Posted on: September 19, 2024, 07:41h.
Last updated on: September 19, 2024, 07:41h.
Wynn Resorts (NASDAQ: WYNN) and some former executives of the gaming company agreed to pay investors $70 million for their alleged roles in covering up the sexual misdeeds of founder and former CEO Steve Wynn. Defendants will pay $9.4 million of that sum with insurance providers covering the rest of it.
Earlier this week, Pomerantz LLP filed a motion asking the United States District Court for the District of Nevada to sign off on initial approval of the settlement in the case Ferris, et al. v. Wynn Resorts Ltd., et al. Representing plaintiffs in the class action suit, Pomerantz claimed some now former Wynn executives obfuscated Steve Wynn’s sexual misconduct, making “material misrepresentations to shareholders during the period of March 28, 2016, to March 12, 2018.”
The complaint alleged defendants were aware of numerous allegations of sexual misconduct made against Wynn over the course of several decades and defendants repeatedly denied those allegations and helped to cover them up,” according to a statement issued by the law firm.
Steve Wynn is widely viewed as the first high-profile executive whose misdeeds were exposed by the “Me Too” movement. A January 2018 article by the Wall Street Journal , which was rumored to have been driven by Elaine Wynn — Steve’s ex-wife — detailed the gaming executives inappropriate behavior toward various female employees, resulting in his ouster from the company he founded.
Wynn Securities Fraud Lawsuit Is Significant
In many instances, class action suits brought by law firms representing disappointed shareholders fall flat because courts often rule that shareholders, in exchange for potential upside in a company’s stock, assume risk.
The assumption of risk is one thing, but when it’s heightened by malfeasance of executives, the door is open for courts to rule in favor of plaintiffs. Wynn’s stock price action confirmed as much. During the aforementioned March 2016 to March 2018 period, the gaming equity nearly doubled, helping Steve Wynn dump his stake at favorable prices. By June of 2018, the stock started sliding in significant fashion as both the Massachusetts Gaming Commission (MGC) and the Nevada Gaming Control Board (NGCB) commenced investigations into goings on at Wynn.
“These events led to a drop in Wynn Resorts’ share price, which caused significant damage to the company’s shareholders,” added Pomerantz.
That’s an accurate claim because in Massachusetts, the gaming company was slapped with $35.5 million in penalties with $500,000 levied against then CEO Matt Maddox — Steve Wynn’s replacement. Prior to those fines being handed down, there was rampant speculation about the gaming company’s ability to retain its operating license for Encore Boston Harbor and rumors that it might be forced to sell the casino hotel to a rival. Though that chatter proved false, it weighed on the stock price.
Maddox, general counsel Kim Marie Sinatra, and then CFO Stephen Cootey were among the executives named in the suit. Maddox left the gaming company on Feb. 1, 2022. Cootey is now employed by Red Rock Resorts.
“This case should serve as a warning to corporations and their officers that talk is not, in fact, cheap,” said Pomerantz partner Murielle Steven Walsh in the press release. “Investors care about corporate integrity and accountability, and companies that are accused of making statements to cover up or deny allegations of serious misconduct by executives face a potentially steep financial reckoning.”
Busy Period for Wynn Legal News
News of the Wynn settlement with investors arrived less than weeks after the company said it reached an agreement with the Department of Justice (DOJ), requiring it to pay $130.13 million and admit to wrongdoing in a long-running, unregulated money transfer scheme that took place at Wynn Las Vegas.
The DOJ said that is the largest ever penalty levied against a single US gaming venue. As part of a non-prosecution agreement (NPA), the gaming company had to admit to violations of anti-money laundering guidelines.
On Sept. 10, Wynn Resorts announced the sale of $800 million of corporate bonds, telling investors it will use proceeds to wipe out debt maturing next year and to pay the fine to the federal government.
