Wynn Wars Escalate
Elaine Wynn has taken her proxy fight with Wynn Resorts’ board of directors to state court in Nevada.
Wynn, who emerged as the company’s largest shareholder earlier this year following a sexual harassment scandal that ousted her ex-husband Steve Wynn as chairman and CEO, wants nominations for directorships reopened, claiming the current board has been altogether too cozy with Steve Wynn. She has targeted one director specifically, Idaho investor John Hagenbuch, reportedly a close friend of Steve Wynn’s, whose re-election she opposes.
Hagenbuch, a director since 2012, is on a special committee of the board investigating the sexual harassment allegations against Wynn, who has denied any misconduct and has since sold off all his stock.
Elaine Wynn got a powerful ally last week when the shareholder advisory group Glass Lewis backed her campaign to reject Hagenbuch.
“We are ultimately inclined to conclude there may be greater value in effectively objecting to Mr. Hagenbuch’s nomination,” said the Glass Lewis recommendation, “which should be considered against his questionable role on the special committee reviewing accusations against Mr. Wynn and his shared culpability for years of misaligned compensation practices that Glass Lewis continues to believe are problematic.”
The group went on to say that Wynn Resorts early response to the Steve Wynn harassment scandal backed Elaine’s contention that board members were subservient to Wynn when it released a February 6 statement saying that has “reluctantly” accepted Wynn’s resignation, calling him a “beloved leader and visionary.”
“Given the gravity of the allegations in question, the possibly adverse impact on portions of Wynn’s business and the decidedly nascent phase of the special committee’s process at that point in time, we consider the issuance of such a statement is fairly tone deaf in terms of timing and cultural context,” the advisory firm said.
Wynn Resorts responded to the report, which gave Wynn the lowest grade possible—“F”—for its pay-for-performance practices the past two years. Maddox received a $24 million pay package, which Elaine Wynn called “exorbitant for a first-time untested public company CEO.”
But a Wynn Resorts press release said that the Glass Lewis report was also critical of Elaine Wynn.
“Ms. Wynn was a company director from 2002 to 2015, during which Wynn maintained similarly restrictive corporate governance provisions…” the report. ”We continue to take a fairly dim view of language that seems to exculpate Ms. Wynn of her shared responsibility for Wynn’s more regressive machinery.”
The Wynn press release urged shareholder to approve Hagenbuch because, “Wynn’s Board and management team are continuing to drive growth at Wynn, move past the founder-led era of Steve Wynn, and evolve into a stronger company that is poised for long-term growth.”
After issuing an open letter to shareholders last month stating her aims, Elaine Wynn wants the court to compel the board to provide her with the contact information for all “non-objecting beneficial owners” of the stock, and she wants the company’s May 16 annual meeting postponed to give her time to reach out to them directly.
“Providing the NOBO list is standard practice under Delaware law, and both federal and state courts have ruled that shareholders of a Nevada corporation are entitled to the list,” she said in a statement accompanying her court filing. “Because a large percentage of Wynn’s shares are held by nominal holders such as brokers, the NOBO list is necessary to identify the actual beneficial owners of Wynn shares. Without knowing the voters, Ms. Wynn is unable run an effective director election campaign.”
After first denying her the list, the board has since acceded to the request. It has stood firm in support of Hagenbuch, however, and refuses to reopen nominations or postpone the meeting.
“Elaine Wynn once again has chosen to litigate rather than communicate, despite the company’s public offers to meet with her to discuss the current state of the business,” the company said in response to the suit.
Wynn has been battling Wynn Resorts for years to assert a say over the company’s affairs. Her 2010 divorce settlement left her with a sizable share of stock, more than 9 percent, but the terms of the agreement vested effective control of it with her ex-husband, who was battling for control of the company with Kazuo Okada, the Japanese machine gaming tycoon who had bankrolled Wynn’s 2002 IPO and was the largest individual shareholder. A bribery scandal tied to a resort development Okada was pursuing in the Philippines led to his ouster from the board in 2012 and his stock was cancelled. Elaine Wynn then sued her ex to regain control of her shares and was herself thrown off the board. It was their court battle that first lifted the lid on the sexual misconduct allegations, revealing the existence of a secret $7.5 million payment Wynn had made to a former Wynn Las Vegas manicurist who was one of his reputed victims. Elaine Wynn claims the board knew of the payment and for years had remained silent in the face of numerous reports of assaults against female employees by her ex-husband.
The allegations are the subject of investigations by regulators in Nevada, where the company own two marquee resorts on the Las Vegas Strip, and Massachusetts, where the company is developing a $2.5 billion gaming resort outside Boston.
Following up on her latest court filing, Elaine Wynn said, “My sole focus is on increasing shareholder value, reforming the company’s corporate governance practices and restoring the company’s reputation.”
In an open letter to shareholders seeking support for its nominees the board responded that it “acted swiftly and decisively to do what is right for the company and its shareholders,” citing the recent appointment of three outside business leaders, all women, as independent directors.
“Today, we are a very different company than we were three months ago, and we have a refreshed, diverse board in place that is committed to active oversight in leading the company forward. We have made great strides in restoring stability at Wynn, but we need your help to continue this progress.”
Steve Wynn, meanwhile, has emerged from obloquy to sue a former Wynn Resorts hair stylist, for defamation for statements he made in an explosive January story in The Wall Street Journal that led to the casino magnate’s downfall.
Jorgen Nielsen was one of only two people who spoke on the record for the story—the other was Elaine Wynn’s publicist—which contained a withering barrage of sexual harassment accusations by former Wynn employees, most of them salon and spa workers. Nielsen, who worked as a salon director at several Wynn hotels, was quoted as saying, “Everyone was petrified’’ of the billionaire, and that he and other employees informed company executives about the harassment, but “nobody was there to help us.”
Wynn has denied any misconduct and has blamed the article’s appearance on the machinations of his ex-wife, a claim the suit reprises by describing Nielsen as her personal stylist.
It characterizes Nielsen as a “disgruntled former employee” who “harbors a personal animus, dislike, and anger toward Mr. Wynn.” It claims his statements, which include an episode in which a salon manager hid in a bathroom to escape him, are blatantly and knowingly untrue.
‘’In falsely accusing Mr. Wynn of sexual misconduct in the #MeToo era, defendant Nielsen acted with the unlawful purpose of smearing Mr. Wynn and creating workplace issues for Mr. Wynn at a time when he was embroiled in highly contentious and public litigation with his ex-wife, Elaine Wynn,’’ the suit states.
Nielsen did not respond to media requests, according to local news reports. A spokeswoman for Elaine Wynn declined to comment.
Meanwhile, the Wynn Boston Harbor in Everett, Massachusetts has a new name. The $2.5 billion casino that is rising towards completion in June 2019 along the banks of the Mystic River has been dubbed the Encore Boston Harbor, signaling the complete break between the founder who gave his name to his company, and that company.
As the announcement was being made workers at the construction site began taking down banners with the old name and replacing them with new banners.
Wynn Resorts dropped the Wynn name from the casino under intense pressure from many Bay State officials in the wake of multiple accusations of rape and sexual harassment that surfaced against Steve Wynn in January in the Wall Street Journal—accusations that prompted his resignation as chief executive officer and his selling of all of his shares in the company.
That wasn’t sufficient for many people, who felt that keeping his name on what will be the largest casino in Massachusetts was degrading to women and to the state’s nascent gaming industry. The Massachusetts Gaming Commission had signaled that the company’s hold on its gaming license was tenuous and could be severed if commission investigators found any proof that company executives had helped hide Wynn’s $7.5 million payment to a massage therapist who accused him of rape when the company was applying for its gaming license in 2014.
The name change, that flushes the Wynn name into the memory hole, was announced at last week’s commission meeting by CEO Matt Maddox. Encore is not a new name for the company, but simply another brand that Wynn Resorts uses, especially for its overseas luxury properties. Wynn runs two Encore hotels in Las Vegas and Macau.
The company hopes this will put enough space between the disgraced founder—who vehemently denies all charges—and his company, which is desperately trying to preserve its right to operate a casino in Everett. Meanwhile, Wynn has filed a defamation suit against the Associated Press for some of its reporting on allegations against him.
“The Wynn brand is strong,” Maddox told the commission. “I also understand the cultural sensitivity here.” He said the company had taken “rapid and decisive actions” put as much space between itself and the founder as possible.
Maddox released the name change at a hearing before the commission on a request by his company to have the founder removed as an “individual qualifier” linked to the casino license. Such qualifiers, who also include company officers and large shareholders, are required to pass state background checks. Wynn divested himself of his 12 percent ownership in the company two months ago. He also moved out of his former villa at the Wynn Las Vegas hotel complex.
The director of the Boston Area Rape Crisis Center, Gina Scaramella, called the action “a positive step” and called it “the first of what we hope will be many steps to create a workplace in which all employees are safe.”
However, members of the commission remained silent on the change.
About 1,500 construction workers are currently at the construction site of a hotel that will have 671 rooms, 13 bars and restaurants, and will, along with the casino, require about 4,000 full time employees. Wynn has so far spent $1.4 billion.
Recently several news reports have revealed that MGM and Wynn have been in discussions about selling the Everett casino to MGM. This would greatly complicate MGM’s situation since state law does not allow a casino owner to hold more than one license in the state. This in turn has fueled speculation about MGM “trading up” by purchasing the Boston Harbor and then selling its interests in the MGM Springfield.
However, at this point that is all that is: speculation. Maddox has deemphasized that possibility in his public statements in which he has said that the company wants to open the resort, but he alluded to the possibility of a sale if the commission’s investigation reaches a negative conclusion. During his talk last week, Maddox noted that the company has added three women to the 11-seat board of directors.
Commissioner Gayle Cameron interrupted the CEO: “I just have to make the point, there’s an issue around women and now women are more valuable to the board. I see what you’re doing. But it just seems to me the company as a whole didn’t value women until they got in trouble.”
Maddox, who is 42, countered that the drive to change was being brought about by a new generation, including himself. “I am part of the generation that believes this. I’m part of the generation that’s driving this.” He added, “Things are moving at lightning speed. We are moving this company forward. We’re taking these issues very seriously.”
One of the new female board members, Betsy Atkins told the Boston Globe, “They are very eager to work with the gaming regulators and satisfy those questions and make sure they have full the support from the gaming commission. They have every desire to go forward.”
Some, like Steve Wynn’s former wife, Elaine Wynn, says the company isn’t going far enough in changing its culture. In a filing last week with the Securities and Exchange Commission, she wrote, “I do not believe these steps go far enough toward changing ‘business as usual’ in Wynn’s boardroom.”
She wants to purge the board of Wynn’s old associates on the board, whose ties to Wynn are too strong.
Atkins disagrees. She told the Globe, “I don’t think it’s a founder-dominated environment at all. I don’t think anyone at the company said it is done.” And if the MGC demands that more heads be chopped off?
“We are in hypothetical land,” she answered. “We will make a business judgment to maximize the value of the company’s assets. That’s the obligation to our shareholders and to mitigate the risk.”
The commission is expected to issue its report within the next week.
In a conference call with investors that followed the commission hearing Maddox told investors that Boston remains a highly attractive location for the company.
“We love the market. We are going to continue to actively cooperate with the regulators there and move forward,” he said.
He reaffirmed that stance in an interview with CNBC: “Boston is not up for sale. What Boston represents for us is a good growth opportunity. I like that market. I found the land. I pursued that deal.”
The mayor of Everett, Carlo DeMaria, spoke approvingly of the name change, which officials including Governor Charlie Baker and Attorney General Maura Healey had publicly called for. “There were a lot of serious allegations made,” he said. “If those prove to be true, they’re not appropriate and a name change is in the best interests of the project.”
He later told the Boston Globe “I don’t see the board allowing this license to slip away, because it is such a lucrative license. The board has an obligation to its shareholders, and they would have to remove those that aren’t suitable.”