IGT CEO Patti Hart Under Intense Fire in Proxy Fight

Vince Martin of CalvinAyre.com on Friday published a report detailing the many concerns over IGT CEO Patti Hart and the proxy fight initiated by Ader Investment Management last week.   A proxy fight is a means of removing and installing new directors.

Ader Investment Management’s Jason Ader has nominated three new directors: Charles Mathewson, Raymond Brooks and Daniel Silvers, who is currently President of Ader’s investment management company.

Martin reports on a number of missteps under Hart’s leadership, that include the nine-figure purchases of Entraction and Double Down Interactive as well as an accelerated $400 million stock buyback executed in June of this past year.  Just a few weeks later, the stock plummeted due to lower-than-expected quarterly earnings.

Martin writes: 

In its proxy filing, AIM echoed many of the concerns about IGT management that I had raised in October. “The Ader Group seeks to refocus IGT on a business model which it believes led to IGT’s historic success…We believe IGT is deeply undervalued as a result of:

(i) a lack of focus on the core slot machine and systems business…

(ii) a lack of casino gaming industry experience in management ranks, and

(iii) the results of poor capital allocation decisions highlighted by a series of costly non-strategic acquisitions.” The activist group also pointed out that “the company’s stock price, which declined by 16.2 percent in 2012, ‘speaks for itself.’”

A source close to Gambling911.com also questioned how Hart could possibly run a publicly traded company based on her “colourful” history.

“She was not entirely truthful in regard to the specific degree obtained from her college in Illinois,” noted the source.  “In recent years, Patti has presented herself with more of an expertise in marketing and economics, with her bio suggesting she earned a degree in Marketing and Economics when in fact her degree was in Business Administration.”

Our source also cited public records that include a civil case filed against Hart in February of last year in the San Mateo County Court.

“Israel and Sara L’heureux, Hart’s former landlords, are seeking $122,500 in lost rent and $18,123 in expenses and damages after Hart allegedly stopped paying rent.  The complaint has Sara describing Hart’s behavior as ‘erratic’.”

Hart was once quoted in the New York Times as having said “I don’t get up in the morning and crunch numbers” just days before Excite@Home, a company where she served as CEO, filed for bankruptcy.

That same article referred to Hart as “adept at marketing and sales...." (ironic considering the degree 'mispresentation noted above) ".. and at building relationships, but that she is not particularly ‘financially astute’”.

While IGT continues to defend Hart by pointing out the company’s total revenue increase in 2012 of 10 percent, Martin scratched beneath the surface a bit, calling the IGT response “somewhat disingenuous”. 

IGT’s response sounds good at first read, but it is somewhat disingenuous, and the company’s defense seems far weaker when analyzed closely. The four years of consecutive double-digit (ie, growth of over ten percent) growth come from the depressed base of 2009, when the gambling industry as a whole seemed on the brink of extinction. In addition, the growth comes solely on an “adjusted” basis; 2012 real earnings actually fell from 2011 earnings. In calculating its adjusted earnings, IGT eliminated a series of charges, notably 20 cents per share from the Double Down acquisition.

- Alejandro Botticelli, Gambling911.com Publisher