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Okada's Past May Plague Le Reve

LAS VEGAS--Kazuo Okada holds a Silver State gaming license as owner of Las Vegas-based Universal Distributing of Nevada.

The world's largest manufacturer of video slot machines in the early 1990s, Universal lost most of its market share after the Nevada Gaming Commission ruled its machines, which programmed near misses to appear on their pay lines, violated state regulations.

Gaming Control Board Chairman Dennis Neilander said this week that Universal no longer conducts much business.

"It's practically dormant," Neilander said.

Two years ago then-control board Chairman Steve DuCharme questioned Okada through a translator when he appeared before the panel on behalf of Aruze Corp.'s attempt to buy Universal.

Okada owns a controlling interest in Aruze, one of the biggest gaming device manufacturers in the world.

DuCharme's questions centered on the value of Universal, and suggested he was concerned that Aruze shareholders were subsidizing Okada with the purchase.

Both DuCharme and current control board Chairman Dennis Neilander questioned a series of software development expenditures made by an Aruze subsidiary which benefited Universal. They suggested the transactions inflated Universal's value.

"The transactions between the subsidiaries might smack of insider trading under U.S. securities law," DuCharme said at the hearing.

"Did Mr. Okada use phantom transfers of funds to pump up the value of UDN so that the publicly traded company would buy UDN at an inflated value, enriching Mr. Okada?" DuCharme asked Okada's lawyer.

Plagued by translation difficulties, Okada was unable to convince the board the transactions made sense from a business standpoint.

The board voted 3-0 to send Aruze's license application back to staff for further investigation rather than recommend approval for the purchase of Universal.

Later in 2000, Aruze was charged by Japanese tax authorities with concealing $35 million in income. The authorities concluded Aruze's payments to Universal were bogus and ruled that they were taxable payments, rather than legitimate expenditures. The Tokyo Regional Taxation Bureau imposed an additional $14.9 million tax on Aruze.

But last year a Tokyo court cleared Aruze of the charges, rescinded the additional taxes and agreed with Aruze's arguments. Japanese tax authorities appealed, an action that's still pending, Neilander said.

Nevada regulators plan to wait until the tax case is resolved before resuming any investigation of Aruze and Okada, Neilander said.

Neilander declined to say if Okada's tax difficulties would affect his licensure as an officer and owner of Wynn Resorts.

"It couldn't hurt if he's cleared," the chairman said.

Wynn Resorts' SEC filings indicate that Aruze has other issues that may be a concern to Nevada regulators.

Wynn Resorts' financing deals all contain contingency arrangements in case Okada runs into regulatory hot water, protecting Wynn and other investors.

If Aruze or Okada are denied gaming licenses as owners of Wynn Resorts stock, Wynn Resorts can require Steve Wynn to buy their shares, or the company can buy the shares itself, using a promissory note.

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