Saturday, January 25, 2003
Copyright © Las Vegas Review-Journal

After Aruze chief's choice, slot maker's license denied

Developer Steve Wynn, right, defended the decision by Kurt Okada, left, not to submit a license application in Missouri. Okada is vice chairman in Wynn Resorts, the company behind Le Reve. Photo by Jeff Scheid / REVIEW-JOURNAL FILE PHOTO.

Le Reve developer Steve Wynn defended his partner's decision not to submit a license application in Missouri, leading regulators there to refuse to renew a slot maker's gaming license.

Wynn Resorts partner Kurt Okada's refusal prompted the Missouri Gaming Commission to vote 4-0 Wednesday not to renew the gaming license of Las Vegas-based slot maker Sigma Game.

Sigma Game's Japanese owner, Katsuki Manabe, borrowed $20 million from Okada several years ago, commission spokesman Harold Bailey said.

The loan wasn't repaid on time and Okada filed a lawsuit to force repayment.

"Mr. Okada feels victimized by this situation," Wynn said. "He lent the Sigma guy the money, and he was supposed to be paid back. Okada thinks this is ridiculous. Why should he pay for lawyers and for filing in Missouri when he has no interest in the state?"

When commission staff members asked Okada and his Japan-based Aruze Corp. to file license applications as Sigma creditors, Okada and Aruze refused.

Aruze is a gaming-device manufacturer specializing in pachi-slo machines, games that combine the spinning reels of slots with the pachinko-related skill factor of the gambler stopping each reel independently.

According to a statement issued by Sigma CEO Jim Jackson, Sigma has repeatedly asked Aruze and Okada to agree to the commission's request, but to no avail.

The commission then voted to deny Sigma a one-year renewal of its Missouri supplier's license.

The current license is good through Feb. 14; as of Feb. 15 Missouri riverboats will be able to leave Sigma machines on the casino floor, but Sigma will no longer be able to maintain those devices or sell new machines in the state, Bailey said.

Sigma said it will use every legal recourse it has, including lawsuits, to reverse the commission's action.

"The problem," Sigma lawyer Donna More said in a statement, "is that neither the commission nor Sigma has the authority to make Aruze and Okada submit the forms. Taking away Sigma's license is not going to change Aruze's or Okada's position. It is simply going to cost people their livelihoods."

Missouri and most other casino states, including Nevada, allow regulators to compel licensees to file license applications for major investors and creditors.

The practice is based on regulators' historic interest in rooting out organized crime influence over gaming operations, and allows states to investigate the backgrounds, finances, friendships and business relationships of key investors and creditors.

Bailey said the commission's only leverage is with Sigma.

"Sigma is our licensee, and we deal with the licensee," he said.

More believes the commission action reflects regulators' desire to investigate Okada.

"For some reason, the Missouri staff wants Okada," More said.

She also said the commission action was arbitrary and unusually harsh, adding that the panel routinely deals with more serious violations by imposing fines.

"I think Sigma has a good argument," Wynn said, noting that the small slot maker has no control over Okada. "Okada's just an adversarial creditor (of Sigma's)," he said. "Missouri is a jurisdiction that often takes a hard line for illogical reasons."

Sigma makes, distributes and services video and reel slot machines in every U.S. casino market, and employs about 135 workers in Nevada, More said.

The Missouri decision could prompt other states' regulators to investigate Okada's relationship with Sigma, insiders said.

Nevada Gaming Control Board Chairman Dennis Neilander said Friday that the panel routinely investigates licensees that receive disciplinary action. He had yet to review Missouri's Sigma decision but said Nevada regulators would likely look at both Sigma's and Okada's actions.

Okada holds a Nevada gaming license as owner of Las Vegas-based Universal Distributing of Nevada.

The nearly dormant company, once the world's largest manufacturer of video slot machines, two years ago was at the center of a Japanese tax dispute that focused on whether Okada's Aruze Corp. made payments to Universal Distributing as a way to pump the value of the Nevada company. Okada won an appeal of an earlier decision assessing taxes on the payments, but the case is still pending.

Wynn Resorts financing contains contingency arrangements in case Okada runs into regulatory problems, protecting Wynn and other investors.

If Aruze or Okada are denied gaming licenses as owners of Wynn Resorts stock, Wynn Resorts can require Wynn to buy their shares, or the company can buy the shares itself, using a promissory note.

Wynn doesn't expect that to happen.

"We think Mr. Okada is a first-rate businessman and a wonderful fellow," Wynn said.