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Aristocrat Execs Pass the Blame

22 August 2003

LAS VEGAS – As reported by the Sydney Morning Herald: "…Almost exactly a year ago, Aristocrat - an Australian company which had become the world's second biggest poker machine manufacturer - was set to become another victim.

"Senior executives from Australia and North America were bunkered down for a marathon three-day meeting to avert a looming earnings crisis.

"…As concerns about revenue surfaced, Des Randall, the Australian chief executive of the group, stared straight across the table at Mark Newburg, the company's US president of operations and delivered an ultimatum.

"…It was September 2002. Five months later, in February this year, the company plunged into crisis, as its share price spiralled out of control, ostensibly after a series of botched deals in South America that saw the company's earnings plunge into the red.

"As the corporate bloodletting gathered pace, the finger for this catastrophe was pointed firmly at the North American executives, who variously were portrayed as a group deliberately misleading head office about the true nature of the company's affairs.

"But interviews conducted by the Herald with North American executives paint a very different picture. It is a picture of a poorly run company desperately attempting to inflate the numbers by grasping for any possible deal. And the deal in mind, centred on Latin America. In fact, there were two deals, one in Brazil, and the other, in Colombia, better known for its cocaine and heroin exports than legitimate business dealings.

"…Shortly after the meeting, Randall told Australian analysts in Las Vegas the company was confident of meeting full year forecasts. The US executives, however, say Randall knew full well that Aristocrat wouldn't meet targets.

"…On February 7, five months after the meeting, Aristocrat announced a $28.8 million profit downgrade - the first of several - and all hell broke loose.

"Since then, more than $1 billion has been wiped from the company's market value and six senior executives including Randall have been sacked and the chairman, ALP stalwart John `Bruvver' Ducker has been forced to fall on his sword and the corporate regulator, the Australian Securities and Investments Commission (ASIC), has launched an investigation…"

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