Gambling Control Board Allows Possible Conflict

In the mid-1940s, Harry Williams revolutionized the pinball business and became one of the country's leading manufacturers of slot machines. His company, WMS indusries, makes the slot machines that are used here in Maine. But now WMS is being acquired by Scientific Games. That's the same firm that monitors the slot machine revenue for the state and alerts gaming regulators if slot machines are out of compliance with state standards. The deal has triggered a tilt warning of sorts for Timothy Doyle, chair of the state's Gambling Control Board.

"I almost likened it to a referee owning a football team, at least in my mind," Doyle said.

The board has been grappling with the WMS acquisition ever since Scientific Games announced the $1.5 billion dollar transaction in January. Even before casino gaming, Scientific Games has overseen online lottery sales like Powerball and Megabucks Plus, as well as lottery scratch tickets. Patrick Fleming, the Gambling Control board's executive director, says Scientific Games must undergo the same level of scrutiny as WMS to ensure it meets state qualifications as a slot machine distributor. But Fleming says a financial review by Macdonald-Page, a South Portland accounting firm, turned up nothing of concern.

"Macdonald Page did not find anything in the review that would lead them to believe that Scientific Games or WMS gaming are not financially viable or financially responsible nor did they find anything in the financial or tax information submitted by the key executives to indicate that the key executives are not financially responsible," Fleming said.

Fleming said Don Armstrong, an investigator for the board, looked into the past activities of the Scientific Game's top three officers and failed to find anything that would adversely affect the individuals' suitability to distribute slot machines in Maine. Despite Fleming's analysis of the firms and its principals, Doyle remains troubled that the state is paying a company to essentially track its own stream of gambling revenue.

"I'm still concerned for what appears to be a conflict, the monitoring system and the slot machine distributor being the same entity," Doyle said.

Just because Scientific Games is the holding company though, does not mean the firm cannot independently monitor the slot machines it will acquire from WMS. Maine is among 14 gambling jurisdictions that permit a company to conduct central site monitoring of machines that it owns. Mike Freese, vice-president of regulatory affairs for Scientific Games, told board members that stakes are high for the company to ensure that its operations meet the highest level of scrutiny and accountability.

"I think it really comes down to one of the charges of all regulators and that is to maintain the integrity of gaming," Freese said.

"Gambling is such a morally suspect industry that you really have to stay away from perceived conflicts as well as real conflicts," said Professor I. Nelson Rose.

That's I. Nelson Rose, a professor of Whittier Law School in Costa Mesa, California and a recognized expert on gambling laws. He says if he were advising Maine's Gambling Control Board, he would recommend putting the slot revenue tracking out to bid simply to eliminate A potential conflict -- despite Scientific Game's ability and intention to keep both operations separate.

"There's no reason why this has to be the same company that's both monitoring and operating the slot machines," Rose said. "Self-regulation is really never a good idea."

The board voted to ask Scientific Games to provide it with additional written information explaining how it will prevent perceived conflicts of interest. More information about the program is available on the web site at www.happmart.com.