Gaming company takes 'hit' from regulators

WEDNESDAY, JUNE 19, 2002

Executives of a gaming company with close ties to the $10 billion tribal casino industry moved Tuesday to counteract a growing legal and financial crisis that threatened its investors and major Indian Country clients.

Shares of Multimedia Games Inc. (NASDAQ:MGAM) fell 30 percent as several tribes in Oklahoma shut down the company's most controversial casino machine. The stock price was $19.88, down $8.62 from the day prior.

"We've taken a pretty big hit here," acknowledged chairman and chief executive Gordon T. Graves during a lengthy conference call with investors yesterday afternoon.

The stock plunge, which occurred during an extremely heavy day of trading, came as legal action against federal regulators mounted. Three tribes -- the Chickasaw Nation, the Choctaw Nation and the Cherokee Nation -- joined Multimedia in a lawsuit against the National Indian Gaming Commission in an attempt to keep the disputed MegaNanza game up and running.

But clients are already bowing to a warning issued last week by the NIGC, which ruled the machine illegal unless operated under a state compact, an agreement none of the affected Oklahoma tribes have. The Chickasaw Nation, the company's largest customer, received a violation notice late Tuesday and began removing MegaNanza to avoid federal fines and penalties.

"Once a tribe is hit, it is a very risky and expensive thing now to continue to run a game," said president and chief operating officer Clifton E. Lind.

Site visits by Indianz.Com to Chickasaw facilities where the game has been a major component of the tribe's business confirmed a virtual ghost town. "They've turned off the machines I like, why should I be here?" inquired one disappointed customer.

About 1,400 games in Oklahoma alone were pulled offline, Graves confirmed. A total 4,000 are affected nationwide, he added.

Investors and analysts yesterday joined the company in expressing "shock" and "disappointment" at the recent turn of events. The NIGC this week finalized changes to the way casino games are defined, which Multimedia says will allow the disputed game to be operated legally.

"There's absolutely no question that the clarification of the rules will make it easier" on tribes and the company, asserted Lind.

The company, however, wasted little time criticizing outgoing NIGC Chairman Montie R. Deer for disagreeing with the new definitions, which affect the Class II category of games such as bingo and pull-tabs. They accused him of opposing the spread of casino wealth in Indian Country

"He sees himself as an enforcer than an enabler," charged Graves, who drew attention to Deer's past as a federal prosecutor. "He feels like he would like to hold back Class II gaming."

NIGC chief of staff Richard R. Schiff declined to comment, citing the litigation. He said all tribes that operate MegaNanza were informed of its definition as a Class III machine.

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