Bloomberg managed to corral Universal Entertainment chairman Kazuo Okada long enough to get his version of the increasingly caustic feud between himself and Wynn Resorts chairman Steve Wynn. Asked about the damning 47-page report prepared for Wynn by former FBI director Louis Freeh that claimed Okada had inappropriately lavished hospitality on Philippine Amusement and Gaming Corporation (Pagcor) execs, Okada said the report was riddled with errors. “They gave [Wynn’s] board the report without letting me review it. Even criminals would be asked to sign off on the findings to ensure there are no mistakes.” Okada is gathering evidence to refute the allegations and undo the forced redemption of his 20% stake in Wynn Resorts.
Freeh’s report cited $110k of allegedly inappropriate favors enjoyed by Pagcor execs – including current CEO Cristino Naguiat Jr. – but Okada questioned Freeh’s failure to distinguish between business and regulatory guests, the fact that Universal’s own room costs were included in the total, and the focus on the total sum rather than the per-person tallies. Okada showed Bloomberg a document indicating that Pagcor had reciprocated Okada’s hospitality by spending over $47k since July 2010 hosting Universal execs in the Philippines. Naguiat has always maintained that such arrangements were typical in the Asian business world, a claim backed up by none other than Las Vegas Sands chairman Sheldon Adelson.
Okada says Freeh’s report was a set-up, designed to eliminate a former partner whom Steve Wynn had come to view as a rival. “We should have been helping each other over the hard times, in a relationship based on trust. But he was a cunning man.” Okada claimed that Wynn had wanted to get rid of him as early as 2002, but only took action once the opening of the Wynn Macau provided the financial security to take such a bold move. “[Wynn] saw his chance when Macau proved to be a success, and started to feel like he was on top of the world around mid- 2010.” Wynn’s actions have certainly convinced Okada of one thing. “I believe that business by nature is about trust … That may be a difference between Western and Asian countries.”
Wynn shares had risen since the company forcibly redeemed Okada’s stake at a steep discount, and they rose even higher on Friday after Wynn filed a document with the US Securities and Exchange Commission saying the company had been granted permission to build a casino on Macau’s Cotai Strip – a lucrative perk so far enjoyed only by Sands China and Galaxy Entertainment. The filing claimed Macau authorities had granted Wynn a 25-year lease on 51 acres of prime Cotai real estate. Shares rose 6% before Wynn abruptly withdrew the report, saying only that it had been filed in error by a clerk. Trading was temporarily halted, but Wynn shares held on to most of their gains even after trading was resumed.
Analysts are divided as to what effect the cockup will have on Wynn’s long-term fortunes. Some say the detail in the filing suggests the info is legit, so the good times are just ahead for Wynn investors. Others say the slip-up may have embarrassed Macau authorities, which could retaliate by looking unfavorably on Wynn’s still pending application. Wynn is already reportedly getting the stink-eye from some Macau junket operators for its ‘outing’ of Okada’s VIP guests. Given Wynn Resorts’ reliance on its Macau operations to provide the bulk of its revenues, Wynn can’t afford to be making any more Macau enemies.
CHANGES COMING TO PAGCOR?
The third party in the Wynn/Okada feud may be facing changes as a result of the controversy. Pagcor’s Naguiat has suggested to PhilStar that the Philippine regulator/operator is contemplating ending its dual role. “We are carefully studying the separation of Pagcor as operator and regulator.” Morphing into a purely regulatory role would be a tricky proposition, in that Pagcor is the national government’s third-largest revenue contributor. Pagcor’s charter requires it to kick up a percentage of its earnings, and lately, Pagcor has been paying off like a hot slot machine. Naguiat suggested the best time for Pagcor to make the switch may be once the four casinos in the ambitious Entertainment City Manila project are up and running.