When you spend $2.6 billion on a resort casino, what’s an extra $35 million?
That’s the fine Massachusetts regulators hit Wynn Resorts with for the actions of former executives who covered up sexual misconduct accusations against the company’s founder and onetime CEO, Steve Wynn.
It’s a lot of money, but the penalty will ultimately be a rounding error, compared with the profits the Everett casino and hotel will produce in the years to come.
The Massachusetts Gaming Commission spent 15 months investigating Wynn Resorts and weighing whether it should be allowed to keep its state gambling license after allegations of inappropriate sexual relationships and rape were made public in The Wall Street Journal in late January 2018.
In a 54-page report released Tuesday, the commission concluded there was “no substantial evidence” that Wynn Resorts or key executives “willfully provided false or misleading information” during or after the licensing process for the company’s Everett casino. The commission said it arrived at that decision despite being “profoundly disturbed” by the Las Vegas company’s “repeated systemic failures and pervasive culture of non-disclosure.”
Wynn Resorts will keep its license to print money, but must pay for an independent monitor “to conduct a full review and evaluation of all policies and organizational changes adopted by the company.”
The company’s board of directors must also provide training in leadership development and other executive skills for Matt Maddox, who took over as chief executive after Steve Wynn resigned just weeks after the Journal story was published.
Neither stipulation is very onerous.
The commission’s report said that under Wynn and his management team, the company’s “corporate culture of the founder-led organization led to disparate treatment of the CEO in ways that left the most vulnerable at grave risk.” But since Wynn Resorts purged its C-suite and boardroom, and there was no evidence that Maddox knowingly withheld information, the commission determined it did not have grounds to pull the license or demand that Maddox step down.
Still, regulators fined Maddox $500,000. His total compensation last year was $17.1 million.
“The Commission concluded that Mr. Maddox has, at critical junctures, demonstrated questionable judgment and other considerable shortcomings in many facets of his responsibility as CFO, President, and CEO. The majority of the Commission determined, however, that these shortcomings bear primarily on his competence, but not his suitability.”
Hence the training, I guess.
The Nevada Gaming Commission also probed Wynn Resorts’ handling of its former CEO’s behavior. The company was fined $20 million, a record for the commission. It’s not a surprise that the hometown gambling cops went easy of one of their biggest corporate citizens.
Yanking Wynn Resorts’ Massachusetts license was never feasible. The casino is nearly built, and it will provide thousands of jobs and millions of dollars in tax revenue. No buyer would have offered it at a price the company would have accepted.
Without that remedy, should the Massachusetts commission have called for Maddox to go?
Last month, I wrote that the CEO needed to step down, and the commission’s report said a minority of its members thought so, as well. I also argued for a $100 million fine — to take a real bite out of the company’s bottom line and send a clear message that Massachusetts will be an aggressive gaming regulator.
All told, the Steve Wynn debacle cost the company $55 million in fines, or almost 10 percent of last year’s net income. There are also outstanding lawsuits against the company and its board, lawyers’ fees, and damage to its reputation. All are manageable.
The commission’s decision was well-considered, but too timid.
The house won. It always does in the gambling world.