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International corporation gets permission to enter Deadwood gambling

By Bob Mercer

Capitol Correspondent

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PIERRE — An international gambling corporation that is a big contractor for the South Dakota Lottery received state regulators’ approval Tuesday to move into Deadwood casino gambling.

Scientific Games is acquiring WMS Industries, another international gambling company listed on the New York Stock Exchange.

WMS already held a manufacturer license from the South Dakota Commission on Gaming. WMS will be a wholly owned subsidiary of Scientific Games and will remain the licensee.

In a report dated Oct. 11, state gaming commission officials said they looked into Scientific Games majority owner and director Ronald Perelman, Scientific Games chairman and CEO Lorne Weil and seven other board members.

“No concerns were identified during the course of our background investigations that would preclude licensing. Staff has reviewed the proposed documentation for the acquisition and has no objection,” said the report, signed by Craig Sparrow, the commission’s director of operations and enforcement.

In a related action, the commission approved a conflict of interest waiver for its legal counsel, Mike Shaw, of Pierre.

Shaw is a member of the May Adam Gerdes Thompson law firm that represents Scientific Games on matters involving the South Dakota Lottery.

Two of the firm’s lawyers, Brett Koenecke and Justin Bell, registered as lobbyists representing Scientific Games during the 2013 legislative session.

The gaming commission has a rule specifically prohibiting a commission member, officer, agent or employee from accepting anything of value from a licensee or applicant and can be a ground for denial of a license.

Scientific Games holds long-running contracts with the South Dakota Lottery for scratch-ticket printing and for the central monitoring system for video gambling. The lottery operates under a separate state commission.

The lottery commission’s contract for the video-lottery system was reached in 2009. The terms called for the lottery to pay Scientific Games a $2.9 million licensing fee and another $1.7 million-plus for controllers installed at establishments.

In addition, Scientific Games receives 0.30 percent of net machine income — money lost or left behind by video lottery players — on a bimonthly basis.

The lottery commission entered the scratch-ticket printing contract in 2010 and later extended it into 2016.

The company, based at Alpharetta, Georgia, received payments from the lottery of approximately $700,000 last year and more than $1.1 million the previous year, according to state vendor records.

A company official told the gaming commission members Tuesday that the WMS merger is a means for Scientific Games to move further into slot machine activity. The company is seeking regulatory approval from various U.S. jurisdictions before completing the merger.