A shareholder lawsuit alleging that Wynn Resorts’ board and former CEO Steve Wynn breached their fiduciary duty was filed Wednesday by a pension group in Massachusetts.
The lawsuit follows the resignation late Tuesday of the 76-year-old Wynn as chairman and CEO. The casino mogul left the Las Vegas-based company after The Wall Street Journal reported on Jan. 26 that Wynn engaged in a “pattern of sexual misconduct” in the workplace and that he paid a $7.5 million settlement to a manicurist who allegedly was pressured into having sex with him in 2005. Wynn has denied the allegations.
Despite news of the lawsuit, Wynn shares were up 7.8 percent Wednesday afternoon.
Analyst Tuna Amobi of CFRA Research said the gains represent a relief rally of sorts because Wynn’s departure lifts a cloud around questions and clears some uncertainties around gaming licensing agency probes.
The suit was filed in District Court in Clark County, Nevada on behalf of the Norfolk County Retirement System, a current stockholder of Wynn Resorts. The company is listed as a “nominal plaintiff” in the complaint. A nominal plaintiff is considered one with a technical connection to a dispute.
A Wynn Resorts representative declined to comment on the lawsuit.
According to the complaint, the plaintiff is seeking a jury trial. Amobi said it’s possible the lawsuit may ultimately get settled before a trial.
The complaint seeks unspecified financial damages for injury and losses sustained in connection with alleged breaches of fiduciary duty, abuse of fiduciary power and the alleged sexual harassment by Wynn. It claims “Wynn knowingly and intentionally breached his fiduciary duties by engaging in a pattern of intentional egregious misconduct and violations of law involving Wynn Resorts.”
The lawsuit also claims “knowing and intentional breaches of fiduciary duty by all members of the [Wynn Resorts] board.”
“The board knowingly turned a blind eye to allegations of patently egregious misconduct by Mr. Wynn involving the company, taking no action to protect the company and its suitability for regulatory compliance and to discharge the directors’ known fiduciary duties to the company to do otherwise until the WSJ report shed light to the public, and even then the board is merely conducting an internal investigation,” the lawsuit says.
The complaint claims that “a majority of the board members are beholden to Mr. Wynn or have a close personal relationship with Mr. Wynn and have a history of acquiescence to Mr. Wynn’s. This lack of independence is further evidenced by their knowing and intentional failure to investigate and knowing and intentional concealment of alleged egregious misconduct involving the company which was obviously in violation of their duties as fiduciaries.”
The misconduct allegations against Wynn also led to investigations by gaming regulators in Nevada, Massachusetts and Macau. The lawsuit claims the Wynn Resorts “board continued to approve of licensing applications to gambling authorities that omitted Wynn’s conduct as the board continued to take no action to investigate the allegations of egregious misconduct involving the company.”
At the same time, the complaint alleges that the compensation and benefits paid to Wynn and the company’s directors during their fiduciary misconduct enriched them at the expense of the company. Wynn continues to own about 12 percent of Wynn Resorts stock.
Shares of Wynn Resorts stock about fell 10 percent on the day the Journal reported the allegations and 9 percent the next trading day.