Wynn-Okada dispute headed back to state court

22 June 2012

By Tim O'Reiley

Wynn Resorts Holdings, LLC on Thursday won its bid to return its legal dispute with former largest investor Kazuo Okada to state court, but with the possibility that two pending cases will become three.

After an hourlong hearing, U.S. District Court Judge Larry Hicks ruled that the case hinged on interpretation of Nevada law and did not fall within federal jurisdiction. In doing so, he turned aside the arguments by attorneys for Okada entities Aruze USA Inc. and Universal Entertainment Corp. who said Wynn's case rose or fell on the federal Foreign Corrupt Practices Act.

"This is a state law claim," Hicks said. "It does not depend on whether or not the FCPA was violated."

The move was a small victory for Wynn, but it doesn't end the legal wrangling.

Wynn had filed the case in Clark County District Court at 2:14 a.m. on Sunday, Feb. 19, just hours after a board of directors meeting where Okada's nearly 20 percent stake in the company was forcibly redeemed at a 30 percent discount.

In addition, the directors decided he was "unsuitable" for board membership due to allegations, detailed in a company-commissioned investigation, that he had improperly provided gifts to Philippine gaming officials while planning a casino resort there. Wynn said Okada not only violated company ethics, but could jeopardize its Nevada gaming license.

Okada shifted the case to federal court on March 12, just days after Clark County District Judge Elizabeth Gonzalez turned down much of Okada's request for access to Wynn corporate documents in a parallel lawsuit.

In a statement after the hearing, an Aruze spokesman said that, "While we respectfully disagree with the court's decision, we're quite confident that a jury, no matter where it is seated, will agree" with Okada.

The Japanese business mogul claims that he was stripped of his stock "without any legitimate justification and to silence a vocal critic."

Hicks left open the possibility that parts of Okada's counterclaim to reinstate his stock, at least partially based on federal securities laws, could be broken off the case and remain in federal court.