Inside Asian Gaming

INSIDE ASIAN GAMING | December 2012 10 COVER STORY fourth-largest FCPA settlement up to that time, Mr Freeh was appointed to monitor Daimler AG’s compliance with the Act after the giant automaker and three subsidiaries agreed to pay $93.6 million in fines and hand over $91.4 million in profits to settle alleged violations. In 2011, he served as an independent investigator for FIFA in the Mohamed bin Hammam bribery scandal. While the SEC was poring over Mr Okada’s January petition, Mr Freeh was briefing Wynn’s Compliance Committee on what he’d learned about the Philippines. His final interview, with Mr Okada and Mr Okada’s US counsel, took place in Tokyo on 15th February. On the 18th, he gave what Wynn describes as a “detailed presentation” to the board and provided copies of his final report, which concluded that Mr Okada’s conduct “constituted prima facie evidence of violations of the Foreign Corrupt Practices Act”. It was on that day, apparently, that Wynn issued a 10-year IOU to buy back Aruze USA’s shares, amounting to a 19.66% stake in the company, at a 30% discount to their market value at the time. The next day, the company filed its suit in Nevada District Court in Las Vegas charging the man who had helped bankroll Wynn’s empire with “breach of fiduciary trust”. Mr Okada was later booted off the board of Wynn Macau. He is still on the boardofWynn Resorts, his seat protected by Nevada law unless the shareholders vote to remove him. “I love Kazuo Okada as much as any man that I’ve ever met inmy life,”SteveWynn once proclaimed. “And there is hardly anything that I won’t do for him.” Obviously, that stopped at Luzon’s steamy shores. The “Big Stick” On 24th February, the Financial Times reported that a lawyer for Wynn Resorts who had served with the US Attorney’s Office in Los Angeles had flown to Washington to meet with criminal prosecutors at the Department of Justice. It was not known at the time if the department has joined the SEC in looking into the company’s affairs. It is still not known. Writing that month in his “White Collar Watch”column in The NewYork Times , former Justice Department prosecutor and law professor Peter J. Henning suggested that Wynn’s suit against Mr Okada “means the Justice Department and the Securities and Exchange Commission will be scouring the company’s books for possible violations, a front that neither side can control.” “By invoking the specter of overseas bribery, Wynn has effectively opened itself up to a wide-ranging federal investigation of its dealings in Macau and elsewhere. Combined with the lawsuit it filed against Mr Okada, the company most likely will face soaring legal costs over the next year or two as it deals with the fallout from the dispute.” Mike Koehler, a law professor with Southern Illinois University and a blogger on all things FCPA, calls this battle of the billionaires“one of the strangest instances of FCPA scrutiny one can imagine”. “The Freeh report puts the DOJ (and perhaps even the SEC given Okada’s membership on the Wynn Board) in a difficult position. How can the agencies not investigate the conduct at issue when the former director of the FBI is terming the conduct ‘prima facie’ FCPA violations. An analogy would be like calling the fire department to inform that your house is on the fire, but the fire department fails to show up.” The UMAC endowment, which has generated at least four shareholder lawsuits, is characterized as “suspicious” by Mr Okada, who cites “its enormous size, the fact that the 10-year term of the pledge matches precisely the length of the casino license Wynn Resorts was seeking, and the fact that the lead trustee of the University of Macau Development Foundation also has a position in the Macau government which enables him to influence the issuance of gaming licenses.” Presumably this refers to a prominent local businessman named Peter Lam Kam Seng, a charter member of the foundation and a member of the committee that elects Macau’s chief executive. “I am at a complete loss as to the business justification for the donation,” Mr Okada said in September in an open letter to Wynn’s shareholders, “other than that it was an attempt to curry favor with those that have ultimate authority for issuing gaming licenses.” He was the only one of the 16 directors to oppose the endowment. Wynn says that’s not true, that he objected only to its length. Charitable contributions as such are not prohibited by the Act as long as they are not used as a “pretense” to cover bribes to government officials. This distinction was reiterated in fresh guidance on the Act issued last month by the Justice Department and the SEC. The guidance gives the example of a Eurasian-based subsidiary of a US NGO that acceded to a request from an agency of a foreign government to make a grant to a local financial institution as a condition for attaining bank status. The company emerged in the clear, however, in part because it informed the DOJ of the request up front and because it did its homework by ensuring the money was transferred to a valid bank account and requiring Mr Okada contends in the Freeh report that “all his efforts in the Philippines prior to the change of presidential administration in the summer of 2010 were undertaken on behalf of and for the benefit of Steve Wynn and Wynn Resorts”. The company vehemently denies this. “By invoking the specter of overseas bribery, Wynn has effectively opened itself up to a wide-ranging federal investigation of its dealings in Macau and elsewhere.”