Feb 21st 2012, 11:08 by V.V.V. | HONG KONG
“I LOVE Kazuo Okada as much as any man that I’ve ever met in my life.” So declared Steve Wynn, one of America’s most successful casino tycoons, of his business companion, Kazuo Okada, as recently as 2008. The latter, a Japanese billionaire whose fortune was built on pachinko gaming outlets, helped fund Mr Wynn’s signature casino on the Las Vegas Strip. The two partners in Wynn Resorts have also built another casino in Macau (pictured), the former Portuguese colony near Hong Kong, which is now a far bigger gambling haven than Vegas.
But the blush is off the rose, and the two lovers are now quarrelling bitterly. Mr Wynn was most unhappy with Mr Okada’s decision to build a casino in the Philippines, which he reckoned would compete with the Macau money-spinner. Mr Okada, for his part, was furious when the casino in Macau gave an extremely generous grant to a local university (reportedly worth some $135m).
This week, in a stunning move, Mr Wynn pushed his partner out the door: he ousted Mr Okada from the board of their company and seized all of his shares. Citing information provided by Louis Freeh, a former head of America’s Federal Bureau of Investigation who now sells his investigative services to paying clients, Mr Wynn accused his former friend of ethical breaches and violations of America’s anti-corruption laws.
Mr Freeh’s claims are contested by Mr Okada and have yet to be confirmed by official investigations. But that did not stop the company’s board from seizing Mr Okada’s shares at a hefty discount. His stake, thought to be worth nearly $2.8 billion, will be reimbursed at a rate of only $1.9 billion. And he won’t get the cash (plus 2% interest for the delay) until ten years from now.
What should shareholders make of this extraordinary development? It is good news for the company as it cleans house, some argue. Gaming officials in Nevada are extremely unkind towards firms that take a lax attitude towards the law. The Freeh investigation reportedly alleges that Mr Okada’s actions violated America’s Foreign Corrupt Practices Act by, among other things, lavishing hotel rooms and gifts upon Philippine regulators who may have influence over Mr Okada’s casino in that country.
Yet it seems unlikely that by proactively revealing wrongdoing and acting firmly to oust the wrongdoer, today’s mess will leave the firm fitter. The boardroom shenanigans only draw further unwanted attention to the company’s standards of corporate governance, which are already under a cloud. American officials are investigating allegations that the large donation made to the university in Macau may have been designed to win friends in the government so as to secure future gaming rights—an allegation hotly denied by Mr Wynn’s company. And plenty of lawsuits and countersuits are now underway that will keep the spotlight on the company’s behaviour. Indeed, in one case a court hearing is due to take place on February 23rd in America.
The gaming industry has generally flourished by working in the shadows, not by seeking the spotlight. Noisily exposing the fact that a senior partner in the Wynn empire may have broken American laws on corruption is sure to attract even greater scrutiny. Tycoons who live in glass casinos should probably not throw stones.
In this blog, our Schumpeter columnist and his colleagues provide commentary and analysis on the topics of business, finance and management. The blog takes its name from Joseph Schumpeter, an Austrian-American economist who likened capitalism to a "perennial gale of creative destruction"
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I bet this makes a good TV drama. Well, there have been no short of such dramas like this out from Asian TV.
While two giants fight, by-standers are sitting back on their armchair and enjoying the show with a smirk.