Class Action Filed In Missouri Against Gray-Market Slot Operator
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Attorneys in Missouri this week filed a class-action lawsuit accusing a manufacturer of gray-market gambling machines of corruption and racketeering. The suit, filed on behalf of seven state residents who claim to have been harmed “through their use of one or more of the thousands of illegal slot machines,” also goes after the owners of the convenience stores that house the machines.
The case no doubt will be watched closely by casino operators, who have complained for years that the gray-market machines are illegal and aren’t subject to the same rules as casino slots in terms of hold rates, regulatory compliance, and other state supervision. The machines, often called video lottery terminals (VLTs), have proliferated in recent years in the Show Me State and elsewhere.
Torch Electronics is among the defendants in the case, along with Warrenton Oil Co., which operates gas and convenience stores throughout the state. Also named as defendants are a company called Mally Inc. and its past president, Mohammad Almuttan, as well as three other individuals the suit ties to the machines, including Torch’s founding owner, Steven Miltenberger.
The suit was filed Tuesday in the Western District Court of Missouri.
Corruption at heart of lawsuit
Last year, Almuttan, who owns several convenience stores in St. Louis, pled guilty to conspiracy to traffic in contraband cigarettes, but he is appealing his four-year prison sentence. The suit says Almuttan remains a member of Mally’s board of directors.
The St. Louis Post-Dispatch has identified Almuttan as the federal informant in last year’s indictment that charged former St. Louis Board of Aldermen President Lewis Reed and former Aldermen Jeffrey Boyd and John Collins-Muhammad with accepting bribes from business owners in order to approve lucrative tax breaks.
Almuttan’s brother, Rami, also pled guilty to distributing synthetic marijuana and other illegal drugs.
Torch owns and operates thousands of the machines in Missouri. They are manufactured by a North Carolina company called Banilla Games. The Almuttan brothers’ stores were among the first venues to house the machines in Missouri.
Another aspect of the suit that figures to draw casino operators’ attention is an allegation that the machines round down to the nearest whole increment, meaning a gambler who won $5.99 would only get $5 back, something legal slot machines are barred from doing. Such rounding, if given enough volume, would produce enormous hold rates for the machines. The net proceeds from the machines are split between Torch and the owners of the establishments.
“Like the legal slot machines operated in licensed casinos in the State of Missouri, Torch’s slot machines are programmed to present a dazzling visual display of bright, flashing colors to capture consumers’ attention and reinforce the false prospect of winning large sums of money,” the suit alleges, along with photos of the machine displays.
No safeguards for vulnerable populations
The lawsuit also alleges that the machines are accessible to vulnerable consumers, including gambling addicts and children.
“Children, including preteens and even toddlers, have been regularly observed gambling on Torch’s illegal slot machines,” the suit reads.
Gray-market machines also have been linked to the debate over sports betting in Missouri, which is surrounded by states with legal sports wagering. Last month, the Missouri House advanced sports betting bills that would allow casinos to have retail sportsbooks and both casinos and professional sports franchises to offer digital platforms. The Senate Appropriations Committee voted against a bill, sponsored by Republican Sen. Denny Hoskins, that would have married legal sports betting with the legalization of VLTs.
The suit also lists contributions of more than $657,000 made by Torch to various politicians and political action committees in Missouri, including $2,650 to the campaign of Gov. Mike Parson. The largest of Torch’s donations, made in June of 2020, was $90,000 to the Missouri Growth PAC, which donates to political campaigns in the state and counts among its greatest contributors the St. Louis-based conservative activist Rex Sinquefield.
The suit alleges that while the consumers who played the machines have lost an unknown amount, it is believed to exceed $5 million. They are seeking three times that amount, plus court expenses.
