Vegas company to pay $1 million to settle Arizona case

By Steve Green (contact)

Friday, Nov. 20, 2009 | 10:19 a.m.

Global Cash Access Holdings Inc. of Las Vegas on Thursday disclosed details about its agreement with Arizona gaming regulators, saying it will pay $1 million to settle an investigation involving actions years ago involving the company's founders.

The Arizona Department of Gaming this summer recommended Global Cash be barred from doing business in the state because of incidents years ago when, it charged, Global Cash defrauded banks by miscoding cash-advance transactions to underpay bank interchange fees; and because of a pattern of misleading regulators and of failing to be forthcoming with them.

Between July 1999 and August 2002, Global Cash avoided paying banks about $26.6 million by miscoding Visa credit card cash-advance transactions, the Arizona investigation found.

Global Cash, which provides credit services and ATM machines to casinos around the country, said that under the settlement it will be allowed to continue serving Indian casinos in Arizona.

"We are very pleased to announce that after months of negotiations, both parties signed an agreement on Nov. 17 resolving these issues. We are thrilled that all licensing concerns in Arizona are now behind us," Scott Betts, president and chief executive officer of Global Cash Access, said in a statement.

Global Cash said the Arizona department agreed to renew GCA’s certification based on GCA’s "significant ownership and personnel changes, implementation of updated policies and controls, pledge to have no further business relationships with individuals and companies involved in the underpayment of interchange fees, new management’s full cooperation with the department’s investigation and payment of a fine."

As part of the settlement, GCA will pay a $500,000 fine in addition to $300,000 to support Arizona’s problem gambling programs and $200,000 to reimburse the department for its legal and investigative costs.

GCA had set aside the $1 million during the third quarter.

Also part of the settlement, GCA admitted to knowingly committing the cash-advance miscoding violations.

"Vendors providing services to our tribal gaming partners will be held to the highest standards of integrity," Mark Brnovich, director of the Arizona Department of Gaming, said in a statement on the settlement. "The public's trust is based upon our commitment to an unwavering regulatory structure."

After release of the Arizona report, the company moved to distance itself from two of GCA's founders -- men sharply criticized by the Arizona regulators.

GCA this summer said it would buy back shares held by the founders, Karim Maskatiya and Robert Cucinotta.

Global Cash serves about 20 Indian casinos in Arizona generates about 5 percent of its revenue in the state. Loss of its license there, however, could have affected licensing elsewhere for the company.

The settlement was initially disclosed Nov. 4 as Global Cash announced third quarter revenue of $164.3 million, down 11 percent from 2008's third quarter.

The company earned $8.1 million or 11 cents per share in the third quarter, down from $8.6 million or 11 cents in the year-ago quarter.