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Gaming Guru

Tim O'Reiley

Elaine Wynn enters legal fray between ex-husband, Okada

20 June 2012

Elaine Wynn on Tuesday opened her own front in the brutal legal war between former husband Steve Wynn and former business partner Kazuo Okada, essentially asking to be declared a free agent so she can sell all or part of her $1 billion in Wynn Resorts Ltd. stock.

In a pleading filed in U.S. District Court in Las Vegas, Elaine Wynn sought to invalidate a 2010 stockholders agreement covering herself, Steve Wynn and Okada. The agreement, drawn up during the Wynns' divorce, requires that each obtain the consent of the other two before selling shares.

According to a regulatory filing on April 30, she was the third-largest shareholder in the company, with 9.7 million shares, or a 9.7 percent stake.

At current stock prices, the stake would be worth $1 billion.

She also holds a seat on the company's board of directors.

According to court papers, "Ms. Wynn would not have agreed to give her ex-husband the potential ability to restrict the market for her stock if not for her desire to support and not undermine the existing alliance between Mr. Wynn and Mr. Okada."

But earlier this year Okada was forced out amid allegations that his separate gaming resort development in the Philippines and alleged gifts to gaming regulators there made him unsuitable as a shareholder.

He was forced to surrender his nearly 20 percent stake at a 30 percent discount and removed from the board

Without Okada, there is no reason to continue the shareholder agreement, Elaine Wynn argues.

Elsewhere in court papers, she said Okada had already given his consent for her to sell.

Although she did not did not lay out a specific plan for liquidating her position, the papers described her desire to "provide significant assistance to various important causes" and "implement estate planning measures" for her children.

Her attorneys declined to elaborate.

Likewise, a spokesman for Japanese gaming magnate Okada declined to comment.

But in a statement, Chairman and CEO Steve Wynn called Elaine Wynn's move "a legally baseless attempt to drag into federal court a domestic relations matter that was previously settled in family court here in Las Vegas. ... It was at the essence of a property settlement between us that was extensively negotiated while Elaine was represented by a divorce lawyer."

Steve Wynn characterized the 2010 agreement as having "provided assurance of stability and continuity to our stockholders and employees since the inception of the company."

Wall Street shrugged off the news as the stock rose $4.19 a share, or 4.18 percent, on Tuesday to close at $104.52 on the Nasdaq Global Select Market.

Analysts have generally downplayed any threat that the ongoing litigation poses to the company's day-to-day operations.

Even if Elaine Wynn sold all her shares, Steve Wynn still controls a 10 percent stake.

Waddell & Reed Financial of Overland Park, Kan., owns 18 percent of the company, and Marsico Capital Management holds another 8.4 percent. Both bought in before the litigation.

No one else holds as much as 1 percent.

Even if a stock sale did not disrupt the company, Elaine Wynn taking on Steve Wynn could bring more discord to a board room that has already seen plenty.

A year ago, Okada argued and voted against a $135 million donation the company made to the University of Macau, one of the catalysts that led to the litigation that erupted early this year.

In court papers, Elaine Wynn confirmed Okada's account of a Feb. 18 board meeting where Steve Wynn "yelled at Mr. Okada's counsel when he introduced himself" and wanted the attorney barred from attending.

At the same meeting, Okada's translator could not keep up with the board discussion as he listened in by phone. His request for a sequential translation, with the speakers and translator alternating, rather than a simultaneous translation was denied, according to Elaine Wynn.

In a parallel Clark County District Court action, Steve Wynn's attorneys have asked Okada to submit to a deposition over what they called defamatory statements made about Steve Wynn with no factual backup. Steve Wynn is also trying to move the federal case back to state court.

Meanwhile, Okada's attorneys seek to reverse the forced sale to the company of his shares.

Okada also wants to be able to vote the shares, held in the name of Aruze USA Inc., in favor of his own slate of directors, although no annual meeting has been scheduled.