LAS VEGAS - The board of directors of Las Vegas-based Wynn Resorts is facing mounting lawsuits from shareholders who allege they breached their fiduciary duties when they ignored what has been described as a longstanding pattern of sexual abuse and harassment by the company's founder, Steve Wynn.
The latest known "derivative lawsuit" filed in state court in Las Vegas against the board and the billionaire was announced Monday by the official in charge of the nation's third largest public pension fund, the New York State Common Retirement Fund.
At least four other shareholder groups have filed lawsuits stemming from sexual misconduct allegations levelled against Wynn in a news report last month. Derivative lawsuits allow shareholders to take legal action on behalf of a company when they believe its officers or directors are not meeting their fiduciary duties.
"These board directors and officers were duty-bound to protect employees and the company, yet they failed to confront allegations of predatory behaviour," Thomas DiNapoli, the New York state comptroller and trustee of that state's retirement fund, said in a statement. "We are asking the court to hold accountable the company officers and directors who allowed this behaviour to go unchecked."
The allegations surfaced a month ago, when the Wall Street Journal reported that a number of women said Wynn harassed or assaulted them. One case led to a $7.5 million settlement with a manicurist who alleged that he pressured her into having sex during an appointment, according to the newspaper.
Wynn has vehemently denied the misconduct accusations and attributed them to a campaign led by his ex-wife. He resigned as chairman and CEO of the company bearing his name Feb. 6. An attorney for Elaine Wynn has denied that she instigated the news report.
San Diego-based attorney Todd Neal with the firm Procopio said the lawsuits serve two purposes: To pursue monetary damages — which would be the loss in share price that occurred as a result of the breaches of fiduciary duty — and to force compliance with processes to be implemented, as well as perhaps to have certain board members removed.
The lawsuit filed by DiNapoli argues that the Wynn Resorts' share price plummeted after the sexual misconduct allegations became public Jan. 26, closing down 10 per cent that day and wiping out $2 billion of market capitalization.
"The stock is now trading at about $164.00, a sustained investor loss of 17%, amid continuing controversy with the Board's inadequate investigation and years of inaction," according to the lawsuit filed Thursday. Shares ended Monday at $169.
The New York State Common Retirement Fund's assets are estimated at $209 billion. It holds shares in Wynn Resorts with an estimated value of about $30 million.
The Massachusetts-based Norfolk County Retirement System and Pennsylvania-based Operating Engineers Construction Industry and Miscellaneous Pension Fund are among the other shareholder groups that have sued the company's board.
If the lawsuits are successful, Wynn and the company's board members could be ordered to pay monetary damages to Wynn Resorts, said Shannon McNulty, an attorney with Clifford Law Offices in Chicago.
"So the shareholders receive the relief as a consequence of the corporation receiving that relief," she said.
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