A lawsuit by Steve Wynn accusing hedge fund manager Jim Chanos of defamation was thrown out last week by a federal judge in San Francisco, according to Bloomberg News.
Wynn’s suit was based on comments made by Chanos at the University of California at Berkeley. Chanos, the short-seller known for foreseeing the collapse of Enron, suggested to a journalism conference last April that the Chinese gaming enclave of Macau, where Wynn is heavily invested, is rife with corruption.
“I got a little nervous the deeper we dug into Macau,” Chanos said at the time. “Although I was long (on) the U.S. casino operators like Mr. Adelson and Mr. Wynn, I began to really get concerned about the risk I was taking with clients’ money under the Foreign Corrupt Practices Act.”
The term “long” expresses optimism about the growth of share values. Steve Wynn’s Wynn Resorts and Sheldon Adelson’s Las Vegas Sands are both firmly established in Macau’s casino landscape.
According to a report in Newsweek, Chanos’ comments “effectively amounted to an indictment of the Chinese financial and economic system,” in which “so-called junket companies … recruit wealthy mainland Chinese gamblers to come to Macau.” Chanos said the culture there is one of “legalized fraud.”
In his lawsuit, Wynn said gaming regulators in Nevada and Massachusetts, the SEC, and other U.S. government agencies have “thoroughly investigated” him and his company and found no reliable evidence of a FCPA violation, according to Business Insider.
But U.S. District Judge William Orrick said comments made by Chanos remarks were protected speech and not slanderous. “It takes a significant inferential leap to conclude that Chanos’s general uncertainty about the questionable business methods in Macau equates to an assertion that Wynn violated the FCPA,” Orrick said.
Wynn has until January 13 to revise and refile his lawsuit. “We intend to take advantage of that opportunity,” said Michael Weaver, a spokesman for Wynn Resorts Ltd.
For the past six months or so, Macau has seen a drop in high-roller play due to a crackdown on corruption by the Chinese government.
