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Are Slot Machines Honest?

by Steve Bourie

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 to provide 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 was curious to get answered and it ended up taking me on a little bit of an adventure. Not only did it result in this story about the regulatory process for electronic gaming machines 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 own facilities for testing electronic gaming machines: Montana, Mississippi, New Jersey and Nevada. For the other states that offer legalized casino gambling but don't have their own labs almost all rely on the services of Gaming Labs International - an independent testing firm based in Toms River, New Jersey.

It only made sense to start with the biggest state first, so in February 1997

I called the Nevada Gaming Control Board to ask for permission to visit their testing lab in Las Vegas. They told me I needed to get permission for that from Bill Bible, the Control Board's chairman, so I wrote him a brief letter explaining that I wanted to write a story about the lab for my book. Twelve days later I received a reply from him stating that I was welcome to visit the lab but that some parts of it were confidential and would not be accessible to me. He only requested that I call that department in advance to make an appointment. A few days later I called and made arrangements for a visit on March 18 at 3:00 p.m.

Not being a computer expert - just a curious casino gambler - I wasn't exactly sure what I should ask and about 10 days before my trip I started to ponder questions I thought might be appropriate. Then, on March 12, just six days before the scheduled visit, I was watching television when I switched channels and caught a story on 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 with parts of an interview with Frank Romano who, Ross said, was banned from the industry because a company he owned with two partners was charged with rigging its video poker machines to avoid giving out royal flush jackpots.

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

Ross said that Romano claimed he didn't know anything about the cheating 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 industry even though Larry Volk the person at his company who programmed the chips to avoid giving the winning hands had been murdered: Volk was shot to death at his house in Las Vegas shortly before he was scheduled to begin giving testimony about how he programmed the chips to cheat.

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

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

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

The next scene shifted to an interview with gambling addiction authority Valerie Lorenz who, Ross said, wasn't surprised that the industry would do such a thing.

Next was an interview with Bill Bible, chairman of the Nevada Gaming Control Board who said that cheaters would be caught and prosecuted. Ross commented that most of the Board's cases involved players cheating casinos and asked Bible if it also applied to casinos that cheat customers. Bible replied that it did and that his department inspects computer chips both before they're put in the machines and also after they're out in actual play.

Ross then questioned how good a job the state did in examining the chips 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 in a slot cheating scandal. Harris was a computer expert in the gaming lab where the machines were tested and the videos were made by the attorney general's office while questioning him about his cheating activities. Harris was eventually convicted of felony cheating charges.

Parts of the "secret" tape are then shown with Harris claiming that the state's gaming regulations weren't being enforced and that the machines were "deceptive."

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

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

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

Ross commented that the attorney general's office told PrimeTime it couldn't prove any criminal wrongdoing based on Harris' allegations and that they never looked at all into the alleged "deceptive" features.

The interview with Bible then continued with him confirming that Harris was a former employee who had a great deal of knowledge about the industry and that his allegations were still under review. Bible denied that any cheating was allowed by him or the 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 the machines were very prevalent. Ross said that in a confidential memo to the attorney general'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." Ross said Hickman thought the machines were "deceptive" but he was ordered to approve them anyway. The machines in question were manufactured by International Game Technology (IGT), the world's largest manufacturer of electronic gaming machines and a company which controls about 75% of the market.

Next was an interview with Tom Baker, president of IGT, in which he's shown a copy of the Harris video. Baker denied that his company's machines were "deceptive" in the way Harris described them on the tape. Ross challenged Baker by asking if his machines were "deceptive" and again questioned whether or not IGT was teasing customers into thinking they were close to winning when they played those machines. Baker replied that Harris said a lot of things, however, Harris was a convicted felon but Baker and his company were not. Ross responded by showing Baker a copy of Gordon Hickman's confidential memo to the attorney general's office about the same subject. Baker then denied there was any favoritism given to his company that he knew about.

At that point Ross pointedly asked if IGT programs its machines with a "near-miss" feature. Baker answered by saying his company's machines were programmed 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 his company was doing it then the law allowed it.

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

The next scene shifted back to Bill Bible with Ross questioning him as to whether or not he thought the public was treated fairly when playing gaming machines in Las 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 were designed to entertain the public as well as to take their money. Ross then asked if a casino customer is better off going to the machines or to one of the table games. Romano replied that they'd be better off going home and that ended the report.

It didn't take long for the effects of PrimeTime Live's broadcast to be felt. The very next day U.S. Representative Frank Wolf (R-Va.), a longtime opponent of legalized gambling, requested an immediate investigation by two federal agencies. "I have asked the FBI to investigate claims of illegality and the Federal Trade Commission to investigate illegal trade practices," Wolf said.

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

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

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

Well, this certainly was an interesting can of worms that had been opened. 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 been associated with and that it was involved in the biggest cheating scandal in Nevada gaming history. In July 1989 the Nevada Gaming Control Board seized about 1,000 of the company's gaming machines in 93 southern Nevada locations (mostly bars and taverns) after it discovered that they contained unapproved computer chips. The company's video poker machines had been altered to avoid giving a royal flush and their keno machines had also been programmed to avoid giving out the top jackpots.

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

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

As for the "near-miss" scenario I knew that this issue had been raised before with Universal Distributing, a Japanese slot manufacturer, that had specifically developed a "near-miss" program for its slot machines. When showing a non-winning combination on their slot machines Universal's program would put two symbols on the payline and then place the third symbol just above or below the payline to make players think they were close to winning. When the Universal machines were originally approved 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 hearings to discuss the "near-miss" issue and officially ruled it illegal. This resulted in Universal having to reprogram about 15,000 of its machines throughout the state.

Well, if the "near-miss" had been ruled illegal in 1988 then why would PrimeTime Live broadcast a report that would purposely lead its viewers to 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 my visit to the testing lab.

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

Do you just approve the initial program or every program the machine can use?

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