Gaming Regulators to Casinos: We Know What Your Real Reasons Are for That Brown Envelope

That was the message that some past and present regulators offered at the Global Gaming Expo in Las Vegas when talking about complaints they receive from casino operators about their peers. The conference panel entitled: “Regulator or Referee: Dealing with Jurisdictional Disputes” told licensees “we understand your game”.

“Regulators don’t really want to be in the middle of anything” said Dennis Neilander of Kaempfer Crowell and former chairman of the Nevada Gaming Commission .  We know that some, even most, of the complaints made by licensees about other licensees are simply to gain some competitive edge. The divisions investigate anyway though, and do not rule by either the “shield or the sword”.

“We used to cringe, then sigh, when that anonymous brown envelope showed up at the door”, said Neilander. We were always pretty sure what would be inside. The panel agreed that the operators spend a lot of time watching each other, as they should,  and sometimes file anonymous complaints with the gaming commissions when they see their competition either making strides in areas they either never thought of, aren’t yet licensed for, or where they just can’t compete.

“We are required by statute to investigate all complaints”, continued Neilander noting that Nevada has even just strengthened that statute. “But we also have the responsibility to promote competition”.   

Uri Clinton, Senior VP and General Counsel of Baha Mar Ltd., agreed that there is almost always a commercial advantage behind the complaints put before the regulators.

David Rebuck, Director of the N.J. Division of Gaming Enforcement also agreed.  A background in law enforcement is great for this type of thing said Rebuck, “but we also have to protect the accused against false accusations. We recognize that there is likely a hidden commercial reason by the competitors, but we do investigate and then we tell both parties about our decisions”.

Steven Martino, of the Maryland State Lottery also agreed.  Maryland officials saw the same thing when there were lots of disagreements in the state before the question to increase intrastate gaming at up to 6 casinos was even on the ballot.  “Question 7″, adding approval for the 6th casino license and also allowing 5 existing casinos to add blackjack and other table games to the already approved slot machines, eventually passed 52%/48% in the state but not before very extensive lobbying by both sides and all kinds of interaction between the casinos and the Lottery regulators.  “We are supposed to enforce the law, but we also have to do the right thing” added Martino.

Rebuck added: “We are outspoken when talking to our licensees about this issue”. If it’s not criminal, and not regulatory, we tell our licensees to “put on their big boy pants” and try to work it out themselves.

Clinton went on to say that the Bahamas are looking at new challenges all the time. Whether its lawsuits, or political campaigns, usually the sides can settle their differences between themselves.

Rob Ziems, Exec. VP, and General Counsel,Aruze Gaming America was moderating the panel and asked if regulators should discourage third parties from complaining about license holders.  The answer from all was a resounding “no!”

Martino said  “if it’s true, we want people to tell us”.

Rebuck was specific about one case.  When we began considering the application of a foreign company to buy an Atlantic City casino, the American Gaming Association filed a brief to stand against that company before we even finished our investigation.  It turned out that the information in the brief was all public information anyway, and when we completed our review of the petition, we were ready to rule on it but it became unnecessary.  The company withdrew their application for ownership of that casino making the petition by the AGA moot. The AGA did then transfer their wishes outlined in that petition into a letter under a different standard when PokerStars applied to be a partner with Resorts Casino for internet gaming.

When asked what happens at the gaming agency if there is a federal investigation that is ongoing, does the regulator just sit on it?

Rebuck replied, “In New Jersey, we accept all applications. We are close to SDNY (U.S. Attorneys Office, Southern District of New York), we have an open dialog with SDNY.  Our actions depend on the information received.  If it relies on the suitability of someone, we will slow down a bit if another agency is still working on it.  It depends upon the particulars. But we don’t sit on it.”

Neilander agreed: “We are like New Jersey in this regard.”

Ziems asked how much regulatory worry there is if law enforcement might take action in the future against an applicant or a licensee?

Martino answered that Maryland would also allow the process to move forward, but carefully.  We do consider public perception and public opinion, he said. Governments are concerned that they don’t look like they got “hoodwinked”, No one wants to look embarrassed.

Rebuck then added, “We have different laws in different jurisdictions, but we all respect each other.  I see different decisions in different jurisdictions every day, for example, our disapproval of MGM some years ago because of the Pansy Ho situation. I think that everyone makes the best decisions they can with the information available to them at the time. We are called upon today to make decisions much more promptly than before based on the needs of the industry, the needs of marketing, revenue for the license holders and revenue for the public agencies”.

While the panel has made different decisions in different jurisdictions, each member agreed that regulators are always trying to keep within the statutes of their jurisdiction and do the right thing.

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