Weekend reading: The gift-horse treatment

TBI chief sees more risk than reward in potential move of top company in 'Inc. 500' to Smyrna

Email | Print By Milt Capps

05-05-2006 2:56 PM — Tennessee Bureau of Investigation Director Mark Gwyn is dead-set on preventing illegal gambling in the state -- even if, in the process of trying to do so, he prevents the fastest-growing private company in the country, as chosen in the "Inc. 500," from settling in Middle Tennessee.

Lately, Gwyn seems to have decided that Rutherford County doesn't need a new high-tech employer badly enough to countenance a plan that would have no impact on gambling in Tennessee -- but would allow companies within the state to build and sell gambling machines. It might be embarrassing, he says.

Gwyn recently refused to support changing Tennessee's anti-gambling laws to allow Smyrna-based Video Gaming Technologies Inc., to bring to Rutherford County an estimated 200 jobs designing, manufacturing and leasing electronic gaming devices to the casino industry.

Given Gwyn's response, those VGT jobs must for now stay in Virginia, Michigan and in VGT's birthplace and nominal home office in South Carolina, leaving the actual Smyrna headquarters with only five VGT jobs.

VGT founder, CEO and sole owner Jon Yarbrough has told NashvillePost.com he would move virtually all VGT employees to Middle Tennessee, if only state law could be amended to allow him to make and sell his products here for customers outside the state.

Yarbrough stresses the 15-year-old firm's financial health: VGT handles roughly $1 billion per year in wagers, with revenues projected at roughly $200 million for the year ahead, all drawn from shares of betting proceeds at American Indian-owned casinos. According to Inc., its growth rate from 2001 to 2004 was 9,721 percent.

VGT's job opportunities are the type many cities and states fight to win. Yarbrough said VGT workers' average pay would easily range upward from $50,000 plus benefits, with $80,000 annual compensation a better estimate for VGT software developers, engineers and other specialists, most of whom are currently ensconced in Charlottesville and would be relocated or replaced.

In contrast, one statistical source suggests median household income in Smyrna was recently pegged at just under $45,000 per year, with median individual incomes of about $37,000 and $27,000 for males and females, respectively.

Yarbrough said yesterday he is perplexed by Gwyn's position, given that Tennessee long ago made it legal for Jack Daniel's Lynchburg distillery in small, "dry" Moore County to manufacture and distribute commemorative bottles of liquor without a retail license, an arrangement with lineage back to 1866.

As with whiskey, "People from Tennessee don't have to go far to find slot machines, either," Yarbrough said, noting the availability of gaming devices in nearby Mississippi, Alabama and Mississippi. "Why would it be so shocking for these machines to be made in Tennessee?" he asked.

Gwyn has apparently been unswayed by that rationale, or by VGT's appeals to employment and economic development.

On March 13, VGT founder and CEO Jon Yarbrough and his legal counsel, Courtney Pearre of Waller Lansden Dortch & Davis, met to review an amended version of VGT's proposed legislation in the office of State Sen. Randy McNally. At the request of VGT, McNally and State Rep. Charles Curtis had weeks earlier sponsored preliminary legislation designed to change state law and free VGT to expand its workforce and create new development and manufacturing facilities in Tennessee.

Among those present were McNally, Gwyn, TBI General Counsel Jeanne Broadwell and TBI Deputy Director Jeff Puckett.

Yarbrough told NashvillePost.com earlier this week that during the meeting, Gwyn "said he didn't like the idea."

Pearre yesterday recalled that Gwyn had explained that "if one of [VGT's] machines might show back up in Tennessee, it could be embarrassing for the TBI." Pearre added, "I don't think their rationale was that logical."

Under the VGT proposal, all operations would be in tight compliance with the Gaming Devices Act of 1962. Finished machines would only be shipped to customers out of state, in keeping with licenses VGT holds from states and council-governments of Cherokee, Choctaw, Chickasaw and Creek Indian nations, which are authorized to operate casinos. Most of the 11,000 VGT game machines now in service are installed in casinos in Oklahoma, but VGT is expanding sales in California, Washington State and in Mexico, where electronic bingo has been legalized.

Speaking in behalf of Gwyn on Wednesday, TBI spokesperson Jennifer Johnson told NashvillePost.com, "The company asked for [Gwyn's] endorsement, but he declined to do that because there is no mechanism in place to ensure that those machines don't end up back here in Tennessee, where gambling [using VGT-type equipment] is obviously illegal."

Johnson essentially confirmed TBI concern regarding the risk of embarrassment to TBI if Gwyn endorsed the requested changes in state laws and VGT operations were later perceived as having contributed to crime. Johnson then wrote in an e-mail, "The bottom line is this: there is no way to ensure that these machines aren't going to be used/sold in Tennessee, meaning [Gwyn] isn't going to endorse" the VGT proposal. She later said that during a 14-year period, TBI seized 3,198 illegal gambling machines and confiscated more than $1.6 million in illegal gambling proceeds.

Pearre told NashvillePost.com that VGT had promised McNally and Curtis the company would not continue lobbying for the bills "if TBI was going to be standing in the way."

Pearre said he chose to work through McNally, in part because of Mcnally's reputation for having provided undercover assistance to TBI investigators during the legendary "Operation Rocky Top" charity bingo-gambling scandal of late Eighties, an incident that exposed corruption among elected and appointed officials and led to a broader ban on gambling.

Meanwhile, around Smyrna, some local officials are hoping for a change of luck: Smyrna Mayor Bob Spivey told NashvillePost.com this week, "Absolutely, yes sir, we'd like very much to have [Yarbrough] make his manufacturing here, rather than keep it in South Caorlina," later adding, "and I feel we need to correct this legislation, post haste."

Yarbrough, a Tennessee Tech alum who will soon be 49, said he has has not abandoned his efforts, and has a location picked-out for expanding VGT operations near the Smyrna Airport, from which he pilots his Cirrus SR22. He estimated he spends more than 200 hours per year in the $450,000 craft, mainly shuttling among VGT offices and customers' entertainment centers. He said he may soon need to upgrade to a jet.