Wynn CEO faces skeptical commissioners
Exec under fire for $10m payout to legal counsel Sinatra
DURING A BRUISING cross-examination with his company’s Boston area casino license hanging in the balance, Matt Maddox, the new CEO of Wynn Resorts, acknowledged “how ridiculous” it looks now that he believed the rash of accusations against his predecessor was a set-up and part of a “litigation strategy.”
Maddox, who is trying to convince the Massachusetts Gaming Commission to deem him and his company suitable for a casino license, also conceded that last year he begged Steve Wynn to stay on before the mogul resigned his positions as chairman and CEO under a cloud of scandal.
“That should show you where we were mentally,” Maddox told the regulators. “We were still in a state of denial.”
Maddox – who was hired by Steve Wynn in 2002, developed a close working relationship with him in 2008 as chief financial officer, became president in 2014, and was tapped to be his successor as CEO – said he was mostly kept in the dark about the allegations of sexual harassment against his boss and completely ignorant of allegations of rape against Wynn until late 2017.
“What does that say about your leadership that they think it’s OK that all these things can be happening but yet, you’re never notified?” asked Gayle Cameron, a member of the commission.
“I think it shows that there were a lot of different people that I think were trying to protect Steve Wynn. And the last thing that they would want to do is tell me,” said Maddox, who explained that he is “known as a very straight arrow.”
“One they can go right around,” Cameron interjected in response.
The contentious exchange was one of the last Wednesday, the second day of an adjudicatory hearing that will determine whether Wynn can open its $2.6 billion Wynn Boston Harbor casino in June as planned. There has been a major change in personnel at the international casino company and, according to the new leaders, a shift in company culture, too, to make it safer and friendlier for employees. Many expect the commission will ultimately fine the company but allow it to retain its license, which is how Nevada gambling regulators handled the matter.
Under cross-examination by Loretta Lillios, the chief enforcement officer for the Investigations and Enforcement Bureau (IEB), Maddox said that after he became company president about five years ago, he and Steve Wynn and Kim Sinatra, who was then general counsel, were the three people “running the company” and were in “constant communication.”
Steve Wynn ran a two-year competitive process to select a successor and Maddox said he “emerged as the person who would become the next CEO” and Wynn planned to retire at the end of 2020. Before he resigned, Wynn urged the board to hire Maddox as his replacement, a board member testified Wednesday.
Maddox is far from the only Wynn Resorts official who claims to have been fooled by Steve Wynn’s denials of sexual misconduct, but he is the only veteran employee who needs to be deemed suitable again during the ongoing proceedings.
At the time, the board opted against suing Elaine Wynn and it also decided not to conduct a thorough investigation into her ex-husband, board member Patricia Mulroy told the gaming commission Wednesday. She said the board relied on the representation by Sinatra that the 2005 incident was an outlier, and was – in Sinatra’s words – “old and cold.”
Mulroy was unclear on how much she knew at the time about the basis for the $7.5 million legal settlement Steve Wynn reached with the accuser, a manicurist who has claimed Wynn raped and impregnated her. Mulroy told gaming regulators that she assumed there had originally been an allegation of non-consensual sexual behavior but that the word “rape” had not been used.
The viewpoint of Mulroy and others was also clouded by the source of the accusation. Elaine Wynn, who had previously been a member of the board even after her second divorce from Steve Wynn, was at that time engaged in contentious litigation against the company.
“Everything was seen through the filter of the litigation and the animosity toward Mrs. Wynn,” said Mulroy on Wednesday. “I could kick myself from here to China that I didn’t speak up, that I didn’t say, ‘Wait a minute, who cares who’s making the assertion?’”
Elaine Wynn is the only other person associated with Wynn who was deemed suitable in 2013 and needs to pass the muster again now.
After the Wall Street Journal in January 2018 exposed a pattern of rape and sexual harassment allegations against Steve Wynn, the company’s board took a more introspective approach, commissioning an investigation into the truth of the allegations, and then a look into who knew about them.
Maddox, who by the time the article was published already heard multiple complaints about Steve Wynn from different sources, said his confidence in his boss’s innocence began to crack after he consulted with Ari Fleischer, a communication professional who was the press secretary for former president George W. Bush.
Fleischer advised Maddox that if there was no truth to the allegations, they should put people in front of television cameras to deny it.
“I shared that plan with Mr. Wynn. He said, ‘Let me think about that.’ I wasn’t sure what to think about that,” Maddox testified. In the ensuing days he recalled thinking, “What actually is real and not real, because we should be on national TV right now. Five days after that he resigns and I’m appointed CEO.”
Mulroy said she was taken aback by the February 2018 Wynn Resorts statement that described the board “reluctantly” announcing Steve Wynn’s resignation.
“I winced when I read it,” Mulroy said.
As the commission launched its investigation last year, Maddox said he learned more about what had occurred within the company.
“I began to realize that there were many victims – and those victims felt powerless,” Maddox told the commission on Tuesday. “For that I am deeply remorseful.
The company’s new leaders say they were shocked and angered by the allegations of sexual harassment against Steve Wynn and that they first learned of them through the Wall Street Journal story. One reason that even board members were in the dark about the pattern of allegations against the former chairman and CEO was that executives within the company helped Steve Wynn buy the silence of his accusers.
Elaine Wynn, who has attended but not yet testified during the hearing, claims that even before her 2016 accusation against Steve Wynn, she told Sinatra what she knew of the 2005 rape allegation. Sinatra, who left the company last August, denies that.
Elaine Wynn learned of the 2005 rape allegation in 2009 when she was divorcing her husband for the second time. Someone who said she was the stepmother of the victim emailed one of her attorneys, according to the Gaming Commission report. Elaine Wynn confronted Steve Wynn, who claimed the woman was extorting him and that nothing sexual occurred. Elaine Wynn also spoke to several company executives about the matter, including Sinatra who she said was “very empathetic.”
Cathy Judd-Stein, the chairwoman of the gaming commission, grilled Maddox about why the company paid Sinatra nearly $10 million in cash and stock rather than firing her for cause.
“I did not think that terminating for cause would be the right action,” said Maddox, who said he also relied on the recommendations of the compensation committee and counsel.
Ellen Whittemore, the company’s new general counsel, said she was more than disappointed by how Sinatra handled the matter, but she was advised that had Wynn Resorts attempted to fire her for cause, it might have resulted in protracted and contentious litigation.
“We needed to get the past behind us,” Whittemore said. When she left, Sinatra was roughly six months away from becoming vested in a stock grant through the company, according to Whittemore.
Judd-Stein also questioned the timing of Sinatra’s severance package, which she said was finalized the same day Sinatra met with Gaming Commission investigators, Aug. 3.
“I had discussions with her about the severance agreement,” Maddox acknowledged. “I have no recollection of Aug. 3 having any relevance.”
In the late winter and spring of 2016, when the board learned of allegations against Steve Wynn via legal action his ex-wife took in relation to a shareholder lawsuit dubbed the Okada litigation, the board neither inquired into the position of the employee, nor whether the matter was reported to human resources, nor whether company policies had been followed, according to Mulroy, who headed up a board committee to look into the allegations after the Wall Street Journal article.
Mulroy said in the spring of 2016, board members assumed that the concerns raised by Elaine Wynn were “just another volley” in her ongoing litigation.
Maddox said he asked Sinatra about the allegation around that time, and she told him, “There had been a consensual relationship between Mr. Wynn and an employee over a decade ago.” More than a year later, Steve Wynn told Maddox that the woman came onto him, and he “went for it.”
Much of the information in the Gaming Commission report stems from depositions and other material from the Okada litigation. On Wednesday, Phil Satre, the new chairman of Wynn Resorts, described the Okada lawsuit as “a drain on the company financially and emotionally,” and said Maddox determined the company was “going to resolve that litigation.”Satre joined the board last year at the recommendation of Elaine Wynn.