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Casino company loses Indian gaming suit
WEDNESDAY, SEPTEMBER 11, 2002

A non-Indian company with close ties to the $12.7 billion tribal gaming industry lost a court battle this week over the future of its controversial casino games.

Multimedia Games Inc. (NASDAQ: MGAM) was rebuffed by a federal judge who said the Texas company lacked "a legally protected interest" under the Indian Gaming Regulatory Act (IGRA). The 1988 law doesn't allow challenges by casino game manufacturers, U.S. District Judge James H. Payne ruled.

"The third party interests of a vendor seeking to sell gaming equipment are not within the zone of interests protected by the IGRA," Payne wrote in an September 9 court order.

The ruling is the latest chapter in an ongoing dispute over the company's legally questionable casino devices. The Chickasaw, Choctaw and Cherokee nations, along with other tribes, operate thousands of Multimedia-supplied games at their facilities in Oklahoma.

But federal regulators haven't been kind to the company or its tribal customers. In April, the National Indian Gaming Commission (NIGC), an independent agency with oversight of tribal casinos, hit Multimedia with a negative decision on the game MegaNanza that sent its stock price plunging more than 50 percent.

NIGC followed up in June with a letter informing Oklahoma tribes to stop operating MegaNanza or face multi-million dollar fines. The Chickasaw Nation, Multimedia's largest tribal customer, was then slapped with a violation notice although no fines were assessed thanks to the lawsuit.

The company's stock price regained somewhat after the offending machines were replaced with another suite known as Reel Time Bingo. Payne in late June said the Chickasaw, Choctaw and Cherokee tribes could operate Multimedia games until the dispute was resolved.

Monday's ruling dashes hopes for an easy resolution. In court papers, NIGC continually backed its views on the company's machines.

The court had also ordered settlement talks with the NIGC. "We will make every effort to find some compromise acceptable to all parties, but I am not overly optimistic," said Multimedia chairman and chief executive officer Gordon T. Graves in an August 29 statement.

Those discussions are essentially moot with the dismissal. The three tribes, although participants in the case, were never allowed to intervene either but their motion is still pending.

As of yesterday evening, the company had not not disclosed Payne's ruling in any public statements. In a required filing with the Securities and Exchange Commission, Multimedia in August said the court's actions could "materially and adversely affect" its business.

MGAM closed at $19.00 yesterday, up $0.58 from the day prior. A press release touted new installations of Reel Time Bingo at a Yakama Nation casino in Washington.

The NIGC is currently without a confirmed chairman. President Bush last week nominated Phil Hogen, a Department of Interior solicitor to the post.

Get the Ruling:
Multimedia Games v. NIGC (9/9)

Relevant Documents:
Multimedia 10Q (8/14)

Discussion on Multimedia:
Yahoo! Finance Message Board

Relevant Links:
Multimedia Games - http://www.multimediagames.com
National Indian Gaming Commission - http://www.nigc.gov