New York Times News Service
MACAU – For more than a decade, they were the odd couple of gambling.
In the early going, Stephen A. Wynn, the Las Vegas magnate with a thousand-watt smile, was on the rebound after his casino and resorts empire, Mirage Resorts, fell prey to a hostile takeover in 2000.
To bankroll his comeback, he turned to a Japanese billionaire, Kazuo Okada, who had made much of his fortune manufacturing gaming machines for Japan’s notorious pachinko parlours – and who was adept at the wild ways of the mushrooming Asian gambling industry.
Together they formed Wynn Resorts, with Okada eventually becoming the company’s biggest shareholder.
“I love Kazuo Okada as much as any man that I’ve ever met in my life,” Wynn effused during an earnings conference call in May 2008.
The love affair is over. Wynn and Okada are now embroiled in a nasty corporate divorce, in one of the most rancourous public feuds the international gambling industry has ever seen.
With each side accusing the other of questionable payments to public officials in Asia, many gambling executives fear collateral damage. They worry that the accusations could prompt government investigations into any number of ethically questionable business practices in gambling, where Asian regulators have often looked the other way.
“It’s like two gunslingers shooting it out,” said a longtime industry official, who insisted on anonymity because he knew both men and wanted to protect the relationships. “And what I’m wondering is whether they’ll both kill each other.”
The fight is playing out in Las Vegas, where Wynn Resorts is based, and here in Macau, the former Portuguese seaport colony now controlled by China, where annual gambling revenue is now four times that of the Las Vegas Strip. Macau was the source of all of Wynn Resorts’ US$613.4 million in profit last year – more than offsetting its money-losing properties in the moribund Nevada economy.
Despite the partners’ joint success in playing the gambling game by Macau’s lax house rules, Wynn’s allies on the company’s board are now accusing Okada of violating American foreign-corruption laws.
These allegations of missteps include giving a visiting Philippine gambling regulator and his entourage free use of the Wynn Macau casino-resort’s opulent Villa 81 – a 650-square-metre pleasure palace that normally rents for $6,000 a night and has amenities including his-and-hers bathrooms with showers built to accommodate six people at a time.
The Okada camp, in turn, is questioning the propriety of a US$135 million donation that Wynn Resorts made last year to the University of Macau – its chancellor is also the head of Macau’s government, with ultimate oversight of gambling. Okada’s litigation has prompted an inquiry by the United States.
Both sides deny wrongdoing. Wynn and Okada declined to be interviewed.
One source of friction is that Okada is pursuing his own casino business in the Philippines, through a company separate from Wynn Resorts. Okada’s going it alone originally had Wynn’s public blessing.
But shortly after Wynn Resorts decided early last year that it would not follow Okada into the Philippine gambling industry – whose reputation is questionable even by Asian gaming standards – the company started an investigation of Okada, conducted by a firm run by the former FBI director Louis J. Freeh.
The Wynn Resorts board cited the reporting by the Freeh Group recently in explaining that Okada’s suspected blandishments to Philippine gaming officials, through use of Wynn hotels in Macau and Las Vegas, were grounds for drastic action: forcing Okada to leave the company and to sell back his nearly 20 per cent stake at a 30 per cent discount to the current stock price.
It may eventually be left to courts to decide whether either side has actually broken any laws, and whether – as Okada’s camp contends – Wynn is seeking to jettison the Japanese executive over behaviour he has long abided because he no longer needs Okada’s money.
Macau casino regulators have asked Wynn Resorts for “detailed information” about the various accusations. The Macau officials also want to know more about the company’s forced buyout of Okada and his ouster from the boards of the Las Vegas parent company and its Wynn Macau subsidiary.
The president of the Philippines, Benigno S. Aquino III, has ordered an informal investigation. The United States Securities and Exchange Commission has begun an inquiry into the university donation.
And Nevada regulators are watching the Wynn-Okada fight. “We are looking at it, and will evaluate it and come to our own conclusions,” said Mark A. Lipparelli, the chairman of the Nevada Gaming Control Board, in a telephone interview.
The Nevada board’s interest is more than idle curiosity. Under its relatively taut regulations, allegations of corruption raise the risk that a person or company can be declared unsuitable, lose their licenses and be barred from the gambling industry.
“Our license would be put under a cloud if we were to not take action, waiting for someone else to do so,” said Robert Miller, the chairman of Wynn Resorts’ compliance committee, in a conference call with reporters on February 21.
The company’s investigative report accuses Wynn’s erstwhile partner of providing Philippine regulators with a series of benefits worth a total of US$110,000.
Many of the favours came in the form of free lodging at Wynn hotels, in Las Vegas and Macau. The most notable might be the four free nights at the Villa 81 here in September 2010 by an entourage led by the chairman of the Philippines Amusement and Gaming Corporation, a government-owned enterprise that is both the regulator and main operator of Philippines casinos. The Freeh Group said he checked in incognito, suggesting someone wanted to hide his stay, but was recognized by hotel staffers.
Besides its showers for six, the Villa 81 amenities include a massage parlour, hair salon and media room with a 254-centimetre flat-panel TV. For paying customers, usually casino high-rollers, the boarding bill alone would have come to US$24,000.
The Philippine chairman, Cristino Naguiat, acknowledged in a statement that he accepted the free lodging, but denied there was anything wrong with it. “Any insinuation that the complimentary accommodations extended to me and my family, who subsequently joined me for the weekend, were a bribe is untrue and just plain wrong,” he said.