Lessons for the Cannabis Industry from the Wynn Revelations

Over the weekend, The Wall Street Journal published an article exposing more than a dozen allegations of sexual harassment and assault against Steve Wynn, the Las Vegas billionaire behind Wynn Resorts. The report landed hard in Massachusetts, where Wynn is building a $2.4 billion casino in Everett, outside Boston.

In order to win approval for Wynn Boston Harbor, Wynn Resorts and Wynn himself had to go through the Massachusetts Gaming Commission’s vetting process; their license was awarded in 2014. In light of The Journal's report, the MGC has launched a follow-on investigation, which will consider whether Wynn Resorts and Wynn himself are still suitable to hold a gaming license under state law.

The Wynn allegations are also already influencing debates around licensed cannabis operators in Massachusetts:  In a tweet on Tuesday, while reporting from a town meeting on a proposed new cannabis cultivation facility in North Andover, Dan Adams, reporter for The Boston Globe, wrote, “One opponent of the North Andover marijuana facility just brought up the sexual harassment allegations against casino mogul Steve Wynn, saying it proves Massachusetts struggles to vet potential operators in regulated industries such as gambling and cannabis.”

One opponent of the North Andover marijuana facility just brought up the sexual harassment allegations against casino mogul Steve Wynn, saying it proves Massachusetts struggles to vet potential operators in regulated industries such as gambling and cannabis.
— Dan Adams, The Boston Globe

Given the parallels in these two highly regulated industries, it’s worthwhile to take a look at the MGC’s vetting process, and what its response to the latest reporting on Wynn can teach the legal cannabis industry.

First, we know that the MGC investigates individuals' criminal history, as well as ties to organized crime or corruption. In addition, though, the commission “has the right to consider any information, including information related to ‘honesty, integrity, good character or reputation.’” This is also the case for cannabis licensees, as we wrote back in November and more recently in January.

Second, MGC investigators appear to rely to a great extent on information that is in the public record when making their suitability determination. This means that they’re focused on documented issues: a civil lawsuit, a criminal filing, a media report in a reliable news source. This makes perfect sense, since it would be poor practice for the government to rely on hearsay alone. But it also means that when there isn’t a public paper trail – like the secret $7.5 million settlement that was paid to a woman who alleged that Wynn assaulted her – the commission will have a difficult time identifying that issue in their vetting process. As an MGC investigator said of that settlement on Wednesday, “This was a private agreement and steps were taken to keep it from the public domain.”

Third, just because you won a license doesn’t mean you get to keep it.  Casino licenses are a “revocable privilege” in Massachusetts, and I fully expect that cannabis licenses will be, too.  Following The Wall Street Journal’s reporting, the MGC is reviewing Wynn and Wynn Resorts’ suitability for holding a license. Among the issues that the commission is sure to consider is the fact that Wynn Resorts chose not to disclose the existence of that $7.5 million settlement to investigators during the vetting process. If this amounts to misrepresentation, then the MGC may have grounds to revoke the license.

Finally, organizational culture and the company's response to an incident matters a great deal to regulators. According to the Boston Business Journal, the MGC’s current review will also consider:

  • How Wynn Resorts responded to the allegations when they first came to light;
  • How Wynn Resorts “from the board on down” responds to the allegations now; and
  • How these allegations could impact the company’s finances.

Bottom line for the cannabis industry: (1) Know your team inside and out. Vet yourself first. (2) Understand that your license is conditional on the continuing good reputation and integrity of your business. (3) Have a plan in place for how you’ll respond if an issue is discovered during and after your license is awarded.  


By Tanya Hoke, Galen Diligence

Image courtesy of Dan Perry via Creative Commons