Lawsuit by Wynn Resorts Shareholder Regarding Alleged Sexual Misconduct Remains Valid
A lawsuit brought by shareholders against Wynn Resorts executives, alleging they concealed Steve Wynn's reported sexual misbehavior, can advance as a class-action suit, a federal judge ruled.
Judge Andrew Gordon didn't pass judgment on the lawsuit's accusations. However, by authorizing it to represent a class, he opened the door for any individual who bought or owned Wynn Resorts shares from Feb. 28, 2014, to Jan. 25, 2018, to join the case.
The suit targets Wynn Resorts Ltd and several current and past executives, including former CEO Matt Maddox and current CEO Craig Scott Billings. It's among several shareholder lawsuits filed post-allegations against Wynn.
On Jan. 26, 2018, The Wall Street Journal published an article titled "Many Recount Steve Wynn's Pattern of Sexual Misconduct in Las Vegas." The article suggested that Wynn coerced Wynn Resorts employees into having sex with him and had reportedly paid a $7.5 million settlement to a woman claiming to be pregnant with his child.
Wynn, who stepped down as chair and CEO later that year, consistently denied these allegations.
Shares Plummet
On the day the article was released, the Massachusetts Gaming Commission announced a regulatory review of the company. With Wynn constructing the $2.6 billion Encore Boston Harbor during the review, investors worried about the possible revocation of its license. Following the article's publication, more women came forward with allegations, causing the share price to plummet, as per the lawsuit.
Ultimately, the company's share price dropped $20.31, or 10.12%, in a single day.
Massachusetts regulators imposed a $35 million fine on Wynn Resorts for not disclosing the accusations and for the existence of the $7.5 million settlement, but permitted the company to retain its license.
‘Steep Decline’
"Owing to Defendants’ misdeeds and omissions, and the dramatic decline in the value of the Company's securities, Plaintiffs and other Class members have incurred significant losses and damages," the complaint stated. "[...] As the senior managers and/or directors of Wynn Resorts, the Individual Defendants were aware of the company's internal affairs details."
The plaintiffs cite multiple statements and press releases issued by Wynn Resorts prior to the WSJ expose. These included references to the company's Code of Business Conduct and Ethics, which declared that "all reported violations of the Code will be taken seriously and promptly investigated."
In his 27-page ruling, Judge Gordon pointed out that a Wynn Resorts press statement post-WSJ article denied the allegations. Yet, a subsequent barrage of calls to the Nevada Gaming Control Board and Las Vegas Metro Police about Wynn's alleged behavior was "adequately linked to these denials to support an inference of price impact."
The lawsuit seeks monetary damages, interest, legal fees, and additional costs.
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