Wynn Resorts and several former executives of the gaming company have agreed to pay investors $70 million for their alleged roles in covering up the sexual misdeeds of founder and former CEO Steve Wynn. Defendants will contribute $9.4 million of the total, while insurance providers will cover the remainder.
Earlier this week, Pomerantz LLP filed a motion for the United States District Court for the District of Nevada to grant initial approval of the settlement in the case Ferris, et al. v. Wynn Resorts Ltd., et al. Representing plaintiffs in this class action suit, Pomerantz alleged that former Wynn executives concealed Steve Wynn’s sexual misconduct and made material misrepresentations to shareholders during the period from March 28, 2016, to March 12, 2018.
The complaint claimed that the defendants were aware of numerous allegations of sexual misconduct against Wynn over decades. However, they repeatedly denied these allegations and helped cover them up, according to a statement issued by the law firm.
Steve Wynn is widely considered the first high-profile executive whose misdeeds were exposed by the Me Too movement. A January 2018 article by the Wall Street Journal, rumored to be driven by Elaine Wynn—Steve’s ex-wife—detailed the gaming executive’s inappropriate behavior toward various female employees, which eventually led to his ouster from the company he founded.
Class action suits by law firms representing disappointed shareholders often fall flat because courts typically rule that shareholders assume risk in exchange for potential upsides in a company’s stock. However, when the risk is heightened by executive malfeasance, courts may favor the plaintiffs. This was reflected in Wynn’s stock price during the noted period, where it nearly doubled, allowing Steve Wynn to offload his stake at favorable prices. By June 2018, the stock sharply declined as both the Massachusetts Gaming Commission (MGC) and the Nevada Gaming Control Board (NGCB) commenced investigations into the company.
“These events led to a drop in Wynn Resorts’ share price, causing significant damage to the company’s shareholders,” added Pomerantz.
In Massachusetts, the company faced $35.5 million in penalties, with an additional $500,000 levied against then-CEO Matt Maddox, who replaced Steve Wynn. Before these fines, there was speculation about the company’s ability to retain its operating license for Encore Boston Harbor, with rumors suggesting it might be forced to sell the casino hotel to a rival. Although these rumors proved false, they impacted the stock price.
Maddox, general counsel Kim Marie Sinatra, and then-CFO Stephen Cootey were among the executives named in the lawsuit. Maddox left the company on Feb. 1, 2022, and Cootey is now employed by Red Rock Resorts.
“This case should serve as a warning to corporations and their officers that talk is not, in fact, cheap,” said Pomerantz partner Murielle Steven Walsh in a press release. “Investors care about corporate integrity and accountability, and companies accused of making statements to cover up or deny allegations of serious misconduct by executives face a potentially steep financial reckoning.”
The news of the Wynn settlement with investors comes just weeks after the company reached an agreement with the Department of Justice (DOJ), requiring it to pay $130.13 million and admit wrongdoing in a long-running, unregulated money transfer scheme at Wynn Las Vegas. The DOJ noted that this is the largest penalty ever levied against a single U.S. gaming venue. As part of a non-prosecution agreement (NPA), the company admitted to violations of anti-money laundering guidelines.
On Sept. 10, Wynn Resorts announced the sale of $800 million in corporate bonds, intending to use the proceeds to repay debt maturing next year and to cover the fine to the federal government.
