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July 31, 2014

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Regulators probe iGames’ ties with slot cheat

Nevada regulators are requiring a Las Vegas gambling device company and its chief executive to submit to a background licensing investigation over concerns about a business arrangement with a convicted slot cheat.

Last week, the Nevada Gaming Commission voted to investigate iGames Entertainment Inc. and its chief executive, Jeremy Stein for suitibility as a manufacturer and distributor of gambling equipment in Nevada. That action follows a similar vote earlier this month by the state Gaming Control Board.

The board -- which requires background investigations of top casino executives -- has the option of investigating equipment makers but doesn't often exercise the privilege.

iGames Entertainment Inc. is a public company that recently relocated its headquarters from south Florida to Las Vegas. Last year, the company acquired patents, trademarks and all other rights to a slot machine security product called "Protector" designed to prevent the cheating of slot machines.

The device was invented by Tommy Glenn Carmichael, a notorious slot cheat who was added to Nevada's Black Book of banned casino players this year after serving time in prison for cheating casinos in Las Vegas and Atlantic City out of millions of dollars.

Carmichael receives a royalty fee on the sale of each device.

The device was approved by Nevada regulators for use in the state's casinos about a year ago and is already in use in multiple Las Vegas properties. The company also has sold the device to Royal Caribbean Cruise Lines for use in shipboard casinos.

Regulators approved the device because it "works as advertised," Control Board member Scott Scherer said.

The device could be converted to a slot-cheating mechanism if it were tinkered with, however, Scherer said.

"There's little doubt in our minds that Tommy Carmichael has the knowledge and the ability to reprogram it," he said. "That gives rise to some concern that if he's producing these products, if he's still involved with this company and this process, he could try and change the product from what was submitted to the lab."

Besides receiving royalty checks, Carmichael said he has no involvement with iGames Entertainment or the device. He sold the patent to another company that sold it to iGames Entertainment in 2002.

"I have completely signed over all my patent rights, I don't have any kind of management position and I have nothing to do with distribution or manufacturing," Carmichael said. "I don't even own shares of (iGames) stock."

"If they are so concerned about the product, why did they approve it in the first place?" Carmichael said.

"It's not the product that concerns us," Scherer said. "It's the relationship that the company has with (Carmichael). We just need to take a closer look at it."

Representatives for iGames Entertainment in Las Vegas could not be reached for comment.

According to the company's most recent quarterly financial statement, the Protector sells for about $130 to $250 each and "completely denies access to the slot machines of all major manufacturers ... unlike previous solutions that have been somewhat effective on only a few cheating methods."

Those methods include using everything from wire hangers and other thin strips of metal to magnets and light wands that disrupt optic sensors that count coins coming out of the hopper.

Carmichael claimed to be able to cheat machines in a matter of seconds by quickly slipping a long object up into a slot machine and disabling its sensor.

"It's like building a vault without having a door on it," Carmichael said. "When I was building slot cheating devices, this product is exactly what I was afraid (slot makers) were going to do," he said.

The Control Board doesn't endorse any products it approves for use.

"What we're saying to operators is that we don't object to you installing it," Scherer said.

Slot makers are continuously upgrading their machines with technology to prevent scam artists who use light wands or other devices that have been used to cheat machines in the past, he said.

"It's a constant process," he said. "The cheaters are coming up with a new way to cheat and the machines are coming up with ways to prevent them."

Scherer said he wasn't immediately aware of other anti-slot cheating products available for sale in Nevada.

The patent for the Protector isn't specific to the product but instead governs the process of protecting slot machines from cheating, Carmichael said. Such a patent makes it difficult for another company to create a similar device, he added.

iGames Entertainment also makes other products, including a table game that resembles a slot machine, play-for-fun electronic games and software that allows two-way text messaging.

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