Regulators continue probe of Wynn’s partner’s finances

Friday, Dec. 29, 2000 | 10:47 a.m.

The state Gaming Control Board will take a close look at a Japanese businessman's dealings in Nevada in light of disclosures that he's been accused of tax evasion.

Dennis Neilander, the ranking member of the regulatory board once Chairman Steve DuCharme retires next week, said a tax dispute on its own wouldn't necessarily hurt Japanese businessman Kazuo Okada's chances of receiving a Nevada gaming license.

Okada, listed by Forbes magazine as that nation's eighth wealthiest person, controls Aruze Corp., Japan's largest manufacturer and distributor of pachinko machines. He's also Steve Wynn's partner in the development of Valvino Lamore, a massive master plan of resort, gaming and nongaming developments on acreage surrounding the Desert Inn hotel-casino, which was closed last summer.

Aruze has been accused of concealing about $35.1 million in income between the 1996 and 1998 fiscal years, the Kyodo news service of Japan reported.

Industry sources said the Tokyo Regional Taxation Bureau has slapped a $14.9 million penalty tax on the company based in Tokyo's Koto ward.

"It all depends on the facts," Neilander said. "We will have to look at the nature of the problem. Were they willfully looking to conceal something or were they trying to take advantage of a tax provision they were entitled to?

"We don't know all the Japanese tax laws and the procedures there, which is why we're going to take a close look at it," he said.

Neilander said there would be cause for concern if if was found that Aruze officials willfully attempted to evade paying taxes.

Tax evasion is a special concern at the gaming board. One of its major responsibilities is to ensure Nevada gambling license holders pay gaming taxes on winnings from gamblers and do not skim casino revenue.

"We'd be concerned if it was something done in bad faith," Neilander said.

A representative of Aruze in Nevada issued a three-paragraph statement in response to Thursday's report.

"The reports regarding the alleged tax evasion involving Aruze Corp. of Tokyo do not reflect on the operations of its subsidiary, Aruze USA in Nevada, or its Nevada affiliate, Universal Distributing of Nevada Inc.," said the statement issued by Billy Vassiliadis of the public relations and advertising firm R&R Partners.

"Kazuo Okada is chairman of Aruze Corp., and the president and sole shareholder of Universal Distributing of Nevada Inc.

"Aruze USA and Universal Distributing of Nevada Inc. are currently waiting for accurate information and will respond responsibly."

Kyodo reported that Aruze allegedly hid income by faking transactions with its Las Vegas affiliates. Aruze reported that its affiliate-built pachinko machines -- a type of slot machine popular in Japan that resembles a pinball machine -- and exported them back to Japan. However, the tax authorities determined the transactions were bogus and that payments to the affiliate were taxable, the sources told Kyodo.

Last month, Aruze announced plans to invest $260 million in Valvino Lamore, Wynn's vision of a complex that may include a hotel-casino with two 3,000-room towers 59 stories high, several casinos, non-casino hotels, condominiums and other mixed-use developments on the shores of a 30-acre man-made lake.

With its investment, Aruze would gain 50 percent control of Valvino Lamore, a privately held company named after Wynn's grandfather.

Gaming Control Board officials have said the investigation of Aruze and Okada has been more difficult than some cases because of language and cultural differences with Japanese authorities. The regulators said the Aruze officials have been forthcoming with information.

DuCharme said Thursday he did not know if Nevada's suitability investigation triggered the probe that led to the tax evasion allegations.