Lottomatica faces Italy probe and denies wrongdoing

Its subsidiary Lottomatica Videolot Rete has received a notice of filing of preliminary investigation from the Regional Prosecutor of the Corti dei Conti - Division of Lazio regarding the concession granted by the Amministrazione Autonoma dei Monopoli di Stato (AAMS) in 2004 for the management of a telematic network for gaming machines.

The audit court’s Lazio division is examining assertions that a company unit, Lottomatica Videolot Rete, did not meet obligations to start up and run the network in compliance with a state concession granted in 2004, it said in a statement.

With the notice of filing, the Regional Prosecutor has requested that Lottomatica subsidiary respond to specific assertions that it did not fully comply, in cooperation with AAMS, with obligations for the starting, activation and management of the telematic network, as well as with some services quality standards.

The firm says it will comply with both requests in a timely manner and vigorously contest them determined that both contain significant inaccuracies and groundless computations. "It is alleged that lack of compliance would have caused damages to the state amounting to approximately 4 billion euros (us$ 5.38 billion)," it said.

Its shares dropped to a three-month low of 28.77 euros in morning trade before rebounding to 29.38 euros, off 3.13 percent.

Lottomatica is confident that its subsidiary has always fully complied with its duties as a concessionaire, including the remittance of all amounts due to the Government. If necessary, the company will also ask, through its subsidiary, for a declaratory judgment that it is full compliant with the terms of the concession.

The state monopoly administrator has sent Lottomatica Videolot Rete and the nine other concession-holders letters with the same demands as those made by the audit court, the statement said.

A financial source said potential fines for all concession-holders could total 98 billion euros. Lottomatica has about 5 or 6 percent of Italy’s video lottery market. Lottomatica said the claims were without merit and so had no financial impact and does not anticipate that any penalties or liabilities will result from this matter.

In reference to concession activities, it strongly believes that its subsidiary operating practices and procedures have resulted in increased reliability and performance of the network for gaming machines.

Further, Lottomatica is confident that, once accurately established, the record of activities by its subsidiary concerning the implementation and on-going management of the telematic network will adequately address the concerns raised both in the Corti dei Conti filing and in AAMS filing.