High Stakes And Higher Scandals: Inside Wynn Resorts' Legal And Ethical Crisis

• From 2012 to 2016, Wynn Resorts highlighted Stephen Wynn as key to the brand’s success, citing his industry experience and role in creating iconic casinos. 
• In January 2018, the Wall Street Journal reported sexual misconduct allegations against Steve Wynn, based on interviews with over 150 current and former employees. 
• The Wall Street Journal article triggered investigations by the Massachusetts and Nevada Gaming Commissions, which found Wynn guilty of misconduct and involved senior officials in a cover-up, leading to $55 million in fines.
• Wynn Resorts’ share price dropped 18% in just a few days after the news about the scandal was published.
• Investors sued Wynn Resorts for failing to disclose Stephen Wynn's misconduct and related suits.
• Wynn Resorts has agreed to pay a $70 million settlement to shareholders to resolve the lawsuit. Affected investors can now file a claim to receive their payouts.

Overview

Stephen Wynn founded Wynn Resorts Ltd WYNN in 2002 and was highly regarded in the casino industry for his role in developing iconic casinos like the Bellagio and Mirage. His success was crucial to the company, attracting high-end clients with his industry expertise. However, in 2018, a Wall Street Journal article exposed sexual misconduct allegations against Wynn, dating back to the 1990s. After the disclosures, Wynn Resorts’ share price plummeted 18% in just a few days in January 2018, hitting investors hard and sparking lawsuits. Recently, the company ultimately agreed to pay a $70 million settlement to affected investors.

Stephen Wynn: A Visionary in High-End Casino Development

Stephen Wynn was a highly respected figure in the casino industry, playing a key role in developing some of the world's most famous casinos, including the Mirage, Treasure Island, Bellagio, Wynn, and Encore in Las Vegas. Wynn was also politically influential, serving as the finance chairman for the Republican National Committee.

By January 2018, Wynn owned nearly 12% of Wynn Resorts, valued at $2.4 billion. The company consistently expressed confidence in his leadership, highlighting his deep industry knowledge, experience, and ability to draw high-end clients. For years, he was seen as the driving force behind Wynn Resorts.

The Wall Street Journal Exposes Allegations Against Stephen Wynn

In January 2018, the Wall Street Journal published an article about Stephen Wynn's sexual misconduct, based on interviews with over 150 current and former employees. One allegation came from a manicurist at Wynn Las Vegas, who claimed he raped her and forced her to undress and lie on a massage table in his office. She later received a $7.5 million settlement.

Another former massage therapist accused Wynn of exposing himself during private appointments and pressuring her to perform sexual acts. He paid her $1,000 in cash after each session.

In the early 1990s, Dennis Gomes, a former executive at the Golden Nugget, reported frequent complaints about Stephen Wynn's sexual harassment of female employees, revealing a troubling pattern of misconduct. 

Initially, Mr. Wynn denied the allegations, saying, "The idea that I ever assaulted any woman is preposterous." The company also denied the claims and said they were made up by Wynn's ex-wife, Elaine Wynn.

Findings from the MGC and NGC Investigations

After the Wall Street Journal revelations, authorities like the Massachusetts Gaming Commission and Nevada Gaming Commission started investigations into the sexual misconduct allegations. As a casino operator, Wynn Resorts is closely regulated, and failing to meet standards could risk its gaming license and harm its reputation. Both commissions found Stephen Wynn guilty of misconduct and revealed that senior executives knew about and hid the issues. 

As a result, Wynn Resorts faced hefty fines. The Nevada Gaming Commission imposed a record $20 million fine, while the Massachusetts Gaming Commission fined the company $35 million. Additionally, the MGC fined Wynn Resorts’ president, Matthew Maddox, $500,000.

Stock Market Reaction and Investor Lawsuit

In the days following the publication of the WSJ article, the share price of Wynn Resorts fell by 18%. 

Many market analysts reported that Stephen Wynn's departure would significantly impact Wynn Resorts' brand image and cast doubt on its future plans. 

Corporate bookings, a major part of Wynn Resorts’ business, were impacted as big brands avoided partnering with Wynn hotels to steer clear of reputational risks. 

"If I were PepsiCo, I'd stay away right now," said John Blank, chief equity strategist at Zacks Investment Research. 

Following the allegations, the NBA severed ties with Wynn Resorts, and concerns grew about the company potentially losing its gaming licenses in Nevada, Massachusetts, and Macau.

Moreover, after the scandal and the sharp stock drop, investors filed a lawsuit against Wynn Resorts and its senior management, claiming they hid information about Stephen Wynn's sexual misconduct and internal problems.

Resolving The Case

To resolve the lawsuit from investors, Wynn Resorts has agreed to a cash settlement of $70 million. If you invested in Wynn Resorts, you may be eligible to claim a portion of this settlement to recover your losses.

Wynn Resorts has made strides in rebuilding its brand and expanding globally since its 2018 scandal. The company secured its first UAE gaming license for a luxury resort slated to open in 2027, reduced debt by $1.2 billion, and initiated a $1 billion share buyback program. Under the leadership of CEO Craig Billings, Wynn has emphasized restoring its reputation and driving long-term shareholder value. However, its stock remains significantly below pre-scandal levels, trading at $93 in November 2024 — a 51% drop compared to $192 in 2018.