Casino ATM company sues its founder’s former employer

By Steve Green

Tuesday, March 23, 2010 | 10:20 a.m.

A company headed by the former chief executive of Las Vegas-based casino ATM operator Global Cash Access Holdings Inc. on Monday filed an antitrust lawsuit against Global Cash.

Sightline Payments LLC filed suit in U.S. District Court in Las Vegas against GCA. Sightline's president and founder is Kirk Sanford, one of the founders and a former CEO of Global Cash whom Global Cash has agreed not to associate with because of his status as an "excluded person" in settlement of an Arizona investigation of GCA.

"GCA has acquired a monopoly of providing cash access products, casino patron credit reporting, cashless gaming and redemption machines to gaming establishments," the lawsuit charges.

A Global Cash spokesman on Tuesday said the company would vigorously defend itself against the accusations. "We're fully confident in our position to defend ourselves," said Scott Dowty, executive vice president of business development at GCA.

Sightline claims GCA's acquisitions in 2008 of competitors Certegy Gaming Services Inc. and Cash Systems Inc. boosted GCA's market share in the casino cash access industry from 75 percent to 90 percent -- lifting the annual cash total provided by GCA to gamblers nationwide to $21 billion.

Sightline said that in recent years it tried to enter the market by purchasing Western Money Systems, described as a vendor of redemption kiosks for casinos.

"GCA learned of the negotiations and with specific intent to deprive Sightline of the acquisition, and an attempt to extend its monopoly to the placement of redemption kiosks in casinos, GCA offered to form a joint venture with Sightline to jointly acquire Western Money Systems; then GCA on its own made an all cash offer to Western Money Systems, which Sightline couldn't match," the suit charges.

"GCA thereby prevented Sightline from acquiring Western Money Systems and acquired Western Money Systems for itself and 2,000 redemption machines, 60 percent of which include ATM functions," Sightline's suit alleges.

Sightline claims GCA has "restrictive agreements" with casinos that are anticompetitive. It requires casinos using GCA's Central Credit LLC gamblers' credit bureau information system to grant GCA exclusive rights to place cash access products in casinos "so as to further enhance its monopoly," Sightline alleges.

Claiming GCA has obtained exclusive rights to provide cash access products to nearly all the casino operators on the Las Vegas Strip and in Atlantic City, Sightline alleged: "GCA pays large sums of money to gaming establishments in subsidies and other incentives which only a monopoly could afford to do in order to obtain exclusive rights to provide cash access products and related services to the gaming industry in Nevada and Las Vegas and vicinity."

The suit alleged other anticompetitive conduct including:

--GCA bars vendors and providers from doing business with Sightline.

--GCA requires all sales and service personnel to sign noncompete agreements preventing them from working for competitors for 18 months to two years after leaving GCA.

--GCA has committed "patent abuse" by threatening to sue casinos that use certain cash access technology.

--In settling an investigation of GCA by the Arizona Department of Gaming last year, GCA agreed not to associate or conduct business with Sanford and in the agreement GCA referred to Sanford as an "excluded person," the lawsuit says. "GCA inserted this provision in an attempt to tarnish Mr. Sanford's reputation and character and to restrict Sightline's ability to seek the necessary gaming certificates and/or licenses in the gaming industry to compete against GCA," the lawsuit charges.

Sanford retired as chief executive of GCA in 2007, the lawsuit says.

"Given the vast experience of Sightline's executive team and prior proven track record with GCA, it is reasonably probably that Sightline would have captured at least 50 percent of the current market if not prevented by GCA actions," the suit charges.

The suit seeks at least $300 million in damages and a court order declaring that certain GCA contracts and mergers are illegal "in that each of said contracts and combinations unreasonably restrains trade, constitutes predatory, as well exclusionary conduct and threatens competition in the industry."

In the Arizona case, Global Cash agreed last November to pay $1 million to keep its license serving Indian casinos in that state and to settle an investigation involving actions years ago involving certain of the company's founders.

The Arizona Department of Gaming last summer threatened to bar Global Cash 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.

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

Because of the Arizona investigation, GCA had distanced itself from two other founders, Karim Maskatiya and Robert Cucinotta.

In the settlement, GCA agreed that if it learns Maskatiya, Cucinotta, Sanford or other "excluded persons" intend to acquire more than 1 percent of its outstanding stock, it will "take all lawful steps to prohibit such acquisition or ownership."

GCA also agreed not to "work, contract, engage, have any business relationship or otherwise be involved or affiliated with the excluded persons in any manner or capacity."