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Ed Vogel

Gaming Control Board: Wynn Partner Gets OK

7 June 2004

CARSON CITY -- A $1 billion slot machine company controlled by Steve Wynn's Japanese business partner received unanimous approval Friday for a two-year Nevada manufacturer's license.

Wynn told members of the Gaming Control Board of the strong ethical character of Aruze Corp. Chairman Kazuo Okada. Okada and Wynn each have invested $380 million in Wynn Resorts, the company building the $2.4 billion Wynn Las Vegas resort on the Strip.

Okada has been licensed for more than 20 years as the owner of Universal Distributing Co. of Nevada, a once-prominent but now largely dormant slot machine company. As part of the approval Friday, Aruze also will acquire Universal. The control board's action will be reviewed June 17 by the Nevada Gaming Commission.

"I really appreciate the opportunity I had at this time," Okada said through an interpreter after the hearing. "I will comply with all the regulations in Nevada. I will do my best to respond to their expectations."

After a hearing that lasted more than four hours, Wynn hugged and then kissed Okada on the cheek. He earlier had vouched for the character of Okada, with whom he also is building a Macau gaming resort.

"He is not just suitable, he is desirable," Wynn said. "He is a risk-taking capitalist."

Wynn told control board members that their decision would have an effect on Wynn Resorts.

"On the surface, this is not related to Wynn Resorts," he said. "But it is profoundly related to Wynn Resorts. He is an equal owner of the company and your findings will reflect on Wynn Resorts."

During the long hearing, Control Board Chairman Dennis Neilander and Scott Scherer repeatedly complained to Okada and his Nevada lawyer, Bob Faiss, about the delays their agents had in acquiring documents from Aruze.

Aruze had gone before the control board four years ago to acquire Universal Distributing, but that decision had been put on hold over tax questions in Japan.

Last year a Japanese tax court threw out charges that Okada had concealed $35 million in income connected to efforts to boost Universal Distributing.

Faiss said Okada has spent $181,000 in the past year translating documents and providing material requested by the control board. He attributed problems in providing documents quickly to cultural and language differences and not requesting information from the right people. He said that until recently, Japanese business leaders did not place as much emphasis on written documents and contracts as their American counterparts. Instead, a lot of transactions are done by a handshake and the understanding both sides want to perform better than normally would be expected.

"There is a significant cultural difference as to contracts, one Americans do not easily understand," Faiss said. "Contracts are looked at as a willingness to do business, not specific details. They simply expect each party will act fairly and do the right thing."

He said most of the problems cited by the control board over Okada's business practices with Universal occurred more than five years ago, when Aruze Corp. was a private company.

"These were private companies," Faiss said. "They had a right how to delegate profits and losses."

One transaction questioned by Scherer was the shipping of computer circuit boards for slot machines to Nevada and then shipping them back to Japan.

Faiss said the law in Japan required the importing of those parts. He said that during one recent year, Okada paid more taxes than any person in Japan.

Scherer sought the limited two-year slot manufacturing license as a way to ensure Okada responds more quickly to the control board's requests for information. The control board also required Okada to assign a key employee fluent in both Japanese and English to handle their business interests in Nevada. This employee must have decision-making power and must inform regulators of material events affecting Aruze in Japan.

But both men said they were encouraged that Okada's company will operate properly because next year, he and Wynn must come before them for licensing of Wynn Las Vegas.

"If Mr. Okada does anything negative, it affects Mr. Wynn, and vice versa," Neilander said.

He acknowledged Okada and his representatives have had "noncompliance" problems with the control board in the past, but "it has improved."

"Mr. Okada has not been involved in anything illegal," Neilander added. "We have had problems because of cultural differences, the lack of disclosure. We need trust with him, like we have had with Mr. Wynn for more than 20 years. It has to be like that."