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March 12, 2012 /PRNewswire/ -- Universal Entertainment Corporation, and its subsidiary Aruze
USA, Inc., today filed a Counterclaim against
Steve Wynn, Wynn Resorts (NASDAQ: WYNN), an officer of Wynn Resorts, and the individual members of the Wynn Resorts Board, to prevent the unjust and improper redemption of shares owned by Aruze
USA, Inc., at a 30 percent discount, and to seek damages, punitive damages and treble damages. Universal Entertainment is seeking a permanent injunction, declaratory relief and multiple claims for damages caused by the actions of Mr. Wynn and the Wynn Resorts Board.
The Counterclaim contends that Wynn Resorts' purported redemption violates the express language of multiple agreements between
Steve Wynn and Aruze
USA, and among
Elaine Wynn, Wynn Resorts and Aruze USA. Further, by means of the purported redemption, Mr. Wynn and the other members of the Board seek to profit from their illegal acts in a process that was corrupt and unfair, causing Universal Entertainment and Aruze
USA irreparable damages based on an unproven pretext.
Kazuo Okada, Chairman of the Board of Directors of Universal Entertainment, said, "We are taking this action to protect our investment from what we believe to be an unconscionable course of conduct perpetrated by
Steve Wynn and the Wynn Resorts Board of Directors to facilitate Mr. Wynn's agenda of maintaining his absolute control over Wynn Resorts and in order to enrich himself. Our lawsuit contends that after having lost control of his previous ventures in
Las Vegas, Mr. Wynn has undertaken this campaign to suppress dissenting views on the Wynn Resorts Board, particularly with regard to Wynn Resorts' unprecedented, inadequately explained and wasteful
$135 million donation to the University of
Macau, so that this venture would not end with the same result."
Mr. Okada added, "Our Counterclaim highlights that the Wynn Resorts Board did not exercise any independent judgment or otherwise act in a manner consistent with sound corporate governance principles. Rather, the Wynn Resorts Board fell in line behind Mr. Wynn and authorized the illegal redemption of Aruze
USA's shares following a hurried and incomplete investigation that lacked sufficient findings and any form of due process in accordance with appropriate governance principles and standards. We are confident in the strength of our claims and look forward to bringing them before the Court."
No Legal Basis for Redemption
Universal Entertainment's Counterclaim contains allegations, among others, that:
No redemption has occurred and that there is no legal basis for the redemption.
The stock held by Aruze USA is subject to transfer restrictions in a stockholders agreement, which preclude any redemption of Aruze USA's stock.
Unlike most Wynn Resorts shares, Aruze USA's shares were never subject to the redemption provision of the Wynn Resorts Articles of Incorporation, as Aruze USA acquired its interest before the redemption provisions became effective.
No Basis for Finding "Unsuitability"
The Counterclaim asserts that, even assuming that the provisions of the Wynn Resorts Articles of Incorporation were applicable to the shares held by Aruze
USA (which Universal Entertainment argues they do not), the Board of Directors could not have in good faith determined that the standard was met for a finding that Mr. Okada, Universal or Aruze
USA is "unsuitable." Mr. Okada denies that there is basis for the finding by the Wynn Board of Directors that he is "unsuitable". He says, "Universal Entertainment is a public company in
Japan with its own Compliance Committee, which adheres to rules relating to business entertainment so that such entertainment is within industry practices and applicable laws. If we become aware that an employee has violated our rules, we impose discipline."
Universal notes that its subsidiary in
the Philippines has a provisional gaming license and that the final license will be granted on the condition that the construction of the casino project is completed. The license comes from building a casino within the designated economic zone for casinos.
Universal also notes that the Articles of Incorporation of Wynn Resorts require that the Board believe the person whose conduct is in question is "likely to jeopardize" Wynn Resorts' applications for, or existing, gaming licenses. This would simply not be the case, as there is no basis under applicable gaming laws for any gaming authority to terminate or withdraw any gaming license or any pending application of Wynn Resorts or its subsidiaries based on the alleged wrongdoings.