Court delays casino game settlement talks

WEDNESDAY, JULY 3, 2002

A casino company with close ties to the $10 billion Indian gaming industry launched a last-ditch effort on Tuesday to speed up resolution of a dispute that has sent investors fleeing.

Multimedia Games (NASDAQ: MGAM) of Texas pleaded with a federal magistrate to keep court-ordered settlement discussions on track. The company in court papers said "time is of the essence" for a flagship casino machine in use at several tribal facilities in Oklahoma.

But after hearing oral arguments via telephone, U.S. Magistrate Sam A. Joyner of the Northern District of Oklahoma instead sided with a request by federal Indian gaming regulators to postpone talks that were to start yesterday. A brief order rescheduled for July 23 and July 24.

The delay effectively scuttles what was arguably Multimedia's best bet to stop the financial bleeding that has occurred since the National Indian Gaming Commission (NIGC) declared the MegaNanza casino game illegal in Oklahoma. The company's stock has dropped more than 30 percent as the market has reacted negatively to the news.

The dispute centers over the classification of two categories of casino games. The NIGC considers the MegaNanza a Class III machine that cannot be operated without a tribal-state compact.

None of the tribes in Oklahoma have such an agreement and there is no chance of getting one. So Multimedia was hoping settlement talks would force the NIGC's top three officials into declaring MegaNanza a Class II, or bingo-like, device.

But government attorneys were able to keep NIGC Chairman Montie R. Deer and commissioners Liz Homer and Teresa Poust from personally attending the talks. In calls with investors, Multimedia executives said they were convinced Homer and Poust were sympathetic to its case.

Homer, however, leaves her post July 5. Her departure did not go unnoticed by Multimedia.

"The insight these commissioners can offer in the settlement conference is invaluable and may be lost in the event defendants stall this settlement proceeding," wrote Tony M. Graham, an attorney for the company, in a July 1 court filing.

The company's other hope is a set of regulations approved by Homer and Poust over the objections of Deer. The rules, which change the way Class II games are defined, go into effect this month.

There is no guarantee, however, that MegaNanza will indeed be reclassified. With Homer gone, Multimedia's chances at immediate success have dropped considerably.

Despite the setback, tribes in Oklahoma are allowed to keep MegaNanza alive while the lawsuit proceeds. A federal judge issued a preliminary injunction to prevent the NIGC from assessing $20,000-a-day fines.

Among Multimedia's top clients are the Chickasaw, Choctaw and Cherokee nations. The three tribes intervened in the litigation last month.

Multimedia stock fell 17 percent yesterday. It was trading at $18.05, down $3.79 from the day prior.

Relevant Documents:
Multimedia Asks to Continue Talks (7/1) | NIGC Requests Delay (7/1)

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