Acquisition could have Maine casino overseer monitoring its own slot machines

Elizabeth Milliken of Old Orchard Beach looks toward her husband who was playing a nearby slot machine at Hollywood Casino — then Hollywood Slots — in Bangor in June 2009.
John Clarke Russ | BDN
Elizabeth Milliken of Old Orchard Beach looks toward her husband who was playing a nearby slot machine at Hollywood Casino — then Hollywood Slots — in Bangor in June 2009. Buy Photo
By Matthew Stone, BDN Staff
Posted July 01, 2013, at 4:12 p.m.

AUGUSTA, Maine — The company that tracks slot machine revenues at Maine’s casinos and warns the state’s gaming regulators if anything is amiss is acquiring one of the five slot machine distributors authorized to do business in Maine.

Scientific Games, which holds a state contract to track real-time slot machine revenues at Hollywood Casino in Bangor and Oxford Casino and report them to the state, announced its plans earlier this year to acquire the gaming company WMS Industries. The two companies expect to complete the deal by the end of the year.

Once the $1.5 billion transaction is complete, Scientific Games would be keeping track of the revenues generated by machines manufactured by its subsidiary and four other distributors and letting the Maine Gambling Control Board know of any malfunctions. Scientific Games is also responsible for shutting down slot machines and informing the control board if any machines fall out of compliance with the state’s standards for the slot machine software.

The five-member Maine Gambling Control Board won’t be required to issue a new distribution license to the combined company, but the board will have to determine if the reconfigured company meets the requirements of its current license, said Patrick Fleming, the control board’s executive director.

Fleming said he’s preparing an analysis for the board to assess whether Scientific Games can continue its independent oversight role for the state’s slot machines when the company owns one of the slot machine manufacturers.

“They’re pretty independent at this point from what I can see,” he said.

The control board quizzed a Scientific Games vice president about the acquisition at an April board meeting.

“We rely on you to monitor our slot machines, and we’ve relied on you since Day One,” said Timothy Doyle, the board’s chairman. “How do you segregate the duties such that the monitoring system and the machines, they maintain the integrity that the state expects?”

Brennen Lawrence, senior vice president and general manager for Scientific Games, said the company is obligated by the terms of its contract with the state to perform what’s known as central site monitoring for slot machines.

“Your requirements of Scientific Games are very specific for the data that we acquire,” Lawrence told the control board. “Although we might have tons of data points, none of it is accessible, and none of it is allowed for Scientific Games’ use for any other purpose than providing it to the state.”

Doyle suggested the company set up a management structure that isolates central site monitoring from slot machine sales and distribution. “I think the board will be looking at that with a sharp eye,” he said at the April meeting.

Doyle declined to comment further on Monday, saying he shouldn’t prejudge a matter before the Gambling Control Board. Aimee Remey, a Scientific Games spokeswoman, said Maine is one of 14 U.S. gambling jurisdictions that allow central site monitors to also own machines. Scientific Games performs central site monitoring in six of those jurisdictions, including Maine.

Scientific Games has performed central site monitoring for Maine slot machines since 2004, before Hollywood Slots opened its doors in Bangor. All slot machines at Maine’s two casinos are connected to a Scientific Games system that collects real-time revenue figures. Scientific Games makes sure the machines are reporting the numbers correctly and reports those numbers to the state.

The casinos submit revenue figures separately, and Maine Gambling Control Board auditors confirm the figures are accurate.

Under its contract, which expires in 2017, Scientific Games collects 0.88 percent of net slot machine revenue, Fleming said. That amounted to more than $5 million in 2012, according to Maine Gambling Control Board figures.

The company also has a separate contract to operate much of Maine’s state lottery.

WMS Industries is one of five distributors authorized to sell slot machines in Maine and is one of the largest gaming manufacturers in the country.

I. Nelson Rose, an expert in gambling law and a professor at Whittier Law School in Costa Mesa, Calif., said he wouldn’t be surprised to see a state in Maine’s situation put its central site monitoring contract back up for bid in order to avoid a conflict.

“The state is going to have to decide whether the companies are still going to be independent enough to trust,” he said, “and they have to worry about reputation, so they may very well require that the contract be put up for bid again.

“It’s not a good image to be self-regulating, even if it’s common.”

http://bangordailynews.com/2013/07/01/business/acquisition-could-have-maine-casino-overseer-monitoring-its-own-slot-machines/ printed on December 26, 2014