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Multimedia Games Questioned by Regulators

NEW YORK – As reported by the CBS MarketWatch: " Multimedia Games, which makes games for use in Indian-run casinos, said in its 10-K that on Dec. 1 it received a "a series of letters" from the National Indian Gaming Commission "expressing the commission's concern that certain of our agreements violate" Indian gaming rules.

"According to those rules, tribes are supposed to hold "sole proprietary interest" in their own gaming operations. 'In particular,' Multimedia says, Indian gaming regulators are 'concerned that our development agreements, whereby we advance development funds to our tribal customers in exchange for allocated floor space and a share of gaming revenue, create a 'proprietary interest' of ours in the tribe's gaming operations.'

"Multimedia (MGAM) says it believes its deals are within the guidelines. Maybe, but this has been a hot-button issue among critics of the company. Multimedia says that if gaming regulators rule its development agreements are really management contracts, 'there could be material adverse consequences to us.'

"…At stake, it would appear, is whether the company can continue to get 30 percent of the gross receipts from casinos it helped build or whether those contracts must be recast to something like 30 percent of the take, after expenses. The difference is more than a few dollars, and would be a further blow to a company whose growth appears stalled…"

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