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Are Shareholder Rights to Company’s Financial Records Limited?

In a 117 page response, one of Las Vegas’ most prominent businesses, the Wynn Resorts, has asked a Clark County District Judge to throw out a lawsuit to inspect the company’s financial records, brought by their largest shareholder and board member, Kazuo Okada. At question is whether Okada, who is a 19.66 percent shareholder in Wynn Resorts, brought the lawsuit as a board member or shareholder. At issue in the business litigation is a $135 million donation given by the Las Vegas business to the University of Macau in 2011. In a vote of 11-1, the Wynn Resorts approved the donation with Okada being the lone dissenting vote.

Under Nevada Revised Statute (NRS) 78.257.1, Nevada stockholders who own or control at least 15 percent of “all of the issued and outstanding shares of the stock “of a Las Vegas business have the right to “inspect, copy, and audit financial records.” However, if the business has provided its stockholders with a “detailed, annual financial statement or … filed during the preceding 12 months all reports required to be filed pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934,” NRS 78.257.1 does not apply. NRS 78.257.6.

In its response to Okada’s litigation, Wynn Resorts argues that they are in current compliance with all SEC filings and disclosures, and as such Okada, as a stockholder, is not entitled to review the business’ financial records. Furthermore, the fact that the Wynn Resorts board was given complete information on the donation and discussed the donation prior to the board’s vote, precludes Okada from filing the business litigation as a director, to circumvent Nevada’s shareholder laws.

District Judge Elizabeth Gonzalez will hear arguments from both sides on February 9.

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