AS PROBE WINDS DOWN, STEVE WYNN SUES GAMING COMMISSION, WYNN RESORTS
By Colin A. Young
STATE HOUSE NEWS SERVICE
STATE HOUSE, BOSTON, NOV. 8, 2018...Embattled former gambling tycoon Steve Wynn is suing the Massachusetts Gaming Commission, the head of its investigations unit and Wynn Resorts in a bid to prevent the release of the findings of the commission's months-long investigation into him and the company he founded.
Wynn, who resigned as president and CEO of Wynn Resorts in February after a Wall Street Journal article detailed allegations of sexual misconduct against him, filed the lawsuit in Nevada late Wednesday. The Gaming Commission was preparing to make public its findings and determine whether Wynn Resorts should continue to hold the license for the resort casino it is building in Everett, and the lawsuit could delay those events.
The lawsuit alleges that Wynn Resorts improperly gave the Gaming Commission documents that were protected by attorney-client privilege, and that the commission used those documents in its investigation and in questioning others as part of the investigation. Wynn is asking a judge to bar the commission from releasing its report if it relies on those documents and is asking for damages of more than $30,000 from the Gaming Commission.
"This development is not surprising as it is consistent with [Wynn's] established litigious tendencies," Gaming Commission Director of Communications Elaine Driscoll said. "The Commission has retained legal representation in Nevada to mount a vigorous defense against his effort to block the release of our months-long investigatory report and to defend against Mr. Wynn's baseless claims for damages against the Commission and its Director of the Investigations and Enforcement Bureau. It is our intention to bring this matter to a swift resolution. The IEB remains focused on its preparations to soon present the Commission with the full extent of its findings."
Since January, the commission has been looking into sexual misconduct allegations against Steve Wynn and the handling of those allegations by Wynn Resorts executives and board members. A January 2018 Wall Street Journal story detailing an alleged "decades-long pattern of sexual misconduct" by the casino mogul, including claims he had pressured employees to perform sex acts, sparked the commission's inquiry.
Karen Wells, head of the commission's investigations bureau and a defendant in the new suit, told the commission earlier this year that she confirmed that Steve Wynn had paid a private $7.5 million settlement to a manicurist to resolve a sexual harassment allegation and that the payment was not previously disclosed during the commission's licensing process.
Commissioners will not be given a copy of the Investigations and Enforcement Bureau's report on Wynn and Wynn Resorts until the suit is resolved, Executive Director Edward Bedrosian said Thursday.
"You will not be able to see the report until these issues are resolved," he said in response to a question from Commissioner Enrique Zuniga. "We need to resolve these issues to make sure the report that is given the commission is the report you will use in the adjudicatory hearing."
Late last month, Bedrosian said the investigation that began in January was almost complete and that he expected the findings of the investigation would be made known at the start of a public hearing on the topic sometime in early December. The commission had originally hoped to have the investigation wrapped up and to hold a public adjudicatory hearing in September. After that pronouncement in August, Bedrosian said investigators went to Las Vegas "following up on a few outstanding matters" and commissioners said they expected to get a copy of the report and hold the hearing on its findings in October.
At the root of Wynn's argument is a cache of documents related to a lawsuit Wynn Resorts brought in 2012 and resolved this spring, dubbed the Okada Litigation. Wynn claims that he and the other parties to that suit -- former Wynn Resorts general counsel Kim Sinatra and Wynn Resorts -- "entered into a common interest agreement by which they agreed to share privileged communications and work product to defend" themselves against counterclaims related to the suit.
Wynn admits that there was no written common interest agreement, but that "they nonetheless memorialized the agreement through their conduct and that of their attorneys throughout the six-plus years of the Okada Litigation."
Wynn claims that the Massachusetts Gaming Commission, as part of its investigation, "demanded that Wynn Resorts provide it with various documents from the Okada Litigation and other legal matters" and that "Wynn Resorts has provided Mass Gaming with scores of documents reflecting communications protected by Mr. Wynn's attorney-client privilege and/or common interest agreements he entered with Wynn Resorts."
"Similarly, Mass Gaming, through Karen Wells and others whose identities are presently unknown, has flagrantly invaded and/or attempted to invade Mr. Wynn's attorney-client privileged and common interest protected communications when questioning various individuals as part of its investigation."
The lawsuit charges that the Massachusetts Gaming Commission was "able to force Wynn Resorts' to comply with their improper demands with threats that the Company would be deemed to have violated its obligation to 'cooperate' with the Mass Gaming investigation into Wynn Resorts' suitability."
The suit also says Wynn and his attorneys have "repeatedly demanded" that Wynn Resorts and Mass Gaming provide a list of the documents provided the Gaming Commission so he can "determine whether, and to what extent, the Company has improperly disclosed his protected communications to the regulators."
Wynn said the Gaming Commission, after declining to provide a list of the documents it has and telling Wynn he must prove that the documents are privileged, ultimately allowed one of his attorneys to review a small batch of the documents it had, which "confirm the Company has, in fact, improperly disclosed Mr. Wynn's protected communications at the unrelenting behest of Mass Gaming officials."
"Recognizing that they have conducted their months-long investigation into Wynn Resorts with total disregard for protecting the privileged communications of Mr. Wynn -- who, again, has no ability to determine what communications and materials have been provided to regulators -- Mass Gaming officials have simply donned the judge's robe, cracked the gavel, and unilaterally determined that Mr. Wynn has failed to sustain his burden of establishing that any privilege applies to the unknown universe of documents acquired during the Mass Gaming investigation," the lawsuit states.
Steve Wynn is asking a judge to order the Gaming Commission to either return or destroy the documents in question and "enjoining them from publicly issuing a report that contains, discloses or otherwise relies upon Mr. Wynn's attorney-client privileged communications or other protected material, including material protected by Mr. Wynn's privacy rights."
The suit also seeks compensatory damages against the Gaming Commission, Wells and Wynn Resorts "in an amount in excess of $15,000" and punitive damages against Wells and the Gaming Commission "in an amount in excess of $15,000."
Steve Wynn's filing on Wednesday capped a busy day in the Wynn Resorts orbit.
During a third-quarter earnings conference call on Wednesday, Wynn Resorts CEO Matt Maddox reportedly told investors that Encore Boston Harbor is on track to open in eight months but made no mention of the investigation by the Massachusetts Gaming Commission, according to CDC Gaming Reports.
A press release Wednesday announcing some of the company's financials included a very brief section about Encore Boston Harbor, the name the company gave its Everett casino development in the wake of the Steve Wynn allegations, and that through September the company has spent $1.83 billion building what it expects will be an approximately $2.6 billion resort casino.
Maddox announced that Wynn Resorts' operating revenue was $1.71 billion in the quarter that ended Sept. 30, according to CDC. Revenue was up 10.2 percent compared to the 2017 third quarter. But the company's success in the third quarter was driven by its business in Macau and came in spite of a 14.1 percent decline in Las Vegas gaming revenue.
Maddox also announced Wednesday that Wynn Resorts is scrapping plans for a $1.5 billion, 38-acre development in Las Vegas that was to include a lagoon and white sand beaches.
Stock in Wynn Resorts was down about 13 percent Wednesday following Maddox's comments, according to the Financial Times, and through Wednesday shares in Wynn Resorts have declined more than 32 percent year-to-date.
Also Wednesday, Wynn Resorts announced that its board chairman who was elevated when Steve Wynn resigned from his company earlier this year, D. Boone Wayson, is retiring from that position. Wayson was replaced as chairman Wednesday by Philip Satre, an independent director who joined the Wynn Resorts board in August as a vice chairman.
Satre is president of the National Center for Responsible Gaming and is a former chairman and CEO of Harrah's Entertainment, according to Wynn Resorts.
The Wynn Resorts Board of Directors has been under scrutiny since the allegations against Steve Wynn became public. The board has seen significant turnover this year as Steve Wynn's ex-wife Elaine, the company's largest shareholder, demanded the company overhaul its board as regulators in Massachusetts and Nevada investigate whether the board knew of, and did not disclose, issues involving Steve Wynn.
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