Kazuo Okada is known as a proud man.
For a long time he had much to be proud of. He founded and built Universal Entertainment Corp. into a gaming machine powerhouse, overcoming controversies and establishing himself as one of the casino industries biggest players. As Steve Wynn’s investment partner and one time “best friend,” Okada had a major influence in the rise of Wynn Resorts, one of the most stylish and successful gaming resort outfits on the planet.
All that has changed now, and perhaps forever. Okada and Wynn remain at war in a protracted litigation that accuses the slot machine king of unethical and even criminal acts. The Japanese businessman’s decision to press forward on a casino resort development in the Philippines remains fraught with professional peril.
And now, in what must feel like a tremendous slap in the face, Universal officials have been compelled to establish a “Special Investigation Committee” and suspend “all rights and authorities” held by Okada and company director Yoshinao Negishi after establishing evidence the company illegally “outflowed” 2 billion yen from a subsidiary, Tiger Resort Asia Limited, to a third party without going through the proper fiduciary channels. That’s about $17.3 million.
The third party?
Okada Holdings Limited, a company directed at the time of the loan by Universal’s majority stockholder, Kazuo Okada.
The investigative committee will consist of external experts, according to a statement posted this week on its website. Peppered with language such as “illegally,” “fraudulent,” and “serious violation,” the statement leaves little room for face-saving for Okada. It’s about as close to being pitched out the front door and into the street as it gets.
Although it’s labeled an improper loan, the “outflow” has the distinct appearance of embezzlement. And the statement alone should be more than enough to attract the attention of Nevada Gaming Control Board, which will be duty-bound to thoroughly investigate the matter. Universal, meanwhile, is clearly attempting to protect its own wobbly credibility. A scandalized gaming machine giant that loses its ability to sell to the biggest casinos in America isn’t likely to be a favorite of investors.
This latest blowup in Okada’s business life surfaced during a May 23 board meeting when a Universal with a damning audit report that said, “there was a possibility that fraudulent acts were carried out” in the funneling of the off-the-books loan.
Universal is moving quickly to repair the damage as it distances itself from its founder. The independent investigation committee is scheduled to submit an interim report by June 30. “The Company will provide full cooperation for the investigation by the Special Investigation Committee,” it states.
In the missive, the company focused on reassuring investors that the loan won’t impede Universal’s performance and officials “already have prospects for collecting the funds. Therefore, even if it is concluded that this is an unauthorized outflow of funds, we believe that there will be no loss for the Company caused by an unlikely event of the Company being unable to collect the funds and that there will be no impact on the Company’s business performance.”
But even if the loan is made good, the damage to Okada’s legacy with Universal appears irreparable.
It’s not the first time it’s been tarnished.
Okada left Wynn Resorts in 2012 after allegations surfaced that he’d unethically, and possibly illegally, lobbied Philippine casino officials. The FBI continues to investigate possible violations of the U.S. Foreign Corrupt Practices Act and has focused on a $40 million payment Okada made in 2010 to a Philippine consultant. The FBI is investigating whether the payment was made to grant Universal tax and casino concession benefits, according to Reuters.
“We sincerely apologize for having caused a great concern for our shareholders, investors, and business partners, as well as other players in the market,” Universal’s official statement reads. “The Company is committed to thoroughly conduct an investigation by the Special Investigation Committee and to clarify the whole picture concerning this issue.”
Okada is a billionaire. He can certainly afford to return the money.
The greater point is this: Universal just announced it’s conducting an independent investigation of possible fraud by its own founder.
That would be truly embarrassing for anyone, much less a proud man like Okada.
John L. Smith is a longtime Las Vegas journalist and author
