Shareholders’ lawsuit against IGT can proceed, judge rules

A class action lawsuit filed by shareholders against slot machine giant International Game Technology can proceed, a Reno federal judge has determined.

The International Brotherhood of Electrical Workers Local 697 Pension Fund from New York filed the shareholders action, saying IGT executives were making false statements in attempt to portray a bright future for the company while its shares declined in value more than 72 percent between Nov. 1, 2007, and Oct. 30, 2008.

U.S. District Judge Edward Reed removed some the claims but didn't dismiss the lawsuit in his ruling.

"Viewed as a whole, we find that plaintiffs have alleged inferences that defendants intentionally misled investors to the investors' detriment at least as compelling as any plausible opposing inference," Reed wrote in his decision Tuesday.

Darren Robbins, a San Diego-based attorney for the union, said the ruling will allow the case to proceed toward discovery procedures and other pre-trial elements. He expects IGT to again seek to have the case dismissed.

"The ruling was carefully crafted," Robbins said.

The lawsuit covered statements made in Securities and Exchange Commission documents and on quarterly earnings conference calls by former IGT Chairman and CEO TJ Matthews and current Chief Financial Officer Pat Cavanaugh.

The union's pension fund owned 62,000 shares of IGT stock, which is traded on the New York Stock Exchange, during the period in question, which was valued at $1 million. Robbins said the shares lost $250,000 to $300,000 of their value.

Shares of IGT averaged $41.09 during November 2007, but fell to an average of $11.50 in October 2008. IGT's stock price closed Wednesday at $15.27, down 34 cents, or 2.18 percent.

Judge Reed tossed out the union's claims that IGT overvalued its earnings per share forecasts, schedules for the development of server-based technology, operating expenses and stock sales.

However, the judge left intact issues relating to deals for server-based gaming technology and other equipment IGT reached with Harrah's Entertainment (now Caesars Entertainment) and the CityCenter development.

IGT did not respond to requests for comment.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.