Rolling the Dice

Rolling the Dice

Coverage of casino licensing and the gambling referendum

'Deeply troubled' Gaming Commission allows Wynn to open casino

‘Deeply troubled’ Gaming Commission allows Wynn to open casino

Company hit with $35m fine and CEO assessed $500,000

WYNN RESORTS WILL need to pay $35 million and its CEO Matt Maddox will need to pony up $500,000 under a Massachusetts Gaming Commission decision that allows the gaming giant to keep its Boston-area casino license and open its Everett resort in June.

In its decision, the commission found the company suitable to retain its casino license while also requiring it to hire an independent monitor, maintain a separation between the positions of chairman and CEO for 15 years, and bring aboard an executive coach to provide training to Maddox on leadership, communication, and sensitivity.

The $35 million fine “is commensurate with the scope of the violations and designed to be sizeable enough to have a meaningful impact,” the decision said.

“We are confident that we have struck the correct balance and met our legal and ethical burdens,” said commission chairwoman Cathy Judd-Stein in a statement. On Wednesday, the Gaming Commission will meet to to discuss its decision in public and answer questions from reporters.

Wynn Resorts said it received a copy of the decision late on Tuesday. “We are in the process of reviewing that decision and considering the full range of our next steps.  We will not have further comment until we have thoroughly reviewed and considered the MGC’s decision,” the statement said.

Because of the 5,000 jobs at stake, many had expected the Gaming Commission to impose a fine and other conditions on Wynn Resorts but allow the company to retain its license. The fate of the $2.6 billion resort casino  was thrown into question after a January 2018 Wall Street Journal article detailed allegations of sexual harassment and worse against Steve Wynn, the company’s founder. Within two weeks Steve Wynn was out as the company’s chairman and CEO, but he left behind lingering questions about those at the company who facilitated his behavior.

The decision notes that the commission found “numerous violations of controlling statutes and regulations largely pertaining to a pervasive failure to properly investigate in accordance with existing policies and procedures and to notify the Commission about certain allegations of wrongdoing. The Commission is deeply troubled by the circumstances of these findings.

Although Steve Wynn has professed his innocence of any wrongdoing, the commission “confirmed the existence of more than two dozen women alleged to have been subjected to some form of sexual misconduct by Mr. Wynn,” according to a footnote in the 54-page report. Alleged sexual misconduct ranged from rape to sexual harassment and Steve Wynn reached personal settlements ranging in dollar value from $9,000 to $7.5 million with at least five former employees. The investigators also said a former Wynn Resorts board member, Dr. Ray Irani, was accused of sexual trafficking in a civil lawsuit.

The entrance to the Encore casino along Broadway in Everett. (Photo courtesy of Wynn Resorts)

With Steve Wynn gone from the company, the Gaming Commission focused most of its attention on who knew what about his sexual misconduct, when  did they know it, and what they did with that information.  The commission identified numerous instances where company employees failed to follow proper procedures or covered up for the company’s founder. But nearly everyone involved in the scandal and most of the company’s board were let go. Ultimately, the Gaming Commission concluded that those who remained were suitable and that they and the company should be allowed to open and operate the casino.

The one questionmark was Maddox, one of the very few high-ranking executives who remained. “Mr. Maddox presents a unique case given his longevity with the company, exposure to information pertaining to the alleged wrongdoings and settlements, and current role as CEO,”  the commission said.

The report said the five-member commission was not unanimous in determining that Maddox should be deemed suitable, and found him to have “demonstrated questionable judgement” and exhibited other shortcomings at critical moments. For example, he became aware of spa employees complaining about Steve Wynn acting in a sexual manner during massages, but took no action to confront Wynn or investigate the employee claims. He learned of a $700,000 legal settlement, but accepted the explanation that Steve Wynn was merely helping a former employee on hard times when in fact the money was paid to former employee who allegedly had “intimate relations” with Wynn. And Maddox took no steps to investigate the sexual trafficking claims against board member Irani.

“Questions were raised as to Mr. Maddox’s sincerity, his genuine concern for the Company workforce as a whole versus the bottom line, his ability to ensure that an effective human resources division and robust compliance program are in place, his adequacy in attention and diligence as to all matters at issue here, and his ability to communicate effectively as CEO,” the ruling said. “The Commission vetted these questions with care and notable concern.”

The commission was particularly troubled that Maddox considered finding legal counsel Kim Sinatra another position at the company after it had become clear that she helped cover up some of the allegations against Steve Wynn. “That he would consider moving Ms. Sinatra elsewhere evidences loyalty over the best interests of the company and, in the eyes of some commissioners, over integrity,” the commission said. “Further, when the company had the opportunity to demonstrate that it takes its transformation seriously by considering terminating Ms.
Sinatra’s employment for cause based on her role in that corporate failure, it instead elected to pay her nearly $10 million in exchange for her removal from the company.”

A footnote to the report noted Sinatra refused to testify before the commission despite being issued a subpoena by the agency.

Ultimately, the report said, a majority of commissioners concluded that Maddox’s shortcomings were due more to issues of competence than suitability. In other words, he needs work on his skills as an executive but met the suitability standards of honesty, integrity, and good character.

The commission had broad authority to alter the 2013 suitability determination that cleared Wynn Resorts for a Bay State casino license, but drastic regulatory action could have had big ramifications. The Massachusetts fine is $15 million more than the $20 million fine that Nevada casino regulators levied in February for the company’s role covering up allegations against the former boss.

Originally dubbed Wynn Boston Harbor but then renamed Encore Boston Harbor to strip any vestige of the former CEO from the enterprise, the casino property is located on a formerly polluted site in Everett right across the Mystic River from Charlestown and Somerville. The company beat-out a partnership between Mohegan Sun and Suffolk Downs for the lone Boston-area casino license available under the state’s 2013 casino law. Massachusetts has one other casino, MGM Springfield, along with the Plainridge Park Casino, a slots parlor located in Plainville.

The $42.7 billion budget bill the state House passed last week relies upon gaming revenue from the Wynn Resorts property. In an editorial roundtable with the Boston Business Journal on Tuesday, House Speaker Robert DeLeo said he wanted the Wynn Resorts casino to open on June 23 as planned to provide work for people.

Fate uncertain, Wynn doles out $1m to 10 groups

Fate uncertain, Wynn doles out $1m to 10 groups

Museum of Fine Arts, RIZE Massachusetts biggest recipients

WYNN RESORTS doled out nearly $1 million in donations to nine Massachusetts nonprofits and the city of Everett over the last two weeks despite uncertainty about whether the company will be allowed to retain its casino license.

Since the close of three days of hearings by the Massachusetts Gaming Commission on April 4, the casino company said it has approved $950,000 in donations to 10 organizations.

A spokesman for Wynn Resorts said the decision to give out the donations was made by CEO Matt Maddox, who faced tough questioning during the three days of Gaming Commission hearings, which focused on the sexual misconduct of Steve Wynn and the company’s response to it.

“I think any other company (or CEO) would place a hold on these until they had final resolution, regardless of what commitment they had made to the community,” said Michael Weaver, the Wynn Resorts spokesman, in an email. “Although a great deal has been written about ‘leadership’ post-hearing, I believe this, in part, is what community leadership looks like.”

The bulk of the money went to three organizations. The Museum of Fine Arts received a $500,000 donation on April 5, one day after the Gaming Commission hearings concluded. The donation was for the exhibit Toulouse-Lautrec and the Stars of Paris. RIZE Massachusetts, which funds opioid treatment efforts, received $250,000 on April 12. New York-based One Love Foundation, which is focused on relationship abuse, received $150,000 on April 15.

Julie Burns, the executive director of RIZE, said her organization began talking with Wynn Resorts about a donation last fall. She said the organization had no concerns about accepting the funding. “We fully expect that they will be a good neighbor not only to us but the entire community,” she said.

Officials at the Museum of Fine Arts could not immediately be reached for comment.

Wynn Resorts made $25,000 donations to the Boston Symphony Orchestra, the Boston Children’s Chorus, and the city of Everett for its annual Village Fest. Three $10,000 donations were made to ROCA Inc., which tries to steer young men away from gangs and street life; the Hispanic American Institute, which promotes social, education, and economic development in Hispanic communities; and the SS Cosmas and Damian Society, which puts on an Italian feast in September. A $2,500 donation went to the Jewish Vocational Service.

The Gaming Commission has been privately discussing what to do with the Wynn Resorts gaming license since April 4. Most observers expect the company to pay a fine and submit to other conditions, but the commission has the authority to strip the casino operator of its license even though the $2.6 billion Everett facility is nearly completed and scheduled to open June 23.

Budget notes: Beacon Hill assuming Encore will open on time

Budget notes: Beacon Hill assuming Encore will open on time

Nursing homes get $30m Band-Aid

THE MASSACHUSETTS GAMING Commission is currently meeting in private, trying to decide whether Wynn Resorts should be allowed to retain its casino license and open on time in June. But budget officials on Beacon Hill are acting as if the decision has already been made.

A fiscal 2020 budget proposal put out by the House Ways and Means Committee on Wednesday counts on $98 million in state tax revenue from the Encore Boston Harbor facility in Everett.

A spokesman for Rep. Aaron Michlewitz of Boston, the chair of the Ways and Means Committee, said the House is following the lead of what the governor did in his budget.

In response to questions about other potential revenue sources not included in his budget proposal, Michlewitz said he was trying to be conservative. “We were trying to build our budget based off the revenues we currently have in front of us,” he said.

$30 million Band-Aid for nursing homes

The House Ways and Means budget proposes a $30 million increase in state spending on nursing homes and also calls for the creation of an “emergency task force” that would recommend ways to bring stability to the industry.

The nursing home industry says 20 facilities closed last year and more than 30 are in danger of going out of business this year. A key part of the problem is that state officials set rates using cost benchmarks from 2007. CHECK IT OUT: A story and a Codcast on the nursing home situation from early March.

At a hearing earlier this week, industry officials testified in support of a number of bills that would provide additional aid to the industry. House leaders, however, seem inclined to put a $30 million Band-Aid on the problem while a task force spends a year proposing longer-term solutions.

Biz-friendly House backs drug price-setting

The business-friendly House isn’t riding to the rescue of the state’s life sciences industry – its budget plan for fiscal 2020 sides with Gov. Charlie Baker in allowing MassHealth to negotiate drug prices directly with manufacturers and, if that effort fails, put them through a rate-setting process.

Robert Coughlin, president and CEO of MassBio, issued a statement suggesting the House Ways and Means budget proposal would be a disaster for an industry that plays a key role in the Massachusetts economy.

“If passed, it would rapidly change the face of biotech innovation, scare away investors, and immediately harm patients who are awaiting the next treatment or cure of their disease,” he said.

The House plan mirrors the governor’s budget proposal on drug pricing. It would allow MassHealth to negotiate more favorable pricing directly with the drug manufacturer. If that effort fails, state officials could move forward with a rate-setting process. If the manufacturer refuses to comply with the outcome of that process, the firm could be referred to the Health Policy Commission, which could hold a public hearing on the manufacturer’s pricing approach. This latter step would come into play only for drugs that cost at least $25,000 per person per year or $10 million in the aggregate annually.

The House proposal did not include a provision in the governor’s budget calling for uncooperative manufacturers to be referred to the attorney general for prosecution under state consumer protection laws. Rep. Aaron Michlewitz of Boston, the chair of the House Ways and Means Committee, said the provision wasn’t needed because the attorney general already has the authority to prosecute.

The House language also spells out what state officials would consider in determining a price for a drug – clinical efficacy and outcomes; publicly available information on the drug’s pricing, including prices paid by other developed nations; the drug’s public health value; utililization of the drug; the likelihood the drug will reduce the need for other medical care; pricing analysis by independent third parties; and the number of manufacturers that produce the drug.

Medicare savings changes

The House Ways and Means budget would alter the eligibility for the Medicare savings program, opening it up to 25,000 more people at an estimated cost of $4 million in fiscal 2020.

For the purpose of determining eligibility, the change would disregard 30 percent of income for seniors who are otherwise eligible.

“This will provide provisions of Medicare newly available to 25,000 low-income seniors,” Michlewitz told reporters.

CHECK IT OUT: A story on seniors worried about losing out on Medicare savings plan coverage from January.

Reproductive health

The House Ways and Means budget would make two big changes targeted at women’s reproductive health.

The bill would spend $500,000 on an effort by the Health Policy Commission, the Betsy Lehman Center and the Department of Public Health to reduce pregnancy-related deaths. The commission would run a two-year pilot, collect data, and report back to the Legislature.

Additionally, the budget bill would direct the Department of Public Health to promote awareness of reproductive health care facilities. The department would also be tasked with analyzing any changes to the availability of reproductive health services.

The clinic promotion policy rider is a companion to legislation Gov. Charlie Baker recently signed into law that backstops $8 million in funding for local clinics who may lose access to federal funds because of a Trump administration rule limiting funding for clinics that provide abortions.

Restaurant Promotion

One area of focus for the House Ways and Means Committee is the Bay State’s restaurants. The budget bill would create an 11-member Restaurant Promotion Commission, which among other endeavors would recommend how to spend $2 million in funding overseen by the Massachusetts Office of Travel and Tourism.

The commission would look into barriers that aspiring restaurateurs face, licensing issues, and the possibilities for cross-promotional partnerships. It would need to submit its findings by Jan. 31, 2020.

Wynn Resorts security chief gone after spying admission

Wynn Resorts security chief gone after spying admission

James Stern copped to covert tactics in hearing last week

THE FORMER FBI AGENT who headed up Wynn Resorts’ security operation no longer has a job at the international casino business four days after telling regulators he spied on employees and the ex-wife of the company’s founder.

The casino company, which plans to open an Everett resort in June, has been under scrutiny since a January 2018 Wall Street Journal story reported on multiple allegations of sexual harassment and worse against founder Steve Wynn, who resigned soon after the story was published.

As the Massachusetts Gaming Commission attempted to determine whether Wynn Resorts should keep its casino license, the company’s security chief, James Stern, acknowledged that he covertly surveilled Elaine Wynn and also spied on others, including one of the sources for the newspaper story.

According to a legal brief filed with the Gaming Commission on Monday, Matt Maddox, the CEO of Wynn Resorts,  contacted Stern on Saturday and told him his services were no longer needed. The filing also said “no surveillance will be conducted of employees or third parties without the permission of the chief global compliance officer and the general counsel or other in-house counsel to whom she delegates responsibility.”

Stern told the commission that he only surveilled Elaine Wynn when she was in the company of Kazuo Okada, a Wynn Resorts investor who Stern claimed had organized crime connections, but a spokeswoman for Elaine Wynn later said she has never met with Okada.

The 49-page legal brief, which described the dismissal of Stern as a “remedial measure,”  argued that Wynn Resorts should retain its casino license in Massachusetts and that no action be taken against Maddox, who faced hard grilling from several commissioners during a three-day hearing last week. The hard questions focused on Maddox’s lackluster initial response to the allegations of sexual misconduct made against Steve Wynn,

“Mr. Maddox’s initial response was based on his utter disbelief that Mr. Wynn engaged in such egregious conduct. Mr. Maddox’s immediate actions reflected that belief, but his subsequent actions are clear and convincing evidence that his suitability determination should not be disturbed,” the legal brief says. “To be clear, there is absolutely no evidence that Mr. Maddox was aware of any of the allegations of sexual misconduct at the time that they were made to other executives. No one has testified (or even suggested) that Mr. Maddox was aware of those allegations—not one email or other piece of evidence exists to show that he was advised of those allegations, and he has twice testified under oath that he was not aware of them. That other executives knew and failed to
advise Mr. Maddox is their failure, not his.”

High stakes as Gaming Commission begins deliberations

High stakes as Gaming Commission begins deliberations

Wynn lawyer says firm has ‘cleansed its character’

AS IT BEGINS DELIBERATIONS on what to do with Wynn Resorts, the Massachusetts Gaming Commission can do pretty much whatever it wants. It can declare the company unsuitable and revoke its casino license. It can fine the company. It can declare individual executives unsuitable. Or it can do nothing.

“The law provides the commission with very broad authority,” said Elaine Driscoll, the spokeswoman for the authority.

Odds are the commission will take some action, particularly in the wake of a report by agency investigators that painted a very grim portrait of a company hiding the misdeeds of its founder and former CEO Steve Wynn and tough questioning of current CEO Matt Maddox and other executives over the last three days.

Commissioner Enrique Zuniga asked Wynn Resorts board chairman Phil Satre how the company would respond if it received an adverse ruling from the Gaming Commission.

“Why would you care about that?” Satre bluntly responded, noting the Gaming Commission would effectively be severing ties with Wynn Resorts.

RELATED:

Wynn security chief spied on boss’s ex-wife

Maddox’s explanations doubted by some commissioners

Wynn CEO faces skeptical commissioners

How Steve Wynn covered his tracks

Report cites significant, repetitive failures at Wynn Resorts

Zuniga quickly amended his question to say he was asking how the company would respond if conditions were placed on its license.

“It would depend on what they are,” Satre said. “If the conditions make it impossible to succeed here, then we’d have to take it up at the board.”

Jed Nosal, an attorney with the Boston office of Brown Rudnick who represented Wynn Resorts at the hearing, told the commissioners that case law suggests a business entity has no moral character of its own. He said a business’s character is determined by its employees, and that a business can change its character by changing its personnel. He said Wynn Resorts has done that at the corporate and board level in the wake of Steve Wynn’s departure.

“We believe that Wynn Resorts has cleansed its character,” he said. Even so, he acknowledged some shortcomings. He said Maddox, a high-level corporate holdover, had admitted making mistakes.  He said the company’s initial response after the report on Steve Wynn’s sexual misconduct in the Wall Street Journal was flawed, but since then has been “strong” and “predictive of the future.”

Robert DeSalvio, president of Encore Boston Harbor, the $2.6 billion hotel and casino going up in Everett, laid out in detail what is at stake financially with the Gaming Commission’s decision.

“This is a truly unique opportunity in America where a business can change a neighborhood,” he said.

DeSalvio said Wynn Resorts is building a hotel and casino on land that was previously a “polluted mess,” while also planning the construction of an “entertainment zone” on nearby property purchased by the company. “We hope to be doing many other things in the area, either by ourselves or with partners,” he said.

He then ticked off the economic benefits that come with Encore Boston Harbor – 5,000 permanent jobs, $50 million in transportation investments, $100 million in annual vendor spend, charitable donations, and state and local tax revenues.

DeSalvio said Everett has received $30 million so far and, once the casino opens, $25.3 million a year for 15 years. Boston will receive $2 million a year for 15 years. Malden and Medford will get $1 million, Chelsea and Somerville will receive $650,000, and Cambridge will get $100,000.

The commissioners declined to comment at the end of the hearing. They are expected to begin private deliberations Friday morning and they may continue over the weekend as they try to reach consensus and craft a written decision.

“We will take our time in making a decision,” said the commission’s chair, Cathy Judd-Stein.

Maddox’s explanations doubted by some commissioners

Maddox’s explanations doubted by some commissioners

Wynn CEO says he ordered surveillance of rumor-monger last year

WYNN RESORTS CEO Matt Maddox said on Thursday that he wasn’t aware of the way Steve Wynn and some of the company’s employees had bought the silence of women who alleged sexual harassment or worse, but some members of the Massachusetts Gaming Commission didn’t seem to buy it.

“Can you see why to some people sitting on this commission it may look like only taking action when you get caught and you’re forced to take action?” asked Eileen O’Brien, a former state prosecutor.

Maddox said he didn’t view his actions that way, although he acknowledged not following up on some information related to settlements negotiated by Steve Wynn. For example, he said he learned of a $700,000 settlement in 2008, but didn’t dig into the details when he was told it was a payout to a longtime employee who had recent “mental issues.”

In an adjudicatory hearing that began Tuesday and continued on Thursday, the Gaming Commission is trying to sort through how Wynn Resorts handled the alleged sexual misconduct of Steve Wynn and how it will handle similar events in the future. The goal is to determine whether Wynn Resorts should be allowed to retain its Massachusetts casino license and open the $2.6 billion Encore Boston Harbor casino in June as planned.

Ellen Whittemore, who joined the company as general counsel after Steve Wynn resigned, said the fact that many in the company were unaware of the breadth of allegations was by design.

“There were decisions made by Mr. Wynn that siloed certain individuals from having knowledge of more than one of the allegations,” Whittemore said.

As he rose through the ranks of the company – and caught glimpses but not the full picture of allegations of sexual impropriety against his boss – Maddox never undertook any real investigation into those charges. However, months after succeeding Steve Wynn as CEO, Maddox authorized an undercover surveillance operation at a salon where a former Wynn employee was widely known to be “saying a lot of really negative things about Wynn and that Wynn was going to go down.”

Wynn’s head of security suggested sending someone to the salon to listen in on the conversations, and Maddox agreed to the covert plan.

“I said, ‘As long as it’s above board, sure,’” Maddox told gaming regulators Thursday. “I thought about it for 30 seconds and didn’t think about it again until I had the report.”

Once Maddox saw the report, he felt uncomfortable about it, worried that it invaded people’s privacy, and he decided to send it to a special committee set up by the board of directors and Massachusetts gaming regulators, he said. He was told not to engage in any more investigations of that nature.

“I found that disturbing,” said commissioner Gayle Cameron, a former New Jersey state police official. “That this would be authorized without a predicate crime because of rumors and innuendo, and then the fact that employees were surveilled.”

Cameron also suggested that the surveillance operation extended beyond listening in at the salon, and said Maddox appeared aware of only a portion of it.

“Would you be surprised to hear that your security department surveilled Elaine Wynn?” Cameron asked.

“I would be surprised to hear that,” Maddox replied.

“I’m struggling with a pattern of information that comes forward that you’re just not aware of,” Cameron said.

In his testimony, Maddox tried to make the case that a new day has dawned at the international casino company, one that emphasizes compliance with company sexual harassment employees. Under the new structure, sexual harassment complaints go to human resources, the general counsel, and an outside law firm, Maddox said.

“There is a much more robust process in place,” Maddox said. “I understand the process because I’ve been involved in changing it.”

However, right after that statement, Cameron called his knowledge into question, noting that there are eight areas in which Wynn’s sexual harassment policy has been enhanced and asking Maddox to name two or three.

“I’d have to go back and look at the exhibits,” said Maddox, who didn’t name a single enhancement from memory.

Under questioning by O’Brien, Maddox also acknowledged that he was unaware of a new protocol for communicating information of concern when he met with investigators in July 2018, more than two years after the protocol had been adopted.

“I can see how that doesn’t look good,” Maddox said.

Loretta Lillios, the chief enforcement counsel for the Gaming Commission’s Investigations and Enforcement Bureau, asked Maddox a question that gets to the heart of why Wynn Resorts officials have been called back before the commission for a review of whether they meet suitability requirements.

“How can we be sure, given the evidence revealed in the investigation, that under your leadership there would be more robust compliance and transparency?” Lillios asked.

Maddox answered the question by urging commissioners to talk to people who have known him throughout his life and from his work in the casino industry. “I think you would hear that Matt Maddox has been an extraordinary leader,” he said, referring to himself in the third person.

Wynn CEO faces skeptical commissioners

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.

RELATED: Maddox explanations doubted by some commissioners

“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.

When Wynn Resorts’ independent board learned around February 2016 that Steve Wynn’s ex-wife was accusing the casino mogul of “inappropriate relations with an employee,” board members went after the messenger, mulling a defamation suit against Elaine Wynn, one of the company’s board members testified.

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.

 

How Steve Wynn covered his tracks

How Steve Wynn covered his tracks

Gaming Commission report indicates money bought silence

THAT’S THE QUESTION, isn’t it?” asked Steve Wynn in an October 2017 deposition.

That was Wynn’s response when he was asked why he paid a manicurist and her husband $7.5 million in 2005 if her allegation that she was raped and impregnated by the gambling mogul was false, as Wynn insisted it was.

“That was 97 days after the opening of the Wynn Las Vegas at a cost of $2.75 billion,” Wynn said. “My name goes up on the sign at the [insistence] of all my colleagues. And along comes this girl who had a turn with me, obviously being advised on what to do. …Anybody who is over 10 years old and knows what goes on in the world knows what happens next. The story gets sensational….The difference between truth and falsity fades into obscurity. The story survives with a life of its own. The damage to reputation is permanent. That’s what I was faced with for having sex with this girl. I was guilty. And she initiated it when I was getting a manicure about 10 yards from here in my office. Bad judgment on my part. All the rest was a contrivance to extort money from me.….As vicious, as rotten as the move was, as scurrilous, as lying – isn’t anybody on earth that can breathe that would ever think I will rape someone. Nuts. So in – in this context, seven and a half million was not a significant number. And I paid it.”

According to a report released Tuesday by the Massachusetts Gaming Commission, the woman, identified under the pseudonym of Amy, was one of several woman who worked under Steve Wynn and allegedly had some form of sexual contact with him over the years. The report, drawing on court deposition transcripts and interviews with those familiar with his activities, paint a devastating picture of Wynn’s approach toward women.

Much of the Gaming Commission’s report focuses on who knew what about Steve Wynn’s extra-curricular sexual activities and what they did about it. It’s part of an effort by the state authority to determine whether Wynn Resorts is suitable to retain its Massachusetts casino license and open a $2.6 billion casino in Everett in June.

Wynn is not really the focus of the report. He resigned from his positions as CEO and chairman in February 2018 and sold all his company stock for $2.1 billion, so he no longer falls within the jurisdiction of the commission. His penchant for settlements – at least five are identified in the Gaming Commission’s report – may shield him from any criminal or civil disciplinary action. Yet the Gaming Commission’s report provides the most detailed picture to date of how a casino genius covered his tracks.

Each case was a bit different, but nearly all of them were handled in similar fashion. Wynn’s attorneys would negotiate a financial settlement and the women would agree the sexual contact never happened. Amy, for example, agreed to write a retraction letter in which she denied the rape and impregnation allegations and voluntarily retracted all accusations and claims against Wynn Resorts and its employees.

Two days later she and her husband signed a settlement agreement with a limited liability company called Entity Y, which was set up to conceal Wynn’s involvement. Under the agreement, Amy immediately received $3.2 million and her husband was paid $550,000. For the next five years, Amy was paid $55,555 per month. For the next 10 years, the husband was paid $3,750 a month. All of the money was provided by Steve Wynn.

Wynn said in the October 2017 deposition that he saw no need to inform gaming regulators of the settlement with Amy and her husband, calling it a personal indiscretion and bad judgment, not a gaming compliance issue. “It was a nonevent,” he said. “It was false. It was a lie. Why would I have to – why would I have to prolong a fabrication?”

According to Wynn’s ex-wife, Elaine, he denied even having sex with Amy when she confronted him with rumors she had heard in 2009. “He claims that nothing happened, that the only thing that happened, he was foolish enough to be alone with this manicurist in his office area, getting a manicure with no staff around to observe and be a witness to the nothing that happened,” Elaine Wynn said in an interview with Gaming Commission investigators.

Beth was the pseudonym for a former cocktail server at Wynn Las Vegas, who alleged in 2006 that she had been “wrongfully engaged in a sexual relationship” with Wynn. Like Amy, she agreed to sign a letter of retraction and in return received a settlement that paid $325,000 to her and $325,000 to each of her parents – a total of $975,000.

Wynn years later said he didn’t recall Beth or the settlement with her, although he confirmed paying the $975,000, according to a deposition he gave in April 2018.

Connie, a worker in the cocktail services department at Wynn Las Vegas, sent a demand letter to Wynn in 2008, alleging she had an intimate relationship with him when he worked at the Mirage. Connie apparently broke it off, but she felt she was owed some compensation. After two years of negotiations, she signed a settlement agreement in which she said the two of them had never been involved sexually. In return, she received $700,000, of which $100,000 went to her attorney.

Debbie, the pseudonym for a cocktail server at Wynn Las Vegas, filed a complaint in 2013 with the Equal Employment Opportunity Commission. During mediation, she alleged she had been raped by Wynn. She told the mediator that Wynn had done the same thing to Connie, but Connie got a car out of it. The matter was eventually settled with Debbie signing a release of all claims against Wynn Resorts in return for $9,000.

From 2014 to 2015, according to the Gaming Commission report, spa attendants at Wynn Las Vegas complained a number of times that Steve Wynn acted inappropriately during massages – disrobing in front of them, exposing his genitals, and talking suggestively. They said he even acted inappropriately when he was joined by his current wife for a couples massage. In several instances, Wynn would tip the spa attendant identified under the pseudonym of Fran $1,000 in cash, according to the report.

In April 2018, after a report in the Wall Street Journal on Wynn’s sexual misconduct and Wynn’s departure from the company, Fran sent a demand letter to him complaining about his behavior and demanding $1 million. According to the Gaming Commission report, Wynn reached a settlement with Fran but the terms have not been released publicly.

The Gaming Commission report did not delve into all of Wynn’s alleged affairs. The report said its research uncovered information that was “largely consistent” with what was reported by the Nevada Gaming Control Board, including sexual misconduct by Wynn in 2005 involving a Wynn Las Vegas cocktail server and flight attendant and sexual harassment involving multiple flight attendants in 2016.

All in all, the Gaming Commission’s investigators talked to 12 current or former employees of firms affiliated with Steve Wynn and one contract employee. Nine of the workers said they were victimized during their employment at Wynn Resorts, two alleged their incidents occurred at previous companies where Wynn worked, and one was a contract massage therapist who worked on Wynn’s yacht.

The one underlying theme in the report is that Wynn didn’t play by the rules everyone else played by. For example, Wynn Resorts instituted a zero tolerance policy for sexual harassment in 2004. Wynn, in his depositions, acknowledged he had never read the policy.

During the deposition in October 2017, Wynn indicated he knew there was some sort of policy on sexual harassment but hadn’t read it and wasn’t familiar with the details. When he was read the policy, he became quite agitated, arguing that it would subject managers to all sorts of unsubstantiated allegations that could lead to terminations and disciplinary actions.

“If I knew about this before today, it wouldn’t exist in its present form for five minutes,” he said.

Report cites ‘significant, repetitive’ failures at Wynn Resorts

Report cites ‘significant, repetitive’ failures at Wynn Resorts

Maddox, other company officials say firm has changed

THE MASSACHUSETTS GAMING COMMISSION on Tuesday began a sprawling review of Wynn Resorts, delving into the alleged sex crimes of the company’s founder, the way it jettisoned an executive working on the Everett resort two years ago, the financial future of the publicly traded firm, and an introduction to an array of new officials running the business.

Wynn Resorts is building a $2.6 billion casino on the banks of the Mystic River that is scheduled to open in June. Its plans have been thrown into jeopardy by the emergence of rape and sexual harassment allegations against Steve Wynn, who helped sell the idea of a Wynn casino in the Boston area five years ago. The allegations, which date back more than a decade and first became public through a Wall Street Journal article early last year, had been hidden away by a company culture that allowed Wynn to play by a different set of rules, the investigation found.

It will be the job of Matt Maddox, a longtime Wynn employee who is the new CEO, and Phillip Satre, the new board chairman, to convince the commission that the days of sweeping sexual harassment under the rug with secret settlements are behind them.

Wynn Resorts leadership has changed dramatically since Steve Wynn resigned and sold his shares in the company in February 2018. Of the 11 people who needed to qualify as suitable during the Gaming Commission’s initial 2013 investigation into the company, only Maddox and Wynn’s ex-wife, Elaine Wynn, are still considered officials who must pass muster with the agency.

Wynn Resorts claims that everyone who was aware of sexual assault allegations against Steve Wynn and didn’t investigate or report them is no longer employed by the company. Maddox and Elaine Wynn are exceptions to that rule, but the Gaming Commission report suggests extenuating circumstances in both cases. With Elaine Wynn, she claimed she fulfilled her duty to notify the board and company officials by alerting the company’s legal counsel, Kim Sinatra. Sinatra, who left the company last August, vehemently disputes that.

Maddox appears to have operated largely on the periphery of the allegations against Wynn. He was accused by one of Wynn’s alleged victims of offering her a bribe or hush money not to talk to a reporter, but investigators for the Gaming Commission said evidence they uncovered undermined that claim. The investigators recommended the commission “should independently evaluate Mr. Maddox’s disavowal of any knowledge of any allegations of sexual misconduct by Mr. Wynn through the years.”

Because of the significant change in leadership, many analysts expect the Massachusetts Gaming Commission to fine the company but leave its casino license intact. That was the approach taken by the Nevada Gaming Commission, which imposed a $20 million fine on the company after issuing a 22-page complaint that covered much of the same ground as the Massachusetts report but with far less detail. The Massachusetts Gaming Commission report did not sugarcoat the depth of the problems at Wynn Resorts.

“The significant changes in leadership, policies, structure, and internal controls at the company do not erase the fact that the corporate failures revealed in this investigation are significant, repetitive, and reflective of the company’s historical governance practices,” the report said.

At the April 2 beginning of an adjudicatory hearing, Matthew Maddox, the CEO of Wynn Resorts, told the Gaming Commission that he is sorry for the failure of his company to listen to allegations of sexual harassment against its founder and he wants to make it a leader in human resources. (Photo by Andy Metzger)

Tuesday was the first day of the adjudicatory hearing to determine whether Wynn, and its new officials, will be considered suitable for the Boston area casino license.

Gaming Commission Chairwoman Cathy Judd-Stein clarified the limits of the panel’s task, which is to look at the suitability of Wynn Resorts and key figures in the company to hold the casino license. “This hearing is not intended to adjudicate the veracity of allegations involving Steve Wynn,” she said at the start of the proceedings.

The commission’s investigators made no attempt to recommend a course of action for the five-member appointed body that oversees gambling across the state, but they made it clear they believe the company should undergo a thorough vetting. After several days of hearings, the commission is expected to deliberate in private and issue its ultimate decision in writing.

For the press assembled at the Boston Convention and Exhibition Center, the day began by receiving a much-litigated report put together by the Gaming Commission’s Investigations and Enforcement Bureau. The report is both immense – weighing in at 199 pages with an appendix about the same size – and sometimes difficult to follow because of the redactions peppered throughout.

Many of the redactions related to victim information, according to the commission.  But there were numerous instances where other information appeared to be redacted, including entire sections of the report. At one point, the report said investigators “confirmed the existence of (redacted) women alleged to have been subject to some form of sexual misconduct by Mr. Wynn. In addition to the matters which have already been discussed earlier in this report, the Investigations and Enforcement Bureau also identified allegations from the following three areas.” The first two areas were redacted in their entirety and the third was redacted except to note the information came from interviews conducted by the Investigations and Enforcement Bureau.

The hearing itself was cloaked in unusual secrecy for the Gaming Commission, which generally streams all of its meetings and publishes reams of meeting documents on its website.

The hearing was not being streamed by the commission – though there were ample television cameras and seating for the public – and the documents were provided to reporters in a room next to the hearing rather than being posted online. The commission had previously been sued by Steve Wynn, who alleged that it made improper use of information protected by attorney-client privilege. A Nevada judge agreed with that argument before Wynn and the commission reached a legal settlement. The decision not to livestream the meeting was made at the advice of legal counsel.

On Tuesday, the hearing delved into how the company handled a local case of sexual harassment involving an unnamed executive working at the Encore Boston Harbor casino and hotel going up in Everett.

According to a report prepared by Denise Murphy, a partner at Rubin & Rudman who specializes in employment law, the executive acted inappropriately at work. “He often included himself in social gatherings, inserting himself into employees’ lunch plans and insisting that Las Vegas employees dine and participate in weekend activities with him,” read the report. “He made inquiries about employees’ private lives and inappropriately shared information about his own private life. His attempts at jokes were considered crude and were not well received. Mr. [redacted] appeared to have no concept of boundaries with his coworkers or subordinates.”

In one incident, the executive massaged the shoulders of a female employee as she made travel arrangements for him. After learning of that behavior, Wynn executives issued a written warning to the executive.

In a second incident that occurred in July 2017, the same executive went to Starbucks with a different woman and when it came time to pay he reached around and put his hand over her mouth as she attempted to pay, according to the report. Executives conducted an investigation and the executive not only copped to the behavior, but even replicated it.

“To their great surprise, not only did he admit the allegations, but he chose to demonstrate his actions by repeating the behavior on the lone female in the room during the investigation’s interview,” said the report.

After that, Maddox and other executives agreed that the offender should be terminated, according to the report. When a top Wynn lawyer called the executive to discuss the situation, he responded by saying he would meet with the company executives “once he put his pants on,” the report said. His departure was later announced as a resignation.

Wynn handled that executive appropriately, Murphy said. “I think that the company did everything right,” she said.

The commission also heard from Drew Chamberlain on the financial strength of Wynn Resorts in the wake of Steve Wynn’s departure. Chamberlain concluded that Wynn’s “financial stability has not been negatively impacted by the events surrounding the misconduct allegations,” and the company’s financial stability depends on retaining its casino licenses in Massachusetts and around the world.

The commission heard from new board members, many of whom were recruited by Maddox, who generally pledged to improve the company’s practices, and had varying backgrounds and perspectives.

Richard Byrne, a former Deutsche Bank executive, described Wynn Resorts as “one of the best companies” and said he was thrilled to join its board. Dee Dee Myers, another new board member who was President Bill Clinton’s press secretary early in his administration, said Maddox convinced her to join the board by pledging to address the company’s past problems.

Commissioner Gayle Cameron asked Maddox why there weren’t people of color among the new board membership.

“The journey is still ongoing. Diverse thought is really important in a board room,” Maddox said. Satre said the company plans to recruit more board members and expects to add two new directors.

Maddox also outlined a new outlook to make Wynn Resorts a leader in the areas where it has stumbled badly, and said he hopes people can “begin to regain trust in us.”

“We are going to lead on the human resources front,” Maddox said. “The days of a company focused on its bottom line to measure success are yesterday. A company needs to be viewed as a net giver in the communities where it operates.”

Report cites significant, repetitive ‘failures’ at Wynn Resorts

Report cites significant, repetitive ‘failures’ at Wynn Resorts

Gaming Commission says Steve Wynn party to six settlements

WYNN RESORTS maintained a culture of cover-up when it came to allegations of sexual misconduct against the company’s founder, according to an extensive report compiled by Massachusetts gambling regulators.

The report, which was provided to the news media on Tuesday ahead of a multi-day hearing into the company’s actions, provides a window into Steve Wynn’s response to allegations of rape and of how company executives handled those and other charges. The result of the adjudicatory hearing before the Massachusetts Gaming Commission will determine whether Wynn Resorts is suitable and can open its nearly completed Everett casino in June as planned.

Wynn Resorts leadership has changed dramatically since Steve Wynn resigned and sold his shares in the company last year after the allegations came to light. Of the 11 people who needed to qualify as suitable during the Gaming Commission’s initial 2013 investigation into the company, only the current CEO, Matthew Maddox, and Wynn’s ex-wife, Elaine Wynn, are still considered officials who must pass muster with the agency.

“The significant changes in leadership, policies, structure, and internal controls at the company do not erase the fact that the corporate failures revealed in this investigation are significant, repetitive, and reflective of the Company’s historical governance practices,” the report said.

Wynn himself refused to give a sworn interview, and the non-disclosure agreements that Wynn made with accusers may have been an impediment to the regulators’ investigation. Wynn entered six settlements after the Wall Street Journal published a January 2018 story documenting his alleged sexual predation, and parties to settlements with Wynn “may face potential damages claims for very substantial sums, should they make disclosures,” the report said.

The report includes excerpts from an October 2017 deposition – months before the Journal story – where Steve Wynn was questioned about allegations that he had raped a manicurist in his office. Wynn denied the charge even though he made a $7.5 million settlement with the manicurist. In somewhat flippant terms, Wynn in that deposition describes his version of events that the manicurist initiated sex with him and then extorted him.

Wynn told a different story to Elaine Wynn in 2009 when they were in the midst of proceedings related to their second divorce, according to what the former casino mogul’s ex-wife told investigators. At that time, he denied any type of sex occurred.

“He claims that nothing happened, that the only thing that happened, he was foolish enough to be alone with this manicurist in his office area, getting a manicure with no staff around to observe and be a witness to the nothing that happened,” Elaine Wynn told investigators of her April 2009 conversation with Steve Wynn.