Missouri lawsuit accuses Torch Electronics of violating racketeering law

A class action lawsuit filed in federal court this week seeks to do what law enforcement and legislators have been reluctant to do – shut down Torch Electronics, the vendor behind many of the video machines in convenience stores offering payoffs of hundreds or thousands of dollars.

The lawsuit in Missouri’s Western District, which accuses the company of federal racketeering and state consumer protection law violations, also names two convenience store companies – Mally Inc. and Warrenton Oil Company – and three individuals as defendants. 

Warrenton Oil, which operates 54 Fast Lane convenience stores, joined Torch in a lawsuit filed early in 2021 in Cole County attempting to block the Missouri State Highway Patrol from investigating its operations.

The individuals are Steven Miltenberger, founder of Torch, and brothers Mohammed and Rami Almuttan, sentenced last year to federal prison on charges of smuggling cigarettes.

Mohammed Almuttan was a key informant in corruption cases that led to bribery charges last year against then-President of the St. Louis Board of Alderman Lewis Reed, Alderman Jeffrey Boyd and former Alderman John Collins-Muhammad.

Miltenberger wrote a letter to the federal judge sentencing Rami Almuttan praising his honesty and calling Mally, the Almuttans’ company, one of Torch’s first customers. 

The lawsuit, filed by attorney Joe Jacobson on behalf of seven plaintiffs, accuses Torch of placing illegal gambling devices in hundreds of locations. The goal, Jacobson said in an interview, is to rid the state of the machines, which entice people with gambling addictions and operate without controls to prevent children from gambling.

“It is really so cruel to people who have gambling problems to place them in these situations,” Jacobson said. “It is like being a cocaine addict and everywhere you go, there are lines of coke sitting on bar tops.”

Torch Electronics, in court filings for civil and criminal cases, argues that its machines do not violate state gambling laws because they offer players a chance to learn the outcome before risking their money. 

Torch Electronics spokesperson Gregg Keller, in a statement sent by text message, declined to address the specifics of the lawsuit.

“We are reviewing the petition but do not comment on pending litigation,” he said.

Torch Electronics began placing the machines in Missouri locations in 2018 and by the next year, complaints about their games and similar machines from other companies led the Missouri State Highway Patrol to launch investigations. During 2019 and 2020, the patrol delivered almost 200 cases to local prosecutors alleging violations of state gambling laws but few charges were actually filed. In Linn County in north-central Missouri, felony cases against Torch and two other vendors were dropped after the prosecutor’s office changed hands on Dec. 31.

“I do not believe the law is clear to obtain a conviction in front of a jury beyond a reasonable doubt,” Prosecuting Attorney Tracy Carlson said in an interview Friday with The Independent.

Only one prosecution, for machines in a Platte County convenience store and owned by a Kansas company, has resulted in a conviction since the machines began appearing in the state. As required by state law, those machines were publicly destroyed in October 2021.

Meanwhile, in Jefferson City efforts to rewrite those laws to specifically outlaw the machines have stalled in a three-way fight over how or whether to expand other types of gambling.

Casinos pushing for sports wagering don’t want their issue joined to provisions allowing the Missouri Lottery to place video gambling machines in bars and truck stops. Video lottery advocates don’t want the casinos to get a new source of revenue if they aren’t included. 

And the companies profiting from thousands of the unregulated machines would prefer that nothing pass at all because it might make it tougher for them to do business.

“I wish that the legislature would clearly make a decision that these devices are clearly legal or clearly not legal,” Carlson said.

The lawsuit notes both the reluctance of prosecutors to file charges and the political power Torch has amassed to block new laws.

Torch has made $657,648 in political donations over the past 5 years, the lawsuit states, and another defendant, Warrenton Oil, has donated $307,500. Much of it has gone to PACs controlled by Steve Tilley, a former House speaker who serves as Torch’s lobbyist.

“Many of Gambling Enterprise’s participants, including Torch and Warrenton Oil, made significant political contributions to elected officials in Missouri, both to disincentivize them from enforcing against members of the Gambling Enterprise laws prohibiting this illegal gambling and to encourage the enactment of new laws legalizing Torch’s slot machines,” the lawsuit states.

To prevail in the lawsuit, Jacobson will have to convince a jury that the unregulated games violate state law. An enterprise which generates income from illegal gambling is clearly covered by the federal Racketeer Influenced and Corrupt Organizations, or RICO, Act, which allows individuals to sue for money lost to organized crime.

The racketeering law requires anyone found to be liable to repay three times the amount of the damages. 

The lawsuit also seeks damages under the state Merchandising Practices Act, accusing Torch of omitting material facts essential for consumers to make an informed decision about how to spend their money. 

The machines, the lawsuit notes, do not disclose what percentage of money deposited is returned to players as winnings. In Missouri’s casinos, state law requires slot machines to pay out at least 80% of the money wagered over the course of a month and most casinos regularly return about 90%.

The seven named defendants are regular Torch machine players, the lawsuit states, with specific instances of losses ranging from $40 to $470. Jacobson will seek to certify as a class everyone who played a Torch machine “on or after March 3, 2018, and who received back following their play an amount of money less than the amount deposited that day.”

Three of the named defendants stated in the petition that they have witnessed children, including one instance of a 10-year-old, playing Torch games. 

“The plaintiffs are generally people who have issues with gambling,” Jacobson said. “They do it regularly and would like to not do it regularly. They see the kids there playing the machines and it is concerning to the plaintiffs.”

The machines are generally unsupervised, with no one checking the age of players or monitoring how they are played, the lawsuit states, and operators are indifferent to whether minors are gambling.

The lawsuit is likely to be lengthy but it can resolve the question of the machines’ legality, Jacobson said.

“Private lawyers can step in,” he said, “and do the work that the government doesn’t have the resources to do or the will to do and enforce the laws.”