Wednesday, October 4, 2023
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Fraud Alleged at Wynn Resorts

LAS VEGAS (CN) - Steve Wynn and his board of directors are covering up bribery, money laundering and other crimes at Wynn Resorts, a shareholder claims in a derivative complaint.

W.A. Sokolowski claims that Wynn and his board "misrepresented Wynn's internal controls in order to allow a widespread scheme of bribery, money laundering and other wrongful behavior," and continue to maintain the deception

Sokolowski's March 24 complaint in Federal Court claims that Wynn et al. are unjustly enriching themselves while putting the company and shareholders at risk.

He claims that Wynn and his board conceal violations of the Foreign Corrupt Practices Act and the Bank Secrecy Act, and directly participate in or aid and abet violations of the Securities Exchange Act.

The complaint takes aim at Wynn Resorts' operation in China. Specifically, it states, the directors should have known that "operating in Macau involved a higher than normal risk" of breaking U.S. and Chinese anti-corruption laws.

Sokolowski says investigations of violations of the Foreign Corrupt Practices Act have been suspended or ended, but "there are ongoing anti-corruption investigations conducted by the Chinese government that are likely to impact Wynn's operations in Macau."

And he claims that the FBI is investigating possible violations of the Bank Secrecy Act.

To keep shareholders in the dark, Sokolowski, says the company's reports "conceal material facts" in the year-end financial statements prepared by Ernst & Young and violate federal accounting oversight and Generally Accepted Auditing Standards.

Sokolowski says Wynn and board members are conducting a "sham investigation" of a shareholder demand letter. He accuses them of potential violations of federal law "solely to protect the defendants and others from personal liability for their long-continuing wrongdoing and the harm it has caused the company."

The investigation brought about by the demand letter is being done by a Delaware law firm that Sokolowski describes as having a "history of generating 'whitewash' reports regarding claims of corporate wrongdoing."

Sokolowski says the demand letter accuses company officials, legal counsel and auditors of "indirect money laundering, payment of bribes" and violating the Foreign Corrupt Practices Act's reporting requirements.

The demand letter accuses Wynn and the defendant directors of covering up "wrongful conduct" of former director Kazuo Okada in order to benefit from his Asian gaming industry contacts.

"Mr. Wynn and each member of the board was willing to make a 'pact with the devil' to obtain his financing and contacts and, thereafter, let him remain a shareholder and director once his egregious conduct became known," Sokolowski claims.

Those acts included donating $135 million to the University of Macau Development Foundation, which Sokolowski claims "was essentially an indirect bribe to the Chancellor of the Development Foundation who was, coincidentally, head of the Macau government."

Sokolowski accuses Wynn and board members of doing nothing to stop known money laundering in Macau and at Wynn Resorts' Las Vegas operations.

"The board and Mr. Wynn, in particular, were well aware or should have been aware that money laundering was taking place at the Wynn Las Vegas, some of which was at the behest of drug dealers known to high-level Wynn executives and other employees," Sokolowski says.

Instead of immediately acting to stop money laundering after it was brought to their attention, Sokolowski says, Wynn and board members "'swept it under the rug.'"

This could lead to charges of Bank Secrecy Act violations that would subject Wynn Resorts to "indictment, massive fines and other expenses," Sokolowski claims.

He accuses Wynn and board members of enhancing their "positions as directors and/or officers of Wynn while providing each of them with substantial compensation, power, and prestige."

This includes using Wynn's political action committee to "give away" millions of dollars of company money to politicians to provide a "personal benefit" for Wynn Resorts officers and directors without providing any benefit to the company, Sokolowski claims.

He claims that nonparty Ernst & Young did not "conduct audits of the company's financial statements in accordant with Generally Accepted Auditing Standards" and "issued false and misleading 'clean' opinion letters as to the company's year-end financial statements."

Sokolowski says the only director Wynn does not control is his ex wife, Elaine Wynn, who is not a defendant in the lawsuit.

In addition to Wynn, the defendant directors are John J. Hagenbuch, Ray R. Irani, Robert J. Miller, Alvin V. Shoemaker, J. Edward Virtue and D. Boone Wayson.

Sokolowski seeks declaratory judgment that the proxy statement presented to shareholders during the company's annual meeting this month was false, and that defendants breached their duty of candor to shareholders.

He wants Wynn Resorts ordered to issue an honest replacement proxy statement.

He is represented by G. Mark Albright, with Albright, Stoddard, Warnick & Albright.

Wynn Resorts did not return a call seeking comment.

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