Steve Wynn calls complaint ‘an embarrassment’
Elaine Wynn, co-founder of Wynn Resorts, has sued her former company and her ex-husband, Wynn Resorts Chairman and CEO Steve Wynn, over an agreement she says improperly stripped her of control over her Wynn stock. The company’s third-largest shareholder, Wynn filed a complaint in Nevada State Court “to gain control of her Wynn Resorts stock so that she can make decisions about her investment like any stockholder,” according to a statement released by the businesswoman and philanthropist.
The complaint accuses the Wynn Resorts CEO of using a stockholder agreement the two signed just before their bitter 2010 divorce to exert “full and perpetual control” over her life, including a requirement that she gain her ex-husband’s approval before selling any of her Wynn shares, which amount to a 9.4 percent stake in the company, worth nearly $900 million.
The complaint also accuses Steve Wynn of using the agreement to force Elaine Wynn off the company’s board of directors a year ago, claiming the CEO engineered the vote to deny her reinstatement to the board after she complained about the company’s internal controls and withheld crucial information from the board.
The details of that information as laid out in the complaint are comprised of a litany of allegations against the CEO related to an alleged culture and “tone at the top” that discouraged any dissent concerning the actions of Steve Wynn and the board he led, including objections to the withholding of information related to potentially illegal actions and misuse of company assets.
The complaint seeks an order nullifying the 2010 shareholder’s agreement, as well as unspecified compensatory damages.
Steve Wynn quickly released a statement calling the complaint “an embarrassment” filled with “lies and distortions.”
“As a result of her removal from the board, Ms. Wynn has no meaningful avenue to protect her substantial economic interest in Wynn Resorts, including any ability to raise issues concerning corporate governance,” said the statement released by Elaine Wynn. “Because of Mr. Wynn and Wynn Resorts’ failures to address this matter, Ms. Wynn has been left with no choice but to proceed with legal action to resolve her claims. This includes seeking a judicial determination that the January 2010 Stockholders Agreement, which purports to prohibit her from transferring stock that she owns without the permission of Mr. Wynn, and grants to Mr. Wynn all rights to vote her stock, is invalid and unenforceable as a matter of law…
“Mr. Wynn’s denial of Ms. Wynn’s ability to control her stock and her ouster from the board came in retaliation for her having raised important concerns about business practices at Wynn Resorts and the complete absence of proper corporate governance.”
Among the specific allegations included in the complaint, according to Elaine Wynn’s statement, are that:
“• Mr. Wynn and certain members of the management team engaged in reckless behavior and created a tone at the top which punished dissent or inquiry;
“• Mr. Wynn was accused of misconduct on company property involving at least one company employee that was sufficiently serious to cause him to make a secret multimillion-dollar payment, and yet the board was never told;
“• Mr. Wynn was forced to terminate employees who he never should have hired because of their associations with alleged illegal activity and, in at least one case, hid the reasons for the executive’s departure; and,
“• Mr. Wynn stifled opposing views within the company, even at the board level; the only time in the board’s history that it ever voted against Mr. Wynn’s ostensible position on any issue was when it voted to oust Ms. Wynn, when in fact it was carrying out his actual direction in doing so.
“Ms. Wynn raises these issues reluctantly: she had hoped, for the sake of her family and of the company she helped to build, that the issues plaguing the operation of Wynn Resorts and the reckless risk-taking of its chairman and CEO Mr. Wynn could be addressed through proper corporate processes and channels. They cannot be. Mr. Wynn has intentionally kept the Wynn Resorts Board in the dark and has turned the general counsel of the company into his co-conspirator.”
The complaint also claims that the stockholders agreement was pushed through as an ostensible attempt to restrict the stock held by former Wynn partner Kazuo Okada, the Japanese billionaire and founder and chairman of Universal Entertainment whose 20 percent stake in the company was forcibly redeemed after allegations Okada bribed Philippine officials (there are several ongoing lawsuits connected to that action), but that Wynn used the agreement to gain perpetual control over his ex-wife’s shares in the company and force her from the board.
“Although bound by the January 2010 Stockholders Agreement to support Elaine Wynn’s director candidacy, Mr. Wynn instead engineered her removal from the board in retaliation for her challenging his decisions and questioning his judgment,” the complaint says. “Ms. Wynn cannot sit by idly and accept punishment for doing what is right and daring even to inquire about Mr. Wynn’s reckless operation of the company….
“The ostensible purpose of the January 2010 Stockholders Agreement was to place restrictions on the stock held by Mr.
Okada (through his company, Aruze USA, Inc.) to preserve the Wynn-Okada alliance and avoid the kind of takeover that the Wynns faced at the Mirage. Mr. Wynn induced Ms. Wynn to sign the January 2010 Stockholders Agreement by a series of false representation, both professional and personal, including that the purpose was to restrict Mr. Okada, not her, and that she would serve on the board for at least as long as the restrictions applied so that she could protect her stock in the company, which is Ms. Wynn’s largest asset.”
Steve Wynn’s response to the suit, issued through a spokesman, minced no words in assailing the action.
“This lawsuit is filled with lies and distortions and is an embarrassment to Ms. Wynn and her counsel,” the CEO’s statement said. “This is simply an attempt to inflict personal pain on Mr. Wynn. Ms. Wynn is a disappointed ex-wife who is seeking to tarnish the reputation of Wynn Resorts and Steve Wynn and their daughters.
“The shareholder agreement in question between Ms. Wynn and Mr. Wynn is the same agreement that Ms. Wynn endorsed at its inception and reaffirmed in their divorce. Ms. Wynn is using this baseless lawsuit as a platform to disavow an agreement she was extremely well advised on by sophisticated counsel at the time of signing.
“Ms. Wynn was a member of the board of directors of Wynn Resorts until last year. She never raised these issues, some of which are over a decade old, with her fellow directors during her 13 years of service. More to the point, she has been aware of the settlement Mr. Wynn made with the Wynn employee in question using his personal funds since 2009. Never once did she raise the issue during the dozens of board meetings she attended over six years, or over the course of the proxy fight she ran last year in an attempt to regain her board seat.”
The response took particular aim at the allegation that Steve Wynn’s actions affected the legacy and inheritance of the couple’s two daughters. “What particularly saddens Mr. Wynn among the many falsehoods is the assertion that Mr. Wynn’s estate planning does not provide for his daughters and grandchildren. This is untrue in every sense of the word and is a shocking allegation for a mother to make concerning family.
“While none of these allegations have any relevance to the shareholder agreement in question, the common thread throughout the complaint is her concerted effort to malign and vilify every individual Ms. Wynn perceives to have slighted her.”
In addition to Steve Wynn and Wynn Resorts, the company names Wynn Resorts General Counsel Kimmarie Sinatra as a defendant.
