Slot maker settles dispute with Missouri regulators

Tuesday, June 3, 2003 | 10:50 a.m.

The Missouri Gaming Commission has reinstated a state supplier license for Sigma Game Inc. as part of a settlement agreement with the slot maker that will include paying a $25,000 fine and revising several compliance procedures at the Las Vegas-based company.

The agreement ends a dispute over the interpretation of disclosure requirements for indirect third party lenders.

Missouri regulators in January refused to reissue a gaming license for Sigma based on the claim that an outside investor, Aruze Corp. Chief Executive Kazuo Okada, refused to submit to a routine background check.

Aruze is a Japanese manufacturer of pinball-like gaming devices called pachinko machines.

Through Okada, Aruze loaned Sigma $20 million a few years ago.

Sigma is controlled by Japanese businessman Katsuki Manabe, a former director of Aruze.

In addition to the loan, Aruze announced plans a few years ago to acquire a controlling interest in Sigma.

The Missouri commission claimed it only became aware of the loan last year, though Sigma disputed those events. The commission last year initiated disciplinary action against Sigma in connection with the alleged failure to disclose the loan.

Sigma filed suit in Missouri state court to block regulators' move to refuse the company's license. In February a judge ordered the Missouri Gaming Commission to issue the company a 90-day license.

Under the agreement, Sigma's third party lenders will not have to submit disclosure forms to the Missouri commission. A compliance plan calls for "strict monitoring of all future conversations" between Sigma, its parent KM Inc. and Aruze. In addition, subject to regulatory approvals, Manabe has agreed to place his controlling interest in a blind trust to be administered by retired New Jersey Supreme Court Justice Gary S. Stein.

The compliance plan and agreement is aimed at assuring the commission that "Sigma is not subject to Aruze control or influence," the company said.

"We are happy to have this episode behind us," Sigma Chief Executive Officer Jim Jackson said. "It puts an end to the potential for costly litigation and to any potential distraction from the company's effort to develop successful casino products."

Jackson and his management team will continue as the sole operating managers of Sigma. Manabe did not have operating management responsibility prior to the agreement and will not be able to assume such a role in the future, the company said.

Gaming regulators typically require major shareholders and investors to submit to background checks along with company executives, arguing that outside groups can influence the way a company does business.

Unlike Nevada licenses, Missouri casino licenses must be renewed each year.