by Cecil Morella
MANILA - Philippine authorities confirmed Wednesday that top gaming officials accepted free luxury accommodation from a Japanese tycoon but denied these were bribes to ensure a new Manila casino was built.
US-based Wynn Resorts filed a suit on Tuesday accusing Kazuo Okada of spending more than $110,000 in travel expenses and gifts on the officials so that his mega-gaming venue in the Philippine capital went ahead.
The suit against Okada, a director of Wynn with a 19.7-percent stake in the firm, alleged the suspect payments were made to two chairmen of the Philippine Amusement and Gaming Corporation (Pagcor) from 2008 to last year.
The top officials' relatives and associates were also beneficiaries, as was the current chairman's nanny and the husband of then-president Gloria Arroyo, the suit alleged.
Pagcor, the Philippines' gaming regulator, awarded a license to Okada's Universal Entertainment in 2008 to build a gaming resort on the shores of Manila Bay featuring 2,000 guest rooms and three hotels.
Philippine President Benigno Aquino's spokesman and the gaming regulator confirmed Wednesday that current Pagcor chairman Cristino Naguiat had accepted free hotel stays at Wynn's Macau resort.
But they said this was standard procedure in the gaming industry, with foreign casino chiefs receiving free accommodation in return when they visited the Philippines.
"It's the gaming industry. There's a practice, that's an industry practice," presidential spokesman Edwin Lacierda told reporters, emphasising that the government believed Naguiat did not profit personally from the favors.
The suit alleged that Naguiat, his wife, three children, nanny and company officials had a five-day trip to Wynn's Macau resort in 2010 during which Okada met with the Pagcor chairman to discuss his Manila casino venture.
Okada allegedly ordered that Naguiat be given the most expensive accommodation at the resort -- a $6,000-a-night villa normally reserved for high rollers -- as well as use of the casino's best butler.
More than $50,000 was spent on Naguiat's visit, including about $20,000 in cash given to the Filipino delegation for shopping and gaming, the suit alleged.
Naguiat also requested and received a Chanel designer bag worth 15,000 Macau patacas ($1,878) for his wife, according to the suit.
Pagcor Vice President Francis Hernando told AFP Wednesday that the allegations of cash payments and gifts were false.
"The insinuation that there were other things given beyond the standard reciprocity is malicious. They were not given anything else," he said.
The suit also alleged that Naguiat's predecessor at Pagcor, Efraim Genuino, had expenses paid for during a 2010 visit to Macau, and that Okada covered his trip to the Beijing Olympics in 2008.
Then president Gloria Arroyo's husband, Jose Miguel Arroyo, also enjoyed a week-long stay at the Wynn Las Vegas resort in 2009 that cost Okada's company $4,642, the suit alleged.
The Wynn suit said it had rejected Okada's repeated requests to form a joint partnership partly because corruption was "deeply ingrained" in the Philippines gaming industry.
It also said payments and perks such as those allegedly made by Okada may have violated the US Foreign Corrupt Practices Act, jeopardising Wynn's own reputation in the process.
Pagcor's Hernando said he could not comment directly on the allegations made against Filipino officials during Arroyo's term, which ended in June 2010.
But he said the allegations made by Wynn in its suit would not impact Okada's plans for Manila, with his casino due to open in 2014.
"It's full steam ahead as far as its execution is concerned," Hernando said.
Wynn's board earlier this week announced it was buying out Okada's stake in the company at a steep discount from the market price, prompting a furious reply from the Japanese tycoon.
"Universal Entertainment will take all legal actions necessary to protect its investment and prevent a forced redemption of its shares," a company statement said.
The Philippines' gaming regulator confirmed Wednesday that top officials accepted free luxury accommodation from a Japanese tycoon but denied these were bribes to ensure a new Manila casino was built.
US-based Wynn Resorts filed a suit on Tuesday accusing Kazuo Okada of spending more than $110,000 in travel expenses and gifts on the officials so that his rival gaming resort in the Philippine capital went ahead.
The suit against Okada, a director of Wynn with a 19.7-percent stake in the firm, alleged the suspect payments were made to two chairmen of the Philippine Amusement and Gaming Corporation (Pagcor) from 2008 to last year.
The top officials' relatives and associates were also beneficiaries, as was the current chairman's nanny and the husband of then-president Gloria Arroyo, the suit alleged.
Pagcor Vice President Francis Hernando told AFP Wednesday that current Pagcor chairman Cristino Naguiat and other officials had accepted free hotel stays at Wynn's Macau resort, but said this was standard business practice.
"They were complimentary rooms extended as a basic courtesy," Hernando said.
"This is standard practice not limited to the casino industry, for the airlines, as well. For hotels (the hotel industry) it's the same thing."
The suit alleged that Naguiat, his wife, three children, nanny and company officials had a five-day trip to Wynn's Macau resort in 2010 during which Okada met with the Pagcor chairman to discuss his Manila casino venture.
Okada allegedly ordered that Naguiat be given the most expensive accommodation at the resort -- a $6,000-a-night villa normally reserved for high rollers -- as well as use of the casino's best butler.
More than $50,000 was spent on Naguiat's visit, including about $20,000 in cash given to the Filipino delegation for shopping and gaming, the suit alleged.
Naguiat also requested and received a Chanel designer bag worth 15,000 Macau patacas ($1,878) for his wife, according to the suit.
Hernando said Naguiat and his party had accepted free dinners as well as accommodation during the visit, but stressed these and the accommodation were a standard courtesy that Pagcor offered to its guests in the Philippines.
Hernando also insisted the allegations of cash payments and gifts were false.
"The insinuation that there were other things given beyond the standard reciprocity is malicious. They were not given anything else," he said.
Arroyo's government awarded Okada's Universal Entertainment one of four gaming licenses in 2008.
It broke ground for its Manila Bay Resorts casino on January 26, promising ultimately more than 2,000 guest rooms in three hotels, with the opening slated for the first half of 2014.
Hernando said the Wynn suit would not impact Okada's plans for Manila.
"It's full steam ahead as far as its execution is concerned," he said.
Wynn took Okada shares
In a story first reported in the Wall Street Journal, the Wynn board—minus Okada—met in Las Vegas Saturday to ask for Okada’s resignation and forcibly “redeemed” his shares, repaying him with a steeply discounted $1.9 billion note which doesn't mature for ten years.
The company says in a statement that the actions were taken after a year-long investigation into Okada, his company, Universal Entertainment, and its private U.S. subsidiary, Aruze USA.
Wynn hired former FBI Director Louis Freeh to conduct the investigation. “Freeh’s investigators uncovered and documented more than three dozen instances over a three-year period in which Mr. Okada and his associates engaged in improper activities for their own benefit in apparent violation of U.S. anti-corruption laws and gross disregard for the Company’s Code of Conduct,” the company said in a statement. “These troubling discoveries include cash payments and gifts totaling approximately $110,000 to foreign gaming regulators.”
The report claimed Okada and his associates have “consciously taken active measures to conceal both the nature and amount of these payments.”
CNBC has learned that these violations allegedly include cash, travel to the Beijing Olympics, Chanel bags, and other gifts considered improper to Philippine regulators. Okada and Wynn have disagreed sharply over whether to expand gaming into the Philippines, and when Okada earlier pursued a project there on his own—putting him in competition with Wynn in the important Asia market—the board stripped him of his vice chairmanship. Now, with this latest investigation, Wynn’s compliance board, led by former Nevada Governor Robert Miller, deemed Okada's alleged actions “unsuitable" under the company’s articles of incorporation. Those articles allow the company to retake his shares, essentially removing them from the market. The shares are being repurchased at a discount after an independent financial advisor “concluded that a discount to the current trading price was appropriate because of restrictions on most of the shares which are subject to the terms of an existing stockholder agreement.” The money will be repaid in ten years with interest of two percent a year.
Okada has not yet responded and there's no word on whether he will step down voluntarily. Under Nevada law, a board cannot forcibly remove a director. Such action has to be taken through a shareholder vote, and it would take a vote of shareholders representing two thirds of shares to oust Okada. And if Okada refuses to resign, it’s not clear when shareholders will be asked. At the same time, the board is asking Wynn Macau, which is separately traded and has its own board, to remove Okada as a director. Sources close to the situation say Macau regulations do not need a shareholder vote to remove a director, the board can do it on its own. The Wynn Macau board is expected to take up the issue perhaps in the next week.
This latest move comes as both sides are due back in court in Las Vegas on Thursday over a lawsuit Okada filed against Steve Wynn and Wynn Resorts. The Japanese businessman is seeking to examine the company's books to determine how hundreds of millions of dollars of money has been spent in Macau by the company.
Wynn’s lawyers, including Robert Shapiro, argued in court earlier that Okada did not have a right to any more information than had already been made available to him through directors’ reports and SEC filings.
Judge Elizabeth Gonzalez replied that directors do have rights to examine the books, as long as their requests are reasonable. She ordered Wynn Resorts to determine what, if any, requests were considered reasonable, and to bring the remaining issues back to her this week for final judgment.
Wynn’s team is still determining if it will deem any of Okada's requests “reasonable” ahead of time.
The company will hold a conference call Tuesday morning. The U.S. stock market is closed Monday for the Presidents' Day holiday but shares in both Universal Entertainment and Wynn Macau will trade on Monday overseas. They could be impacted by the announcement that a large part of Kazuo Okada's fortune has been taken from him, money he won't see until February 2022. AFP/CNBC
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