Processing Your Payment

Please do not leave this page until complete. This can take a few moments.

April 5, 2019

Regulators to start talks Friday on casino license

Photo | Courtesy Wynn Resorts is building this casino in Everett.

As the Gaming Commission brought its three-day hearing on the suitability of Wynn Resorts to a close Thursday afternoon, Commissioner Enrique Zuniga posed a question to the company's CEO and the chairman of its board: What would Wynn Resorts do as a company if the commission revokes the license for its planned $2.6 billion Everett casino?

"Why would you care about that?" Chairman Philip Satre retorted. "I mean, our financial condition at that point in time is not something that is an issue for you. It's an issue for our shareholders ... but why is it an issue for you if you decide 'we don't want you here'?" 

Zuniga then asked what Wynn Resorts would do if the commission decides to let the company keep its lucrative license, but only with certain conditions imposed by regulators. Satre said it would depend on what those conditions are. 

"The reality is we are a very strong company financially. We have high expectations for what we're going to be able to accomplish here at Encore Boston Harbor," he said. "If the conditions make it impossible for us to succeed here, then I think our board of directors is going to have to take that under consideration." 

After closing remarks from investigators and Wynn Resorts officials, the commission adjourned its hearing around 5:20 p.m. Thursday and the five commissioners turned their attention to deciding whether the company -- in light of its "significant" and "repetitive" failures related to sexual misconduct allegations against founder Steve Wynn and the changes it's made in the year since he left -- remains suitable to hold the lone Boston area resort casino license.

"The commission can make determinations on suitability which include: suitable, not suitable, or suitable with some type of conditions or something like that," Gaming Commission Executive Director Edward Bedrosian told reporters last week.

The five commissioners will begin their deliberations in person Friday morning and Chairwoman Cathy Judd-Stein said at the conclusion of the hearing: "We will take our time in making a decision."

The commission's decision will be issued in writing "as promptly as administratively feasible," per commission regulations. The decision is to be the final decision of the commission and Wynn Resorts is not entitled to "any further review from the commission's determination of suitability" but the decision "may be reviewed by the appropriate court," the regulations allow.

The commissioners will weigh the report from its Investigations and Enforcement Bureau (IEB), which found that "a limited group of executives and employees in positions of authority at the Company, including in the legal divisions, were aware of certain allegations of sexual misconduct against Mr. Wynn involving employees, but they disregarded Company policies when it came to handling those allegations."

Wynn Resorts did not contest the findings of the IEB report.

Commissioners will also consider the hours of testimony from CEO Matt Maddox, members of the company's "refreshed" board of directors and from company co-founder Elaine Wynn, the ex-wife of Steve Wynn who remains the company's largest single shareholder.

Maddox, who joined Steve Wynn to launch the company in 2002 and was Steve Wynn's own choice to succeed him as chief executive, appeared to be a particular point of focus among the commission and its investigators.

Loretta Lillios, deputy director and chief enforcement counsel of the IEB, asked Maddox how the Gaming Commission could be sure, given the information revealed by its investigation, that Wynn Resorts under Maddox would adhere to more robust compliance and transparency. 

"I think that my record as a leader, when I took over Feb. 7, has been quite strong. I think that if you were to ask character witness -- CEOs of all major banks, shareholders, all the major law firms, all of our investors, all of our employees, where I grew up, where I went to college, hundreds and hundreds of character witnesses from the top of the industry across the board to the bottom -- I think you would hear that Matt Maddox has been an extraordinary leader since he took over because of what he's done," Maddox said. "I would like to be judged on the time since I took over and the actions I took. It's the only real way to measure someone."

In testimony that stretched across two days, Maddox described Wynn Resorts under Steve Wynn as a paranoid culture where company executives were constantly engaged in bitter litigation, some of it involving Steve Wynn's ex-wife and company co-founder Elaine Wynn. Judd-Stein noted that Maddox repeatedly said he was distracted by various litigation when asked about his handling of information related to allegations against Steve Wynn.

"I am concerned, Mr. Maddox ... do you feel you have the capacity to handle the multi-faceted nature of such an organization where you would be so distracted by significant litigation, I give you that, but at the same time perhaps not the welfare of your employees?" she asked.

Maddox said he "certainly know[s] that I have the capacity to lead this company and to make it better." He added, "I believe that I am the exact right person at this point in time to make Wynn Resorts a great company."

Jed Nosal, a Boston-based attorney representing Wynn Resorts at the commission hearing, told commissioners Thursday, "Mr. Maddox admitted he made mistakes but is committed to learning from those mistakes."

Commissioner Gayle Cameron told the CEO during his testimony that "it seemed to me that you were making excuses for high-level folks who had failed to do their job" and that she was struggling with Maddox's repeated claims that he was not aware of information related to Steve Wynn's alleged misconduct until it was brought forward by investigators.

"I'm not sure what to tell you," he said. "As I've been leading this company, the changes have been extraordinary."

Over the three days of testimony at the Boston Convention and Exhibition Center, Maddox and other Wynn officials detailed the changes at Wynn Resorts in the roughly 14 months since Steve Wynn resigned and sold off his ownership stake. The company laid out the changes in a detailed white paper and on a website unveiled this week to respond to things that arose in the hearing.

"Although there is nothing the company can do to erase the past, there has been a great deal done to change the future," Nosal said in the company's closing statement. 

The company's board of directors has changed significantly since 2013 when the Gaming Commission first deemed the company a suitable operator and everyone who was directly responsible for disclosing a settlement involving Steve Wynn and his alleged victims to the Mass. Gaming Commission is also gone, the company said. Maddox is the only person from the company's original list of qualifiers -- people who must be found individually suitable -- who is still active in the company. Elaine Wynn also remains a qualifier due to her status as a significant shareholder, but she was removed from the company's board in 2015. 

Jennifer Marietta-Westberg, a researcher from Cornerstone Research who was called by Wynn Resorts as a witness on Wednesday, said that Wynn Resorts made "the strongest and swiftest response" in separating itself from a troublesome CEO and transforming its board of directors of 19 companies that have dealt with sexual or racial misconduct by top executives since 2014. 

Whether the five commissioners think that the steps Wynn Resorts has taken in the last year are sufficient for the company to maintain its suitability is an open question. 

As the licensee, Wynn Resorts bears the burden of proof and must show the commission "by clear and convincing evidence both its affirmative qualification for licensure and the absence of any disqualification for licensure," per state gaming regulations. 

"The individuals that have been identified as bearing the most responsibility for the corporate failures here have been replaced at the company," Lillios said in the IEB's closing remarks. "But all of those changes do not erase the fact that corporate failures were revealed in this investigation and they are significant, repetitive and reflective of the company's historical governance practices. Those inactions and failures on the part of the identified executives ... appear to have contributed to a culture where employees were reluctant to report certain allegations to management regarding Mr. Wynn." 

The IEB did not make a recommendation to the commission, but Lillios added, "The IEB would urge the commission to evaluate the company's remedial measures in light of the evidence revealed in this investigation and detailed in the IEB's report." 

The Gaming Commission has taken the actions of former executives into account in past suitability reviews.

In August 2013, when regulators deemed Ourway Realty LLC unsuitable for the state's one slots-only casino license, it cited "a number of practices" that former Ourway head Gary Piontkowski engaged in "that were deeply troubling," specifically noting his personal cash withdrawals from the track's money room. 

Piontkowski, who was chairman of the State Racing Commission under former Gov. Bill Weld and founded Plainridge Racecourse in 1997, had resigned from his position months earlier citing his health.

"Though he is no longer part of the organization, we must consider the systemic issues that allowed those practices to take place, what has been done to remedy those deficiencies, and what the outlook for the future is vis-à-vis the operation of a ... gaming establishment," the Gaming Commission wrote in its 2013 decision. "It is noteworthy that all of the adjustments, including the removal of Piontkowski, took place only after the Bureau brought the issues outlined in the Report to light. They were not detected by the principals of the organization themselves."

Sign up for Enews

WBJ Web Partners

0 Comments

Order a PDF