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Best of Howard Stutz

Gaming Guru

Howard Stutz

WMS Board Member Resigns, Makes Accusations

9 December 2004

CHICAGO -- A WMS Industries board member abruptly resigned last month while firing off a two-page resignation letter that alleges company wrongdoing at the Chicago-based slot machine manufacturer and a personal vendetta by a Wisconsin gaming regulator, documents show.

The action, which induced WMS to make an 8-K filing Nov. 17 with the Securities and Exchange Commission and led a gaming analyst to comment that the matter cast a "dark cloud" over the company's stock price, comes as the company appears to be rebounding as one of the gaming industry's leading equipment suppliers.

Sales of slot machines had increased considerably, one analyst said, while customer acceptance of WMS games in Atlantic City was "positive and strong."

In November, the price of WMS stock outpaced all of the manufacturing segment, surging 10.24 percent and closing the month at just less than $29.74.

WMS has asked an independent third-party law firm to investigate allegations leveled by Donna More, 46, a Chicago-based attorney who joined the WMS board in May 2000, a company spokeswoman said. More, a former Illinois gaming regulator who has also been a member of Mandalay Resort Group's board of directors since 1998, resigned her position with WMS in a Nov. 11 letter to company Chairman Louis Nicastro.

In the letter, she said: "I find myself in the odd position of fulfilling my fiduciary obligation by resigning from the WMS Board and using my public voice to raise issues that I believe are antithetical to shareholder interests with respect to transparency, independence and gender discrimination."

In its SEC filing, WMS said More resigned after she learned her name would not be submitted to stockholders for renomination as a director at the company's annual meeting today.

The company also pointed out that More exercised options on 75,000 shares of WMS stock on Nov. 2, realizing a profit of $1.2 million.

"The board declined to renominate Ms. More because, in its view, Ms. More put her own personal interests in conflict with the company's interests in connection with a state regulatory matter. Ms. More was notified that she would not be renominated on Oct. 12, 2004," according to WMS's statement to the SEC.

The actions by More and WMS surprised many observers. One industry insider who knows More said the public actions were highly out of character.

Nevada Gaming Control Board Chairman Dennis Neilander said state regulators were familiar with the matter, but would not conduct their own investigation.

"We're aware of the circumstances and WMS told us they have an independent third party looking into the matter," Neilander said. "We'll review the findings of the third party. It could become a concern, but for now, we're letting the third party look at the matter."

Mandalay Resort Group general counsel Yvette Landau said only, "We don't discuss the activities of our board members."

Several phone calls to More's office in Chicago were not returned. WMS executives wouldn't comment.

The company instead had an outside spokeswoman say the matter was spelled out in the SEC filing.

Goldman Sachs analyst Steve Kent wrote: "We do think the controversy surrounding this letter and that it was filed as an 8-K will put somewhat of a dark cloud of controversy over the (company's) shares. Separately, we think that WMS is on its way to recovery."

WMS designs, manufactures and sells gambling machines throughout the United States and in 50 foreign gaming jurisdictions.

The company's titles include "Monopoly" and "Hollywood Squares." At the opening of Global Gaming Expo in October, WMS was the center of attention when movie superstar Clint Eastwood cut the trade show's opening ribbon and appeared in the company's booth to unveil "A Fistful of Dollars," a progressive game based on the actor's legendary Western films.

More is an associate in the Chicago office of Greenberg Traurig, a worldwide law firm with offices throughout the United States. She served as chief legal counsel for the Illinois Gaming Board during the initial development of the state's riverboat gambling industry and was an assistant U.S. attorney early in her professional career.

In her letter to Nicastro, More used the term "suspicious" in reference to her not being renominated to the WMS board.

"You know quite well that I have raised concerns about the effectiveness of the WMS Board, about the compensation levels of the company's executives, about conflicts of interest on the part of the company's outside counsel and about the company's responses to abuses of regulatory authority on the part of the Wisconsin Bureau of Indian Affairs," More wrote.

She related that a Wisconsin regulator had a "personal vendetta" and was bent on having her removed from the WMS board. The company is going through its annual licensing review in Wisconsin, where it provides slot machines to the state's tribal gaming properties.

According to both More's letter and WMS, she was acting as outside legal counsel on behalf of WMS with respect to certain regulatory matters. Linda Minash, a member of Wisconsin's gaming regulatory agency who was named in More's letter, said he wasn't sure of the reasonings behind the letter.

"Frankly, I really don't have any problem with Donna More, nor did Wisconsin have any issue with WMS," Minash said. "We were conducting our annual background check for the company's annual license renewal. I really don't have a problem with Ms. More."

Scott Larrivee, a spokesman for the Wisconsin Division of Administration, which oversees gaming, said the company gave Wisconsin advance notice of the SEC filing but there hasn't been any communication since.

WMS is having its independent investigator look into the matter. More's letter was attached to the SEC filing, as was a response from Nicastro written Nov. 17. In his letter, the company chairman, in five bullet points, disputed More's allegations, saying she had never brought her accusations to the board and never voted against any board action.

"You were not renominated by the board because, against the advice of the company and its counsel, you communicated directly with a state regulatory agency in a manner that was viewed by that agency as an attempt to compromise the integrity of its license renewal process," Nicastro wrote. "In the view of the board, your actions could have jeopardized the company's gaming licenses."

WMS Board Member Resigns, Makes Accusations is republished from