Company Name: MGM Mirage
Public Availability Date: March 19, 2001
Document Sections:
LETTER OF INQUIRY
APPENDIX
APPENDIX
STAFF REPLY LETTER
[LETTER OF INQUIRY]
February 14, 2001
Securities and Exchange Commission
Division of Corporate Finance
Office Of The Chief Counsel
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Mail Stop: 0402
Re: Stockholder Proposal Submitted on Behalf of Mr. John J. Gilbert
Ladies and Gentlemen:
Pursuant to Rule 14a-8(g) under the Securities Exchange Act of 1934, enclosed
please find as Exhibit A a copy of a proposal (collectively, with the supporting
statement, the "proposal") submitted by J. Michael Schaefer on behalf of John J.
Gilbert for inclusion in the 2001 proxy materials of MGM MIRAGE, a Delaware
corporation (the "company" or "MGM MIRAGE"). The company presently intends to
omit the proposal from its proxy materials for the company's annual meeting of
shareholders scheduled to be held on May 1, 2001, on the grounds stated below
and respectfully requests that the Staff confirm that it will not recommend any
enforcement action against the company based on the omission of the proposal. To
the extent that any reasons for omission stated in this letter are based upon
matters of law, this letter shall serve as supporting opinion of counsel
pursuant to Rule 14a-8(j)(2)(iii).
BACKGROUND INFORMATION
In order to understand the reasons why the company believes it may properly
exclude the proposal, some background information is required. The proposal was
initially received by the company on December 28, 2000 from J. Michael Schaefer
on behalf of himself and Henry F. Wood. Mr. Schaefer failed to provide the
company with evidence that he and Mr. Wood owned the requisite number of shares
for the proposal to be included in the company's proxy materials. After inquiry
from the company, Mr. Schaefer indicated that neither he nor Mr. Wood owned the
requisite number of shares, and thus the company declined to include the
proposal in its proxy materials. Subsequently, Mr. Schaefer stated that he had
been authorized by his client John J. Gilbert to resubmit Mr. Schaefer's
original proposal on behalf of Mr. Gilbert.
Mr. Schaefer has a checkered history with the company and Mirage Resorts,
Incorporated ("Mirage"), the company's wholly owned subsidiary which was
acquired in May 2000. This history includes:
(1) The Mirage Casino-Hotel and Bellagio canceled Mr. Schaefer's credit lines
and check cashing privileges in early 1999 after reviewing his recent history.
(2) Mr. Schaefer sued the companies and one of the executives individually
challenging this decision.
(3) Mr. Schaefer was barred from all Mirage properties as a result of his
actions, and he was denied admittance to the 1999 Mirage Annual Shareholder's
meeting.
(4) Mr. Schaefer filed an additional multi-count suit challenging all of the
actions taken by Mirage and its subsidiaries.
(5) All of the suits were decided in favor of Mirage and its subsidiaries.
(6) Mr. Schaefer sought unsuccessfully to personally address the company's board
of directors in December 2000.
In addition, in 2000 Mr. Schaefer requested a political contribution from the
company in connection with his candidacy for political office. The company chose
to contribute to Mr. Schaefer's opponent.
I. THE PROPOSAL MAY BE OMITTED UNDER RULE 14a-8(i)(4)
AS IT IS RELATED TO A PERSONAL GRIEVANCE AND IS DESIGNED TO FURTHER A PERSONAL
INTEREST NOT SHARED WITH OTHER SECURITY HOLDERS AT LARGE.
Based upon Mr. Schaefer's prior history with Mirage and the company and upon
correspondence received from Mr. Schaefer, recent examples of which are included
as Exhibit B to this letter, the company believes that the primary objective of
the proposal is to further Mr. Schaefer's personal agenda in light of his
apparent grievances against Mirage and the company. In addition, the company
believes that Mr. Schaefer is using Mr. Gilbert's status as a shareholder of the
company in an attempt to force inclusion of Mr. Schaefer's original proposal in
the company's proxy even though Mr. Schaefer is not eligible to submit the
proposal. The company believes that the true objective of the proposal is
personal to Mr. Schaefer and is not an interest shared with the other
shareholders at large.
In a No-Action Letter of January 31, 1994 re International Business Machines
Corporation ("IBM"), the Division of Corporate Finance of the Commission found
that a shareholder proposal may be excluded where the proposal relates to
redress of a personal claim or grievance or is designed to result in a benefit
to the proponent or to further a personal interest, which benefit or interest is
not shared with the other security holders at large. Specifically, the
proponent, who had a prior history with IBM relating to the subject matter of
his proposal, was using the shareholder proposal process to request that IBM
create reports disclosing political contributions in excess of $10,000 all in an
effort to use that information for his own interests. From the proponent's
history with IBM and from the language and personal nature of the proposal, the
Department of Corporation Finance found there was "some" basis for excluding the
proposal.
As in the IBM No-Action letter, the company believes that Mr. Schaefer is
improperly using the shareholder proposal process to further his personal
agenda, which is not shared by the company's shareholders at large. As such, the
company believes the proposal may properly be omitted under Rule 14a-8(i)(4).
II. THE PROPOSAL MAY BE OMITTED UNDER RULE 14a-8(i)(3)
AND RULE 14a-9 AS VAGUE AND INDEFINITE AND THEREFORE MISLEADING AND BEYOND THE
POWER OF THE COMPANY TO EFFECTUATE.
Rule 14a-8(i)(3) permits the omission of proposals and supporting statements
that are contrary to the federal proxy rules, including Rule 14a-9, which, in
turn, prohibits false or misleading statements in proxy materials. The proposal
violates Rule 14a-9 and may, therefore, be omitted pursuant to Rule 14a-8(i)(3)
because (i) it is inherently vague and indefinite, subject to varying
interpretations by shareholders of the company, and (ii) it contains false and
misleading statements. In addition, Rule 14a-5(a), the application of which to
stockholder proposals is also contemplated by Rule 14a-8(i)(3), requires, in
pertinent part, that "the information in the proxy statement shall be clearly
presented ..."
Specific examples of how the proposal is vague, indefinite and misleading are
presented below:
1. The proposal states that the company contributes "substantial sums" of money
for political contributions. The company believes that term "substantial sums"
will mislead shareholders into believing that the political contributions made
by the company are of an extraordinary nature and are disproportionate in amount
to the company's revenues, assets and earnings, which the company believes is
entirely inaccurate.
2. In the supporting statement, the proposal the proposal includes many
statements which purport to describe the company's policy with respect to
political contributions, such as "If someone with a family-member employed by
the corporation is a candidate, we give to that candidate because of a family
relationship." These statements are not an accurate description of the company's
policies and, therefore, should not be included in our proxy materials.
3. The proposal also states "our [purporting to speak for the company] policies
are unwritten and subject to a whim." All contributions made by the company are
carefully considered, in particular to ensure such contributions comply with
applicable law. The language in the proposal that suggests the company's
contributions are "subject to a whim" is misleading because it suggests the
company does not carefully consider such decisions.
The company believes that the proposal is misleading and should be omitted from
the company's proxy materials because it fails to accurately describe the
company's practices in making political contributions and has failed to disclose
what the company believes to be the true objective for the proposal, namely to
set a policy which could directly benefit Mr. Schaefef's personal political
agenda not shared by the shareholders at large.
III. THE PROPOSAL MAY BE OMITTED UNDER RULE
14a-8(i)(7) AS RELATING TO ORDINARY BUSINESS OPERATIONS.
The company believes that the proposal may be omitted from the proxy materials
for the 2001 annual meeting pursuant to the provisions of Rule 14a-8(i)(7)
because it deals with matters relating to the conduct of the ordinary business
operations of the company.
If adopted, the proposal would require the company to create a set policy for
something that has traditionally been left to the business discretion and
judgment of management. The company believes that management must retain
flexibility in determining which organizations and individuals should receive
contributions from the company.
Under the Delaware General Corporation Law, the allocation of charitable
contributions is a matter that a corporation is permitted to relegate to its
ordinary business operations. Political contributions are specifically
authorized by Section 122, "Specific Powers" of the Delaware law, which provides
that corporations may "make donations for the public welfare or for charitable,
scientific or educational purposes ..." Under the Delaware law, decisions
concerning the allocation of political contributions need not be approved by the
shareholders or the board of directors and, as a result, are permitted to be
treated by the company has a matter relating to the conduct of its ordinary
business operations.
The company treats the allocation of its political contributions as a part of
its ordinary business operations. The company contributes on a regular basis to
numerous political campaigns and charitable causes as part of its ordinary
business operations. As a general matter, the board of directors of the company
has delegated to management the responsibility of selecting the political
campaigns and charitable organizations to which the company contributes.
The proponent is asking the company to create additional reports and make
additional disclosures to shareholders beyond the reporting requirements imposed
by the Securities Act of 1933 and the Securities Exchange Act of 1934 and the
reporting requirements of the gaming authorities that oversee the company's
business and affairs.
The Staff has consistently taken the view that the determination of what
disclosure to shareholders is desirable in addition to that necessary to meet
the Commission's reporting requirements is properly left to the discretion of
the board of directors and the management of the company as a matter relating to
the conduct of the ordinary business operations of the company. (see No-Action
Letters April 6, 1998, re Circuit City Stores, Inc.; February 17, 1998 re AT&T
Corporation; February 9, 1998 re Burlington Northern Sante Fe Corp.; and June
10, 1998 re ConAgra, Inc.). Thus, the proposal is an improper subject for action
by shareholders because it is a matter relating to the conduct of the ordinary
business operations of the company.
In summary, for the reasons and on the basis of the authorities cited in Section
I through III above, MGM MIRAGE respectfully requests your advice that the
Division will not recommend any enforcement action to the Commission if the
proposal is omitted from MGM MIRAGE's proxy materials for the 2001 annual
meeting. I am sending Mr. Schaefer, on behalf of Mr. Gilbert, a copy of this
letter, thus advising him of our intent to exclude his proposal from the proxy
material for the 2001 annual meeting.
As previously announced in a press release, the company's annual meeting of
stockholders is scheduled for May 1, 2001, which is more than 30 days before the
date of the annual meeting in 2000. We plan to mail our proxy materials, and
file them with the Commission, on or about March 31, 2001. We did not receive a
copy of the letter from Mr. Gilbert's broker as to his status as a shareholder
of the company for the past year until February 1, 2001. Therefore, we
respectfully request, on behalf of the company that the staff of the Commission
waive the requirement set forth in Rule 14a-8(j) that the company's reasons for
excluding a proposal be submitted no later than 80 days before it files its
definitive proxy materials with the Commission.
Enclosed are seven copies of this letter, together with exhibits. If the staff
disagrees with the company's conclusion that the proposal may be omitted from
the 2001 proxy materials, we request the opportunity to confer with the staff
prior to the issuance of your position. If you wish any further information on
this matter, please call the undersigned at (310) 282-6247 or Gary N. Jacobs,
Executive Vice President and General Counsel of the company at (702) 693-7129.
Very truly yours,
Janet S. McCloud
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP
cc: Gary N. Jacobs, Esq. (w/encl.)
Scott Langsner (w/encl.)
[APPENDIX]
BE IT RESOLVED by shareholders assembled in annual meeting in person and by
proxy that it be recommended to the Board of Directors that it adopt a written
policy with regard to the issue of political contributions to local, state, or
national office, and that a list of contributions be prepared annually as to
amount, date, and recipient and made available to shareholders and investors on
request.
Statement in Support
Our corporation annually contributes substantial sums to local, state and
federal candidates; we can give up to $10,000 to local candidates and virtually
unlimited amount in gifts to various committees supporting election of a
President, Senator or Congress-person. If someone with a family=member employed
by the corporation is a candidate, we give to that candidate because of a
'relationship' Our business relates primarily to the state and county executive
and legislative officials, thus support of judicial or educational-board
candidates is minimal. Our policies are unwritten and subject to whim. The board
should adopt some guidelines as to its support of good government, much as
Chambers of Commerce do; supportive of those who support our industry and
nonsupportive of those who do not. Because of the substantial amounts involved,
and the affect on investors and the industry, our policy should not be a secret
but should be formulated so that it can be modified, debated, applauded.
[APPENDIX]
February 17, 2001
Office of the Chief Counsel
SEC Dept. of Corp. Finance
Washington, DC 20549
Re: Shareholder Proposal Submitted on Behalf of John J. Gilbert
I am apprised of a February 14, 2001 letter to your office by a Los Angeles firm
representing the issuer, MGM/MIRAGE, and respectively take issue with the
contents.
Because one has a dispute with his corporation, that does not detract from the
credibility or importance of the issue if it is not purely personal, if it is of
general nature and one that is of interest to investors in general.
I am not trying to obtain a special benefit or privilege, there is no litigation
pending with the issuer, and the same goes for John J. Gilbert, the sponsor as
to qualifying shares. The problem is, the issuer simply cannot tolerate dissent.
This office apologizes for any inconvenience occasioned by the fantasy of Mr.
Wood claiming to have sufficient shares when he does not; I do have sufficient
shares but lack the required one year holding period as they were not purchased
until after the Mirage liquidation a year ago. (I would think that liquidations
ought give rise to special exceptions as to proposals to the successor corporate
entities).
Please consider carefully the defamatory nature of the letter, one of pure
advocacy playing footloose with the facts. As an officer of the Courts and
member in good standing for decades of both the Nevada and California Bars, and
as a former financial analyst with the Commission in 1962, working for
Corporation Finance when Manny Cohen was its director and William Carey was
Chairman, I represent to you as follows:
1. The cancellation of my credit lines at The Mirage and Bellagio, lines of
$5,000 and $3,500, came at a time when my performance on credit lines with
perhaps 15 casinos was perfect (and still is), never a late payment, and
periodic play on the lineit was purely as a bully-tactic to punish me for
having sought to seek equal treatment at both both Mirage and Bellagio.
a. I had a $3500 line at Bellagio, great rapport there.
b. Mirage would only cash checks for $1000, no credit line, when I applied for
$5,000 there, like I had for many years at MGM, it was GRANTED, then the Chief
Financial Officer Charles Nordling for all Mirage interests personally called me
to cancel it; and when I wrote several letters seeking to have the same at
Mirage I had a Bellagio, establishing the $3500 at Bellagio for years, all owned
by same entity, his response was to ZERO ME OUT AT BOTH.
c. When I filed an action for declaratory relief, to establish as a matter of
law that years of flawless credit relations as to the $3500 at Bellagio and
$1,000 check cashing at Mirage I was entitled to maintain the status quounless
there could be some basis for a change ...... general counsel simply had me 86d,
or barred, for all-four-Mirage-Casinos, specifically banning my attendance with
ladyfriend at a $1,000 UNLV FOUNDAT] annual charity dinner 4 days later, black
tie, that I had all my plans made-for (offering to lift the ban, let me go to
dinner if I'd dismiss my action for declaratory relief. How petty!
2. The fact that the declaratory relief and intentional infliction of emotional
distress litigations (the barring from the UNLV charity dinner) cases were
dismissed may well be a tribute to the 'muscle' of the town's largest casino
corporation, Steve Wynn being a God to may people in power, than it is to
unbiased consideration of the dispute.
3. The "unsuccessful attempt to address the board of directors" simply means my
request to meet with them was ignored.
4. In 1999 I held proxies from 8 investors in Mirage Resorts, (including the
Lewis & John J. Gilbert family interests), and Mirage demanded my
barring/exclusion from the Annual Meeting pursuant to the Trespass Order issued
as to the Charity Dinner (it being a nonreviewable lifetime discretionary total
ban).
5. That Mr. Schaefer is a political activist, see attached nationally syndicated
James J. Kilpatrick column, and this obviously upsets some of those who are in
debate with Schaefer.
6. The contribution of money, $1,000, to my political opponent, is not at all
criticized, most casinso do not contribute anything to judicial races,
especially Justice of the Peace (under $7500 jurisdiction) but seek to buy favor
or the "ear" of higher court judges, county commissioners having gaming/liquor
jursidiction, and state and federal lawmakers who deal with gaming issues.
Mr. Schaefer strongly feels we need a $1,000 maximum on judicial contributions,
or less, or a total bank, it is now $10,000 limits, and he'd like to see our
gaming companies give to any credible candidate in runoff elections, to help
with the costs of government. Mr. Schaefer in 1998 and in 2000 got 43% of the
vote, each time against a younger attractive lady lawyerthe 1998 candidate
Jennifer Togliatti was the daughter of Caesars Palace Vice President George
Togliatti, and a good judge, conducted herself then and now with Class; the 2000
candidate was someone who had never been to court for a client, and who had
goons ripping down Schaefer signs and putting up her signs, and she is today in
small claims court (Justice Court) trying to explain the conduct of her
campaign. The problem as to the contribution issue again is credibility:
a. Mirage insists that they had a "relationship" with the year 2000 candidate,
Natalie Tyrrell, and that was the basis of the contribution of $1,000
b. This is not credible, as they have refused to respond to several inquiries to
identify the 'relationship', i.e. is someone in her family an employee, or a
good patron. (It was obvious in 1998 what the Caesars relationship was to
Jennfier Togliatti). There simply is not a relationship of Mirage would have
indicated what it was; it was simply the repudation by petty corporation
counsel, who after banning this writer from a black-tie dinner he'd subscribed
to, now they want to fuel the opponent.
Mr. Schaefer in 1998 obtained $1000 contributions from the Hilton Hotel
interests, same from Mandalay Bay interests, and $500 contributio from the
Riviera Hotel interests and others; this year he was supported financially by
the MRT Gaming Co., the Tropicana Hotel, and others. Mirage/MGM is absent only
because of the pettiness of their perspective
Mr. Schaefer does not need the money, he is a multimillionare, his firm owning
114 rentals in adjacent Nye County, and blocks of securitiessuch as 30,000
shares of Service Corp. Intl, on the NYSE (now $4). He does need and demands
integrity, disclosure, and candor.
It should be obvious to the Commission that "other security holders at large"
have an interest in knowing just who gets our corporate political money. Mr.
Schaefer wants no money, he just insists that information be available, and
since it is not available to the individual investor, like himself, it should be
an issue that the "security holders at large" should decide as to its desirabili
It should be obvious to the Commission that "substantial", if a vague term, is
of course made specific when the dollar amounts are disclosed. Let the amounts
be dislosed, if that is what security holders at large feel is warranted, and
each investor can draw his or her own conclusion.
It is noteworthy that issuer counsel has not suggested to Mr. Schaefer that the
wording be modified, or that vaguess give way to clarity in some respect; the
issuer simply wants to slam the door and turn-off-the-light.
It should be obvious to the Commission that the level of political involvement
by any investor-owned company is a policy issue, and subject to input by those
who own the enterprise. Whether money is given to democrats, or republicans, or
nonpolical matters such as ballot issues, or to defeat Congressman Frank Wolf (R.Va.),
perhaps that is administration. But whether it is done at all, or done
extensively, and in what amounts, is something crying out for disclousre.
If Mirage, or MGM/Mirage, had simply indicated that they really don't have a
'relationship' with Natalie Tyrrell in the Justice of the Peace election, but
that they madeoa contribution at the request of a corporate officer (Mr.
Russell, Mirage Counsel who did the Charity Dinner trespass order is suspected,
and that is his right to be a bully), then it would appear that there is both
candor and crediblity in the political funder area; there is neither.
Mr. Schaefer has not objection to issuer contributing to his opponents, they
probably need the money and he does not. But if an Investor is going to be
stonewalled when making an inquiry, that itself suggests that annual disclosure
is something that the 'security holders in general' have a right to evaluate, as
to whether it is desirable or necessary. Let the issuer state its case in its
proxy material.
(Oh, that is academic, with Mr. Kerkorian owning maybe 60% we know that the
issuer will get its way 100%, but let us not deprive the minority investors, and
the media, and the academics, the opportunity to debate the issue of political
disclosure)
The undersigned request the opportunity to meet with Staff, in Washington DC or
elsewhere, in person or by phone, if staff finds that there is some personal
issue or gain that outweighs public disclosure here. Thanks for listening.
Very truly yours,
J. MICHAEL SCHAEFER
Public Interest Attorney
cc: Christensen,Miller, Fink,
Jacobs, Glaser, Weil & Shapiro LLP
Attention: Janet J. McCloud, Esq.
cc: Gary N. Jacobs, Esq., General Counsel
Scott Langsner,/Secretary
[STAFF REPLY LETTER]
March 19, 2001
Response of the Office of Chief Counsel
Division of Corporation Finance
Re: MGM MIRAGE
Incoming letter dated February 14, 2001
The proposal recommends that the board of directors adopt a written policy with
regard to political contributions and provide shareholders, upon request, with a
list that includes the amount, date, and recipient of contributions.
Based on the facts presented, there appears to be
some basis for your view that MGM MIRAGE may exclude the proposal under rule
14a-8(i)(4) because John J. Gilbert is a nominal proponent for J. Michael
Schaeffer, and the proposal relates to the redress of a personal claim or
grievance or is designed to result in a benefit to Mr. Schaeffer or further a
personal interest, which benefit or interest is not shared with the other
security holders at large. Accordingly, we will not recommend enforcement action
to the Commission if MGM MIRAGE omits the proposal from its proxy materials in
reliance on rule 14a-8(i)(4). In reaching this position, we have not found it
necessary to address the alternative bases for omission upon which MGM MIRAGE
relies.
We note that MGM MIRAGE did not file its statement of objections to including
the proposal at least 80 calendar days before the date on which it will file
definitive proxy materials as required by rule 14a-8(j). Noting the
circumstances of the delay, we grant MGM MIRAGE's request that the 80-day
requirement be waived.
Sincerely,
Michael D.V. Coco
Attorney-Advisor
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