All of the stories in this book relating to slot machines and video poker are based on the assumption that those machines act in a random manner. This means we’re assuming that those games aren’t programmed to avoid giving a player a winning slot combination or poker hand and the opportunity exists on each pull of the handle, or push of a button, for any possible winning combination to occur.

We know that there are gaming regulatory agencies that are supposed toprovide the public with protection from playing on a rigged machine but how is it done?and how effective is it?

Being the nosy guy that I am, these were a couple of questions I wascurious to get answered and it ended up taking me on a little bit of an adventure. Notonly did it result in this story about the regulatory process for electronic gamingmachines but it also led me to question the motives of a national news organization.

In the United States there are only four states that have their ownfacilities for testing electronic gaming machines: Montana, Mississippi, New Jersey andNevada. For the other states that offer legalized casino gambling but don’t havetheir own labs almost all rely on the services of Gaming Labs International - anindependent testing firm based in Toms River, New Jersey.

It only made sense to start with the biggest state first, so inFebruary 1997. I called the Nevada Gaming Control Board to ask for permission to visit their testing labin Las Vegas. They told me I needed to get permission for that from Bill Bible, theControl Board’s chairman, so I wrote him a brief letter explaining that I wanted towrite a story about the lab for my book. Twelve days later I received a reply from himstating that I was welcome to visit the lab but that some parts of it were confidentialand would not be accessible to me. He only requested that I call that department inadvance to make an appointment. A few days later I called and made arrangements for avisit on March 18 at 3:00 p.m.

Not being a computer expert - just a curious casino gambler - Iwasn’t exactly sure what I should ask and about 10 days before my trip I started toponder questions I thought might be appropriate. Then, on March 12, just six days beforethe scheduled visit, I was watching television when I switched channels and caught a storyon the ABC News show PrimeTime Live about slot machines. The segment was titled"Against All Odds" and featured their chief investigative reporter Brian Ross.

The story focused on the computer chips in slot machines and began withparts of an interview with Frank Romano who, Ross said, was banned from the industrybecause a company he owned with two partners was charged with rigging its video pokermachines to avoid giving out royal flush jackpots.

Ross went on to say that the public knows little about the innerworkings of machines and that PrimeTime conducted a four-month investigation intothe industry that included numerous interviews with industry officials, the reading ofconfidential documents and the viewing of secret video tapes of an interview with a formerstate gaming official who was involved in a slot cheating scandal.

Ross said that Romano claimed he didn’t know anything about thecheating at his company and that he had persuaded a federal judge of that fact. Also,Romano had no qualms with talking about the "secrets" of the gambling industryeven though Larry Volk the person at his company who programmed the chips to avoid givingthe winning hands had been murdered: Volk was shot to death at his house in Las Vegasshortly before he was scheduled to begin giving testimony about how he programmed thechips to cheat.

Ross said Romano claimed the computer chips made cheating possible andthat the true "secret" of the industry was that the chips of many machines wereprogrammed with a "near-miss" feature which didn’t directly affect the oddsof the game but did lure players into playing longer.

Romano then gave an example where a slot machine would line up two 7son the payline and have the third 7 settle below the payline making people think they wereclose to winning. He said those kind of results were programmed into the machines onpurpose.

Ross said the casinos pay out up to 98% on these machines and thatRomano claimed the industry came up with this idea as a way to get the dollar volume up bykeeping the players at the machines for a longer period. Romano claimed it was"cheating" and that the industry was "teasing" the player by makingthem think they were close to winning.

The next scene shifted to an interview with gambling addictionauthority Valerie Lorenz who, Ross said, wasn’t surprised that the industry would dosuch a thing.

Next was an interview with Bill Bible, chairman of the Nevada GamingControl Board who said that cheaters would be caught and prosecuted. Ross commented thatmost of the Board’s cases involved players cheating casinos and asked Bible if italso applied to casinos that cheat customers. Bible replied that it did and that hisdepartment inspects computer chips both before they’re put in the machines and alsoafter they’re out in actual play.

Ross then questioned how good a job the state did in examining thechips because of allegations raised in a six-hour series of supposedly "secret"videotapes with Ronald Harris, a former Gaming Control Board employee who was involved ina slot cheating scandal. Harris was a computer expert in the gaming lab where the machineswere tested and the videos were made by the attorney general’s office whilequestioning him about his cheating activities. Harris was eventually convicted of felonycheating charges.

Parts of the "secret" tape are then shown with Harrisclaiming that the state’s gaming regulations weren’t being enforced and that themachines were "deceptive."

Harris: I remember reviewing one, and it was a thousand times morelikely that the three 7s would line up directly above the payline than on the payline. Imean, doesn’t that seem deceptive to anyone here?

Questioner: To make the customer feel as though they came very close togetting a jackpot and that perhaps the next one or the next one, to paraphrase the ad, thebaby would be ready to deliver?

Harris: Yeah, exactly. Exactly. Yeah, it’s out there. It’sbeing done. It’s condoned by the board...

Ross commented that the attorney general’s office told PrimeTimeit couldn’t prove any criminal wrongdoing based on Harris’ allegations and thatthey never looked at all into the alleged "deceptive" features on slots.

The interview with Bible then continued with him confirming that Harriswas a former employee who had a great deal of knowledge about the industry and that hisallegations were still under review. Bible denied that any cheating was allowed by him orthe board and he pointed out that Harris just didn’t have much credibility.

In the next scene Ross said that two other former employees of the lab,without any criminal backgrounds, also believed that the machines were"deceptive." He interviewed Gordon Hickman a retired employee who said that themachines were very prevalent. Ross said that in a confidential memo to the attorneygeneral’s office Hickman claimed that he was ordered to okay machines that"display near-misses in 7s a third of the time just above the payout line." Rosssaid Hickman thought the machines were "deceptive" but he was ordered to approvethem anyway. The machines in question were manufactured by International Game Technology(IGT), the world’s largest manufacturer of electronic gaming machines and a companywhich controls about 75% of the market.

Next was an interview with Tom Baker, president of IGT, in whichhe’s shown a copy of the Harris video. Baker denied that his company’s machineswere "deceptive" in the way Harris described them on the tape. Ross challengedBaker by asking if his machines were "deceptive" and again questioned whether ornot IGT was teasing customers into thinking they were close to winning when they playedthose machines. Baker replied that Harris said a lot of things, however, Harris was aconvicted felon but Baker and his company were not. Ross responded by showing Baker a copyof Gordon Hickman’s confidential memo to the attorney general’s office about thesame subject. Baker then denied there was any favoritism given to his company that he knewabout.

At that point Ross pointedly asked if IGT programs its machines with a"near-miss" feature. Baker answered by saying his company’s machines wereprogrammed in accordance with the law. Ross then asked if the law allowed the"near-miss" feature. Baker said he personally didn’t know, but if hiscompany was doing it then the law allowed it.

A voice-over from Ross then commented that gambling industry criticshave concerns about the regulations that are in place and the scene shifted back togambling addiction expert Valerie Lorenz who said the casino industry makes the laws inNevada and she questioned if any other business would be allowed to get away withdeceiving the public in such a manner.

The next scene shifted back to Bill Bible with Ross questioning him asto whether or not he thought the public was treated fairly when playing gaming machines inLas Vegas. Bible replied that he had no doubt the public was indeed treated fairly.

The final scene went back to Romano who said that the machines weredesigned to entertain the public as well as to take their money. Ross then asked if acasino customer is better off going to the machines or to one of the table games. Romanoreplied that they’d be better off going home and that ended the report.

It didn’t take long for the effects of PrimeTime Live’sbroadcast to be felt. The very next day U.S. Representative Frank Wolf (R-Va.), a longtimeopponent of legalized gambling, requested an immediate investigation by two federalagencies. "I have asked the FBI to investigate claims of illegality and the FederalTrade Commission to investigate illegal trade practices," Wolf said.

The segment also became a subject of discussion that same day in theManitoba Parliament when Gary Doer, an opposition party leader, called for a governmentinvestigation into the matter because a Winnipeg casino used slot machines manufactured byIGT. "If the computer machines are programmed in the United States to have this kindof near-miss operation to entice people, particularly addicted people, to keep going, Iwant that stopped here in Manitoba," said Doer.

The show also sparked a call in the Nevada legislature for its owninvestigation, but with a slightly different twist: they wanted to know who leaked theattorney general’s confidential Ronald Harris videotapes to ABC News. "Thatentire piece is hinging on the unsubstantiated allegations of a convicted felon,"said Nevada Assembly Minority Leader Peter Ernaut. "What is said on those tapes issecondary to how they got public."

The Nevada legislature didn’t seemed too concerned about theallegations raised in the broadcast because they believed they weren’t valid."Our programs do not create a near-miss scenario and every symbol is randomlyselected," said Brian McKay, general counsel for IGT. "We don’t makedeceptive machines. We never have," he added.

Well, this certainly was an interesting can of worms that had beenopened. It surely gave me some additional direction for the questions I wanted to ask but,actually, I was already familiar with the subjects raised in this report.

I knew that American Coin was the company that Frank Romano had beenassociated with and that it was involved in the biggest cheating scandal in Nevada gaminghistory. In July 1989 the Nevada Gaming Control Board seized about 1,000 of thecompany’s gaming machines in 93 southern Nevada locations (mostly bars and taverns)after it discovered that they contained unapproved computer chips. The company’svideo poker machines had been altered to avoid giving a royal flush and their kenomachines had also been programmed to avoid giving out the top jackpots.

Eventually, the company surrendered its license and paid $1 million infines. Authorities also pursued a criminal case against the company but were later forcedto drop those proceedings when their star witness Larry Volk, the American Coin programmerwho said he had been ordered to program the rigged chips, was shot in the back of the headand killed outside his Las Vegas mobile home in October 1990. A suspect was later arrestedand tried in the case but a jury didn’t convict him.

Romano, who was a one-third partner in the company along with hisbrother-in-law and father-in-law, claimed he never knew of the cheating scheme. In a laterbankruptcy proceeding against his partners a federal judge agreed with Romano’s claimof innocence and ruled in his favor.

As for the "near-miss" scenario I knew that this issue hadbeen raised before with Universal Distributing, a Japanese slot manufacturer, that hadspecifically developed a "near-miss" program for its slot machines. When showinga non-winning combination on their slot machines Universal’s program would put twosymbols on the payline and then place the third symbol just above or below the payline tomake players think they were close to winning. When the Universal machines were originallyapproved for use in Nevada the state’s regulators weren’t aware of the problem.In 1988, however, the Nevada Gaming Control Board discovered the "near-miss"scenario and filed a complaint against Universal. The Board then held a series of hearingsto discuss the "near-miss" issue and officially ruled it illegal. This resultedin Universal having to reprogram about 15,000 of its machines throughout the state.

Well, if the "near-miss" had been ruled illegal in 1988 thenwhy would PrimeTime Live broadcast a report that would purposely lead its viewersto believe that it was in use today? Maybe what I had heard about the illegality of the"near-miss" was wrong? I knew this was an issue that I had to bring up during myvisit to the testing lab.

The five-story State of Nevada office building at 555 East WashingtonAvenue is about 10 blocks north of the hustle and bustle of Las Vegas’ downtowncasino district. I went to the second floor to meet Greg Gale, Chief of the Audit Divisionfor the Gaming Control Board, who brought me to meet Mark Robinson, the Lab Manager forthe board’s Electronic Services division. They explained that Gale was temporarilysupervising Robinson’s area because the department’s chief recently retired andthat Electronic Services would be on its own again once a new chief was in place. All ofmy questioning was directed to Robinson, but occasionally Gale would supply an answer tohelp clarify an issue.

What are your department’s duties?

We test machines before they’re approved for use in Nevada andthen we also have a field inspection group that goes out every day and checks the chipsthat are in the machines to be sure that what’s out there is actually what we’veapproved.

How did your department come about?

Back in the early ’80s the Board had the lab and it was under theenforcement division. We also had a group of computer programmers, who did in-housecomputer programming, and that was in the administration division. The Board decided toform a separate division that had all the technical resources in one division and thatbecame Electronic Services.

So you had a lab back in the early ’80s. Do you know when itfirst started?

I don’t know the exact date. Somewhere in the late ’70s, likeabout ’75 or ’78. They started looking at the mechanical machines and developedsort of an expertise in the enforcement division first. Then, as the electronics grew inthe machines, they realized they needed an electronics group to handle it.

How many people are in the department?

There are a total of 18 in electronics and computer services.We’ve got 10 in the lab part.

What is the background of all the people that check the machines?

Primarily electrical engineers.

How long have you been here?

I’ve been with the Board 12-and-a-half years and I’ve been inthe lab about a year-and-a-half now.

And you’re in charge of the whole lab?

The lab inspectors, the whole thing.

And the lab part tests the machines?

Yes, out in the field and prior to approval. We have a group that doesboth. We have six people that go out and do it in the field and we’ve got three herein the office.

This is for the entire state?

Yes. For the entire state.

So, some of you would go to Reno?

Right. We do have agents who are permanently stationed in the CarsonCity office: four of them. Three of them go out and one is their supervisor who also doessome in-house work with the electronic equipment.

What’s the normal procedure when a manufacturer comes in with a new slot machine?

We have about a six-month process to get it approved. We start bytesting the machine to make sure it’s random. We look at the source code. We look atthe principles behind how the random generation occurs and we look through the source codefor any possible problems.

What is the source code?

The source code is the programming that makes the machine run. All ofthe slot machines we’re approving today are computer-based machines; there are nomechanicals anymore.

Do you get a written printout of the programming?

Generally, we get it on a floppy disk so that we can use our computertools to review it faster. Reading it page after page isn’t practical anymore.

What do you look for?

Most of it’s written in a way that’s fairly understandable.There’s some modules that make up each of the functions that go on in the machinelike maybe handling the hopper or handling the coin acceptor so you need to look at thosespecific functions in greater depth and read through them to see how they work.

The main thing that we’re looking at though is its randomgeneration. How does it pick the stops that it’s going to show you? Or, how does itpick the cards it’s going to show you? And we’ve developed over the years apretty good understanding of the various ways you can generate numbers randomly using acomputer.

When you approve a particular model of machine. Do you just approvethe initial program or every program the machine can use?

We do approve each program. The first program that is approved is thefirst model of that machine. It goes through the entire process and it gets presented tothe Board and the Commission for their approval or denial. If the machine is approved thenthe manufacturer may modify it under the regulations and they can make all kinds ofvariations to that machine.

They primarily get a platform approved, like a spinning-reel slotmachine or a video poker machine. Then all of the minor variations, like changes in paytables, or in the case of poker you go from regular poker to deuces wild, to jokers wild,to any possible combinations you can think of...

Gale: We should probably say that before you can actually submit adevice to the lab for its inspection approval you need to have a license in the state ofNevada. That’s really the initial step. You have to apply to us and you have tosubmit to a background and financial investigation. Once you have that license in hand youcan then submit your device for approval.

Robinson: Once we’ve reviewed it and we find that it meets all ofthe regulations and technical standards then we recommend it for field trial and thechairman administratively approves a field trial at a location that the manufacturer hasselected. They go out and install one or more machines at that location and we administera field trial where we observe the machine for problems on the floor. We also have thelocation tell us about any problems they may have with it.

What can happen in the field test to disrupt the approval process?

The primary thing is meter problems where the machine doesn’t havea good accounting of everything that is going on. A lot of times in the field you’llhave people playing them and they’re hitting buttons all over the place and doing allkinds of crazy things to them that you might not do in a lab environment.

Gale: Like pouring a soft drink down the coin acceptor to see if itwill trip the coin hopper!

Just having the machine on for hours and hours and hours - you know -days continuously, sometimes generates different problems than you’ll see in a labenvironment. Some of the mechanical problems will also show up a lot more in the fieldthan they will in the lab.

Because they’re taxed, I guess you need to have an accounting of each machine’s revenue?

That’s correct. Every machine has to have the capability to countthe coin in and the coin out. That’s what our audit division is looking at whenthey’re out doing their audits.

Once you’ve approved a particular machine is that manufacturerthen free to re-set the paybacks to whatever they want within the 75% minimum paybacklimits of Nevada law?

Correct. They can make all the variations to that machine that theywant to within the technical standards.

How do you know that the chips in the machines are within the limitsof the law? Is every machine tested?

Every machine is tested to a degree, yes. When a manufacturer submitschanges he gives a summary list of his changes in the chips. We review those and we also,on a sample basis, review the modules themselves in a greater depth to make sure that whatthey’re telling us on the surface is also true in the chips.

Initially, are you approving the chip or the whole machine?

Initially, we’re approving the whole machine including the chip.After that it’s just chips that need to be changed to different percentages.

If a casino wants to change a chip inside a machine to make it payback less do they have to let you know?

No. They can go ahead and change the chips on their own, but they needto have a system internally to be sure that they’re putting in only approved chips.That’s what our field inspection is going out and verifying daily: that they are allapproved chips.

So, if they have a machine that’s returning 90% and they wantto change it to 80%?

That’s okay as long as it’s an approved chip.

Who puts the chip in? The casino or the manufacturer?

It depends on their relationship with the manufacturer. Sometimes themanufacturer will come out and do it or sometimes the larger casinos have an in-housestaff that can do it and they can probably do it cheaper that way but you need someexperience in doing that. The manufacturers will do it but they’ll charge extra fordoing it.

And each chip is set to pay back a certain amount?

That’s correct.

How many approved chips are there?

We have a total of about 45,000 chips approved for all machines.

How many are approved for any particular brand of machine?

It would depend on the particular brand. It could be anywhere from twoor three all the way up to several thousand.

But the probabilities of the randomness would be the same in all of that one machine’s chips and just the payback percentage would change?

That’s correct. Different manufacturers do it different ways. Someput the part that is the random number generator in one chip and then put the attributesabout the payout percentage in a separate chip and that makes it easier to sort of mix andmatch. Other manufacturers don’t design that way, but they will have the same randomnumber generator in all their chips.

Is there some sort of coding on the chip that let’s you knowit’s an approved chip?

There is a code number which we have on file that contains all of theattributes on that chip including its percentage. We would look at either themanufacturer’s code number or our own approval number which also has to be on thechip and then from that we go back to our computer and it tells us what percentage it hasto be.

Are the chips in the machines sealed or taped? Is there any way youcan see if they’ve been tampered with?

Not visually, no.

Gale: Now, with Megabucks and some of the larger slot machine payoffs,many times the manufacturers will actually seal the EPROMS into the boards themselveswhere people can’t take them out, or they’ll put them behind a locked door whereonly they have the key. But, we’re talking about Megabucks which is 6,7,8 milliondollars a jackpot and it’s installed at 135 casinos in the state so they’re veryconcerned about security over their programs. But we detect modification through theinspection process. That’s how you know something’s been tampered with: you pullit out and you read it.

Robinson: Also, the tape could be missing but the chip could be justfine. So, if you do go after a machine that had been taped and the tape was gone maybesomebody just took the chip out and put it back in again.

Are all of the machines taped?

No. Only the Megabucks machines, the wide-area progressives and some ofthe casinos voluntarily tape their larger denomination machines

How do you know that a chip hasn’t been tampered withinternally?

When we go out to the field we have a laptop computer that has adatabase with all of the signatures of all of the chips so it knows what all of the chipsshould look like. We take the machine apart and we take the chips out of the machine. Weput them into our laptop and press the button and it will read the chip and all of thecontents in there. It will do the same calculations on those chips that we did here in theoffice. It will compare what the values should be and look it up in a database and if itfinds that it’s an approved value then it will go ahead and say "that was anokay chip." Otherwise, it will alert the operator to make sure that they’veactually put the chip in right and then, assuming that was done right, it will log that asa chip it’s never seen before and we’ll follow up on those.

You only do this on a spot basis?

On a random basis we will show up at a location one day and say"we’re going to do your location today and we want access to the machines rightnow."

Do you check all of the machines in that location?

No. If it’s a restricted location (this means it’s licensedfor 15 or fewer machines) that has 15 machines we’ll do all 15. Generally, we can doabout 100 machines in a day so we’ll only do a sample at a large location because,otherwise, at a really large location, we could be there potentially 20 days.

How long does it take you to visit every casino and do you visitevery casino?

We do try to visit every casino and our cycle is about every two years.

What if you get a complaint from a player that they thinkthere’s something wrong with a machine?

We’ll go and do the same kind of chip inspection and we will seeif it’s an approved chip or not. If it’s not an approved chip we’ll takethe chip out and bring it back to the lab and analyze it there.

Then, on a case-by-case basis, depending on what we see is wrong withit...if it’s labeled with an approved label number we’ll start by comparing thatchip with the approved chip and see how different it is. Is it completely different orjust a couple of bytes different? Then we’ll actually go in and analyze what theeffect of the difference is. We will also talk to the manufacturer and say "how didthis get out without going through the approval process?" and we try to work itthrough there until we eventually determine what the problem is with the chip.

What’s the penalty if it’s not an approved chip?

It could be anywhere from a simple violation letter all the way up toloss of license. It depends on exactly what we’re looking at: was it maliciouslydone? Is it actually a gaffe where the house or player is cheated?

We had the case of American Coin back in 1989 where they werespecifically putting in gaffed chips that produced no poker royal flushes. They lost theirlicense on it as opposed to an administrative error on their part where it’s a goodchip, but somehow it got through the cracks and it didn’t get submitted to the Boardproperly but there doesn’t seem to be any malicious capability in the chip - somebodywas just sloppy with the paperwork.

I saw the recent PrimeTime Live show about slot machines and it impliedthat many of your machines have a "near-miss" feature. I thought that the"near-miss" was outlawed. Is that correct?

That’s correct. There was a case that involved an attribute thatwas labeled "near-miss" and that relates back to Universal Distributing Companyin 1988. The process that they were using, which was deemed at that time to be a"near-miss" feature, was not in accordance with the regulations. What they woulddo was after they selected the reels, if you had a losing combination they would present adifferent losing combination that was more like 7, 7 and 7 just below the line. It wasoutlawed because it didn’t just independently select the reels and then display theresults to the player. It independently selected the reels and if it didn’t like theresults that it came up with it went to another table and randomly selected a differentset of results to show to the player.

Gale: After it determined that a losing combination was selected thenit went out and got different symbols to display to make it look like you just barelymissed a jackpot.

Robinson: More frequently than it should.

Gale: But you’re right (about it being outlawed) since regulation14 was amended back in 1989 to prevent that type of activity.

What Gale was referring to here was the section of Nevada’s gaminglaws that was completely updated in 1989 and applies to "manufacturers, distributors,gaming devices, new games and associated equipment."

Regulation 14.040 pertains to minimum standards for gaming devices andparts of it specifically state "All gaming devices submitted for approval: must use arandom selections process to determine the game outcome of each play of a game. Eachpossible combination of game elements which produce winning or losing game outcomes mustbe available for random selection at the initiation of each play. The selection processmust not produce detectable patterns of game elements. After selection of the gameoutcome, the gaming device must not make a variable secondary decision which affects theresult shown to the player." The wording in those regulations seemed to adequatelysum up the state’s position on the "near-miss" scenario: it’s illegal.

After the interview we took a brief tour of the lab. I guess I hadvisions of a sprawling lab with technicians in white coats scurrying about in a high-techenvironment. Instead, it was just a rather small room - about the size of your averageMcDonald’s dining area - with nobody there and work benches strewn with electronicequipment plus a few slot machines. The highlight was seeing the area where the approvedchips were kept. It consisted of a series of storage cabinets that were covered with aheavy-gauge metal screen and padlocks.

My visit left me with the impression that these guys were obviouslyvery good at what they did and there seemed to be a lot of safeguards in place to preventcheating on a machine. It just seemed that the department was kind of small for themassive amount of work it needed to do.

A check of Nevada’s gaming records for the fiscal year ending June30, 1996 showed there were 185,610 slot machines throughout the state. Hmm, let’ssee, if there are six people that go out and check on the machines and they can do amaximum of 100 machines a day - it would take them 1,856 days, or five years, of workingseven days a week, to inspect every single machine!

Of course, Nevada’s gaming industry really hasn’t had much inthe way of scandals so maybe their system works just fine. But what about the otherstates? Do they do it differently?

On May 15, 1997 I went to 1601 Atlantic Avenue in Atlantic City, NewJersey to meet with Richard Williamson, Supervisor of the Technical Services Bureau at thestate’s Division of Gaming Enforcement. We were joined by Keith Furlong, PublicInformation Officer for the Division and we spoke in Williamson’s office located in astate building just a few blocks west of the boardwalk’s casinos.

What does your department do?

We do the pro-active review of the games.

How many people are in the department?

There are 19.

How many actually go out in the field to test the machines?

Eleven. We’re not that big of a unit for the job we’ve got. Alittle bit of a historical perspective on this: we’re the same size that we were 10years ago and in the past four years we’ve gone from just four slot manufacturers to11, plus three keno systems.

How many machines are there?

33,000 but that goes to 35,000 right before the end of the summer withthe opening of Bally’s Wild Wild West Casino, plus Trump is putting in another 600games in a new area which will be open by the Memorial Day weekend.

Do you test every single machine in the city?

Yes. Every game that goes up in the casinos, we go out and we inspectevery game. We actually seal the chip onto the circuit board. We come back... we have adatabase where we put in the information that "machine 1234 was put on Bally’sPark Place floor on this date, with this denomination and this program in it." And ifit’s a progressive, it was set at this rate of progression. We have documentationthat supports all that information so that we’ve got an audit trail.

How long does it take you to inspect all of the games in the city?

Well, we don’t go out and inspect every game every year. What wedo is I have an audit program set up where we use a random selections process. We’reat a 95% assurance level with a 2% deviation. We go out and we take from the population ofslot machines. We have a random start and we pick every Nth one. We go out and we justinspect all those games from top to bottom. We come back and record it.

Are you selecting by kind of game or by casino?

By casino. We’ll do a random selection of all the games in acasino. But that’s our audit program. That’s the only time that we go into acasino and don’t tell them what games we’re going to look at.

All of the other times we go and do inspections is when the casino iscalling us to change the payoff percentage, do denomination changes, put bill acceptorson, or do some kind of a modification to the game. We go in and the casino creates theon-site inspection paperwork which spells out what’s happening. Then we go in, weinspect the games and sign off on the paperwork. We give a copy to the principalthat’s on-site for the Casino Control Commission so they have our signature that thegames are working as approved. The games goes up and we come back and document it in ourdatabase.

So you don’t continually inspect every machine?

We pre-inspect every machine before it goes up. It has to have theapproved EPROM (computer chip). We don’t do 100% verification because I don’tthink it’s cost effective. What I do keep track of on a database is the last time welooked at a game so at any point in time I can query for any game that has been looked atany variety of times.

Can a casino go in and change an EPROM on their own?

No. Not in this jurisdiction.

What do the casinos do when they want to make a change? Call themanufacturer?

No. They contact us and we schedule one of our gaming equipmentspecialists to go out to the casino and, generally, when they’re doing an EPROMchange they’re doing a bank of games or they’re doing a model change where youchange the chip, you change the glass, you change the reel strips and you’ve got anew slot machine.

So, the casinos are not allowed to go inside the machines to changeany of those things unless you’re there to supervise it?

Yes.

How does your approval process work for a new machine?

Well, naturally, the company would have to be licensed, or at least bein the licensing process, before they could submit a product.

Assuming they’ve met that requirement, what do they have tosubmit?

They send in a full slot machine. They send in documentationon...let’s say an operator’s manual. They also send in more detaileddocumentation on the random number generator used within the game. I’d have to saythat’s one of the most important features. We do that first because if the randomnumber generator doesn’t pass then that’s the end of the game.

What kind of testing do you do?

The first thing we check is the random number generator to make surethat there are no discernible patterns within that program. Then we do a physical reviewof the game. Review it for security to see that it can’t be compromised in verysimple ways, like easily opening up the door, or having easy access to the inside of themachine. Then we do a review of the circuitry of the board to see that they don’thave switches or ways of manipulating the game that would not be detectable by the casinomanagement or the regulators.

A lot of times the tendency by a manufacturer is to make these machinesreal user friendly and sometimes they can go to excess and give them (the casino) theability to change payout percentages without any notification to management or theregulators. So we would have them remove anything that could compromise the integrity ofthe game.

The next thing we’ll do is a mathematical review of the particularprogram that operates the pays and plays of the game. When we do that review we’redoing it to make sure that it’s in compliance with the minimum payout percentagesmandated in this jurisdiction.

The final step is to do an emulation of the game. We take it into thelab and then with our electronic equipment, rather than just playing the game, we forcepays and we force losers.

For instance, we require that all machines lock up on the top award.So, if you receive the top award, say a royal flush, then you should not be able to throwthose cards away. Then we check that the meters are working properly; that the pays occurand record properly; and that the machines will lock up on single awards over $1,200because that’s an I.R.S. rule.

About how long does it take for your approval process?

The time is really subjective to the experience of the company and thefamiliarity of the company with our regulations. So, for a seasoned manufacturer - someonewho’s been submitting products for years - the approval process is generally quicker.Also, location has a big difference. If they’re close we can pick up the phone andtalk to them. Time zones make a difference, language barriers - if it’s somebody fromEurope or Japan - it’s more difficult. So those are factors that extend the time ofthe prototype approval. Say, if the company was in New Jersey, and they submit the productand they’re very familiar with the rules and they’ve done all their homework onthe game we could probably knock out a prototype in 60 days.

It’s my understanding that your department was also involved inthe discovery of the "near-miss" slot machine programs. Is that correct?

Yes. It was discovered while it was in here for approval but the factsare that it was discovered at the same time in Nevada and that company withdrew it fromthe approval process here. So, actually, we never did issue a letter on it.

But, the "near-miss" machine is illegal? Is that correct?

Well, it would be illegal in this jurisdiction if someone were to sendone in.

Do you consider a video poker machine to be different than a slot machine?

It was determined by the Casino Control Commission back in the firstcouple years of the ’80s that it is a slot machine.

So you don’t make any difference in your laws between skill andnon-skill machines?

Only to the fact that we require the payout percentage to be 2% higheron a game that is affected by skill.

You require it to be 2% higher? That’s the first I’veheard of that. I haven’t completely read your laws, but...

It won’t say that in the law. It was a policy adopted by theCommission about the time that video pokers were approved because of a field test. Theywent out and they watched people play and it was determined that someone who was veryunskilled at playing poker could lower the payout percentage of the game below the minimumstandard just by continually making poor selections. So they thought they should raise it2% so that even a poor player would have a better chance with the added 2% payout.

The minimum return on slots is 83% so the video poker machines wouldhave to return a minimum of 85%?

Yes.

I’ve read some articles where the writers claim that becauseNew Jersey law treats video poker machines the same as slots that the video poker machinesmight be programmed to avoid giving players better hands by dip switches or other means.Are the machines allowed to do that?

No. As part of our proactive approach to the game inspection we do notallow dip switches. We do not allow a casino to arbitrarily change the payout percentages.We do keep a record on what program is in there at all times for investigative andauditing purposes. The casinos are required, when they do their count of the games, tocalculate the payout percentage of the game and compare it to the theoretical payout andinvestigate the differences. They have to report that to us for every slot machine.

They have to tell you the theoretical payout?

We require them to compare the actual with the theoretical and we tellthem what the theoretical is.

What are the sanctions you can take against a casino if you findthem in violation of your policies?

Well, that’s all licensing and it comes down to individuals. Wehave licensing requirements with internal controls where an entity would have to reportthis and someone in a certain department is required to report those things. So, if theydon’t report it, you go to the person whose job it is.

Generally, most of these things can be worked out by going to theindividual. If that doesn’t work you go to their boss. If that doesn’t work yougo to corporate counsel. If that doesn’t work then you resort to legal measures, butit’s really all one-on-one. It’s not that big of an industry here, we’vejust got 12 entities and we know all of them. So, if you’ve got a problem you justwalk in, or make an appointment, and sit in their office or have them come over and talkit out.

What would you say is the most common problem you’ve seen inthe machines?

Most common? Lights out. The game’s got to operate as prototypeapproved. It’s like your car: if your turn signals aren’t on who’s going toknow you’re turning? If the coin-in light is off how are you going to know that thecoin was accepted?

My point is that when a game hits that floor it should be in a workingcondition so that the patron understands how the game works because there’s no placeelse they can go for the rules other than what’s right in front of them. And, if theydo have a question, someone within the casino, be it a slot attendant or whoever, shouldbe able to come over and explain it to the patron so that there’s no complaint thatgoes beyond that game.

After our interview I took a tour of the testing facilities and Inoticed it contained many of the same electronic testing machines that I had seen in theNevada lab. The only difference here was that the facilities were spread out in threesmaller rooms as opposed to being in one room. Also, I guess my timing was better herebecause I did see a few people working on some projects.

My impression, once again, was that many safeguards were in place forthe player. Actually, there seemed to be more safeguards in New Jersey because of theirrestrictions on the ability of the casinos to go in and make changes to the machines ontheir own.

Also, it was interesting to discover that although Nevada has almostsix times as many machines as New Jersey, they only have about half as many inspectors:just six compared to New Jersey’s 11.

Even with their more aggressive rules, however, New Jersey officialsstill don’t test every machine on a continuing basis and, just like in Nevada, arandom testing program is used. Williamson noted that "it’s notcost-effective" to test every machine and I guess I could see his point. Also, whenquestioned on the "near-miss" slot machines, Williamson said they were notallowed in New Jersey which is the same situation as in Nevada.

After leaving the state facility my next stop was at Gaming LabsInternational in Toms River, about 75 miles north of Atlantic City. GLI is a privatetesting facility that is contracted by gaming regulatory agencies throughout the world todo testing of gaming machines as well as lottery and keno systems.

The company’s president, James Maida, previously worked as atesting engineer at New Jersey’s Gaming Enforcement Division in the mid 1980s. In1989 GLI was the first independent testing lab to open in the U.S. and it has beenresponsible for servicing more than 160 gaming jurisdictions throughout the world. Thecompany is hired by regulatory agencies for consulting on gaming issues as well as forauditing programs but its primary function is the testing and monitoring of electronicgaming equipment. GLI is the largest company of its kind in the world and in 1996 Maidawas named one of the top 25 most influential people in gaming by International Gamingand Wagering Business Magazine. Besides its Toms River headquarters GLI also hasoffices in Colorado, Africa and Australia.

I wrote a few months ahead to ask about visiting the lab and madearrangements with Todd Elsasser, Director of Operations, to meet for an interview and atour of the facility.

Downtown Toms River looks like a typical "quaint"mid-American small town and GLI’s offices were located in a rather large single-storystorefront office at 26 Main Street. Elsasser and I spoke in his office for about 45minutes and then went on a tour of the facility which had a much larger area devoted totesting than either of the state facilities. There also seemed to be about a dozen or sopeople directly working in those areas, but still - no white lab coats!

Elsasser and I covered a lot of subjects and when I sat down to writethis story I called him back to ask him a few more questions. Unfortunately, he neverreturned my calls and then, after sending him an e-mail to inquire about us gettingtogether, I received a message on my answering machine from James Maida saying"regretfully, we cannot give interviews... we’re a regulatory agency and notallowed to give interviews to the general press. We would not be able to make anystatements, nor should we be quoted in your publication." He also suggested that forinformation on the "near-miss" controversy I should consult the article he wrotefor the summer 1997 issue of Slot Manager" magazine.

I’m not sure what happened to make the folks at GLI change theirmind but, due to Maida’s request, I can’t go into the exact details of what wassaid at Elsasser’s office. The truth is, however, that it was pretty similar to whatwas said in both Nevada and at the state facility in New Jersey: there are safeguards inplace to regulate gaming machines in all of the states with legalized casino gambling. Theregulations may differ slightly from state-to-state, but there are programs in place toprotect the public when playing in a regulated jurisdiction.

Now, what about that "near-miss"? Well, in his article Maidawrote that after the PrimeTime Live story was broadcast he received lots of callsfrom his clients concerning the "near-miss" feature and he assured them thatthose kind of games do not exist in North America.

I guess that pretty much summed up the situation: two state regulatoryagencies said that "near-miss" machines were illegal and then the president ofthe world’s largest independent testing laboratory also said those kind of machineswere illegal and just didn’t exist. So that’s the end of that controversy,isn’t it? Well, not exactly.

In the August 1997 issue of Casino Journal, a respected tradepublication that follows the casino industry, writer Jeff Burbank reported that while a"near-miss" on the payline is outlawed in Nevada, a "near-miss" aboveor below the payline is perfectly legal in that state.

Burbank interviewed Ellen Whittemore, the former deputy attorneygeneral for gaming in 1988 and 1989 who was responsible for writing Nevada’sRegulation 14 which pertains to the "near-miss" situation. She said that a"near-miss" above or below the payline was legal and that actually it was betterfor the players because it meant that players could more easily win jackpots.

What Whittemore was referring to here was the "virtual reel"technology used in today’s slot machines. At one time slot machine jackpots werelimited by the number of stops on each reel but that isn't the case anymore.

Previously, if a machine had three reels and each reel had 22 stops,then the maximum number of combinations that particular machine could show was 10,648 (22x 22 x 22). Therefore, a $1 machine couldn’t offer a jackpot of more than $10,648 orit would lose money. Someone then came up with the idea of a "virtual reel" thatcould offer many more combinations by using a computer chip to create a make believe reelwith as many stops as were needed. This way a $1 machine with, for instance, three 50-stopvirtual reels, would have a maximum number of 125,000 (50 x 50 x 50) combinations. Theonly problem is that the actual reels in the machines still only have 22 physical stops,so the computer must tell the reels where they should stop. This is known as"mapping" and since there are more "computer" stops than"physical" stops it necessitated that many of the winning symbols appear morethan once. Whittemore said that because of the virtual reel technology and the randomnumber selection process it is just natural that "near-miss" combinations wouldappear more frequently above or below the payline. The Nevada Gaming Commission heldextensive hearings on this subject and on September 22, 1988 it filed a stipulationdeclaring it legal.

Pretty confusing, isn’t it? Well, the important thing to rememberhere is that although a "near-miss" is acceptable above or below the payline, itcan’t be programmed into the machine. It is only allowed when it’s the result ofa random number generation process that just happens to put those particular results onthe reel. If a "near-miss" is purposely programmed to appear either above,below, or directly on the payline, then that would be illegal in any regulated gamingjurisdiction.

One of the major problems when discussing the "near-miss"issue is that different people may have different interpretations of what it means. Inthis instance Whittemore used it to refer to combinations appearing above and below thepayline. Traditionally, however, the "near-miss" got its name from the UniversalDistributing incident and only applied to a "near-miss" directly on the paylinewhich was purposely programmed into the machine. Which brings us back to the PrimeTimeLive report.

Did PrimeTime Live mislead its viewers to think that any kind of"near-miss" was legal on Nevada’s slot machines? I believe they did. At nopoint in the show did they ever actually define what a "near-miss" was and theyalso implied at the beginning of the program that the "near-misses" wereoccurring directly on the payline. Additionally, they never mentioned the fact that a"near-miss" on the payline is illegal in Nevada. This was a simple fact theycould have easily looked up in the state’s gaming regulations and it’s hard tobelieve that they didn’t know about it.

It seemed that the ABC news show had its mind made up going into thestory and set out to find any source of information that could help lead to theirpreconceived conclusions. After all, their two prime sources were a convicted slot cheatand a former gaming industry official with a bias against Nevada gaming regulators.Although the news show portrayed Romano as one of a select few willing to talk about thegambling industry’s "secrets," the fact is he wasn’t exactly pleasedwith the state’s regulators. This became much more apparent on April 16, 1997, justfive weeks after the show aired, when Romano filed a $6 million lawsuit against the stateGaming Control Board, the state Gaming Commission and state Attorney General Frankie SueDel Papa for violating his civil rights in the handling of his American Coin case.

I realize that television is a competitive business that often relieson sensationalism to sell itself, but I’m sure we would all like to think that amajor news organization would try to present a balanced presentation of a situation andlet the viewers decide for themselves who’s right and who’s wrong. That justdidn’t seem to be the case here. If they wanted to be fair they should have at leasthired an independent lab to check the claims of their sources and report those results intheir broadcast.

Eventually, the initial controversy over the "near-miss"issue died out and no hearings of any kind were ever held. Chances are pretty good,however, that this issue will continue to linger and the industry will one day have tocome up with a way to permanently resolve it.

And how does this story affect you? Well, at least when you walk into a casino and play a slot machine in a regulated jurisdiction you can be assured that measures have been taken to assure you of a fair game. You can also be assured that a "near-miss" won’t be programmed to appear on the payline, but I suggest that you don’t look above or below that payline to see what else is showing!