Judge rejects shareholder motion on former Bellagio art

Wednesday, Sept. 6, 2000 | 10:30 a.m.

An effort to place a legal trust over artwork owned by MGM MIRAGE of Las Vegas has been denied by a Nevada judge, though shareholder lawsuits will be permitted to continue against the company.

In a hearing last week, Clark County District Court Judge Nancy Saitta denied a motion by Crandon Capital Partners of New York to place a constructive trust on artwork that once was displayed in the Bellagio's art gallery. The artwork was acquired as part of MGM Grand Inc.'s $6.4 billion acquisition of Mirage Resorts Inc., and is in the process of being sold off by MGM MIRAGE.

Crandon, which held stock in Mirage prior to the buyout, sued on March 29 over rights granted to former Chairman and Chief Executive Steve Wynn in the sale of this art by MGM Grand. Wynn's agreement gave him the right of first refusal to purchase any art sold by the company, either by matching an outside offer or by paying the appraised value or book value of the artwork.

Crandon argued this could enrich Wynn at the expense of Mirage shareholders, since Wynn could conceivably pay less than an outside offer if the outside offer was higher than the appraised value or book value of the art. Crandon argued that all proceeds from art sales should be placed into a constructive trust until the court could rule on the validity of Crandon's claims.

In an Aug. 28 hearing, however, Wynn's attorneys successfully argued that Wynn hadn't unfairly benefited from the agreement, in that Wynn purchased just three of the 11 paintings sold so far by MGM MIRAGE. Following the purchase, Wynn waived his right of first refusal on remaining artworks in the MGM MIRAGE collection.

"Plaintiffs' speculation of a 'windfall' (for Wynn) is without foundation," Wynn's attorneys wrote in an Aug. 22 legal brief.

The attorneys also argued that, since most of the art has been sold already and Wynn has waived his rights, a constructive trust would be moot.

However, Wynn's attorney's weren't completely successful, as Saitta ruled against a motion to dismiss the Crandon lawsuit.

The lawsuit was the second filed by Crandon against Mirage. Crandon sued Mirage in February, just hours after MGM Grand announced its initial $17 bid for Mirage. This lawsuit argued Wynn and the Mirage board would not act in the best interests of shareholders. There has been no activity on this lawsuit after it was consolidated with similar shareholder lawsuits.

Shareholder lawsuits are nothing new to Crandon, which has sued at least four other firms this year alone, including Speedway Motorsports and OfficeMax Inc. North Carolina-based Speedway was sued over the sale of the Las Vegas Motor Speedway Industrial Park to Chairman O. Bruton Smith, while OfficeMax was sued for adopting a "poison pill" provision in April.