LAS VEGAS, NV – Elaine Wynn, a co-founder of Wynn Resorts, the Company’s third largest shareholder and a former member of the Board, today filed a complaint in Nevada State Court to gain control of her Wynn Resorts stock so that she can make decisions about her investment like any stockholder.
Ms. Wynn, a prominent businesswoman, philanthropist and community leader, who has long experience with Wynn Resorts and the gaming industry, is being denied her right to control her own stock by her ex-husband Stephen Wynn, the Company’s Chairman and CEO. As stated in her complaint, Mr. Wynn breached their January 2010 Stockholders Agreement by orchestrating Ms. Wynn’s ouster from the Board of Directors in retaliation for her asking questions about the “tone at the top,” the absence of appropriate internal controls, the withholding of information from the Board and the reckless activity of the CEO and others in the Company.
As a result of her removal from the Board, Ms. Wynn has no meaningful avenue to protect her substantial economic interest in Wynn Resorts, including any ability to raise issues concerning corporate governance. Because of Mr. Wynn and Wynn Resorts’ failures to address this matter, Ms. Wynn has been left with no choice but to proceed with legal action to resolve her claims. This includes seeking a judicial determination that the January 2010 Stockholders Agreement, which purports to prohibit her from transferring stock that she owns without the permission of Mr. Wynn, and grants to Mr. Wynn all rights to vote her stock, is invalid and unenforceable as a matter of law.
In filing the complaint, Ms. Wynn “also seeks damages for Mr. Wynn’s breach of his obligations under the January 2010 Stockholders Agreement, including for his failure to support her renomination and reelection to the Board of Directors, and for Wynn Resorts’ tortious interference with that contract. Furthermore, and in the alternative, to the extent that the January 2010 Stockholders Agreement is deemed valid and enforceable, Ms. Wynn seeks specific performance ordering Mr. Wynn to comply with his contractual obligations, as explicitly required by the January 2010 Stockholders Agreement.”
Mr. Wynn’s denial of Ms. Wynn’s ability to control her stock and her ouster from the Board came in retaliation for her having raised important concerns about business practices at Wynn Resorts and the complete absence of proper corporate governance.
Among other things, the complaint asserts:
• Mr. Wynn and certain members of the management team engaged in reckless behavior and created a tone at the top which punished dissent or inquiry;
• Mr. Wynn was accused of misconduct on Company property involving at least one Company employee that was sufficiently serious to cause him to make a secret multi-million dollar payment, and yet the Board was never told;
• Mr. Wynn was forced to terminate employees who he never should have hired because of their associations with alleged illegal activity and, in at least one case, hid the reasons for the executive’s departure; and
• Mr. Wynn stifled opposing views within the Company, even at the Board level; the only time in the Board’s history that it ever voted against Mr. Wynn’s ostensible position on any issue was when it voted to oust Ms. Wynn, when in fact it was carrying out his actual direction in doing so.
Named as a defendant, in addition to Mr. Wynn, is Wynn Resorts’ General Counsel Kimmarie Sinatra, who aided and abetted the breach of Mr. Wynn’s fiduciary duties and the intentional interference with contractual relations.
As the complaint states:
“Ms. Wynn raises these issues reluctantly: she had hoped, for the sake of her family and of the Company she helped to build, that the issues plaguing the operation of Wynn Resorts and the reckless risk-taking of its Chairman and CEO Mr. Wynn could be addressed through proper corporate processes and channels. They cannot be. Mr. Wynn has intentionally kept the Wynn Resorts Board in the dark and has turned the General Counsel of the Company into his co-conspirator.”
“Every time Elaine Wynn sought information, as a director should, she confronted a ‘tone at the top’ that punished inquiry, even by her, a major shareholder, director and co-founder of Wynn Resorts. Mr. Wynn operates the Company without the effective checks and balances that the law requires, beginning with independent and effective Board members. Ms. Wynn and her fellow Board members were intentionally fed misinformation by Mr. Wynn and Kimmarie Sinatra, the Company’s General Counsel, a process that depended on the deficiencies in the internal controls and their intentional circumvention with regard to the decisions of the Chairman and CEO.”
“Although bound by the January 2010 Stockholders Agreement to support Elaine Wynn’s director candidacy, Mr. Wynn instead engineered her removal from the Board in retaliation for her challenging his decisions and questioning his judgment. Ms. Wynn cannot sit by idly and accept punishment for doing what is right and daring even to inquire about Mr. Wynn’s reckless operation of the Company.”
As the complaint continues: “The ostensible purpose of the January 2010 Stockholders Agreement was to place restrictions on the stock held by Mr. Okada (through his company, Aruze USA, Inc.) to preserve the Wynn-Okada alliance and avoid the kind of takeover that the Wynns faced at the Mirage. Mr. Wynn induced Ms. Wynn to sign the January 2010 Stockholders Agreement by a series of false representation, both professional and personal, including that the purpose was to restrict Mr. Okada, not her, and that she would serve on the Board for at least as long as the restrictions applied so that she could protect her stock in the Company, which is Ms. Wynn’s largest asset.”
“Now that the shares held by Mr. Okada’s company have been redeemed, the ostensible purpose of the January 2010 Stockholders Agreement has been frustrated. If the purpose was indeed to impose limits on Mr. Okada, as Mr. Wynn and his counsel maintained, then there is no legitimate basis for continuing to enforce the Agreement’s restrictions on Ms. Wynn’s shares.”
“As is now clear, Mr. Wynn is misusing the January 2010 Stockholders Agreement to exert full and perpetual control over his former wife’s life and legacy.”