Wynn Resorts, in an extraordinary step, said its Compliance Committee has concluded a year-long investigation into a member of its board of directors, Kazuo Okada, whose entities own roughly 20 percent of Wynn Resorts’ stock, and are seeking to oust him from the board and buy back his stake.

Wynn Resorts said it took action after receiving an independent report detailing numerous apparent violations of the U.S. Foreign Corrupt Practices Act (FCPA) by Aruze USA, Inc.; its parent company, Universal Entertainment Corporation; and its principal shareholder, Kazuo Okada. Okada currently is a director of Wynn Resorts, Limited, and of Wynn Macau, Limited, a majority-owned subsidiary of the company. Okada also owns 20 percent stake in Wynn. Wynn also has filed a lawsuit against Okada, Aruze and Universal Entertainment in Nevada District Court, Clark County for breach of fiduciary duty and related offenses. It said it intends to communicate with the appropriate regulatory agencies and government authorities on these matters.

“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,” Wynn said. According to Wynn, the Compliance Committee, chaired by former Nevada Gov. Robert Miller, engaged 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 investigation.

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 U.S. anti-corruption laws and gross disregard for the Wynn’s code of conduct. According to Wynn, these 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 (PAGCOR), who directly oversee and regulated Mr. Okada’s Provisional Licensing Agreement to operate in that country,” Freeh said in his report. The report further stated that Okada and his associates have “consciously taken active measures to conceal both the nature and amount of these payments.”

Based on the Freeh Report, presented to the Wynn Resorts Board of Directors on Feb. 18, Wynn’s board determined that Aruze USA, Inc., Universal Entertainment Corporation and Okada are “unsuitable” under the provisions of the company’s Articles of Incorporation. The board was unanimous (other than Okada) in its determination. It has requested that Okada resign as a director of Wynn Resorts. The company said it will immediately inform the board of directors of its Hong Kong-listed subsidiary, Wynn Macau, Limited, of its actions and will recommend that Okada also be removed from the Wynn Macau Board.

As part of its decision that Okada is “unsuitable,” Wynn’s board has redeemed Aruze’s 24 million Wynn Resorts’ shares, representing roughly 20 percent of the company. Wynn said it has engaged an independent financial advisor to assist in the fair value calculation and concluded that a discount to the current trading price was appropriate because of restrictions on most of the shares which are subject to the terms of an existing stockholder agreement. Pursuant to the Articles, the company has issued a 10-year, $1.9 billion promissory note in redemption of the shares. The note matures on Feb. 18, 2022, and bears interest at the rate of 2 percent per annum.

 “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,” Miller said. “Unfortunately, it is very clear from the Freeh Report that Mr. Okada repeatedly flouted these requirements.”

Wynn said the Freeh Report is the culmination of a year-long investigation by the Compliance Committee based on increasing concerns the board had relating to the activities of Okada and Aruze USA, Inc. 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 refused to sign the company’s code of conduct or participate in mandatory Foreign Corrupt Practices Act training for directors.

In response to the move by Wynn Resorts board, Universal Entertainment and Okada, its principal shareholder, said they would take all legal actions necessary to protect their investment in Wynn.

“It is unfortunate that the Wynn Resorts board of directors has decided to operate as a Star Chamber and not like a board of a publicly traded company, protecting the interests of its stockholders,” Universal Entertainment said. “The decision by the Wynn board, which followed a rushed investigation that lacks absolute findings, to redeem Universal Entertainment's nearly 20 percent holdings in Wynn Resorts based on its project in the Philippines is outrageous. We have not even been provided with the opportunity to review the Freeh Report. It is now more evident than ever that additional independent oversight is needed on the Wynn Resorts board. Universal Entertainment will take all legal actions necessary to protect its investment and prevent a forced redemption of its shares.”