCOR) on Monday to apologize for its being dragged in its shareholder dispute.
The state-owned PAGCOR oversees the $2 billion Manila Bay Resort casino project, which the Okada-led Universal Entertainment will build an integrated resort and casino in.
At the heart of the shareholder dispute at Wynn are the alleged “illicit cash payments and gifts” of Universal Entertainment to PAGCOR officials.
Cash payments, gifts
Wynn said its compliance committee hired Louis Freeh, a former Federal Bureau of Investigations (FBI) director, federal prosecutor, and US district court judge, to conduct investigations on Okada’s Philippine investment.
After a year-long investigation, Freeh’s team presented their findings to the Wynn board on Saturday, February 18.
Wynn said Okada and his firms, Universal Entertainment and Aruze USA, Inc, are “unsuitable” as shareholders due to the findings of Freeh’s team that $110,000 illicit cash payments and gifts were made to “two chief gaming regulators” in the Philippine Amusement and Gaming Corporation (Pagcor).
Citing Freeh’s report, Wynn said in its Sunday statement that “investigators uncovered and documented more than 3 dozen instances over a 3-year period in which Mr. Okada and his associates engaged in improper activities for their own benefit… 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 2 chief gaming regulators at the Philippines Amusement and Gaming Corporation (PAGCOR), who directly oversee and regulated Mr. Okada’s Provisional Licensing Agreement to operate in that country,” Wynn said, quoting the Freeh Report.
During times when Okada was trying to arrange for development of the Philippines resort, he or his associates and companies covered expenses for Filipino regulators at both Wynn Las Vegas and Wynn Macau.
Chief gaming regulator Cristino Naguiat Jr., for example, visited Wynn Macau in September 2010 with his friends and associates. Wynn apparently learned of this visit because some of their expenses were covered by an Okada account at the resort. The purpose of the visit ostensibly was for Naguiat to learn more about the casino business.
The report further stated that Okada and his associates have “consciously taken active measures to conceal both the nature and amount of these payments.”
Wynn also said in the statement that they were concerned that Okada had told the firm’s directors “that gifts to regulators are permissible in Asia.”
Wynn, which is itself being investigated over alleged violations of the Foreign Corrupt Practices Act, said Okada violated it, too. The law prohibits U.S. companies and individuals from making bribes in foreign countries in order to obtain or do business in those countries.
On Monday, February 20, the shares of Universal Entertainment plunged in Tokyo trading, prompting the gaming firm to issue a statement.
It called Wynn board’s move as “outrageous” and that it will “take all legal actions necessary to protect its investment in Wynn and prevent a forced redemption of its shares.”
“The decision by the Wynn Board, which followed a rushed investigation that lacks absolute findings, to redeem Universal Entertainment’s nearly 20% holdings in Wynn Resorts based on its project in the Philippines is outrageous.”
Okada visits and Pagcor visits
In a statement on Monday afternoon, Febuary 20, PAGCOR said Okada personally visited and apologized to the state officials for being dragged into the mess.
PAGCOR chair and CEO Cristino Naguiat Jr. said that Okada explained that the alleged US$110,000 cash gifts to PAGCOR officials are “inaccurate.”
“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,” Pagcor said, quoting the Japanese billionaire.
Naguiat said in the statement that no gifts in cash or in kind were received by PAGCOR during his tenure.
Naguiat, however, 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.
Naguiat, a political appointee, assumed the PAGCOR post in July 2010. He took over from Ephraim Genuino under whom Okada’s Universal Entertainment received a provisional license to operate an integrated resort and casino in 2008.
“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 3 official visits by PAGCOR executives in Macau and Las Vegas combined,” Naguiat stressed.
“As for the period from 2008 to June 2010 only the previous management of PAGCOR can answer that,” he said.
The Philippines expects to get a slice of the gaming world’s eastward tilt as the rising wealth of Asians flock to nearer casinos, threatening traditional gambling mecca Las Vegas.
Naguiat had said casino gaming revenues could reach $11 billion in 5 years time.
Pagcor granted franchises to 4 companies to develop its much-touted 100-hectare Bagong Nayong Pilipino – Entertainment Manila.
These are :
- Enrique Razon-led Bloomsbury Investments
- Travelers International Hotel Group (a JV between Genting and Andrew Tan-led Alliance Global Group)
- Henry Sy-led Belle Corp.
- Okada-led Universal Entertainment (through subsidiary Tiger Resorts, Leisure and Entertainment Inc.)
Okada had called the project “the next huge entertainment tourism hub in the region,” citing proximity to China, South Korea, Japan, Singapore and Hong Kong.
“Manila has a competitive advantage over other major Asian cities,” he had been quoted as saying.
Wynn had argued Okada, the single biggest shareholder of Wynn, had conflict of interest since Wynn has operations in Macau.
This brings to a head the long-simmering dispute of a growing rift between founder Stephen Wynn and Okada.
Okada helped bankroll the company starting 12 years ago.
Wynn’s Sunday pronouncements were considered a surprise weekend attack after Okada sued Wynn on Thursday, February 16, over not having access to internal financial reports on a US$135 million donation made by Wynn to University of Macau.
A complaint has been filed at the US Securities and Exchange Commission.
Probes on the Macau school donation came after Okada’s Universal Entertainment invested in the Philippines, putting him in competition with Wynn. – Rappler.com