The testimony of various players last week in the Wynn Resorts Ltd. during three days of suitability hearings before the Massachusetts Gaming Commission provided as much drama and surprises as an old “Perry Mason” TV melodrama.
One of the most dramatic came in the form of a letter instead of personal testimony. It was part of a report released by the commission’s Investigations and Enforcement Bureau (IEB). Steve Wynn, who founded the company now under the microscope, and then 14 months ago resigned as president and CEO and divested all of his interests after allegations about him surfaced in the press, claims that the manicurist he paid $7.5 million to in a settlement, scammed him.
The encounter happened in 2005, when Wynn was at the height of his career, just after opening the $2.75 billion Wynn Las Vegas. He wrote, “It started off as a manicure,” an account that unwinds almost like the opening of a film noir. The former CEO declined to be interviewed personally but provided written testimony.
Now aged 77, Wynn recounts how he was sitting in his shorts and T-shirt, when the never identified manicurist began rubbing his leg.
“I realize now I should have reported it,” he said. Instead they had sex, and the woman would later accuse Wynn of raping her and getting her pregnant. The $7.5 million settlement came as naturally as night follows day:
“Along comes this gal who had a turn with me, obviously being advised on what to do,” Wynn said. “Anybody who is over 10 years old and knows what goes on in the world knows what happens next. The story gets sensational.”
The commission’s issue is that this incident was never disclosed when it was investigating Wynn’s suitability to operate a casino in Massachusetts in 2013. It pointedly questioned the various company officials who testified last week about whether any in the current power structure knew about the allegations against Wynn and did nothing. And whether the corporate culture has actually changed as a result of Wynn’s departure, as new CEO Matt Maddox claimed last week in an emotional speech to the commission.
Wynn’s statement claims he had “multiple, consensual relationships” with employees over the years. “I deny ever having any relationship that was not consensual,” he wrote. He added, “That was 97 days after the opening of the Wynn Las Vegas at a cost of $2.75 billion. I said, Jesus, my name is on the sign on the top of the building. As vicious, as rotten as the move was, as scurrilous, as lying—isn’t anybody on earth that can breathe that would ever think I will rape someone. Nuts. So in this context, $7.5 million was not a significant number. And I paid it.”
More explosive was testimony by Wynn’s ex-wife Elaine Wynn, who during the third and final day of testimonies, told the commission she never told regulators what she knew of her ex-husband’s sexual liaison because she was told that the matter had been handled appropriately by Kim Sinatra, the company’s legal counsel (now departed from the company with a large severance package.)
Elaine Wynn co-founded the company and is now its largest shareholder. She said she first learned of the encounter in 2009, four years after it happened. She claimed she received an email “out of the blue” recounting the allegations. She was at the time in the midst of a nasty divorce with Wynn. Nevertheless she confronted him, only to be told by him that he had been extorted.
Sinatra told her about the settlement, and since it came from Wynn’s money and not the company’s she said she was satisfied.
According to the IEB report, “At the time, Ms. Wynn had no reason to doubt Ms. Sinatra and reasonably believed that Ms. Sinatra and Mr. Schreck and the company’s attorneys knew best how such allegations should be handled.”
The issue resurfaced in 2012 in the midst of the company’s lawsuit against another Wynn partner, Kazuo Okada, and as Steve Wynn was attempting to oust his ex-wife from the board of directors. She tried to stay on the board, although she was eventually ousted in 2015.
She left the manicurist’s settlement out of her suitability application to the MGC in 2013 and only began doubting the Sinatra’s advice over the ensuing years as she asked more questions about it.
“I started to sense that there was a bit of a change of tone and mood at the board, and I do believe that I was being referred to as a bitter, cynical ex-wife,” she said. “That was frustrating for me because I obviously believed that some of the questions I was asking were legitimate questions to be asked by a director, certainly as a shareholder,” she told the commission.
Sinatra has disputed the timing of the conversation and what it involved, but under questioning Elaine Wynn declared, “I strongly maintain that I spoke to her in 2009.”
The IEB report revealed that she was the subject of an undercover surveillance by Wynn Resorts’ head of security shortly after the Wall Street Journal story came out about Steve Wynn in January of 2018. This came as a surprise, she said.
She told commissioners “My attorneys never like me to editorialize, but I will say that in the world that we live in, gossip is always around, and people would speculate.” she said when Cameron questioned her about it. “I think somebody suggested that maybe I was being surveilled, and I found that difficult to believe. It wasn’t until this morning that I learned that perhaps that was accurate.”
The head of security, James Stearn, confirmed the surveillance and said he ordered it when he became suspicious she was meeting Kazuo Okada, the co-founder of the company. He said Steve Wynn and Maddox were not informed of it. Elaine Wynn claims she has never met Okada.
She maintains that she strongly supports the company. She noted that she could have already sold her shares and moved on. “I’m here because I am team Wynn,” she said.
Ex-corporate counsel Kim Sinatra came up again when Matt Maddox testified that Sinatra was more interested in protecting Steve Wynn’s interests than the company’s. That led to him dismissing her and naming the current counsel, Ellen Whittemore.
Maddox underwent sharp grilling by commissioners Commissioner Gayle Cameron and Chief Enforcement Counsel Loretta Lillios, concentrating on his leadership skills and the fact that several under him failed to provide him with details of Wynn’s settlement payments. No one has been able to show that Maddox knew about the allegations against his CEO at the time. He said he was more focused on preserving the company in the wake of the Okada lawsuit where billions of dollars were in the balance.
Maddox—who helped Wynn launch the company in 2002—was his handpicked successor and was CFO and president when Wynn resigned. He said when he first learned of the three different settlements, he didn’t believe they were true and didn’t believe it was his responsibility to inform the MGC about them. He said other officials were informed about them and that he didn’t known many of the details before replacing Wynn.
Cameron said, “I’m trying to understand this. You know about a settlement, you have a woman emailing you who has alleged something happened to her, you read about dozens of women who have made allegations who come forward, and you firmly believe that they all lied? That’s what you stated to the IEB, that they all lied. I’m having trouble understanding that, I really am.”
“I would be if I were you, too,” said Maddox. “But when crisis hits, and I think almost everybody’s immediate reaction unless you have the cold hard facts is typically denial.”
Maddox said Sinatra told him, “that there had been a consensual relationship with Steve and an employee over a decade ago that was reviewed by gaming attorneys and outside attorneys and had been handled appropriately and there had been a settlement made.” He was never told that the settlement involved the accusation of rape.
He noted that he was able to persuade Wynn to leave the company, and that he initiated corporate policies that took on harassment head on and reformed the corporate culture.
Cameron probed, “Did you ever feel betrayed by your staff …that all knew about this and yet didn’t tell you as the president of the company? What does that say about your leadership that they think it is OK that all these things can be happening but yet you’re never notified?” She added, “I’m trying to learn what you did as a leader.”
“I tend to not focus on the past but try to fix the future,” replied Maddox. “When there is time to make a change, I make it,” he said of when he finally replaced the executives who knew of Wynn’s settlement. “I wasn’t perfect in this.”
He said the fact that he wasn’t informed of the allegations shows “that there were a lot of different people that, I think, were trying to protect Steve Wynn and the last thing that they would want to do is tell me.”
Why was that Cameron asked. Maddox replied, “I think I’m known as a very straight arrow.”
“One they can go right around,” said Cameron, evoking a gasp from the audience.
Cameron honed in, asking the CEO if he knows what “Known or should have known” means.
“It means there was willful neglect around something you should have known,” Maddox answered. In his final statement Maddox reiterated: “The company transformed in a very rapid way, and that didn’t happen by accident.”
Maddox said he learned of the contents of the January 2018 Wall Street Journal report on the allege “decades-long pattern of sexual misconduct” ten days before it was published.
He was asked if it ever occurred to him or anyone in the company to alert the gaming commission about it. Maddox said he didn’t think that ever happened. “It took me about five days to start to turn the denial into maybe there is something else here … I understand how ridiculous that looks.”
Board of Directors Chairman Phil Satre testified that the intense scrutiny the company endured made it better. “As we lead this company into the future, we are committed to implementing and enforcing industry-leading policies for compliance and meeting the highest standards of excellence,” he said.
After the hearing he told the press, “the entire board and management are full partners in the ongoing effort to foster a safe workplace environment where all are encouraged to voice concerns and employees at every level of the organization are held accountable.”
Near the end of the presentation by Wynn, Robert DeSalvio, who will lead the Encore Boston Harbor if the company retains its license, reminded the commission of the economic boon the casino will be for the region, including $575 million to the city of Everett over the next dozen years and the 5,000 jobs being created, many for local residents.
The MGC will soon go behind closed doors to decide whether Wynn Resorts can keep its license and open the $2.6 billion Encore Boston Harbor in Everett, which lies across the Mystic River from the Boston skyline. The casino is due to open in June and the company has already started hiring staff and taking hotel bookings.
The commission will also issue a suitability decision on the seven board of directors and individual company executives.
Although no one knows what is in the minds of the five commissioners, it is perhaps inevitable that industry analysts are “making book” on the possible outcome. John DeCree, a Las Vegas-based analyst with Union Gaming told investors last week, “It’s impossible to tell how these things will go, but based on the information available, we expect Wynn Resorts to maintain its license but get hit with a substantial fine (greater than the $20 million levied by Nevada Gaming Commission) and be subjected to regulatory probation and additional oversight.”
On the other hand, wrote McCree: “if the commission determines the company is unsuitable (even after appeal), and Wynn is required to vacate its license, we envision a trustee to oversee the opening of the property and an orderly sale process.”
John L. Smith of CDC Gaming Reports doesn’t expect the commission to force a sale. “No one reasonably expects Massachusetts to force the sale of a company that has made obvious strides to scour its corporate culture in the #MeToo era. It does, however, serve as a reminder that, as the facts have emerged from multiple investigative bodies, there will be no room for error in the future. Nor should there be.”
The report the investigators submitted to the commission concluded that the “company’s board of directors was not collectively informed in 2005 of the initial rape allegation, or of Mr. Wynn’s characterization that he engaged in consensual sexual relations with a subordinate employee, or of the eventual $7.5 million settlement agreement.” Those who did know, the report says, are no longer employed.
The company insists it is now a different institution from the one that Wynn founded and then led. During testimony before the commission, Maddox declared “Wynn Resorts has changed from a founder-led organization to a global enterprise overseen by a capable, independent and accountable board of directors.”
Maddox said, “I knew when I took over on Feb. 7, 2018, that we had to be strong, be fast and get to the truth. Only the truth was going to let this company survive and thrive. We had to be transparent, cooperative and progressive.”
During his search for the truth, Maddox said he started off skeptical of the allegations against Wynn and company. “As those investigations began, the denial changed, and I began to realize that there were many victims — and those victims felt powerless,” he said. “For that, I am deeply remorseful. They felt that they didn’t have a voice. That if they were to speak up, they could be retaliated against. Or if they did, it would not be investigated. For that I am truly sorry. I am sorry that our company did not live up to its values. And when I started to realize that truth, I took it very personally. And decided that no matter who the CEO is of Wynn Resorts, or who the chairman is, that would never happen again.”
As they listened, the panel found no problems with new board chairman Phil Satre and other board directors Dee Dee Myers, Betsy Atkins, Winifred “Wendy” Webb and Richard Byrne. Nor with the CFO Craig Billings or new chief counsel Ellen Whittemore.
In a sense the company that Steve Wynn founded is now his ex-wife Elaine’s company since when he left she had by far the largest number of shares. Taking its cues from her, the company has not disputed anything in the allegations against it. She didn’t oppose the company paying the record $20 million fine to the Nevada Gaming Control Board to keep its license there.
Wynn Resorts cooperated with gaming regulators in both Nevada and Massachusetts, voluntarily producing thousands of pages of documents and unlimited access to company executives as well as sharing. In its statement to the MGC it promised to share “detailed information regarding the swift and decisive actions the company took as soon as it became aware of the allegations against the founder. . In summary, Wynn Resorts has changed from a founder-led organization to a global enterprise overseen by a capable, independent and accountable Board of Directors.”
The company has created an independent committee to investigate claims of sexual harassment led by a former Boston police commissioner.
Maddox’s showing during the hearing has prompted the Boston Globe’s editorial staff to call for the commission to require that Maddox step down as a condition for the company retaining its license.
Globe columnist Joan Vennochi wrote last week, “Steve Wynn is gone from Wynn Resorts. But not his ugly legacy. That lingers, as long as Matt Maddox, Wynn’s handpicked successor, runs Wynn Resorts.”
Vennochi also wrote that Elaine Wynn should be forced to sell off her shares.
Globe Deputy Managing Editor Larry Edelman also called for Maddox’s departure. “I am torn on this, but I think CEO Matt Maddox should be required to step down. Before he succeeded Steve Wynn in February 2018, Maddox had been the company’s president since 2013 and Wynn’s right-hand man.”
Like Cameron, Edelman is highly skeptical of Maddox’s claims to have been “completely in the dark” regarding the accusations against his boss. “If he didn’t know anything, he should have, and his resignation would cement the company’s claim that it has cleaned house.”
Underlying last week’s testimony is the continuing power struggle in the company between both Maddox and Elaine Wynn. This was highlighted when Maddox testified that he at first believed the allegations against Wynn were orchestrated by his ex-wife. She campaigned against several former and current board members and against Maddox.
Meanwhile, apparently stunned by the ferocious nature of some of the questioning last week, the company tried a new approach, suggesting that the commission was violating its due process rights and those of the executives and directors.
In a brief posted this week, Wynn Resorts said the MGC “impermissibly shifted the burden to Wynn MA, the Company, and Mr. Maddox to demonstrate why their 2013 suitability” should remain, rather than “first proving by substantial evidence that the licensee has failed to maintain its suitability by clear and convincing evidence.”
The brief continued, “Their license cannot simply be put on trial before the Commission without the IEB making such a finding and decision,” and compared it to requiring a defendant in a trial to prove his innocence rather than for the prosecution to prove his guilt.
Those questioned were blindsided last week when they were quizzed about facts that had not been included as evidence in the IEB report. One of these was about the surveillance of Elaine Wynn, which Maddox denies knowing anything about.
That surveillance was conducted by James Stern, who admitted to doing it during testimony. He was fired two days after the hearings ended.
Wynn’s brief also called into question Cameron’s line of questioning about Maddox’s leadership, “which is not a statutory criterion in the Gaming Act and was not mentioned at all in the IEB Report.”
In a related development, Nevada’s Gaming Control Board provided Wynn with written confirmation that Maddox “was found suitable and remains in good standing with gaming regulators in that state,” and Nevada commission Chairman Tony Alamo told the Boston Globe that his commission’s investigation of Wynn is concluded.
That information was included in the Wynn brief in response to a suggestion by Massachusetts commissioners that the Nevada commission has not closed its investigation yet.
Board Chairman Phil Satre—with Elaine Wynn nodding in agreement—also bristled at a particular line of questioning during the hearings when Commissioner Enrique Zuniga asked Satre what the company would do in the event of an “adverse finding.”
Satre snapped, “Why would you care about that? I mean, our financial condition at that point in time is not something that is an issue for you. It’s an issue for our shareholders. It’s an issue for everywhere else, but why is it an issue for you, if you’ve decided, ‘We don’t want you here.’ ”
Satre also reminded the commission that they might not be in a position to demand the ouster of the current CEO or others because the Massachusetts property is a tiny part of the company’s overall holdings. He warned that the company would not do business in the state if the commission made it impossible to do so.
Although Wynn has invested about $2 billion in the Everett casino, which is about 2 percent of its annual revenue, Macau accounts for about 75 percent of its revenue. Meanwhile the company is strong enough that it recently announced a takeover bid for Australia’s Crown Resorts. It is also in the running for a license for an integrated casino-resort license in Japan.
