WASHINGTON/MACAU, Feb 23 (Reuters) - A U.S. law
against foreign bribery is the unusual weapon of choice in an
increasingly bitter boardroom struggle between U.S. casino mogul
Steve Wynn and Japanese investor Kazuo Okada. But both sides may
end up shooting blanks.
Okada last month accused Wynn Resorts Ltd of making an
"inappropriate" $135 million donation to the University of
Macau, based in the former Portuguese colony that is now the
world's largest gambling destination.
Earlier this week the Las Vegas-based casino company
responded with its own accusations, flagging some $110,000 in
hotel rooms and other expenses that Okada allegedly provided to
Asian gaming regulators through his Japan-based company
Universal Entertainment Corp.
U.S. securities regulators are investigating Okada's
accusations against Wynn Resorts, which has in turn said it
plans to take its accusations to U.S. authorities.
Neither set of allegations provides a straightforward case
for U.S. authorities to make, legal experts said.
The Foreign Corrupt Practices Act (FCPA) bars companies with
U.S. links, such as a stock listing, from bribing officials of
foreign governments in order to get or keep business.
But the donation by Wynn was to a university, not to a
"foreign official" that the statute applies to. Wynn said the
donation had been vetted by lawyers, and provided at a public
ceremony, in which Okada participated.
The "transparency and openness" of the donation "run counter
to any assumption that a bribe was being paid," said Palmina
Fava, a partner at the law firm Paul Hastings, who focuses on
FCPA investigations. (She said at the time of the comments that
she was not involved in the dispute. Although she does not
represent any parties involved, she subsequently learned and
disclosed to Reuters that attorneys at her firm are representing
Okada and his company.)
Payments that raise suspicion under the law are often
mislabeled on the company's books and do not include enough
information to identify who is receiving the payment, Fava said.
Any case against Okada could also be a stretch, since the
law generally applies to situations with a clear connection to
the United States.
"For non-U.S. companies, they usually need to take an act
while in the U.S. to subject themselves to U.S. jurisdiction,"
said Eli Richardson, a former federal prosecutor who now works
in private practice at the law firm Bass, Berry & Sims.
The Justice Department has also in recent months suffered
several setbacks in FCPA cases, which could dull any appetite to
test its jurisdictional reach. Earlier this week, for example,
it abandoned one of its biggest bribery cases in the military
equipment business after it failed to convince two juries that
what the executives did in the case was illegal.
LAWSUIT VS LAWSUIT
According to Wynn Resorts, the dispute with Okada stems in
part from his push to develop new casino projects in the
Philippines, which Wynn opposed out of concerns that they could
steal Chinese clientele away from its Macau operations.
Months of tension between the long-time business partners
burst into the open last month when Okada, who owned a 20
percent stake in Wynn Resorts, sued the company and said it had
denied him access to its books.
In his lawsuit, Okada said he objected to a donation by Wynn
to the University of Macau because the school sits on land owned
by the government, and "there had been no discussion" whether
the large gift was an "appropriate" use of corporate funds.
The donation is scheduled to be provided in annual
installments through 2022, the same year Wynn Macau Ltd's gaming
concession expires. Macau contributes about three quarters of
Wynn Resorts' revenue.
In response to the lawsuit, Wynn said Okada was the sole
dissenting vote against the donation from the company's
16-member board. He had objected to the length of time over
which the donation would occur, not its propriety, Wynn said.
Following the lawsuit, the U.S. Securities and Exchange
Commission notified Wynn that it had opened an informal inquiry
into the donation. An SEC spokeswoman declined to comment on the
status of the inquiry.
The SEC has brought at least one case in the past that
involved a donation to a charity rather than a foreign official,
but the director of the charity had a direct connection to the
company's business in the country.
Schering-Plough Corp in 2004 paid a $500,000 civil penalty
to resolve allegations that it violated the FCPA in making a
donation to a Polish charity whose director also controlled a
government health fund that influenced orders of pharmaceutical
Experts said Wynn's case against Okada is more substantive,
since it includes more detail from a report by former FBI
director Louis Freeh who led an investigation that began last
The "gross improprieties" Freeh found include expenses for
hotel rooms and meals that amount to $110,000 over the course of
three years, some which were allegedly inaccurately recorded in
an attempt to disguise the recipient.
One transaction flagged in the report was a $50,000 hotel
bill from September 2010 for the chairman of the Filipino
government gaming commission, PAGCOR, to visit Wynn Macau with
But other items highlighted in the report seem more benign.
One, for example, is a $1,600 dinner for 15 people.
The culture of gift-giving in Asia also muddies the case
against Okada. For many companies and individuals in the region,
what would be considered a bribe in the U.S. is no more than
civil etiquette or nicety that is needed to secure trust and
build relationships, according to legal advisors in Asia.
In China, at lunar new year, red packets or "lai see"
containing cash are given. Red packets or similar monetary gifts
are also given at weddings and other celebratory or auspicious
events in many Asian countries including India and the
If businesses or individuals are not sensitive to local
customs and traditions when they are operating in developing
countries, it can reflect badly on them and at times affect
their operations and eventual profitability.
Timothy McNally, who heads Cambodian gaming firm NagaCorp
and operates a compliance firm, saw a need for companies and
governments in emerging markets to establish their own policies
and codes of conduct, taking into account cultural practices.
He said he often sees cash gifts at special occasions.
"The bottom line is I am seeing an envelope passed and I can
see cash inside and it makes me a little nervous because it is a
different culture, different tradition," said McNally. "Does
that mean there is anything sinister attached? There may or may
The Philippines gaming regulator, Cristino Naguiat, said in
response to the Wynn allegations that his office provides
security and other benefits for casino executives when they
visit the Philippines, and Okada simply returned the favor.
"We have this inter-casino courtesy and reciprocity (with)
casino executives, we definitely take care of their
transportation, security, we take them out for dinner," Naguiat
said. "From the way I look at it, there was nothing wrong with
our transactions with Mr. Okada."
Statements from the allegedly bribed officials in support of
an alleged bribe giver could also prove useful to a defense,
said Richardson, the former prosecutor.
The FCPA also has an explicit carveout for expenses that
directly relate to promoting or demonstrating a company's
products or services, something that Okada might argue applies
in this case, lawyers said.
The SEC and the Justice Department have brought a few cases
against companies for bribes around $100,000, but those involved
companies whose shares traded in the U.S. and involved straight
cash payments to officials.
Jacqueline Wolff, a former federal prosecutor who heads the
white-collar defense group at the law firm Manatt, Phelps &
Phillips said the use of the FCPA in the Wynn-Okada allegations
was not surprising.
"There is a history of companies accusing competitors of
violating all kinds of criminal laws and therefore getting an
unfair business advantage," she said.
The case in the U.S. District Court of Nevade is Okada v.
Wynn Resorts, no. A-12-654522-B.
(This version updates a version published on February 23,
2012, and corrects the byline.)
(Reporting by Aruna Viswanatha and Farah Master)
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