StateLine: Casino regulation can be a haven for patronage and corruption

Tom Benner

Editor's note: For Monday publication with MassAction

Out in Las Vegas, William “Billy Gamble” Thompson rolled his eyes when he heard the governor of Massachusetts promising honest and efficient oversight of the casino industry.

 “New Jersey said that and it was corrupt as hell at the beginning,” said Thompson, a professor at the University of Nevada at Las Vegas who studies the gambling industry. “Louisiana was going to be great, and the governor went to jail.”

 Patrick says he will look to other states while crafting an independent casino control commission to license, regulate and oversee three proposed casinos and their employees in Massachusetts.

 But industry experts warn such agencies, no matter how they are structured, are potential patronage havens, susceptible to political interference and corruption, and - because they are usually paid for with casino revenues - often become unwitting boosters for the industry they are charged with keeping honest.

 “You’ve got to keep your eyes open, you’ve got to watch for friendships and buddy systems,” Thompson said. “You don’t want the commissioners to be too close to the elected politicians.”

 State spending on casino regulation varies wildly. So does the level of vigilance.

 In 2003, South Dakota spent $945,000 and employed a 12-person office to oversee 36 mostly small casinos, while New Jersey spent $62.7 million with 714 employees overseeing 12 casinos, according to the American Gaming Association.

 Nevada, the first state with legalized gambling, fell in the middle, spending $30.7 million in 2003 on 432 employees regulating more than 2,000 sites where gambling is allowed.

 States can take different approaches to regulating casinos. New Jersey has four inspectors assigned to each casino at all times, while Nevada does spot checks and investigates complaints.

 Casinos and politics inevitably intertwine. In Nevada, where gaming licenses can be found from venerable Vegas strip casinos to mom-and-pop taverns and grocery stores, politicians have been known to use their connections to help constituents become licensed.

 Louisiana Gov. Edwin Edwards went to jail for taking a bribe in exchange for a riverboat casino license. Pennsylvania’s gaming board, frequently cited for partisanship, is currently under investigation for giving a casino license to a reputed mobster.

 “There haven’t been too may cases of outright bribery,” Thompson said. “Usually a politician will go to a board member and try to use friendship or a past relationship to try to get a license.”

 The politically ambitious have been known to use casino commissions as a stepping stone. Harry Reid, the current U.S. Senate majority leader, nursed his wounds from a first, failed Senate race while heading Nevada’s gaming commission in the 1970s.

 Each state’s governor generally appoints the members of gambling commissions - in some cases from the world of politics, while others have professional and technical backgrounds.

 “You can point to good and bad examples,” said gambling researcher Clyde Barrow of the Center for Policy Analysis at UMass-Dartmouth. “It could be a turnpike authority with political patronage, or it could be a group of technocrats with experience in finance, labor relations, the hospitality industry.”

 True to its top-spending status, New Jersey’s casino control commissioners collect handsome salaries: its chairman gets $141,000 a year, while four other commissioners are paid $125,000 each.

 New Jersey split its oversight functions into two distinct offices, an independent casino control commission that falls within its state treasury to handle licensing and regulation, and a separate law enforcement division that falls within its attorney general’s office.

 Patrick proposes a similar two-pronged system for Massachusetts.

 Most states charge casinos for the cost of regulating them - amounting to less than 1 percent of casinos’ general revenues. On that basis, regulating three casinos in Massachusetts would cost about $20 million a year, Barrow said.

 With casinos footing the bill, some commissions have tended to bloat, industry experts say. That was the case in New Jersey, when Steven P. Perskie took over as head of the New Jersey Casino Control Commission in 1990.

 Over four years, Perskie reduced the number of employees under his direct control 503 to 361, and reduced his budget from $26.7 million to $23 million.

 “It was too big,” said Perskie, now a judge. “It was ossified at that point.”

 Perskie believes the agencies set up to control casinos can themselves be controlled - but it takes vigilance.

 “That requires the willingness of those in authority to undertake from time to time to kind of evaluation that is appropriate for all government,” he said.

Tom Benner of The Patriot Ledger (Quincy, Mass.) may be reached at tbenner@ledger.com.