02/19/2012 05:55 EST | Updated 04/20/2012 05:12 EDT

Wynn Resorts buys out biggest stakeholder Okada, asks him to resign after payments probe

NEW YORK, N.Y. - Wynn Resorts Ltd. is looking to sever ties with its biggest stakeholder and one-time ally.

The Las Vegas casino operator said Sunday that it forcibly bought back all the shares controlled by Kazuo Okada after finding the Japanese tycoon made improper payments to overseas gambling regulators. The company also filed a lawsuit against Okada for breach of fiduciary duty and asked him resign from its board.

The announcement marked the latest deterioration of Okada's relationship with Steve Wynn, founder of Wynn Resorts.

Okada is the founder of casino game maker Universal Entertainment Corp., which held an almost 20 per cent stake in Wynn Resorts through its privately held subsidiary Aruze USA Inc.

Aruze's 24 million shares were worth about $2.7 billion based on Friday's closing price and were acquired for the discounted price of about $1.9 billion.

The actions by Wynn Resorts stem from a separate casino resort project Okada is undertaking in the Philippines.

After a year-long investigation, Wynn Resorts said it found more than three dozen instances over a three-year period in which Okada and his associates engaged in "improper activities for their own benefit."

That included cash payments and gifts totalling about $110,000 to foreign gaming regulators, the company said. Wynn Resorts said the actions were in violation of U.S. anti-corruption law.

The investigation, which was led by a former FBI director Louis Freeh, also found Okada and his associates consciously took actions to conceal "the nature and amount of these payments," Wynn said.

Based on the report, Wynn Resorts said its board found that Okada is "unsuitable." The company's articles of incorporation provide for redemption at "fair value" of the shares held by unsuitable individuals.

The company issued a 10-year, $1.9 billion promissory note in redemption of the shares. The notes bear an interest rate of 2 per cent.

Wynn said it will also immediately recommend that Okada be removed from the board of its Hong Kong subsidiary, Wynn Macau Limited.

An email sent to Aruze seeking comment from Okada was not immediately returned.

Since 2000, Okada has invested $380 million in Wynn Resorts. But last month, Okada filed a lawsuit against the company to seek financial documents regarding Wynn's $135 million donation to the University of Macau; its 2010 amendment to a shareholders agreement among Okada, company founder Steve Wynn and Wynn's ex-wife, Elaine Wynn; and the use of $30 million that Okada gave to Wynn Resorts in 2002 to help develop a Macau casino project.

During a conference call with investors earlier this month, Steve Wynn addressed the company's "sharp disagreement" with Okada over his dealings in the Philippines.

Wynn said that the company had taken "a very strong opinion about not wanting to give the impression that Wynn Resorts was the developer of the land that (Okada) acquired in the Philippines."

Wynn said that Okada was free to go into business in the country, but that he did so "without the organizational support or financial support of the company that he is an investor in at the moment."

In Las Vegas, Wynn Resorts Ltd. owns the Wynn Las Vegas and Encore Las Vegas resorts. The company also owns Wynn Macau and Wynn Encore Macau in China.