Sigma sues to retain license in Missouri

Tuesday, Feb. 11, 2003 | 10:56 a.m.

A Las Vegas slot machine maker has filed suit in a state court to block Missouri gaming regulators from revoking the company's license to do business in that state.

Sigma Game Inc. -- known for its popular "Game of Life" slot machine based on the classic board game -- Monday requested a permanent injunction from a Cole County, Mo., circuit court as well as a temporary restraining order to prevent the Missouri Gaming Commission from failing to renew Sigma's vendor license last month.

The move may have a ripple effect by triggering investigations in at least a dozen other states where the company is licensed to sell slot machines, jeopardizing the company and putting its workers' jobs at risk, Sigma representatives said.

At issue is a $20 million loan made about three years ago from Kazuo Okada to the owner of Sigma's parent company, Katsuki Manabe. Okada is one of Japan's richest men and a key partner with Steve Wynn in Wynn Resorts Ltd.'s Le Reve resort in Las Vegas. He is also the chief executive of Aruze Corp., a Tokyo-based maker of pinball-like gambling devices called pachinko machines. Manabe is a former director of Aruze Corp.

The Missouri Gaming Commission said it first learned of the loan last year and aimed to find out more about the relationship between Okada and Manabe.

Okada refused to submit to a background check, forcing the commission to refuse Sigma's license renewal based on rules requiring that key executives, investors and other "key persons" submit to background checks, the commission said.

Unlike Nevada gaming licenses, which tend to be permanent, Missouri licenses must be renewed each year.

"It was a nonstandard loan transaction involving a great deal of money that allowed Sigma to remain a growing concern," Missouri Gaming Commission Executive Director Kevin Mullally told the Sun in a previous interview.

"(Okada) has refused to submit the paperwork after repeated requests. This is basic background information -- the same standard information we ask of any other licensee."

Neither the company nor the commission has the authority to require Aruze or Okada to submit to the checks, Sigma contends.

"The commission doesn't have a rule that compels Aruze and Okada to make disclosures," Sigma Chief Executive Officer Jim Jackson said. "We are powerless because Aruze and Okada are not employees or agents of Sigma, so our repeated pleas for disclosure have gone unheeded."

Sigma also claims the Missouri commission has disregarded the company's right to a fair hearing.

The decision to revoke the license was made during a pending disciplinary action initiated last fall to discuss the loan, a violation of constitutional rights to due process, Sigma attorney Donna More said.

The commission appointed an administrative law judge and a status meeting occurred in late December, she said.

But the commission still decided not to renew the license before the company had a chance to present its side of the case before a judge, she said.

"Before there's been any testimony, the commission said, 'Forget the hearing, let's not renew the license and make it effective immediately,' " she said.

The restraining order requests that the penalty be stayed immediately pending a hearing on the loan.

"Otherwise," More said, "the Missouri commission will be taking away the license based on hearsay and innuendo."

Mullally said the commission has the right to investigate any key individual who could influence the way a company does business, no matter how close the affiliation or where the person is located.

The company hasn't been denied due process, he added.

"They have chosen to fail to comply with the process that was due them," he said. "They are the ones that chose to enter into the transaction. It's an unfortunate situation but it's a situation of their making."

The commission decided not to renew the license now because the yearly license was up for renewal, he said. The action makes the disciplinary action moot, he said.

Around the time of the loan, Aruze announced plans to acquire a controlling interest in Sigma. Aruze has taken no action on those plans and doesn't have a stake in Sigma, Sigma representatives said.

Aruze officials could not be reached for comment and Okada's Las Vegas attorney refused to comment.

But More said it was the opinion of Aruze and Okada that the commission didn't have jurisdiction over them to require the information. The one-time loan was made several years ago and isn't a major factor in the company's operations, she added.

Nevada Gaming Control Board representatives could not be reached for comment by press time. Board Chairman Dennis Neilander said in a previous interview that the agency would investigate the matter.

Gaming regulators typically require major shareholders and other investors to submit to background checks along with company executives to make sure individuals aren't skimming profits or otherwise engaging in illegal or unsavory activities. Non-employees can still influence a company, regulators say.

More said Sigma will litigate based on who qualifies as a "key person."

The company expects a judge's decision on the temporary restraining order sometime this week, she said.

Sigma has been licensed in Missouri since 1994 and employs about 130 people. About 100 employees are based in Las Vegas, with the remainder scattered across satellite sales offices nationwide.

The company introduces up to 10 new machines each year and now offers a total of more than 100 machines under such titles as "Easy Riches," "Throw the Dough" and "Big Top Circus."