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Wynn to settle Universal Entertainment suit for US$2.4b
[LOS ANGELES] Wynn Resorts Ltd agreed to pay a total of US$2.4 billion to settle a lawsuit with Universal Entertainment Corp over the forced redemption of the Japanese pachinko-machine maker's 20 per cent stake in the casino operator six years ago.
The settlement announced on Thursday is the latest dramatic turn since Steve Wynn resigned last month from the casino empire he founded amid a sexual harassment scandal. It adds US$464 million to a US$1.94 billion 10-year promissory note Wynn gave Universal in 2012 for the shares, and it puts an end to the biggest chunk of the court fight that started with the acrimonious falling out between Mr Wynn and his former business partner, Kazuo Okada.
Wynn Resorts has come under scrutiny from gaming regulators in Macau, Nevada and Massachusetts, where it is building a US$2.4 billion casino resort, in the wake of reports the founder and now former chairman pressured employees into having sex with him. The settlement with Universal Entertainment may help clear a path for Mr Wynn, the company's biggest shareholder, to sell part of his stake should that be necessary.
Mr Okada, ousted from his Tokyo-based company last year, isn't a party to the settlement and Wynn Resorts' claims against him for breach of fiduciary duty remain pending. A trial on those allegations is scheduled for next month in Las Vegas and a lawyer for Mr Okada, J Stephen Peek, said his understanding is that the claims against his client will move forward.
In February 2012, Wynn Resorts took the Japanese billionaire's shares, which then had a market value of about US$2.7 billion, and gave him the promissory note in exchange. The company claimed Mr Okada had put the company's gaming licences at risk by making illicit payments to Philippine regulators. Mr Okada countered that he was forced out of the company because Mr Wynn perceived him as a threat to his control.
Wynn Resorts will make the US$2.4 billion payment to Universal by March 31, the company said in a statement.
"Today's outcome is tremendous for our client," David Krakoff, a lawyer for Universal Entertainment, said in a separate statement. "It resolves long-running litigation on very favourable terms, and provides substantial resources for Universal to continue its international growth."
The settlement doesn't cover claims by Mr Wynn's ex-wife, Elaine Wynn, who has been trying to get out from under a 2010 stockholder agreement that ties up her 10 per cent stake in the company.
Last week, Mr Wynn asked a judge to dismiss his ex-wife's claims pertaining to the validity of that agreement because, following his resignation last month, he no longer seeks to enforce it. His request was denied in part because Aruze USA, the Universal Entertainment unit that held the Wynn shares, argued that it was party to the 2010 agreement and neither Steve nor Elaine Wynn could sell their shares without its permission.
A spokesman for Elaine Wynn declined to comment.
As part of the settlement announced on Thursday, Aruze will no longer consider itself part of the 2010 agreement, which will open the door for Mr Wynn to renew his argument that his ex-wife's claims are moot. If the judge agrees this time, Mr Wynn would be free to sell his shares if gaming regulators decide the misconduct allegations make him ineligible to be the company's largest shareholder.