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Wynn Resorts, Limited (NASDAQ:WYNN)

February 21, 2012 9:00 am ET

Executives

Matt Maddox - Chief Financial Officer, Principal Accounting Officer and Treasurer

Stephen A. Wynn - Founder, Chairman, Chief Executive Officer, Chairman of Wynn Macau Limited and Chief Executive Officer of Wynn Macau Limited

Robert J. Miller - Director, Chairman of Compliance Committee and Member of Compensation Committee

Kim Sinatra - Senior Vice President, General Counsel and Secretary

Analysts

Joseph Greff - JP Morgan Chase & Co, Research Division

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Carlo Santarelli - Deutsche Bank AG, Research Division

Mark Strawn - Morgan Stanley, Research Division

Harry Curtis - Nomura Securities Co. Ltd., Research Division

Felicia R. Hendrix - Barclays Capital, Research Division

Steven E. Kent - Goldman Sachs Group Inc., Research Division

Operator

Welcome to the Wynn Resorts Conference Call. I will now turn the call over to Mr. Matt Maddox.

Matt Maddox

Thank you. Good morning, everyone. Before we get started, I need to remind everybody that we will be making forward-looking statements on this call, and those statements may or not may not come true. Now I'm going to turn over to Steve to introduce the call.

Stephen A. Wynn

Good morning. I think this is an unusual phone call occasioned by the incidents that took place this weekend when we had a board meeting. It concerns the shareholder of the company, the director; Aruze USA; Universal, the parent company in Japan; and our Director Kazuo Okada. This matter was brought to the attention of the board and brought to the vote of the board because of the actions of the Compliance Committee chaired by Governor Robert Miller. I'm going to introduce Governor Miller, but I would like to remind the people on the call that beside the other distinguished members of the board of Wynn Resorts, Governor Miller himself is probably the most qualified Chairman of a Compliance Committee for a Nevada corporation. Of all the humans that we could have found in the world, this gentleman probably is the most qualified. He was just a Justice of the Peace, he was a District Attorney. He was the Chairman of the National District Attorneys' Association. And then as Lieutenant Governor, fulfilled the last 2 years of the governor's term of former Senator Ryan and then received 2 full terms of 8-year, 4 years a piece, for a total of 10 years as the longest-sitting governor in Nevada history. I don't think any citizen in the history of our state has had more qualifications, more training and more judgment and perspective on issues of compliance or law enforcement than Governor Miller. It is, therefore, my pleasure to turn the meeting and the discussion over to Governor Miller.

Robert J. Miller

Thank you, and good morning to everybody. I'm certain that all of you would like to just skip to the bottom line, but please allow me a few minutes to go through the deliberate and lengthy process that led up to the decision on Saturday, because I think the what and the whens are relative in consideration of the why. This began well over a year ago. In fact, in early to mid-July of the year 2010, the company did an internal investigation for the Compliance Committee relative to the concept of considering business in the Philippines, and that was pursuant to our belief that Mr. Okada, a shareholder and board member had approached Mr. Wynn to suggest the concept of doing business in the Philippines. The reason it came to the Compliance Committee is because the Compliance Committee, under Nevada regulations, has a responsibility of considering anything that might have bearing upon our privileged license. And since this company has a privileged license, the Compliance Committee is structured under the Nevada regulatory authority to self-report anything that might be of interest to them in their ongoing consideration as to the license that we hold, the people that we deal with or anything that might raise questions in their mind. That report raised some questions about whether or not this company should do business in the Philippines. Subsequent thereto, because there were ongoing conversations by Mr. Okada suggesting he was considering doing business in the Philippines, additional reports occurred. In February of the year 2011, in other words, approximately one year ago, one group that was hired to do some follow-up assessment of the risk of doing business in the Philippines uncovered some questions relative to Aruze, Universal and Mr. Okada. Those questions related to associations of Mr. Okada and his company in the Philippines. They related to questions revolving around the usage of some rights provided by those companies to the Philippine government, which were controlled by PAGCOR, the regulatory authority, at least a portion of them were controlled by PAGCOR, and subsequently, some of that rights was diverted for the use of the then Chairman of PAGCOR's sons in their political elections. The license given to Mr. Okada and his company in May of 2010 was characterized by the Filipino press as the midnight deal, and it was granted by the individual whose sons benefited from the utilization of the rights. I'm not suggesting that there was a direct connection or knowledge by Mr. Okada or Aruze at this point in time, but certainly as you might expect with us being a committee assigned a task of investigating whether there's anything needed to be reported to the appropriate authorities, it raised some concerns and raised some eyebrows in our mind.

So on February 24, 2011, just short of one year ago, the Board of Directors on which all members were present, including Mr. Okada, discussed Universal's commitment in the Philippines. We discussed some of these facts. We then advised that the company should not do business in the Philippines. This was, of course, disputed by Mr. Okada, but it was all the other board members suggesting it. We advised Mr. Wynn that it was extremely unlikely that this Board of Directors would have ever approved doing business in the Philippines and suggested to him that he cancel this meeting that had been scheduled with Philippine President Aquino at the request of Mr. Okada, which he did.

In the ensuing months, there were another board meeting on July 28, 2011. At that time, there was a further discussion by the board of Mr. Okada's continued involvement in the Philippines. And at the meeting of the independent directors, we expressed concern to Mr. Wynn and our General Counsel, Ms. Sinatra, regarding possible probity issues attendant [ph] to Mr. Okada and that his involvement in the Philippines might have an adverse effect on Wynn Resorts. We certainly had taken into consideration in account some publications and some documentations from Aruze and the Universal's own websites, in which there were implicit, and sometimes explicit, representations that Wynn Resorts was involved in the deal that Mr. Okada and his company were only solely involved in. Those were misrepresentations, and so that was one of the considerations that brought it to our attention.

At that time in August, we decided that there needed to be further follow-up on the Foreign Corrupt Practices Act and brought in an outside expert to inform all board members of the parameters of the Foreign Corrupt Practices Act. All board members, except Mr. Okada, attended that meeting. We also have a Code of Conduct, which outlines the requirements of being a member of the board and what is suitable and responsible activities on board members. All members of the board, except Mr. Okada, have signed that.

A further investigation indicated that in August of 2011, the questions arose as to the land, which Mr. Okada and his companies had purchased in the Philippines for the purpose of opening the casino. The questions revolved around the individual that had sold the land to Mr. Okada, his potential associations with government officials in the Philippines, the fact that he was subsequently indicted specifically related to that sale, but on the basis of income tax evasion for understating the value of the money that he received, not to suggest that there was any definitive evidence of collusion except that it raised another specter of concern. Additionally, Mr. Genuino, the former Chairman of the PAGCOR Gaming Regulatory Authority, was charged with conduct that resulted in criminal conduct in the Philippines as well.

Then in September, September 27 of last year, the Compliance Committee met again. We discussed the actions of Universal and the casino concession, the indictment of those PAGCOR officials and the investigation of the seller of the land that I outlined just a minute ago. At that time, we had indicated to the board and to Mr. Okada the process that had evolved to date. He reacted in a very negative manner in the boardroom and as is included in the report, the ultimate report with Judge Freeh, which I'll outline more of in a minute, Mr. Okada is listed as saying, in that report, to several of the board members' recollection, that in the Asian market, it is customary to provide gifts to government officials, and that you don't do it directly, you do it through intermediaries. This was in the course of our discussion with him about the Foreign Corrupt Practices Act. And it was frankly a shock as expressed by many of the board members to hear someone suggest that, that would be acceptable or even legal behavior.

Pursuant thereto, at the end of September in 2011 and in compliance with the instructions of the Compliance Committee, General Counsel, Ms. Sinatra, and the Compliance Officer, Mr. Tariq[ph], met with Mr. Okada's attorneys to discuss concerns about the committees had relative to his involvement in the Philippines and it's effect on his ability to remain a member of this Board of Directors. Therefore, Mr. Okada, through his attorneys, a full year ago, had direct knowledge of some of the facts that were outlined, some of the facts that I just related to you were brought directly to the attention of his attorney. So a full year ago, he was aware of the earliest substance of components of our concerns about him doing business and his actions in the Philippines potentially adversely affecting Wynn Resorts.

Subsequent thereto, he had declined to withdraw from the Philippines or withdraw from his involvement with Wynn Resorts, not recognizing any potential for conflict. Because of the serious nature of the materials that we had received and the fact that we felt that it was important to have a complete investigation, the Compliance Committee in the beginning of November of 2011 hired Judge Louis Freeh and his firm. Judge Freeh is the former Director of the Federal Bureau of Investigation. They conducted an interview -- excuse me, several interviews and an investigation up until last weekend. It should be noted that Mr. Okada strongly objected to the concept of hiring Judge Freeh to look into these matters of concern to us.

Judge Freeh made repeated efforts to interview Mr. Okada, however, he would not initially make himself available. Finally, we gave Mr. Okada a deadline saying that we're tired of waiting for time to interview him. The deadline was February 1. At the request of his attorneys, when they suggested that he would be -- make himself available on February 15, we agreed that we would allow that to occur before a final report was completed.

According to Judge Freeh's report, he spoke to Mr. Okada for 7.5 hours in the presence of Mr. Okada's attorney. Following the interview, he informed Mr. Okada that he would be finalizing the report on Friday, February 17, and offer him an opportunity to present any exculpatory evidence prior to that timeframe. He determined that no additional exculpatory evidence was presented, and thus a final report was presented to the committee and ultimately the board on Saturday, February 18.

According to the report, and I will quote portions thereof: First, Mr. Okada, his associates and companies appear to have engaged in a pattern of prima facie violations of the Foreign Corrupt Practices Act.

Second, the prima facie Foreign Corrupt Practices Act violations by Mr. Okada, his associates and companies constitute a substantial ongoing risk to Wynn Resorts and to its Board of Directors, creating regulatory risk, conflicts of interest and potential violations of his fiduciary duty to Wynn Resorts. Finally, Mr. Okada's documented refusal to receive Wynn Resort requisite SEPA training provided to other directors, as well as his failure to sign in the acknowledgment of understanding of Wynn Resort's Code of Conduct increases this risk going forward.

Third, the report says despite being advised by the Wynn Resort's Board of Directors and Wynn Resort's attorneys on the strict U.S. anti-bribery laws, which govern Wynn Resorts and its board, Mr. Okada strongly believes and asserts that when doing businesses in Asia, he should be able to provide gifts and things of value to foreign government officials whether directly or by the use of third-party intermediaries or consultants.

Fourth, Mr. Okada, his associates and companies appear to have engaged in a long-standing practice of making payments and gifts to his 2 chief gaming regulators at the Philippine's Amusement and Gaming Corporation, PAGCOR, who directly oversee and regulate Mr. Okada's Provisional Licensing Agreement to operate in that country.

Five, Mr. Okada, his associates and companies have arranged and designed his corporate gaming business and operations in the Philippines in a manner which appears to contravene Philippine constitutional provisions and statutes that require 60% ownership of Philippine nationals, as well as Philippine criminal statute. I might add, by the way, that in trying to ascertain whether the appropriate filings had been rendered to the Philippine government relative to this land and these provisions I just mentioned, access to Mr. Freeh was denied, and that access was signed -- that denial was signed by a Filipino government official who was one of the individuals that there is evidence indicating was, his expenses were paid for in the Wynn Macau visit by Mr. Okada and his companies.

Six, Mr. Okada has stated that Universal paid -- this is Mr. Okada's own statement -- that Universal, his company, paid the expenses, or a portion thereof, related to the then PAGCOR Chairman Genuino's trip to Beijing during the 2008 Olympics. I repeat, those are his own words to Judge Freeh.

After this hearing, Judge Freeh -- after hearing Judge Freeh's report, the board consulted with 2 prominent gaming law firms here in the state of Nevada. Each firm recommended that based upon the report, the board had substantial ground to find Mr. Okada, Universal and Aruze unsuitable. I would point out that prior to that occurring, the Compliance Committee exercised its function in determining that there were sufficient concerns that this information should be presented to the appropriate regulatory authorities in Nevada and in Macau, where our licenses are held, and to other governmental officials that oversee Foreign Corrupt Practices Act. That's the full extent -- and third, that we would provide a report to the Board of Directors so that they could determine as a board, the question of unsuitability and what actions to take if unsuitability was determined. That's a board function, not a function of the Compliance Committee.

So the board was then provided a copy of Mr. Freeh's report. After receiving it, reading it and then receiving the advice of the 2 Nevada legal expert firms, unanimously concluded that Mr. Okada, Universal and Aruze were, in fact, unsuitable and posing an ongoing risk to the company, Wynn Resorts, it's shareholders and to our reputation in general.

I think it's important for me to give you little background on the provisions of the company's Articles of Incorporation, which have been in place since 2002 because they define unsuitability as follows, and I'll quote: An unsuitable person shall mean a person who in the sole discretion of the Board of Directors of the corporation is deemed likely to jeopardize the corporations or any affiliated companies application for, receipt of approval for, rights to the use of or entitlement to any gaming license. So it's not just existent licenses, it's prospective licenses.

The board based on the Freeh report then and after consulting with these experts found that he met this standard and that his companies did as well. Having thus found Mr. Okada, Universal and Aruze unsuitable, the board was under obligation to take action to protect the corporation. Specifically, under Nevada sections or under Sections 5.040 and 5.045 of the Nevada gaming regulations, which clearly establish the obligation of licensing to self-police.

So it was a recommendation of both Gaming Council that it was not sufficient for the board to simply turn the matter over to Nevada regulators, rather Nevada law also requires the company to use all available tools to avoid any association with an unsuitable person. We have such tools in our Article of Incorporation. Specifically, it says that after you determine the person to be unsuitable or in this case an entity, because the stock is owned by Aruze, this shall be subject to redemption out of funds legally available by action of the Board of Directors to the extent either required by the gaming authority making the determination or to the extent deemed necessary or advisable by the Board of Directors. The advice of the gaming experts was that we would be scrutinized based upon our decision or indecision as to taking action. Since we have the tool to take action, our license would be put under a cloud if we were to not take action waiting for someone else to do so. It will potentially jeopardize not only our existent licenses but clearly could be utilized as a sign or our unsuitability for prospective licenses in any other jurisdiction.

So it was the recommendation that we must avail ourselves with these tools and mitigate the risk to the company's current and future licenses. The terms for redemption are outlined, and I'm going to turn to Matt Maddox, the CFO of the company, to outline the process redemption, once that determination have been made.

Matt Maddox

Thank you, Governor Miller. The redemption process is clearly outlined in Articles of Incorporation, which as Governor Miller stated [indiscernible] company exception. Following the finding of unsuitability, the articles provide for redemption at fair value of the security to be redeemed. The company engaged an independent financial adviser, Moelis & Company, to assist in the fair value calculation. And the company and Board of Directors concluded that the discount of approximately 30% to the current trading price was appropriate, because of various restrictions on most of the shares under the terms of an existing stockholder agreement. The articles state that the redemption price may be paid in cash, by promissory note or a combination of both. However, if it is a promissory note, the articles require a note with the term up to 10 years, paying interest at 2% per annum. Accordingly, the company has issued a 10-year $1.9 billion promissory note in consideration for the redeemed shares. .

To be clear, the company has lawfully executed redemption at fair value and the 24.5 million shares are no longer outstanding. The accounting impact is quite simple. The impact on the balance sheet is as follows: Long-term debt increases by $1.9 billion, and that is at the Wynn Resorts level, and shareholder equity will be reduced by that same amount.

With that, I'll turn it back over to you, Governor.

Robert J. Miller

Before I open it to questions, I would like to also clarify one of the reasons I gave you a timeline of all this is to show you knowledge of Mr. Okada. And I think to put into perspective, there've been previous stories in which attribute to Mr. Okada, the decision to file litigation relative to the records of this company and, specifically, an SEC request relative to the decision of the company to provide a donation to the University of Macau.

If you listen to the timeline carefully, you would be able to ascertain that when these actions were initiated by Mr. Okada, it was long after he was personally aware of this ongoing investigation and the serious nature in which this company was approaching it. As it relates to the gift to Macau, that was vetted in advance by outside experts relative to the Foreign Corrupt Practices Act. At the time the board considered this matter, Mr. Okada was present. He did not object or raise any objections to the concept of giving money to the University of Macau. His objections and concerns were the fact that it was over a 10-year period. He suggested it will be over a 5-year period. In fact, when the money was -- when the announcement was made and the initial donation was delivered, at his request, Mr. Okada was personally present and in his insistence, he was included in the photographs handing over the money. This company maintains a very high standard as it relates to compliance with the laws and the regulations upon which our licenses are granted, and we take very seriously any person or entity associated with our organization that could be guilty or could create serious harm to continue our operation and business.

So based on the evidence, we took the steps that were necessary to protect the company, the company's employees and its shareholders, and we're going to continue to run our business in compliance with the Code of Conduct and the laws of the jurisdictions in which we operate.

At this time, I would ask the operator to open the lines for a few questions. So please restrict your questions to the subject to this call.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Joe Greff with JPMorgan.

Joseph Greff - JP Morgan Chase & Co, Research Division

A few questions here, what law firms were involved? Second question is, when did you disclose these findings or suspicions to relevant third-party, regulators, SEC, Department of Justice, et cetera? And then my final question is, will the Freeh report be disclosed publicly for investors, and if so, when?

Kim Sinatra

This is Kim Sinatra. As far as law firms, Wachtell Lipton from New York has been advising the company on the corporate matters. With respect to gaming law, both Brownstein Hyatt and Gordon Silver were engaged by the company and the independent directors. With respect to the litigation, Bob Shapiro from Glaser Weil, Pisanelli from Pisanelli Bice, and Gibson Dunn has been the company's outside counsel on FCPA matters led by Debra Yang in the L.A. office and Kelly Austin [ph] in Hong Kong. And John Lane provided some advice to our independent directors through this process. As far as disclosure to regulatory authorities, do you want to handle that Governor Miller?

Robert J. Miller

Well, the minutes of Compliance Committee meetings are provided to regulators at all times in which they are prepared. And so the gaming regulators in Nevada were aware that there was ongoing concerns and investigations. I believe but I can't say with certainty, I was told at least, that at some point in time, after we made it clear to Mr. Okada's attorneys what was going on, their own minutes related in their compliance that they knew that there was an investigation. So the Gaming Control Board had made periodic inquiries as to the status of it, conversations were had with them about the progress and yet, with their approval, they said they would wait until we had a completed report from Judge Freeh. That report has been provided to them. Our counsel in Macau has made the gaming authorities in Macau aware of it and as far as other authorities, we are, since it's been a holiday weekend, we are in the process of ascertaining exactly whom, through the advice of our Foreign Corrupt Practices Act counsel, to provide that information to as well. We suspect the Judge Freeh might have some ideas as to where that should go. And as to the Freeh Report, as you are aware in earlier releases, civil litigation was initiated by the company questioning a breach of fiduciary responsibilities by Mr. Okada and his capacity as the board member. Filed with that suit in the eighth judicial district court in the State of Nevada is a copy of the Freeh Report.

Operator

Your next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Question that I've gotten from a lot of investors is kind of what's the mechanism recourse here from the other side? And so just wondering if, legally, you could provide any color whatsoever on, is it possible for the other side to either try and get an injunction against the actions that have been taken as it relates to the securities that have been issued already and the stocks that's been retired? And then secondarily, just kind of what -- how other regulators might play into that recourse that he might have as well?

Kim Sinatra

This is Kim Sinatra. We're not going to engage in a lot of speculation as to what people might do, but I think people should be very clear that the action and the redemption occurred on Saturday. The shares have been canceled. And so whatever action would be appropriate would probably not include an injunction because the actions has already occurred.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

And, Kim, then to clarify, can the valuation as a secondary matter be contested in any fashion as obviously it was a fairness opinion that was provided by an outside party, but that's a subjective judgment, is there an ability to contest that legally?

Kim Sinatra

You can contest most things in the U.S. these days, so probably.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

And just lastly, would the jurisdiction be the State of Nevada?

Kim Sinatra

It's a Nevada charter that is being administered by a Nevada corporation. Aruze USA is also a Nevada corporation, so it certainly seems appropriate that Nevada is the jurisdiction for adjudicating these matters.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

That's very helpful. And then one last big picture strategic question but just the company's thoughts on the impact for future gaming licenses as it might relate to ongoing development in Macau or, particularly, in Japan as it might relate to these matters, any thoughts on that from Steve or Matt would be helpful.

Robert J. Miller

Well, I will reply that as I indicated earlier, the advice of Nevada counsel that we exercise all actions we have the lawful authority to do was related to not only our existing licenses and how it would be viewed, but the prospects of our licenses in any other jurisdiction that we might want to pursue further investments and/or other opportunities that occur. I won't speculate on what those can be because all of you can. If we were to have waited and not taken action while having the ability to do so, it would cast a cloud over us. We would be in a situation saying that we have declared this company, Aruze, and it's -- our one board member, Mr. Okada, to be unsuitable. And yet we allow them to keep stock and stay on the board for an indefinite period of time while having the ability to act. We chose to act because not only was that the advice of counsel, but that's clearly what's in the best of interest in this company and its shareholders.

Operator

Your next question comes from the line of Carlo Santarelli with Deutsche Bank.

Carlo Santarelli - Deutsche Bank AG, Research Division

Governor, would you be able to outline for us maybe a timeline over the next call it several weeks, several months of maybe what we could expect to see, or talk to us a little bit about how you would foresee these process evolving?

Robert J. Miller

I think when Johnny Carson retired, that was the end of anyone's ability to foresee the future, and I didn't have that ability even when Johnny Carson was doing the Tonight Show. There's litigation enacted by this company, as well as the other litigation that I mentioned that Mr. Okada had initiated previously. This is kind of unrelated to these facts. They would -- I would assume respond to that litigation. And I've been around the court system long enough to know that it's impossible to predict how long some thing's going to take for total resolution. So I'm sorry, I can't tell you. You'll have to get an expert on, which I'm not qualified to do to tell you how long it would take to have something resolved in the legal system.

Carlo Santarelli - Deutsche Bank AG, Research Division

So could I ask then, from your standpoint, is this issue resolved from Wynn Resort's standpoint?

Kim Sinatra

Well, you're asking if there's any further action required in the company's part in order to affect this redemption. The answer is, no.

Operator

Your next question comes from the line of Mark Strawn with Morgan Stanley.

Mark Strawn - Morgan Stanley, Research Division

One question. I was curious if the Nevada Gaming Control Board has the right to decide whether Okada is suitable to hold the promissory note? And is there's any way they could find him unsuitable to hold that, and would that require you to restructure the way this transaction was structured?

Robert J. Miller

The Nevada gaming authorities have virtually unlimited ability to make any determination they deem fit to any person or entity that has licenses or subject to the laws and regulations of Nevada gaming. So while I can't answer what they will do, they clearly have the ability to review all of the facts that have been outlined here, plus they have the ability to review the -- as soon as they [ph] hold. And that's within their determination. They've indicated, I believe, over the weekend that they will conduct their own investigation, and we'll have to wait and determine what they decide they want to do.

Mark Strawn - Morgan Stanley, Research Division

Okay. Is it fair to say you've kept them abreast of the ongoing investigation and the findings, et cetera?

Robert J. Miller

It is our obligation as a privileged licensee to keep the Gaming Control Board aware of anything that might raise concerns. But, as I said, they were aware through our minutes and apparently even through some minutes of subsequently of Aruze that this was going on. They'd asked us along this process. So, yes, we've made them generally aware of the fact that we were conducting investigations. The earlier investigations, I outlined some of the facts therein that raised their eyebrows and concerns. Judge Freeh's investigation is much more substantive and more detailed as you might expect from somebody who ran the FBI. And we have made them aware of the fact of his investigation and have sent them a copy of his investigation at this point.

Operator

Your next question comes from the line of Harry Curtis with Nomura.

Harry Curtis - Nomura Securities Co. Ltd., Research Division

First of all, you have not gotten the shares from the transfer agent. Is that right?

Kim Sinatra

The transfer agent was notified on Saturday evening/Sunday morning that the redemption had occurred. And they're obligated to take whatever action is necessary. The articles are really clear, herein providing that the shares are deemed canceled. So we feel pretty comfortable that we're covered in that regard.

Harry Curtis - Nomura Securities Co. Ltd., Research Division

Has there been any precedent where shares have been canceled and there's been -- they've either been delivered either with or without some kind of a lawsuit that attempts to stay that delivery?

Kim Sinatra

I'm not aware of any such precedence. Those shares were certificated shares and not freely tradable anyway, so they fall into a bit of a special bucket.

Harry Curtis - Nomura Securities Co. Ltd., Research Division

Okay. And then, Matt, can you just walk us through the math behind the 30% discount, why that's the right number?

Matt Maddox

So we engaged Moelis & Company to provide a evaluation and also fairness opinion. And they focused on a variety of factors, including the restrictions in the shareholder agreement. As Kim pointed out, they made these securities not freely tradable. And I don't want to get into the details of that but I think any of you can do your own analysis and can probably see the merit in this discount.

Harry Curtis - Nomura Securities Co. Ltd., Research Division

And then last question is and this kind of a circumstance, is one fairness opinion typical or, generally, are there more?

Matt Maddox

So we feel very comfortable with Moelis & Company and their fairness opinion. This circumstance -- I don't know of once fairness opinion or more is the norm, but typically you would see a fairness opinion from a very reputable institution, which we have received.

Operator

And your next question comes from the line of Felicia Hendrix with Barclays Capital.

Felicia R. Hendrix - Barclays Capital, Research Division

Governor Miller, other than through the investigation, have you had any contact with the regulators at PAGCOR? And as Okada attempts to find defense in this, I'm just wondering how relevant it is if he can solicit support by them in this?

Robert J. Miller

I'm sorry, have we had any contact with the regulators at PAGCOR?

Felicia R. Hendrix - Barclays Capital, Research Division

Yes.

Robert J. Miller

In Judge Freeh's report, he indicates that he made an effort to obtain information from PAGCOR relative to the filings seemingly required under Filipino law to the license granted to Universal and Mr. Okada. And the question under their law where there's a possible violation of their requirement for a specific percentage of Filipino ownership and whether that had been subverted. He was not provided that information, I said earlier, by the Filipino authorities. And as I said, the individual that declined -- signed the letter of declination provided is one of the individuals receiving the comps and other gifts from Universal, Aruze and presumably Mr. Okada. I might point out that in Judge Freeh's report, you will find that there, as he outlines potential violations or prima facie evidence of the violations of the Foreign Corrupt Practices Act, he doesn't just list 1 or 2 or 3 or 4 or 5 or 6 or 7, and I could go on and on. He lists 37 separate instances. That's exclusive of Mr. Okada's own admission that he and his company paid for part of the cost of Mr. Genuino attending the Beijing Olympics.

Operator

Your next question comes from Steven Kent with Goldman Sachs.

Steven E. Kent - Goldman Sachs Group Inc., Research Division

Just 2 questions. Just to go back on this, I guess, first, I'm not an attorney, I don't think many of us are on the phone, but doesn't the board or the people who are investigating have the responsibility to tell the Department of Justice, the FBI, the SEC if they even have some questions about an FCPA violation? Don't you need to tell those authorities almost immediately? It just seems a long time to wait before telling some of these other regulators beyond just the Nevada gaming regulators? And then the second thing is, which I think somebody is trying to get at earlier about strategy, one of the advantages of being affiliated with Mr. Okada was that if you went into Japan or try to bid on a project in Japan, if there ultimately was an opportunity there, that having the relationship with him would facilitate that, would actually open up the doors a little bit more. How do you now think about Japan as an opportunity, if and when the legislation does pass and put you in a competitive position to get in there?

Kim Sinatra

Steve, this is Kim Sinatra. With respect to the first part of notification is, we've had Foreign Corrupt Practices experts, including Judge Freeh and our regular outside counsel on this from the beginning, and we are cognizant of our reporting obligation, and we intend -- we feel like we have fulfilled them and we intend to continue to fulfill them.

Robert J. Miller

Let me just interject, I've given to you a 1.5-year timeline and perhaps there a possibility of misconstruing the evidence of the Foreign Corrupt Practices Act violation. The specific evidence and these 37 violations only came to our attention very recently as Judge Freeh pursued this investigation, and we awaited only the interview with Mr. Okada to ascertain whether or not there was any refutable evidence, which Judge Freeh concluded, did not occur. So we have had the advice of outside counsel, but we didn't provide it to the federal authorities because we didn't know it, and it was really a short window of time in which we've known of the instances, which clearly provide prima facie evidence to quote Judge Freeh of this. And somebody else can answer the possibility of investing in Japan, but I suspect that based on the evidence that we've uncovered or we could go in Japan with Mr. Okada and Universal and these facts as outlined, I don't see how that would [indiscernible] our benefit.

Matt Maddox

We shouldn't be confused. Wynn Resorts is the premier high-end integrated resort developer both in Las Vegas and in Macau. And our credentials speak for themselves. So any new opportunities that come up, we have to make sure that our reputation is pristine and our product will speak for itself. That's our strategy, and that's what we're going to continue to do going forward.

Operator

We have run out of time for questions. I'll now turn the floor back to management for any closing remarks.

Stephen A. Wynn

It Steve Wynn again. Thank you Governor Miller for the narration and the clarify -- I hope what will be for all interested party's clarification. We will, of course, from time to time as required by law make any other declarations or filings as the cases proceed. Thank you all for your attention, and good morning.

Operator

Thank you, everyone, for joining today's conference call. You may now disconnect.

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Source: Wynn Resorts Ltd. - Special Call
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