Entertainment

Wynn Resorts takes tougher stance as it defends its Massachusetts gaming license

Key Points
  • The Massachusetts Gaming Commission is reviewing Wynn Resorts gaming license after allegations of sexual harassment surfaced against founder Steve Wynn. 
  • Regulators are deliberating the license now. A decision could come in the next few weeks.
  • Wynn has followed up with a post-hearing brief that questions whether regulators are violating the company’s due process rights and those of the executives and directors.
Elaine Wynn fixes her hair during day one of the Massachusetts Gaming Commission's three-day hearing on the Wynn Resorts casino license at the Boston Convention & Exhibition Center in Boston on April 2, 2019.
David L. Ryan | Boston Globe | Getty Images

Wynn Resorts is taking an aggressive new tack with the Massachusetts Gaming Commission, questioning whether regulators are violating the company's due process rights and those of the executives and directors in a post-hearing brief.

Wynn's suitability as a gaming license holder in Massachusetts is under review after a #MeToo scandal erupted around founder Steve Wynn. He resigned as chairman and CEO and sold his entire stake in the company within months after the Wall Street Journal first made the allegations and a $7.5 million settlement public.

Last week, the gaming commission held three days of intense hearings into the company's qualifications, and that of its individual qualifiers including CEO Matt Maddox, the board of directors and Wynn's largest shareholder, Elaine Wynn. Regulators are deliberating the license now. A decision could come in the next few weeks.

In a post-hearing brief, dated Monday, Wynn Resorts argued the commission has "impermissibly shifted the burden to Wynn MA, the Company, and Mr. Maddox to demonstrate why their 2013 suitability" should remain intact rather than investigators "first proving by substantial evidence that the licensee has failed to maintain its suitability by clear and convincing evidence."

Last week, the Investigations and Enforcement Bureau declined to make a recommendation to regulators regarding Wynn Resorts' suitability as a gaming licensee.

"Their license cannot simply be put on trial before the Commission without the IEB making such a finding and decision," the company said in the brief, calling it something "akin to the Commonwealth dragging a defendant into court and, rather than proving his or her guilt without a reasonable doubt, requiring the defendant to prove [italics theirs] his or her innocence. "

During last week's hearing, the company was caught off-guard when questions were asked about facts not presented as evidence in the IEB's report. For instance, commissioners grilled Maddox about whether he knew James Stern, the company's executive vice president of corporate security and investigations, had monitored Steve Wynn's ex-wife Elaine, along with employees who were thought to have taken her side in her divorce and ensuing litigation against her former husband. Maddox denied any knowledge of that surveillance. Stern was fired on April 6, two days after the hearing's conclusion.

Wynn Resorts chief executive Matthew Maddox speaks during day one of the Massachusetts Gaming Commission's three-day hearing on the Wynn Resorts casino license at the Boston Convention & Exhibition Center in Boston on April 2, 2019.
Boston Globe | Boston Globe | Getty Images

The company defended Maddox in the brief, calling into question how the commission is applying the standard of suitability as "one that judges his leadership, which is not a statutory criterion in the Gaming Act and was not mentioned at all in the IEB Report."

Commissioners were especially tough in their questioning of Maddox, Steve Wynn's protegee and appointed successor. Maddox has repeatedly denied knowledge of the litany of complaints by employees against Steve Wynn.

Commissioner Gayle Cameron challenged Maddox's leadership and judgement by asking what it says about his leadership that so many people kept him in the dark. Cameron had formerly been with the New Jersey State Police and had been tasked with enforcing gaming regulations in that state.

In its post-hearing brief, Wynn Resorts responded: "…the settlements were known to very few within the Company who worked in silos, meaning that some individuals became aware of certain settlements, but not others."

In the hearing, when Cameron, said: "It seems to me that you were making excuses for high-level folks that had failed to do their job," Maddox answered simply, "Well, I'm sorry you feel that way. Maybe you could characterize it as an excuse, but it was the truth."

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The commission also suggested that Nevada's investigation may be continuing, however, the Nevada Gaming Control Board provided Wynn Resorts with written confirmation that Maddox was found suitable and remains in good standing with gaming regulators in that state, according to a statement received by Wynn Resorts. The chairman of the Nevada Gaming Commission Tony Alamo said its investigation has ended entirely.

Throughout the past year, Wynn executives and board members have submitted to investigators, and those investigators testified about the full cooperation they received. But as third day of the hearings concluded last week, the tone took a significant turn when Commissioner Enrique Zuniga asked Wynn Resorts Chairman Phil Satre how the company would respond if the commission came back with an "adverse finding."

Satre shot back, "Why would you care about that? I mean, our financial condition at that point in time is not something that is an issue for you. It's an issue for our shareholders. It's an issue for everywhere else, but why is it an issue for you, if you've decided, 'We don't want you here.'"

Elaine Wynn, the company's largest shareholder and individual qualifier, was seen nodding her head in approval of Satre's response. Satre warned commissioners if they restrict the license to the point of making it difficult for Wynn Resorts to do business, Wynn would not persist in Massachusetts.

Satre went on to explain that though Wynn Resorts has invested in Everett, Massachusetts, the Boston property is anticipated to make up a tiny portion of Wynn's overall revenues.

The company has spent $2 billion on the now re-named Encore Boston Harbor, which is scheduled to open in June. Construction was a massive undertaking, spanning years. It cleaned up tons of toxic waste and reshaped what had become, essentially, an industrial wasteland into a luxury tourist destination. It's employed roughly 4,000 union construction workers and others. Once it open, Wynn expects to hire about the same number to staff the casino resort.

Encore Boston Harbor President Bob DeSalvio laid out at the hearing the enormous financial boost the company has provided local municipalities, with $30 million in taxes paid to date.

What does matter is Macau, where the company makes roughly three-quarters of its revenue. Maddox has spent several years of his career developing the Wynn properties in Macau. On the last two earnings calls, he highlighted the Crystal Pavilion, predicting it could become a top tourist destination there.

Just this week, gaming analysts were surprised by an announcement from Australia's Crown Resorts that it had received a confidential takeover bid by Wynn Resorts. Wynn confirmed the talks but denied there had been a settled offer, and then promptly withdrew from all talks.

And Wynn Resorts has been actively lobbying Japan for a chance at a license for an integrated casino-resort there.

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