A securities fraud class action was commenced in the U.S. District Court for the Southern District of California against Multimedia Games, Inc.
The suit, "Gordon T. Connors v. Multimedia Games, Inc., Gordon T. Graves; and Larry D. Montgomery," Case No. 98 CV 1014K (JFS), involves violations of Sections78j(b) and 78t(a), respectively, and Rules 10b-5 promulgated thereunder, 17 C.F.R. Section 240. 10b-5, on behalf of all persons who purchased common stock in Multimedia Games, Inc. from and after August 4, 1997 through January 2, 1998.
Multimedia Games, Inc. (MGAM) provides satellite-linked, high-stakes electronic bingo games and interactive high-speed electronic bingo games played on a network of video machines in casinos owned primarily by American Indian tribes throughout the United States. The action involves the defendants' casino game "Megamania."
The action charges that MGAM and its officers and directors manipulated the price of MGAM common stock through the device of a stream of materially false statements and misleading statements that (1) defendants knew that the National Indian Gaming Commission had no jurisdiction or authority to supersede the DOJ's determination that its MegaMania game employed gambling devices and that MegaMania was Class III gaming; (2) Penny Coleman, as acting General Counsel, had no authority to issue any binding opinion on behalf of the NIGC; and (3) the NIGC's letter dating July 23, 1997, in fact did not conclude that MegaMania was not a Class III gaming.
The defendants further failed to disclose: (1) the contents of the letters sent in July 1997 by the Department of Justice to the Indian tribes in which the Department of Justice concluded that MegaMania was an illegal Class III device; (2) the Department of Justice is vested with the exclusive jurisdiction to prosecute violations of Indian Gaming Regualtory Act and, therefore, the ultimate determination of whether MegaMania is Class III gaming belongs to the courts of the United States pursuant to an enforcement action brought by the Department of Justice; (3) the NIGC may not extend its jurisdiction to Class III gaming simply by making an enormous finding that a Class III game is actually a Class II game; and (4) that defendants had no basis to believe that the Department of Justice had retreated from its conclusions that MegaMania was an illegal Class III gaming device. Finally, the defendants' press releases and reports were false because, in fact, MegaMania is an
illegal Class III gaming device.