A whistleblower auditor claims that International Game Technology, the world's leading slot machine manufacturer, knowingly filed false state tax returns and could owe Nevada more than $20 million in back taxes.
Attorney John Bartlett said Tuesday his office on Dec. 31 served Reno-based IGT with a complaint filed on behalf of Jim McAndrews, a former state Taxation Department auditor who was hired by IGT to oversee its sales and use tax compliance.
Bartlett said McAndrews, who has been placed on administrative leave by IGT, has whistleblower protection under state law.
Ed Rogich, IGT vice president of marketing, said McAndrews "has one opinion and we have another - and ours is based on our internal auditors' and third-party external auditors' view that we have no tax liability."
Rogich also said he thought the complaint, first filed on Feb. 27, 2003 in Washoe County District Court, was still under court seal and because of that "we're not in a position to talk about the case."
Once the case was filed, state Attorney General Brian Sandoval had to step in to see whether the state would intervene. In late October, Sandoval advised Washoe District Judge Steven Kosach that he would do so.
Deputy Attorney General Greg Zunino said that following Sandoval's decision the case was no longer under court seal - and in any case McAndrews and his lawyer went public with the allegations. Zunino also said McAndrews' claims must undergo more review before the state decides whether to join with McAndrews.
That decision will have to be made soon since IGT is likely to move to dismiss the case and the court will schedule a hearing on the dismissal motion, Zunino said.
"At that point, we'd have to commit to joining (with McAndrews) or opposing the complaint," Zunino said.
If it appears that the tax money is owed the state, "that's certainly a significant concern, particularly given the amount of money that's alleged to be owed," Zunino said.
But, he added, "We haven't taken a position yet regarding the merits of the case. The next step is to decide whether to take up this action and proceed with it against IGT or move to dismiss it."
The complaint alleges IGT and Anchor Coin Inc. were involved in a joint venture and since 1997 filed false sales and use tax returns with the state on sales and leases of slot machines and slot components. Anchor Coin later was acquired and merged into IGT.
The companies "engaged in a scheme to evade the payment of substantial amounts of sales and use taxes on millions of dollars in gaming machine sales," the complaint states. Bartlett said in a separate statement that the tax loss could be more than $20 million, and penalties and interest could be added to that amount.
The complaint also says McAndrews tried to bring the tax compliance issues to the company's attention "but has been rebuffed in these attempts."
Bartlett also said that McAndrews is entitled under state law to up to half of any money recovered as a result of the legal action.