Nevada judge revives stock fraud lawsuit against Steve Wynn

A federal judge in Nevada revived elements of a securities fraud lawsuit seeking class action status for allegations that executives at Wynn Resorts Ltd. knew about, but ignored reports of sexual harassment and misconduct against the founder Steve Wynn.

U.S. District Judge Andrew Gordon ruled the case may go forward alleging that Steve Wynn, board members and top executives at his Las Vegas-based company violated securities laws and rules through material fraud allegations and omissions.

Wynn has denied allegations that were revealed by a Wall Street Journal report about dozens of casino employees in January 2018, when the judge described behavior that cumulatively would amount to a decades-long pattern of sexual misconduct.

The former casino mogul, who is now 79, resigned as the Chief Executive and Board Chairman shortly after the news came out of the Journal article and has multiple ongoing courts fights.

His lawyers in the current case, Colby Williams in California and Michelle Johnson and Colleen Smith in Las Vegas, declined to comment on Gordon's order.

A different federal judge dismissed the complaint in May 2020, but allowed plaintiffs led by John Ferris and Joann Ferris to amend and refile the case.

It seeks unspecified damages for unnamed holders of Wynn stock that plunged in value more than 17% after misconduct allegations became public.

The court's decision underscores the fact that material issues relating to corporate management are material issues for investors, especially when management turns a blind eye to reports of wrongdoing, said Murielle Steven Walsh, attorney for the plaintiffs. This type of financial misconduct poses a threat to a company's financial success.

Gordon, in his 42 page order issued July 28, said that the revived case should focus on two statements made by the company:

One, a press release responding to allegations raised in Wynn's ex-wife Elaine Wynn regarding serious misconduct and misuse of company resources by Wynn.

At this stage the judge said, plaintiffs sufficiently alleged that Steve Wynn, current company president and CEO Matt Maddox, and two other executive executives, Kimmarie Sinatra, former executive vice president general counsel and secretary, and Stephen Cootey, former chief financial and accounting officer and treasurer, were aware of information contradicting their statements that denied misconduct allegations.

The inference that these defendants were aware of Wynn's alleged misconduct at the time of their statements is cogent and compelling, Gordon wrote.

Wynn Resorts spokesman Michael Weaver said in a statement that the company looks forward to the case moving beyond the allegations stage.

Wynn Resorts owns and operates casinos in Macau and the Chinese gambling enclave of Las Vegas, Massachusetts.

Its statement said similar allegations were investigated in 2018 and 2019 by Nevada gambling regulatory agencies and both affirmed the company's licensure and good standing.

In February 2019, the Nevada Gaming Commission concluded a year-long probe and fined Wynn for failing to investigate claims of sexual misconduct against it.

Then-Commisser Philip Pro, a former federal judge, said investigators found a failure of a corporate culture to effectively govern itself as it should.

In April 2019 the Massachusetts Gaming Commission fined Steve Wynn for failing to disclose years of allegations of sexual misconduct against Wynn Resorts $35 million. It also fined Maddox $250,000 for a clear failure to investigate at least one misconduct complaint.

Wynn Resorts was troubled by the systemic failures and pervasive culture of non-disclosure.

The company agreed in November 2019 to accept $20 million in damages from Wynn Resorts and $21 million more from Insurance carriers on behalf of current and former employees of Steve Wynn to settle shareholder lawsuits accusing company directors of failing to disclose misconduct allegations.

The agreements made no admission of wrongdoing.

In another ongoing legal case, the Nevada Gaming Commission is considering Steve Wynn's appeal of a decision by the Nevada Supreme Court in December last to consider fineing him up to $500,000 and declare him unsuitable for gambling ties with the state.

Also a pending defamation lawsuit against The Associated Press and an AP reporter based on a story about accounts to Las Vegas police from two women who alleged sexual misconduct by Steve Wynn.

Wynn operated, owned, built and operated notable Las Vegas properties including the Golden Nugget, Mirage, Treasure Island and Bellagio before building the Wynn and Encore resorts on the Las Vegas Strip.