Gold Rush has filed a lawsuit against another VGT operator, Accel Entertainment

Gold Rush Amusements has filed a lawsuit in Cook County alleging “unlawful and impermissible conduct” by Accel Entertainment, adding another chapter to the ongoing dispute between two of the three largest video game terminal (VGT) operators in Illinois.

The two sides have been at odds since last July, when Accel tried to convert two loans totaling $30 million it made to Gold Rush in 2019 into debt equity. Illinois Gaming Board Administrator Marcus Fruchter denied Accel’s original request in December, and his decision was unanimously upheld by the board in February.

Underappreciated as a form of state tax revenue in Illinois, VGTs generated more than $381.6 million in taxes in the first five months of the year, with the state’s share reaching $325.5 million. By comparison, state taxes generated by casino gaming and sports betting combined in 2022 totaled $116.8 million, a figure that does not include May’s sports betting revenue report.

Promises made, promises broken?

In a 25-page lawsuit filed in the Chancery Division, Gold Rush alleged that Accel CEO Andy Rubenstein “expressly assured Gold Rush’s Rick Heidner that Accel would not exercise conversion rights unless Gold Rush was able to repay the loans.’

The lawsuit also states that Rubenstein said Accel was not interested in being a minority shareholder in Gold Rush prior to the execution of the 2019 loan documents. The two parties amended the initial agreement in December 2020, giving Gold Rush “the unequivocal right to repay the loans at any time without penalty for early repayment’.

Shortly after the initial loan was executed, however, Gold Rush alleged that Accel began spreading misinformation about Accel. Gold Rush alleged that representatives of Accel made false representations that Gold Rush would lose its license, Accel would own Gold Rush, Gold Rush would shut down its VGTs and that Heidner would be charged.

In December 2019, the IGB proposed revoking Heidner’s license to operate VGT after filing a complaint for two violations of the Video Games Act involving “illegal inducement” in November 2018. In April 2021, the two sides reached a settlement, in for which Heidner paid the IGB $75,000 and the board retroactively renewed Gold Rush’s license and restored the gaming company to good standing. In the time between the complaint and the settlement, Heidner received a non-target letter from the US Attorney’s Office in June 2020.

Gold Rush alleges that Rubenstein had personal knowledge of Accel’s disinformation campaign but did nothing to stop it, further alleging that the CEO “issued a directive to his sales team that Accel would pay “chapter” for each account that Accel can take away from Gold Rushing.”

In July, Gold Rush alleged that Accel tried to convert the loan into debt despite previous promises Rubenstein had made to Heidner. On July 30, Gold Rush was able to raise enough cash to pay off one of the loans and made a wire transfer to Accel, but the payment was returned by Accel a few days later. However, Accel eventually provided a notice of conversion of the transferred funds to Gold Rush via email.

Refusal to accept the second loan?

In March, Gold Rush informed Accel that it had the funds to repay the full amount of the loan, plus interest, and requested an exact repayment amount. He alleged that Accel refused to provide repayment amounts and then filed two lawsuits – one against Gold Rush for alleged breach of the loan agreement and one against IGB challenging the decision to ban the debt-to-equity conversion.

In the lawsuit, Gold Rush notes that Accel operates nearly 14,000 VGTs, nearly four times as many as Gold Rush, and that its growth has been driven by acquisitions of other competitors in the state. As of May’s earnings report, there were 42,965 operating terminals, nearly 2,500 more than July 2021.

Gold Rush also claims that “as a result of Accel’s misconduct and unfair competition, Gold Rush’s reputation, reputation, prestige, goodwill and business have been damaged” and that “lost use agreements with businesses, current and future, have resulted in lost revenue and gold rush profits.”

Gold Rush is seeking compensatory and punitive damages, as well as interest, attorneys’ fees and other legal costs, covering six counts that include violations of the Illinois Antitrust Act, fraudulent inducement, breach of contract and the Illinois Declaratory Judgment Act.

Photo: Shutterstock

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