LOS ANGELES (Reuters) - Picasso's famed "Dream" painting turned into a nightmare for Las Vegas casino magnate Steve Wynn when he accidentally gave the multimillion dollar canvas an elbow.

Wynn had just finalised a $139 million (74 million pound) sale to another collector of his painting, called "Le Reve" (The Dream), when he poked a finger-sized hole in the artwork while showing it to friends at his Las Vegas office a couple of weeks ago.

Director and screenwriter Nora Ephron, who witnessed and related the incident in her blog on the Huffington Post Web site (www.huffingtonpost.com), said Wynn had raised his hand to show the group something about Picasso's 1932 portrait of his mistress Marie-Therese Walter.

"At that moment, his elbow crashed backward right through the canvas. There was a terrible noise," Ephron wrote, noting that Wynn has retinitis pigmentosa, an eye disease that damages peripheral vision.

"Smack in the middle ... was a black hole the size of a silver dollar. 'Oh shit,' he said. 'Look what I've done. Thank goodness it was me.'"

Wynn's office on Tuesday confirmed the story, an account of which also appeared in this week's The New Yorker. Both accounts said Wynn had decided to release the buyer from the sale agreement and to repair and keep the painting himself.

Wynn, a millionaire casino developer and art collector, developed The Mirage and Bellagio resorts in Las Vegas in the 1990s, which spearheaded a profusion of luxury hotels and casinos on the once-seedy Las Vegas Strip.