Kum & Go's Krause Sues Iowa Over Machine Gambling Ban

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Kum & Go's Krause Sues Iowa Over Machine Gambling Ban

WEST DES MOINES, Iowa -- Iowa's state ban on slot machine-like gambling games touched off a lawsuit yesterday by the owners of the TouchPlay machines that the Iowa lottery had placed in some 6,700-plus convenience stores, gas stations, grocery stores and other retailers around the state.

The state's largest owner of TouchPlay machines, Royal Financial, a West Des Moines company that distributes the machines at convenience store chain Kum & Go, filed suit against the Iowa Lottery, seeking damages for money lost because of the ban that went into effect in May against the slot machine-like games, according to the Des Moines Register.

Although Royal is just the latest in a series of businesses that have sued the state for breach of contract, its suit is notable because it claims the lottery's chief executive personally asked Kum & Go founder Bill Krause to get involved in the TouchPlay program, reported the Register. Krause also owns a stake in Royal Financial.

According to the lawsuit, State lottery chief Dr. Ed Stanek "stated he needed one private party to take the lead and purchase one thousand (TouchPlay devices) in order to make the TouchPlay program viable. Without such a purchase, the entire TouchPlay program could fail. He requested that Krause be that party."

"... The Lottery Authority represented to Royal Financial that the TouchPlay program would last for a minimum five-year period, that Royal Financial would recoup its investment and expenses," continued the suit.

State officials told the Register they were reviewing the suit and declined to comment further. The state has argued in previous court actions that the companies that invested in the TouchPlay program did not have contracts with the state.

In May, the courts denied a request for a temporary court order to stop the lottery from proceeding with the ban. The judge wrote that while the state enticed the private companies to invest in the program, there was evidence that either party could end the relationship at any time.

Last month, 30 businesses filed amended court papers seeking damages from the state that they have estimated could reach $900 million. Another suit is pending in federal court, said the Register.

According to details in the lawsuit and reported by the Register, the TouchPlay machines were owned by private companies but operated under the authority of the Iowa Lottery, a public agency. The state received 24 percent of the money generated after paying out prizes.

With 1,700 machines, Royal Financial owned the most machines. According to state financial figures released in May, the TouchPlay machines generated more than $105 million in sales during the past fiscal year. Of that amount, $37.5 million was left to share with the state and its partners.

The suit charges that Stanek told Krause he was developing a new lottery program to raise money for the state and noted the lottery's "strong" objection to the amusement devices being developed by one of Krause's companies. Stanek said he planned to work to ban the amusement devices, the lawsuit says, but "he promised that if the amusement devices were removed, they could be replaced with the (TouchPlay devices)."

Controversy over TouchPlay broke out in the Iowa Legislature this year. Casinos and anti-gambling advocates opposed the devices, leading lawmakers to vote overwhelmingly to ban them.

"Whatever political pressures they may face, our state officials always have a responsibility to honor their word," Krause said in a statement. "That's especially true in a situation where they approach a private citizen with a request to invest millions of dollars so the state can balance its budget. A private citizen or private company committed to doing the right thing for our state should never suffer the loss of millions based on government officials' arbitrary decisions."

According to the Register, three Kum & Go stores house six of the top seven machines in the state based on wagering totals. The top machine in the state, where more than $298,000 was wagered over eight months, is located at the Kum & Go store on East Euclid.