Derivative Lawsuit Alleges Board Failed to Protect Company, Employees Against Longstanding Pattern of Sexual Abuse and Harassment
New York State Comptroller Thomas P. DiNapoli today announced that, as Trustee of the New York State Common Retirement Fund, he has filed a legal action against officers and directors of Wynn Resorts Ltd. The derivative action alleges that certain officers and directors were aware that former CEO Stephen Wynn repeatedly made unwanted sexual advances towards employees and pressured employees to perform sex acts, yet failed to investigate or hold him accountable.
"These board directors and officers were duty-bound to protect employees and the company, yet they failed to confront allegations of predatory behavior," DiNapoli said. "We are asking the court to hold accountable the company officers and directors who allowed this behavior to go unchecked. The deeply disturbing revelations underscore that this board was loyal to Mr. Wynn at the expense of the safety of the company's employees and the company's shareholders."
A derivative lawsuit allows shareholders to take legal action on behalf of a corporation when the company's officers or directors have not met their obligations as fiduciaries of the company. Among its requests for relief, DiNapoli's lawsuit seeks to have Wynn Resorts' take "necessary actions to enhance the Company's governance to comply with applicable laws and to protect Wynn Resorts, its employees, and its stockholders from repeating the harms described" in the complaint.
The lawsuit alleges that the Wynn Resorts board knew of serious allegations against Mr. Wynn by, at the latest, March 28, 2016, when those allegations surfaced in litigation involving the company and Elaine Wynn (former board member and Mr. Wynn's ex-wife). According to the lawsuit, the board's failure to act on this and other reports of Mr. Wynn's pattern of sexual abuse and harassment of his employees was a breach of their fiduciary duties to the company. Moreover, because gambling is a heavily regulated industry that requires a showing of "suitability" to obtain and maintain a gaming license, the board's concealment of allegations against Mr. Wynn puts the company's gaming licenses in jeopardy.
Mr. Wynn resigned in response to public pressure following a published report, based on interviews with more than 150 witnesses, which detailed his history of sexual abuse and harassment. Wynn Resorts' stock value plummeted in the wake of the revelations and the company faces mounting lawsuits, the possible loss of its gaming licenses, and other legal and regulatory sanctions.
The full text of the complaint filed in District Court in Clark Co., Nevada can be read here.
As of January 31, 2018 the Fund held 183,800 shares in Wynn Resorts with an estimated value of $30,435,442. The Fund will vote its shares against all incumbents and all insiders nominated to serve on Wynn Resorts' board at the company's annual meeting.
About the New York State Common Retirement Fund
The New York State Common Retirement Fund is the third largest public pension fund in the United States with estimated assets of $209.1 billion as of Dec. 31, 2017. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. The Fund has consistently been ranked as one of the best managed and best funded plans in the nation. The Fund's fiscal year ends March 31, 2018.
The press release can be viewed here.
Cohen Milstein Sellers & Toll PLLC represents the New York State Common Retirement Fund in this derivative action.