Wynn raises the stakes in Las Vegas

There isn’t much moral high ground in Las Vegas and Steve Wynn failed to take it this week. Mr Wynn, who pioneered Vegas’s rise from tawdriness to a luxury family resort – and then extended his empire to Macau… – spent the weekend not only accusing his former business partner of bribing foreign officials but seizing his $2.5bn stake in Wynn Resorts at a substantial discount. By the time Kazuo Okada woke up on Sunday, his equity had vanished.

The Wynn-Okada tussle is an enthralling battle of wills between two hardened Vegas gamblers. It is also a sad reflection of the lack of investors’ rights in Nevada, which takes to deliberate extremes the US tendency to place the interests of corporate directors above those of their shareholders. The irony is that the 70-year-old Mr Wynn may yet be hoist by his own – and his adopted state’s – legal petard.

Mr Okada, accused by Wynn Resorts of greasing palms to smooth the construction of a $2.3bn casino complex in Manila, remains a director of the company. Mr Wynn found it easy enough to dump him as a fellow shareholder but showing that he breached his duties as a director will be tougher, for which Mr Wynn is to blame.

It is a shame that he muddied things in how he chose to strike against Mr Okada, a former slot machine operator with whom Mr Wynn partnered when plotting a return from the hostile takeover of his Mirage Resorts by Kirk Kerkorian in 2000. If he had been fairer, he could have enhanced his reputation.

As it is, instead of looking like a crusader against corruption in Asian gambling – of which there is plenty – Mr Wynn comes across as a brutal infighter who neatly outwitted an inconvenient rival. His stake in Wynn Resorts increased, together with the share price, but his moral authority was diluted.

Mr Okada has serious questions to answer. An internal investigation by Louis Freeh, the former director of the Federal Bureau of Investigation, alleged that he and his associates had made $110,000 in cash payments and gifts to foreign regulators. Mr Okada denies misconduct, describing the accusations as “outrageous”.

The trouble is that Wynn Resorts’ board – on which Mr Wynn and his former wife Elaine sit – ruled on the matter itself. Rather than waiting for Nevada’s regulators to assess the allegations against Mr Okada, it took things into its own hands. It seized his stake at 31 per cent below the share price, offering to compensate him in cash (plus 2 per cent interest) a decade from now.

The board says it had no choice but to act promptly given the seriousness of the allegations. If Mr Okada has breached the Foreign Corrupt Practices Act, which bars US corporations from paying bribes to gain business overseas, it would have been in danger of losing its licences. It also says the terms of the share repurchase were dictated by its articles of incorporation.

Perhaps, but that’s because Mr Wynn devised them, as well as insisting on Mr Okada signing over his voting rights and barring him from selling his stake without Mr Wynn’s approval. When battle was joined, the board decided (with a rubber stamp from Moelis & Co, the investment bank) to discount this illiquid, non-voting block.

In most places, it would rightly be illegal for a board to confiscate the property of a shareholder of whom it doesn’t approve in such a manner. But this is Nevada and these are the deeds of Wynn Resorts, drafted and signed by Mr Wynn in 2002.

Having suffered one takeover, Mr Wynn did his best with his new company to minimise the chances of ever having his authority challenged again. As well as arrogating voting rights, he specified that its directors’ liability “shall be eliminated or limited to the fullest extent permitted” by Nevada law.