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.
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.