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  1. Home
  2. / Investing
  3. / Global Equity

Steve Wynn Accused of Working for China to Lobby Trump

If Elon Musk proceeds to buy Twitter, he would surely face censorship pressure stemming from Tesla's Shanghai factory, as Steve Wynn's experience shows.
By ALEX FREW MCMILLAN
May 18, 2022 | 09:30 AM EDT
Stocks quotes in this article: TWTR, TSLA

Casino mogul Steve Wynn has finally been sued by the U.S. Justice Department in a bid to compel him to register as an agent of the Chinese government, something he has refused to do voluntarily despite repeat requests.

There's an intricate web behind why the Justice Department has made this move, claiming Wynn violated the Foreign Agents Registration Act. I've read through the complaint against Wynn, which you can find here.

There's a call from a yacht off the coast of Italy to then-president Donald Trump, a cameo by the rapper Pras, even an appearance by the "fugitive financier" Jho Low, caught up in the 1MDB corruption scandal that has seen Malaysia's former prime minister sentenced to 12 years in prison. It's an eye-opening insight into how Wynn faced pressure over his business in China that the Justice Department says caused Wynn to do Beijing's bidding.

The bottom line is that, according to the allegations, Steve Wynn felt pressure due to his empire's operations in Macau to push requests from a senior Chinese cop. The Chinese government tried to use Wynn to get the Trump administration to deny a leading Chinese dissident's visa, ban him from flying, and deport him back to face "justice" in Beijing. The sordid details show how the Chinese Communist Party and Chinese government will use any means necessary to silence critics and imprison enemies, particularly any leverage they can obtain through corporate connections.

Wynn has denied the charges through his lawyers, Reid Weingarten and Brian Heberlig. He has already declined two DOJ advisories that he must state that he was lobbying for China, and failed to respond to a third notice this April.

"Steve Wynn has never acted as an agent of the Chinese government and had no obligation to register under the Foreign Agents Registration Act. We respectfully disagree with the Department of Justice's legal interpretation of FARA and look forward to proving our case in court," the legal team said in a statement.

After reading the details, there's no doubt in my mind that Elon Musk would face pressure from Beijing to kick critical voices off Twitter (TWTR) . Beijing would use the Tesla (TSLA) factory in Shanghai and its huge sales in China as leverage to try to silence discussion of sensitive topics like the Tiananmen Square massacre, the concentration camps set up in Xinjiang province, or the utter evisceration of civil liberties as Hong Kong has turned into a police state.

The Case Against Wynn

I'll outline the case against Wynn in a little more detail. It starts around May 2017, when the allegations say Jho Low, now thought to be a fugitive in China, brokered a meeting between a Chinese national-security official with venture capitalist Elliott Broidy, the former finance chair of the Republican National Committee, and the Fugees rapper Pras, full name Prakazrel Michel, as well as Nickie Davis, a fundraiser in Honolulu political circles.

Full name Nickie Mali Lum Davis, she pled guilty to unregistered lobbying in August 2020 both on behalf of China, and in connection to getting forfeiture claims and a criminal investigation dropped in the 1MDB case. At one point, Davis, who is also a Hollywood producer, tried to set up a golf game between Trump and Najib Razak, the Malaysian head of state, to get the 1MBD investigation to conclude. According to her plea, Davis agreed to forfeit US$3 million she was paid for those efforts, although she had "the expectation of tens of millions more in success fees," according to the Justice Department.

At the first meeting in the Wynn case, the Chinese official, Sun Lijun, then the vice minister for public security, allegedly pushed Broidy, Pras and Davis to get a Chinese dissident deported, after he filed for political asylum. Davis already pled guilty to such behind-the-scenes lobbying to get a Chinese dissident, "PRC National A," extradited.

The controversial and outspoken Chinese exile Miles Guo, or Guo Wengui in Chinese, has identified himself as "National A," through the G News outlet that he founded with Trump adviser Steve Bannon. "Bringing down Miles Guo is the top priority of the CCP, whose days are numbered," G News says in an article outlining some of the convoluted connections involved.

The allegations against Wynn say that Broidy, who knew Wynn from their work on the Republican National Committee, then around June 2017 asked for Wynn's help. The two got to know each other when Wynn served as finance chair of the Republican National Committee from January 2017 to January 2018, with Broidy as his deputy much of that time. Broidy thought Wynn's friendship with Trump, Republican Party connections and business dealings in China would be "helpful in getting access to Trump Administration officials," the complaint states.

Sun, who rose through the public-security ranks in China, later called Wynn to ask about Miles Guo's "removal" from the United States, the Justice Department states. Wynn then allegedly said he'd raise it with Trump and Trump administration officials, having had no prior connection to or interest in Guo's status. Sun went on to ask Wynn through Broidy to get Guo's pending application for a new visa denied, and to get him placed on a "no-fly" list, the complaint states.

There's then a bunch of detailing of texts for Wynn via Wynn's wife from Broidy, one noting that Chinese President Xi Jinping had even asked Trump directly when they met at Mar-A-Lago to help getting Guo sent back to China. Wynn allegedly had dinner with Trump and his team "on or about June 27, 2017," when Wynn conveyed the Chinese desire to get Guo sent back to China, and gave Guo's passport photos to Trump's secretary. Broidy then allegedly sent a text to Wynn that Sun "was extremely pleased and said that President Xi Jinping appreciates" Wynn's assistance.

Davis then got involved in "at least eight" half-hour telephone calls between Wynn and Sun, the Justice Department says, when Wynn thought Davis, who helped translate, was Sun's assistant. Sun stressed the importance of getting Guo's visa denied, the allegations state, while Wynn mentioned his business interests in Macau "on multiple phone calls."

Around August 2017, Wynn had multiple unscheduled personal meetings with Trump in the White House, the complaint states, sometimes touching on the topic of Guo. In late August, Broidy took Wynn and Wynn's wife on his yacht for a trip off the coast of Italy. The complaint says both Broidy and Wynn called Trump from the yacht, with Wynn asking again about Guo's status, and Trump saying he'd look into the matter.

Perhaps thanks to his connections through Steve Bannon, Guo has remained in the United States, even though Bannon was arrested on Guo's yacht, the Lady May, in 2020. Guo declared bankruptcy in February, while Bannon was charged with defrauding donors to a campaign to get a wall built on the Mexican border.

Wynn's Motivation

Wynn was "motived by his desire to protect his business interests" in China, the Justice Department states. When the efforts surrounding Guo failed, he tried to extricate himself with a text to Davis, the complaint says, texting "as a private citizen, I believe I have exhausted the advantages of my position. If there is any other aspect of this situation may occur to you going forward, I would of course be anxious to help. I remain grateful for the privilege of being part of the Macau and PRC business community."

The Justice Department insists that it is bringing the case, the first civil lawsuit under the Foreign Agents Registration Act in more than three decades, to show its commitment to ensuring "transparency in our democratic system," as Assistant Attorney General Matthew Olsen put it. "Where a foreign government uses an American as its agent to influence policy decisions in the United States, FARA gives the American people a right to know."

The complaint does say that Wynn told the White House Chief of Staff and two senior National Security Council officials in a meeting in late July 2017 that it was Chinese officials who had contacted him, and they were "very interested" in having Guo returned to China as soon as possible. So Wynn's defense team may lean on any instances where they can demonstrate that the casino mogul was merely passing along Chinese official requests.

There's no doubt overseas casino operators face pressure in Macau, which generated six times the revenue of all Las Vegas casinos in 2019. The Macau government had in 2016 granted fewer casino tables than expected to the new Wynn Palace casino, allocating it only 100 instead of the 250 predicted. That led Nomura to downgrade the stock, and caused Wynn to transfer tables from its existing Wynn Macau casino. Wynn Macau is also forced to renegotiate its license, with a renewal this year, while Chinese officials often limit the number of gamblers allowed to travel to Macau.

The insights shouldn't affect current operations. Wynn stepped down from his executive positions at the U.S. casino company that bears his name, Wynn Resorts WYNN, as well as its Hong Kong-listed Chinese arm, Wynn Macau HK:1128 and WYNMY, in 2018, after "me too" allegations of sexual misconduct against him from past and present employees. Wynn Macau shares fell slightly, down 0.4% on Wednesday, out of synch with a narrow 0.2% gain in Hong Kong stocks.

Elon Musk and the Chinese

Why would Elon Musk feel the same kind of pressure? Well, China accounts for 24.8% of Tesla's sales, as of Q1 2022.

The Chinese government has done Tesla favors in getting its Shanghai plant off the ground. Tesla was the very first car company to be allowed to own its China operation outright. Overseas owners previously had to set up joint ventures with local partners, until a rule change as Tesla was negotiating to enter the market. Tesla has also been granted a four-year tax break running through 2023 that slashes the standard corporate tax rate of 25% to 15% for Tesla.

Tesla is also leasing the land under the factory from the Shanghai government. If it fails to spend C¥14.1 billion (US$2.1 billion) on the plant or to generate C¥2.23 billion (US$330 million) in taxes by the end of 2023, the local government can reclaim the site.

So there are a couple of key concerns that will come to a head next year, when Tesla needs to demonstrate it's done enough to justify getting the land, and when its tax break comes to an end. A couple of key discussions that will need to take place with Chinese Communist Party officials. A couple of key decisions that could go the wrong way, if Tesla doesn't do everything right.

Tesla says its Shanghai factory and Chinese "long-lived assets" are already worth US$2.6 billion, so it presumably clears the capex-spending hurdle pretty easily. But the Chinese government has shown itself willing to eliminate entire industries such as for-profit tuition essentially overnight. It would have few qualms about changing its mind about a single foreign company that only operates due to special favors, anyway, and "steals" new-energy vehicle sales from the growing ranks of Chinese electric-vehicle makers.

It's little surprise that China, where many industries are state-owned and private entrepreneurs have recently been brought to heel by the Chinese Communist Party, would use corporate connections to push its agenda. The question is how well tycoons and moguls can resist those pressures, while maintaining the world's most-populous nation and second-largest economy as a market, and production base.

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At the time of publication, Alex Frew McMillan had no position in the securities mentioned.

TAGS: Investing | Markets | Politics | Stocks | Trading | Gaming | China | Global Equity | Elon Musk | Electric Vehicles

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