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Wynn Survives in Massachusetts

The Massachusetts Gaming Commission decided to punish Wynn Resorts for the sins of the father, but in the end allowed the company to retain its gaming license to open Encore Boston Harbor (l.) on June 23.

The Massachusetts GamingThe Massachusetts Gaming Commission last week levied a $35 million fine on Wynn Resorts and attached other conditions it must fulfill if it is to keep its license to run the $2.6 billion Encore Boston Harbor casino, due to open June 23. Wynn CEO Matt Maddox was also fined $500,000.

Since Wynn Resorts averaged $18.4 in daily revenue in 2018, it can pay the fine with less than two days’ worth of revenue. Put another way, the fine is about the same as a 1.3 percent cost overrun for the Boston property. However, the fine is not tax-deductible by the company.

In a 54-page decision the commission determined that although former officials of the company covered-up allegations of sexual misconduct against former Chairman and CEO Steve Wynn, the current officials were not connected with those cover-ups. It stated, however, that it was “profoundly disturbed” by “repeated systemic failures and pervasive culture of non-disclosure presented in the report.” The report was generated for the panel by its investigators after nearly a year of probing the company founder’s long history of allegations.

The $500,000 fine against Maddox holds him responsible for not launching an investigation immediately after he heard of allegations against Wynn.

Commission Chairwoman Cathy Judd-Stein told a press conference after the decision was announced, “The main message that we wanted to send is how much we feel our role is to secure the integrity of the gaming industry.” She added, “We also really want to make sure that the people of Massachusetts know we will always protect the vulnerable and make sure the employees here in Massachusetts are safe.”

A spokesman for Wynn confirmed that the company had received the report from the commission, but would not be commenting further at that time. Michael Weaver said, “We are in the process of reviewing that decision and considering the full range of our next steps. We will not have further comment until we have thoroughly reviewed and considered the MGC’s decision.”

The fines must be paid within 30 days of being levied. If Wynn requests a judicial review, the funds must be put into an escrow account.

The executives and board members of the company underwent a grueling three-day suitability hearing last month. During those hearings company officials insisted that the company had transformed the corporate culture in the year since the corporation was rocked by sexual allegations against its founder and then-CEO Steve Wynn.

Individuals who particularly came under blistering scrutiny were Maddox and co-founder, ex-wife and current largest shareholder Elaine Wynn. The most damning revelations was that former top executives covered up allegations against Wynn and failed to disclose to the MGC the $7.5 million payment to a former employee when the company initially applied for its license in 2014. Maddox denied knowing about the payoff, and said when he finally notified, he was told it was for a former employee “in financial distress.’

Steve Wynn has consistently denied that he did any of the things alleged against him, but the commission had no power to punish him further.

Elaine Wynn testified that she reported the settlement to former general counsel Kim Sinatra in 2009 but was told the employee had been attempting to shake down her ex-husband.

Some of the conditions imposed on the company are designed to ensure that Wynn Resorts and its CEO continue forward with the reforms they have initiated and boasted about. One condition not addressed by the MGC was the company’s announced intention to ban its founder from its properties worldwide.

Conditions include:

• Keep the posts of CEO and chairman separate, in order to prevent the concentration of power in one person that was in place when Steve Wynn was in charge. The company had already taken this step, but the commission wants to make that permanent for the life of the 15-year casino license.

• Require an independent monitor, appointed by the commission for five years, to ensure that the company follows through with its announced reforms, such as anti-sexual harassment procedures. The monitor’s brief would include human resource policies, internal reporting channels, the use of outside attorneys, confidentiality clauses, and gag orders or any other provisions that might impact non-executive workers. The commission reserved the right to clarify the monitor’s role at any time. The five-year term for the monitor could be reduced to three years, depending on the company’s progress.

• Encore Boston Harbor employees must undergo anti-harassment and discrimination training. That includes all of the 5,800 employees that will be hired running up to the June opening of the casino. The training must be concluded within three months of the casino’s opening.

• Wynn Resorts must notify the MGC of any civil or criminal complaint against any of the casino qualifier “immediately upon notice of the action.”

• CEO Matt Maddox must undergo an executive coach. As a result of the three-day grilling of Maddox, commissioners apparently decided that he was guilty of incompetence rather than poor character in his dealings with the sexual misconduct allegations against his mentor, Steve Wynn. The $500,000 fine is one result, and the training from an executive coach is the other. He will be coached in leadership development, effective and appropriate communication for internal, community-wide reporting and messages, human resource issues, such as diversity, hostile work environments, sexual harassment and team building.

The commission’s long-delayed decision that came after several week’s of deliberations said, “Specifically, the corporate culture of the founder-led organization led to disparate treatment of the CEO in ways that left the most vulnerable at grave risk,” adding ,“While the company has made great strides in altering that system, this commission remains concerned by the past failures and deficiencies.”

The decision continues, “Given our findings, it is now in the interest of the commonwealth that the gaming licensee move forward in establishing and maintaining a successful gaming establishment in Massachusetts.” T

he commission writes, “One of the key metrics by which we will measure that success will be the overall well-being, safety, and welfare of the employees. A second but equally important metric is the importance of compliance and communication with the regulator. This penalty is designed to guarantee these practices.”

Allegations against Wynn first came to light in January of 2018 after the Wall Street Journal published an investigative piece that detailed many allegations against the company’s founder, including payment of a $7.5 million settlement to a manicurist who claimed Wynn raped her and got her pregnant. Within a month Wynn resigned as CEO and chairman of the board and divested himself of all company stock and interests. His protégé Maddox, who had been president and chief financial officer, took over and instituted an institutional house cleaning and reform that, although the commission approves, it wants to ensure won’t be subject to backsliding later on.

When the Encore Boston Harbor does open in the city of Everett, across the Mystic River from Boston, it will have 671 rooms, a 210,000 square foot casino with more than 3,000 slots, a 37,000 SF ballroom, a dozen dining choices and several bars. The 27-story tower dominates the skyline for miles around, and is easily seen from all over the metro area.

Wynn executives are now focused on the June opening and the economic boom that the Boston metro area is undergoing. Robert DeSalvio, president of Encore Boston Harbor, told CDC Gaming Reports, “If you go downtown Boston you see nothing other than cranes. It’s just on an incredible tear as far as economic development, so you know you add that all up, and the fact that we ended up with the sole license in eastern Massachusetts, and it’s just a great recipe.”

DeSalvio said he believes the company’s reputation for quality transcends its former CEO and he emphasizes “team-oriented” over “founder-led.”

“When we survey our guests very few would have ever met Mr. Wynn. What they do know is what the brand stands for and that’s something that will not change,” he said.

Everett is a city of about 45,000. Wynn has committed to hiring about 6,000 people and buying from local vendors and businesses. One of these is Everett resident Daniel Lanigan, founder and owner of Lord Hobo Brewing Company. His craft beer will be served at the Encore. He told CDC Gaming Reports, “I can see how some other metropolitan areas might poo-poo the idea of a Vegas casino coming in and throwing weight around, but I don’t get that vibe here at all. I get a lot of support, a lot of curiosity.”

Everett Mayor Carlo DeMaria reacted with relief to the end of the year of uncertainty for his city.

“I know 5,000 people who can’t wait to get to work, and with this resolution, they now can,” he said in a statement. “Here in Everett, we are counting down the days to June 23rd—the opening of the Encore resort and with it, the culmination of the largest single-phase private development in the history of the commonwealth. This is truly a great day for the people of Everett.”

City councilmember Mike McLaughlin added, “I’m excited to see that they’re going to stay in this community.” The city’s voters endorsed the casino in 2013 by 86 percent to 13 percent.

Resident Alfred Lattanzi told the Boston Globe, “It’s going to be a destination city,” he said. “Everyone is going to know Everett.” Others predicted the casino will revitalize the area, bring down real estate taxes, raise home prices and improve roads.

Wynn has also recently finished a vast environmental cleanup of the 33-acre riverfront that restored it to its condition before it was contaminated by several chemical plants there over the years.

The multi-million dollar cleanup replaced millions of tons of contaminated sediment. Elizabeth Henry, president of the Environmental League of Massachusetts, describes the riverfront before the clean up as “a train wreck of a site. Nobody wanted to touch it because the environmental liabilities were expensive to touch.”

Wynn then planted 1,000 native trees, tens of thousands of shrubs and 50,000 flowers.

In advance of the commission’s vote, but after the hearing, Wynn did some other spadework to build up its public relations deficit with a $25,000 donation to the Boston Symphony Orchestra, $25,000 to the Boston Children’s Chorus and $500,000 to the Boston Museum of Fine Arts. Other beneficiaries included RIZE Massachusetts, $250,000, $10,000 to the SS Cosmas and Damian Society,

The decision by the MGC was actually the second positive thing that happened to the company last week. The first was when Australian proxy advisory firms Institutional Shareholder Services and Glass Lewis & Co recommended shareholders vote for a merger of Wynn with Crown Resorts in advance of the commission’s ruling. Wynn withdrew from a $10 billion buyout of Crown on April 10 a few hours after reports of the talks were published in Financial Review, but back-channel discussions have continued, according to GGB sources.

The firms praised Wynn’s year-long reforms, which prompted Wynn board Chairman Philip Satre to comment, “As we lead Wynn Resorts into the future, we will continue to seek input from all of our stakeholders and action on matters that are in the best interest of our guests, our employees and our shareholders. We appreciate the validation ISS and Glass Lewis have provided to us, through their rigorous reviews of the progress we’ve made.”

Glass Lewis’ statement hailed Wynn’s “refreshment” of executives and board, “As well as the remedial actions taken by the company following Mr. Wynn’s ouster, we do not believe it is necessary for shareholders to oppose the election of any of the board’s current directors based on the failings of former company officials detailed by the Massachusetts Gaming Commission and Nevada Gaming Control Board reports” The Nevada regulators hit Wynn with a $20 million fine several months ago.

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