Old probe of business practices at IGT revealed

By Liz Benston (contact)

Thursday, June 13, 2002 | 11:08 a.m.

A controversy erupted in Australia Wednesday that exposed an investigation into the business practices in the early 1990s of International Game Technology of Reno, the world's largest maker of slot machines and other gaming equipment.

The state government of Victoria, Australia, launched an investigation in 1998 into whether IGT had failed to pay customs duties in Turkey in 1992 and 1993. Company employees in Europe were accused of understating the value of gaming devices supplied to Turkey by as much as $2 million to avoid paying duties. The investigation was aimed at determining whether IGT was still a suitable company to be involved in Victoria's gambling industry.

Nevada gaming authorities said today they had cooperated with Victoria officials and had followed the investigation, which did not result in any fines in either Australia or Nevada . The investigation determined that the misdeeds were the result of a few employees and involved a specific shipment of machines to Turkey.

IGT, which said it self-reported the misdeeds to regulators worldwide, has since consolidated its European compliance arm in Nevada.

State Gaming Control Board Chairman Dennis Neilander said the Nevada agency is monitoring IGT's consolidated compliance operation.

"We monitor their compliance efforts pretty closely," he said.

IGT has emerged with its reputation intact, company executives said today.

"The company acted to take appropriate steps to prevent recurrence," said Michelle Chatigny, vice president of compliance for IGT. "The company has a very good reputation for self-investigation, self-reporting and self-policing. We really have one of the top compliance departments in the gaming industry."

The company no longer does business in Turkey, as the country banned gambling in the late 1990s, she said.

Wall Street analysts contacted this morning said they were not familiar with the Turkey investigation, though they added that it doesn't appear to be significant for a company with a market capitalization of $5.3 billion.

One analyst, who declined to be identified, said gaming companies are still sensitive to any hint of impropriety given some scandals that have erupted in recent years. "It's never good when you get publicity like this," the analyst said.

Details on the Turkey business dealing surfaced this week over a review of a controversial payment made by IGT's European subsidiary to Australian gaming regulators.

A state ombudsman in Victoria, Australia, has concluded its investigation into the propriety of the payment and reported its findings to the Australian Parliament, newspapers and wire services in Australia reported.

The ombudsman denounced the regulating agency, the Victorian Casino and Gaming Authority, for accepting a $200,000 payment from IGT aimed at covering the cost of the Turkey investigation. IGT was not party to that investigation.

The payment was deemed inappropriate, and it was made without properly informing the authority's board, the ombudsman said. As a result, the government of Victoria is now considering changing state gaming laws to prevent companies from covering the costs of investigations into their business dealings.

Nevada gaming regulators require companies to pay for the cost of suitability investigations.