A Nevada federal judge revived a securities fraud lawsuit in which executives at Wynn Resorts were well aware of some reports concerning misconduct and sexual harassment against Steve Wynn, the casino operator’s founder and former CEO. According to the allegations, even though the executives knew about these events, they chose to disregard them.
Andrew Gordon, a US District Judge, will allow the case to go forward under the allegation that top executives and board members, as well as Steve Wynn himself, breached Securities and Exchange Commission (SEC) laws by material misrepresentations and omissions.
The Allegations Against Steve Wynn Date Back to 2018
In January 2018, the Wall Street Journal reported that dozens of casino employees labeled Wynn’s behavior as sexual misconduct that lasted more than a decade. Of course, Wynn denied these allegations but decided to resign as the board chairman and company chief executive after the article appeared. Not only that, but he also has quite a few ongoing court fights. The embattled former casino heavyweight’s lawyers, Colby Williams, Michelle Johnson and Colleen Smith, refused to comment on Gordon’s order against the 79-year-old Wynn.
In May 2020, the complaint was dismissed by another federal judge, but the plaintiffs, which were led by Joann Ferris and John Ferris, were allowed to refile and amend the suit. Damages for unknown holders of Wynn stock are wanted. Wynn’s stock value dropped by 17% after the allegations of the said misconduct became known to the public last year, fueling the lawsuit.
The plaintiffs’ attorney, Murielle Steven Walsh, said that the decision by the court underscores the fact that behaviors such as harassment and sexual misconduct by executives at a certain corporation present a material issue for the investors. The issue is even bigger if management decides to ignore reports of the said wrongdoing.
Gordon Issued a 42-Page Order At the End of July
On July 28, Gordon issued a 42-page order that affirms that there are comments made by Wynn Resorts and the revived case should focus on them. The first one is not a single statement, but rather several statements that were made by Steve Wynn and the company that were a response to the Journal article.
The second is a press release in which an adequate response should be given concerning the allegations that were raised by Elaine Wynn, Wynn’s ex-wife. These allegations are in a legal filling and, according to them, Wynn is accused of misusing the company resources, and also of serious misconduct.
According to the judge, the plaintiffs in this case sufficiently alleged that the CEO of the company, Matt Maddox, two other executives, Kimmarie Sinatra and Stephen Cootey, as well as Wynn himself, were aware of the fact that they knew about the misconduct, but contradicted it by providing statements that denied those allegations.
Gordon also wrote that the inference by the defendants is compelling and persuasive, as they were aware of the misconducts by Wynn at the time of their statements. Michael Weaver, a Wynn Resorts spokesman, said that the company wants the case to go beyond the allegation stage.
Wynn Resorts Has Been Fined Multiple Times
Wynn Resorts currently owns and operates casinos in Massachusetts, Las Vegas and Macau. The company also released a statement in which it said that similar investigations also took place in 2018 and 2019, and that they were brought up by the gambling regulators in Nevada and Massachusetts. Both of those investigations proved that the executives and the company itself are in good standing.
The Nevada Gaming Commission (NGC) fined Wynn Resorts a record-breaking $20 million and, thus, ended a year-long probe. The fine was the result of the company having failed to investigate the sexual misconduct claims against Wynn before he stepped down.
Phillip Pro, a former federal judge and then-commissioner of the NGC, stated that investigators found that the corporate culture failed to govern itself in the way it should.
After the $20 million fine, Wynn Resorts was fined another $35 million by the Massachusetts Gaming Commission in April 2019. An investigation determined that executives failed to disclose the allegations against Wynn, which had lasted several years. Maddox was also fined $500,000 for not investigating at least one complaint. The regulators in Massachusetts stated that they were troubled by these failures.
In November 2019, Wynn Resorts agreed to pay $20 million in damages, as well as $21 million to settle the lawsuits in which company directors failed to disclose the misconduct. The $21 million in damages was paid to insurance carriers.
The Nevada Supreme Court has yet another ongoing case against Wynn in which it is considering the appeal made by Wynn on a decision by the NGC last December. The commission consider issued him a $500,000 fine and deemed him unsuitable for renewing his Nevada gambling ties, but Wynn appealed.
Moreover, Wynn has a pending defamation lawsuit against an Associated Press reporter that is still pending. The lawsuit is based on a story that ties two women who alleged sexual misconduct against him.