Slovenians beat cultural barrier to state license

By Liz Benston

Monday, Jan. 19, 2009 | 2 a.m.

Three years into the arduous process of obtaining a Nevada gaming license, Slovenian business partners Tomaz Zvipelj and Joze “Joc” Pececnik stumbled before the Nevada Gaming Control Board. At a hearing in November 2006, the board declined to license the partners’ gambling machine company and criticized them for sloppy record-keeping and obstructing the investigation process.

Such an outcome can spell the end for entrepreneurs attempting to secure a coveted Nevada license — a gold standard that can open doors to other gaming licenses worldwide.

This story, however, has a happy, and perhaps unprecedented, ending.

The men got their license in December — five years after starting the process. Their company, Elektroncek, will soon begin distributing electronic versions of table games in Nevada and elsewhere in North America. The games, including roulette, blackjack and craps, are gaining popularity in regions where live dealers are prohibited.

The company got its license with a lot of hard work and millions of dollars in cleanup efforts that are unusual for a business of its size.

Led by gaming attorney John Maloney, a former Gaming Control Board investigator who tracked down mob figures in the 1980s, the company created an A-list compliance committee. It included Sam Weaver, who worked with Maloney at the Gaming Control Board; Gordon Dickie, part of a Control Board investigations unit that tracked Frank “Lefty” Rosenthal, among others; and Steve Rybar, the FBI veteran at the center of Operation Yobo, which took down prominent politicians in the 1980s in one of Nevada’s biggest corruption scandals.

All this, for a company that wasn’t doing business with bad people or in black markets.

Gaming companies aren’t required to have compliance committees. They are common at large, publicly traded companies but voluntary at smaller, private companies such as Elektroncek, which began life in a garage some years after Slovenia declared independence from the former socialist republic of Yugoslavia in 1991.

Regulators found no smoking guns. Instead, they uncovered a rat’s nest of accounting and tax problems. At the end of the paper trail, they discovered incompetent bookkeepers, incorrect tax forms, an unconvincing business plan and business entities that served little purpose.

The biggest hurdle was an invisible one. The Slovenians, respected businessmen in their home country, were flustered by a system, born from the days of mob rule, in which businesspeople are required to answer open-ended questions in detail and reveal personal details unknown even to close friends and family. Attempting to answer such questions as best they could, they came across as uncooperative, even untrustworthy — a cardinal sin in Nevada’s regulatory process.

The tide turned in 2007 when the company hired PricewaterhouseCoopers to review company records and serve as a go-between with regulators whose patience was wearing thin.

“There were people all over Eastern Europe who said, ‘You’re never going to get a license,’ ” Maloney said. “I have to give all the credit to Joc and Tomaz. They could have walked away from this but didn’t.”

Indeed, they could have followed a route taken by many other gambling manufacturers that don’t do business in Nevada, making money in less-regulated jurisdictions where messy books are tolerated.

The resulting cultural exchange has been a learning process for both sides.

“I think the applicants have done a pretty remarkable job” responding to regulators’ concerns, Board Chairman Dennis Neilander said at the December hearing. Two years ago, Neilander had called the problems with the applications “irreparable.”