Wynn Rocked in Massachusetts Hearings
Fourteen months after Steve Wynn left under a cloud—more like a hurricane—for sexual misconduct, the company he founded is facing the music with the Massachusetts Gaming Commission. Whether, after all the testimony, explanations and mea culpas, it will stay for the dance with its gaming license intact, or be sent packing, depends on the commission accepting that Wynn’s corporate culture has changed in that year.
The commission held three days of hearings last week to determine Wynn’s “suitability” to keep its license.
The commission also released the long-awaited report, which was, in its way, anticipated locally as the Mueller report was anticipated nationally.
The report assists the panel in deciding whether to allow the company to keep its license to operate its $2.6 billion casino resort in Everett. It details Wynn’s alleged misconduct. It tells what the people who worked at Wynn knew and did about it and the steps it has taken since then to change the corporate culture so the mistakes that happened won’t be repeated.
It details how executives knew about the sexual harassment for decades but disregarded the company’s own policies. They not only ignored those policies, they also actively covered up the incidents.
Wynn himself has consistently denied any allegations, but the company accepted that all of the incidents occurred in its settlement with the Nevada Gaming Control Board in February. The board hit the company with a $20 million fine, in part because withheld information about a $7.5 million settlement that Wynn paid to a manicurist who alleged that he raped her. But most important, the board didn’t yank its license to operate in Las Vegas.
During the first day of hearings board member Patricia Mulroy testified, “I have to be very frank with you. That man did lots of things wrong that are beyond comprehension.”
She added, “I was brand new to this board and this board could not focus on that discussion. Everything was seen from the filter of the litigation and the animosity towards Mrs. Wynn… I could kick myself here from China that I didn’t speak up. I let myself get sucked into that vortex of vitriol and for that I am just furious with myself.”
Mulroy joined the board in the fall of 2015. At the time she was told that the 2005 settlement to the manicurist was for a one-time indiscretion, “an outlier event,” and “old and cold” and that the sex was consensual. The term “rape” was never used. After the publication of the Wall Street Journal story, Mulroy was appointed chairman of a special committee to investigate the allegations. She explained that the board tended not to believe the allegations because they were used by Elaine Wynn in her divorce against Steve Wynn and the board had intense animosity toward her.
Mulroy testified that the board asked Sinatra many times about other settlements and was told there were none. Then her committee uncovered them.
“I was furious,” she said. “When we found out there were other settlements, when we found out about other incidents in the salon and spa, I was shaken to my bone. I was absolutely shaken to the core.”
Current Wynn President and CEO Matt Maddox also testified that he only learned of the allegations from the 2016 court filing. He was also told the relationship with the manicurist was consensual. He later heard the term “assault” when he was preparing for a deposition in 2017.
As the allegations surfaced, Maddox said the company was immersed in an extremely acrimonious case against a co-founder whom, executives were warned, would stop at nothing to discredit Steve Wynn. Including planting stories about him in the press.
“In hindsight, I should have paid more attention to it,” Maddox testified. “I should have thought of it as something other than a really tough litigation strategy, because that’s how it was positioned.”
He added “I understand how ridiculous that looks,” but “when crisis hits I think almost everybody’s immediate reaction unless you have cold hard facts is typically denial.”
Mulroy and Maddox are among 17 total Wynn Resorts higher-ups the board are interviewing, including Chairman Phil Satre, Executive Vice President Ellen Whittemore, CFO Craig Billings, board director Dee Dee Myers, security chief Jim Stern, Encore Boston Harbor President Robert DeSalvio and co-founder and ex-wife Elaine Wynn.
Maddox asked to address the commission. His remarks began: “Fourteen months ago when the Wall Street Journal article came out, our company was shaken to its core. We were in crisis, and many of us were in denial.” The company’s 25,000 employees worried about their future amidst reports that the company might be sold or broken up.
“I knew when I took over on February 7, 2018 that we had to be strong, be fast and get to the truth. Only the truth was going to let this company survive and thrive. We had to be transparent, cooperative and progressive,” said Maddox.
He thanked the commission’s Investigations and Enforcement Bureau (IEB) for helping the company to “get to the truth.”
“As those investigations began, the denial changed, and I began to realize that there were many victims—and those victims felt powerless,” he said. He decided, “no matter who the CEO is of Wynn Resorts, or who the chairman is, that would never happen again” and that the company would transform itself from a company that was about one man “into a progressive company that’s about the 25,000 people.”
He committed to transforming the company into a leader, with independent compliance committees, a “refreshed” board of directors, new management team and indirect and direct reporting, “so there would never be another opportunity for someone to feel like they did not have a voice.”
The company has been recast as “progressive,” visionary, creative and a leader in how it treats employees and of the need to invest in communities, he said. “A company needs to be viewed as a net giver in the communities in which it operates, not a net taker.”
Maddox concluded, “The transformation that we’ve gone through and the changes that we’ve made—which we’re going to outline in this report—I hope, will help all of you regain trust in us. We want to make you proud as a licensee here in Massachusetts.”
Whatever the commission does or doesn’t do to the company, Steve Wynn himself won’t be subject to disciplinary action since he has divested himself of all shares or ties to the company.
Although the hearings are public, the discussions among the five commissioners will take place behind closed doors. Interestingly, unlike most commission meetings, this one is not being live-streamed.
The report details that a manicurist, known under the pseudonym “Amy,” who worked in a casino salon alleged that Wynn raped her in 2005 and got her pregnant. She complained to then-vice president of hotel operations, Doreen Whennen and met with her and Wynn Las Vegas CEO Marc Schorr. Her employment records show that “Amy” “resigned” the next day.
In actuality a company attorney negotiated a $7.5 million settlement with “Amy” that was paid over a decade. In return she withdrew allegations and signed a non-disclosure agreement. Wynn set up an LLC to pay the settlement, so that the money couldn’t be traced to company funds. That attorney did not inform the company’s general counsel at the time and board members were never told. The executives involved are no longer employed by the company.
One of the company’s issues with the MGC is that the settlement was never disclosed in 2014 when it was holding hearings on Wynn’s suitability to hold a license.
Elaine Wynn, Wynn’s ex-wife, and currently the largest shareholder in the company, learned of the settlement 10 years ago and informed the general counsel.
Around the same period a cocktail server, whose pseudonym is “Beth” claimed Wynn forced her to have sex with him. She and her parents agreed to a $975,000 settlement from Wynn in 2006. But before that “Beth” informed the hotel’s chief human resources officer, who informed Wynn Las Vegas’s general counsel.
A 2018 letter from “Beth’s” attorney said she felt pressured into continuing a sexual relationship with Wynn.
The report contains other allegations. Such as a 2008 settlement for $700,000 with a cocktail waitress who was fired after negotiations over severance pay and later sent a demand letter claiming that Wynn pursued her for a year. This incident happened before the formation of Wynn Resorts, although two company executives were aware of it.
In 2014 a cocktail server fired from Wynn Las Vegas filed a complaint over the firing. During mediation she claimed to have been raped by Wynn in 2005. She was paid $9,000. Although the general counsel and several other officials knew of the complaint, it was never investigated. None of these officials are with the company today.
Two massage therapists claim that between 2013-2014 Wynn behaved inappropriately at the Encore Spa. These complaints included exposing himself, making inappropriate comments and requests for “sensual massage.” They informed the director who told Brian Gullbrants, who at that time was head of hotel operations at Wynn Las Vegas and is currently executive vice president of the Everett casino. He informed former Wynn Las Vegas President Maurice Wooden who informed current Wynn CEO Matt Maddox. Gullbrants is on the list of those expected to testify to commission. He is the only current employee who had oversight over a property where most of the Wynn allegations are centered.
Many other allegations are detailed in the 200-page report, which, according to several media outlets that obtained it said, “Their efforts at secrecy made it exceedingly difficult, if not impossible, for gaming regulators to detect this potentially derogatory information through typical regulatory means.”
Wynn himself faces no disciplinary action. Neither did seven employees named in the report as knowing about the allegations but taking no actions. None of them are still with the company. One, Kim Sinatra, formerly executive vice president and general counsel, left Wynn last summer with a $1.8 million severance package and millions of dollars in stock.
That severance package drew the attention of MGC Chairman Cathy Judd-Stein, who zeroed in on it during questioning of current CEO Matt Maddox.
“Did Ms. Sinatra know that her severance payment was being signed on August 3?” she quizzed. “Did she ask you to make sure to sign on August 3? Did she know before our deposition that she was going to be paid nearly $10 million?”
Maddox denied knowledge of it, although he said he did talk with Sinatra before her deposition by the MGC’s investigators.
Another board member, Betsy Adams, similarly grilled, responded, “At the time we believe we believe this was the right business decision. We were concerned about stabilizing the company… And not invited another big, ugly, public, protracted lawsuit.”
Another board member, Jay Johnson, told the panel, “When the WSJ came out, to say that I was disappointed would be an understatement. It rocked my boat and I wasn’t sure if I wasn’t sure I wanted to stay on this board.” He said that the reforms over the last 14 months persuaded him to remain, calling them “nothing short of remarkable.”
Although Wynn himself is beyond the reach of the commission, he could face police charges, according to a spokesman for the Clark County, Nevada District Attorney’s Office. That would probably require the cooperation of the persons named in the report, several of who have gotten large settlements. The cocktail waitress reportedly threatened to go public last year until the company accused her of extortion and brought in the FBI.
When the Wall Street Journal expose in January 2018 was published, it forced Wynn to resign as CEO and sell all 12 million shares of his company stock, cutting all ties with the company he founded. He made $2.1 billion on the sale. He also signed a non-compete agreement that runs out in a year. Shortly thereafter more women went public, one alleging rape in the early 1970s, and another claiming that she was “coerced” into having sex with Wynn when he was managing the Golden Nugget.
Although even Wynn Resorts’ critics credit the company for transforming a corporate culture that allowed allegations of sexual misconduct against Wynn to be covered up for decades, experts say the company can do much more to create a different kind of workplace in the dawning age of #MeToo.
Wynn has raised more women to be executives, and added several to the board of directors. It has ejected executives known to have been aware of the allegations but who did nothing. It has created an independent committee that includes a former Boston police commissioner to review future allegations.
Those changes are detailed in an 18-page report submitted to the MGC ahead of the intense grilling that began last week. Among the changes: The company no longer requires confidentiality in sexual harassment claims, allowing past and former employees to speak up.
Some critics nod approvingly, but add that other companies go further, giving employees the option to go to court publicly, rather than accept private arbitration which some say favors the corporation. Statistics show that businesses win arbitration most of the time and payouts are subsequently less.
Wynn spokesman Michael Weaver accepts that the company does things differently but insists, “Our goal of not protecting sexual harassers is the same.”
Some experts say the company could assess if those policies are working, and make the results public. The MGC could, if it chooses, require Wynn to file regular reports, said Jason Schloetzer, corporate governance expert at Georgetown University’s McDonough School of Business, interviewed by AP News.
Weaver notes that Wynn brought in Great Places to Work, which conducts workplace surveys and research, to see how well these new policies are working. Since sexual harassment training was initiated last summer Wynn has received 22 confirmed cases that involved workers or guests that were resolved by disciplinary action or firing.
Jennifer Chatman, a management professor at the University of California-Berkeley business school told AP News that Wynn should do more to open up “stepping stone jobs” that lead to executive positions. “The hospitality business doesn’t have some of the gender pipeline inequities of other domains like high tech and investment banking,” said Chatman. “This should be a place where women should have been excelling for some time.”
Gina Scaramella director of the Boston Area Rape Crisis Center, who early on demanded that the company remove Steve Wynn’s name from what is now known as Encore Boston Harbor, and whose organization helped Wynn create its sexual harassment policies, nevertheless insists that in the coming months and years: “The proof will be in how it’s implemented. We’ll be watching.”
One bizarre incident told in the MGC’s report happened after the company adopted its new human resources reforms. It involves an unnamed Wynn Resorts manager at the soon-to-open Encore Boston Harbor who admitted to a touching incident. He then demonstrated what he had done to a lone woman during the investigation, resulting in his immediate dismissal.
Before that happened, the socially-awkward manager would find ways to horn in on employees’ lunches, pry into their private lives and invent reasons for them to spend weekends working with him.
The attorney who conducted an independent review of the company’s new anti-harassment policies commented, “My investigation revealed that the reason why this particular person was there on the Everett site was because he had a specialized knowledge of how to get the job done on casinos.”
She said she felt the new policies were not sufficient to protect employees from misconduct from a supervisor who has power over them.
The IEB’s own investigation of this incident included interviewing the manager accused of touching an employee’s shoulders, who, it said, “appeared to have no concept of boundaries with his co-workers or subordinates.”
When human resources supervisors investigated the manager, he not only admitted to approaching an employee from behind: “To their great surprise, not only did he admit the allegations, but he chose to demonstrate his actions by repeating the behavior on the lone female in the room during the investigation’s interview.” He was fired shortly thereafter.
The report noted the “striking contrast” between how this complaint was treated compared to how such complaints were treated before Wynn left the company.