In Fight Between Casino Moguls, a Spotlight on the FBI

(Reuters) - In April 2015, a sworn statement submitted in a Nevada lawsuit between rival casino moguls Steve Wynn and Japan's Kazuo Okada contained an unusual assertion. Its author said Wynn's head of security had asked to meet him in Japan and then persuaded him to travel to the United States to talk to federal agents pursuing a different matter: a criminal bribery probe into Okada.

The person who provided the statement, Yoshitaka Fujihara, then an executive at Okada's Universal Entertainment Corp., said he did not pay for his business-class flights, lodging and meals for two meetings with the Federal Bureau of Investigation in California. Wynn Resorts has since acknowledged covering those costs and making other arrangements for Fujihara, as well as other potential witnesses, to meet with the FBI.

Fujihara's account helped prompt the judge in the Nevada case to allow questioning into Wynn Resorts' role in facilitating the separate criminal investigation into Okada. As a result, the case has opened a rare window into the workings of a U.S. overseas bribery probe and the role played by a company in the investigation of a rival, according to a Reuters review of court documents and interviews with people involved.

As previously reported by Reuters, the Federal Bureau of Investigation has since 2012 been examining whether a $40 million payment from Okada-affiliated companies to a Manila middleman was a bribe to secure tax breaks for his company's new $2.4 billion casino in the Philippines. Under the Foreign Corrupt Practices Act, it is a crime for companies with U.S. operations to bribe foreign government officials.

Okada has denied making improper payments, and no charges have been brought. Fujihara, who has since left Universal, could not be reached. Universal did not respond to requests for comment or make Okada available for an interview.

The civil case in which Fujihara submitted his statement, at the request of Okada's lawyers, stems from a prior business relationship between the two casino titans that soured when Wynn dismissed Okada from the board of Wynn Resorts in 2012. At the time, Wynn claimed that Okada had spent over $100,000 to wine and dine and provide gifts to Philippine gaming officials, and filed suit claiming the Japanese billionaire had breached his duties as a director. Okada said the payments were not illegal and that his ouster was unjustified.

The criminal bribery investigation into Okada was initiated after Wynn filed its civil suit, according to people familiar with the probe. In a statement responding to Fujihara's assertions, the Wynn Resorts head of security, James Stern, said that he reported to FBI agents in Las Vegas around March 2012 that former Okada employees had contacted him with allegations of wrongdoing more serious than those in the civil suit.

Stern, a former FBI agent himself who had postings in Tokyo and speaks Japanese, said in his statement that he was later contacted about a current Okada employee willing to talk. Stern said his first encounter with Fujihara was in late November 2012 in a hotel room at the ANA Intercontinental Hotel in Tokyo.

Stern said he "explained that Wynn Resorts and I were cooperating with the government's criminal investigation, and inquired whether Mr. Fujihara was willing to speak to and meet with investigators from the FBI."

He said Fujihara agreed to his request. Stern said he then "coordinated arrangements" for Fujihara and another former Okada associate, Toshihiko Kosaka, to travel to San Francisco to meet with the FBI. Kosaka did not respond to a request for comment.

It was a role well suited to Stern, an expert interrogator who had contacts within the Japanese police and was head of Asia organized crime at the FBI before joining Wynn in 2007. All told, he connected 11 current and former Okada employees with the FBI by making introductions, organizing flights, scheduling meetings, and covering expenses for these potential witnesses on trips from Japan to locations such as Los Angeles, Hawaii and Guam, according to people familiar with the situation.

Wynn Resorts spent more than $100,000 on travel, meals and accommodations for the potential witnesses, according to an Okada court filing that cited Wynn Resorts expense reports.

The total number of witnesses Stern brought to the FBI has not been disclosed in the ongoing civil case. Fujihara is the only former Okada associate to submit a statement to the court.

Overseas corruption probes are difficult for the United States to conduct because of language differences, the challenges and costs related to locating and interviewing witnesses, and other issues, legal experts said. As a result, the government leans on companies that are subject to the FCPA to uncover and report foreign bribes on their own, and corporations often assist investigations into wrongdoing by their own employees or when they believe they are a victim of a crime, the experts said.

But in interviews with half a dozen law professors and former FCPA prosecutors, none said they had heard of a situation in which federal agents had coordinated with a business rival of a target company to contact witnesses and pay for their travel to the United States in an overseas bribery investigation.

Such reliance could suggest that the government probe might not have been pursued in the same way without the rival's help, and that private interests were helping set the government's agenda, these experts said. A spokesman for the U.S. Department of Justice declined to comment.

Jay Albanese, a professor at Virginia Commonwealth University, said the notion of introducing potential witnesses to the FBI and paying for their travel fell into a legal gray zone with no known precedent in cases brought under the FCPA in federal court. "There is clearly an ethical boundary in the methods by which witnesses and suspects who are foreign nationals are brought to the U.S. when necessary for interviews," Albanese said. "The law is not yet clear in this area."

In court papers, Wynn Resorts said Stern acted as a go-between and did not participate in any witness interviews with the FBI, and that the company followed federal guidelines for paying for travel and accommodations when assisting in an investigation. It also cited a non-FCPA case in which a court found a company's cooperation with a U.S. government investigation of a rival with which the company was engaged in civil litigation to be legitimate.

Philip Urofsky, a partner at law firm Shearman & Sterling, said that while the nature of cooperation between Wynn and the government in this case was "unusual," it was not necessarily improper. "It doesn’t mean there is anything wrong with it," said Urofsky, who as a former federal prosecutor oversaw FCPA investigations. "It’s clearly strategic."

'CORPORATE ESPIONAGE'

In court filings, Okada's legal team has sought to portray Stern's work with the FBI as evidence of "corporate espionage" aimed at discrediting Okada in the civil lawsuit, which could go before a jury as early as this year. "We learned earlier this year that Wynn Resorts had instigated and extensively facilitated a federal criminal investigation," Okada lawyer Stephen Peek said at a December 2015 court hearing.

Wynn Resorts' lawyers in court filings denied the allegations of espionage. They argued that as a regulated casino company, Wynn Resorts had an obligation to self-report suspected criminal activity by a director, even if the alleged actions by Okada were not directly related to his duties at Wynn Resorts.

A company spokesman, Michael Weaver, said it "acted according to the law and regulations that govern its business in reporting relevant information" to law enforcement authorities.

Wynn Resorts has claimed in court papers that the Okada side is using the civil case in part to find out more about what the government is doing in the criminal probe and prepare for a possible defense. Okada’s lawyers deny this.

The judge in the civil case, Elizabeth Gonzalez of Nevada's Clark County District Court, rejected claims by Okada's lawyers that Stern's contacts with potential witnesses were improper. She said his actions did not violate the rules governing the process by which evidence is exchanged in civil cases, known as discovery.

But she has allowed continued questioning about Stern's communications with witnesses and to the FBI. In a June 2015 hearing, Gonzalez said she had never seen a case in which a company that considered itself harmed by alleged wrongdoing had contributed such support to a criminal probe.

"I am familiar with victims assisting the government in their investigation. I am unfamiliar with victims paying for travel and lodging for parties associated with the person who's being investigated," Gonzalez said. "I'm not saying it's improper. I'm just saying I'm going to let them do the discovery."

Stern has been ordered by the judge to provide more testimony in the case.

- Nathan Layne, Reuters