Nevada Supreme Court asked to define when slots malfunction

Cengiz "Gene" Sengel wasn't even planning to gamble.

It was September, 1996. The Belmont, Calif., resident was vacationing in Lake Tahoe. Sengel and his wife spent part of the day in Incline Village. Then fate struck.

"We took the wrong road from Incline Village and ended up in Truckee," which is on I-80, said Sengel in a recent interview.

The Sengels decided to drive down I-80 to Reno and try their luck. They ended up at the Silver Legacy hotel-casino. Sengel fished two quarters out of his pocket, plunked them into an International Game Technology QuarterMania progressive slot machine and let the reels fly.

The result propelled the Sengels onto a two-year emotional rollercoaster ride involving court and regulatory agency hearings, and taking them from peaks where they thought they were independently wealthy to valleys where they felt they'd been cheated out of a fortune.

"We hit a jackpot of $1.8 million," said Sengel. "I put two quarters in, and I got the symbols on the payline."

The Sengels were ecstatic.

"We were all happy, jumping up and down," Sengel said.

But something was wrong.

"All of the sudden we started getting all kinds of denials from everybody," Sengel said. "They started talking about all kinds of internal workings of the machines that aren't visible to us."

"They," were IGT technicians sent to verify the jackpot. And what the technicians found was that the slot machine had malfunctioned. The machine's reels stopped suddenly after it tilted, says the company. They lined up along the payline by mistake, not design.

And in any event, what the reels say is beside the point, argue IGT and other gaming machine manufacturers. Jackpots are determined by an internal random number generator (RNG) chip, not the machine's reels.

"Anytime a person hits a jackpot, ... they all have to be verified to ensure that it is a valid jackpot," said Ken Creighton, associate general counsel for IGT.

"The outcome is generated randomly by the computer," said Randy Adams, head of game development for IGT competitor Anchor Gaming. "All (the reels are) is a mechanical display of something that has been decided by the computer."

Moreover, argues Adams, this fact is well-known among the gaming public.

"Everybody knows that when you hit one of these big jackpots, it has to be verified," said Adams.

In Sengel's case, that's precisely what happened, said Creighton. The machine was found to be in 'tilt' mode, and had not generated a jackpot. And besides, the reels didn't line up evenly, he said.

But none of this was well-known to Sengel. In fact, the machine he was playing indicated he had won a jackpot, Sengel said.

"I had no idea how the jackpots were determined," said Sengel. "You never expect to win a big jackpot. You win, and then they start talking about these little details. ... They just don't want to pay us. It's our jackpot."

But Sengel didn't buy that explanation. Like many gamblers these days, he appealed IGT's finding to the Nevada Gaming Control Board. Keith Copher, chief of enforcement for the board, says his agents get calls about player disputes like Sengel's "every day."

"I think it averages out to at least one a day," said Copher.

Of course, not all of those disputes are over machine malfunctions. Many have to do with mistakes made by dealers or instances where players misunderstand the rules on a slot machine and think they should be awarded a jackpot, said Copher.

"There are a variety of disputes," he said.

Actual machine malfunctions probably represent only 10 to 20 percent of the total cases board agents see, said Copher. The board's 99 enforcement agents deal with a variety of things, including disputes, cheating and crimes, said Copher.

It's almost impossible to say what percentage of their time board agents' spend investigating malfunctions, or how much money the board spends investigating malfunction disputes, he said.

"It's just part of the enforcement agents' job," he said.

Marc Robinson, lab manager for the board, is charged with inspecting and testing machines that have been involved in a dispute. Of the 53 enforcement cases the lab handled over the last year, 25 to 50 percent involved malfunctions, Robinson said.

Because the lab does a lot more than handle enforcement cases -- for instance, it also tests new games and software -- lab technicians probably spend only 2 percent of their time on malfunctions, Robinson said.

Sengel's case has turned into a true test of the system. After the board sided with IGT, Sengel appealed his case to Reno district court, which upheld the board's ruling. Sengel is again appealing his case, this time to the Nevada Supreme Court. And Sengel's Reno attorney, John White, believes he has a legal strategy that can win.

The industry argument that jackpots are determined internally by a hidden component runs counter to the public's perception that jackpots are determined by the lineup of the external reels, White says. Essentially, the industry position amounts to a secret condition of the contract between gambler and casino.

"In my view it's just institutional cheating," said White.

The whole point of playing a slot machine is to try to line the reels up on the payline. When those reels line up, a jackpot should be awarded, White said.

"That's the whole idea of a slot machine," said White. "The game worked exactly as it was designed to work."

In fact, in Sengel's case, the slot machine itself did not malfunction, said White. It was the machine's bill validator which malfunctioned.

"There was no malfunction in the game or any part of the game," he said.

"That's just not the case," said IGT's Creighton.

Anchor Gaming's Adams claims most gamblers involved in machine disputes are what the industry terms "claimers" -- people who create malfunctions or lie, hoping the casino will just pay them off.

"We believe a lot of times ... that what happens is about 90 percent of these complaints are claimers," said Adams. "If he's a claimer, if he screams loud enough ... then the only solution for the operator is to get the Gaming Control Board involved."

Another recent case involving video game manufacturer Silicon Gaming is under board review. In that case, Rick Radner claims he was playing a Silicon Gaming slot at the Fiesta hotel-casino when the machine malfunctioned, dealing him two queens of spades.

And Joseph Pepitone is suing IGT, Arizona Charlies and the gaming control board over a $464,000 jackpot he claims he won but the Board denied due to a malfunction.

For its part, the board follows the industry line.

"The board's policy ... is that you have to have the random number generator make the decision," said Robinson.

But White believes that argument does not fly, legally.

"Our first claim is that the patron, unless and until they put some signage on the machine ... be allowed to rely on the display," said White. "He's given no warning that the random number generator determines the outcome of the game."

Courts have historically rejected such arguments, siding with the gaming industry. But White suggests that might be changing. In Mississippi, a state court recently overturned a gaming commission ruling upholding the industry view. In that case, White says, the court determined players should be entitled to rely on the outcome of the machine's external display.

White hopes the Nevada Supreme Court will change this.

"Every patron in this state who plays a progressive slot machine with mechanical reels expects to receive a jackpot if the reels stop randomly with all necessary winning symbols on the payline," said White. "We call this the 'What you see is what you get,' rule. ... If this is the law, the Nevada Supreme Court will find in favor of Gene and he will finally win his $1.8 million jackpot."

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