Okla. tribes ruled casino game illegal

MONDAY, AUGUST 12, 2002

A casino company with close ties to the $10 billion Indian gaming industry was warned months in advance of a crucial stock plunge that its flagship product was illegal to operate in Oklahoma.

But tribal regulators, whom Indian leaders say are best equipped to manage their casinos, only shared the information with the company, having been gagged by a non-disclosure agreement they signed with Multimedia Games Inc. of Texas (MGAM). The company's stock subsequently fell 50 percent after federal officials in June moved to shutdown the MegaNanza game.

The stock price has gained in recent weeks but not to its full glory, when thousands of MegaNanzas were whirring in tribal casinos. The Chickasaw Nation is the company's largest tribal client and its gaming empire has expanded in recent years, largely in part to the success of the disputed machine.

The gag agreement, though, expired last month and the company's cozy relationship with its tribal clients is now playing a role in court. Multimedia has asked a federal judge to rule that its its products are legal.

The National Indian Gaming Commission disagrees. Court documents note that at least three tribes -- the Cheyenne-Arapaho, the Eastern Shawnee and the Seneca-Cayuga -- considered MegaNanza to violate tribal and federal law, decision made as early as last fall. The Muscogee Creek Nation arrived at a similar conclusion in May.

Nevertheless, company executives claimed shock when NIGC Chairman Montie Deer acted. "He threw us a curve," said chairman and chief executive officer Gordon T. Graves in June, "that was surprising and extremely disappointing."

In subsequent conference calls with investors, Graves and other executives have downplayed the dispute, despite claiming irreparable harm to itself and Indian Country. Although the company obtained a preliminary injunction against NIGC that bars fines and other punishment, they have been replacing MegaNanza with another suite of machines.

Multimedia has asked for a permanent ruling but NIGC has attacked the company's argument that it is losing money. "The estimates of economic loss were speculative estimates contradicted by admissions by the plaintiff in corporate representations to the Securities and Exchange Commission," the agency wrote in a July 18 court filing.

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