Arizona Department of Gaming

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Arizona Department of Gaming

• Our Mission Statement
• Protect the Public,
• Ensure Compliance with the Gaming Compacts,
• and Regulate the Gaming Industry.

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Gaming Vendor Certification

• Gaming Vendor Certification Mission Statement
• We determine suitability of gaming vendors
  in order to protect the public, ensure compliance
  with gaming compacts, and regulate the gaming
  industry.

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Topics Covered

• Who we certify
• Who is the applicant
• Process we use
• Background Investigation
• Financial Investigation
• Company
• Key Personnel
• International Investigations

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Application review is basis for what we do
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Who We Certify
Management Contractor Financiers Manufacturers of Gaming Devices Distributors of Gaming Devices Provider of Other Gaming Related Equipment Other Key Suppliers who are ancillary to Gaming, if exceeds 10,000/month Providers of Goods or Services not mentioned above and exceeds 10,000/month
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Provider of Other Gaming Related Equipment

• Poker Blackjack Equipment and Gaming Supplies
• Playing Cards
• Gaming Chips
• Keno Equipment
• Card Shufflers
• Intellectual Property
• Ticket Redemption Kiosks tap into slot
  accounting
• Off Track Betting
• Bill Validators, if selling directly to casino

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Other Key Suppliers who are ancillary to Gaming,
if exceeds 10,000/month

• Surveillance Security
• Currency/Coin Counters
• Architectural Services
• Check Cashing
• Independent Gaming Testing Lab
• Money Carts

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Providers of Goods or Services not mentioned
above and exceeds 10,000/month

• Entertainment
• Printing
• Uniforms
• Marketing
• General Contractor
• Computer Equipment
• Office Supplies
• Etc.

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Who is the Applicant

• Follow the Money
• Off the Organizational Chart
• Company Principles

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Follow the Money

• Hidden Ownership or Control
• Equity Owners
• Debt Owners
• Creditors
• Lenders
• Parents
• Interlocking Board of Directors

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Off the Organizational Chart

• Key Personnel
• Consultants and Others
• Financial and Technical Expertise

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Key Personnel

• A key person is anyone who can control or
  substantially influence the behavior of the
  applicant

• Owners
• Directors
• Officers
• Major Stockholders
• Lenders
• Managers of critical operations
• Key technical personnel
• Critical consultants or suppliers

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How We Do It

• Process begins once a completed application and
  required fee are received
• Scope
• Background Investigation
• Financial Investigation

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Scope

• Management Contractors, Financiers,
  Manufacturers/Distributors of Gaming Devices,
  Providers of Gaming Related Equipment
• Background Investigation / Extensive Financial
  Investigation
• Team of Peace Officer Financial Investigator
• Travel to Vendor site / Possibly Vendors
  Accountants and/or Auditor

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Scope(Continued)

• Other Key Suppliers Who are ancillary to Gaming,
  if exceeds 10,000/month
• Background Investigation / Financial
  Investigation
• Team of Peace Officer Financial Investigator
• Travel to Vendor site / Possibly Vendors
  Accountants and/or Auditor

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Scope(Continued)

• Providers of Goods or Services not Mentioned
  Prior and Exceed 10,000/month
• Background Investigation / Financial Review
• One Investigator does both background and
  financial review
• Entire investigation conducted from office over
  the phone

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Travel to Vendor

• Face to Face interview
• Immediate access to supporting documents
• Observe workplace
• Tour operation or warehouse
• Meet with independent auditors

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Background Investigation

• Company
• Review of litigation for involvement with
  unsuitable element
• Inquires of jurisdictions where applicant is
  licensed (including foreign)
• Arizona Corporation Commission Check
• Better Business Bureau inquiry
• Johnson Act Compliance Verification
• Independent gaming test laboratory approval

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Background Investigation

• Key Personnel
• Criminal History Check
• Inquiries of Jurisdictions where Key Person has
  worked, lived and has been licensed
• Accurint
• Compare to addresses listed on application work
  and home
• Review arrests or legal entries
• Review affiliations or family connections
• Review for aliases

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Key Personnel(Continued)

• Face to Face Interview
• Submit Fingerprints to FBI
• Submit Fingerprints to Arizona Department of
  Public Safety

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Financial Investigation

• Company
• Company Credit Check
• Review Federal and State Tax Returns
• Compare tax returns to Federal Arizona State
  tax transcripts
• Review SEC Filings - EDGAR
• Review list of Shareholders
• Review Articles of Incorporation By-laws

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Financial Investigation(Continued)

• Company Continued
• Arizona Corporation Commission information ties
  to application
• Annual Reports / Financial Statements
• Corporate Minutes Board/Audit Committee Minutes
• Proxy Statements
• Trial Balance

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Financial Investigation(Continued)

• Company Continued
• Accounts Receivable Accounts Payable Review
  for unusual terms
• UCC Filings
• Customer List Unsuitable Entities
• Lease / Sales Agreements - Review for unusual
  terms
• Litigation for financial impact
• Cash Flow Projection
• Source of initial capitalization

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Financial Investigation(Continued)

• Company Continued
• External Auditor Workpapers
• Cash Review if no external auditor

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External Auditor

• Management Representation Letter
• Engagement Letter
• Auditors Report on Internal Controls
• Auditor Fees
• Legal Representative Letters
• Review sample of workpapers
• Report to owners

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Cash Review

• Obtain company bank statements
• Select sample of cash receipts and disbursements
• For Receipts
• Confirm total of all checks matches deposit slip
• Match check to invoice
• For disbursements
• Vendor name on invoice agrees with check
• Confirm item paid for is appropriate

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Financial Investigation

• Key Personnel
• Key Personnel Credit Check
• Review Federal State Tax Returns
• Foreign Earnings
• Securities Selling Buying
• Business Investments
• Compare tax returns to Federal Arizona State
  tax transcripts
• Review personal balance sheet

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Key Personnel(Continued)

• Review Bank Statements
• Face to Face Interview
• Accurint

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Accurint

• Property owned
• Previous owner
• Market Value
• Purchase price
• Bankruptcies
• UCC Filings
• Tax Liens
• Recreational Vehicles

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International Investigations

• Make Contact with the U.S. Embassy
• To gain intelligence on the company
• Advice on translators, consultants and
  accountants
• Set up appointment with detailed itinerary of
  what we want to see
• Meet with national and local constabulary
• Contact Interpol

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International Investigations(Continued)

• Carry fingerprint kit difficult to obtain
  fingerprints in some countries
• Contract with independent interpreter
• Contract with independent accountant, tax
  advisor, and lawyer familiar with national and
  local customs
• Contact where have applied for license
• If possible coordinate visit with other
  jurisdictions to share information

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Questions or Comments?