David vs. Goliath: Different outcome

Wednesday, Feb. 15, 2006 | 12:34 p.m.

CARSON CITY - What do you call a whistleblower who loses his claim against a gaming giant? In James McAndrews' case: ski instructor.

McAndrews took on his employer, International Game Technology, one of the biggest names in the industry. He sued in 2003, alleging the company and its subsidiaries owed up to $50 million in back taxes based on faulty filings.

Last week the Nevada Supreme Court threw the case out and left McAndrews out in the cold, so to speak.

"I definitely fell on a grenade," said McAndrews, who is working the slopes of the Sierra Nevadas. He has been on paid administrative leave since suing, but expects to wrap up his employment at IGT soon.

He turned whistleblower after reporting what he said was underreported earnings. He noted there was a state amnesty program to pay back taxes without penalties.

"It would have made them look like heroes," he said. "I was shocked to get their reaction. I thought it was a home run, but I walked into a wall.

"The boss accused me of trying to get him fired."

After continuing to push his claim inside the company, McAndrews filed suit. The lawsuit could have turned into a payday not only for the state but also for him. Nevada law allows whistleblowers to collect up to half of anything the state collects.

But in a 5-2 decision, the court ruled that whistleblowers in such cases are only able to pursue their lawsuits if there is cheating or fraud, such as a company keeping double books.

Ed Rogich, IGT vice president for marketing, said the final resolution "took a long time" but it upheld the position of the company. IGT "goes through an annual audit, and there are no discrepancies we are aware of, at least not to the degree they were sensationalized along the way."

The court agreed with IGT's view that the case comes down to a question of interpreting state law, and should not be subject to a whistleblower suit but handled by the state Taxation Department.

In a February filing with the Securities and Exchange Commission, IGT said it had been advised twice that "we had a good faith legal basis for our position."

But the filing said the state, which started an audit after McAndrews complained, believes the company may owe some taxes and company officials continue to "correspond" with the Taxation Department.

McAndrews said he felt vindicated by that.

"I filed the complaint to get them to comply," he said. "The money for myself was not the main purpose. I was not out there to get their money ... The day we filed the lawsuit, I went into work. I tried to straighten it out. But I was rebuffed."

Rogich said McAndrews "took his chances."

"We disagreed," he said. "There is no ill will over this."

He declined to discuss McAndrews' future with the company. McAndrews said he hopes his attorney can negotiate an agreement with the company to end his employment.

"They can't fire me, and I don't want to go back," said McAndrews, who said he had been happy with his job, adding that he was given a $7,000 pay raise "even after the screaming and yelling I did."

He figures he'll have a difficult time finding another job in a big company because "a blemish like this is pretty devastating."

"I seriously doubt I will be able to work as a tax person again," he said. "I can't see anybody in Reno-Sparks area hiring me.

"IGT will end up paying some tax money. I hurt them."

In a dissenting opinion, Chief Justice Bob Rose wrote that the decision "will have a chilling effect on all future whistleblower actions, effectively discouraging whistleblowers from coming forward with information of wrongful conduct."

McAndrews said he learned that lesson.

"I would not recommend anybody do this," he said. "It's been three years of hell."

Cy Ryan can be reached at (775) 687-5032 or at cy@lasvegassun.com.