Gold Rush Amusements has filed a lawsuit in Cook County claiming “illegal and tortious conduct” by Accel Entertainment, adding another chapter in the ongoing dispute between two of the three largest operators of video gaming terminals (VGTs) in Illinois.
The two sides have been at odds since last July, when Accel attempted to convert two loans totaling $30 million it made to Gold Rush in 2019 into debt equity. Illinois Gaming Board Administrator Marcus Fruchter rejected the initial request by Accel in December, and his decision was unanimously upheld by the board in February.
Underappreciated as a form of state tax revenue in Illinois, VGTs have generated more than $381.6 million in taxes through the first five months of the year, with the state’s share coming to $325.5 million. By comparison, state taxes generated from casino gaming and sports wagering combined in 2022 have totaled $116.8 million, a figure that does not include May’s sports wagering revenue report.
Promises made, promises broken?
In a 25-page lawsuit filed with the Chancery Division, Gold Rush alleges that Accel CEO Andy Rubenstein “expressly assured Rick Heidner of Gold Rush that Accel would not exercise the conversion rights unless Gold Rush was unable to pay back the loans.”
The lawsuit also states that Rubenstein said Accel was not interested in being a minority shareholder of Gold Rush prior to the execution of the 2019 loan documents. The two sides amended the original agreement in December 2020, giving Gold Rush the “unequivocal right to repay the loans at any time with no prepayment penalty.”
Shortly after the original loan was executed, however, Gold Rush claims Accel started spreading misinformation about Accel. Gold Rush alleges that Accel representatives were making false statements that Gold Rush was going to lose its license, Accel was going to own Gold Rush, Gold Rush would have its VGTs shut off, and that Heidner would be indicted.
In December 2019, the IGB proposed revoking Heidner’s license to operate VGTs after filing a complaint alleging two violations of the Video Gaming Act involving an “illegal inducement” in November 2018. In April 2021, the two sides reached a settlement, in which Heidner paid the IGB $75,000 and the board retroactively renewed Gold Rush’s license and restored the gaming company’s good standing. In the period between the complaint and settlement, Heidner obtained a non-target letter from the U.S. Attorney’s Office in June 2020.
Gold Rush alleges that Rubenstein had personal knowledge of Accel’s misinformation campaign, but did nothing to stop it, further claiming that the CEO “issued a directive to his sales team that Accel would pay a ‘bounty’ for any account Accel could take away from Gold Rush.”
In July, Gold Rush alleged that Accel sought to convert the loan into debt equity despite the previous promises Rubenstein was said to have made to Heidner. On July 30, Gold Rush was able to procure 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. Eventually, however, Accel provided a conversion notice of the wired funds to Gold Rush via email.
A refusal to accept the second loan?
In March, Gold Rush informed Accel that it had funds available to repay the full loan amount, plus interest, and requested an exact payoff amount. It claimed that Accel refused to provide payoff amounts and then filed two lawsuits — one against Gold Rush for allegedly breaching the loan contract, and one against the IGB challenging the decision to prohibit the conversion of the debt into equity.
In the lawsuit, Gold Rush notes that Accel operates nearly 14,000 VGTs, almost four times as many as Gold Rush, and that its growth has come through acquiring fellow competitors in the state. As of May’s revenue report, there were 42,965 terminals in operation, nearly 2,500 more than in July 2021.
Gold Rush also alleges that “as a result of Accel’s wrongful conduct and unfair competition, Gold Rush’s standing, reputation, prestige, good will, and business were damaged” and that the “lost use agreements with establishments, current and future, resulted in a loss of revenue and profits for Gold Rush.”
Gold Rush is seeking compensatory and punitive damages as well as interest, attorney’s fees, and other court costs spanning six counts that include violations of the Illinois Antitrust Act, Fraudulent Inducement, Breach of Contract, and the Illinois Declaratory Judgment Act.