By Walter Pavlo
For the Leader Herald
Wynn Resorts CEO Matthew Maddox took over the company in a crisis that would have tested the most seasoned executive. As the right-hand-man to Steve Wynn for nearly 20 years, Maddox not only learned from the casino magnate but earned his respect. Now Maddox is considering whether the company stays in Boston or moves on.
The Massachusetts Gaming Commission (MGC) gave its decision on Wynn’s suitability last week with a number of conditions, including a fine of $35 million for the company and $500,000 for Maddox. While one would think Wynn/Maddox would cut the checks and move on, MGC’s wording in its decision may cause problems for Wynn down the road … or it could offer a way for Wynn to bow out gracefully.
The penalties on Wynn/Maddox are significant but they are not going to effect the financial viability of either. So it would seem like a “no-brainer” to accept that deal and move on printing money with the Encore Boston Harbor resort. MGC determined that not only was Wynn suitable but:
“After a careful review of the record in this matter, the Commission concludes that there is no substantial evidence to support a finding that Wynn MA, LLC, Wynn Resorts, Limited, or any of its associated qualifiers willfully provided false or misleading information to the Commission at any time during the RFA-1 licensing process.”
MGC went on to put a “However” in their decision that puts Wynn in an awkward position. In citing an instance where Wynn’s then- general counsel Kim Sinatra, was asked in 2013 by a consultant for MGC who was conducting the suitability investigation, about internal dealings at Wynn where some of “These matters may involve litigation and personal relationships as well as business matters.” MGC believed that this was an opportunity where Sinatra should have disclosed her knowledge of accusations of a sexual assault by Mr. Wynn on a Wynn employee and subsequent $7.5 million settlement. MGC stated that it believes Sinatra knew of the settlement but was unable to question Sinatra directly because she declined to be interviewed for this most recent investigation. Sinatra left Wynn last year with a generous compensation package.
MGC’s conclusion was that “… it is difficult to fathom why the existence of the allegations and settlements was not disclosed to the Commission in 2013 and 2014 during the RFA-1 and RFA-2 reviews.” That conclusion might be of interest to Sterling Suffolk and Mohegan Sun, partners in the competing bid against Wynn. Had Sinatra provided information as to the allegations against Mr. Wynn, one is left to speculate as to how that information may have influenced MGC’s decision. Mohegan Sun asked a Suffolk County Superior Court (Massachusetts State Court) to throw out the casino license awarded to Wynn in 2014, saying the MGC did not properly investigate the casino and Mr. Wynn. Sterling Suffolk is suing Wynn for $1 billion in federal court stating the the gaming license was improperly steered to Wynn. MGC’s findings in its decision on Wynn’s suitability will likely be a part of any litigation in those cases. However, the MGC decision could also be an opportunity for Wynn to gracefully exit Boston.
Wynn has been NOT been found “not suitable” and a finding of suitability in Massachusetts is dependent on whether Wynn will accept the terms (fines and other conditions) of MGC’s decision. Chairman Phil Satre had a pragmatic view of the licensing process when asked by MGC Enrique Zuniga at an open hearing on April 4 about how Wynn might react to any conditions placed on it as part of finding it suitable to operate in Massachusetts, “Conditions on our license would depend on what they are, of course. I mean we have to evaluate that at that point in time …. If the conditions make it impossible for us to succeed here, then I think our board of directors is going to have to take that under consideration.” No doubt, Wynn is going through that process now and leaving Boston would not be out of the question.
Since Maddox has taken over Wynn, he has not only distanced himself from the alleged actions of Mr. Wynn, but he has also taken the company in a new direction. Last November he abandoned the second phase of Wynn’s Paradise Park Lagoon project, something that was part of Mr. Wynn’s vision and has embarked on expanding the company’s Macau venues. Wynn has made overtures that they were interested in buying Australia’s Crown Resorts. Wynn has options.
Wynn has expressed frustration with MGC and Satre’s comments were evidence of that frustration when he was asked by MGC commissioner Zuniga how a finding of not suitable would effect Wynn, Satre said, “Why would you care about that. I mean our financial condition at that time would not be an issue for you. It’s an issue for our shareholders … but why is it an issue for you?”
Wynn can turn down the MGC offer, sell the casino, and take a more steps to distance itself from its co-founder and namesake, Steve Wynn. Alternative, it can accept the terms of the MGC, and continue to fight for the license for years to come.
We now wait on Wynn.
Walt is a recognized expert on federal white-collar criminal matters and consults with defendants and attorneys on case strategy, You can reach him at waltpavlo@500PearlStreet.com.