Published on: September 19, 2024, 07:41h.
Last updated on: September 19, 2024, 07:41h.
Wynn Resorts (NASDAQ: WYNN) and certain former executives of the company have agreed to pay investors a total of $70 million to settle allegations of covering up founder and former CEO Steve Wynn’s sexual misconduct. The defendants will contribute $9.4 million of the settlement, with insurance providers covering the rest.
Recently, Pomerantz LLP filed a motion with the United States District Court for the District of Nevada seeking preliminary approval of the settlement in the case Ferris, et al. v. Wynn Resorts Ltd., et al. The law firm claimed that some former Wynn executives concealed Steve Wynn’s misconduct, providing false information to shareholders between March 28, 2016, and March 12, 2018.
The complaint alleged that the defendants were aware of numerous accusations of misconduct against Wynn spanning several decades and actively covered up those allegations,” according to a statement from Pomerantz.
Steve Wynn was one of the first high-profile executives exposed by the “Me Too” movement. A 2018 Wall Street Journal article, reportedly instigated by Elaine Wynn, detailed his inappropriate behavior towards female employees, leading to his removal from the company.
Significance of Wynn Securities Fraud Lawsuit
Many class action suits brought by law firms representing dissatisfied shareholders often fail due to the assumption of risk by shareholders in the company’s stock. However, when executive misconduct exacerbates this risk, courts may rule in favor of the plaintiffs. Wynn’s stock performance during the period mentioned saw significant volatility, impacting shareholders negatively.
The fallout from executive wrongdoing had a direct impact on Wynn Resorts’ share price. Investigations by the Massachusetts Gaming Commission and the Nevada Gaming Control Board further added pressure on the stock. The subsequent decline in share value resulted in substantial losses for shareholders.
These events culminated in Massachusetts imposing fines totaling $35.5 million, with former CEO Matt Maddox also fined $500,000. Speculation regarding the company’s future and operating license for Encore Boston Harbor negatively affected the stock price before the fines were announced.
Maddox, along with general counsel Kim Marie Sinatra and then CFO Stephen Cootey, were named in the lawsuit. Maddox left the company in 2022, while Cootey is now employed elsewhere.
“This case should serve as a warning to corporations and their executives that accountability and transparency are essential. Companies found to be covering up serious misconduct by their executives face severe financial repercussions,” said Pomerantz partner Murielle Steven Walsh.
Recent Legal Developments at Wynn
Shortly after settling with investors, Wynn Resorts agreed to pay $130.13 million and admit wrongdoing in an unregulated money transfer scheme at Wynn Las Vegas, following an agreement with the Department of Justice. The settlement marked the largest penalty levied against a single US gaming venue and required the company to adhere to anti-money laundering guidelines.
In another development, Wynn Resorts announced the issuance of $800 million in corporate bonds to retire existing debt and fund the DOJ settlement.