Wynn Resorts Board Gets Scrutiny After Steve Wynn’s Resignation

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With

Steve Wynn

out as top executive of the casino empire he founded, pressure is now building on board members and other executives at

Wynn Resorts
Ltd.


WYNN 8.64%

, as regulatory investigations into alleged sexual misconduct at the company continue.

Mr. Wynn, 76 years old, stepped down Tuesday night from his dual roles as chairman and chief executive, citing an “avalanche of negative publicity” stemming from a Wall Street Journal investigation published late last month. By installing new leadership at the company, the Wynn Resorts board, which has long been criticized for corporate governance failures and close ties to Mr. Wynn, signaled that it was trying to move past the allegations.

Wynn Resorts stock closed up nearly 8.7% Wednesday.

But at a meeting Wednesday, gambling regulators in Massachusetts, where Wynn Resorts is planning a $2.4 billion casino, raised pointed questions with implications for executives who were in a position to know about Mr. Wynn’s alleged misdeeds and didn’t report them.

They also said Mr. Wynn’s resignation raises new questions about the power he will continue to wield at Wynn Resorts, given that he still has control of more than 20% of the company’s shares.

A Wynn Resorts spokesman declined to comment on questions raised at the Massachusetts meeting. The company said it is “fully cooperating” with the state’s investigation and “will address any questions the commission has directly with it.” The company said details of Mr. Wynn’s separation agreement will be released when it is finalized.

Stephen Crosby,

chairman of the Massachusetts Gaming Commission, zeroed in on an allegation that Mr. Wynn in 2005 paid a $7.5 million settlement to a manicurist who told people at the time that Mr. Wynn had forced her to have sex with him. Mr. Crosby said a central question is what the Wynn Resorts board of directors and executives knew about the settlement and associated allegations, and when they knew it.

Massachusetts regulators have stressed that they are closely investigating not just Mr. Wynn but also his board and the company, and that they are assessing the group’s broader pattern of conduct as opposed to any one specific allegation.

Investigators have asked for information about Mr. Wynn’s behavior during the 1990s when he was running Mirage Resorts Inc., for example, according to a person familiar with the matter. Mr. Wynn lost control of that company in 2000 and sold it to Kirk Kerkorian’s MGM Grand Inc. amid a declining stock price and pressure from investors.

Gambling regulators in Nevada also said they were continuing an investigation despite Mr. Wynn’s resignation. Nevada statutes require that anyone with more than a 10% stake in a casino company must be licensed and is subject to ongoing suitability review.

The Wynn Resorts board has consistently received low marks from outside proxy advisory firms for what they have called poor corporate governance practices and its “excessive” executive compensation policies. Half of Wynn Resorts’ independent directors have had seats for more than 10 years, a tenure investors often criticize as being too long.

Two key board members have had decadeslong personal and business dealings with Mr. Wynn.

Boone Wayson,

named nonexecutive chairman in the wake of Mr. Wynn’s resignation Tuesday, is a longtime family friend of Mr. Wynn; the two men have worked together since the 1980s.

Mr. Wayson didn’t respond to requests for comment. He has served on the Wynn Resorts board since the company’s founding in 2002 and was on the board of Mirage Resorts, Mr. Wynn’s previous company, starting in 1987, according to securities filings.

Mr. Wynn’s father and Mr. Wayson’s father operated a Maryland bingo hall together in the 1950s; Mr. Wayson’s brother served as Mr. Wynn’s legal adviser for many years, and his sister has worked as a spokeswoman for Mr. Wynn, according to a shareholder complaint filed just hours before Mr. Wynn’s resignation Tuesday.

Another director,

Patricia Mulroy,

who was tapped to lead the special committee investigating Mr. Wynn, has dealt with the casino executive for decades.

Ms. Mulroy met Mr. Wynn in 1990 when she was Nevada state water manager, overseeing permitting for his casino projects such as Treasure Island and Bellagio—which he no longer owns—and worked to protect water supply and quality on issues in those projects, according to the Nevada Commission on Ethics. She also served as a member of the Nevada Gaming Commission, one of two state bodies that oversees the casino industry.

Ms. Mulroy sought an opinion from the state ethics committee when Mr. Wynn asked in 2015 if she would become an independent director at his company. The ethics committee said, “There could be a perception that Wynn contacted Mulroy based upon her membership on the Gaming Commission.” But “her testimony and history with Wynn confirms that their connection is through water management,” the committee said.

Ms. Mulroy asked whether an independent director would be considered an “employee” of Wynn Resorts and therefore subject to the one year revolving-door bar under ethics law.

She won a waiver after pledging to the ethics committee that her anticipated work as an independent director wouldn’t include duties “associated with or pertaining to gaming and is anticipated to focus mainly on water issues.”

Ms. Mulroy didn’t respond to requests for comment.

In the Massachusetts regulatory investigation, the Wynn Resorts executive leadership team also faces questions, particularly relating to “suitability” requirements for casino operators.

Matt Maddox,

the Wynn Resorts president who was named CEO Tuesday night, and

Kim Sinatra,

the company’s general counsel, were at the company when it applied for the Massachusetts license and failed to disclose the $7.5 million settlement.

They are both considered “individual qualifiers,” along with several other Wynn Resorts executives, meaning they are subject to ongoing reviews of their personal suitability.

According to filings in a court battle between Mr. Wynn and

Elaine Wynn,

his ex-wife and a co-founder of the company, Ms. Sinatra knew about the allegations since at least 2009. In court filings, Ms. Wynn said she learned about the settlement and asked Ms. Sinatra about it in 2009. Ms. Sinatra told Ms. Wynn it had been properly handled, according to the filing.

Mr. Wynn’s resignation came amid a long-running legal dispute with Mr. Wynn’s former business partner, Japanese gambling mogul

Kazuo Okada.

On Monday, a Nevada judge allowed claims to proceed against Wynn board members involved in the 2012 ousting of Mr. Okada, then the company’s largest shareholder.

Wynn Resorts forcibly redeemed Mr. Okada’s 20% stake, then valued at $2.77 billion, at a 30% discount, and the board voted to remove him as a nonexecutive director, saying an internal investigation conducted by a former FBI director had found him to be “unsuitable” based on the company’s own regulations.

The judge’s ruling means Wynn board members could now be held personally liable in the 2012 lawsuit in which Mr. Okada, who has denied allegations of wrongdoing, is fighting to reclaim his shares. The decision came after Mr. Okada’s lawyers presented evidence they said showed the board had intended to oust the businessman months before the conclusion of the investigation into his alleged corrupt activity.

Write to Chris Kirkham at chris.kirkham@wsj.com and Susan Pulliam at susan.pulliam@wsj.com

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