GGRAsia – Okada faces US$3.4-bln lawsuit over Wynn stake axing

Okada faces US$3.4-bln lawsuit over Wynn stake axing

Jun 26, 2015 Newsdesk Japan, Latest News, Philippines, Top of the deck

Universal Entertainment Corp, controlled by Japanese pachinko entrepreneur Kazuo Okada, says it is to defend a shareholder lawsuit that seeks nearly JPY421.6 billion (US$3.42 billion) in damages due to the forcible redemption by Wynn Resorts Ltd – at discount – of a 20 percent stake Mr Okada’s firm held in the U.S.-based casino operator.

Jasdaq-listed Universal Entertainment said in a filing on Thursday that one of its shareholders, Tsuyoshi Hosoba, alleges its management breached duty of loyalty and duty of due care in relation to the February 2012 Wynn Resorts stake cancellation.

That incident happened after Wynn Resorts alleged in a filing to Nasdaq that Mr Okada had engaged in activities in pursuit of a casino licence in the Philippines that made him “unsuitable” to be a shareholder of Wynn Resorts, a Nevada-regulated casino business. The allegations included claims Mr Okada had breached U.S. anti-bribery laws by providing gifts and things of value to officials at the Philippine Amusement and Gaming Corp – that country’s casino regulator – at a time he was seeking a casino licence in Manila.

Mr Okada has strongly denied wrongdoing and has since been seeking to clear his name and recover money lost in the redemption haircut, including via lawsuits against Wynn Resorts in the U.S.

Following allegations made by Wynn Resorts, Mr Okada and his company have been investigated in the U.S., the Philippines and in Japan. His side says no wrongdoing has been identified in those investigations and stated in March that a probe in the Philippines had been “concluded“, although that was later denied by the country’s Justice Secretary.

Complaint list

Mr Hosoba is making seven complaints against Mr Okada, three other current directors, six former directors and three former executive officers of Universal Entertainment.

As well as the claims of breach of loyalty and duty of care in relation to the Wynn Resorts stake redemption, it is alleged that Universal Entertainment: acquired real estate in the Philippines at a higher price than the appraised value; that the company provided financing for a third party based on “unreasonable business judgment”; that the defendants were involved in a wrongful remittance made by former employees of the company; that the business entrustment agreement entered into between the company and the third party “has no reasonable grounds”; that the company’s filing of lawsuits for defamation regarding prejudicial reporting falls under the “breach of duties”; and that all of the above “discredited the company”.

Universal Entertainment said in its Thursday filing that Tamaki Katsube, the lawyer representing Mr Hosoba is also litigation counsel for Access Journal Co Ltd – which Universal Entertainment has previously sued for defamation. Universal Entertainment added that Mr Katsube had also represented a former senior manager of Universal Entertainment who is in dispute with the company.

“On the basis of the aforementioned circumstances, the company determined that it is necessary to join the action on the defendant’s side as a supporting intervener in order to clarify that the management framework of the company had no defect,” said Universal Entertainment.

The firm added: “Because the action was filed against directors, former directors and former officers of the company by a shareholder, it does not have a substantial effect on business results of the company.”

In 2012 Wynn Resorts’ board voted to cancel Mr Okada’s 20 percent stake amounting to 24.5 million shares and issue him with a promissory note for US$1.9 billion. The note was in effect a 30 percent discount on the then US$2.77 billion valuation of his stake, held through Universal Entertainment.

In May, Tiger Resort, Leisure and Entertainment Inc – a firm controlled by Mr Okada that is developing the Philippines project, Manila Bay Resorts – told GGRAsia by email that it is “actively targeting to open the property by 2016”, mentioning in an earlier email it had spent US$750 million so far and was committed to spending a further US$1 billion.