Rare split vote by Control Board advances Australian slot company

By Richard N. Velotta (contact), In Business reporter

Fri, Nov 13, 2009 (3 a.m.)

A growing Australian slot machine manufacturer, hoping to make Las Vegas a base of operations for its North American distribution, cleared an important hurdle Nov. 4 when the state Gaming Control Board recommended a license and its registration as a public company.

The recommendation for Ainsworth Game Technology Ltd. wasn’t without controversy. The matter will be forwarded to the Nevada Gaming Commission after a rare 2-1 vote. Board member Mark Lipparelli cast the vote against the recommendation, citing the company chairman’s track record for regulatory compliance.

The board spent 2 1/2 hours questioning Chairman Leonard Ainsworth, CEO Daniel Gladstone and Chief Financial Officer Mark Ludski about regulatory compliance plans, focusing most of its time on Ainsworth, the former top executive for Australian rival, Aristocrat Technologies Inc.

Ainsworth sought a Nevada gaming license in 1986 and 1993, withdrawing from the process both times when regulators questioned several transactions.

When Ainsworth left Aristocrat, that company eventually was licensed in Nevada. When Ainsworth formed the company that bears his name, it grew into an important player in Queensland and New South Wales in Australia. The company set up an office in Fort Lauderdale, Fla., to service gaming companies in South America. Now, company officials want to establish a base in Las Vegas and get a Nevada license so it can submit its proprietary slot machine platform to the state’s equipment lab for scrutiny.

Having a Nevada license would be advantageous because it would open up yet another important market — Macau — since American casino companies operating there prefer to conduct business with Nevada licensees.

Ainsworth would not manufacture slot machines in Las Vegas, but would install its software here.

Regulators said they expected Ainsworth to establish a “robust compliance committee” to monitor transactions, especially those in high-risk markets such as Russia and Mexico.

Gladstone said the company has been working toward getting a Nevada license and stepping up compliance since June 2007.

The board required having the compliance committee in operation before it can conduct business in the state.

But the issue that caused the most turmoil and led to Lipparelli’s no vote involved matters that occurred when Ainsworth withdrew his previous applications.

Regulators questioned Ainsworth about monitoring transactions in Russia and about deals with a denied Nevada license applicant in New Jersey.

Ainsworth admitted that compliance matters have not been a priority because as a small operator in Australia it didn’t need vigorous oversight. He said he had an arms-length relationship with his executives and didn’t handle day-to-day operations questioned by regulators.

“I’m comfortable that the company in front of us today is different from the company that was before us when you walked away from us,” board member Randall Sayre said. “But I’m disappointed that we had to address issues we had to address today.”

It was Sayre that wanted the condition that the compliance committee be in place before the company could conduct business in the state.

But that condition wasn’t enough for Lipparelli, who wanted further explanations about the details of the deals questioned by Control Board investigators.

In other business, the Control Board also scheduled its hearing to license MGM Mirage’s CityCenter on Nov. 13.

Control Board officials considered scheduling the hearing at its regular monthly meeting, but with an already heavy agenda and travel issues surrounding the death of a family member of a key witness for MGM Mirage partner Dubai World, it made it expedient to move the meeting date.

The license would then go to the five-member Nevada Gaming Commission for final approval on Nov. 19. Several CityCenter facilities are scheduled to open in December with the grand opening of Aria planned for Dec. 16.