A federal judge in Nevada has given the go-ahead to a lawsuit that seeks class-action status for Wynn Resorts shareholders. The plaintiffs allege that executives at Wynn Resorts Ltd. knew about but disregarded reports that former Chairman and CEO Steve Wynn engaged in a pattern of sexual harassment and misconduct against his employees.
According to the Associated Press, U.S. District Judge Andrew Gordon ruled the case can go forward. It is based on the claim that Wynn, members of his board and top executives at his Las Vegas-based company violated Securities and Exchange Commission rules through “material misrepresentations and omissions.”
The case went public in January 2018 following an expose in the Wall Street Journal. Wynn resigned shortly thereafter, but has continued to deny the allegations. The Journal cited dozens of casino employees who described, as the judge noted, “behavior that cumulatively would amount to a decades-long pattern of sexual misconduct.”
The lawsuit seeks unspecified damages for unnamed holders of Wynn stock, which plummeted by more than 17 after percent after the scandal broke. “The court’s decision underscores the fact that alleged sexual misconduct and harassment by corporate executives are material issues for investors, especially when management turns a blind eye to reports of wrongdoing,” said Murielle Steven Walsh, attorney for the plaintiffs. “This type of misconduct poses a threat to a company’s financial success.
The judge said plaintiffs “sufficiently alleged” that Wynn, current company president and CEO Matt Maddox and two other executives, Kim Sinatra, former executive vice president general counsel and secretary, and Stephen Cootey, former chief financial and accounting officer and treasurer, “were aware of information contradicting their statements that denied misconduct allegations.”
“The inference that these defendants were aware of Wynn’s alleged misconduct at the time of their statements is cogent and compelling,” Gordon wrote.
In a statement, Wynn Resorts spokesman Michael Weaver said the company looks forward to the case “moving beyond the allegation stage.”
In February 2019, the Nevada Gaming Commission fined the company a record $20 million for failing to investigate claims of sexual misconduct against Wynn. Then-commissioner Philip Pro said investigators found “a failure of a corporate culture to effectively govern itself as it should.” Later that year, the Massachusetts Gaming Commission fined Wynn Resorts $35 million for on the same basis. It also fined Maddox $500,000 for a “clear failure” to investigate at least one misconduct complaint.
Massachusetts regulators said they were “troubled by the systemic failures and pervasive culture of non-disclosure” at Wynn Resorts. At one point, there was speculation the company would rebrand and wipe the famous Wynn signature from resorts in Las Vegas, Macau and Boston.
