University of Calgary

PRISM: University of Calgary's Digital Repository

Alberta Gambling Research Institute Alberta Gambling Research Institute

1984

Legalized gambling : an overview

Beare, Margaret E.; Hampton, Howard; Canada. Solicitor General

Canada. Programs Branch; Canada. Solicitor General Canada.

Ministry Secretariat

Solicitor General Canada, Ministry Secretariat

http://hdl.handle.net/1880/41372

technical report

Downloaded from PRISM: https://prism.ucalgary.ca

I ~ i d s t r y of the Solicitor General of Canada

MAINC Hv 6710 B43 1984

/ i I i i

Beare, Margaret E Ij

Leqalized qamblinq : an I - i i overview - 1:'

3 5057 00384 7703 I 1:

Margaret E. Beare Senior R e s e a r c h Officer Polic9 Research Sect ion

and

Howard Hampton Research C o n s u l t a n t

LEGALIZED GAMBLING:

AN OVERVIEW

I 984-i 3

T h e v i e w s e x p r e s s e d i n t h i s working p a p e r p r e p a r e d i n 1983 a r e - t h o s e o f t h e a u t h o r s and a r e n o t n e c e s s a r i l y t h o s e o f t h e U i n i s t r y of t h e Sol ic i tor G e n e r a l o f Canada. T h i s b a r k i n g 2 a p e r may n o t b e p u b l i s h e d , c i t e d or r e p r o d u c e d w i t h o u t 2 e ~ i s s i o n o f t h e M i n i s t r y .

This working p a p e r is a v a i l a b l e i n ~ r e n c h . C e d o c w e n t de travail est d i s p n i b l e en f r a n q a i s .

TABLE OF CONTENTS

Chapter Title

EXECUTIVE SUNMARY 1

REVIEW OF LEGALIZED GAM3LING RESEARCH Introduction Jusfifying the Legalization of Gambling 1. The Revenue Debate:

A. Regressivity Quest ion B. Cost of Legalized Gambling Revenue C. Additional "Costs"

( i) Harm to Horse-Racinc Irdustry (ii) Disrespect for Gamblirg Laws

(iii) Compulsive Gambling D. Dedication of Revenues

Combatting Organized Criminal Involvement in Legal and Illegal Gambling:

A. L q a l Gambling as Competition for Illegal Gambling Operations

( i ) Tax-Free Gambl ing (ii) Anonymity (iii) Credit Operations (iv) Better Odds (v) Simplicity and Immediacy

(vi) Informal Social Network (vii) Convenience

(viii) Variability B. Or~anized Criminal ~nvolvement in

Lesal Gambling Operations ( i) Laundering funds (ii) "Walking-with-chips"

(iii) Casino as Criminal C1l~S

11. LAW ENFORCE?ISNT AND CONTROL OF LEGALIZED GA!.IBLING 1, Effectiveness of Gambling Law Enforc2~nent 4 4 2. The Role of Commissions 4 6

A, Co?-~issions As Fact Finders 46 B. Co-rtissions As Regulatory Agencies 48

III. NEVADA: A CASE HISTORY The Traditional North American Casino

Gambling Yodel 5 0 1. Historical Background to the Establishment

of Ganing in Nevada 5 1 2. Political & Economic Pressures: Xevada

Gambling Tax Revenue 52

3. Control of Casinos in Nevada: Regulatory Structure A. Gaming Commission B. Gaming Board C. Gaming Policy Committee

4. Licensing A. Who Requires A Gaming License B. Who Qualifies For A Gaming License C. Types of Gaming Licenses D. Taxation Requirements

5. Criticisms of the Nevada Model A . Discretionary Power of the Commission

( i) The Rosenthal Case (ii) Lists of Excluded Persons (iii) Appointment of Interim Supervisor

B. Relationship Between the Board and the Commission

C. Conflict of Interest (i) Post Employment Restrictions (ii) Industry Capture of its Regulators

IV. NEW JERSEY 1. Control of Casinos in New Jersey:

The Regulatory Structure A. The Casino Control Commission B. The Division of Gaming Enforcement

2. Licensing A. Who Requires A License B. Licensing Procedure C. Size of the Atlantic City Casino Industry

3. Weaknesses in New Jersey Casino Model A. Discretionary Power of the Commission

( i) Temporary Casino Permits (ii) Division Recommendation Versus

Commission Decisions B. Organized Crime and Corruption: "The Mob

Wades Ashore In Atlantic City". C. Failure A t Land Development and Planning;

~ e n e f its for the Elderly, Increased Employment and Environmental Concerns

(i) State Land Banking (ii) Land Speculation

(iii) Taxation (iv) Dominating Casino Construction (v) Employment (vi) Housing (vii) Environmental Destruction

D. F a i l u r e o f Cus tomer P r o t e c t i o n : I s s u e s R e l a t e d i n g t o A l c o h o l and T i p p i n g i ) A l c o h o l

i i ) T i p p i n g E. Skimming, T h e f t and Tax E v a s i o n F. I n c r e a s e o f S t r e e t Cr ime i n C a s i n o

E n v i r o n m e n t G. P u b l i c H e a r i n g on S t a t u t o r y & R e g u l a t o r y

C o n t r o l s o v e r C a s i n o C r e d i t & C a s i n o I n d u s t r y C r e d i t P r a c t i c e s i ) E x t e n t o f C r e d i t

i i ) W a l k i n g w i t h c h i p s i i i ) Fraud R e l a t e d t o C r e d i t P r a c t i c e s

i v ) C a s i n o C r e d i t & O r g a n i z e d C r i m e V ) C o u r t i n g o f "Big-Time" Gamble r s

v i ) The Compuls ive Gambler v i i ) C o n c l u s i o n on C r e d i t

4. C a s i n o T a x a t i o n Revenue A. C a s i n o Revenue Fund B. C a s i n o C o n t r o l Fund

V. NEW YORK 'S DECISION REGARDING CASINOS 1. Background 1 3 1 2. N e w York S t a t e S t u d i e s P e r t a i n i n g to

C a s i n o Gambl ing 1 3 3 A. 1975 - Easy Money 1 3 3 B. 1979 - F i n a l R e p o r t o f t h e C a s i n o

Gambl inq S t u d y P a n e l (Lynch R e p o r t ) 1 4 3 C. R e u t e r and Ruth S t u d y 1 4 5 D. 1 9 8 1 - Abram's s t u d y - 147

V I . THE SEARCH FOR AN UTOPIAN CASINO' MODEL 1. S t a t e V e r s u s P r i v a t e C o n t r o l :

P r o b l e m s o f State-Owned C a s i n o s A. I s s u e of C o r r u p t i o n B. C o n f l i c t o f I n t e r e s t C. F u n d i n g f o r t h e F a c i l i t i e s D. The S t a t e A s C a s i n o B o s s

2. B r i t i s h V e r s u s American Model A. Economic C o n s t r a i n t s B. L e g a l C o n s t r a i n t s

VII. LEGALIZED GAMBLING IN GREAT BRITAIN 1. Introduction

2. Gambling Policy in Great Britain: The Attitude Towards Gambling Activities 159

3. Recent History of British Gaming Law 160 A. Royal Commission on Betting, Lotteries

and Gaming - 1949-51 161 B. Betting and Gaming Act 1960/Betting,

Gaming and Lotteries Act 1963 163 C. The Gaming Act - 1968 165

4. Control of Gaming in Great Britain A. Enforcement Under the Gaming Act of 1968 166

(i) Restrictions Upon Gaming Under Gaming Act 1968 167

(ii) Bingo Clubs 169 (iii) Commercial Casinos 169 ( i v ) Gaming In Registered (Non-Commercial)

Members' Clubs 171 (v) Slot Machines - Part I11 of the

Gaming Act 1968 172 B. Regulatory Structure: The Gaming Board 175 C. Licensing 179

( i) Licensing Authorities 179 (ii) Renewal of Licenses 182 (iii) Restrictions Attached to a License

on Renewal 183 D. The Gaming Act 1968 and the Gaming Board:

How Effective Have They Been 183

5. Betting, Bookmaking and Lotteries in Great Britain 190

A. Bookmaking in Britain 192 B. Lotteries in Great Britain 194

6. Conclusions: British Scheme of Gambling Control 202

VIII. APPLICATION OF ENGLISH LEGALIZED GAMBLING EXPERIENCE 1. Gambling Legislation in the Bahamas 209

A. Comparison Between British and Bahamas' Gambling Legislation 209

B. Licensing in the Bahamas 210 C. Restrictions on Casino Gaming 210 D. Amendments to the Lottery and Gaming Act

1969: Tightening Up the British Model 211 E. Casino Taxation in the Bahamas 212

2. Legalized Gambling in Australia A . Control of Gambling in Australia B. Types of Gambling

(i) Racing (ii) Poker Machines

(iii) Lotteries (iv) Soccer Pools (v) Minor Gaming

(iv) Casinos C. The Casino Industry in Australia

(i) Tasmania (ii) Northern Territory (iii) Control of Gaming Areas

D. Betting Behaviour and Tax Revenue Gains

3. Legalized Gambling in New Zealand A. Forms of Legalized Gambling

( i) Lotteries (ii) Bingo

(iii) Prize Competitions (iv) Horse-Racing

B. Summary and Conclusions

IX. EUROPEAN CASINO MODEL 1. Introduction: Key Features

2. Legalized Gambling in France A. Casino Gambling

( i) Control of Casino Gambling (ii) Participation in Casino and

Gaming Circle Gambling (iii) Taxation (iv) Corruption

B. Horse-Racing in France (i) Control of Horse-Racing (ii) Off-Track Betting (iii) Taxation

C. Lotteries in France D. Conclusion: Importance of French

Gambling Controls E. Additional Examples of Legalized

Gambling: European Model (i) Monaco

(ii) Switzerland

REFERENCES

BIBLIOGRAPHY

A P P E N D I X A T h r e e L a n d m a r k S t u d i e s as B a c k g r o u n d t o L e g a l i z e d G a m i n g

B T e m p o r a r y C a s i n o P e r m i t s C S u m m a r y and R e c o m m e n d a t i o n - L y n c h R e p o r t D A b r a m s R e p o r t

( v i i )

FOREWORD

L e g a l i z e d g a m b l i n g is a v e r y b r o a d t o p i c . T h e r e f o r e ,

t h i s s t u d y is l i m i t e d to f o r m s w h i c h are m o s t r e l e v a n t t o

Canada : c a s i n o s , l o t t e r i e s , o f f - t r a c k and i n t e r - t r a c k

b e t t i n g , a n d s l o t m a c h i n e s . B i n g o is n o t i n c l u d e d b e c a u s e

i t is n e a r l y u n i f o r m i n r e g u l a t i o n f r o m p l a c e t o p l a c e .

T h i s d o c u m e n t p r e s e n t s d e s c r i p t i o n s a n d a n a l y s e s o f

l e g a l i z e d g a m b l i n g o p e r a t i o n s a n d l e g i s l a t i o n i n c o u n t r i e s

w h i c h h a v e s o c i a l s y s t e m s s i m i l a r t o Canada . The p r i m a r y

f o c u s is on t h e U n i t e d S t a t e s a n d E n g l a n d , w i t h lesser

e m p h a s i s o n t h e Bahamas, A u s t r a l i a , New Z e a l a n d , F r a n c e ,

Monaco a n d S w i t z e r l a n d .

EXECUTIVE SUMMARY

INTRODUCTION

T h i s r e p o r t w a s p r e p a r e d i n r e s p o n s e t o a r e q u e s t by t h e

RCMP S e n i o r Gaming S p e c i a l i s t s t h a t a s t u d y be c o n d u c t e d

i n t o l e g a l i z e d g a m b l i n g i n w e s t e r n socie t ies . L e g a l

g a m b l i n g i s s u e s a re d i s c u s s e d i n g e n e r a l w i t h a n e m p h a s i s

upon l e g a l i z e d c a s i n o g a m b l i n g . An e x a m i n a t i o n w a s made o f

l e g a l g a m b l i n g i n Nevada , N e w J e r s e y , N e w York , G r e a t

B r i t a i n , t h e Bahamas , A u s t r a l i a , N e w Z e a l a n d , F r a n c e , Monaco

a n d S w i t z e r l a n d . However , t h i s e x e c u t i v e summary is

c o n c e r n e d p r i m a r i l y w i t h E n g l a n d a n d t h e U n i t e d S t a t e s .

MODELS ANALYSED

The Nevada mode l is a h i g h l y d e v e l o p e d r e v e n u e p r o d u c i n g

s y s t e m o f c a s i n o gaming w h i c h , d u e to i ts employment i m p a c t ,

e c o n o m i c s p i n o f f s and l a r g e t a x r e v e n u e s , is v i t a l t o t h e

economy o f t h e S ta t e . The New J e r s e y mode l was i n t e n d e d to

e n h a n c e u r b a n r e n e w a l , raise s t a t e t a x r e v e n u e s a n d

e l i m i n a t e o r r e d u c e i l l e g a l g a m b l i n g o p e r a t i o n s . New York

is i m p o r t a n t f o r t h e t h o r o u g h e x p o s i t i o n o f t h e r e a s o n s f o r

w h i c h l e g a l c a s i n o gaming was o r i g i n a l l y p r o p o s e d , and t h e

r e a s o n s f o r w h i c h it w a s l a t e r r e j e c t e d . G r e a t B r i t a i n is a

j u r i s d i c t i o n where l e g a l g a m b l i n g , i n c l u d i n g c a s i n o s ,

o f f - t r a c k b e t t i n g s h o p s , s p o r t s p o o l s a n d l o t t e r i e s , was

a d o p t e d , n o t t o i n c r e a s e t a x r e v e r i u e s or c r e a t e new

employment o r e c o n o m i c b e n e f i t s , b u t t o c o n t r o l a n d c u r t a i l

t h e d e v e l o p m e n t o f i l l e g a l g a m b l i n g .

RESEARCH OBJECTIVE AND METHODOLOGY

The o b j e c t i v e o f t h i s s t u d y is t o p r o v i d e i n f o r m a t i o n o n

i s s u e s r e l a t e d t o t h e e n f o r c e m e n t , r e g u l a t i o n , and con-

sequences of the introduction of various forms of legalized

gambling.

Data wer? collected from law enforcement and Justice

agencies and other relevant government agencies,

professional contacts and libraries in the United States,

England and Australia. Interpol aided in the collection of

some of the information from other countries which might

have unique experiences with respect to legalized gambling

that might prove pertinent to Canada.

The distinctions between gaming (casinos) and gambling or

betting (non-casino activities) are important. Facts and

conclusions which are applicable to casino gaming may not be

applicable to other types of gambling and vice versa. For

purposes such as tax revenue or organized crime control, a

clear distinction must be made between casino gaming and

other forms of comparatively low-s takes gambling such as

horse-race betting, lotteries and sports-betting. Casino

gaming may be similar to other forms of gambling but it is a

significantly different activity. Thus, controlling casino

gaming involves different insights and conclusions. The

issues involved in the operation and control of casinos are

more complex and defy simplistic rules.

JUSTIFYING THE LEGALIZATION OF GAMBLING

In relation to legalizing gambling there are really two

distinct questions:

1) What are the costs and benefits of activities such as

off-track race betting, sports betting, and betting

shops? - 2 ) What are the costs and benefits of casinos and

slot-machines?

F i v e a r g u m e n t s s u p p o r t l e g a l i z a t i o n . I n p r a c t i s e t h e s e

g o a l s h a v e n o t b e e n e q u a l l y r e a l i z e d .

Gambl ing c a n b e a s i g n i f i c a n t s o u r c e of new t a x r e v e n u e

( i . e . , c a s i n o s i n Nevada a n d i n ~ t l a n t i c C i t y , and Cana-

d i a n l o t t e r i e s . )

t h e g a m b l i n g i n d u s t r y c a n p r o v i d e s i g n i f i c a n t employment

( i . e . , Nevada a n d N e w J e r s e y c a s i n o s 1. t h e g a m b l i n g i n d u s t r y c a n r e v i v e a s t a g n a n t l o c a l

economy ( i . e . , C a s i n o s i n A t l a n t i c C i t y , New J e r s e y , a n d

as p r o p o s e d b u t r e j e c t e d f o r t h e C a t s k i l l R e g i o n of N e w

Y o r k ) . L e g a l g a m b l i n g c a n c u r t a i l i l l e g a l g a m b l i n g ( i .e.,

S p o r t s P o o l s , a n d loca l b e t t i n g s h o p s i n Great B r i t a i n ) .

Where t h e i n t r o d u c t i o n o f l e g a l g a m b l i n g a p p e a r s

i n e v i t a b l e , r e g u l a t i o n s c a n c o n t r o l t h e g r o w t h o f

g a m b l i n g a c t i v i t i e s ( i . e . , t h e B r i t i s h p o l i c y of s t r i c t

c o n t r o l o f a l l f o r m s o f b e t t i n g a n d g a m i n g ) .

PROBLEMS ASSOCIATED WITH LEGAL GAMBLING:

1. O v e r e s t i m a t i o n o f G a m b l i n g Tax R e v e n u e s

The p r o f i t a n d r e v e n u e p o t e n t i a l is o f t e n o v e r e s t i m a t e d

by p o l i t i c i a n s a n d e n t r e p r e n e u r s o f l e g a l g a m b l i n g .

S e v e r a l f a c t o r s m u s t b e t a k e n i n t o a c c o u n t .

a ) N o v e l t y : When a new f o r m of l e g a l g a m b l i n g f i r s t

a p p e a r s it may e n j o y a p e r i o d d u r i n g w h i c h d a i l y

p r o f i t s are h i g h e r t h a n o v e r t h e l o n g - t e r m .

b ) Monopoly v s . C o m p e t i t i o n : I f a j u r i s d i c t i o n is

t h e f i r s t t o i n t r o d u c e a p a r t i c u l a r fo rm o f

g a m b l i n g i t may h a v e a n u n u s u a l l y w i d e and p r o f i -

t a b l e m a r k e t . When o t h e r j u r i s d i c t i o n s d e v e l o p

t h e same or a s i m i l a r a c t i v i t y , c o m p e t i t i o n may

s u b s t a n t i a l l y r e d u c e p r o f i t s .

c ) R e v e n u e S w i t c h i n g : G a m b l i n g r e v e n u e s h o u l d n o t b e

s e e n a s e n t i r e l y "new" money. To some d e g r e e i t

r e p r e s e n t s c o n s u m e r e x p e n d i t u r e s w i t c h e d f r o m

o t h e r sectors o f t h e economy. Some p r o p o r t i o n o f

w h a t a g o v e r n m e n t may r e c e i v e i n g a m b l i n g r e v e n u e

it may lose i n sales t a x e s f r o m c o n s u m p t i o n o f

o t h e r g o o d s a n d s e r v i c e s or l o s s o f i n v e s t m e n t

c a p i t a l i n o t h e r i n d u s t r i e s .

L i k e w i s e , g a m b l i n g r e v e n u e may " s w i t c h " to a new

f o r m o f g a m b l i n g a c t i v i t y , f r o m a n o l d e r ac t i -

v i t y . F o r e x a m p l e , e v e n a f t e r some e f f o r t s h a d

b e e n made t o b a l a n c e t h e n e g a t i v e e f f e c t s o f O f f -

T r a c k B e t t i n g (OTB) o n t h e h o r s e - r a c e i n d u s t r y ,

t h e 1 9 8 1 r e p o r t o f t h e New York S t a t e R a c i n g

I n d u s t r y f o u n d t h a t t h e c o m p e t i t i o n f r o m OTB h a d

c o n t i n u e d t o i n c r e a s e , c a u s i n g a s e r i o u s c a s h f l o w

p r o b l e m f o r t h e race t r a c k s , r e s u l t i n g i n p u r s e s

i n s u f f i c i e n t to m a i n t a i n a h i g h q u a l i t y o f

r a c i n g . A s i -mi - l a r r e s u l t was o b s e r v e d i n B r i t a i n

w i t h r e s p e c t to b e t t i n g a t R a c e - t r a c k T o t a l i s a t o r s

(The T o t e ) . The T o t e b e g a n i n 1 9 2 8 as a s y s t e m o f

r a c e t r a c k b e t t i n g t o e n a b l e r a c e g o e r s t o b e t a n d

t o ra i se money f o r t h e r a c i n g i n d u s t r y . However ,

s i n c e The B e t t i n g a n d Gaming A c t 1 9 6 0 , w h i c h

p e r m i t t e d of £ - t r a c k b e t t i n g s h o p s t o a c c e p t c a s h

b e t s on a w i d e v a r i e t y o f e v e n t s i n d u c l i n g h o r s e -

races, T o t e b e t t i n g h a s f a l l e n s u b s t a n t i a l l y i n

p o p u l a r i t y . T h i s is i m p o r t a n t , n o t b e c a u s e o f

p o s s i b l e harm t o a n y o n e g a m b l i n g a c t i v i t y , b u t

r a t h e r b e c a u s e it n e g a t i v e l y a f f e c t s t h e h o r s e -

racing and horse breeding industry as a whole, and

may seriously distort estimations of revenue

potential.

2. Revenue Dependency

A government may become dependent on gambling revenues.

It then must attempt through advertising and other means

to create a market for gambling, i.e., to induce more

citizens to gamble. The lottery advertisement in Canada

would serve as an example of this active government

recruitment of participants. The issues of government

inducement of gambling and government preference for

gambling revenue over more broadly-based tax reform are

both worthy of consideration.

3. Additional "costs" Associated with Legal Gambling

Law Enforcement Costs

A jurisdiction that is considering legal gaming

must be prepared to pay, or legislate that the

- casinos pay, for expensive regulatory bodies to

guard against the influence and infiltration of

organized crime. In New Jersey, some of these

costs are absorbed by casino managers who must pay

for the regulatory boards and commissions, and for

enforcement within their establishment. The

applicant must also pay for the investigatory

processing of his casino license application.

In addition to the costs involved in attempts to

restrict organized criminal infiltration, the New

Jersey Interim Report on Casino Gambling noted

that casinos create classic conditions for large

- 6 -

i n c r e a s e s i n s t r e e t crime, a l a r g e , t r a n s i e n t ,

t o u r i s t p o p u l a t i o n , a p e r m i s s i v e s oc i a l

e n v i r o n m e n t , accelerated commercial a c t i v i t y ,

l a r g e a m o u n t s o f c a s h i n c i r c u l a t i o n and a l a r g e

i n f l u x o f p e r s o n s a t t r a c t e d t o s u c h a n a t m o s p h e r e

f o r c r i m i n a l p u r p o s e s . The i n c r e a s e d l e v e l s o f

l a w e n f o r c e m e n t a n d t h e c a s h l o s s e s m u s t be

s u b t r a c t e d f r o m est imates o f r e v e n u e p r o f i t w h i c h

t h e c a s i n o s create. Even t h o u g h t h e c a s i n o s p a y

f o r e n f o r c e m e n t w i t h i n t h e i r e s t a b l i s h m e n t s , t h e

i n c r e a s e d e n f o r c e m e n t costs on t h e s t reet are p a i d

f o r by t h e communi ty .

b ) R e g r e s s i v i t y

A gaming t a x is s a i d t o b e r e g r e s s i v e i f a g r e a t e r

p r o p o r t i o n o f t h e r e v e n u e is o b t a i n e d f r o m

g a m b l e r s e a r n i n g l o w t o ' m i d d l e i n c o m e s r a t h e r t h a n

o b t a i n e d f r o m a l l p l a y e r s as a n e q u a l p r o p o r t i o n

o f t h e i r i n c o m e s . T h e r e f o r e , i f a g a m b l i n g a c t i -

v i t y h a s a h i g h t a x " t a k e - o u t " r a t e and i f t h i s

f o r m o f g a m b l i n g is p a r t i c u l a r l y p o p u l a r w i t h

lower income p l a y e r s t h e n t h a t p a r t i c u l a r gaming

t a x wou ld b e r e g r e s s i v e . A gaming t a x is s a i d t o

b e " p r o g r e s s i v e " i f a g r e a t e r p r o p o r t i o n o f t h e

r e v e n u e is o b t a i n e d f r o m g a m b l e r s i n t h e h i g h e r

i ncome b r a c k e t s .

S t u d i e s i n t h e U n i t e d S t a t e s i n d i c a t e t h a t s p o r t s -

c a r d s , l o t t e r i e s a n d b i n g o s a re r e g r e s s i v e w h i l e

p a r i - m u t u e l b e t t i n g , s p o r t s b o o k s a n d c a s i n o s ( f o r

t o u r i s t s i n t h e a r e a s w h e r e t h e games are p l a y e d )

a r e p r o g r e s s i v e . G o v e r n m e n t s , i n t h e q u e s t f o r

r e v e n u e , o f t e n t u r n to t h e h i g h t a k e o u t games

which a r e a l s o h i g h l y r e g r e s s i v e ( i . e . , s p o r t s

c a r d s and l o t t e r i e s ) .

Governments have a g g r e s s i v e l y m a r k e t e d t h e i r

g a m b l i n g a c t i v i t i e s i n an a t t e m p t t o a c h i e v e and

t o m a i n t a i n a h i g h l e v e l o f p a r t i c i p a t i o n .

Whereas i n v e s t m e n t i n l o t t e r i e s is " v o l u n t a r y , "

t h e b a r r a g e o f a d v e r t i s e m e n t s and t h e a c c e s s i b i l -

i t y o f t h e games have a d i r e c t and i n t e n t i o n a l

i n f l u e n c e on t h e p o p u l a t i o n .

c ) C o m p u l s i v e Gambl inq

The p o t e n t i a l f o r l e g a l i z e d g a m b l i n g to e n c o u r a g e

c o m p u l s i v e g a m b l i n g r e m a i n s unknown. What is

known is t h a t p e o p l e gamble more, t h e more a v a i l -

a b l e g a m b l i n g becomes. The g a m b l i n g i n d u s t r y i n

A t l a n t i c C i t y now t a k e s more s e r i o u s l y t h e c l a i m s

o f c o m p u l s i v e g a m b l e r s t h a t t h e y were e n c o u r a g e d

or e v e n l u r e d i n t o g a m b l i n g . An i n c r e a s i n g number

o f l aw s u i t s a r e b e i n g f i l e d a g a i n s t t h e c a s i n o s .

4 . L e g a l Gambl ing f o r Tax Revenue P u r p o s e s a n d t h e Law

- E n f o r c e m e n t T r a d e - o f f

Our s t u d y i n d i c a t e s t h a t e x t e n s i v e economic p r o f i l e s ,

c l e a r l y acknowledged a i m s and " r i g i d " c o n t r o l s y s t e m s

a r e a l l a f f e c t e d by compromises and c o n t r a d i c t i o n s , some

p r e d i c t a b l e , some u n p r e d i c t a b l e .

E v i d e n c e shows t h a t i f t h e i n c e n t i v e f o r l e g a l i z a t i o n is

t o o b t a i n g r e a t e r government t a x r e v e n u e and economic

g r o w t h t h e n compromises mus t be made which can a d v e r s e l y

a f f e c t t h e l e g a l and s o c i a l c o n t r o l o f g a m b l i n g . I n

o r d e r f o r government r e v e n u e s t o be s i g n i f i c a n t , t h e

c a s i n o s or b e t t i n g o f f i c e s , ( g o v e r n m e n t owned, or

p r i v a t e l y owned w i t h t a x e s a c c r u i n g to t h e g o v e r n m e n t )

m u s t e i t h e r h a v e a l a r g e p r o f i t m a r g i n ( i .e . , l o t t e r i e s )

or a l a r g e t u r n o v e r i n g a m b l i n g a c t i v i t y ( i . e . , c a s i n o s

i n t h e U n i t e d S t a t e s ) .

The p r o f i t m a r g i n i n t h e N e w J e r s e y C a s i n o s may n o t be

p a r t i c u l a r l y l a r g e b u t t h e number o f g a m b l i n g t r a n s -

a c t i o n s , a n d t h e a d d i t i o n a l non-gambl ing a c t i v i t i e s

w h i c h are t a x e d , r e s u l t i n s i g n i f i c a n t g o v e r n m e n t

r e v e n u e . R e s e a r c h i n G r e a t B r i t a i n and i n t h e U n i t e d

S t a t e s i n d i c a t e s t h a t w h e r e t h e g o v e r n m e n t i n s t i t u t e s a

s i g n i f i c a n t t a x o n s u c h l e g a l g a m b l i n g e s t a b l i s h m e n t s as

" b e t t i n g o f f ices" a n d " o f f - t r a c k b e t t i n g s h o p s " , s e r i o u s

g a m b l e r s w i l l b e t w i t h i l l e g a l o p e r a t o r s a n d g e t better

o d d s .

( a ) Compromise -- T h e Example of A t l a n t i c C i t y

The New J e r s e y e x p e r i e n c e w i t h c a s i n o g a m b l i n g

i l l u s t r a t e s some o f t h e e n f o r c e m e n t " t r a d e - o f f s " . U n l i k e t h e d e v e l o p m e n t o f l e g a l g a m b l i n g i n Nevada

a n d Great B r i t a i n , l e g a l g a m b l i n g i n N e w J e r s e y

. w a s a d e l i b e r a t e p o l i c y c h o i c e o f t h e s t a t e

g o v e r n m e n t . I n e s t a b l i s h i n g t h e l e g a l and

e c o n o m i c f r a m e w o r k f o r t h e A t l a n t i c C i t y c a s i n o s ,

S t a t e o f f i c i a l s examined t h e s u c c e s s e s and

f a i l u r e s o f l e g a l i z e d c a s i n o g a m i n g i n Nevada ,

Great B r i t a i n a n d e l s e w h e r e . C a r e f u l l y p l a n n e d

r e g u l a t o r y a n d d e g i s l a t i v e p r a c t i c e s w e r e i n t r o -

d u c e d i n o r d e r t o a t t e m p t t o f u l f i l l t h e p r o m i s e s

t h a t had b e e n made f o r a n e c o n o m i c boom i n t h e

A t l a n t i c C i t y a r e a a n d t h e p r o m i s e d b e n e f i t s t o

t h e e l d e r l y a n d m i n o r i t y s e g m e n t s o f t h e a p o p u l a -

D i v i s i o n o f Law, C r i m i n a l J u s t i c e and S t a t e

P o l i c e , i d e n t i f i e d p o t e n t i a l p r o b l e m s f o r a c a s i n o

i n d u s t r y and n o t e d s i x i s s u e s t h a t t h e r e g u l a t o r s

o f c a s i n o gaming would have t o r e s o l v e :

i. An i n c r e a s e i n b o t h s t r ee t crime and o r g a n - i z e d crime;

i i . S o c i a l d i s l o c a t i o n - - e l d e r l y and m i n o r i t i e s ;

i ii . Consumer p r o t e c t i o n - - i s s u e s r e l a t e d to a l c o h o l , t i p p i n g and c r e d i t ;

i v . Unwise l a n d d e v e l o p m e n t ;

v. N e g a t i v e e n v i r o n m e n t a l r e s u l t s ;

v i . I n e q u i t a b l e s t r a i n s on p u b l i c r e s o u r c e s .

The p o l i c y g r o u p , i n a n s w e r t o t h e p r o b l e m s i t

i d e n t i f i e d , d e v i s e d r e g u l a t i o n s to e n c o u r a g e t h e

b e s t a s p e c t s o f c a s i n o gaming. I t recommended:

i. Aga in ' s t t h e g r a n t i n g o f c o n d i t i o n a l or t e m p o r a r y l i c e n s e s ;

i i . The e x c l u s i o n or " b l a c k l i s t i n g " of p e r s o n s w i t h c r i m i n a l b a c k g r o u n d s and a s s o c i a t i o n s ;

i ii . C r e d i t r e s t r i c t i o n s - - c r e d i t s h o u l d n o t be g r a n t e d . I f c h e q u e s were a c c e p t e d - t h e u n d e r s t a n d i n g would b e t h a t t h e c h e q u e would b e d e p o s i t e d a t t h e bank w i t h i n t w o b u s i n e s s d a y s ( a s i n B r i t a i n ) ;

i v . A g a i n s t t i p p i n g o f c a s i n o e m p l o y e e s ( a s i n B r i t a i n ) and a g a i n s t t h e c o n s u m p t i o n o f a l c o h o l i n c a s i n o g a m b l i n g rooms.

S i g n i f i c a n t l y , t h e N e w J e r s e y g o v e r n m e n t compro-

m i s e d on or abandoned e a c h o f t h e s e recommenda-

t i o n s . I m p o r t a n t i s s u e s o f l a w e n f o r c e m e n t and

c a s i n o c o n t r o l were s a c r i f i c e d or compromised t o

f a c i l i t e e a s i e r and more r a p i d d e v e l o p m e n t o f *

c a s i n o s . T h i s l e d t o some s e r i o u s p r a c t i c a l law

e n f o r c e m e n t p r o b l e m s , among w h i c h a r e t h e c a s i n o

c r e d i t i s s u e , t h e monitoring o f c a s i n o r e v e n u e a n d

t h e u s e o f p o l i t i c a l i n f l u e n c e i n t h e c a s i n o

i n d u s t r y .

P r o b l e m s w i t h C a s i n o C r e d i t

When r e g u l a t i o n s f o r t h e New J e r s e y c a s i n o s w e r e

b e i n g c o n s i d e r e d , it w a s recommended t h a t no

c r e d i t b e g r a n t e d e x c e p t f o r c h e q u e c a s h i n g w i t h

d e p o s i t d u e i n t w o b u s i n e s s d a y s . G r a d u a l l y t h i s

c h a n g e d . C r e d i t is now e x t e n d e d to g a m b l e r s who

h a v e a n e s t a b l i s h e d c r e d i t r a t i n g a n d t h e y are

g r a n t e d 90 b a n k i n g d a y s ( o r 1 2 0 c a l e n d a r d a y s ) t o

r e p a y c r e d i t o v e r $ 2 , 5 0 0 . T h e s e r e s t r i c t i o n s , as

l a x a s t h e y a r e , a r e i n p r a c t i c e e v e n less r i g i d l y

e n f o r c e d . The a v a i l a b i l i t y o f c r e d i t is c l o s e l y

r e l a t e d t o t h e i s s u e s o f o r g a n i z e d crime

i n f l u e n c e ( i . e . , t h e u s e o f money o b t a i n e d from

c a s i n o c r e d i t t o f u n d l o a n s h a r k i n g a n d d r u g

t r a f f i c k i n g o p e r a t i o n s ) , i n d e b t e d a n d c o m p u l s i v e

g a m b l e r s , a n d c o l l e c t i o n d i f f i c u l t i e s .

E x p e r t s c o n c l u d e t h a t m i n o r c h a n g e s i n c r e d i t

p r a c t i c e s w i l l n o t a d e q u a t e l y comba t t h e s c h e m e s

o f t h e d e d i c a t e d g a m b l e r o r t h e i n v o l v e m e n t of t h e

o r g a n i z e d c r i m i n a l . The s c h e m e s d e v i s e d to

" w a l k - w i t h t h e c h i p s " ( i . e . , l e a v e t h e c a s i n o w i t h

d o l l a r s o b t a i n e d f r o m c r e d i t ) w i l l c h a n g e as

e n f o r c e m e n t or r e g u l a t i o n s c h a n g e . A c c o r d i n g t o

t h e f o r m e r Director o f t h e D i v i s i o n o f C r i m i n a l

J u s t i c e , New J e r s e y D e p a r t m e n t o f t h e A t t o r n e y

G e n e f a l , it is n e c e s s a r y t o t i g h t e n c a s i n o c r e d i t

p r o c e d u r e s , a n d i f p o s s i b l e e l i m i n a t e c r e d i t

a l t o g e t h e r .

( c ) M o n i t o r i n g C a s i n o R e v e n u e

C a s i n o r e v e n u e is d i f f i c u l t t o m o n i t o r . The c a s h

f l o w i n g f r o m c u s t o m e r t o d e a l e r to management a n d

b a c k is a n o p e n i n v i t a t i o n f o r t h e f t . Any " c h e c k "

s y s t e m t e n d s o n l y to c o n t r o l o n e p e r i o d i n t h e

movement o f t h e c a s h . The o p e r a t i n g p r i n c i p l e ,

h o w e v e r , seems t o b e t h a t e n o u g h c h e c k s w i l l

r e s u l t i n a f a i r l y h o n e s t s y s t e m .

S l o t m a c h i n e o p e r a t i o n s a r e v u l n e r a b l e to r e v e n u e

s k i m m i n g , a n d N e w J e r s e y c a s i n o s h a v e b e e n f o u n d

t o b e h i g h l y v u l n e r a b l e to c r e d i t f r a u d s

e n g i n e e r e d by i n s i d e r s and t h e i r o u t s i d e co-

c o n s p i r a t o r s .

M i d d l e - l e v e l e m p l o y e e s of B a l l y ' s c a s i n o a n d an

o u t s i d e c r i m i n a l g r o u p d e ' f r a u d e d t h e c a s i n o o f $4

m i l l i o n w i t h i n a t w o week p e r i o d i n t h e summer o f

1 9 8 0 . I n 1 9 8 1 , R e s o r t s I n t e r n a t i o n a l and t e n

c a s i n o o f f i c i a l s were c h a r g e d w i t h t h e v i o l a t i o n

o f c a s i n o c r e d i t r e g u l a t i o n s f o r t h e i r i n v o l v e m e n t

i n a scheme t h a t d e f r a u d e d Resorts I n t e r n a t i o n a l

o f $ 4 . 1 m i l l i o n .

( d l T h e C a s i n o I n d u s t r y a n d P o l i t i c a l I n f l u e n c e :

The i n t e r e s t o f c a s i n o o p e r a t o r s i n l a r g e r p r o f i t s

l e a d s t h e i n d u s t r y to l o b b y g o v e r n m e n t f o r a less

r e s t r i c t i v e e n v i r o n m e n t i n w h i c h more g a m b l i n g a n d

g r e a t e r p r o f i ts c a n b e a c h i e v e d . The l o b b y i n g

c a p a c i t y a n d p o l i t i c a l i n f l u e n c e o f t h e i n d u s t r y

s h o u l d n o t b e u n d e r e s t i m a t e d . 4.

C a s i n o o p e r a t o r s e n g a g e i n e x t e n s i v e d i r e c t

l o b b y i n g o f p o l i t i c i a n s . C a s i n o e x e c u t i v e s a t t e n d

and c o n t r i b u t e to f u n d - r a i s i n g f u n c t i o n s , and

p o l i t i c i a n s a r e i n v i t e d and e n t e r t a i n e d a t t h e

c a s i n o s . The i n d u s t r y o f f e r s f a v o u r s t o p o l i t i c a l

f i g u r e s and e x e r t s w h a t e v e r i n f l u e n c e it h a s w i t h

p o l i t i c a l f i g u r e s .

The c a s i n o i n d u s t r y a l s o employs l a w y e r s and

r e p r e s e n t a t i v e s who a r e p e r c e i v e d t o h a v e

p o l i t i c a l i n f l u e n c e . The l a w f i r m s employed by

t h e i n d u s t r y a r e o f t e n t h o s e t h a t a r e most a c t i v e

i n r a i s i n g f u n d s f o r key p o l i t i c i a n s . F i n a l l y ,

t h e c a s i n o s h a v e b e e n a c t i v e i n e m p l o y i n g f o r m e r

h i g h l e v e l g o v e r n m e n t o f f i c i a l s a s r e p r e s e n t a t i v e s

o f t h e i n d u s t r y .

None o f t h e s e a c t i v i t i e s is i l l e g a l - - h o w e v e r ,

l e g a l g a m b l i n g is a l w a y s a t r a d e o f f be tween

g r e a t e r c a s i n o r e v e n u e s a c h i e v e d u n d e r l i b e r a l

gaming l a w s and k e e p i n g o u t o r g a n i z e d crime v i a

r e s t r i c t i v e gaming l a w s and c a r e f u l r e g u l a t i o n .

Thus t h e p o l i t i c a l i n f l u e n c e o f t h e c a s i n o

i n d u s t r y and t h e c a p a c i t y t o l o b b y s u c c e s s f u l l y

f o r " l i b e r a l " r e g u l a t i o n and c o n t r o l of gaming ,

d i r e c t l y a f f e c t s t h e i s s u e s o f o r g a n i z e d c r i m i n a l

i n £ i l t r a t i o n o f t h e i n d u s t r y .

LEGAL GAMBLING AS COMPETITION FOR ILLEGAL GAMBLING

The f o l l o w i n g s e v e n f a c t o r s m u s t be acknowledged i n

a t t e m p t i n g to r e p l a c e i l l e g a l w i t h l e g a l i z e d g a m b l i n g .

1. Tax F r e e Gambl inq - I l l e g a l g a m b l i n g u s u a l l y

is n o t t a x e d . T h e r e f o r e , to t h e e x t e n t t h a t l e g a l

- 1 3 -

g a m b l i n g is t a x e d it h a s less f u n d s a v a i l a b l e to

b e d i s t r i b u t e d t o t h e w i n n e r s . Even w h e r e l e g a l

g a m b l i n g o p p o r t u n i t i e s e x a c t l y d u p l i c a t e i l l e g a l

o p p o r t u n i t i e s , some g a m b l e r s may p r e f e r i l l e g a l

modes f o r t h e m a r g i n a l l y g r e a t e r r e t u r n on

w i n n i n g s . T h e 1 9 6 8 R o y a l Commiss ion on Gambl ing

(Great B r i t a i n ) made t h e f o l l o w i n g comments on t h e

r e l a t i o n s h i p b e t w e e n i l l e g a l g a m b l i n g a n d l e g a l

g a m b l i n g :

The i n c i d e n c e o f i l l e g a l b e t t i n g is i n o u r o p i n i o n q u i t e s i m p l y a f u n c t i o n o f t h e c o m b i n e d r a t e s o f d u t y a n d l e v y on b e t t i n g ... it is l i k e l y t o i n c r e a s e r a p i d l y o n c e t h e combined r a tes h a v e e x c e e d e d a c e r t a i n c r i t i c a l p o i n t . Where t h a t p o i n t is c a n he a s c e r t a i n e d w i t h c e r t a i n t y o n l y by t e s t i n g t h e s y s t e m to d e s t r u c t i o n , w h i c h w e d o n o t recommend. B u t t h e e v i d e n c e w e h a v e r e c e i v e d s u g g e s t s t h a t t h e p r e s e n t combined r a t e o f 8 . 5 % . . . i s r u n n i n g i t d a n g e r o u s l y c l o s e .

A n o n y m i t y - I l l e g a l g a m b l i n g u s u a l l y o c c u r s i n ,

s e c r e c y , w h i c h may a l l o w g a m b l e r s t o a v o i d t a x e s ,

h i d e t h e i r b e t t i n g h a b i t s , r e m a i n anonymous , and

h i d e l a r g e a m o u n t s o f c a s h .

3. C r e d i t O p e r a t i o n s - High r i s k c r e d i t e x t e n d e d b y

i l l e g a l o p e r a t i o n s c a n n o t be m a t c h e d i n most l e g a l

o p e r a t i o n s . The e t h i c s o f e n c o u r a g i n g i n d e b t e d -

n e s s a n d t h e d i f f i c u l t i e s a s s o c i a t e d w i t h collec-

t i o n a re more e a s i l y r e s o l v e d by i l l e g a l

o p e r a t o r s .

4 . B e t t e r Odds - I l l e g a l g a m b l i n g o p e r a t i o n s o f t e n

o f f e r more a d v a n ' t a g e o u s o d d s , o r o d d s t h a t seem

more a d v a n t a g e o u s . G r e a t e r f a ? n i l i a r i t y w i t h

i l l e g a l o p e r a t i o n s a n d t h e a b i l i t y t o i n q u i r e

a b o u t t h e o d d s may make t h e s e i l l i c i t o p e r a t i o n s

seem more a t t r a c t i v e .

5. I n f o r m a l S o c i a l Network - A more a b s t r a c t a d v a n t -

a g e r e l a t e s t o t h e soc ia l a s p e c t o f i l l e g a l

g a m b l i n g w h i c h is l a r g e l y m i s s i n g f r o m b u r e a u -

c r a t i c l e g a l g a m b l i n g o r g a n i z a t i o n s . S t a t e -

o p e r a t e d games may a c t u a l l y b e v i e w e d w i t h

h o s t i l i t y as a n i n t r u s i o n i n t o l o c a l games . T h i s

is n o t t o s u g g e s t t h a t a l l i l l e g a l games i n v o l v e

close p e r s o n a l i n t e r a c t i o n , b u t t h a t t h i s i n t e r -

a c t i o n is a c o n s i d e r a t i o n i n some bookmak ing

o p e r a t i o n s a n d i n p o k e r games .

6 . C o n v e n i e n c e , S i m p l i c i t y a n d Immediacy - I l l e g a l

b o o k m a k e r s o f f e r t h e c o n v e n i e n c e o f t e l e p h o n e

b e t t i n g and c r e d i t . Some l e g a l i z e d g a m b l i n g

e s t a b l i s h m e n t s , ( e . g . , OTR's, N e w York C i t y )

a l l o w t e l e p h o n e b e t t i n g b u t o n l y a g a i n s t f u n d s

p r e v i o u s l y d e p o s i t e d . I n B r i t a i n , t e l e p h o n e

b e t t i n g is p e r m i t t e d , b u t o n l y t h o s e who h a v e an

e s t a b l i s h e d c r e d i t r a t i n g w i t h t h e bookmaker a r e

a l l o w e d to b e t i n t h i s way. H i g h l y a c c e s s i b l e

b e t t i n g f a c i l i t i e s , c h e a p t i c k e t s , f a s t d r a w s a n d

q u i c k c o l l e c t i o n p r o c e d u r e s are a d d i t i o n a l conven-

i e n c e s w h i c h l e g a l g a m b l i n g m u s t a c h i e v e a n d main-

t a i n .

7. V a r i a b i l i t y - I l l e g a l b o o k m a k e r s a c c e p t b e t s on

o t h e r s p o r t s a s w e l l a s h o r s e - r a c e s . The v a r i a -

b i l i t y i s s u e is somewhat d i f f e r e n t i n B r i t a i n

w h e r e B e t t i n g S h o p s a n d S p o r t s P o o l s o f f e r a n

u n l i m i t e d v a r i e t y o f b e t s ( h o r s e - r a c e s , g r e y -

h o u n d s , b e a u t y c o n t e s t s , g e n e r a l e l e c t i o n s , e t c . )

w i t h s e v e r a l t y p e s o f o d d s ( f i x e d o d d s , T o t e o d d s ,

or m u l t i p l e b e t s ) . I t would seem t h a t t h e B r i t i s h

scheme o f l l c e n s e d b e t t i n g s h o p s and s p o r t s

b e t t i n g p o o l s h a s r e s u l t e d i n g r e a t e r c o n t r o l

b e i n g e x e r c i s e d o v e r i l l e g a l g a m b l i n g by p u b l i c

a u t h o r i t i e s , a n d more e f f e c t i v e e n f o r c e m e n t o f

g a m b l i n g l a w s . The b e t t i n g s h o p s a n d p o o l s c a t e r

t o t h e low s t a k e s b e t t o r who w i s h e s t o b e t

o c c a s i o n a l l y upon f a v o u r i t e s p o r t s or r a c e s . They

p r o v i d e a n a l t e r n a t i v e t o numbers games a n d

i l l e g a l s p o r t s b e t t i n g .

E x p e r i e n c e i n t h e U n i t e d S t a t e s d o e s n o t a c c o r d

w i t h t h a t i n B r i t a i n . A s t u d y c o n d u c t e d f o r t h e

Commiss ion o n t h e Review o f t h e N a t i o n a l P o l i c y

t o w a r d G a m b l i n g s t a t e d t h a t , a f t e r r e c o g n i z i n g

o t h e r f u n c t i o n s , t h e e x i s t e n c e o f a S t a t e l o t t e r y

a p p e a r s t o e n c o u r a g e r a t h e r t h a n d i s c o u r a g e

g a m b l i n g o n numbers . I t h a s b e e n a r g u e d t h a t i f

t h e r e is a n y s u b s t i t u t i o n o f t h e l e g a l f o r t h e

i l l e g a l game, i t is more t h a n c o m p e n s a t e d f o r b y

t h e o p p o s i t e e f f e c t , c o m p l e m e n t a t i o n , where p a r t i -

c i p a t i o n i n o n e t e n d s t o i n c r e a s e t h e p r o b a b i l i t y

o f p a r t i c i p a t i o n i n t h e o t h e r .

LEGAL GAMBLING, LEGAL CASINOS AND ORGANIZED CRIME

I t m u s t b e remembered t h a t c u r t a i l i n g t h e amount o f l o w

s t a k e s s t r ee t b e t t i n g ( a s h a s a p p a r e n t l y been a c h i e v e d i n

B r i t a i n ) is n o t t h e same as o u s t i n g o r g a n i z e d crime. B o t h

t h e Gaming B o a r d f o r G r e a t B r i t a i n a n d The Task F o r c e on

L e g a l i z e d Gambl ing i n t h e U n i t e d S t a t e s c o n c l u d e d t h a t

o r g a n i z e d crime is n o t e a s i l y e x p e l l e d f r o m g a m b l i n g a c t i v i -

t i e s e v e n when some m e t h o d s o f g a m b l i n g a r e l e g a l i z e d . *

Wherever c a s i n o s a r e f o u n d , t h e y a r e i n s e p a r a b l e f rom

o r g a n i z e d c r i m i n a l a c t i v i t i e s . V i r t u a l l y e v e r y s t u d y

u n d e r t a k e n i n t h e U n i t e d S t a t e s , B r i t a i n , A u s t r a l i a and

e l s e w h e r e p o i n t s o u t t h a t c a s i n o gaming , w h e t h e r i l l e g a l o r

l e g a l , e n c o u r a g e s o r g a n i z e d c r i m i n a l a c t i v i t y . A f o r m e r

p r o s e c u t o r i n t h e N e w J e r s e y A t t o r n e y G e n e r a l ' s D e p a r t m e n t

h a s n o t e d t h a t o r g a n i z e d crime must a l w a y s be r e c o g n i z e d a s

a n i n t e r e s t g r o u p w i t h r e s p e c t t o l e g a l gaming. I f a

j u r i s d i c t i o n is n o t w i l l i n g to a c c e p t t h i s i n v o l v e m e n t t h e n

i t s h o u l d n o t g e t i n v o l v e d i n l e g a l i z e d gaming.

F o u r main f a c t o r s e x p l a i n t h e a t t r a c t i o n be tween c a s i n o s and

o r g a n i z e d crime,

1. O b s e r v a t i o n s i n B r i t a i n , N e w J e r s e y and Nevada

i n d i c a t e t h a t c a s i n o s a l w a y s i n v o l v e l a r g e c a s h

f l o w s c h a n g i n g h a n d s q u i c k l y , w i t h t h e p o t e n t i a l

f o r s u b s t a n t i a l p r o f i t s . T h e s e l a r g e , q u i c k -

moving c a s h f l o w s and p o t e n t i a l p r o f i t s a r e an

i n v i t a t i o n t o o r g a n i z e d crime.

2. C a s i n o s are a n a t t r a c t i o n to o r g a n i z e d c r i m i n a l s

b e c a u s e t h e y o f f e r t h e p o s s i b i l i t y o f l a u n d e r i n g

o t h e r i l l e g a l l y g o t t e n f u n d s . The c a s h - f l o w o f

t h e c a s i n o a l l o w s c r i m i n a l p r o c e e d s to be e a s i l y

i n t e r m i n g l e d . I t is v i r t u a l l y i m p o s s i b l e t o

v e r i f y or r e f u t e a c l a i m t h a t l a r g e , o t h e r w i s e

u n e x p l a i n a b l e sums w e r e won a t a c a s i n o .

3 . Where e a s y c r e d i t is a v a i l a b l e f rom c a s i n o s

(Nevada and N e w J e r s e y , b u t n o t B r i t a i n ) o r g a n i z e d

c r i m i n a l s c a n u s e l e g i t i m a t e bor rowed money t o

f i n a n c e i l l i c i t e n t e r p r i s e s , e .g . , l o a n s h a r k i n g

and d r u g s .

4. The f o u r t h f a c t o r is less e a s i l y d e f i n e d b u t is

r e a d i l y d e t e c t a b l e i n t r a n s c r i p t s o f t e s t i m o n y

g i v e n by c a s i n o o p e r a t o r s a n d t h r o u g h t h e docu-

m e n t e d c a s i n o g a m b l i n g r e c o r d s o f o r g a n i z e d

c r i m i n a l s . C a s i n o s p r o v i d e a n e x c l u s i v e c l u b - l i k e

a t m o s p h e r e w h e r e o r g a n i z e d c r i m i n a l s ( a n d o t h e r

h i g h - r o l l e r s ) c a n e n j o y t h e e x c i t e m e n t o f h i g h

r i s k g a m b l i n g i n a l u x u r i o u s s e t t i n g o f f i r s t -

c l a s s meals, rooms a n d e n t e r t a i n m e n t wh ich o f t e n

are f r e e t o v a l u e d p a t r o n s .

T h i s i n t e r a c t i o n b e t w e e n t h e c a s i n o s a n d o r g a n i z e d

c r i m i n a l s is m u t u a l l y r e w a r d i n g . I t became c l e a r

f r o m t h e t e s t i m o n y o f c a s i n o c r e d i t m a n a g e r s i n

A t l a n t i c C i t y t h a t c l i e n t s w i t h h i g h c a s h

p o t e n t i a l are c o u r t e d by c a s i n o m a n a g e r s . T h i s is

t r u e e v e n when t h e c a s i n o ' s f i l e s r e c o r d e v i d e n c e

o f f a i l u r e t o p a y , s e r i o u s c r i m i n a l i n v o l v e m e n t o r

o t h e r " d e r o g a t i v e " i n f o r m a t i o n on a p a r t i c u l a r

c u s t o m e r . L i k e w i s e , t h e l a v i s h t r e a t m e n t a n d

s e r v i c e s o f t h e s e g r a n d c a s i n o s p r o v i d e t h e

c r i m i n a l w i t h t h e soc ia l o u t l e t a n d a c k n o w l e d g e d

p r e s t i g e t h a t h i s s e m i - i n v i s i b l e , c l a n d e s t i n e

e x i s t e n c e d e n i e s .

PUBLIC OR PRIVATE OWNERSHIP

The d e b a t e i n New York S t a t e o v e r l e g a l g a m b l i n g r a i s e d

t w o c e n t r a l q u e s t i o n s : -

1 ) H o w w i l l c a s i n o s b e r e g u l a t e d ?

2 ) Who w i l l c o n t r o l c a s i n o s ?

T h e R e p o r t o f t h e T a s k F o r c e o n L e g a l i z e d Gambl ing n o t e d

t h a t t h e a r g u m e n t f a v o u r i n g p r i v a t e l y owned c a s i n o s was t h a t

t h e y would b e more e f f i c i e n t a n d t h e r e f o r e more p r o f i t a b l e

f o r r e v e n u e p u r p o s e s . The r a t i o n a l e f o r s t a t e o w n e r s h i p

was t h a t w i t h g r e a t e r s t a t e c o n t r o l it w a s more l i k e l y t h a t

t h e i n f l u e n c e o f o r g a n i z e d crime c o u l d be e l i m i n a t e d . Some

a n a l y s t s o f g a m b l i n g i n t h e U.S. a r g u e t h a t t h e r e is l i t t l e

r e a s o n t o b e l i e v e t h a t S t a t e employed c a s i n o o p e r a t o r s a n d

dealers wou ld b e a n y more h o n e s t t h a n p r i v a t e e m p l o y e e s .

T h e f o l l o w i n g f o u r f a c t o r s are re la ted to g o v e r n m e n t owner-

s h i p :

I t m i g h t b e eas ier f o r o f f i c i a l s w i t h i n a S t a t e b u r e a u -

c r a c y , e i t h e r f o r s e l f - i n t e r e s t or p o l i t i c a l r e a s o n s , t o

allow i l l e g a l a c t i v i t i e s s u c h a s r e g u l a t i o n v i o l a t i o n s

t o g o u n d e t e c t e d , u n r e p o r t e d a n d u n p r o s e c u t e d .

T h e S t a t e c o u l d be c a u g h t i n a c o n f l i c t o f i n t e r e s t ; o n

o n e hand t h e a c q u i s i t i o n o f r e v e n u e , on t h e o t h e r , l a w

e n f o r c e m e n t c o n c e r n s . The l a r g e r and less r e s t r i c t e d

t h e g a m b l i n g a c t i v i t y t h e g r e a t e r t h e r e v e n u e , b u t a l so

t h e g r e a t e r t h e e n f o r c e m e n t d i f f i c u l t i e s .

T h e Sta te m i g h t be u n w i l l i n g or p o l i t i c a l l y i n c a p a b l e o f

e x t e n d i n g t h e l a r g e a m o u n t s o f c a p i t a l n e c e s s a r y f o r t h e

c o n s t r u c t i o n a n d i n i t i a l o p e r a t i o n o f c o m p e t i t i v e ,

l u x u r i o u s , c a s i n o - h o t e l s , w i t h p o p u l a r a m e n i t i e s s u c h a s

e a s y c r ed i t , j u n k e t s f o r b i g g a m b l e r s , f r e e l i q u o r ,

e n t e r t a i n m e n t , a n d o t h e r i n d u c e m e n t s . A s a r e s u l t ,

s t a t e - r u n c a s i n o s would l i k e l y be less p o p u l a r and

t h e r e f o r e less e f f i c i e n t i n r a i s i n g r e v e n u e . The i s s u e s

h e r e are l a r g e l y p o l i t i c a l . How c a n a g o v e r n m e n t

j u s t i f y to t h e e lec tora te t h e b u i l d i n g o f e x p e n s i v e ,

l u x u r i o u s c a s i n o - h o t e l s ? L i k e w i s e , t h e s p e n d i n g of

p u b 1 i c money t o p r o v i d e j u n k e t s f o r w e a l t h y h i g h - s t a k e

I

I

I I I

t r i c t i n g a v i c e t o a p a r t i c u l a r a r e a a n d c l a s s , ( l e i s u r e

c l a s s ) so a s n o t t o a l l o w t h e " s o c i a l p r o b l e m " to s p r e a d .

g a m b l e r s a n d l i b e r a l c r e d i t f o r s u c h g a m b l e r s may be

c r i t i c i z e d .

4. The S t a t e m i g h t b e u n w i l l i n g or p o l i t i c a l l y i n c a p a b l e o f

m a t c h i n g t h e h i g h s a l a r i e s p a i d by t h e p r i v a t e s e c t o r

gaming c a s i n o s . A s a r e s u l t t h e s t a t e m i g h t h a v e some

d i f f i c u l t y i n a t t r a c t i n g a n d k e e p i n g t h e m o s t c o m p e t e n t

c a s i n o m a n a g e r s a n d o p e r a t o r s . T h i s would be r e f l e c t e d

i n t h e o p e r a t o r s e f f i c i e n c y , p r o f i t a b i l i t y and a b i l i t y

t o detect a n d e n f o r c e t h e c o n t r o l l i n g r e g u l a t i o n s of

s t a t e r u n c a s i n o s .

BRITISH VERSUS AMERICAN MODEL: A QUESTION OF VALUES?

A f i n a l i s s u e w h i c h m u s t b e c o n s i d e r e d i n t h e C a n a d i a n

c o n t e x t r e l a t e s t o t h e s o c i a l v a l u e s of o u r s o c i e t y . The

Nevada a n d N e w J e r s e y models o f l e g a l c a s i n o gaming a r e

b a s e d upon t h e t h e m e s o f e c o n o m i c d e v e l o p m e n t , employmen t ,

a n d gaming t a x r e v e n u e f o r t h e g o v e r n m e n t . The B r i t i s h

m o d e l , w h i c h h a s b e e n r e f e r r e d t o as t h e Vstrict s o c i a l

c o n t r o l c l u b model", is b a s e d o n t h e v i e w t h a t gaming is a n

i n e v i t a b l e e v i l t h a t c a n n o t b e i g n o r e d b u t d e f i n i t e l y o u g h t

n o t t o be e n c o u r a g e d . The " c l u b " is s e e n as a way o f res-

I f t h e g a m b l i n g c l u b s c l o s e d d u e t o l a c k o f b u s i n e s s , t h e

B r i t i s h Governmen t p r o b a b l y wou ld n o t b e c o n c e r n e d , and i n

f a c t t h e c l o s u r e m i g h t be v i e w e d p o s i t i v e l y . The B r i t i s h ,

o f f i c i a l l y a t l e a s t , d o n o t see l e g a l g a m i n g as a p r e f e r a b l e

s o u r c e o f t a x r e v e n u e . --

I f j u r i s d i c t i o n s i n Canada a r e c o n s i d e r i n g l e g a l c a s i n o

gaming t h e y s h o u l d e x a m i n e t h e s e t w o a l t e r n a t i v e m e t h o d s

o f c o n t r o l . However , a s p e c t s o f t h e s e a l t e r n a t i v e s may n o t

be c o m p a t i b l e w i t h t h e v a l u e s and a t t i t u d e s o f c o n t e m p o r a r y

attitudes and values of a particular society. A Canadian

jurisdicion might be able to establish a stringent control

system and restrictive "members-only" casino model such as

in Britain but such a system might not be politically sale-

able nor legal given the Charter of Rights and Freedoms. I

I

I

- 21 -

I. REVIEW OF LEGALIZED GAMBLING RESEARCH

Introduction

Seldom is legalized gambling introduced without some

justification or motive apart from the potential enjoyment,

by the players, of the gambling activity. The sentiment

remains, even where gambling is established, that pleasure

alone is not justification enough. Legalized gambling must

"do something" beneficial for society. The justifications

most often cited are to raise revenue, to revitalize a

deteriorating area, and to fight organized crime by drawing

the market for gambling away from the criminals. Research

indicates that the consequences arising from legalized

gambling can be predicted and these effects relate directly

to the goals of the jurisdiction that establishes the

regulations under which legalized gaming operates.

The serious study of legalized gambling began in 1974,

when the National Science Foundation published a monograph

by David Weinstein and Lillian Deitch titled The Impact of

Legalized Gamblinq: The Socioeconomic Consequences of

Lotteries and Off-Track Betting. In 1976, the Commission on

the Review of the National Policy Toward Gambling published

Gambling in America and in England, in 1978, the Home Office

Research Unit, published Gambling: A Review of the

Literature, by D.B. Cornish. l

1. The* Revenue Debate

A. The ~ e g r e s s i v i t y Quest ion

One o f t h e p r o b l e m s w i t h s t u d i e s o f l e g a l i z e d g a m b l i n g

is a n i m p l i c i t b u t u n a c k n o w l e d g e d v a l u e j u d g e m e n t a b o u t

"good" a n d "bad" g a m i n g o p e r a t i o n s . V a l u e s may h a v e a p l a c e

i n a n a n a l y s i s o f t h i s phenomenon; h o w e v e r , t h e y m u s t b e

c l e a r l y s t a t e d , so t h a t t h e a r g u m e n t may b e a s s e s s e d . T h e

i s s u e o f r e g r e s s i v i t y is o n e s u c h a r e a , e n t a n g l e d w i t h m o r a l

j u d g e m e n t s , p a t e r n a l i s m a n d cr i t ic ism o f S t a t e t a x a t i o n o f

l e g a l i z e d gaming . The G a m b l i n q i n A m e r i c a r e p o r t s t a t e s

t h a t :

The s u r v e y r e s u l t s t e n d to s u p p o r t t h e a r g u - m e n t s o f t h o s e who claim t h a t e s t a b l i s h i n g Nevada - type g a m b l i n g i n d e n s e l y p o p u l a t e d areas w i l l f o s t e r p a r t i c i p a t i o n by t h o s e who c a n l e a s t a f f o r d it.*

P e t e r . R e u t e r comments i n r e b u t t a l :

I t is h a r d to i n t e r p r e t t h i s as a n y t h i n g o t h e r t h a n a moral s t a t e m e n t a b o u t g a m b l i n g . The a t t r a c t i v e n e s s o f g a m b l i n g t o l o w e r income g r o u p s is s e e n h e r e n o t a s a n a r g u m e n t t o p e r m i t t i n g t h e l e s s f o r t u n a t e to e n j o y o n e o f t h e i r r e c r e a t i o n s b u t as a r e a s o n to c o n t i n u e t o p l a c e t h e game i n l o c a t i o n s ( s u c h a s Nevada a n d t h e C a r i b b e a n ) w h e r e it c a n o n l y b e r e a c h e d by t h e more a f f l u e n t . 3

A gaming t a x is termed " r e g r e s s i v e " i f a g r e a t e r

r e v e n u e is o b t a i n e d from i n d i v i d u a l s m a k i n g low to m i d d l e

i n c o m e s r a t h e r t h a n e q u a l l y f r o m a l l i n d i v i d u a l s as a p r o -

p o r t i o n o f t h e i r income. T h a t is, i f p e r s o n A, e a r n i n g

$ 2 0 , 0 0 0 p e r annum, loses t h e same amount o f money w h i l e

g a m b l i n g as p e r s o n B, e a r n i n g $ 5 0 , 0 0 0 p e r annum, t h e loss is

p r o p o r t i o n a t e l y g r e a t e r f o r p e r s o n A, a s a p e r c e n t a g e o f

a n n u a l s a l a r y . The t a x p a i d on t h e t w o sums a l t h o u g h e q u a l ,

would a l s o be p r o p o r t i o n a t e l y g r e a t e r f o r pe r son A, and

would t h e r e f o r e be deemed r e g r e s s i v e .

American d a t a c o l l e c t e d i n 1975 f o r t h e Commission f o r

t h e Review of t h e N a t i o n a l P o l i c y Toward Gambling, i n d i c a t e d

t h e d e g r e e of r e g r e s s i v i t y of s e v e r a l t y p e s of gambling.

The a n a l y s i s i n d i c a t e s t h a t s t a t e l o t t e r i e s a r e t w i c e a s

r e g r e s s i v e a s s a l e s t a x e s , w i t h - "numbers games" and s p o r t s

c a r d s p o t e n t i a l l y even more r e g r e s s i v e . O f f - t r a c k b e t t i n g

and s p o r t s bookmaking, on t h e o t h e r hand, cou ld be p r o g r e s -

s i v e . The c a s i n o s s t u d i e d were i n Nevada, and t h e c o s t of

g e t t i n g t h e r e and expenses involved i n s t a y i n g n e a r t h e

c l u b s r e s u l t e d i n an u p p e r - c l a s s c l i e n t e l e . T h e r e f o r e , f o r

t h e U.S. a s a whole, t h e Nevada c a s i n o t a x was p r o g r e s s i v e ;

however, f o r Nevada r e s i d e n t s , c a s i n o s were more r e g r e s s i v e

t h a n f o r t h e g e n e r a l U.S. p o p u l a t i o n . 5

According t o t h e a n a l y s e s of S u i t s and o t h e r s t h e r e is

s i g n i f i c a n t v a r i a t i o n among v a r i o u s l e g a l i z e d gaming a c t i v i -

t i e s w i t h r e g a r d t o regressivity/progressivi t y :

s p o r t s c a r d s - numbers - l o t t e r i e s - bingo - h o r s e books - p a r i -mutual - o f f - t r a c k b e t t i n g - s p o r t s books - c a s i n o ( f o r n o n - r e s i d e n t s ) -

h i g h l y r e g r e s s i v e h i g h l y r e g r e s s i v e r e g r e s s i v e r e g r e s s i v e r e g r e s s i v e p r o p o r t i o n a l p r o p o r t i o n a l proportional/progressive p r o g r e s s i v e

S u i t s o b s e r v e s t h a t t h e more r e g r e s s i v e t y p e s of gambling

a r e un i fo rmly games w i t h h igh take-out r a t e s , i .e. , percen-

t a g e of gambling p r o c e e d s t h a t a r e n o t d i v i d e d among t h e

winne r s bu t go i n s t e a d to t h e S t a t e , c h a r i t i e s , o r

o r g a n i z e r s . The most r e g r e s s i v e games--sports c a r d s ,

numbers, s t a t e l o t t e r i e s - - h a v e take-out r a t e s t h a t exceed

f i f t y p e r c e n t . Cas inos and s p o r t s books a r e c h a r a c t e r i z e d

by low take-out r a t e s . 6

S t a t e d e p e n d e n c e upon l o t t e r y t a x r e v e n u e h a s b e e n

p a r t i c u l a r l y c r i t i c i z e d b e c a u s e it is more r e g r e s s i v e t h a n

some o t h e r f o r m s o f l e g a l i z e d g a m b l i n g and t h e S ta te i n m o s t

i n s t a n c e s h a s a monopo ly o n t h e a c t i v i t y . T h e r e f o r e , t h e

S t a t e n o t o n l y r u l e s o u t c o m p e t i t i o n b u t a l so is f r e e t o se t

a r b i t r a r i l y t h e g a m i n g t a x , u n r e s t r a i n e d by b e t t i n g t r e n d s ,

number o f w i n n e r s or s i m i l a r c o n s i d e r a t i o n s . R e s e a r c h

c o n d u c t e d by B r i n n e r a n d C l o t f e l t e r , u s i n g 1 9 7 3 f i s c a l y e a r

f i g u r e s f o r t h e e x c i s e t a x a s a p e r c e n t a g e o f t h e t o t a l cost

o f r u n n i n g l o t t e r i e s , r e v e a l s t h e w i d e v a r i a t i o n f r o m S t a t e

t o S ta t e . 7

C o s t as % T a x Revenue as E x c i s e Tax R a t e o f T i c k e t % o f T i c k e t ( R e v e n u e a s

S t a t e Sa les R e v e n u e S a l e s R e v e n u e % o f C o s t )

New H a m p s h i r e N e w York N e w J e r s e y C o n n e c t i c u t P e n n s y l v a n i a M a s s a c h u s e t t e s M i c h i g a n M a r y l a n d

A s i n d i c a t e d , t h e sa les r e v e n u e is d i v i d e d b e t w e e n t h e cost

o f r u n n i n g t h e l o t t e r i e s ( i n c l u d i n g p r i z e s ) and t h e S t a t e

t a x c h a r g e d . The w i d e s t d i v i s i o n is i n New H a m p s h i r e , w h e r e

3 8 % o f t h e sa les r e v e n u e g o e s t o w a r d t a x e s a n d 62% g o e s to

costs. T h e r e f o r e , i n t h a t S t a t e t h e t a x r e v e n u e is 61% o f

t h e costs. I n New York , t h e d i v i s i o n is q u i t e d i f f e r e n t

w i t h s a l e s r e v e n u e s b e i n g d i v i d e d u p 50% fo r costs a n d 48%

f o r t a x r e s u l t i n g i n t h e t a x p o r t i o n a l m o s t e q u a l l i n g t h e

cost p o r t i o n ( 9 2 % ) . T h e r e is no a v a i l a b l e i n f o r m a t i o n t o

e x p l a i n how t h e i n d i v i d u a l S t a t e s d e c i d e w h a t p r o p o r t i o n to

c h a r g e . Some w r i t e r s claim t h e t a k e - o u t may r e f l e c t t h e

moral v i e w o f t h e S t a t e t o w a r d t h e g a m b l i n g a c t i v i t y w i t h

t h e h i g h e r t a x r e f l e c t i n g a n a t t e m p t by t h e S t a t e t o

d i s s u a d e p e o p l e f r o m s p e n d i n g t h e i r money on gaming . T h i s

m a r k e t - o r i e n t e d a p p r o a c h o f t h e s t a t e l o t t e r i e s a n d t h e

g e n e r a l l a c k o f p u b l i c a w a r e n e s s a s to wha t t h e t a x t a k e - o u t

is f o r a n y p a r t i c u l a r gaming a c t i v i t y .

N o t a l l l e g a l gaming o p e r a t i o n s a re m o n o p o l i e s a n d t h e

c o n t r o l l i n g a g e n c y d o e s n o t a l w a y s d i c t a t e t h e t a k e - o u t o r

cos ts t o t h e g a m b l e r . I n Nevada , t h e S t a t e sets o n l y t h e

t a x r a te o n c a s i n o w i n n i n g s . The c a s i n o managemen t , v i a t h e

r u l e s , d e t e r m i n e s t h e p l a y e r ' s d i s a d v a n t a g e , w h i c h may v a r y

b e t w e e n g a m e s , f r o m o n e c a s i n o to a n o t h e r , a n d w i t h t h e

e x p e r t i s e o f t h e p l a y e r . T h e r e f o r e , c o m p e t i t i v e p r e s s u r e s

i n t h e c a s i n o m a r k e t h e l p t o d e t e r m i n e t h e p r i c e o f a c a s i n o

game. S t a t e s c o u l d c o n t r o l c a s i n o s b u t o n l y by e s t a b l i s h i n g

a n d c o n t r o l l i n g t h e r u l e s o f t h e games o f f e r e d . I n N e w

J e r s e y , c a s i n o games o p e r a t e u n d e r more r i g i d r u l e s t h a n i n

Nevada , b u t t h e e l e m e n t o f c o m p e t i t i o n r e m a i n s . I n c o n t r a s t

t o c a s i n o s , t h e p a r i - m u t u a l b e t t i n g t a x is a p r o p o r t i o n o f

t h e t o t a l amoun t w a g e r e d ( t h e " h a n d l e " ) r a t h e r t h a n t h e

l e v e l o f g r o s s p r o f i t or w i n n i n g s a s i n c a s i n o s . T h e r e f o r e ,

t h e S t a t e sets t h e t a k e - o u t r a t e , i .e . , t h e p r o p o r t i o n o f

money n o t r e t u r n e d to b e t t o r s .

I f s o c i e t y i n g e n e r a l is c o n c e r n e d a b o u t who is b e a r i n g

t h e b u r d e n o f gaming t a x e s , t h e n S u i t ' s a r g u m e n t r e g a r d i n g

r e g r e s s i v i t y a n d d i f f e r e n t i a l t a k e - o u t is i m p o r t a n t . A

t e n d e n c y c a n b e d e t e c t e d f o r g o v e r n m e n t s , i n t h e i r q u e s t f o r

r e v e n u e , to t u r n to t h e h i g h t a k e - o u t games , w h i c h a r e a l s o

t h e m o s t r e g r e s s i v e . The S t a t e t a x r e v e n u e ( i . e . , a l a r g e

p r o p o r t i o n o f t h e t a k e - o u t ) , v o l u n t a r y or n o t , may b e coming

f r o m less a f f l u e n t g r o u p s . The p r o b l e m may n o t l i e w i t h t h e

t a x a t i o n r a t e , or w i t h t h e f a c t t h a t a s e g m e n t o f t h e popu-

l a t i o n d e s i r e s t o s p e n d a l a r g e r p e r c e n t a g e o f income o n

gaming t h a n d o e s t h e rest o f s o c i e t y , b u t w i t h t h e f a c t t h a t

t h e s t a t e h a s a monopo ly a n d c a n d i c t a t e t h e r a t e o f t a k e -

o u t . I t is i r o n i c t h a t among t h e v a r i o u s i l l i c i t g a m b l i n g

a c t i v i t i e s , l a w e n f o r c e m e n t h a s t r a d i t i o n a l l y b e e n m o s t

c o n c e r n e d w i t h t h o s e f o r m s w h i c h a re v i e w e d a s " e x p l o i t i v e

m o n o p o l i s t i c . " Some l e g a l g a m b l i n g o p e r a t i o n s - - s t a t e r u n or

p r i v a t e - - m a y a l s o be so d e s i g n a t e d .

B. The Cost of Leqalized Gambling Revenue

T h e r e a re t w o i n t e r c o n n e c t e d a s p e c t s t o t h i s c o n c e r n :

f i r s t , t h e a c t u a l cost o f o b t a i n i n g e a c h d o l l a r o f r e v e n u e ,

a n d s e c o n d , t h e r e v e n u e p o t e n t i a l o f t h e g a m b l i n g " m a r k e t "

a s a r e t u r n o n t h e cost i n v o l v e d i n p r o v i d i n g t h e o r g a n i z a -

t i o n a n d m a c h i n e r y n e c e s s a r y t o c a p t u r e t h e m a r k e t .

B l a k e y , among o t h e r s , a r g u e s t h a t g a m b l i n g r e g u l a t i o n

costs much more t h a n o t h e r f o r m s o f t a x a t i o n . U s i n g l o t t e r -

ies as a n e x a m p l e , h e est imated t h a t f i f t e e n t o f o r t y p e r -

c e n t would g o to e x p e n s e s w h i l e more r e g u l a r f o r m s o f t a x

cost a b o u t f i v e p e r c e n t . B l a k e y a r g u e s t h a t p o l i t i c i a n s a n d

o t h e r s i n t e r e s t e d i n e n c o u r a g i n g t h e l e g a l i z a t i o n o f

g a m b l i n g t e n d t o o v e r e s t i m a t e t h e p r o f it p o t e n t i a l . Of t e n

l a r g e sums o f money a re m e n t i o n e d i n p r o - l e g a l i z a t i o n d i s -

c u s s i o n s b a s e d o n s i m p l e m u l t i p l i c a t i o n o f o n e y e a r ' s

r e v e n u e , w i t h no c o n s i d e r a t i o n g i v e n to t h e e f f e c t s o f

i n c r e a s i n g c o m p e t i t i o n , loss o f t h e n o v e l t y a s p e c t , a n d

o t h e r f a c t o r s . T h e s e r e v e n u e f i g u r e s - - e v e n i f t h e y c o u l d be

r e a l i z e d - - w o u l d r e p r e s e n t o n l y 1 . 3 % t o 4% o f r e v e n u e

r e q u i r e m e n t s . The Task F o r c e on L e g a l i z e d G a m b l i n g

e s t i m a t e d t h a t e v e n l o t t $ r i e s o p e r a t i n g a t a n " o p t i m a l "

l e v e l wou ld y i e l d i n m o s t S t a t e s o n l y 1 o r 2 p e r c e n t o f t h e

r e v e n u e o f s t a t e a n d loca l g o v e r n m e n t . 8 S i n c e L a s Vegas is

d o m i n a t e d by g a m b l i n g o p e r a t i o n s , t h e t a x r e v e n u e f r o m t h i s

a c t i v i t y d o e s ' i n f a c t r e p r e s e n t t h e h i g h e s t t a x s o u r c e ;

h o w e v e r , L a s V e g a s is i n many ways u n i q u e as w i l l be n o t e d

l a t e r i n t h i s a n a l y s i s .

S t a t e g o v e r n m e n t l o t t e r i e s r e q u i r e c o n s t a n t and expen-

s i v e p r o m o t i o n i n o r d e r t o compe te w i t h o u t - o f - S t a t e l o t t e r -

ies and a l t e r n a t i v e i n - S t a t e l e g a l and i l l e g a l gaming

a c t i v i t i e s . Once t h e m a c h i n e r y is i n o p e r a t i o n , t h e S t a t e

m u s t a c t a s a b u s i n e s s manager , i .e . s e l l i n g t h e g a m b l i n g

p r o d u c t , w h i l e h a v i n g to set a s i d e o t h e r , p o s s i b l y more

s e r i o u s , and p e r h a p s more a p p r o p r i a t e , p o l i t i c a l i s s u e s s u c h

a s t h e e t h i c a l c o n s i d e r a t i o n s r e l a t e d to S t a t e - r u n and

S t a t e - p r o m o t e d g a m b l i n g . S t o c k e r o b s e r v e s t h a t t h e r e is no

o t h e r fo rm o f c o n s u m p t i o n t h a t r e c e i v e s s u c h o f f i c i a l

e n c o u r a g e m e n t a s g a m b l i n g . 9

I n t e n s e s t a t e i n v o l v e m e n t i n g a m b l i n g a c t i v i t i e s b r i n g s

i n t o q u e s t i o n t h e " v o l u n t a r y " a s p e c t o f c e r t a i n f o r m s o f

g a m b l i n g . To a r g u e , f o r example , t h a t i n v e s t m e n t i n t h e

l o t t e r y is v o l u n t a r y , i g n o r e s t h e b a r r a g e o f a d v e r t i s i n g ,

d i f f e r e n t i a l a c c e s s t o c o m m o d i t i e s and t h e a c c e s s i b i l i t y of

t h e l o t t e r y game--with some e v i d e n c e t h a t t h e games a r e more

a c c e s s i b l e i n p o o r e r a r e a s t h a n i n more a f f l u e n t a r e a s .

B l a k e y comments t h a t :

p e r s u a s i o n may b e more d a n g e r o u s t h a n c o e r c i o n . A p e r s o n r e a l i z e s it when he is f o r c e d t o p a y a t a x , b u t n o t n e c e s s a r i l y when he is e n t i c e d to gamble.10

H e d e s c r i b e s t h r e e s t a g e s i n t h e " s e l l i n g " of gaming.

The e a r l y New Hampshire e x p e r i e n c e r e p r e s e n t s p h a s e I , where

t h e l o t t e r y b e n e f i t e d f rom b e i n g a n o v e l t y and from b e i n g a

monopoly. The S t a t e c a n , t h e r e f o r e , a d o p t a " t a k e i t o r

l e a v e it" a p p r o a c h . The s e c o n d p h a s e is e x e m p l i f i e d by t h e

s o p h i s t i c a t e d l ' consumer-product a p p r o a c h " t o l o t t e r i e s i n

N e w J e r s e y , w h e r e t h e S t a t e makes v i g o r o u s a t t e m p t s to t a p

t h e g a m b l i n g " m a r k e t " . The l o t t e r y e s t a b l i s h e d i n 1970 i n

N e w J e r s e y was b a s e d on an e x a m i n a t i o n of t h e New Hampshire

and New York l e g i s l a t i o n and i n t r o d u c e d a number o f

c o m p e t i t i v e m e a s u r e s :

a ) l o w e r - p r i c e d t i c k e t s ;

b ) more f r e q u e n t d r a w i n g s ;

c ) more o u t l e t s ;

d ) numbered t i c k e t s i n l i e u o f r e c o r d i n g p u r c h a s e r s '

names a n d addresses;

e ) b e t t e r o d d s ;

f e n e r g e t i c p r o m o t i o n . 11

The t h i r d p h a s e f i n d s t h e S t a t e s o c o m m i t t e d t o l o t t e r i e s a s

a n e s s e n t i a l s o u r c e o f t a x r e v e n u e t h a t it m u s t f i n d or

crea te a c o n t i n u o u s l y i n c r e a s i n g m a r k e t f o r gaming . B l a k e y

a r g u e s t h a t i n t h i s s t a g e t h e l o t t e r y is b e i n g s u b s t i t u t e d

t h e i n t r o d u c t i o n o f a b r o a d - b a s e d income t a x i n N e w J e r s e y

o r t a x r e f o r m i n New H a m p s h i r e , w h i c h would m e e t s t r o n g e r

p o l i t i c a l o p p o s i t i o n . l2

S i m i l a r c r i t ic isms h a v e b e e n d i r e c t e d t o w a r d o f f - t r a c k

b e t t i n g , w h i c h h a s b e e n f o u n d to be c o s t l y b o t h i n t e r m s o f

o p e r a t i n g e x p e n s e s a n d i n t h e harm d o n e to t h e r a c i n g

i n d u s t r y . Hickman a r g u e s t h a t t h e r e v e n u e q u e s t i o n mus t b e

v i e w e d a s a z e r o sum game, w h e r e b y r e v e n u e g a i n i n o n e area

i m p l i e s a s h i f t away f r o m s o m e o t h e r r e c i p i e n t or gaming

a c t i v i t y , a n d d o l l a r s s p e n t o n gaming o f a n y sor t r e m o v e s

d o l l a r s f r o m o t h e r c o n s u m e r a c t i v i t i e s . l3 ~ e s e a r c h

i n d i c a t e s t h a t t h e S t a t e s h o u l d n o t v i e w l e g a l i z e d gaming

r e v e n u e as b e i n g " f o u n d money" b e c a u s e it is i n most c a s e s

money t h a t wou ld h a v e c i r c u l a t e d v i a some o t h e r means . I f

t h e p u r c h a s e o f l o t t e r y t i c k e t s or b e t t i n g are a t t h e

e x p e n s e o f t a x a b l e c o n s u m p t i o n e x p e n d i t u r e , t h e n t h e n e t

r e v e n u e f r o m g a m b l i n g m u s t be r e d u c e d by t h e amount o f l o s t

s a l e s t a x r e v e n u e s . l4 Hickman s t a t e s t h a t t h e r e v e n u e g a i n

i n New York C i t y was p r i m a r i l y a t t h e e x p e n s e o f t h e S t a t e

g o v e r n m e n t a n d t h e h o r s e r a c i n g i n d u s t r y , b e c a u s e many OTB

p a t r o n s were l u r e d f r o m t h e race t r a c k s . I n s u p p o r t o f t h i s

c o n c l u s i o n , t h e T w e n t i e t h C e n t u r y Fund a s s e r t e d t h a t t h e r e

w a s n o j u s t i f i c a t i o n f o r t h e h i g h l y p u b l i c i z e d e x p e c t a t i o n

t h a t l e g a l i z a t i o n o f g a m b l i n g would p r o v i d e an i m p o r t a n t

s o u r c e o f r e v e n u e f o r S t a t e t r e a s u r i e s .

The costs o f t h e r e v e n u e g a i n e d f r o m l e g a l i z e d g a m b l i n g

v a r y w i t h t h e d i f f e r e n t f o r m s o f a c t i v i t y p u r s u e d . However ,

some g e n e r a l e x p e n s e t r e n d s seem to a p p l y t o g a m b l i n g i n

g e n e r a l d u e t o t h e c o n s t a n t n e e d to p r o m o t e t h e gaming

a c t i v i t i e s . R o s e d e s c r i b e s t h e s t a g e s t h a t are a p p a r e n t i n

w h a t is o f t e n a d e c l i n i n g g r o w t h c u r v e :

a ) i n i t i a l i n t e r e s t , n o v e l t y , monopo ly and t h e r e f o r e

h i g h p r o f i t ( t h i s s t a g e is o f t e n u s e d to i n f l a t e

es t imates o f r e v e n u e p o t e n t i a l ) ;

( b ) s a t u r a t e d m a r k e t ;

( c ) r a p i d l y i n c r e a s i n g c o m p e t i t i o n - - o f t e n o c c u r r i n g

w e l l a f t e r t h e i n i t i a l d e c l i n e o f t h e a c t i v i t y ;

( d ) r a p i d d r o p i n p l a y e r i n t e r e s t ;

( e ) g r o w t h o f S t a t e r e l i a n c e on r e v e n u e f r o m g a m b l i n g ;

( f ) i n c r e a s e d a d v e r t i s e m e n t a n d p r o m o t i o n ;

( g ) i n t r o d u c t i o n o f new v a r i a t i o n s a n d e x o t i c f o r m s o f

gaming--no l o n g e r c o n c e r n e d w i t h s u b s t i t u t i n g f o r

i l l e g a l gaming a c t i v i t i e s ;

( h ) a c t i v e a n d c o n t i n u o u s e x p e n s i v e p r o m o t i o n b y t h e

~ t a t e . 1 5

S u i t s , summing up t h e r e v e n u e d e b a t e , a r g u e s t h a t

" w h a t e v e r else it may b e , g a m b l i n g is n o t a f i s c a l p a n a c e a ,

a n d w e wou ld b e f o o l i s h i n d e e d , t o e x p e c t it to p r o v i d e much

i n t h e way of b u d g e t a r y r e l i e f " . l6

C. Additional "Costs"

I n a d d i t i o n t o f i n a n c i a l e x p e n d i t u r e , t h e d e p e n d e n c e of

t h e s t a t e o n l e g a l i z e d g a m b l i n g r e v e n u e may i n c u r o t h e r

t y p e s o f costs:

( i ) Harm t o Horse Rac ing I n d u s t r y

O f f - t r a c k b e t t i n g can a t t r a c t wager ing t h a t pre-

v i o u s l y o c c u r r e d a t race t r a c k s . The N e w York h o r s e

r a c i n g i n d u s t r y is an e x c e l l e n t example o f t h e

u n a n t i c i p a t e d (or i g n o r e d ) consequence o f t h e d r i v e f o r

gaming r evenue . The i n d i r e c t costs i n terms of i n j u r y

to t h e h o r s e r a c i n g i n d u s t r y a r e c r i t i c a l and i r o n i c ,

because t h e c o - o p e r a t i o n of t h e i n d u s t r y was i m p o r t a n t

i n t h e deve lopment o f o f f - t r a c k b e t t i n g i n N e w York

C i t y . Coa t e and R o s s s t a t e t h a t :

The c o - o p e r a t i o n from t h e h o r s e r a c i n g i n d u s t r y was s e c u r e d by a s s u r a n c e s by t h e s t a t e government t h a t o f f - t r a c k b e t t i n g would n o t p r o s p e r a t t h e expense of t h e i n d u s t r y i t s e l f . So f a r t h i s ha s n o t been t h e c a s e . l 7

I n 1972-73, a f t e r it became a p p a r e n t t h a t harm was

b e i n g done to t h e r a c i n g i n d u s t r y and t h e r e v e n u e s of

S t a t e and l o c a l governments were be ing t h r e a t e n e d , a

mora tor ium was p l a c e d on OTB w h i l e t h e problem was

s t u d i e d . The re was an o b v i o u . ~ need t o i n c r e a s e r a c e

t r a c k a t t e n d a n c e a t l e a s t to t h e l e v e l reached b e f o r e

t h e i n t r o d u c t i o n of OTB, and it was n e c e s s a r y t o r e t u r n

a g r e a t e r s h a r e o f t h e r evenue to t h e t r a c k o p e r a t o r s

and h o r s e owners . T h i s w a s e v e n t u a l l y done by

e s t a b l i s h i n g a number of c o n s t r a i n t s . The hou r s o f OTB

were r e s t r i c t e d i n o r d e r t o a l l o w o n - t r a c k b e t t i n g t o

compete , and o f f - t r a c k bets could o n l y be p l aced on

r a c e s r u n o u t s i d e o f t h e r e g i o n where t h e b e t was be ing

p l a c e d .

N e v e r t h e l e s s , t h e 1981 r e p o r t on t h e N e w York

S t a t e Rac ing I n d u s t r y found t h a t :

The c o m p e t i t i v e a s p e c t of OTB has con- t i n u e d to e s c a l a t e . Al though t o t a l wager ing on r a c i n g has i n c r e a s e d s i g n i -

s h i f t i n g o f w a g e r s a n d t h e a s s o c i a t e d r e v e n u e d i s t r i b u t i o n s h a v e c a u s e d s e r i o u s c a s h f l o w p r o b l e m s to t h e t r a c k s a n d p u r s e ' l e v e l s i n s u f f i c i e n t t o m a i n t a i n t h e h i g h q u a l i t y o f r a c i n g t h a t h a s b r o u g h t t h e s p o r t to p r e e m i - n e n c e i n N e w y o r k . 1 8

Race t r a c k b e t t i n g is a f f e c t e d a l s o by o t h e r f o r m s

o f g a m b l i n g . The New York s t u d y c o n c l u d e d t h a t t h e

d o w n t u r n i n t h e r a c i n g i n d u s t r y w a s d u e to t h e g a s

crises o f 1 9 7 4 a n d 1 9 7 9 a n d t h e s u b s e q u e n t rise i n g a s

p r i c e s , t o t h e c o m p e t i t i o n f r o m N e w J e r s e y when t h e

Meadowlands S p o r t s Complex o p e n e d i n 1 9 7 6 , and t h e

d e v e l o p m e n t o f N e w J e r s e y c a s i n o g a m b l i n g i n 1 9 7 8 .

A n o t h e r p r o b l e m is t h e c o n s t a n t n e e d f o r OTB o p e r a t i o n s

t o e x p a n d i n o r d e r t o m e e t t h e i r o p e r a t i n g e x p e n s e s .

T h i s f i n a l p o i n t is c r i t i c a l to N e w York OTB b e c a u s e it

a p p e a r s t h a t t h e b e t t i n g c o r p o r a t i o n s h a v e r e a c h e d

t h e i r maximum l e v e l and h a v e s a t u r a t e d t h e i r c u r r e n t

m a r k e t :

I t is a p p a r e n t t h a t t h e c o r p o r a t i o n s w i l l e x p e r i e n c e slow g r o w t h i n t h e f u t u r e w h i l e e x p e n s e s w i l l o u t p a c e t h a t g r o w t h . The e n d r e s u l t w i l l b e less n e t r e v e n u e a v a i l a b l e f o r loca l g o v e r n - m e n t s . 1 9

The f o l l o w i n g two p a g e s show, f i r s t , pre-OTB

p r o j e c t e d a t t e n d e n c e a n d d a i l y h a n d l e as compared t o

t h e a c t u a l post-OTB a t t e n d a n c e and d a i l y h a n d l e , and

s e c o n d , t h e c o m b i n e d OTB p r o f i t / l o s s p r o j e c t i o n r u n n i n g

t h r o u g h 1986.*O AS t h e c h a r t s i n d i c a t e , t h e b r o k e n l i n e

r e p r e s e n t s a n estimate o f d a i l y t r a c k a t t e n d a n c e i f OTB

were n o t o p e r a t i n g a n d t h e t a b l e shows t h e d e c r e a s i n g

n e t r e v e n u e a n d i n c r e a s i n g e x p e n s e s o f o p e r a t i n g OTB.

T o g e t h e r t h e s e f i g u r e s r e v e a l a s a t u r a t e d b e t t i n g

m a r k e t .

AVE. DAILY ATTENDANCE (1965-1980)

( THOUSANDS ) 30 .75 - - - - - --,-------- * /

* * * * * * * * * * * * *

NEW YORK RACING ASSOC. AVE. DAILY HANDLE

(1965-1980 ) ( M I L L I O N S )

* 4.10 / * 1 / * /

/ * * 0'

. -4- /' * #

* # /

/ * 0 / * / / / *

* * * * *

Broken l i n e r e p r e s e n t s p r o j e c t s o f pre-OTB t r e n d s ( p r o j e c t i o n s b a s e d on 1960-1972 d a t a )

COMBINED OFF-TRACK BETTING PROFIT/LOSS ( $ M i l l i o n s )

ACTUAL EST. 1 9 7 7 1 9 7 8 1 9 7 9 1 9 8 0 1 9 8 1

H a n d l e

O p e r a t i n g Revenue

E x p e n s e s

N e t Revenue

S u r c h a r g e

T o t a l D i s t r i b u t i o n s

H a n d l e

O p e r a t i n g Revenue

E x p e n s e s

N e t Revenue

S u r c h a r g e

T o t a l D i s t r i b u t i o n s

PROJECTED 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6

T o t a l may v a r y s l i g h t l y d u e to r o u n d i n g

( i i ) D i s r e s p e c t f o r Gambl inq Laws

I n no f i e l d o f . . . e n d e a v o r h a s t h e i n g e n u i t y o f man b e e n more e x e r t e d t h a n i n t h e i n v e n t i o n o f d e v i c e s to comply w i t h t h e l e t t e r , b u t t o d o v i o l e n c e t o t h e s p i r i t and t h w a r t , t h e b e n e f i c i e n t o b j e c t s and p u r p o s e s o f t h e l a w s d e s i g n e d to s u p p r e s s t h e v i c e o f g a m b l i n g . 21

H e l s i n g , i n Gambl ing i n A m e r i c a , r e f e r s t o t h e

" b e n i g n p r o h i b i t i o n " a g a i n s t c e r t a i n i l l e g a l games

which a r e g i v e n l o w p r i o r i t y by l a w e n f o r c e m e n t

a g e n c i e s . The S t a t e may f i n d it n e c e s s a r y to " s i d e -

s t e p " t h e l a w i n c a r r y i n g o u t i t s g a m b l i n g a c t i v i t i e s .

A s B l a k e y a c k n o w l e d g e s , S t a t e s h a v e o f t e n f l o u t e d

f e d e r a l l a w s and h a v e c r e a t e d s p e c i a l t a x l o o p h o l e s f o r

w i n n i n g s , and t r e a t e d S t a t e - r u n and u n l a w f u l g a m b l i n g

i n c o n s i s t e n t l y . F o r e x a m p l e , t o a v o i d v i o l a t i n g t h e

law a g a i n s t m a i l i n g l o t t e r y p r i z e s , l o t t e r y o f f i c i a l s

i n N e w York would open a bank a c c o u n t i n A l b a n y i n t h e

w i n n e r ' s name, t h e n close o u t t h e a c c o u n t and h a v e t h e

bank m a i l a bank d r a f t t o t h e w i n n e r . 2 2 S t a t e l e g i s -

l a t u r e s h a v e - f o u n d , or c r e a t e d , p r o v i s i o n s i n t a x a t i o n

l a w s to a l l o w c o m p e t i t i o n w i t h i l l e g a l g a m b l i n g and t o

i n c r e a s e S t a t e r e v e n u e s t o t h e d e t r i m e n t o f t h e c o n f i -

d e n c e i n s p i r e d i n t h e t a x s y s t e m . I n some s t a t e s , s u c h

a s N e w J e r s e y , t h e l aw is e n a b l i n g b o t h i n what it d o e s

n o t c o n t a i n ; i .e. , a d e q u a t e a c c o u n t a b i l i t y r e g a r d i n g

c r e d i t v i o l a t i o n s , and i n terms of what is c o n t a i n e d ; '

i .e . , a 4% g r o s s r e v e n u e w r i t e - o f f f o r bad c r e d i t

d e b t s .

The movement t o w a r d s l e g a l i z e d g a m b l i n g i n m o s t

c o u n t r i e s h a s b e e n g r a d u a l and p i e c e m e a l . One r e s u l t

h a s been t h a t e x i s t i n g l a w s a r e i g n o r e d or c i r c u m -

v e n t e d , and o c c a s i o n a l c h a n g e s m u s t b e made to a v o i d

b l a t a n t v i o l a t i o n o f s t a t u t o r y p r o h i b i t i o n s . T h e s e

p e r i o d s o f " b e n i g n p r o h i b i t i o n " a re o f t e n p a r t o f an

o n g o i n g c y c l e w h i c h f l u c t u a t e s b e t w e e n t o l e r a n c e a n d

moral o u t r a g e a t a b u s e s w h i c h t h e n leads t o more e f f e c - .

t i v e b u t s p o r a d i c e n f o r c e m e n t .

A s B l o c k states:

. . . t h e more f l a g r a n t a b u s e s o f p u b l i c to le r - a n c e lead t o i m p o s i t i o n o f c o n t r o l s on t h e more e g r e g i o u s a s p e c t s o f p u b l i c g a m b l i n g e n t e r p r i s e . T h i s i n t u r n , f r e q u e n t l y l e a d s t o f u r t h e r e f f o r t s t o e x t e n d c o n t r o l , o c c a s i o n a l l y r a n g i n g f r o m r i g i d p r o h i b i t i o n o f o f f - t r a c k b e t t i n g t o t h e c u r b i n g o f b i n g o games . A t t e m p t s a t s u c h b r o a d c o n t r o l h a v e i n v a r i a b l y l e d i n t h e p a s t to w i d e - s p r e a d p u b l i c t o l e r a n c e o f s y n d i c a t e d u n d e r w o r l d c o n t r o l , t o s y n d i c a t e a b s o r p t i o n or domina- t i o n o f l e g i t i m a t e e n t e r p r i s e s , a n d more d i s a s t r o u s l y , t o d e a l s w i t h a n d p a y - o f f s t o c o r r u p t l a w e n f o r c e m e n t o f f i c i a l s . U s u a l l y t h e n e x t s t a g e is i n d i g n a n t p u b l i c r eco i l a n d a n a t t e m p t a t new a p p r o a c h e s a n d a p p r a i s a l s , l e a d i n g t o g r e a t e r r e l a x a t i o n o f e x i s t i n g s t a n d a r d s or more f e a s i b l e l e g a l c o n t r o l . . . f u r t h e r r e l a x a t i o n . . . a b u s e o f p u b l i c to le r - a n c e . . . e f f o r t s t o impose r i g i d r es t r i c -

2 3 t i o n s .

E n f o r c e m e n t p o l i c i e s r e f l e c t to some e x t e n t t h e s e n t i -

m e n t o f t h e p u b l i c . V a r i o u s w r i t e r s e m p h a s i z e t h e

p o i n t t h a t t h e p u b l i c c a n a f f e c t t h e m o r a l c o n t e x t i n

w h i c h t h e l a w s are e n f o r c e d . A c o n t r a d i c t i o n may e x i s t

w i t h r e f e r e n c e t o s o - c a l l e d v i c t i m l e s s crimes, i . e . ,

g a m b l i n g , p r o s t i t u t i o n , l i q u o r v i o l a t i o n s , e t c .--where

t h e r e may b e a p u b l i c desire t o o u t l a w t h e a c t i v i t y b u t

a l a c k o f m o t i v a t i o n or e v e n t o l e r a n c e f o r s tr ict

e n f o r c e m e n t .

One k e y c o n c e r n i n a n y s i t u a t i o n i n v o l v i n g v a s t

d i s c r e t i o n i n e n f o r c e m e n t is p o l i c e c o r r u p t i o n . The

p o t e n t i a l f o r a b u s e is p a r t i c u l a r l y h i g h i n g a m b l i n g

e n f o r c e m e n t d u e to t h e l a r g e amount o f money, t h e l a c k

- 36 -

o f v i s i b i l i t y and t h e c l i e n t e l e o f some g a m b l i n g

establishment^.^^ L e g a l i z i n g a g a m b l i n g a c t i v i t y d o e s

n o t remove--and may i n c r e a s e - - t h e p o t e n t i a l f o r p o l i c e

or p o l i t i c a l c o r r u p t i o n b e c a u s e r e g u l a t i o n s m u s t b e

e n f o r c e d , l i c e n s e s mus t b e g r a n t e d , and t a x r e v e n u e

m u s t b e c a l c u l a t e d and p a i d .

( i i i ) C o m p u l s i v e Gambl inq

Two o f t h e t h r e e i m p o r t a n t s t u d i e s m e n t i o n e d a t

t h e b e g i n n i n g o f t h i s r e p o r t have been c r i t i c i z e d f o r

i g n o r i n g o r m i n i m i z i n g t h e i s s u e o f t h e c o m p u l s i v e

g a m b l e r . They r e f e r to f i n d i n g s t h a t s u p p o r t t h e

b e l i e f t h a t more p e o p l e gamble when g a m b l i n g is l e g a l

b u t t h i s i n f o r m a t i o n is n o t t r e a t e d a s s i g n i f i c a n t to

a n y d e c i s i o n r e g a r d i n g l e g a l i z a t i o n .

A c r i t i q u e o f t h e t r e a t m e n t a f f o r d e d c o m p u l s i v e I

g a m b l i n g is p r o v i d e d by M a r t e n e z and L a n d s b e r g , who

r e f e r t o t h e " c u r s o r y and i n e p t h a n d l i n g o f t h e compul-

s i v e g a m b l e r . " 2 5 heir c r i t i q u e o f t h e W e i n s t e i n and

D e i t c h s t u d y comments on t h e r e f e r e n c e to c o m p u l s i v e

g a m b l e r s a s mere " o v e r - i n d u l g e r s " and rejects t h e

s u g g e s t i o n t h a t t h e number o f s u c h p e r s o n s is n e g l i g i -

b l e . M a r t e n e z and L a n d s b e r g t a k e t h e f i g u r e 6 m i l l i o n

t o b e a c o n s e r v a t i v e estimate, b a s e d on r e s e a r c h which

h a s f a i l e d to c l e a r l y d e f i n e c o m p u l s i v e n e s s and t h e r e -

f o r e , f a i l s to i d e n t i f y c o m p u l s i v e g a m b l e r s i n t h e

U n i t e d S t a t e s . They a r g u e t h a t t h e r e is a r e a l s o c i a l

p r o b l e m which m u s t b e c o n s i d e r e d by t h o s e making

g a m b l i n g p o l i c y . The c o m p u l s i v e g a m b l e r , t h e y empha- . - ~ s i z e , a f f e c t s n o t m e r e l y h i m s e l f , b u t becomes a major

I

b u r d e n to s o c i e t y i n t e r m s o f c r i m i n a l a c t s he may

commit , work i n e f f e c t i v e n e s s , f a m i l y d i s r u p t i o n ,

i m p o v e r i s h m e n t , i n c a r c e r a t i o n , s u i c i d e , e tc .

I

A

R e u t e r

p o t e n t i a l l y

t h e o f t e n 1

a r g u e s t h a t t h e i s s u e of t h e c o m p u l s i v e o r

c o m p u l s i v e g a m b l e r may be a t t h e h a s e o f

o o s e l y a r g u e d p o s i t i o n s a g a i n s t l e g a l i z a t i o n

t h a t f a l l s h o r t o f becoming m o r a l a r g u m e n t s . R e u t e r

s t a t e s t h a t t h e a u t h o r s o f Gambl ing i n A m e r i c a began by

a g r e e i n g t h a t it was i m p o r t a n t t o o b t a i n some i n f o r m a -

t i o n a b o u t c o m p u l s i v e g a m b l e r s , b u t v e r y n e a r l y i g n o r e d

t h e t w o r e s e a r c h s t u d i e s which a d d r e s s e d t h i s i s s u e .

H e r e f e r s to t h e "vague r e f e r e n c e " made t o t h e social

costs o f c o m p u l s i v e g a m b l i n g and s t a t e s t h a t t h i s

acknowledgement s c a r c e l y c o n s t i t u t e d a "meaning£ u l

d i s c u s s i o n o f t h e p r o b l e m " . 26

I t is e s t i m a t e d t h a t c o m p u l s i v e g s m b l e r s may

number a s h i g h a s 1.1 m i l l i o n p l u s 3 t i m e s a s many

p o t e n t i a l c o m p u l s i v e g a m b l e r s . The estimates a r e o n l y

t h a t - - e s t i m a t e s - - b u t t h e need f o r a d d i t i o n a l in fo rma-

t i o n r e l a t i n g t o c o m p u l s i v e g a m b l i n g , a l t h o u g h acknow-

l e d g e d , is n e v e r a d e q u a t e l y a d d r e s s e d by W e i n s t e i n &

D e i t c h o r i n t h e Gambl ing i n America s t u d y .

The p o t e n t i a l f o r l e g a l i z e d g a m b l i n g to e n c o u r a g e

c o m p u l s i v e g a m b l i n g r e m a i n s unknown. What is known is

t h a t p e o p l e gamble more, t h e more a v a i l a b l e g a m b l i n g

becomes. C r e a t i n g new means f o r c o m p u l s i v e g a m b l e r s t o

e a s i l y f u l f i l l t h e i r u r g e may harm, t h e i n d i v i d u a l and

h i s or h e r f a m i l y . However, it is a m a t t e r o f d e b a t e

w h e t h e r or n o t c o m p u l s i v e g a m b l i n g and c o m p u l s i v e

g a m b l e r s is a p o l i c y c o n c e r n . J u s t a s some would

s u g g e s t t h a t t h e p o o r o u g h t to be a l l o w e d to s p e n d

however much t h e y may c h o o s e on g a m b l i n g , c o m p u l s i v e

g a m b l i n g may b e v iewed as a p r i v a t e r a t h e r t h a n a

p u b l i c c o n s i d e r a t i o n . The d e b a t e on t h i s i s s u e would

be more r e l e v a n t i f more i n f o r m a t i o n were a v a i l a b l e .

Human i t a r i an c o n c e r n s a s i d e , i f t h i s p o t e n t i a l

p o p u l a t i o n is a s h i g h as some e s t i m a t e s p l a c e i t , t h e n

one cou ld e x p e c t t h e l a r g e r s o c i e t y to be n e g a t i v e l y

a f f e c t e d . With h i g h e r r e p o r t e d g a r n i s h m e n t s o f wages ,

g r e a t e r i n s t a b i l i t y o f employment, g r e a t e r g e o g r a p h i c

m o b i l i t y , g r e a t e r f r e q u e n c y o f a l c o h o l consumpt ion ,

g r e a t e r m a r i t a l c o n f l i c t and s e p a r a t i o n , t h e heavy

gambler p o p u l a t i o n a p p e a r s t o be a h i g h l y d i s a f f e c t e d

g roup . I n d e f e n d i n g OTB a g a i n s t s t u d i e s l i n k i n g

e x c e s s i v e b e t t i n g t o m a r r i a g e d i s r u p t i o n and d i v o r c e ,

W e i n s t e i n and D e i t c h s t a t e :

I t is j u s t a s l i k e l y t h a t e x c e s s i v e i n t e r - es t i n OTB b e t t i n g is a s much an e f f e c t a s a c a u s e of m a r i t a l i n s t a b i l i t y . The b e t t o r may be e s c a p i n g from t h e unhappy m a r i t a l s i t u a t i o n to t h e more s a t i s f y i n g OTB s i t u a - t i o n . 2 7

M a r t i n e z & Landsberg comment on t h e t o t a l l a c k o f

s u b s t a n t i a t i o n f o r t h i s s t a t e m e n t and q u e s t i o n whether

it q u a l i f i e s a s a p o s i t i v e a s p e c t of OTB even i f it

were a c c u r a t e .

Dedication of Revenues

"Ded i c a t i o n n means t h e a l l o c a t i o n o f s p e c i f i c gambl ing revenue--or a l l gambling revenue-- to s p e c i f i e d p u r p o s e s .

E d u c a t i o n , s p o r t s , l o c a l government a s s i s t a n c e , s t a t e i n s t i -

t u t i o n s , p r o p e r t y t a x r e l i e f f o r t h e e l d e r l y , and i n d i v i d u a l

c h a r i t i e s a r e p o p u l a r r e c i p i e n t s o f t h e d e d i c a t e d r e s o u r c e s

i n t h e Un i t ed S t a t e s and Canada. Three " a d v a n t a g e s n of t h i s

u se o f gaming r evenue have been i d e n t i f i e d :

1. it c r e a t e s g r o u p s of s u p p o r t e r s f o r t h e p a s s a g e of t h e s p e c i f i c l e g a l i z e d gambling l e g i s l a t i o n ;

2 . it emphas i ze s t h e c o n t r i b u t i o n of t h e gambling a c t i v i t y to t h e a t t a i n m e n t of "wor thyn c a u s e s or

3 . i t may n e u t r a l i z e o b j e c t i o n s t o government o p e r a - t i o n o f a g a m b l i n g e n t e r p r i s e . 2 8

I n some i n s t a n c e s t h e " a d v a n t a g e s " may n o t i n c l u d e a n a c t u a l

f i n a n c i a l g a i n by t h e r e c i p i e n t s . Money o b t a i n e d from

lo t t e r i e s is sometimes s u b t r a c t e d f rom what t h e o r g a n i z a t i o n

would h a v e r e c e i v e d f rom r e g u l a r t a x s o u r c e s . I t is p o s s i -

b l e t h a t r e c i p i e n t s may a c t u a l l y r e c e i v e l e s s t h a n t h e y

would h a v e t h r o u g h g e n e r a l a p p r o p r i a t i o n s . I n p r i n c i p l e ,

d e d i c a t i o n v i o l a t e s t h e p u b l i c f i s c a l o r t h o d o x y t h a t a l l

S t a t e r e v e n u e s h o u l d be p l a c e d i n a s i n g l e g e n e r a l fund from

which t h e l e g i s l a t u r e w i l l make payments b a s e d on p u b l i c

n e e d s i n a c c o r d a n c e w i t h e s t a b l i s h e d s p e n d i n g p r i o r i t i e s .

The p r a c t i c e c a n d e p r i v e a w o r t h y o r g a n i z a t i o n o f a d e q u a t e

f u n d i n g i n a manner less v i s i b l e t h a n a c l e a r r e f u s a l t o

a l l o c a t e S t a t e r e s o u r c e s .

D e d i c a t i o n o f f u n d s is , t h e r e f o r e , u s e f u l i n o r d e r t o

"sell" t h e g a m b l i n g scheme, and less s u c c e s s f u l a s a re l ia-

b l e f u n d i n g s o u r c e . I t may p r o v e t o b e o n l y a t e m p o r a r y

m e a s u r e u n t i l s o c i e t y comes to a c c e p t f u l l y t h e i d e a o f

r e v e n u e - g e n e r a t i n g gaming w i t h o u t t h e theme o f " a i d i n g a

good cause1 ' a s a n a d d i t i o n a l s e l l i n g t e c h n i q u e .

2. Combatting Organized Criminal Involvement In Legal And Illegal Gambling

I t h a s been a s s e r t e d t h a t l e g a l g a m b l i n g o p e r a t i o n s

c a n n o t compe te w i t h e q u a l s u c c e s s a g a i n s t a l l f o r m s of

i l l e g a l g a m b l i n g o p e r a t i o n s . T h e r e f o r e , some i l l e g a l

g a m b l i n g w i l l s t i l l o c c u r o n c e t h e l e g a l i z a t i o n h a s t a k e n

p l a c e . More s i g n i f i c a n t is t h e f a c t t h a t e x p e r i e n c e i n d i -

c a t e s t h a t w h e r e v e r t h e r e is a v a s t amount o f money- -e i the r

f rom a l e g a l or a n i l l e g a l s o u r c e - - o r g a n i z e d c r i m i n a l s w i l l

s t r i v e to become i n v o l v e d i n t h e a c t i v i t y . P r o f i t is n o t

c r i m i n a l s t o " l a u n d e r " c r i m i n a l p roceeds . T h e r e f o r e , i t

s h o u l d be e x p e c t e d t h a t o r g a n i z e d c r i m i n a l s w i l l c o n t i n u e t o

p a r t i c i p a t e i n some t y p e s of i l l e g a l and l e g a l gambl ing

o p e r a t i o n s .

A. Legal Gambling As Competition For Illegal Gambling Operations,

The f o l l o w i n g f a c t o r s e x p l a i n why l e g a l gambling might

a f f e c t i l l e g a l gambling o p e r a t i o n s b u t n o t e l i m i n a t e them.

( i ) Tax-Free Gamblinq - I l l e g a l gamble r s a r e n o t

l i k e l y t o pay income t a x e s on t h e i r w inn ings ,

s i n c e t h e s e winnings a r e t y p i c a l l y hidden from t h e

t a x sys tem. C h r i s t i a n s e n & Shagan speak of t h e

" r evenue i m p e r a t i v e " t h a t may s u p e r c e d e t h e

a t t e m p t t o combat i l l e g a l gambling. I f comba t t i ng

i l l e g a l gambling were t h e s o l e aim i n runn ing OTB

o p e r a t i o n s , t h e n t h e S t a t e would m a i n t a i n a s h i g h

a pay-out a s p o s s i b l e . However, t h e d e s i r e f o r

r evenue o f t e n o v e r r i d e s t h i s s e c o n d a r y motive. I n

N e w York, t h e l e g i s l a t u r e imposed a 5% " temporary"

s u r c h a r g e on o f f - t r a c k winnings and r e q u i r e d t h e

r e g i o n a l OTB c o r p o r a t i o n s t o f o l l o w s u i t :

N e w York C i t y d i d implement t h e s u r - c h a r g e on J u l y 1, 1 9 7 4 , and t h i s t a x h a s remained i n e f f e c t s i n c e t h a t d a t e . The s u r c h a r g e was j u s t i f i e d a s a r e v e n u e measure. . . t h i s t a x is an e x t r a o r d i n a r i l y good example of t h e f o r c e of what migh t be termed t h e " revenue i m p e r a t i v e " i n t h e development of gambl ing . - law.29

( i i ) Anonymity - There is a c e r t a i n anonymous c h a r a c t e r

t o i l l e g a l gambling which some c l i e n t s d e s i r e .

T h i s s e c r e c y may a l l o w them to avo id t a x e s and

a l s o h i d e s t h e i r b e t t i n g h a b i t s and t h e e x i s t e n c e

and a v a i l a b i l i t y of l a r g e amounts of c a s h .

( i i i ) C r e d i t o p e r a t i o n s - High r i s k c r e d i t e x t e n d e d by

i l l e g a l o p e r a t i o n s c a n n o t be m a t c h e d i n m o s t l e g a l

o p e r a t i o n s . The e t h i c s o f e n c o u r a g i n g i n d e b t e d -

n e s s a n d t h e d i f f i c u l t i e s associated w i t h c o l l e c -

t i o n are more e a s i l y r e s o l v e d by i l l e g a l

o p e r a t o r s . N e w J e r s e y c a s i n o s h a v e b e e n i n v o l v e d

i n e x t e n d i n g h i g h r i s k c r e d i t b u t a n a t t e m p t is

b e i n g made t o c u r t a i l t h i s g a m b l i n g i n c e n t i v e .

B e t t e r o d d s - I n "numbers" games t h e o d d s a re

g e n e r a l l y 1 , 0 0 0 t o 1 a n d t h e p a y - o f f is a b o u t 600

t o 1, less t h e c o m m i s s i o n p a i d by t h e bookmaker t o

h i s r u n n e r . , Some lo t t e r i e s o f f e r a b e t t e r d e a l ,

w i t h o d d s o f close t o 600 t o 1 and a p a y - o f f a s

h i g h a s 1 0 0 , 0 0 0 t o 1, b u t t h e r e is g r e a t v a r i a t i o n

a n d u s u a l l y t h e o d d s are less a d v a n t a g e o u s - - o r

p e r h a p s e v e n more i m p o r t a n t l y , t h e y seem less

a d v a n t a g e o u s .

S i m p l i c i t y a n d Immediacy - I l l e g a l b e t t i n g is

n o t e d f o r h i g h l y a c c e s s i b l e b e t t i n g f a c i l i t i e s ,

c h e a p e r t i c k e t s , f a s t e r d r a w i n g s , q u i c k collec-

t i o n .

I n f o r m a l Socia l Network - S t a t e r u n games may be

v i e w e d w i t h h o s t i l i t y as a n i n t r u s i o n i n t o t h e

loca l games . T h i s is n o t to s u g g e s t t h a t a l l

i l l e g a l games i n v o l v e close p e r s o n a l i n t e r a c t i o n ,

b u t t h a t t h i s i n t e r a c t i o n is a c o n s i d e r a t i o n i n

some bookmak ing o p e r a t i o n s a n d p o k e r games .

( v i i ) C o n v e n i e n c e - I l l e g a l b o o k m a k e r s o f f e r t h e conven-

i e n c e o f t e l e p h o n e b e t t i n g a n d credi t . Some

l e g a l i z e d g a m b l i n g e s t a b l i s h m e n t s , ( i . e . , OTB's,

N e w York C i t y ) a l l o w t e l e p h o n e b e t t i n g b u t o n l y

a g a i n s t f u n d s p r e v i o u s l y d e p o s i t e d .

( v i i i ) V a r i a b i l i t y - I l l e g a l bookmaker s a c c e p t b e t s on

o t h e r s p o r t s as w e l l as h o r s e races. A s

C h r i s t i a n s e n & S h a g a n a r g u e , " e v e n i f i l l e g a l

h o r s e race w a g e r i n g were t o b e w h o l l y a b s o r b e d b y

OTB, t h e major i l l e g a l bookmaking o p e r a t i o n s ,

w h i c h d e p e n d p r i m a r i l y on team s p o r t s b e t t i n g ,

wou ld s u r v i v e " . 30

The 1 9 7 7 T a s k F o r c e o n L e q a l i z e d G a m b l i n g c o n c l u d e d

t h a t l e g a l i z e d g a m b l i n g " is n o t a n e f f e c t i v e weapon a g a i n s t

o r g a n i z e d crime. "31 ~ i k e w i s e , a s t u d y c o n d u c t e d f o r t h e

Commiss ion o n t h e Rev iew o f t h e N a t i o n a l P o l i c y t o w a r d

G a m b l i n g s t a t e d t h a t a f t e r r e c o g n i z i n g o t h e r f u n c t i o n s t h e

e x i s t e n c e o f a S t a t e l o t t e r y a p p e a r e d to e n c o u r a g e r a t h e r

t h a n d i s c o u r a g e g a m b l i n g on numbers . 32 H y b e l s s ta tes t h a t :

I f t h e r e is a n y s u b s t i t u t i o n o f t h e l e g a l or t h e i l l e g a l game, i t is more t h a n c o m p e n s a t e d f o r by t h e o p p o s i t e e f f e c t , c o m p l e m e n t a t i o n , w h e r e p a r t i c i p a t i o n i n o n e t e n d s t o i n c r e a s e t h e p r o b a b i l i t y o f p a r t i c i p a t i o n i n t h e o t h e r . 33

B. Orqanized Criminal Involvement In Leqal Gamblinq Operations

L e g a l i z i n g a n a c t i v i t y d o e s n o t a s s u r e t h a t t h e

l e g a l i z e d v e r s i o n o f t h e p r e v i o u s l y i l l e g a l o p e r a t i o n w i l l

n o t a t t r a c t o r g a n i z e d c r i m i n a l s . Cr ime is a b u s i n e s s a n d a s

s u c h it w i l l o p e r a t e w h e r e v e r t h e r e is a p r o f i t to be

made--or w h e r e t h e l e g a l o p e r a t i o n may s e r v e t h e e n t e r p r i s e

i n some i l l i c i t manne r .

. - A s t u d y of t h e New J e r s e y c a s i n o i n d u s t r y h i g h l i g h t s

t h e numerous ways i n w h i c h a l e g a l o p e r a t i o n may b e n e f i t

o r g a n i z e d crime e v e n i f it were p o s s i b l e to p r e v e n t t h e i r

d i r e c t i n v o l v e m e n t i n o w n e r s h i p or management :

( i ) l a u n d e r i n g f u n d s -- t h e huge c a s h - f l o w o f a c a s i n o

allows f o r e a s y c l e a n s i n g o f c r i m i n a l p r o c e e d s .

I t is v i r t u a l l y i m p o s s i b l e t o v e r i f y o r r e f u t e a

p a t r o n ' s claims o f w i n n i n g ;

( i i ) e a s y c r e d i t a n d t h e a b i l i t y t o " w a l k - w i t h - c h i p s "

a l l o w s t h e c r i m i n a l to u s e l e g i t i m a t e b u t bo r rowed

money to f i n a n c e i l l i c i t e n t e r p r i s e s , i . e . , l o a n

s h a r k i n g a n d d r u g s ;

( i i i ) e v i d e n c e f r o m N e w J e r s e y i n d i c a t e s t h a t t h e

' p o p u l a r i t y o f t h e c a s i n o s among o r g a n i z e d

c r i m i n a l s creates a " p r i v a t e c l u b " a t m o s p h e r e

c o n d u c i v e t o f u r t h e r c r i m i n a l a g r e e m e n t s .

" C o m p l i m e n t a r i e s " s u c h as f r e e rooms, m e a l s ,

t h e a t r e t i c k e t s , a n d n e a r l y u n l i m i t e d c r e d i t

g r a n t e d t o known c r i m i n a l s , s u g g e s t t h a t t h e

c r i m i n a l s were c o u r t e d by t h e c a s i n o s .

LAW ENFORCEMENT S CONTROL OF THE LEGALIZED GAMBLING MARKET

1. Effectiveness of Illegal Gamblinq Law Enforcement

Most gambling enforcement officers and chiefs of police...rated "fighting organized crime" as the most im ortant reason for enforcing gambling laws. 9 4

Considerations of legalized gambling must acknowledge

the reality of illegal gambling enforcement. At best, rigid

enforcement practices reduce and divert illicit activities

from one geographical area to another or one form of

gambling to another. There does not tend to be a choice

between no gambling, illegal or legal, and legalized

gambling, plus constant repressed illegal activities--but

rather a condition of constant illegal activity (although

varying in degree and forms) whether or not legalized

gambling exists.

Two significant studies for the Gamblinq in America

Commission examined gambling enforcement in New Jersey and

arrived at very different conclusions. Reidel and

~ h o r n b e r r ~ ~ ~ argue that gambling enforcement - is possible,

and present statistics comparing gambling conviction rates

and severity of sentences in Newark, Philadelphia, and

Washington, D.C. One of their assertions was that "the

argument that favours decriminalization of gambling laws

because they are unenforceable is wrong." The New Jersey

Supreme Court issued a directive that all sentences in

gambling cases be imposed by one judge, and that strict,

immediate sentences be handed out in all cases involving . - syndicated crime. Based on the arrest and conviction

statistics, Reidel and Thornberry argued that the strict

laws and increased enforcement in New Jersey indicated that

- 45 -

it w a s p o s s i b l e to e n f o r c e g a m b l i n g l a w s . However , t h e i r

f i n d i n g s

i n d i c a t e

p o l i c y " :

1.

2.

3 .

4 .

h a v e b e e n c r i t i c i z e d b e c a u s e t h e y f a i l e d t o

w h e t h e r as a r e s u l t o f t h i s " s t r i n g e n t e n f o r c e m e n t

t h e r e h a d b e e n a n y g e n e r a l or i n d i v i d u a l d e t e r r e n t e f f e c t w h i c h would r e d u c e f u t u r e i l l e g a l g a m b l i n g ;

t h o s e " c o n t r o l l i n g " t h e i l l i c i t g a m b l i n g m a r k e t p l a c e r e l o c a t e d .to j u r i s d i c t i o n s w h e r e a more l e n i e n t e n f o r c e m e n t p o l i c y w a s a d o p t e d ;

t h o s e " c o n t r o l l i n g " t h e i l l i c i t g a m b l i n g m a r k e t p l a c e r e a l l o c a t e d t h e i r r e s o u r c e s t o 0 t h f o r m s o f i l l i c i t or l i c i t a c t i v i t i e s ;

t h e cost o f " o f f i c i a l p r o t e c t i o n " ( f r o m t h e e f f e c t s o f t h e s t r i n g e n t e n f o r c e m e n t ) h a d i n c r e a s e d . 3 6

I n a g r e e m e n t w i t h t h e s e c r i t ic isms, P e t e r R e u t e r and

t h e New J e r s e y I n t e l l i g e n c e B u r e a u a r g u e d t h a t t h e r e w e r e

d i f f i c u l t i e s w i t h s t r i n g e n t e n f o r c e m e n t programmes wh ich

w e r e n o t a p p r e c i a t e d . A c c o r d i n g to R e u t e r t h e i n t e n s i f ica-

t i o n programme l e d to t h e a p p r e h e n s i o n o f a new c lass o f

g a m b l i n g o f f e n d e r s who wou ld n o t g e n e r a l l y b e p e r c e i v e d as a

s e r i o u s t h r e a t to s o c i e t y . The career c r i m i n a l s a v o i d e d

a r r e s t b y p u t t i n g m i n o r o f f e n d e r s i n t o t h e most v i s i b l e

p o s i t i o n s w i t h i n t h e i l l e g a l o r g a n i z a t i o n . The less e x p e r -

i e n c e d c r i m i n a l s , t h e r e f o r e , t e n d e d to make u p t h e

s t a t i s t i c a l i n c r e a s e i n arres ts f o r g a m b l i n g v i o l a t i o n s .

T h e s e c r i t i c s d o n o t claim t h a t s t r i n g e n t e n f o r c e m e n t

p o l i c i e s h a v e no i m p a c t . The a r r e s t s a n d s e v e r e s e n t e n c e s

r e s u l t i n g f r o m t h e New J e r s e y p r o g r a m may h a v e d i s r u p t e d t h e

e s t a b l i s h e d i l l i c i t g a m b l i n g o r g a n i z a t i o n s s u f f i c i e n t l y t o . - o p e n them u p t o more c o m p e t i t i o n and weaken a n y e x p l o i t i v e

m o n o p o l i s t i c p r a c t i c e s w h i c h e x i s t u n d e r c o n d i t i o n s o f

s t a b i l i t y .

2. The Role of Commissions

Two t y p e s o f c o m m i s s i o n s a r e i m p o r t a n t to a n y s t u d y o f

g a m b l i n g : o n e t y p e a f f e c t s t h e way t h a t s o c i e t y , i n c l u d i n g

p o l i c y m a k e r s , t h i n k s a b o u t g a m b l i n g ; t h e s e c o n d t y p e

a f f e c t s t h e a c t u a l r e g u l a t i o n o f g a m b l i n g .

A. Commissions as Fact Finders

Commiss ions , p a n e l s and i n v e s t i g a t o r y b o a r d s a r e more

t h a n t h e sum of t h e members; c o m m i s s i o n s o f t e n become

" s i t u a t e d " w i t h i n t h e d e b a t e , e i t h e r b e c a u s e o f t h e composi -

t i o n o f t h e s e w o r k i n g g r o u p s or b e c a u s e o f t h e i r a f f i l i a t i o n

a n d m a n d a t e . F o r e x a m p l e , i n a n e s s a y e n t i t l e d "Easy S p o r t :

R e s e a r c h a n d R e l e v a n c e " ,37 R e u t e r d i s c u s s e s t h e Commission

o n t h e Review o f N a t i o n a l P o l i c y Toward Gambl ing , w h i c h

p r o d u c e d t h e i n f l u e n t i a l Gambl ing i n A m e r i c a . H e a r g u e s

t h a t w h e r e a s a s i g n i f i c a n t p o r t i o n o f t h e b u d g e t w e n t i n t o

p r o d u c i n g r e s e a r c h , m o s t o f t h e C o m m i s s i o n e r s ' t i m e wen t

i n t o a t t e n d i n g h e a r i n g s and t h a t t h e r e s u l t i n g r e p o r t was

b a s e d a l m o s t e n t i r e l y on t h e h e a r i n g s and n o t on t h e

r e s e a r c h . H e s t a tes : " R e s e a r c h r e s u l t s were s i m p l y p o t e n -

t i a l a m m u n i t i o n f o r t a k i n g a p o s i t i o n . "38 ~ c c o r d i n g to

R e u t e r , t h e Gambl ing Commiss ion , l i k e o t h e r p o l i c y a d v i s o r y

c o m m i s s i o n s , u n d e r s t o o d t h e v a l u e o f r e s e a r c h a s a s o u r c e o f

a u t h o r i t y f o r i t s p o l i c y r e c o m m e n d a t i o n s and c o n c l u s i o n s .

When it came t o t h e p r e p a r a t i o n o f its F i n a l R e p o r t ,

h o w e v e r , t h e Commiss ion c h o s e l a r g e l y to i g n o r e i t s own

r e s e a r c h . 39

R e u t e r a s s e r t s t h a t t h e d y n a m i c s o f t h i s commiss ion

would o p e r a t e i n many, i f n o t m o s t , f a c t - s e e k i n g s t u d i e s .

F i r s t , t h e c o m m i s s i o n was made up l a r g e l y o f l a w y e r s who

were more f a m i l i a r w i t h t h e c o n c e p t o f " t e s t i m o n y " a s a

- 47 -

v a l i d s o u r c e o f " ev idence" than wi th a n a l y z i n g e m p i r i c a l

r e s e a r c h s t u d i e s . T h i s is n o t t o s u g g e s t t h a t some of t h e

a r t i c l e s i n t h e body o f s o c i a l s c i e n c e r e s e a r c h t h a t was

g e n e r a t e d were n o t open to cr i t ic ism, b u t r a t h e r to s u g g e s t

t h a t g e n e r a l l y t h e r e s e a r c h was ignored by t h e l awyer s

r a t h e r t h a n c r i t i c i z e d .

Second, t h e c r e a t i o n of a commission to i n v e s t i g a t e a

phenomenon is u s u a l l y a consequence of some e x i s t i n g se t o f

c i r c u m s t a n c e s . The gambling commission was a r e s p o n s e to conce rn about l e g a l i z e d gambling and t h e growth of f e d e r a l

involvement i n enforcement a g a i n s t i l l e g a l gambling. These

c o n d i t i o n s se t t h e t o n e o f t h e report - -nowhere more c l e a r l y

t h a n i n t h e t o t a l r e j e c t i o n o f r e s e a r c h f i n d i n g s t h a t

suppor t ed t h e c l a i m t h a t t h e p r e v i o u s (U.S. J u s t i c e

Department) e s t i m a t e s o f t h e amount of i l l e g a l gambling were

h i g h l y i n f l a t e d :

I f t h e s u r v e y ' s e s t i m a t e s of a $5 b i l l i o n i l l e g a l hand le a r e t aken a t f a c e v a l u e , and t h e ~ u s t i c e Department e s t i m a t e s of $29 b i l l i o n t o $39 b i l l i o n a r e r e f u t e d , i t might be c o n s t r u e d t h a t t h e i n c i d e n c e of i l l e g a l gambling is o n l y o n e - s i x t h t o one-e igh th o f what it is commonly though t to b e , and a s i g n i f i c a n t r e d u c t i o n i n enforcement a c t i v i t y would fo l low. Nothing could be f u r t h e r from t h e Commission's i n t e n t .*0

Reu te r o b s e r v e s t h a t t h i s r e j e c t i o n of t h e s u r v e y f i n d -

i n g s , wi th no a l t e r n a t i v e i n f o r m a t i o n e x c e p t t h e Department

o f J u s t i c e e s t i m a t e (which Department o f f i c i a l s acknowledged

t o t h e Commission cou ld n o t be r e l i e d upon) was i n c o n s i s t e n t

and i r r a t i o n a l . There r u n s th rough t h e r e p o r t an a c c e p t a n c e

o f a somewhat m o r a l i s t i c view of gambling which- p u t t h e onus

of p rov ing some t a n g i b l e b e n e f i t s o n t o t h o s e who s u p p o r t e d

g r e a t e r l e g a l i z a t i o n . T h i s p o s i t i o n was pe rhaps v a l i d ;

p r o d u c i n g a n e u t r a l , s c i e n t i f i c document .

I n v e s t i g a t o r y c o m m i s s i o n s may b e c o m m i t t e d to p a r t i c u -

l a r o r i e n t a t i o n s , and may c o n s c i o u s l y or u n c o n s c i o u s l y

a c c e p t o r reject r e s e a r c h r e s u l t s a c c o r d i n g t o how w e l l t h e

r e s u l t s c o r r e s p o n d to a s p e c i f i c p e r s p e c t i v e . T h e r e may n o t

b e a s i n g l e a g r e e d upon r e a l i t y i n an i s s u e s u c h a s

g a m b l i n g . T h e r e a r e too many a s p e c t s of t h i s a r e a o f

r e s e a r c h t h a t r e q u i r e i n t e r p r e t a t i o n b a s e d on c e r t a i n g i v e n

a s s u m p t i o n s t o make i t p o s s i b l e f o r t h e r e t o be o n l y o n e

" t r u e " and f i n a l v e r s i o n . P o l i t i c a l i n t e r e s t s , economic

i n t e r e s t s and moral a t t i t u d e s a l l i n t e r t w i n e . 4 1

B. Commissions as Regulatory Agencies

The " u s e " o f c o m m i s s i o n s i n t h e r e g u l a t i o n o f c a s i n o s

w i l l be d i s c u s s e d i n t h e Nevada and N e w J e r s e y c h a p t e r s t o

i l l u s t r a t e v a r i a t i o n s i n c o n t r o l s y s t e m s and t h e consequen-

ces o f t h e s t r u c t u r e to t h e d e c i s i o n s t h a t a r e made. I n

Nevada and N e w J e r s e y t h e commiss ion s e r v e s t o l e g i t i m a t e

d e c i s i o n s i n a d d i t i o n t o r e g u l a t i n g t h e a g e n c i e s . The p o i n t

was made a s e a r l y a s 1 8 9 2 by t h e U n i t e d S t a t e s A t t o r n e y

G e n e r a l :

The Commission. . . is , o r c a n be made, o f g r e a t u s e . . . I t s a t i s f i e s t h e p o p u l a r clamor f o r a g o v e r n m e n t s u p e r v i s i o n . . . a t t h e same t i m e t h a t t h e s u p e r v i s i o n is a l m o s t e n t i r e l y n o m i n a l . F u r t h e r , t h e o l d e r s u c h a commis- s i o n g e t s to b e , t h e more i n c l i n e d it w i l l b e f o u n d to t a k e t h e b u s i n e s s . . . v i e w of t h i n g s . 4 2

T h i s g r a d u a l c o - o p t a t i o n o f t h e r e g u l a t o r y a g e n c y , by t h e

o r g a n i z a t i o n t h a t is s u p p o s e d l y b e i n g s u b j e c t to t h e r e g u l a -

t i o n , is n o t u n i q u e t o t h e g a m b l i n g i n d u s t r y . However, i f

t h e c a s i n o i n d u s t r y re l ies on c o m m i s s i o n s a s its main s o u r c e

of regulation these subtle (and not so subtle) shifts in

loyalty should be anticipated.

111. NEVADA: A CASE HISTORY

TEE TRADITIONAL NORTH AMERICAN CASINO GAMBLING MODEL

Nevada h a s been t h e f o c u s o f numerous s t u d i e s o f c a s i n o

g a m b l i n g and o r g a n i z e d crime. The v e r d i c t s r e g a r d i n g t h e

Nevada o p e r a t i o n s t e n d t o b e d e f i n i t i v e b u t c o n t r a d i c t o r y .

One r e p o r t may a l l e g e e x t e n s i v e c o r r u p t i o n and a b u s e w h i l e

o f f e r i n g m i n o r r e c o m m e n d a t i o n s f o r a l l e v i a t i n g t h e h o l d o f

o r g a n i z e d c r i m i n a l s o v e r t h e g a m b l i n g o p e r a t i o n s ; t h e n e x t

r e p o r t may j u d g e Nevada t o be f r e e f rom c r i m i n a l i n f l u e n c e .

I n 1950 t h e K e f a u v e r Committee - R e p o r t c o n c l u d e d t h a t :

A s a c a s e h i s t o r y o f l e g a l i z e d g a m b l i n g , Nevada s p e a k s e l o q u e n t l y i n t h e n e g a t i v e . 4 3

I n 1 9 7 6 , The P r e s i d e n t ' s Commission on t h e Review o f

t h e N a t i o n a l P o l i c y Toward Gambl ing s t a t e d t h a t :

B e c a u s e s c r u p u l o u s l y c o n t r o l l e d p r i v a t e ( g a m i n g ) e n t e r p r i s e h a s p r o v e n s u c c e s s f u l i n Nevada, t h e Commission commends t h e b a s i c f ramework t o a n y S t a t e w i s h i n g t o l e g a l i z e c a s i n o s . . . T h e Nevada c o n t r o l s t r u c t u r e s h a v e s t o o d t h e tests o f t i m e a n d , o f t e n , b i t t e r e x p e r i e n c e ; t h e S t a t e ' s Gaming P o l i c y Commi t t ee , Gaming Commission, a n d Gaming C o n t r o l Board a l l seem to o p e r a t e e f f e c t i v e l y and t o commend t h e m s e l v e s a s m o d e l s to o t h e r s t a t e s . 44

The Gambl ing i n A m e r i c a a u t h o r s s a i d t h a t " o r g a n i z e d crime

o n c e was a s i g n i f i c a n t f a c t o r i n some Nevada c a s i n o s " b u t

t h a t " t h e p r e s e n c e o f o r g a n i z e d crime i n Nevada had become

n e g l i g i b l e " . 4 5 The r e p o r t w a s made p u b l i c i n 1 9 7 6 ; b e f o r e

t h e y e a r was o v e r , e v i d e n c e o f c o r r u p t i o n a p p e a r e d . W i t h i n

t h r e e y e a r s , w i d e - s p r e a d c o r r u p t i o n was w e l l documented .

The f o r c e d c l o s i n g i n 1 9 7 9 o f t h e $100 m i l l i o n A l a d d i n Hotel

o c c u r r e d b e c a u s e o f c o n n e c t i o n s to o r g a n i z e d crime. I n t e r -

c e p t e d c o n v e r s a t i o n s be tween K a n s a s C i t y o r g a n i z e d crime

f i g u r e s a n d L a s V e g a s c a s i n o o p e r a t o r s , w h i c h i n v o l v e d

i n s t r u c t i o n s o n how t o s k i m , a n d claims t h a t a " m a j o r gaming

o f f i c i a l " , ( c o d e name M r . C l e a n f a c e ) was on t h e p a y r o l l o f

o n e o f t h e h o t e l s , t h r e a t e n e d t h e c r e d i b i l i t y o f t h e Nevada

Gaming C o n t r o l ~ o d e 1 . ~ ~ r t may b e t h a t t h e Nevada c a s i n o

i n d u s t r y a n d o r g a n i z e d c r i m i n a l a c t i v i t i e s are too e n t w i n e d

t o make r e f o r m a n y t h i n g o t h e r t h a n a s y m b o l i c g e s t u r e .

1. Historical Background To The Establishment Of Gaming In Nevada

Gambl ing i n t h e W e s t w a s t h e a c c e p t e d p a s t i m e o f t h e

g o l d - m i n e r s a n d t r a p p e r s who came to town p e r i o d i c a l l y f o r

s u p p l i e s . A s A r n o l d s t a t e s :

Nex t t o m i n i n g , g a m b l i n g w a s t h e b i g g e s t b u s i n e s s a n d w e n c h i n g was t h e f a v o u r i t e p a s t i m e . P e o p l e gambled o n w h e r e t h e n e x t f l y would l i g h t , w h e t h e r t h e n e x t f e m a l e p a s s e r b y wou ld b e b l o n d e o r b r u n e t t e , who c o u l d s p i t a stream o f t o b a c c o j u i c e f a r t h e s t a n d s t r a i g h t e s t . 4 7

A g e n e r a l a c c e p t a n c e o f g a m b l i n g h a d b e e n e s t a b l i s h e d

d u r i n g o v e r o n e - h u n d r e d y e a r s o f l e g a l b e t t i n g . T h e n , i n

1 9 0 9 , t h e S t a t e p r o h i b i t e d a l l ' f o r m s o f g a m b l i n g . G a m b l i n g

r e m a i n e a a c r i m i n a l o f f e n s e f o r t w o d e c a d e s , 4 8 b u t t h e new

p r o h i b i t i o n was h e l d r e s p o n s i b l e f o r t h e loss o f i m m e d i a t e

r e v e n u e , t h e g r o w t h o f i l l e g a l b e t t i n g , t h e d e v e l o p m e n t of

" p r o t e c t i o n " r a c k e t s , a n d o t h e r f o r m s o f p o l i t i c a l pay-

o f f s. G a m b l i n g p r o h i b i t i o n i n Nevada c o i n c i d e d w i t h l i q u o r

p r o h i b i t i o n . T u r n e r b e l i e v e d t h a t :

One o f t h e b y - p r o d u c t s o f a l l t h i s ( l i q u o r p r o h i b i t i o n ) w a s t h e c r e a t i o n o f a lawless- n e s s i n a t t i t u d e f o r a w h o l e g e n e r a t i o n of A m e r i c a n s ; a n d a c l a s s o f d i s h o n e s t l a w e n f o r c e m e n t o f f i c e r s a n d p u b l i c o f f i c e h o l d e r s s u c h as t h e n a t i o n had n e v e r known b e f o r e . 4 9

I n 1 9 3 1 , a g a m b l i n g b i l l and a l i b e r a l d i v o r c e b i l l

were p a s s e d by t h e Nevada l e g i s l a t u r e . The e a s y m a r r i a g e /

e a s y d i v o r c e l a w s , c o u p l e d w i t h t h e e x c i t e m e n t and g l a m o u r

o f t h e e n t e r t a i n m e n t c a s i n o - h o t e l s t h a t d e v e l o p e d o v e r t h e

n e x t t e n y e a r s , f o u n d e d t h e Nevada g a m b l i n g and e n t e r t a i n -

men t i n d u s t r y . E v e n t s t h r o u g h t h e 1 9 4 0 ' s cemented t h e t i e s

b e t w e e n t h e c a s i n o s , t h e e n t e r t a i n m e n t w o r l d , and o r g a n i z e d

crime. By t h e m i d - 1 9 4 0 ' ~ ~ it was common f o r t h e b i g g e r

c a s i n o s t o i m p o r t famous e n t e r t a i n e r s t o a t t r a c t t h e c rowds

and t o p r o v i d e c o m p e t i t i o n f o r t h e o t h e r e n t e r t a i n m e n t and

g a m b l i n g e s t a b l i s h m e n t s .

Ben jamin "Bugsy" S i e g a l was t h e f i r s t c l e a r l y v i s i b l e

i n t r u s i o n o f e a s t e r n o r g a n i z e d c r i m i n a l s i n t o t h e o p e r a t i o n

o f o n e o f t h e c a s i n o s . I n t h e m i d - 1 9 4 0 1 s , S i e g a l b u i l t t h e

F l a m i n g o , which was a l a r g e r and f a n c i e r h o t e l t h a n t h e

e x i s t i n g c o m p e t i t i o n . S u b s e q u e n t l y C l e v e l a n d c r i m i n a l s

j o i n e d w i t h t h e i m p r e s s a r i o W i l b u r C l a r k to b u i l d t h e Desert

I n n . Capone-connec ted g a n g s t e r s b u i l t t h e s t a r d u s t Hotel.

Through t h e 1 9 5 0 ' s a n d 1 9 6 0 1 s , p o l i t i c a l r h e t o r i c s t i l l

p u r p o r t e d to b e c o n c e r n e d w i t h e x c l u d i n g o r g a n i z e d c r i m i n a l s

f rom g a m b l i n g o p e r a t i o n s . The f o l l o w i n g s t a t e m e n t by t h e

G o v e r n o r o f Nevada was e c h o e d by t h e G o v e r n o r of N e w J e r s e y

some t w e n t y y e a r s l a t e r :

I a g r e e w i t h a n y m e a s u r e n e c e s s a r y to k e e p hood lums o u t o f Nevada.. . W e m i g h t a s w e l l s e r v e n o t i c e on u n d e r w o r l d c h a r a c t e r s r i g h t now t h a t t h e y a r e n o t welcome i n Nevada and w e a r e n ' t g o i n g to h a v e them here .5O

2. Political -and Economic Pressures: Nevada Gamb Revenue

~linq Tax

The h i s t o r y o f gaming i n Nevada, and an e x a m i n a t i o n o f

t h e g a m b l i n g i n d u s t r y t o d a y , r e v e a l s t h a t g a m b l i n g is n o t

m e r e l y r e c r e a t i o n o r e v e n a d d i t i o n a l S t a t e r e v e n u e , b u t is

e s s e n t i a l t o t h e economic w e l l - b e i n g of t h e s t a t e . 51 his

1 , i s s u e s i n N e v a d a , w i t h p o l i t i c a l c a r e e r s b a s e d on s u p p o r t

a n d a d v a n c e m e n t o f t h e g a m b l i n g i n d u s t r y .

The g a m b l i n g i n d u s t r y p r o v i d e s a l a r g e p e r c e n t a g e o f

t h e t a x r e v e n u e s o f t h e S t a t e o f Nevada . The Nevada Gaming

Commiss ion a n d t h e S t a t e Gaming C o n t r o l Boa rd s t a t e d i n 1 9 8 2

t h a t gaming i n Nevada p r o d u c e d a b o u t 45% o f t h e r e v e n u e f o r

t h e S t a t e G e n e r a l Fund ; t h a t t h e s a l e s a n d u s e t a x p r o d u c e d

a b o u t 4 0 % ; a n d 6 5 % o f t h e sales t a x came f r o m t h e r e s t a u -

r a n t s a n d b a r s i n t h e l a r g e c a s i n o s . 52 I n a d d i t i o n t o t h e

S t a t e t a x e s , t h e f e d e r a l g o v e r n m e n t a n d l o c a l c o u n t i e s ,

c i t i e s and t o w n s h a v e t a x e s o n gaming . The F e d e r a l g o v e r n -

m e n t p r e s e n t l y l e v i e s a w a g e r i n g e x c i s e t a x o f 2 % o f a l l

w a g e r s a c c e p t e d b y b o o k m a k e r s , b a s e d on h o r s e r a c i n g a n d

s p o r t s e v e n t s t h r o u g h o u t t h e U n i t e d S t a t e s . The p r i n c i p a l s

a n d t h e i r a g e n t s m u s t e a c h p u r c h a s e a n a n n u a l $500 w a g e r i n g

s t a m p . The l o c a l g o v e r n m e n t l e v y on gaming v a r i e s f r o m

j u r i s d i c t i o n t o j u r i s d i c t i o n b u t r e l a t e s d i r e c t l y t o t h e

g a m i n g a c t i v i t y a n d d o e s n o t i n c l u d e t h e income t a x e s ,

p r o p e r t y t a x e s a n d s a l e s t a x e s t h a t a c c r u e i n d i r e c t l y .

T a b l e s A, B a n d C r e c o r d t h e d i r e c t l e v i e s p a i d by t h e

gaming i n d u s t r y i n Nevada f o r t h e f i s c a l y e a r s 1 9 7 0 t h r o u g h

J u n e 3 0 , 1979.53

( M i l l i o n s of d o l l a r s

Year 1 9 7 0

Year 1 9 7 0

T o t a l $ 5 8 . 5

F e d e r a l $ 1 0 . 1

S t a t e $ 3 9 . 3

41 .7 5 4 . 9 6 2 . 3 74 .4 8 2 . 5 9 1 . 2

1 0 2 . 4 1 2 1 . 7 1 4 9 . 8

C o u n t y $ 6 . 7

6 . 8 8 .0 9 . 1

1 0 . 1 1 0 . 7 1 1 . 5 1 2 . 8 1 3 . 8 1 6 . 5

TABLE B ( P e r c e n t of t o t a l p a i d - - d o l l a r s i n m i l l i o n s )

F e d e r a l S t a t e C o u n t v o t h e r 1 T o t a l $ 5 8 . 5

( p e r c e n t ) 1 7 . 3 1 8 . 0 1 5 . 2

6 .2 5 .4 4 .3 4 .2 2.6 2 .4 2 .1

( p e r c e n t ( pe rce i t ) ( p e r c e n t ) 6 7 . 1 1 1 . 5 4 . 1 6 7 . 0 1 0 . 9 4 . 1 70 .8 1 0 . 3 3 . 6 7 8 . 6 1 1 . 5 3.7 8 0 . 2 1 0 . 9 3 . 5 8 1 . 9 1 0 . 6 3 . 2 8 2 . 2 1 0 . 4 3 .2 8 3 . 6 1 0 . 5 3 .3 8 4 . 9 9 .7 3 .0 8 5 . 5 9 .4 3.0

TABLE C ( C o m p a r i s o n s t o 1967- -base y e a r 1 9 6 7 e q u a l s 1 0 0 . 0 % )

T o t a l F e d e r a l S t a t e C o u n t v o t h e r 1 2

Year ( p e r c e n t ) ( p e r c e n t ) ( p e r c e n t ) ( p e r c e n t ) ( p e r c e n t ) 1 9 7 0 1 4 5 . 5 1 1 2 . 2 1 6 4 . 4 1 3 1 . 4 1 0 9 . 1

C i t i e s a n d o t h e r local g o v e r n m e n t s .

The f o l l o w i n g two c h a r t s r e c o r d g r o s s gaming r e v e n u e

f i g u r e s f o r t h e f i s c a l y e a r J u l y 1, 1 9 8 1 t o J u n e 30, 1 9 8 2 ,

a n d t h e T o t a l L i c e n s e Fee and Tax C o l l e c t i o n s f o r t h e same

p e r i o d . 54 The f i r s t t a b l e p r e s e n t s t h e t o t a l d o l l a r

i n t a k e . Even t h o u g h t h i s g r o s s f i g u r e is n o t t u r n e d o v e r t o

t h e s t a t e t h e $2 .5 b i l l i o n f i g u r e i n d i c a t e s t h e amoun t o f

money t h a t is c i r c u l a t e d by t h e i n d u s t r y . The s e c o n d c h a r t

shows i n d o l l a r s t h e g r o s s r e v e n u e c o l l e c t e d i n l i c e n s e f e e s

a n d t a x c o n t r i b u t i o n s .

Counties

Clark Washoe Douglas Elko Carson City All Others

Total

Clark Was hoe Douglas Elko Carson City All Others

Total

Clark Washoe Doug la s Elko Carson City All Others

Total

GROSS NEVADA GAMING REVENUE

J U L Y 1, 1981 THROUGH JUNE 30, 1982

Increase/-Decrease Dollars Dollars Percent

GAME AND TABLE REVENUE

SLOT MACHINE REVENUE

C o u n t i e s

C l a r k Washoe D o u g l a s E l k o C a r s o n C i t y A l l O t h e r s

T o t a l

C l a r k Washoe D o u g l a s E l k o C a r s o n C i t y A l l O t h e r s

T o t a l

C l a r k W a s h o e D o u g l a s E l k o C a r s o n C i t y A l l O t h e r s

T o t a l

L I C E N S E F E E AND TAX COLLECTIONS

TOTAL COLLECTIONS F ISCAL YEAR TO DATE

J U L Y 1, 1981 THROUGH JUNE 30, 1 9 8 2

I n c r e a s e / - D e c r e a s e D o l l a r s D o l l a r s P e r c e n t

PERCENTAGE F E E COLLECTIONS

ENTERTAINMENT TAX COLLECTIONS

Control of Casinos In Nevada: Requlatory Structure

I t is n e c e s s a r y t o d i s t i n q u i s h b e t w e e n p u r e l y t h e o r e -

t i c a l c o n t r o l s as o p p o s e d to a c t u a l o n e s . S k o l n i c k &

Dombrink s t a t e :

Our s t u d i e s o f l e g a l c o n t r o l s o n c a s i n o s i n Nevada , A t l a n t i c C i t y a n d E n g l a n d . . . h a v e p r o v e n t h a t r a t i o n a l d i s c u s s i o n s o f c a s i n o g a m b l i n g s h o u l d n o t p r o c e e d w i t h o u t a s t r a i g h t f o r w a r d a c k n o w l e d g e m e n t t h a t c o n t r o l o f t e n l o o k s b e t t e r i n t h e o r y t h a n i n p r a c - t i c e . The l a r g e r t h e e c o n o m i c i n t e r e s t of t h e s t a t e i n c a s i n o g a m b l i n g , t h e g r e a t e r is t h e o u t s i d e r e s s u r e t o erode t h e m e c h a n i s m s o f c o n t r o l . 5 9

Nevada c a s i n o s are r e g u l a t e d by a t r i p a r t i t e s t r u c t u r e :

A. Gaming Commission

The Nevada Gaming Commiss ion m a k e s , l i c e n s i n g d e c i -

s i o n s , e n a c t s r e g u l a t i o n s c o h s i s t e n t w i t h t h e Gaminq

C o n t r o l A c t a n d i n i t i a t e s j u d i c i a l p r o c e e d i n g s . I t h a s

t h e power t o l e v y t a x e s a n d l i c e n s e f e e s or impose

s t r i c t c o n d i t i o n s upon t h e u s e o f a n y l i c e n s e , Any

a p p l i c a n t who h a s b e e n d e n i e d a l i c e n s e by t h e

Commiss ion m u s t n o r m a l l y w a i t a y e a r b e f o r e a p p l y i n g

a g a i n . T h e Commiss ion h a s f i v e members a n d o v e r s e e s

t h e Gaming B o a r d .

B, Gaminq Control Board

The S t a t e Gaming C o n t r o l Boa rd h a s i n v e s t i g a t o r y a n d -

e n f o r c e m e n t r e s p o n s i b i l i t i e s . T h i s b o a r d c o n d u c t s

b a c k g r o u n d i n v e s t i g a t i o n s a n d makes l i c e n s i n g recomrnen-

d a t i o n s , e n f o r c e s g a m b l i n g s t a t u t e s a n d r e g u l a t i o n s ,

co l lec t s t a x e s a n d f e e s , a n d p o l i c e s l i c e n s e d g a m b l i n g

e s t a b l i s h m e n t s . 56

The Board is directed by three full time members

appointed by the Governor who maintain a staff of more

than 300 employees, including auditors, investigators,

enforcement personnel, clerks and secretarial workers.

Because the investigation of applicants is believed to

prevent or reduce the influx of organized criminals,

the Board spends considerable resources on

investigative activities.

C. Gaming Policy Committee

The Gaming Policy Committee has advisory power only.

It is headed by the Governor and includes one member

representing the Commission and one from the Board, two

members representing the general public, two members

representing the gaming industry, one representing the

Nevada Senate and one representing the Nevada Assembly.

The following chart shows the organization of the

Gaming Control Agencies and staff .57

ORGANIZATION OF GAMING CONTROL AGENCIES AND S T A F F

GOVERNOR a GAMING POLICY COMMITTEE

L e g a l C o u n s e l t o B o a r d A d v i s o r y t o B o a r d and C o m m i s s i o n and Commi s s i on

STATE GAMING CONTROL BOARD

NEVADA GAMING COMMISSION

EXECUTIVE SECRETARY 1

ADMINISTRATION AND TAX AND L I C E N S E

C h i e f

AUDIT C h i e f

S P E C I A L I N V E S T 1 - GATIONS AND INTELLIGENCE

INVESTIGATIONS C h i e f

ENFORCEMENT C h i e f

1 C h i e f

D e p u t y C h i e f

7

TAX. AND L I C E N S E AND ECONOMIC

RESEARCH D e p u t y C h i e f

CARSON C I T Y D e p u t y Chief

LAS VEGAS D e p u t y

E l e c t r o n i c s P a y r o l l P e r s o n n e l A c c o u n t i n g T r a i n i n g

CORPORATE S E C U R I T I E S

D e p u t y C h i e f

4. Licensing

A. Who Requires a License

Anyone s e e k i n g t o " o p e r a t e , c a r r y o n , c o n d u c t , m a i n t a i n

o r e x p o s e f o r p l a y i n t h e S t a t e o f Nevada a n y game or s l o t

m a c h i n e , " or a n y o n e who r e c e i v e s d i r e c t l y or i n d i r e c t l y a n y

c o m p e n s a t i o n f o r " k e e p i n g , r u n n i n g , or c a r r y i n g on a n y game,

or s l o t m a c h i n e " m u s t o b t a i n a gaming l i c e n s e . 5 8 T h i s

i n c l u d e s a n y credi tor who c o u l d ( a s j u d g e d by t h e

Commiss ion ) e x e r t i n f l u e n c e o v e r t h e gaming e s t a b l i s h m e n t

b e c a u s e o f a n y i n d e b t e d n e s s o f t h e l i c e n s e e . When p u b l i c l y

t r a d e d c o r p o r a t i o n s e n t e r e d t h e c a s i n o m a r k e t t h e i r

o f f i c e r s , d i r e c t o r s , e m p l o y e e s or s h a r e h o l d e r s who c o u l d

" e x e r c i s e c o n s i d e r a b l e i n f l u e n c e or c o n t r o l " a l s o had t o b e

l i c e n s e d ,

B, Who Qualifies For A Gaminq License

The Nevada l a w s ta tes t h a t :

1. Any p e r s o n who t h e c o m m i s s i o n d e t e r m i n e s is q u a l i f i e d to r e c e i v e a l i c e n s e or be f o u n d s u i t a b l e u n d e r t h e p r o v i s i o n s o f t h i s c h a p t e r , h a v i n g d u e c o n s i d e r a t i o n f o r t h e p r o p e r p r o t e c t i o n o f t h e h e a l t h , s a f e t y , morars, g o o d o r d e r and g e n e r a l w e l f a r e o f t h e i n h a b i t a n t s o f t h e S t a t e o f Nevada a n d t h e d e c l a r e d p o l i c y o f t h i s s t a t e , may be i s s u e d a s t a t e gaming l i c e n s e or f o u n d s u i t a b l e . The b u r d e n o f p r o v i n g h i s q u a l i f i c a t i o n to r e c e i v e a n y l i c e n s e o r b e f o u n d s u i t a b l e is o n t h e a p p l i c a n t .

2. An a p p l i c a t i o n to r e c e i v e a l i c e n s e or b e f o u n d s u i t a b l e s h a l l n o t b e g r a n t e d u n l e s s t h e c o m m i s s i o n is s a t i s f i e d t h a t t h e a p p l i - c a n t is:

( a ) A p e r s o n o f g o o d c h a r a c t e r , h o n e s t y a n d i n t e g r i t y ;

( b ) A p e r s o n whose p r i o r a c t i v i t i e s , c r i m i n a l r e c o r d , i f a n y , r e p u t a t i o n , h a b i t s and a s s o c . i a t i o n s d o n o t p o s e a t h r e a t to t h e p u b l i c i n t e r e s t o f t h i s s t a t e or to t h e e f f e c t i v e r e g u l a t i o n and c o n t r o l o f gaming , o r create or e n h a n c e t h e d a n g e r s o f u n s u i t a b l e , u n f a i r or i l l e g a l p r a c - t i ces , m e t h o d s and a c t i v i t i e s i n t h e c o n d u c t o f gaming or t h e c a r r y i n g on o f t h e b u s i n e s s and f i n a n c i a l a r r a n g e m e n t s i n c i d e n t a l t h e r e t o ; a n d

( c ) I n a l l o t h e r r e s p e c t s q u a l i f i e d to be l i c e n s e d or f o u n d s u i t a b l e c o n s i s t e n t l y w i t h t h e d e c l a r e d p o l i c y of t h e s t a t e .

3. A l i c e n s e t o o p e r a t e a gaming e s t a b l i s h - ment s h a l l n o t be g r a n t e d u n l e s s t h e a p p l i - c a n t h a s s a t i s f i e d t h e commiss ion t h a t :

H e h a s a d e q u a t e b u s i n e s s p r o b i t y , c o m p e t e n c e and e x p e r i e n c e i n gaming or g e n e r a l l y ; and

( b ) The p r o p o s e d f i n a n c i n g o f t h e e n t i r e o p e r a t i o n is:

1) A d e q u a t e f o r t h e n a t u r e o f t h e p r o p o s e d o p e r a t i o n ; and

2 ) From a s u i t a b l e s o u r c e .

Any l e n d e r or o t h e r s o u r c e o f money or c r e d i t w h i c h t h e commiss ion f i n d s d o e s n o t meet t h e s t a n d a r d s set f o r t h i n s u b s e c t i o n 2 may b e deemed u n s u i t a b l e .

4. An a p p l i c a t i o n to r e c e i v e a l i c e n s e or be f o u n d s u i t a b l e c o n s t i t u t e s a r e q u e s t f o r a d e t e r m i n a t i o n o f t h e a p p l i c a n t ' s g e n e r a l c h a r a c t e r , i n t e g r i t y , and a b i l i t y to p a r t i c i - p a t e or e n g a g e i n , or be a s s o c i a t e d w i t h gaming. Any w r i t t e n or o r a l s t a t e m e n t made i n t h e c o u r s e o f a n o f f i c i a l p r o c e e d i n g of t h e b o a r d o r commiss ion by a n y member t h e r e o f o r a n y w i t n e s s t e _ s t i f y i n g u n d e r o a t h which is r e l e v a n t t o t h e p u r p o s e o f t h e p r o c e e d i n g is a b s o l u t e l y p r i v i l e g e d and d o e s n o t impose l i a b i l i t y f o r d e f a m a t i o n or c o n s t i t u t e a g r o u n d f o r r e c o v e r y i n any c i v i l a c t i o n .

5. The commiss ion may i n its d i s c r e t i o n - g r a n t a l i c e n s e to a c o r p o r a t i o n which h a s c o m p l i e d w i t h t h e p r o v i s i o n s of NRS 463.490 t o 463 ,530 , i n c l u s i v e .

C. Types of Gaming Licenses

F o u r t y p e s o f S t a t e gaming l i c e n s e s a r e i s s u e d :

R e s t r i c t e d - I s s u e d when t h e o p e r a t i o n c o n s i s t s o f 1 5

o r less s l o t m a c h i n e s and no o t h e r gaming. I t is

i s s u e d a n n u a l l y and is renewed q u a r t e r l y .

N o n r e s t r i c t e d - I s s u e d when t h e o p e r a t i o n c o n s i s t s o f

1 6 o r more s l o t m a c h i n e s o n l y , o r when t h e r e a r e o n e or

more games o r t a b l e s , w i t h o r w i t h o u t s l o t m a c h i n e s .

T h i s a l s o is i s s u e d a n n u a l l y and renewed q u a r t e r l y .

M a n u f a c t u r e r s a n d / o r D i s t r i b u t o r s - I s s u e d to

m a n u f a c t u r e r s , s e l l e r s , and d i s t r i b u t o r s o f gaming

d e v i c e s , e q u i p m e n t and m a t e r i a l s . I t is i s s u e d f o r one

y e a r .

S l o t Mach ine O p e r a t o r s - I s s u e d to i n d i v i d u a l s o r

b u s i n e s s e s who p l a c e s l o t m a c h i n e s i n l i c e n s e d

r e s t r i c t e d or n o n r e s t r i c t e d l o c a t i o n s on a l e a s e ,

r e n t a l or p e r c e n t a g e a g r e e m e n t . T h i s l i c e n s e is

r e n e w a b l e q u a r t e r l y . 59

D. Taxation Requirements- -

Gaming i n Nevada is t a x e d a t t h e c o u n t y , s t a t e and

f e d e r a l l e v e l s . The main s o u r c e s o f t a x a t i o n r e v e n u e l i s t e d

below d o n o t i n c l u d e income t a x e s , p r o p e r t y t a x e s or s a l e s

t a x e s : 60

i ) Q u a r t e r l y Coun ty L i c e n s e F e e s (NRS 463.390 )

- C a r d games ( s t u d and d raw p o k e r , b r i d g e , w h i s t , so lo and p a n g u i n g u i ) ; $25 m o n t h l y f o r e a c h t a b l e , p a y a b l e q u a r t e r l y i n a d v a n c e .

- O t h e r games s u c h a s t w e n t y - o n e , c r a p s , r o u l e t t e , e x c l u d i n g s lot m a c h i n e s ; $50 m o n t h l y e a c h game, p a y a b l e q u a r t e r l y i n a d v a n c e .

- S l o t m a c h i n e s ; $10 m o n t h l y f o r e a c h m a c h i n e , p a y a b l e q u a r t e r l y i n a d v a n c e .

i i ) Q u a r t e r l y P e r c e n t a g e F e e s (NRS 463 .370)

T h i s t a x is b a s e d on g r o s s gaming r e v e n u e . The c u r r e n t r a t e is:

- 3 p e r c e n t o f a l l g r o s s gaming r e v e n u e up t o $150 ,000 p e r q u a r t e r , p l u s ;

- 4 p e r c e n t o f a l l g r o s s gaming r e v e n u e a b o v e $ 1 5 0 , 0 0 0 , b u t less t h a n $400 ,000 e a c h q u a r t e r , p l u s ;

- 53 p e r c e n t o f a l l g r o s s gaming r e v e n u e e a c h q u a r t e r a b o v e $400,000.

i i i ) A n n u a l S t a t e L i c e n s e Fee (NRS 463 .380)

B a s e d on t h e number o f games o p e r a t e d by an e s t a b l i s h m e n t , a S t a t e L i c e n s e F e e is c h a r g e d :

1 game $100 2 games 200 3 games 4 00 4 games 750 5 games 1 , 7 5 0 6 o r 7 games 3 ,000 8 t o 1 0 games 6 , 0 0 0

11 t o 1 6 games 1 , 0 0 0 f o r e a c h game 1 7 o r more games 1 6 , 0 0 0 p l u s $200 f o r

e a c h game i n e x c e s s o f 1 6

O r i g i n a l l y t h e Annual S t a t e L i c e n s e F e e s wen t i n t o t h e S t a t e G e n e r a l Fund f o r u s e by t h e S t a t e ; now, t h e f e e s a r e d i v i d e d e q u a l l y among t h e 1 7 c o u n t i e s , a f t e r a d m i n i s t r a t i v e costs h a v e b e e n d e d u c t e d .

i v ) Q u a r t e r l y S l o t Machine L i c e n s e F e e s (NRS 463.373 and NRS 463.375) -

T h e r e is a q u a r t e r l y f e e b a s e d on t h e number o f s l o t m a c h i n e s i n o p e r a t i o n .

- n o t more t h a n 1 5 s l o t m a c h i n e s and no o t h e r games: $35 q u a r t e r l y i n a d v a n c e f o r e a c h mach ine ( i n l i e u of p e r c e n t a g e t a x f o r t h e s e l i c e n s e e s ) ;

games: $20 q u a r t e r l y i n a d v a n c e f o r e a c h m a c h i n e .

v ) Q u a r t e r l y L i c e n s e F e e s on G a m e s (NRS 4 6 3 . 3 8 3 ) 1 game $12.50 2 games 25 .00 3 games 50 .00 4 games 93.75 5 games 218.75 6 or 7 games 375.00 8 t o 1 0 games 750.00

11 t o 1 6 games 125 .00 f o r e a c h game f r o m 1 t h r o u g h 1 6 , i n c l u s i v e

1 7 t o 26 games 2 , 0 0 0 . 0 0 p l u s $ 1 , 2 0 0 f o r e a c h game 1 7 t h r o u g h 26

27 t o 3 5 games 1 4 , 0 0 0 . 0 0 p l u s $700 f o r e a c h game 27 t h r o u g h 3 5

36 games a n d o v e r 2 0 , 0 0 0 . 0 0 p l u s $ 2 5 f o r e a c h game o v e r 3 5

v i ) C a s i n o E n t e r t a i n m e n t Tax (NRS 463.401 )

A 1 0 % t a x a p p l i e s t o a l l s a l e s o f m e r c h a n d i s e , f o o d , b e v e r a g e s and a d m i s s i o n s c h a r g e s f o r e n t e r t a i n m e n t e x c e p t i n gaming e s t a b l i s h m e n t s h a v i n g 50 o r less s l o t m a c h i n e s a n d / o r n o t more t h a n t h r e e games .

v i i ) F e d e r a l Tax Stamp on S l o t M a c h i n e s (NRS 4 6 3 . 3 8 5 )

B e t w e e n 1 9 7 2 a n d J u l y 1, 1 9 8 0 a l l s lo t m a c h i n e l i c e n s e e s had to p a y $250 p e r m a c h i n e to I n t e r n a l Revenue f o r a F e d e r a l t a x s t a m p . (Nevada wou ld k e e p 80% o r $200 ; F e d e r a l Governmen t t o o k 2% or $ 5 0 ) . On J u l y 1, 1 9 8 0 , t h e F e d e r a l t a x w a s - r e p e a l e d . T h e s e f u n d s a re d e d i c a t e d f o r s p e c i f i e d e d u c a t i o n f u n d s r e q u i r e m e n t s .

v i i i ) Race W i r e S e r v i c e L i c e n s e F e e (NRS 463 .450)

The d i s s e m i n a t i o n o f h o r s e r a c i n g i n f o r m a t i o n ( race w i r e s e r v i c e s ) w e r e p l a c e d u n d e r t h e c o n t r o l o f t h e S t a t e i n 1949 . A l i c e n s e f e e o f $10 p e r d a y f o r e a c h race c o v e r e d by t h i s s e r v i c e is c h a r g e d . T h i s s e r v i c e i s e s s e n t i a l f o r OTB a n d I.T.B. o p e r a t i o n s .

i x ) P a r i - M u t u a l W a g e r i n g (NRS 464 a n d 4 6 6 )

P a r i - m u t u a l e v e n t s a r e t'axed b a s e d on t h e t o t a l w a g e r s a t a c e r t a i n p e r c e n t a g e , i .e . , J a i A l a i is t a x e d a t 3% o f t o t a l w a g e r s .

C r i t i c i s m of T h e Nevada Model

T h r e e s t r u c t u r a l and r e g u l a t o r y d e f i c i e n c i e s a p p e a r

w i t h i n t h e Nevada mode l .

A, D i s c r e t i o n a r y Power of t h e Commiss ion

I t is a r g u e d by s u p p o r t e r s o f t h e Nevada model t h a t t h e

Commission r e q u i r e s v a s t d i s c r e t i o n a r y power i n o r d e r t o

combat c o r r u p t i o n and o r g a n i z e d crime. A t t e m p t s t o res t r ic t

t h i s power h a v e t r a d i t i o n a l l y been u n s u c c e s s f u l i n Nevada.

( i ) The R o s e n t h a l C a s e

The Board a d v i s e d t h e Commission t h a t R o s e n t h a l ' s

a p p l i c a t i o n f o r a l i c e n s e s h o u l d b e d e n i e d , b a s e d on a

p r e v i o u s c o n v i c t i o n f o r c o n s p i r a c y t o b r i b e an a m a t e u r

a t h l e t e and o t h e r " u n s u i t a b l e " v i o l a t i o n s . The

Commission d e n i e d t h e l i c e n s e and R o s e n t h a l a p p e a l e d t o

t h e Nevada D i s t r i c t C o u r t , wh ich r e v e r s e d t h e

Commission d e c i s i o n on t h e b a s i s t h a t he had been

d e n i e d p r o c e d u r a l d u e p r o c e s s a s g u a r a n t e e d by t h e

F o u r t e e n t h Amendment t o t h e U.S. C o n s t i t u t i o n .

The S t a t e o f Nevada and t h e Gaming Commission

a p p e a l e d t o t h e Nevada Supreme C o u r t , which h e l d t h a t :

W e v i e w gaming ( a s ) a m a t t e r r e s e r v e d t o t h e s t a t e s w i t h i n t h e mean ing o f t h e T e n t h Amendment t o t h e U n i t e d S t a t e s C o n s t i t u t i o n . W i t h i n t h i s c o n t e x t w e . f i n d no room f o r f e d e r a l l y p r o t e c t e d - c o n s t i t u t i o n a l r i g h t s . T h i s d i s t i n c - t i v e l y s t a t e p r o b l e m is to be g o v e r n e d , c o n t r o l l e d and r e g u l a t e d by t h e s t a t e l e g i s l a t u r e and to t h e e x t e n t t h e l e g i s - l a t u r e d e c r e e s , by t h e Nevada C o n s t i t u t i o n . I t is a p p a r e n t t h a t i f w e were t o r e c o g n i z e f e d e r a l p r o t e c t i o n s o f

t h i s w h o l l y p r i v i l e g e d s t a t e e n t e r p r i s e , n e c e s s a r y s t a t e c o n t r o l wou ld be s u b s t a n - t i a l l y d i m i n i s h e d and f e d e r a l i n t r u s i o n

- i n v i t e d . 6 1

On t h e b a s i s o f R o s e n t h a l , t h e o n l y way a n

a g g r i e v e d a p p l i c a n t may s e e k j u d i c i a l r e v i e w is to

c h a l l e n g e t h e l i c e n s i n g s t a t u t e as b e i n g

u n c o n s t i t u t i o n a l - - n o t by q u e s t i o n i n g t h e a d v e r s e

d e c i s i o n o f t h e c o m m i s s i o n . I n s u p p o r t o f t h e

R o s e n t h a l d e c i s i o n , S h a f f e r s t a t e s :

W h i l e i n e q u a l i t i e s t o t h e i n d i v i d u a l may o c c u r u n c h e c k e d , a n y i n d i v i d u a l i n t e r - ests a r e f a r o u t w e i g h e d by t h e p u b l i c i n t e r e s t i n v o l v e d . A s R o s e n t h a l exemp- l i f i es , t h e n e e d f o r t h e Nevada Gaming Commiss ion t o h a v e a b s o l u t e d i s c r e t i o n - a r y power i n l i c e n s u r e is e s s e n t i a l i n o r d e r t o e f f e c t i v e l y p r e v e n t c r i m i n a l i n f i l t r a t i o n i n t o a n area w i t h a h i s t o r y o f v u l n e r a b i l i t y t o c r i m i n a l e l e m e n t s . The u s e o f l i c e n s i n g to c o n t r o l c r i m i n a l i n t r u s i o n n o t o n l y e x i s t s a t t h e l i c e n - s u r e s t a g e , b u t c o n t i n u e s o n c e a gaming l i c e n s e h a s b e e n g r a n t e d . 6 2

( i i ) L i s t o f E x c l u d e d P e r s o n s

The " L i s t o f E x c l u d e d P e r s o n s " is a p r o v i s i o n

w h i c h t h e Commiss ion c a n e x c l u d e or e jec t p e r s o n s known

f o r d e a l i n g w i t h a c r i m i n a l s y n d i c a t e . Once a name is

o n t h i s l i s t , a l l gaming l i c e n s e e s m u s t bar t h e i n d i v i -

d u a l . T h i s l i s t was i n t e n d e d to p r o t e c t t h e c r e d i b i -

l i t y o f t h e c l u b a n d k e e p t h e i n d u s t r y " c l e a n " . I n

r e a l i t y , , u n t i l s u c c e s s f u l l y f o u g h t i n New J e r s e y , t h e

" u n s a v o r y " p e r s o n s who were b e i n g b l a c k l i s t e d were n o t

c r i m i n a l s b u t were s u c c e s s f u l card c o u n t e r s who w e r e

c o s t i n g t h e c a s i n o s more t h a n t h e y w i s h e d to a f f o r d . 6 3

Appointment of Interim Supervisors

The Nevada Commission also decides which gaming

establishments may remain open pending judicial review

of a Commission decision. The Commission can petition

the district court for appointment of a supervisor.

The Commission decides if a supervisor is to be chosen,

chooses the individual and awaits the judicial review

of the Commission's decision, which is limited to the

Commission's record of the hearing.

B. R e l a t i o n s h i n B e t w e e n t h e B o a r d a n d t h e C o m m i s s i o n

A division in responsibility exists between the Board

and the Commission. This separation of powers was designed

in part to ensure against the easy corruption of either

agency. However, the separation is more theoretical than

real. The Board and the Commission are distinct units, but

some blurring occurs :

- the Commission issues regulations which are drawn up and enforced by the Board;

- the Board and Commission share the same legal counsel ;

- members from each branch meet to discuss issues and individuals;

- the Board has never made a positive recommendation that was overturned by the Commission. However, the Commission has rejected negative recommendations by the Board.

Perhaps the greatest difficulty is the ambiguity of the

relationship between the two sections. As Skolnick states :

It is one thing clearly to combine inves- tigation and judging in an administrative agency. It is another clearly to separate these functions. But the present Nevada

system is a will-of-the-wisp, sometimes combining, sometimes separating. All too often the process ends up mainly confus- ing--to the board and its agents the commission, and the applicants. 6 4

The emphasis is on control while encouraging the prosperity

of the industry. This is in keeping with a reliance on

licensing provisions as the main gaming control method in

~ e v a d a ~ ~ rather than continual intensive supervision of the

gaming establishments. The discretionary latitude of the

Commission has been acknowledged and the potential for

corruption recognized. Licenses may therefore in some

instances be obtained to the detriment of the industry.

Even where corruption is not strictly an issue, the politi-

cal power or financial status of an applicant may sway the

Commission. The Nevada Supreme Court decided against

Rosenthal; however, as an indication of the calibre and

prestige of the lawyers that the casino applicants can hire,

it is noted that Rosenthal was represented by Erwin Griswold

--former Dean of Harvard Law School and former Solicitor

General of the United States.

Conflict of Interest

(i) Post Employment Restrictions

Members of the casino Commission are forbidden to

have any pecuniary interests in common with holders of

gaming licenses. However, there are no limits on

post-employment opportunities. This is because so many

of the jobs in the state of Nevada are in some way - related to casino operations. It is argued that the

four year restriction in operation in New Jersey might

mean that capable people would not accept appointments

on the Gaming Commission. Shaffer suggests a limited

restriction system which would prohibit members for two

y e a r s f r o m employmen t w i t h p a r t i e s who came b e f o r e t h e

B o a r d or Commiss ion d u r i n g t h a t m e m b e r ' s t e n u r e , a n d

t h e n o n l y i f t h a t a p p e a r a n c e was r e g a r d i n g a non-

r o u t i n e mat ter . 6 6

A s S k o l n i c k s t a ted i n House o f C a r d s :

I n Nevada . . . n o t o n l y do a g e n c y p e r s o n n e l c o n s c i o u s l y u s e t h e i r a p p o i n t m e n t s as s t e p p i n g s t o n e s t o more l u c r a t i v e jobs i n t h e r e g u l a t e d i n d u s t r y , t h e a g e n c i n e f f e c t e n c o u r a g e s them t o do so. 6 y

( i i ) I n d u s t r y C a p t u r e o f I t s R e g u l a t o r s

The i s s u e o f f u t u r e j o b s is h i g h l y p r o b l e m a t i c i n

t h a t i t b u i l d s up a l l i a n c e s b e t w e e n t h e Commiss ion and

t h e g a m b l i n g i n d u s t r y it r e g u l a t e s . The n a t u r e o f t h e

i n t e r a c t i o n b e t w e e n t h e s e t w o a g e n c i e s e n c o u r a g e s t h e

Commiss ion t o move away f r o m b e i n g a s t r i c t l y n e u t r a l

r e g u l a t o r a n d become i n s t e a d , a "manage r" f o r t h e

i n d u s t r y . The e x c h a n g e o f p e r s o n n e l b e t w e e n c a s i n o a n d

g o v e r n m e n t r e g u l a t o r y a g e n c i e s , t h e f r e q u e n c y o f

p e r s o n a l c o n t a c t a n d t h e p o s s i b l e a n t i c i p a t i o n o f

r e t u r n i n g a g a i n to p r i v a t e employmen t , r e s u l t i n a

b u i l d i n g u p o f f e e l i n g s o f comraderie b e t w e e n t h e t w o

sides. T h i s is n o t u n i q u e to g a m b l i n g c o m m i s s i o n s , b u t

is t r u e o f m o s t l o n g s t a n d i n g r e g u l a t o r y a g e n c i e s . I t

i s made e v e n more i n e v i t a b l e i f t h e s t a t e o f f i c i a l s

h o l d p o o r l y p a i d p o s i t i o n s i n a n area w h e r e t h e same

s k i l l s i n p r i v a t e b u s i n e s s command l a r g e sa la r i es .

Many w r i t e r s s u g g e s t t h a t Nevada Commiss ion

s a l a r i e s o u g h t to be made c o m p e t i t i v e w i t h p r i v a t e

c a s i n o s a l a r i e s . 68 A documen t e n t i t l e d R e g u l a t i o n o f

Gaming p u b l i s h e d by t h e S ta te o f Nevada c o m p a r e d t h e

s a l a r i e s b e t w e e n t h e New J e r s e y Gaming C o n t r o l Boa rd

a n d t h e Nevada Gaming C o n t r o l B o a r d .

N. JERSEY GAMING TITLE CONTROL BOARD

( 1 / 7 9 ) .

C h a i r m a n o f t h e Boa rd 6 0 , 0 0 0 D i v i s i o n C h i e f 4 2 , 4 7 9 D i v i s i o n D e p u t y C h i e f 3 6 , 9 2 6 S e n i o r A g e n t 2 7 , 5 5 9 A g e n t I1 2 3 , 8 0 6 A g e n t I 2 0 , 5 6 3

NEVADA GAMING CONTROL BOARD

( 7/79

Even w i t h i n Nevada t h e a u d i t o r s o f t h e Nevada Gaming

C o n t r o l Boa rd were p a i d l o w e r s a l a r i e s t h a n t h e Nevada

P u b l i c S e r v i c e Commiss ion A u d i t s t a f f . 69 T h e r e f o r e ,

t h e g a m i n g Commiss ion o f Nevada f a i l e d to be c o m p e t i -

t i v e w i t h a n y o f t h e ma in a l t e r n a t i v e s o u r c e s o f

employmen t - - i .e. gaming s a l a r i e s i n N e w J e r s e y , Nevada ,

or c o m p a r a b l e p o s i t i o n s i n Nevada o u t s i d e o f t h e gaming

f i e l d .

The Commiss ion members c a n c h o o s e t o s t a y u n d e r -

p a i d a n d c o m m i t t e d to r e g u l a t o r y c o n t r o l , q u i t and t a k e

b e t t e r p a y i n g employmen t w i t h t h e c a s i n o s , r e m a i n w i t h

t h e Commiss ion b u t i d e n t i f y c l o s e l y w i t h t h e g a m b l i n g

i n d u s t r y , or s t a y o f f i c i a l l y w i t h t h e Commiss ion b u t be

p u t on t h e p a y r o l l o f t h e c a s i n o s . As S k o l n i c k a n d

Dombrink s ta te :

A l t h o u g h t h e Board may a t t e m p t t o e n f o r c e gaming r e g u l a t i o n s , t h e p o t e n - t i a l l y s e n s i t i v e Gaming Commiss ion c a n c h o o s e t o i g n o r e Boa rd recommenda- t i o n s . . . Conuniss ion v o t e s t o o v e r r i d e B o a r d recommended l i c e n s e d e n i a l s o r r e v o c a t i o n s p r o m p t e d c r i t i c i sm t h a t t h e Commiss ion was p o l i t i c a l , weak a n d - u n s u p p o r t i v e o f t h e b o a r d . The w i r e t a p t r a n s c r i p t s of c o n v e r s a t i o n s b e t w e e n K a n s a s C i t y o r g a n i z e d crime f i g u r e s a n d L a s V e g a s c a s i n o o p e r a t o r s h i n t e d a t a more s i n i s t e r s i t u a t i o n : g a m i n g c o n t r o l o f f i c i a l s had a p r i c e and w e r e o p e n t o i n £ l u e n c e , a r t i c u l a r l y t h r o u g h f r i e n d - s h i p t i e s . 7 8

IV. NEW JERSEY

BACKGROUND

The s t a t e d p u r p o s e o f t h e New J e r s e y c a s i n o e n t e r p r i s e

i s s i g n i f i c a n t l y d i f f e r e n t f r o m t h a t o f Nevada . U n l i k e wha t

Rose r e f e r s t o a s t h e " f r e e e n t e r p r i s e " o r i e n t a t i o n w i t h its

e m p h a s i s on l i c e n s i n g , r e g u l a r a u d i t s a n d i n v e s t i g a t i o n s , 71

New J e r s e y ( a n d P u e r t o R i c o ) f o c u s on " t o ~ r i s t a r e a r e v i t a l -

i z a t i o n " as t h e i m p e t u s f o r t h e c a s i n o i n d u s t r y . The New

J e r s e y s t a t u t e s ta tes t h a t c a s i n o g a m b l i n g is i n t e n d e d t o

i m p r o v e t h e g e n e r a l w e l f a r e , h e a l t h a n d p r o s p e r i t y o f t h e

s t a t e a n d t h e r e f o r e same as a u n i q u e t o o l o f u r b a n r e d e v e l -

o p m e n t . T h e l e g i s l a t i o n a t t e m p t s to i n s u r e t h i s r o l e by

r e q u i r i n g t h a t c a s i n o s i n N e w J e r s e y b e r e s t r i c t ed t o

A t l a n t i c C i t y a n d b e h o u s e d w i t h i n a h o t e l . The ' h o t e l '

r e q u i r e m e n t is d e s i g n e d to:

a s s u r e t h a t t h e e x i s t i n g n a t u r e and t o n e o f t h e h o s p i t a l i t y i n d u s t r y i n A t l a n t i c C i t y is p r e s e r v e d a n d t h a t t h e c a s i n o rooms l i c e n s e d ... are a l w a y s o f f e r e d and m a i n t a i n e d as a n i n t e g r a l e l e m e n t o f s u c h h o s p i t a l i t y f a c i l i - t i e s , r a t h e r t h a n as t h e i n d u s t r y u n t o them- s e l v e s t h a t t h e h a v e become i n o t h e r j u r i s d i c t i o n s . 7 3

A t t h e r e q u e s t o f t h e G o v e r n o r , t h e A t t o r n e y G e n e r a l

a n d t h e T r e a s u r e r , a s t a f f p o l i c y g r o u p was f o r m e d to s t u d y

t h e c a s i n o i n d u s t r y e l s e w h e r e and t o " i d e n t i f y , d e s c r i b e and

s e e k s o l u t i o n s t o p r o b l e m s " t h a t e x i s t e d i n t h o s e j u r i s d i c -

t i o n s . The p o l i c y g r o u p had t h e a s s i s t a n c e of e i g h t w o r k i n g

g r o u p s composed o f members o f t h e D i v i s i o n o f Law, C r i m i n a l

J u s t i c e a n d S ta te P o l i c e . I t is s i g n i f i c a n t t h a t t h i s g r o u p

i d e n t i f i e d , a t t h e o n s e t , t h e n e t w o r k o f p o t e n t i a l p r o b l e m s

t h a t a c a s i n o i n d u s t r y c a n create. T h e y d e v e l o p e d r e g u l a -

t o r y s c h e m e s t o " c a p t u r e a n d e n c o u r a g e . . . t h e b e s t a s p e c t s o f

c a s i n o g a m b l i n g a r o u n d t h e w o r l d . " However , t h e c a s i n o

i n d u s t r y i n A t l a n t i c C i t y p r e s e n t l y i n c l u d e s many o f t h e

f a i l u r e s a n d s h o r t c o m i n g s i d e n t i f i e d by t h e p o l i c y g r o u p .

The c r i t i c a l d e c i s i o n to b e made is w h e t h e r some o f t h e

n e g a t i v e c o n s e q u e n c e s are i n f a c t immune to r e g u l a t i o n a n d

c o n t r o l a n d a re i n f a c t d i r e c t , i n h e r e n t , p r o d u c t s o f t h e

c a s i n o i n d u s t r y .

The p o l i c y g r o u p a c k n o w l e d g e d a t l e a s t s i x i s s u e s t h a t

t h e i r c o m p r e h e n s i v e r e g u l a t o r y s c h e m e s would h a v e to

r e s o l v e :

1. a n i n c r e a s e i n crime--street crime p l u s o r g a n i z e d crime;

2. s o c i a l d i s l o c a t i o n - - e l d e r l y and m i n o r i t i e s ;

3 , c o n s u m e r p r o t e c t i o n ;

4 . u n w i s e d e v e l o p m e n t ;

5. n e g a t i v e e n v i r o n m e n t a l r e s u l t s ;

6 . i n e q u i t a b l e s t r a i n s o n p u b l i c r e s o u r c e s ( p r o t e c t i o n o f S t a t e r e v e n u e ) .

The a i m was to a c h i e v e a p e r m a n e n t r e v i t a l i z a t i o n o f t h e

t o u r i s t a n d c o n v e n t i o n i n d u s t r i e s w i t h f ew d e t r i m e n t a l

s i d e - e f f e c t s . A s t h e r e p o r t s t a t e s :

T h e i n t e r e s t s of t h e S t a t e i n t h e s u c c e s s o f c a s i n o g a m b l i n g are n o t c o t e r m i n o u s w i t h t h e i n t e r e s t s o f t h e e n t r e p r e n e u r . w h i l e t h e l a t t e r m e a s u r e s a n e t r e t u r n o r i n v e s t m e n t a g a i n s t t h e d e g r e e o f r i s k , t h e S t a t e m u s t m e a s u r e soc ia l a n d e c o n o m i c b e n e f i t s a g a i n s t o f f s e t t i n g soc ia l e c o n o m i c a n d e n v i r o n m e n t a l costs. 75

T h i s r e p o r t made s e v e r a l c r i t i c a l r e c o m m e n d a t i o n s wh ich

were s u b s e q u e n t l y e i t h e r m o d i f i e d or a b a n d o n e d i n t h e

i n t e r e s t s o f g r e a t e r f r e e d o m f o r t h e c a s i n o i n d u s t r y . A f t e r

a p p r o x i m a t e l y f i v e f u l l y e a r s o f o p e r a t i o n , it is becoming

o b v i o u s t h a t t h e r e was m e r i t t o t h e s e c o n s i d e r a t i o n s . The

I n t e r i m R e p o r t ( 1 9 7 7 ) o f t h e p o l i c y g r o u p recommended:

1. a g a i n s t c o n d i t i o n a l ( o r t e m p o r a r y ) l i c e n s e s ; 7 4

2 . t h e e x c l u s i o n or " b l a c k l i s t i n g " of p e r s o n s w i t h c r i m i n a l b a c k g r o u n d s a n d a s s o c i . a t i o n ~ ; ~ ~

3 . t h a t c r e d i t s h o u l d b e r es t r ic ted t o c h e q u e c a s h i n g w i t h d e p o s i t r e q u i r e d two b u s i n e s s d a y s a f t e r d r a w i n g ; 76

4 . a p r o h i b i t i o n o n t i p p i n g .

1. C o n t r o l of C a s i n o s I n New Jersey: The R e q u l a t o r y S t r u c t u r e

The s t r u c t u r e o f c o n t r o l i n N e w J e r s e y c o n s i s t s o f t w o

g o v e r n m e n t a g e n c i e s : t h e C a s i n o C o n t r o l Commiss ion (The

C o m m i s s i o n ) ; a n d t h e D i v i s i o n o f Gaming E n f o r c e m e n t ( T h e

D i v i s i o n ) .

A, The C a s i n o C o n t r o l C o m m i s s i o n

The Commiss ion is a u t h o r i z e d to h e a r a n d d e c i d e a p p l i -

c a t i o n s f o r l i c e n s e s , t o c o n d u c t h e a r i n g s p e r t a i n i n g to

c i v i l v i o l a t i o n s o f t h e a c t , t o col lect a l l l i c e n s e f e e s a n d

t a x e s , a n d t o p o l i c e t h e o p e r a t i o n o f c a s i n o s . T h i s p a n e l

is made u p o f f i v e members who m u s t be c i t i z e n s o f t h e

U n i t e d S t a t e s a n d r e s i d e n t s o f New J e r s e y . N o member may

h o l d a n e l e c t i v e or a p p o i n t i v e o f f i c e i n f e d e r a l , s t a t e or

local g o v e r n m e n t a n d no more t h a n t h r e e members may b e o f

t h e same p o l i t i c a l a f f i l i a t i o n . 77

To c o n t r o l t h e b i a s i n g e f f e c t o f Commiss ion members

d e s i r i n g f u t u r e employmen t w i t h i n t h e gaming i n d u s t r y , t h e

s t a t u t e s p e c i f i e d t h a t :

n o member o f t h e Commiss ion may h o l d a n y d i r e c t or i n d i r e c t i n t e r e s t i n , or be e m p l o y e d b y , a n y a p p l i c a n t o r b y a n y p e r s o n l i c e n s e d by or r e g i s t e r e d w i t h t h e Commiss ion f o r a p e r i o d o f f o u r y e a r s commencing on t h e d a t e h i s m e m b e r s h i p on t h e Commiss ion t e r m i - n a t e s . 78

Commission: Legal, Financial, Licensing and Administra-

tive.79

NEW J E R S E Y CASINO CONTROL COMMISSION TABLE OF ORGANIZATION

LEGAL D I V I S I O N

ADVISORY S E C T I O N

HEARINGS & L I T I G A T I O N

S E C T I O N

L E G I S L A T I O N AND PLANNING

SECTION

AFFIRMATIVE ACTION

S E C T I O N

F I N A N C I A L EVALUATION AND CONTROL D I V I S I O N

I

F INANC I A L E VALUATION S E C T I O N

L I C E N S I N G D I V I S I O N

EMPLOYEE CAS I N 0 ENTERPRISE L I C E N S I N G L I C E N S I N G L I C E N S I N G S E C T I O N S E C T I O N S E C T I O N

ADMINISTRATIVE D I V I S I O N

ADMIN . SECTION

BUDGET & F I S C A L PERSONNEL

INFORMATION ]

B. The D i v i s i o n of Gaminq E n f o r c e m e n t

The D i v i s i o n is a c t u a l l y a n a g e n c y o f t h e O f f i c e o f t h e

A t t o r n e y G e n e r a l a n d t h e Director o f t h e D i v i s i o n is a n

A s s i s t a n t A t t o r n e y G e n e r a l . The D i v i s i o n i n v e s t i g a t e s

a p p l i c a n t s f o r l i c e n s e s a n d c o n d u c t s e x t e n s i v e i n v e s t i g a -

t i o n s o f t h e a p p l i c a n t s ( a t t h e a p p l i c a n t s ' e x p e n s e ) f o r

l i c e n s e s . The D i v i s i o n a l s o r e v i e w s c a s i n o o p e r a t i o n s

t h r o u g h o b s e r v a t i o n a n d a u d i t s o f t h e o p e r a t i o n s . I n

t h e o r y , t h e N e w J e r s e y s y s t e m e m p h a s i z e s t h e i m p o r t a n c e o f a

b i f u r c a t e d s t r u c t u r e o f c o n t r o l w i t h a c l ea r s e p a r a t i o n

b e t w e e n t h e g r o u p w h i c h d o e s t h e i n v e s t i g a t i o n s ( t h e

D i v i s i o n ) a n d t h e g r o u p w h i c h makes d e c i s i o n s b a s e d on t h e

r e s u l t s ( t h e C o m m i s s i o n ) . The i n t e n t b e h i n d t h i s s e p a r a t i o n

was t o make it h a r d e r f o r c a s i n o i n f l u e n c e to e f f e c t t h e

d e c i s i o n s o f t h e r e g u l a t o r y a g e n c i e s . The f o l l o w i n g c h a r t

shows t h e b r a n c h e s or o r g a n i z a t i o n w i t h i n t h e D i v i s i o n o f

Gaming E n f o r c e m e n t .

2. L i c e n s i n q

A. Who R e q u i r e s a L i c e n s e

The r e g u l a t i o n s s p e c i f y t h a t o w n e r s , e m p l o y e e s , c o r p o r -

a t i o n s , sel lers a n d d i s t r i b u t o r s o f g a m b l i n g e q u i p m e n t m u s t

o b t a i n gaming l i c e n s e s . The owner m u s t p r o v e t h a t h e :

- owns a n a p p r o v e d h o t e l ;

- h a s t h e f i n a n c i a l means a n d b u s i n e s s c o m p e t e n c e t o r u n a c a s i n o ;

- h a s a "good r e p u t a t i o n f o r h o n e s t y a n d i n t e g r i t y . "

B. L i c e n s i n g P r o c e d u r e

The l i c e n s i n g i n v e s t i g a t i o n is e x t r e m e l y c o s t l y ( o f t e n close to o n e m i l l i o n d o l l a r s t o a p p l y and p e r h a p s f i f t y

m i l l i o n d o l l a r s t o o p e n b e f o r e a n y r e t u r n s a r e g a i n e d ) .

T h i s e x p e n s e is b o r n by t h e a p p l i c a n t w h e t h e r or n o t t h e

a p p l i c a t i o n is s u c c e s s f u l s i n c e by t h e t i m e a d e c i s i o n on

t h e a p p l i c a t i o n is made, t h e l a n d h a s b e e n o b t a i n e d and i n

some cases t h e c a s i n o is o p e r a t i n g u n d e r a t e m p o r a r y

l i c e n s e . D e t a i l e d i n f o r m a t i o n r e l a t e d t o f a m i l y , h a b i t s ,

c h a r a c t e r , c r i m i n a l arrest r e c o r d , b u s i n e s s a c t i v i t i e s ,

f i n a n c i a l a f f a i r s a n d b u s i n e s s , p r o f e s s i o n a l , a n d . p e r s o n a 1

associates f o r a t e n - y e a r p e r i o d p r e c e d i n g t h e f i l i n g f o r

t h e a p p l i c a t i o n m u s t b e p r o v i d e d . Once g r a n t e d , t h e l i c e n s e

i s t r e a t e d a s a r e v o c a b l e p r i v i l e g e w i t h no p r o p e r t y r i g h t s

a t t a c h e d .

T h r o u g h o u t t h e o p e r a t i o n o f t h e c a s i n o , l i c e n s e e s a n d

r e g i s t r a n t s h a v e a " c o n t i n u i n g d u t y t o p r o v i d e a n y assis-

t a n c e or i n f o r m a t i o n r e q u i r e d by t h e Commiss ion o r D i v i s i o n ,

a n d to c o - o p e r a t e i n a n y i n q u i r y o r i n v e s t i g a t i o n c o n d u c t e d

by t h e D i v i s i o n o r t h e C o m m i s s i ~ n . " ~ ~ The c a s i n o o p e r a t o r

m u s t k e e p p r o p e r f i n a n c i a l r e c o r d s t h a t w i l l be a v a i l a b l e

f o r i n s p e c t i o n b y t h e Commiss ion . F a i l u r e t o s a t i s f y t h e

Commiss ion i n t e r m s o f i n t e r n a l f i n a n c i a l i n v e s t i g a t i o n s , o r

t h e D i v i s i o n i n terms o f i n s p e c t i o n o f p r e m i s e s o r i n s p e c -

t i o n o f p e r s o n s a s s o c i a t e d w i t h t h e o p e r a t i o n , c o u l d r e s u l t

i n r e v o c a t i o n o f t h e l i c e n s e , a t w h i c h t i m e t h e Commiss ion

may a p p o i n t a " c o n s e r v a t o r " ( s i m i l a r t o Nevada 's

' ' s u p e r v i s o r " ) 8 1 t o r u n t h e c a s i n o w h i l e a n i n v e s t i g a t i o n is

u n d e r t a k e n .

C. S i z e of the A t l a n t i c Ci ty Casino Industry

A s o f t h e e n d o f 1 9 8 2 , t h e r e w e r e 9 o p e r a t i n g c a s i n o s

i n A t l a n t i c C i t y . The f o l l o w i n g t a b l e s i n d i c a t e t h e d e g r e e

o f i n v e s t m e n t , e x t e n t o f h i r i n g , a n d a l i m i t e d es t imate o f

t h e t o u r i s t p o p u l a t i o n b a s e d on b u s s t a t i s t i c s .

and s l o t m a c h i n e s w h i c h e a c h c a s i n o p r o v i d e s and t h e t h i r d

t a b l e p r e s e n t s s t a t i s t i c s on t h e f i x e d a s s e t i n v e s t m e n t i n

~ t l a n t i d C i t y p e r c a s i n o f rom 1978 t o 1 9 8 2 .

THE NEW JERSEY CASINO INDUSTRY TAB= GAMES AND SLOT MACHINES I N OPERATION

R e s o r t s 1982 - 1981 -

Tahle Games:

Rlackj ack 84 8 4

Craps 20 20

R o u l e t t e 11 10

Rig S i x 6 6

Baccarat

T o t a l Table Games 124 123

S l o t Machines:

$.05 s l o t machines 135 9 3

$.25 s l o t machines 1,071 1,160

$1.00 s l o t machines 309 3 16

Other s l o t machines1 234 180

T o t a l S l o t Machines 1,749 1,749

AS OF DECEMBER 31, 1982 AND 1981*

Caesars 1982 1981 -

B a l l y 1982 1981

Sands Harrah' s 1982 1981 1982 1981

Casino Square Footage 60,000 60,000 49,061 48,045 60,000 60,000 38,336 32,236 44,698 44,090 --

I I n c l u d e s $.lo and $.50 s l o t machines and a l l denominations of p r o g r e s s i v e , v ideo poker, v ideo b lack jack , v i d e o d i c e and s l o t machines. (Video d i c e and b i g b e r t h a s l o t machines were in t roduced dur ing 1982.)

* New J e r s e y , Casino Cont ro l Commission Annual Repor t , December 31, 1982, pp. 16-17

Table Games:

Blackj ack

Craps

Roulet te

Big Six

Baccarat

Total Table Games

S l o t Machines:

$.05 s l o t machines

$.25 s l o t machines

$1.00 s l o t machines

Other s l o t machines1

Tota l S l o t Machines

THE NEW JERSEY CASINO INDUSTRY TABLE GAMES AND SLOT MACHINES I N OPERATION

AS OF DECEMBER 31, 1982 AND 1981*

Golden Nugget 1982 1981

Playboy 1982 1981

Clar idge 1982 1981

Tropicana T o t a l lnd;stry 1982 1981 1982 1981

Casino Square Footage 40,662 40,662 52,313 51,823 29,950 28,982 50,795 46,305 425,815 412,143

Includes $.lo and $.50 s l o t machines and a l l denominations of progressive, video poker, video blackjack, video d i ce and s l o t machines. (Video d i ce and big bertha s l o t machines = r e introduced during 1982.)

* New Je r sey , Casino Control Commission Annual Report, December 31, 1982, pp. 16-1 7

~ e s o r t s ~

Ceasars

Bal ly

Sands

Harrah ' s

Golden Nugget

Playboy

Clar idge

~ r o p i c a n a ~

*

l ~ h e f ixed a s s e t investment r ep re sen t s property and equipment before accumulated deprec ia t ion a s reported by each cas ino l icensee.

* F O ~ the f i s c a l year ended on or about December 31. Table taken £ran the New J e r sey Casino Control C m s s i o n Annual Report, Cecember 31, 1982, p.19.

There is m accura te count of t h e mmber of t o u r i s t s and l o c a l r e s iden t s vho use the

cas ino f a c i l i t i e s da i ly . The following t a b l e s record t h e number of buses and nunber

of bus passengers i n t o the cas inos i n 1981 and 1982; t h e number of h o t e l roams

provided by the cas ino indus t ry (no a v a i l a b l e record of the average vacancy r a t e ) ;

t h e s i z e of convention space wi th in the cas ino industry, again, no ava i l ab l e record

of t h e booking of t h i s space. The f i n a l table in t h i s s ec t ion ind ica t e s t h e ex t en t

of gnployment of fe red by each of the nine separa te casinos.

J a n u a r y

F e b r u a r y

March

A p r i 1

May J u n e

J u l y

A u g u s t

S e p t e m b e r

O c t o b e r

November

December

T o t a l

THE NEW JERSEY CASINO INDUSTRY BUS S T A T I S T I C S

FOR THE YEARS 1982 and 1981

Number of Number of Buses Passengers

1982 1981a 1982 1981a

a A s o f A p r i l 1 4 , 1 9 8 1 , s e v e n c a s i n o s were i n o p e r a t i o n . A s o f J u l y 2 3 , 1 9 8 1 , e i g h t c a s i n o s w e r e i n o p e r a t i o n . A s o f November 2 6 , 1 9 8 1 , n i n e c a s i n o s w e r e i n o p e r a t i o n .

THE NEW JERSEY CASINO INDUSTRY HOTEL ROOMS

A S OF DECEMBER 31,

THE NEW JERSEY CASINO INDUSTRY CONVENTION SPACE IN SQUARE- FEET

A S OF DECEMBER 31,

THE NEW JERSEY CASINO INDUSTRY

1978

~ e s o r t s l 3 , 2 2 6

C a e s a r s - B a l l y - S a n d s - H a r r a h ' s - G o l d e n N u g g e t - P l a y b o y - C l a r i d g e - T r o p i c a n a * -

HOTEL ROOMS AS OF DECEMBER 31,

TOTAL 3 , 2 2 6

F o r t h e f i s c a l y e a r e n d e d o n or a b o u t December 31. T a k e n

f r o m t h e N e w J e r s e y C a s i n o C o n t r o l Commiss ion , A n n u a l

R e p o r t , December 31, 1 9 8 2 , p . 1 3

3. Weaknesses in New Jersey Casino Model

A. Discretionary Powers of the Commission

( i ) T e m p o r a r y C a s i n o P e r m i t s

Ar t i c l e 6A o f t h e N e w J e r s e y s t a t u t e p r o v i d e s

t h a t t h e Commiss ion may g r a n t a t e m p o r a r y c a s i n o

p e r m i t upon f o r m a l r e q u e s t by t h e c a s i n o l i c e n s e

a p p l i c a n t i f among o t h e r c o n d i t i o n s :

t h e t e m p o r a r y c a s i n o p e r m i t w i l l best s e r v e t h e i n t e r e s t s o f t h e p u b l i c w i t h p a r t i c u l a r r e 3 e r e n c e to t h e p o l i c i e s a n d p u r p o s e s e n u m e r a t e d i n S e c t i o n 1 o f t h i s a m e n d a t o r y a n d s u p p l e m e n t a r y ac t . 8 2

T h e s e p e r m i t s , w h i c h may b e i s s u e d p r i o r to t h e

c o m p l e t i o n o f t h e i n v e s t i g a t i o n , are u s u a l l y v a l i d f o r

n i n e m o n t h s a n d may b e r enewed f o r a n a d d i t i o n a l t h r e e

mon th p e r i o d b u t n o t beyond t h e t w e l f t h mon th . ( T h i s

p o l i c y c o n s t i t u t e s a r e j e c t i o n o f t h e r e c o m m e n d a t i o n by

t h e I n t e r i m P o l i c y Group. I t a l s o g r a n t s g r e a t e r f r e e -

dom t h a n Nevada d o e s . Nevada h a s a s y s t e m o f g r a n t i n g

t e m p o r a r y l i c e n s e s b u t o n l y t o e s t a b l i s h m e n t s t h a t

a l r e a d y h e l d o p e r a t i o n a l l i c e n s e s , n o t t o new

u n a p p r o v e d c a s i n o o p e r a t i o n s . 1 A s W. T. 0' Donne11

s t a t e d :

New J e r s e y . . . h a s a p p a r e n t l y a s s i g n e d a h i g h p r i o r i t y t o t h e e s t a b l i s h m e n t of t h e S t a t e ' s gaming i n d u s t r y a n d r e a l i z e s t h a t t e m p o r a r y c a s i n o p e r m i t s s p e l l a q u i c k e r r e v i t a l i z a t i o n o f t h e A t l a n t i c C i t y a r e a . 8 3

S e c t i o n 1 o f t h e C a s i n o C o n t r o l A c t e m p h a s i z e s

t h a t t h e resort i n d u s t r y r e p r e s e n t s a c r i t i c a l l y impor-

t a n t a n d v a l u b l e a sse t i n t h e c o n t i n u e d v i a b i l i t y a n d

e c o n o m i c s t r e n g t h o f t h e t o u r i s t , c o n v e n t i o n a n d resort

i n d u s t r y o f t h e S t a t e o f N e w ~ e r s e ~ " . ~ ~ The f o c u s is

c l e a r l y o n t h e a d v a n c e m e n t o f t h e resor t i n d u s t r y ,

w h i c h t e n d s t o m i l i t a t e a g a i n s t t h e a t t e m p t t o c o n t r o l

a n d r e g u l a t e t h e i n d u s t r y . A s M r . J o h n Degnan , f o r m e r

A t t o r n e y G e n e r a l o f N e w J e r s e y , a r g u e d i n 1 9 8 0 , t h e

g r a n t i n g o f some o f t h e l i c e n s e s r e p r e s e n t e d a tilt

t o w a r d t h e c o n c e p t o f e c o n o m i c d e v e l o p m e n t o f A t l a n t i c

C i t y , r a t h e r t h a n t o w a r d crime c o n t r o l . A New York

T i m e s e d i t o r i a l s t a t e d :

When A t t o r n e y G e n e r a l J o h n Degman i n f o r m e d t h e C a s i n o C o n t r o l Commiss ion t h a t , a c c o r d i n g to l a w , Resorts

I n t e r n a t i o n a l was u n q u a l i f i e d f o r a p e r - m a n e n t l i c e n s e , he was s i m p l y i g n o r e d . 85

The a r g u m e n t o f t h e c a s i n o o p e r a t o r s is t h a t t h e

i n v e s t i g a t i o n by t h e Gaming E n f o r c e m e n t D i v i s i o n is so

t i m e c o n s u m i n g t h a t it is more p r a c t i c a l and e f f i c i e n t

t o h a v e t h e c a s i n o s i n o p e r a t i o n w h i l e t h i s is b e i n g

c o m p l e t e d . Once a c a s i n o is o p e r a t i n g i t is a d v a n t a -

g e o u s f o r t h e S t a t e to g r a n t t h e p e r m a n e n t l i c e n s e and

demand m i n o r " c o n d i t i o n s " r a t h e r t h a n close a v i a b l e

b u s i n e s s . The g r a n t i n g o f a t e m p o r a r y c a s i n o p e r m i t ,

t h e r e f o r e , o f t e n d i c t a t e s f i n a l a p p r o v a l o f t h e

c a s i n o . T e m p o r a r y l i c e n s e s h a v e b e e n o b t a i n e d by

c a s i n o s s u c h as B a l l y ' s P a r k P l a c e e v e n when d e r o g a t o r y

i n f o r m a t i o n w a s a v a i l a b l e .

( i i ) D i v i s i o n R e c o m m e n d a t i o n s V e r s u s Commiss ion D e c i s i o n s

I n some i n s t a n c e s t h e Gaming E n f o r c e m e n t D i v i s i o n

h a s recommended a g a i n s t t h e g r a n t i n g o f a l i c e n s e o n l y

t o h a v e t h e C a s i n o C o n t r o l Commiss ion d e c i d e i n t h e

c a s i n o ' s f a v o u r . C a s i n o s l i c e n s e d a g a i n s t t h e Gaming

E n f o r c e m e n t D i v i s i o n r e c o m m e n d a t i o n s i n c l u d e Resorts

I n t e r n a t i o n a l , C l a r i d g e and B a l l y ' s P a r k P l a c e . The

B a l l y case may s e r v e as a n i n s t r u c t i v e e x a m p l e o f t h e

p r a c t i c e v e r s u s t h e t h e o r y o f c a s i n o c o n t r o l . The

s e q u e n c e a s w e l l as t h e c i r c u m s t a n c e s h i g h l i g h t s e v e r a l

o f t h e l a x i t i e s i n t h e N e w J e r s e y s y s t e m .

T h e B a l l y case i l l u s t r a t e d t h e m a l f u n c t i o n i n g

r e l a t i o n s h i p b e t w e e n t h e t w o s e p a r a t e r e g u l a t o r y

b r a n c h e s - - t h e D i v i s i o n a n d t h e Commiss ion . I n t h i s ) .

case t h e D i v i s i o n recommended t h a t B a l l y ' s P a r k P l a c e

n o t b e g r a n t e d a l i c e n s e , w h i l e t h e Commiss ion con-

c l u d e d t h a t t h e f u l f i l l m e n t o f c e r t a i n c o n d i t i o n s w o u l d

- 87 -

s a t i s f y t h e r e q u i r e m e n t s . G i v e n t h e e v i d e n c e a g a i n s t

a l l o f t h e p r i n c i p a l s i n t h i s c a s e , and t h e h i s t o r y o f

t h e B a l l y e n t e r p r i s e i n Nevada, i n A u s t r a l i a and i n

B r i t a i n , t h e g r a n t i n g o f a p e r m a n e n t l i c e n s e i n N e w

J e r s e y m u s t b e e x p l a i n e d i n t e r m s o t h e r t h a n a f i r m l y

b a s e d f a i t h i n t h e i n t e g r i t y o f t h e c o r p o r a t i o n . I n

F e b r u a r y 1 9 7 8 , B a l l y a p p l i e d f o r a c a s i n o l i c e n s e i n

New J e r s e y . B e f o r e t h e l i c e n s e was g r a n t e d , and w h i l e

t h e i n v e s t i g a t i o n i n t o B a l l y was i n p r o c e s s , a tempor-

a r y c a s i n o p e r m i t and a c e r t i f i c a t e o f o p e r a t i o n were

i s s u e d . I n v e s t i g a t i o n r e v e a l e d t h a t t h e Nevada Gaming

Commission had f o u n d t h e R a l l y D i s t r i b u t i n g Company

g u i l t y of d e a l i n g s w i t h known o r g a n i z e d c a s i n o f i g u r e s

( i . e . , J a c k Rook lyn , I r v i n g Kaye, G e r a r d o C a t e n a , Sam

W. K l e i n ) and had f a i l e d to f u l l y d i s s o c i a t e i t s e l f

f rom t h e s e c o n n e c t i o n s e v e n when it was made a c o n d i -

t i o n o f t h e l i c e n s e .

The B a l l y o r g a n i z a t i o n was also d e n o u n c e d i n an

A u s t r a l i a n r e p o r t by M r . J u s t i c e M o f f i t t i n 1973 .

Commenting on r u m o u r s o f o r g a n i z e d crime i n f i l t r a t i o n

i n t o c e r t a i n A u s t r a l i a n gaming c l u b s , M o f f i t t c o n c l u d e d

t h a t :

t h e r e is a r e a l and v e r y m a t e r i a l r i s k t h a t t h e B a l l y o p e r a t i o n , i f c o n t i n u e d h e r e ( A u s t r a l i a ) w i l l i n t i m e be a v e h i c l e i n w h i c h , and a l o n g s i d e w h i c h , o r g a n i z e d crime w i l l i n f i l t r a t e or f u r t h e r i n f i l t r a t e c l u b o p e r a t i o n s i n N. S .W. i n some way. . . and f u r t h e r . . . t h a t a s a mere s t a t e m e n t o f t h e r i s k , it is too g r e a t t o h a v e t h e B a l l y o r g a n i z a t i o n t r a d i n g h e r e a t

The N e w J e r s e y Gaming E n f o r c e m e n t D i v i s i o n d e s -

c r i b e d p a y o f f s , b r i b e s , a f f i l i a t i o n s w i t h o r g a n i z e d

c r i m i n a l s and i l l e g a l c a s i n o a c t i v i t i e s . The f i n a l

r e p o r t o f t h e D i v i s i o n l i s t e d s i x r e a s o n s why B a l l y ' s

P a r k P l a c e was u n q u a l i f i e d f o r l i c e n s u r e a s a c a s i n o

- l i c e n s e e , B a l l y w a s u n q u a l i f i e d f o r l i c e n s u r e as a

c a s i n o s e r v i c e i n d u s t r y l i c e n s e e , W i l l i a m T. O ' D o n n e l l

w a s u n q u a l i f i e d f o r l i c e n s u r e as a c a s i n o k e y e m p l o y e e ,

a n d A l e x a n d e r R.A. W i l m s was u n q u a l i f i e d f o r l i c e n s u r e

a s a c a s i n o k e y e m p l o y e e ( l a t e r t h e D i v i s i o n a g r e e d t o

w a i v e M r . W i l m s as a p e r s o n r e q u i r e d t o q u a l i f y ) . The

e x h a u s t i v e a n d e n o r m o u s l y e x p e n s i v e i n v e s t i g a t i o n

t h e r e f o r e c o n c l u d e d n e g a t i v e l y f o r B a l l y on e v e r y

p o i n t . However , t h e C o m m i s s i o n e r s c h o s e t o d i s r e g a r d

t h e f i n d i n g s o f t h e i n v e s t i g a t i o n by t h e D i v i s i o n .

Even w h i l e a c k n o w l e d g i n g t h a t " g i v e n t h e v i r t u a l

i d e n t i t y b e t w e e n O ' D o n n e l l a n d B a l l y M a n u f a c t u r i n g f o r

n e a r l y 20 y e a r s , a n y b u s i n e s s c o n t a c t b e t w e e n t h e m

ca r r i e s a n e s p e c i a l s i g n i f i c a n c e a n d t h e p o t e n t i a l f o r

r ea l i n f l u e n c e o v e r company p o l i c y , " t h e y d e c i d e d t h a t

O ' D o n n e l l c o u l d be j u d g e d s e p a r a t e l y f r o m B a l l y and

t h a t t h e r e f o r e B a l l y ' s P a r k P l a c e a n d R a l l y

M a n u f a c t u r i n g Company c o u l d be g r a n t e d a l i c e n s e , w h i l e

f i n d i n g O ' D o n n e l l n o t q u a l i f i e d . 87

The major c o n d i t i o n s a t t a c h e d to t h e l i c e n s e s were

d e s i g n e d to a s s u r e t h a t n e i t h e r O ' D o n n e l l n o r W i l m s

c o u l d e x e r c i s e a n y c o n t r o l o r i n f l u e n c e o v e r t h e

p o l i c i e s , b u s i n e s s or a c t i v i t i e s o f e i t h e r c o r p o r a t e

a p p l i c a n t . I n a summary of t h e i r s p e c i f i c e v a l u a t i o n

o f O ' D o n n e l l t h e y r e m a r k e d upon h i s " k i n d n e s s , g e n e r -

o s i t y , l o y a l t y , i n t e l l i g e n c e a n d l e a d e r s h i p a b i l i t y "

b u t c o n c l u d e d t h a t "he h a s n o t s a t i s f i e d u s by c l e a r

a n d c o n v i n c i n g e v i d e n c e t h a t h e p o s s e s s e s t h e h i g h

s t a n d a r d o f g o o d c h a r a c t e r , h o n e s t y a n d i n t e g r i t y I

demanded by t h e C a s i n o c o n t r d l ~ c t " ' . 8 8

What t h e B a l l y case seems to show is t h e i n f l u e n c e

t h a t a c a s i n o c a n e x e r t . A s a c o n d i t i o n o f t h e

Temporary Casino Permit, Bally's Park Place was

required to "co-operate with and aid in the development

and implementation of plans to improve the traffic

circulation of Brighton Park area". The Commission

stated that Bally's Park Place assumed the major cost

in upgrading Brighton Park, i.e., a new irrigation

system, resodding, new landscaping, etc. The casino

employed, at the same time that the Commission was

considering whether or not it should even be licensed,

4,300 persons in a huge new casino complex.89 Rally's

Park Place was committed to providing a "reasonable

share of the housing construction requirement for

Atlantic City". By December, 1979, Bally accepted

responsibility for 56 units of family housing. The

hotel met the requirements and exceeded the minimum

qualifying sleeping units specified. Evidence of the

power of the Bally Corporation appears at several

levels, even if the possibility of direct payoffs is

excluded. When Bally failed to hire the appropriate

number of minority personnel, assigned 'correction' was

for Bally to make a meaningful financial contribution

to Atlantic Construction Training Program--a non-profit

corporation formed to develop apprentice training

programs. Wherever dollars could rectify a situation,

Bally was quick to respond, and seemingly generous in

the settlement.

The bifurcation between enforcement and adjudication

was intended as a "checks and balances" system which

would reduce or eliminate corruption. In New Jersey,

the ~as&o Control Commission is responsible both for

regulating the casinos and for the economic development

of the Atlantic City "blighted" area. These two

responsibilities may prove contradictory amd result in

a biased evaluation of potential casino operations.

B. O r g a n i z e d C r i m e a n d C o r r u p t i o n : "The Mob Wades A s h o r e I n A t l a n t i c c i t y n Y U

N e w J e r s e y h a s n o t s u c c e e d e d i n s h o w i n g - o r g a n i z e d crime

t h a t it is n o t welcome i n A t l a n t i c C i t y . G o v e r n o r B r e n d a n

B y r n e ' s w a r n i n g t o " k e e p y o u r f i l t h y h a n d s o u t o f A t l a n t i c

C i t y , k e e p t h e h e l l o u t o f o u r s t a t e " h a s had l i t t l e

e f f e c t . The e v i d e n c e o f c r i m i n a l i n v o l v e m e n t is c o n c l u -

s i v e . A s S a l e r n o p u t it i n a p o e t i c m e t a p h o r : "I see t h e

b e g i n n i n g o f s i l k e n webs s p u n by r a r i o u s s p i d e r s a r o u n d

A t l a n t i c The c h a i r m a n o f t h e C a s i n o C o n t r o l

Commiss ion , Joe L o r d i , a c c o r d i n g t o t h e e v i d e n c e , had d e a l -

i n g s w i t h o r g a n i z e d crime f a m i l i e s and g a v e a r e f e r e n c e f o r

a gun p e r m i t t o a man w i t h a p o l i c e r e c o r d who a s s o c i a t e d

w i t h o r g a n i z e d c r i m i n a l s . The s t r u c t u r e o f c a s i n o g a m b l i n g

c o n t r o l i n New J e r s e y g a v e too much a u t h o r i t y t o a s i n g l e

o f f i c i a l who n e g o t i a t e d w i t h o u t t h e k n o w l e d g e o f t h e o t h e r

p a r t - t i m e c o m m i s s i o n e r s .

T h e E c o n o m i s t , i n a n e x p o s 5 o f sorts, d e c l a r e d t h a t :

Gaming c o m p a n i e s h a v e h i r e d s o man) N e w J e r s e y p o l i t i c s i n t o t h e i r employ t h a t t h e y c o n t r o l w h a t h a s b e e n d e s c r i b e d as a g o v e r n - m e n t i n e x i l e . I n o n e c a p a c i t y o r a n o t h e r gaming c o m p a n i e s h a v e r e t a i n e d e v e r y p r o m i - n e n t l a w f i r m i n t h e s t a t e whose members i n c l u d e r e c e n t o f f i c e - h o l d e r s f r o m a f o r m e r g o v e r n o r a n d c h i e f j u s t i c e to a f o r m e r s t a t e a t t o r n e y - g e n e r a l , a n d p o l i t i c a l i n s i d e r s f r o m t h e f o r m e r s t a t e c h a i r m a n o f t h e D e m o c r a t i c P a r t y t o M r . B y r n e ' s f o r m e r l a w p a r t n e r . 9 2

One a u t h o r o b s e r v e s t h a t w h e r e a s t h e l a w made i t

i l l e g a l f o r D i v i s i o n a n d Commiss ion members t o h a v e an

i n t e r e s t i n c a s i n o s , t h e l e g i s l a t o r s who w r o t e t h e l a w d i d

n o t e x t e n d t h e p r o h i b i t i o n to o t h e r S t a t e o f f i c i a l s . here- f o r e , e v e n t h o u g h t h e s e i n d i v i d u a l s a r e n o t i n p o s i t i o n s o f

d i r e c t c o n t r o l o f t h e c a s i n o s , t h e i r p o s i t i o n s , o r p r e v i o u s

p o s i t i o n s , would h a v e b e e n i n f l u e n t i a l i n s e t t i n g up t h e

- 91 -

r e g u l a t i o n a n d e s t a b l i s h i n g p r o c e d u r e s f o r r u n n i n g t h e

o p e r a t i o n s . 9 3 A s t u d y by t h e New York T i m e s o f l a n d s a l e s

a n d o t h e r t r a n s a c t i o n s showed t h a t i n 1 9 7 9 more t h a n 50 t o p

loca l o f f i c i a l s a n d k e y g o v e r n m e n t e m p l o y e e s , i n c l u d i n g f i v e

o f t h e n i n e members o f t h e P l a n n i n g B o a r d , and t h r e e o f t h e

s e v e n members o f t h e Z o n i n g Board had i n v e s t e d i n C a s i n o

s t o c k , s o l d p r o p e r t y f o r c a s i n o d e v e l o p m e n t or had o t h e r

f i n a n c i a l t ies t o t h e g a m b l i n g i n d u s t r y . 94

What e m e r g e s is a p i c t u r e o f o v e r l a p p i n g i n t e r e s t s .

The g a m b l i n g e n t r e p r e n e u r s h i r e t h e m o s t k n o w l e d g e a b l e

l a w y e r s t o work f o r t hem. The g a m b l i n g b u s i n e s s is s t i l l

r e l a t i v e l y new i n N e w J e r s e y a n d t h e r e f o r e t h e e x p e r t s i n

t h e f i e l d w e r e o f t e n b r o u g h t i n f r o m Nevada a n d o f t e n had

e x p e r i e n c e i n r u n n i n g c a s i n o s p r i o r to t h e a t t e m p t a t c h a n g -

i n g t h e image o f t h e c a s i n o i n d u s t r y . T h e r e s u l t maybe a

n e t w o r k o f p o l i t i c i a n s , i n t e r a c t i n g w i t h g a m i n g e n t r e p r e -

n e u r s who a s s o c i a t e d d i r e c t l y or i n d i r e c t l y i n o r g a n i z e d

crime. Mayor L a z a r o w o f A t l a n t i c C i t y is q u o t e d a s h a v i n g

d e c l a r e d :

A l l we care a b o u t is s e e i n g t h e s e c a s i n o s o p e n up a n d i m p r o v e o u r econom 55 We're n o t c o n c e r n e d a b o u t who r u n s them.

I n v e s t i g a t i o n s i n t o c o r r u p t i o n h a v e r e s u l t e d i n s e v e r a l

p o l i t i c a l careers b e i n g t e r m i n a t e d , K e n n e t h McDonald

r e s i g n e d f r o m t h e s t a t e ' s C a s i n o C o n t r o l Commiss ion a f t e r

a l l e g a t i o n s t h a t he h e l p e d o n e o f t h e F.R. I . ' s f i c t i t i o u s

s h e i k s t o o b t a i n a c a s i n o l i c e n s e and S e n a t o r H a r r i s o n

W i l l i a m s was f i l m e d b o a s t i n g to u n d e r c o v e r a g e n t s t h a t he

h e l p e d o n e c a s i n o a p p l i c a n t s a v e $3 M i l l i o n t h r o u g h a . - c o n t r a c t w i t h t h e Commiss ions Cha i rman J o s e p h L o r d i .

However , e v e n g r e a t e r t e r m i n a t i o n is b e i n g e x p e r i e n c e d

w i t h i n o r g a n i z e d crime ci rc les . The d i r e c t o r o f t h e

P e n n y s l v a n i a Cr ime Commiss ion , Wallace P. Hay, r e f e r s t o

m a j o r r e s h u f f l i n g u n d e r w a y i n t h e - m o b s t r u c t u r e f r o m

M a r y l a n d t h r o u g h N e w York C i t y " , as o r g a n i z e d c r i m m i n a l s v i e

t o move i n t o t h e A t l a n t i c C i t y a r e a . 9 6 However , L t . C o l o n e l

J u s t i n D e n t i n o o f t h e N e w J e r s e y S t a t e P o l i c e a r g u e s t h a t

t h i s "war" w h i c h is p r e d o m i n a n t l y w i t h i n t h e B r u n o crime

f a m i l y b e g a n as e a r l y a s 1 9 7 5 a n d r e l a t e s o n l y t o t h e v y i n g

f o r power w i t h i n t h e c r i m i n a l o r g a n i z a t i o n r a t h e r t h a n t o

c a s i n o c o n t r o l . 97 O r g a n i z e d crime is d i s c u s s e d f u r t h e r

u n d e r o u r d i s c u s s i o n o n c r e d i t .

F a i l u r e a t L a n d D e v e l o p m e n t a n d P l a n n i n q : B e n e f i t s for t h e E l d e r l y , I n c r e a s e d Employment a n d E n v i r o n m e n t a l C o n c e r n s

C a s i n o g a m b l i n g was i n t r o d u c e d i n t o A t l a n t i c C i t y

o s t e n s i b l y t o s o l v e socia l a i l m e n t s . The c o n s t i t u t i o n a l

amendment w h i c h l e g a l i z e d t h e g a m b l i n g o p e r a t i o n s p r o v i d e d

t h a t a n y s t a t e r e v e n u e d e r i v e d f r o m t h e c a s i n o s wou ld he

a p p l i e d s o l e l y f o r t h e p u r p o s e o f p r o v i d i n g r e d u c t i o n s i n

t h e p r o p e r t y t a x e s , r e n t , and m u n i c i p a l u t i l i t i e s b i l l s o f

e l i g i b l e s e n i o r c i t i z e n s a n d d i s a b l e d r e s i d e n t s o f t h e

T h e s e i n t e n d e d r e c i p i e n t s c l a i m n o t to h a v e

b e n e f i t e d t h r o u g h t h e a d o p t i o n o f c a s i n o g a m b l i n g a n d t h e

i n c r e a s e d r e v e n u e t h a t w a s s u p p o s e d to assist them.

T h e New J e r s e y l e g i s l a t u r e a p p r o v e d c a s i n o - h o t e l d e v e l -

opmen t p a r t i a l l y a s a means o f r e m e d y i n g t h e s u b s t a n d a r d a n d

i n s u f f i c i e n t h o u s i n g w h i c h e x i s t e d i n A t l a n t i c C i t y . P r i o r

t o c a s i n o s , t h e number o f d e m o l i t i o n s o u t p a c e d t h e r a t e o f

c o n s t r u c t i o n . Be tween 1 9 7 0 a n d 1 9 7 7 , 1 , 0 3 1 u n i t s were b u i l t

w h i l e a p p r o x i m a t e l y 2 , 1 9 1 d e m o l i t i o n s were r e c o r d e d . 99 I n

a d d i t i o n , A t l a n t i c C i t y had more s u b s i d i z e d h o u s i n g u n i t s

t h a n a n y o t h e r c i t y i n New J e r s e y and a n o t h e r 3 , 0 0 0 were

b e i n g p r o c e s s e d or p r o p o s e d . C a s i n o g a m b l i n g was s e e n a s a

s o u r c e o f f u n d s w h i c h , w i t h a master p l a n f o r c a r e f u l

r e d e v e l o p m e n t , c o u l d r e v i t a l i z e t h e c i t y . A c a r e f u l l y

c o n s i d e r e d p l a n w a s e s s e n t i a l b e c a u s e t h e r e w a s a l i m i t e d

l a n d mass a n d v e r y l i t t l e v a c a n t l a n d ; a g i n g , b u t e x i s t i n g

s t r u c t u r e s - - s o m e d e s e r v i n g o f p r e s e r v a t i o n ; a r e s i d e n t i a l

p o p u l a t i o n t h a t was l a r g e l y p o o r , e l d e r l y , o r b o t h ; a n d a n

i n a d e q u a t e street n e t w o r k .

The s p e c i f i c d e t a i l s o f t h e A t l a n t i c C i t y d e v e l o p m e n t

p l a n c a n b e o b t a i n e d e l s e w h e r e b u t wha t o u g h t t o h e empha-

s i z e d h e r e is t h e c o m p l e x i t i e s i n v o l v e d i n t h e i n t r o d u c t i o n

o f c a s i n o s .

( i )

( i i )

Land B a n k i n g

Land b a n k i n g by t h e s t a t e w a s l e ss t h a n s u c c e s s f u l i n

A t l a n t i c C i t y b e c a u s e it was s t a r t e d o n l y a f t e r p r i c e s

h a d begun t o rise. M u n i c i p a l b u d g e t c o n s t r a i n t s and

l i m i t e d f e d e r a l f u n d i n g p r e v e n t e d much S t a t e a c q u i s i -

t i o n .

Land S p e c u l a t i o n

The i m p l e m e n t a t i o n o f c o n t r o l s to c u r b l a n d s p e c u l a -

t i o n w a s m e t w i t h s t r o n g p o l i t i c a l o p p o s i t i o n - - p e r h a p s

b e c a u s e l o c a l l o n g - t i m e r e s i d e n t s c o u l d lose u n d e r

s u c h r e g u l a t i o n s .

( i i i ) T a x a t i o n

When s p e c u l a t o r s a r e b u y i n g up l a n d w h i c h w i l l h a v e a

h i g h v a l u e , t h e t e n d e n c y is f o r t h e i r t a x t o r e f l e c t

t h i s v a l u e . However , t h e s e h i g h t a x e s w i l l d r i v e t h e

l o w to m i d d l e i ncome r e s i d e n t s o u t of : t h e n e i g h b o u r -

hood. I f t a x e s are k e p t i n l i n e w i t h w h a t t h e y w e r e

p r i o r t o t h e s p e c u l a t i o n , t h e n it w i l l s e r v e t o

e n c o u r a g e t h e s p e c u l a t o r s t o h o l d o n and n o t d e v e l o p

o r s e l l t h e i r p r o p e r t i e s . Re tween t h e 1 9 7 6 l e g a l i z a -

t i o n o f c a s i n o g a m b l i n g a n d 1 9 8 0 , A t l a n t i c C i t y l o s t

400 p r i v a t e b u s i n e s s e s ( t h e r e w e r e 2 , 1 0 0 i n i 9 7 6 a n d

1 , 7 0 0 i n 1 9 8 0 ) and t h i s d e c l i n e is e x p e c t e d to con-

t i n u e . The c a s i n o s a r e m a k i n g money f o r t h e m s e l v e s a n d

f o r t h e S t a t e t h r o u g h t a x r e v e n u e , b u t t h e smal l

b u s i n e s s o p e r a t o r c a n no l o n g e r p a y t h e i n c r e a s i n g

p r o p e r t y t a x a n d is e i t h e r a b a n d o n i n g h i s b u s i n e s s or

s e l l i n g o u t t o l a n d s p e c u l a t o r s if h i s p r o p e r t y is

s u i t a b l y l o c a t e d .

( i v ) D o m i n a t i o n by C a s i n o C o n s t r u c t i o n

Non-cas ino b u i l d i n g a n d d e v e l o p m e n t may n o t b e c o m p e t i -

t i v e w i t h c a s i n o c o n s t r u c t i o n . The S t a t e o f N e w J e r s e y

had d e c l a r e d t h a t A t l a n t i c C i t y would n o t b e d o m i n a t e d

t o t a l l y by t h e c a s i n o i n d u s t r y , b u t t h a t a m i x t u r e o f

b u s i n e s s e s , i n d u s t r y a n d r e c r e a t i o n a l f a c i l i t i e s w o u l d

c o - e x i s t . C o m p e t i t i o n f o r l a b o u r and mater ia l s h a s

d r i v e n u p t h e costs o f c o n s t r u c t i o n . The c a s i n o

i n d u s t r y h a s p r o v e n i t s e l f t o b e b e t t e r a b l e to c o m p e t e

t h a n o t h e r p r i v a t e or g o v e r n m e n t d e v e l o p e r s . T h e

d a n g e r e x i s t s t h a t t h e c i t y w i l l become d o m i n a t e d by

c a s i n o c o n s t r u c t i o n .

( V ) Employment

An i m p o r t a n t c o n s i d e r a t i o n i n t h e i n t r o d u c t i o n of

c a s i n o s w a s t h e l a r g e number o f j o b s t h a t would be

c r e a t e d . T h i s was e x p e c t e d to l i m i t t h e n e e d f o r

s u b s i d i z e d h o u s i n g a n d t o r e d u c e t h e number o f p e r s o n s

r e q u i r i n g w e l f a r e . The r e s u l t s h a v e b e e n almost t h e

r e v e r s e . Most o f t h e c a s i n o - r e l a t e d j o b s h a v e b e e n

. f i l l e d by n o n - r e s i d e n t s o f A t l a n t i c C i t y .

A t l a n t i c C i t y had had a p r o b l e m o f s e a s o n a l employment

a n d i t w a s a r g u e d t h a t t h e c a s i n o s wou ld a l l e v i a t e t h i s

s i t u a t i o n . To d a t e , t h e r e v e r s e is t r u e . The p r o p o r -

t i o n o f s e a s o n a l j o b s , as compared to f u l l y e a r employ-

m e n t , h a s d e c l i n e d b u t t h e a c t u a l number o f s u c h j o b s

h a s more t h a n d o u b l e d . T h i s r e l a t i o n s h i p was t r u e a l so

f o r w e l f a r e a s s i s t a n c e - - t h e numbers i n c r e a s e d e v e n

t h o u g h t h e p r o p o r t i o n o f t h e t o t a l p o p u l a t i o n on

w e l f a r e d e c r e a s e d . The c a s i n o s m u l t i p l i e d so q u i c k l y

o n c e t h e f i r s t t h r e e w e r e i n o p e r a t i o n t h a t c a s i n o -

r e l a t e d j o b t r a i n i n g f o r l o c a l r e s i d e n t s

w e r e i n e f f e c t i v e a t d i r e c t i n g t h e C i t y ' s p o p u l a t i o n

i n t o t h e g a m b l i n g i n d u s t r y ' s employmen t . The new

c a s i n o s r e q u i r e d t r a i n e d p e r s o n n e l i m m e d i a t e l y a n d ,

t h e r e f o r e , r e c r u i t e d t h e i r m o s t e s s e n t i a l e m p l o y e e s

f r o m Nevada . N e w J e r s e y is b e g i n n i n g to p l a c e some

l o c a l l y t r a i n e d r e s i d e n t s i n some o f t h e s e p o s i t i o n s

b u t s t i l l t h e l o w p a y , l ow p r e s t i g e and n o n - s k i l l e d

p o s i t i o n s a r e most o f t e n t h e p o s i t i o n s o f f e r e d t o N e w

J e r s e y r e s i d e n t s .

( v i ) H o u s i n g * The c o m p e t i t i o n f o r h o u s i n g h a s d r i v e n t h e p o o r a n d

e l d e r l y o u t o f t h e i r homes. I n some cases, t h e l o w

m i d d l e c lass h a s b e e n f o r c e d f r o m t h e i r b u s i n e s s e s ,

w h i c h now s i t v a c a n t d u e to e x o r b i t a n t r e n t a l s a n d

t a x e s . loo T h e c i t y g o v e r n m e n t r e s p o n d e d to r i s i n g

a s s e s s m e n t s by c u t t i n g t h e p r o p e r t y t a x rate f rom $ 7 . 1 3

t o $3 .62 p e r $100 v a l u a t i o n , b u t r e v a l u a t i o n by t h e

c i t y t a x assessor i n c r e a s e d l a n d v a l u a t i o n by as much

a s 500%. Hawkins r e a c h e s t h e c o n c l u s i o n t h a t :

Gove rnmen t c o n c e n t r a t e d i t s e a r l y e f f o r t s o n g e t t i n g t h e f i r s t c a s i n o o p e n and k e e p i n g o r g a n i z e d crime o u t o f t h e l o c a l g a m b l i n g b u s i n e s s . A l t h o u g h t h a t s e t t i n g o f p r i o r i - t i e s was r e a s o n a b l e , s u b s e q u e n t e v e n t s h a v e d e m o n s t r a t e d t h e n e e d f o r e a r l y p l a n n i n g t h a t d o e s n o t n e g l e c t t h e ph s i c a l a n d e c o n o m i c e f f e c t s o f d e v e l o p m e n t . y o 1

( v i i ) E n v i r o n m e n t a l D e s t r u c t i o n

A i r p o l l u t i o n , t r a f f i c c o n g e s t i o n , t h e d e m o l i t i o n o f

h i s t o r i c b u i l d i n g s , i n a d e q u a t e water s y p p l y a n d i n t h e

case o f A t l a n t i c C i t y , f e a r o f d e s t r u c t i o n o f t h e

P i n e l a n d s c o n s e r v a t i o n a r e a , are a l l c o n c e r n s associ-

a t e d w i t h t h e i n t r o d u c t i o n o f c a s i n o s . A s Hawkins

a r g u e s t h a t t h e r a p i d r e d e v e l o p m e n t o f e n v i r o n m e n t a l l y

s e n s i t i v e resort l o c a t i o n s e n t a i l s c o n s i d e r a b l e c o s t s

t h a t c a n n o t b e m e a s u r e d i n d o l l a r s . l o 2 Hawkins

s u g g e s t s t h a t i t may b e n e c e s s a r y f o r g o v e r n m e n t s ,

c o n s i d e r i n g l e g a l i z i n g c a s i n o s , t o p u r c h a s e h u g e l a n d

b l o c k s a n d c r e a t e "new town" s i t u a t i o n s r a t h e r t h a n

a t t e m p t t o b l e n d or impose t h e c a s i n o s t r u c t u r e i n t o

a n e x i s t i n g e n v i r o n m e n t .

D. C u s t o m e r P r o t e c t i o n : I s s u e s R e l a t i n g t o A l c o h o l a n d T i p p i n g

( i ) A l c o h o l .

I n New J e r s e y no c o m p l i m e n t a r y or u n r e q u e s t e d

d r i n k s c a n l e g a l l y b e s e r v e d to g a m b l e r s on t h e

c a s i n o f l o o r . T h i s was i n t e n d e d to e l i m i n a t e t h e

e n c o u r a g e m e n t o f g a m b l e r s t o become i n t o x i c a t e d .

A s h a s b e e n s u g g e s t e d by s e v e r a l s t u d i e s , o n c e

t h e New J e r s e y "compromise" r u l e is a p p l i e d t o a

c r o w d e d gaming room, it is i m p o s s i b l e t o m o n i t o r

when a p a t r o n is r e q u e s t i n g a n d when a n e m p l o y e e

i s o f f e r i n g . The S t a t e Commiss ion I n v e s t i g a t i o n

R e p o r t a n d t h e G o v e r n o r ' s S t a f f P o l i c y R e p o r t

s u g g e s t t h a t d r i n k i n g be a l l o w e d o n l y o u t s i d e t h e

i m m e d i a t e - gaming area, w h i c h would r e q u i r e t h e . - g a m b l e r t o l e a v e t h e g a m b l i n g t a b l e i n o r d e r t o

d r i n k . lo3 T h i s h a s n o t s o l v e d r e l a t e d p r o b l e m s

o f t h e p r o x i m i t y o f d r i n k i n g to gaming n o r t h e

i s s u e o f c o m p l i m e n t a r y a l c o h o l b e i n g p r o v i d e d t o

v a l u a b l e c u t o m e r s .

- 97 -

( i i ) T i p p i n g :

The o r i g i n a l S t a t e Commiss ion o f I n v e s t i g a t i o n

recommended no t i p p i n g f o r New J e r s e y b u t t h e

f i n a l A c t a d o p t e d t h e t i p p i n g p r o c e d u r e u s e d i n

t h e Bahamas. The e m p l o y e e d e p o s i t s t h e t i p i n a

" d r o p box" a n d t h e w e e k l y amoun t is d i s t r i b u t e d

among t h e d e a l e r s o n t h e b a s i s o f t h e number o f

h o u r s t h e y worked .

The a n t i - t i p p i n g r u l e was a imed a t a v o i d i n g d i r e c t

i n t e r a c t i o n b e t w e e n t h e d e a l e r and t h e p a t r o n

h o w e v e r , t h e d e a l e r c a n a l w a y s f i n d a p a t r o n t o

p l a c e b e t s f o r him and e n t e r i n t o o t h e r f o r m s of

c o l l u s i o n a n d d e c e p t i o n . The a n t i - t i p p i n g r u l e

c a n o n l y a t t e m p t t o r e d u c e c o r r u p t i o n a t o n e

l e v e l .

E. Skimming, Theft & Tax Evasion

C a s i n o r e v e n u e h a s a l w a y s b e e n h a r d to m o n i t o r . The

c a s h f l o w i n g f r o m c u s t o m e r t o d e a l e r and d e a l e r to manage-

m e n t is a n o p e n i n v i t a t i o n f o r t h e f t . Any ' c h e c k ' s y s t e m

t e n d s o n l y to c o n t r o l o n e p e r i o d i n t h e movement o f t h e

c a s h . The o p e r a t i n g p r i n c i p l e , h o w e v e r , seems t o b e t h a t

e n o u g h c h e c k s w i l l r e s u l t i n a f a i r l y h o n e s t s y s t e m .

I n New J e r s e y , e a c h gaming t a b l e is e q u i p p e d w i t h a box

i n t o w h i c h t h e money is d e p o s i t e d . I t is t e r m e d a " d o u b l e -

l o c k d r o p box" b e c a u s e t h e Commiss ion h a s p o s s e s s i o n o f t h e

k e y t o o n e of t h e l o c k i n g d e v i c e s a n d t h e c a s i n o o p e r a t o r

p o s s e s s e s t h e o t h e r . The d r o p box is t a k e n to a c o u n t i n g

room and i n f r o n t o f t h e v a r i o u s r e p r e s e n t a t i v e s , i n c l u d i n g

t w o S t a t e i n v e s t i g a t o r s , t h e money, i .e . , h o u s e w i n n i n g s , is

c o u n t e d . What t h i s means is t h a t , i f i t c a n b e a s sumed t h a t

-

t h e S t a t e i n v e s t i g a t o r s , Commiss ion a g e n t and c a s i n o manage-

m e n t c a n n o t b e p e r s u a d e d t o c o l l a b o r a t e and s h a r e t h e

i l l e g a l r e w a r d s o f s k i m m i n g , t h e n a n y t h e f t m u s t o c c u r a t an

e a r l i e r s t a g e , p r i o r to t h e money d r o p p i n g i n t o t h e d o u b l e -

l o c k box. No clear e s t i m a t e e x i s t s o f how much sk imming

o c c u r s p r i o r t o t h e money e n t e r i n g t h e d rop -box .

New ~ e r s e y l a w e n f o r c e m e n t o f f i c i a l s h a v e a g r e e d w i t h

t h e IRS t h a t s k i m s c a n o c c u r i n s l o t m a c h i n e o p e r a t i o n s , and

t h e y h a v e f o u n d c a s i n o s t o be h i g h l y v u l n e r a b l e t o c o s t l y

c r e d i t f r a u d s e n g i n e e r e d by i n s i d e r s a n d t h e i r o u t s i d e

c o n s p i r a t o r s . F o r e x a m p l e , m i d d l e - l e v e l e m p l o y e e s o f

B a l l y ' s c a s i n o a n d an o u t s i d e crime g r o u p d e f r a u d e d t h e

c a s i n o o f $4 m i l l i o n w i t h i n a t w o week p e r i o d i n t h e summer

o f 1980 . I n 1 9 8 1 , (May l l ) , t h e A t t o r n e y G e n e r a l c h a r g e d

Resorts I n t e r n a t i o n a l a n d t e n c a s i n o o f f i c i a l s w i t h v i o l a -

t i o n o f c a s i n o c r e d i t r e g u l a t i o n s f o r t h e i r i n v o l v e m e n t i n a

" c h e q u e k i t i n g " scheme t h a t d e f r a u d e d Resorts I n t e r n a t i o n a l

o f $ 4 . 1 m i l l i o n .

C a s i n o f i n a n c i a l o p e r a t i o n s are n o t t h e same a s t h o s e

o f o t h e r b u s i n e s s e s b e c a u s e o f t h e e x t e n t o f c a s h f l o w .

C h i p s a r e t h e e q u i v a l e n t t o c a s h a n d m u s t be c o n t r o l l e d i n

t h e same m a n n e r .

F. Increase of Street Crime in Casino Environment

The I n t e r i m R e p o r t on C a s i n o Gambl ing n o t e d t h a t

c a s i n o s d r a w t o g e t h e r a l l t h e c l a s s i c a l c o m p o n e n t s f o r

l a r g e - s c a l e i n c r e a s e s i n s t reet crime a c t i v i t i e s - - a l a r g e

t r a n s i e n t t o u r i s t p o p u l a t i o n , a p e r m i s s i v e social e n v i r o n -

m e n t , a c c e l e r a t e d c o m m e r c i a l a c t i v i t y , l a r g e a m o u n t s o f

loose money i n c i r c u l a t i o n and a n i n f l u x o f a l a r g e number

o f p e r s o n s a t t r a c t e d t o s u c h a n a t m o s p h e r e f o r c r i m i n a l

p u r p o s e s . The i n c r e a s e d l e v e l s o f l a w e n f o r c e m e n t and t h e

c a s h losses m u s t b e s u b t r a c t e d f rom est imates o f r e v e n u e

p r o f i t w h i c h t h e c a s i n o s create. Some o f t h e e x t r a p o l i c i n g

w i t h i n t h e c a s i n o is p a i d f o r by t h e c a s i n o ( i . e . money

c o u n t o v e r s e e r s , s e c u r i t y i n t h e gaming rooms, e t c ) b u t

o u t s i d e , c h a n g e s i n crime rates are b o r n e by s o c i e t y .

R i s i n g c r i m e - - s p e c i f i c a l l y p r o s t i t u t i o n , a l c o h o l a n d d r u g

a b u s e , p o r n o g r a p h y , p i c k p o c k e t s a n d f r a u d u l e n t b u s i n e s s

s c h e m e s , h o t e l room b r e a k i n g a n d e n t e r i n g a n d car t h e f t - -

becomes a t h r e a t b o t h to t h o s e l i v i n g i n t h e a r e a and to t h e

g a m b l i n g v i s i t o r s . A t t h e s t ree t l e v e l , " t h e s e o f f e n s e s a r e

s i m i l a r to t h e crimes c o m m i t t e d i n a n y h e a v y t o u r i s t a r e a .

The e x t e n t o f t h e p o p u l a t i o n " s w e l l " is i n d i c a t e d by t h e

f a c t t h a t d u r i n g t h e summer, 1-1$ M i l l i o n p e o p l e c a n be i n

t h e c i t y w h i c h h a s a r e s i d e n c y p o p u l a t i o n o f a p p r o x i m a t e l y

48 ,000 . T h e f o l l o w i n g g r a p h c h a r t s t h e i n c r e a s e i n t o t a l

c r i m i n a l c o m p l a i n t s f i l e d b e t w e e n 1978-1982. lo4

ETVNTIC C I T Y MUNICIPAL COURT

TIMEC FRA-"IE: C R I 5 N P . L COURT YEAR SXPTEMBER 1 to AUGUST 31

G. P u b l i c H e a r i n g o n S t a t u t o r y a n d R e q u l a t o r y C o n t r o l s O v e r C a s i n o C r e d i t a n d C a s i n o I n d u s t r y C r e d i t P r a c t i c e s ( T r e n t o n , New J e r s e y , March 1 - 4 , 1 9 8 3 )

O r i g i n a l l y , when p r o p o s a l s f o r t h e o p e r a t i o n a n d r e g u -

l a t i o n of t h e New J e r s e y c a s i n o i n d u s t r y were b e i n g

c o n s i d e r e d , i t w a s recommended t h a t n o c r e d i t b e g r a n t e d

e x c e p t f o r c h e q u e c a s h i n g w i t h d e p o s i t d u e i n two b u s i n e s s

d a y s . G r a d u a l l y t h i s c h a n g e d a n d c r e d i t is now e x t e n d e d t o

g a m b l e r s who h a v e a n e s t a b l i s h e d c r e d i t r a t i n g , who are t h e n

g r a n t e d 90 b a n k i n g d a y s ( 1 2 0 c a l e n d a r d a y s ) to r e p a y a n y

c r e d i t o v e r $ 2 , 5 0 0 . T h e s e r e s t r i c t i o n s on t h e g r a n t i n g o f

c r e d i t , a s l a x a s t h e y a r e , a r e i n p r a c t i s e e v e n less

r i g i d l y e n f o r c e d . Lax c r e d i t , i n d e b t e d g a m b l e r s a n d collec-

t i o n d i f f i c u l t i e s a l l create a n u n s a v o r y a n d u n n e c e s s a r y

p r o b l e m a t i c e n v i r o n m e n t w h i c h f e e d i n t o t h e c o m p u l s i v e

g a m b l i n g d e b a t e a n d t h e i s s u e o f t h e g o v e r n m e n t ro le i n

e n c o u r a g i n g t h i s p a r t i c u l a r fo rm o f c o n s u m p t i o n . U n l i k e t h e

Nevada c a s i n o s , A t l a n t i c C i t y is o n l y a s h o r t d r i v e f r o m

home f o r o v e r 3 0 m i l l i o n p o t e n t i a l g a m b l e r s . T h e s e c o n c e r n s

w e r e t h e s u b j e c t o f a p u b l i c h e a r i n g o n c r e d i t p r a c t i c e s

h e l d i n rent on, New J e r s e y , March 1-4 , 1983.

i ) E x t e n t o f C r e d i t

I t m i g h t b e a s sumed t h a t b e c a u s e t h e o r i g i n a l recommen-

d a t i o n i n N e w J e r s e y w a s t o d e n y c r e d i t , t h e amoun t o f

c r e d i t g r a n t e d wou ld be m i n i m a l . A t t o r n e y G e n e r a l I r w i n

Kimrnelman d i s p e l l e d a n y s u c h b e l i e f i n t h e o p e n i n g p r e s e n t a -

t i o n by i n f o r m i n g t h e a u d i e n c e t h a t f r o m May 1 9 7 8 - December

1 9 8 2 p l a y e r s p u r c h a s e d c h i p s t o t a l l i n g $ 1 2 b i l l i o n a n d o f

t h a t $ 3 . 3 b i l l i o n was p u r c h a s e d w i t h c r e d i t . The c r e d i t f o r

1 9 8 2 a l o n e w a s a p p r o x i m a t e l y $1 .5 b i l l i o n a n d may i n d i c a t e

f u t u r e t r e n d s . S e v e r a l o f t h e c a s i n o s a d v a n c e a l m o s t o n e

m i l l i o n d o l l a r s e a c h i n c r e d i t d a i l y a n d c r e d i t c u r r e n t l y

a c c o u n t s f o r n e a r l y 3 0 % o f a l l t a b l e game r e v e n u e . T h i s

becomes c r i t i c a l b e c a u s e o n e o f t h e m a i n d e t e r m i n a n t s o f

w h e t h e r or n o t a n i n d i v i d u a l w i l l g e t c r e d i t is w h e t h e r or

n o t a n o t h e r c a s i n o h a s e x t e n d e d c r e d i t to t h e p l a y e r - - n o t

w h e t h e r o r n o t t h e d e b t was e v e r p a i d o f f , or t h e p l a y e r had

a bank a c c o u n t t o c o v e r t h e c r e d i t , or w h e t h e r or n o t a d e b t

w a s e v e r w r i t t e n o f f f o r t h e p e r s o n i n q u e s t i o n .

The 4 % g r o s s r e v e n u e w r i t e - o f f t h a t t h e c a s i n o s are

g r a n t e d f r e e f rom t a x a t i o n to c o v e r bad d e b t s t e n d s t o '

e n c o u r a g e t h e h i g h - r i s k g r a n t i n g o f c r e d i t . C r e d i t is o n l y

g r a n t e d a t t h e t a b l e games n o t a t t h e s l o t m a c h i n e s , a n d

b e c a u s e 5 4 % o f t h e r e v e n u e is g e n e r a t e d a t t h e t a b l e s and

4 6 % f r o m t h e ' s l o t m a c h i n e s , t h i s 4 % w r i t e - o f f c a n b e u s e d

s o l e l y to c o u n t e r a c t bad t a b l e c r e d i t d e b t s . The p e r c e n t a g e

o f bad d e b t s o u g h t to b e m e a s u r e d o n l y a g a i n s t t h e income

d e r i v e d f r o m c r e d i t ( r a t h e r t h a n a g a i n s t t h e t o t a l gaming

i n c o m e ) t o show t h e a c t u a l e x t e n t of t h e p r o b l e m . The

s t a t i s t i c s o n t h e amoun t o f bad d e b t s a p p e a r s m a l l when

compared to t o t a l r e v e n u e , b u t s i g n i f i c a n t when compared t o

a l l c r e d i t g r a n t e d . From J a n u a r y 1 9 7 9 , t h r o u g h t h e e n d o f

1 9 8 2 , a p p r o x i m a t e l y $ 6 4 m i l l i o n w o r t h o f bad c h e q u e s a n d

u n p a i d m a r k e r s r e m a i n e d u n c o l l e c t e d by t h e c a s i n o s .

When p e o p l e o n p u b l i c a s s i s t a n c e a r e g i v e n $ 3 5 , 0 0 0

c r e d i t , a n d when a p l a y e r who makes $ 1 5 , 0 0 0 a y e a r c a n e n d

u p owing t w o c a s i n o s $ 9 0 , 0 0 0 , bad c a s i n o c r e d i t management

c a n b e i d e n t i f i e d . However , when known m o b s t e r s who d o n o t

e v e n g a m b l e a re g r a n t e d $ 2 7 , 0 0 0 i n "comps" ( c o m p l i m e n t a r i e s

s u c h as a room, f o o d , e n t e r t a i n m e n t ) a n d o t h e r n o t o r i o u s

o r g a n i z e d crime f a m i l y members r e c e i v e c r e d i t i n t h e

h u n d r e d s o f t h o u s a n d s o f d o l l a r s , t h e r e may b e s o m e t h i n g

more a t s t a k e t h a n s i m p l y p o o r d e c i s i o n mak ing . However ,

a l l a l l e g a t i o n s o f wrong d o i n g become a ma t t e r o f e v a l u a -

t i o n , b e c a u s e t h e c a s i n o s a r e n o t a t t h i s t i m e bound by

a c c o u n t a b l e . A s A t t o r n y G e n e r a l Kimmelman s t a t e d : "They

e x e r c i s e t h e i r u n f e t t e r e d d i s c r e t i o n i n t h e name o f

' b u s i n e s s j u d g e m e n t ' w h i c h t h e y u s e as a c l o a k o f

immun i t y " . 1 0 5

C o u p l e d w i t h t h e a p p a r e n t h a p h a z a r d g r a n t i n g o f c r e d i t

a n d t h e c a s i n o o p e r a t o r s a b i l i t y to w r i t e - o f f 4 % o f g r o s s

r e v e n u e s f o r bad d e b t s , t h e p r a c t i c e o f g r a n t i n g t h e c r e d i t

c u s t o m e r s 1 2 0 ( o r 90 b a n k i n g d a y s ) i n t e r e s t f r e e t o r e p a y

a n y l o a n s o v e r $ 2 , 5 0 0 s h o u l d be e x a m i n e d . Even when t h e

money is r e p a i d , it h a s b e e n u n a c c o u n t e d f o r d u r i n g t h i s

" l a g t i m e " . I f t h e money h a s b e e n u s e d f o r g a m b l i n g t h e n

t h e 1 2 0 d a y l a g t i m e a n d t h e t e n d e n c y t o g i v e c r e d i t t o

t h o s e who h a v e b e e n g r a n t e d it b e f o r e a l l o w s t h e p a t r o n to

" c h a s e h i s money" b y a p p l y i n g f o r c r e d i t e l s e w h e r e i n o r d e r

t o win b a c k w h a t he h a s l o s t - - o r t o lose t h e o r i g i n a l p l u s

t h e a d d i t i o n a l c r e d i t . The l a g p e r i o d a l s o a l l o w s f o r

" k i t i n g " . C r e d i t f r o m o n e c a s i n o c a n be u s e d to p a y o f f

a n o t h e r c a s i n o . W h i l e t h e p a t r o n c a n k e e p mov ing h i s c r e d i t

money a r o u n d f r o m c a s i n o to c a s i n o he is b u i l d i n g up h i s

c r e d i t r a t i n g e v e r y t i m e a paymen t is made--even a p a r t i a l

p a y m e n t . T h e c a s i n o s d o n o t c o n s u l t w i t h e a c h o t h e r t o

g u a r d a g a i n s t t h e e v e n t u a l m a s s i v e w r i t e - o f f s o f bad d e b t s

made n e c e s s a r y by t h e s e p r a c t i c e s . The f o l l o w i n g t a b l e

p r e s e n t s t h e c a s i n o c r e d i t f i g u r e s f o r 1 9 8 0 a n d 1 9 8 2 .

T w e n t y - f i v e M i l l i o n d o l l a r s (or 1 . 7 2 % o f t o t a l w i n ) w a s

w r i t t e n o f f t o b a d c h e q u e s a n d u n p a i d m a r k e r s . O v e r $ 6 4

M i l l i o n h a v e b e e n w r i t t e n o f f s i n c e 1 9 7 9 . The 1 9 8 2 t a x

w r i t e - o f f r e p r e s e n t s $2 M i l l i o n loss t o t h e s e n i o r c i t i z e n s

f u n d i n a d d i t i o n to p e r c e n t a g e losses to numerous o t h e r

o r g a n i z a t i o n s .

ii Walk ing -Wi th -Ch ips

Some c r e d i t p r o b l e m s wou ld be s o l v e d i f it w e r e

p o s s i b l e t o p r e v e n t t h e p a t r o n f r o m " w a l k i n g w i t h t h e

c h i p s " . The p r o b l e m s o f e x c e s s i v e g a m b l i n g would r e m a i n b u t

t h e r e wou ld b e less r i s k o f t h e p a t r o n u s i n g t h e c r e d i t

e x t e n d e d by t h e c a s i n o to i n v e s t i n a n i l l i c i t e n t e r p r i s e

( o n e e x a m p l e p r e s e n t e d was o f a n i n d i v i d u a l who was c o n d u c t -

i n g a l o a n s h a r k i n g o p e r a t i o n f r o m t h e f l o o r o f t h e c a s i n o

u s i n g c r e d i t money a s t h e b a s e o f h i s o p e r a t i o n ) . I t

a p p e a r s d i f f i c u l t , h o w e v e r , t o m a i n t a i n s u r v e i l l a n c e o v e r

c r e d i t p u r c h a s e d c h i p s . To r e d u c e c o l l u s i o n among c a s i n o

p e r s o n n e l , t h e c a s i n o k e e p s t h e g r a n t i n g o f c r e d i t s e p a r a t e

f r o m t h e c a s h i n g o f c h i p s . T h e r e is l i t t l e or no i n t e r a c -

t i o n b e t w e e n t h e s e b i f u r c a t e d a s p e c t s o f c a s i n o management .

Once a p a t r o n is g r a n t e d c r e d i t i n t h e f o r m o f c h i p s i t is

r e l a t i v e l y e a s y to g o t o t h e t e l l e r w i c k e t and c a s h i n t h e

c h i p s f o r d o l l a r s . The te l le rs w i l l a s k i f t h e p a t r o n h a s

a n y c r e d i t o u t s t a n d i n g and t h e p a t r o n may l i e or g i v e a

d i f f e r e n t name o r h a v e a n a c c o m p l i c e who c o u l d h o n e s t l y

r e s p o n d i n t h e n e g a t i v e . Some o f t h e e m p l o y e e s on t h e f l o o r

k e e p a n e y e o u t f o r known a n d l a r g e c r e d i t c u s t o m e r s b u t i t

is i m p o s s i b l e to k e e p a c h e c k o n a l l c u s t o m e r s o n c e t h e

c r e d i t is g r a n t e d . A f t e r a f ew m i n u t e s a t a c r o w d e d

g a m b l i n g t a b l e it m i g h t a p p e a r t h a t t h e c h i p s had been

g a m b l e d away , a l t h o u g h t h e p a t r o n may h a v e w a l k e d w i t h m o s t

o f t h e money. Even w h e r e t h e p a t r o n h a s p l a y e d and h a s won

t h e r e is n o n e c e s s i t y t o p a y b a c k t h e c r ed i t u n t i l t h e 1 2 0

i n t e r e s t f r e e d a y s h a v e e l a p s e d .

i i i ) F r a u d R e l a t e d t o C r e d i t P r a c t i c e s

M r . B a r r y Goas , C h i e f o f t h e C a s i n o C o n t r o l s e c t i o n o f

t h e A t t o r n e y G e n e r a l ' s C r i m i n a l J u s t i c e D i v i s i o n o u t l i n e d

s i x o f t h e ways t h a t " scams" are c o n d u c t e d i n t h e c a s i n o

c r e d i t m a r k e t .

a. Bank A c c o u n t / A c c o m n l i c e Scam

S t e p 1: The p a t r o n c a n t e m p o r a r i l y i n f l a t e h i s bank b a l a n c e a n d o f f e r t h i s b a l a n c e a s a b a s i s upon w h i c h t o q u a l i f y f o r c r e d i t . The money i n t h i s a c c o u n t may be b o r r o w e d f o r t h e c o u p l e o f d a y s a r o u n d t h e p e r i o d t h a t t h e c a s i n o wou ld be c h e c k i n g . Newly o p e n e d a c c o u n t s are t h e r e f o r e s u s p e c t , h o w e v e r , c a s i n o s a re n o t a l w a y s c o n c e r n e d a b o u t t h i s f a c t . The p a t r o n may e x p l a i n t h a t h e / s h e is "new t o t h e area" i n o r d e r t o e x p l a i n t h e a c c o u n t . I n some i n s t a n c e s a n a c c o m p l i c e i n t h e bank h a s g i v e n o u t f a l s e i n f o r m a t i o n on t h e p a t r o n . B a s e d o n t h i s a r t i f i c a l b a l a n c e , a n amount of c r e d i t w i l l l i k e l y b e g r a n t e d .

S t e p 2: The c r ed i t p a t r o n may p l a y a t a t a b l e w i t h a c o n f e d e r a t e a n d b e t e v e n and odd a g a i n s t him. I n t h a t way no c h i p s w i l l a c t u a l l y be l o s t a n d t h e c o n f e d e r a t e c a n t a k e t h e ' w i n n i n g s ' t o t h e w i c k e t a n d c a s h them i n .

S t e p 3: C r e d i t w i l l b e b u i l t up d u r i n g a p r o c e s s o f p a y i n g o f f s m a l l c r e d i t d e b t s a s t h e p l a y e r ' s r e p u t a - t i o n is e s t a b l i s h e d . A f t e r a m a j o r amount o f c r e d i t is g r a n t e d t h e p a t r o n c a n s i m p l y w a l k away w i t h t h e d o l l a r s .

A n o t a b l e scam, named " O p e r a t i o n P i s c e s " by t h e l a w

e n f o r c e m e n t o f f i c i a l s i n v o l v e d a l a r g e number o f p e r s o n s

o b t a i n i n g and w a l k i n g away w i t h r e l a t i v e l y small a m o u n t s o f

money--an a v e r a g e o f $ 3 5 , 0 0 0 p e r p e r s o n f o r a t o t a l t h e f t o f

$7.9 m i l l i o n o f w h i c h t h e S t a t e l o s t a n amount b a s e d on t h e

4% o f t h e g r o s s r e v e n u e w r i t e - o f f a l l o w a n c e . W i t h t h e

p a t r o n h a v i n g 1 2 0 d a y s i n w h i c h to p a y b a c k t h e c r e d i t l o a n ,

f o u r m o n t h s w i l l h a v e g o n e by b e f o r e t h e scams a r e d e t e c t e d

or i n v e s t i g a t i o n s c a n e v e n b e g i n .

b. Front -Money Scam

A v a r i a t i o n o n t h e p r e v i o u s scam is t h e t e c h n i q u e o f

b r i n g i n g a n amoun t o f c a s h to t h e c a s i n o t o l e a v e i n

t h e s a f e t y d e p o s i t box to b e u s e d a s " u p - f r o n t " money.

T h i s amount w i l l b e s i g n i f i c a n t - - p e r h a p s $10 ,000-- a n d

o n t h e s t r e n g t h o f t h i s t h e p a t r o n w i l l be g r a n t e d

a d d i t i o n a l money upon demand. I n t h i s way t h e c r e d i t

l i n e w i l l b e b u i l t up beyond t h e l e v e l o f t h e p a t r o n ' s

r e s o u r c e s .

c. T.T.O.

T h i s is h a r d l y a scam i n t h e t r a d i t i o n a l s e n s e o f t h e

word s i n c e t h e c a s i n o s seem t o d e l i b e r a t e l y e n c o u r a g e

t h i s f o r m o f a b u s e . I f a p a t r o n h a s a c r e d i t l i m i t o f

$ 5 , 0 0 0 h e may r e q u e s t t h a t " t h i s t i m e o n l y " h e b e

g r a n t e d a n a d d i t i o n a l $ 1 0 , 0 0 0 . I f he p a y s t h e f i r s t

T.T.O. o f f t h e n i t is l i k e l y t h a t h i s l i m i t w i l l s o o n

b e r a i s e d . I f t h e p a t r o n is w a l k i n g w i t h c h i p s , t h e

c o n f i d e n c e t h a t t h e p a y i n g o f f o f t h e f i r s t T.T.O.

i n s t i l l s i n t h e c a s i n o management may be q u i t e f a l s e .

When t h e c r e d i t l i m i t becomes s i g n i f i c a n t t h e p a t r o n

may "wa lk" w i t h t h e e n t i r e amount .

d . U s e o f V o l u n t e e r s a n d F o r c e d V o l u n t e e r s

I f a p a t r o n knows t h a t he would h a v e d i f f i c u l t y o b t a i n -

i n g c r e d i t f o r h i m s e l f , h e may e n t e r i n t o a n a g r e e m e n t

w i t h someone else. The v o l u n t e e r w i l l o b t a i n t h e

c r e d i t a n d k e e p a p e r c e n t a g e o f t h e money f o r h i m s e l f

a n d g i v e o v e r t h e rest t o t h e n o n - c r e d i t w o r t h y

p a t r o n . I f t h e g a m b l e r is u s i n g t h e c r e d i t d o l l a r s f o r

a p r o f i t a b l e i l l i c i t a c t i v i t y a n d is n o t l i k e l y t o lose

t h e money i n t h e c a s i n o , t h e v o l u n t e e r h a s n o t h i n g t o

lose r e g a r d i n g p a y b a c k . From a l a w e n f o r c e m e n t p o i n t

o f v i e w , h o w e v e r , t h e c r e d i t g r a n t e d h a s d i s s a p p e a r e d

f r o m s i g h t .

T h e f o r c e d " v o l u n t e e r " s i t u a t i o n may i n v o l v e a l o a n -

s h a r k i n g s i t u a t i o n w h e r e t h e l o a n s h a r k f o r c e s t h e

i n d e b t e d i n d i v i d u a l t o g o to t h e c a s i n o to g e t c r e d i t

t h a t w i l l t h e n b e u s e d t o p a y o f f h i s p r e v i o u s l o a n s .

The i n d e b t e d i n d i v i d u a l w i l l now owe t h e c a s i n o t h a t

w h i c h he p r e v i o u s l y c o u l d n o t p a y to t h e l o a n s h a r k .

e. U s e o f a F i c t i c i o u s P a t r o n or a F i c t i c i o u s N a m e

C o l l u s i o n b e t w e e n g a m b l e r s c a n c a u s e c a s i n o losses

b e c a u s e i n most cases a p e r s o n c a n o n l y b e h e l d r e s p o n -

s i b l e f o r t h e g a m b l i n g he h i m s e l f d o e s . One p a t r o n may

e n t e r t h e c a s i n o a n d claim t o be a n o t h e r i n d i v i d u a l who

h e knows h a s a p a r t i c u l a r c r e d i t l i n e a t t h e c a s i n o .

I d e n t i f i c a t i o n wou ld u s u a l l y n e e d t o b e shown, b u t i f

t h e a c t u a l c r e d i t - h o l d i n g i n d i v i d u a l is g e t t i n g a k i c k -

back t h e n o b t a i n i n g t h e n e c e s s a r y documen t wou ld n o t b e

a p r o b l e m . When t h e c a s i n o demands to b e p a i d back t h e

p e r s o n i n whose name t h e c r e d i t w a s h e l d d e n i e s h a v i n g

b e e n i n t h e c a s i n o on t h o s e p a r t i c u l a r n i g h t s - - a n d i n

f a c t h e w a s n o t . I t w i l l u s u a l l y b e e a s y f o r him t o

p r o v e h i s p r e s e n c e e l s e w h e r e .

A n o t h e r v a r i a t i o n o f t h i s scam is f o r an i n d i v i d u a l to

g o to t h e c a s i n o w i t h t h e i d e n t i f i c a t i o n o f a d o c t o r o r

l a w y e r or someone who would seem to be r e l i a b l e . W i t h

t h i s f a l s e i d e n t i f i c a t i o n t h e i n d i v i d u a l may r e q u e s t

c r e d i t . I f it is on t h e weekend and t h e c r e d i t /

employmen t r e f e r e n c e s are u n a v a i l a b l e t h e c a s i n o may

g r a n t a T.T.O. t o t h e i n d i v i d u a l w h i l e h i s a p p l i c a t i o n

is b e i n g p r o c e s s e d .

f . T h e L a r g e - S c a l e M u l t i - D i m e n s i o n a l Scam

T h e s e o p e r a t i o n s make u s e o f many o f t h e p r e v i o u s l y

d i s c u s s e d scams. The e m p h a s i s t e n d s t o be on h i g h

vo lume / low a m o u n t s o f c r e d i t t h e f t . The numerous and

. i n v i s i b l e p e o p l e i n v o l v e d w i l l s e l d o m r e v e a l t h e m s e l v e s

i v )

t o b e i n t e r c o n n e c t e d - - e s p e c i a l l y g i v e n t h e 1 2 0 d a y

d e l a y i n a n y i n v e s t i g a t i o n .

O p e r a t i o n P i s c e s , w h i c h was m e n t i o n e d e a r l i e r , is o n e

e x a m p l e o f a scam o f t h i s s o r t t h a t w a s u n c o v e r e d . A

t h i r t e e n mon th i n v e s t i g a t i o n r e v e a l e d i n v o l v e m e n t by 8

c a s i n o s i n a $7.9 m i l l i o n s w i n d l e by numerous i n d i v i -

d u a l s i n c o l l u s i o n w i t h a bank o f f i c i a l who g a v e o u t

f a l s e f i n a n c i a l reports on t h e scam members .

C a s i n o C r e d i t a n d O r q a n i z e d C r i m e

Any c a s i n o w h i c h a l l o w e s c r e d i t as a n i n t e g r a l p a r t o f

i t s o p e r a t i o n is w e l c o m i n g o r g a n i z e d c r i m i n a l s t o p a r t i c i-

p a t e i n t h e g a m b l i n g a n d to make u s e o f t h e c a s i n o s to

o p e r a t e o t h e r i l l i c i t e n t e r p r i s e s . O r i g i n a l l y , i n Nevada ,

t h e i n v o l v e m e n t o f o r g a n i z e d crime was so b l a t a n t t h a t t h e

o f f i c i a l s i n t h e c o u n t i n g rooms a r e r e p o r t e d t o h a v e d i v i d e d

t h e money i n t o t h r e e p i l e s - - o n e f o r t h e c a s i n o , o n e f o r t h e

g o v e r n m e n e a n d o n e f o r o r g a n i z e d crime. When a t t e m p t s w e r e

made to " c l e a n - u p " t h e ' c a s i n o s , t h e n t h e c r ed i t s y s t e m came

t o Nevada a s a r e p l a c e m e n t f o r t h e more o b v i o u s p a y - o f f s

t h a t had b e e n made.

E x p e r t s s ta te t h a t m i n o r t i n k e r i n g w i l l n o t a d e q u a t e l y

c o m b a t t h e s c h e m e s o f t h e d e d i c a t e d g a m b l e r or t h e i n v o l v e -

m e n t o f t h e o r g a n i z e d c r i m i n a l . The s c h e m e s w i l l c h a n g e as

e n f o r c e m e n t c h a n g e s . The s e r i o u s c a s i n o p a t r o n is i n f i -

n i t e l y a d a p t a b l e a n d it is n a i v e t o t h i n k o t h e r w i s e . T h i s

is n o t t o s a y t h a t " n o t h i n g w o r k s " , b u t r a t h e r t o a p p r e c i a t e

t h e d i f f i c u l t i e s i n v o l v e d i n m a i n t a i n i n g c o n t r o l o v e r c a s i n o

o p e r a t i o n s . T i g h t e n i n g up o n t h e c r e d i t p r o c e d u r e s wou ld b e

a p l a c e t o b e g i n , a n d i f it is deemed p o s s i b l e , t h e d e c i s i o n

m i g h t be t o e l i m i n a t e c r e d i t . I f p a t r o n s do n o t w a n t t o

w a l k a r o u n d t h e c a s i n o s c a r r y i n g wads o f money, t h e n t h e y

c o u l d have access to s a f e t y d e p o s i t b o x e s whereby t h e y c o u l d

u s e up to t h e l i m i t t h a t t h e y have a l r e a d y d e p o s i t e d a t t h e

c a s i n o or some g e n e r a l i z e d a r e a s h a r e d by a l l of t h e c a s i n o s

t h a t would o p e r a t e l i k e a 2 4 h o u r s a v i n g s b a n k . l o 6 .

The c r i t i c a l f a c t o r seems t o be t h a t o t h e r b u s i n e s s e s

r e s t r i c t c r e d i t b e c a u s e it is good b u s i n e s s t o do so.

C a s i n o s t e n d t o b e g e n e r o u s b e c a u s e , a g a i n , it is good

b u s i n e s s w i t h l i t t l e r i s k i n v o l v e d - - p a p e r money to b e g i n

w i t h , p l u s a 4 % w r i t e - o f f t o c o v e r bad d e b t s . I n s t e a d o f a

bad d e b t w r i t e - o f f , p e r h a p s t h e c a s i n o s s h o u l d pay d o u b l e

f o r a l l d e b t s ~ n c o l l e c t e d . l 0 ~ T h i s m i g h t n o t b e e n f o r c e a b l e

b e c a u s e o n l y t h e c a s i n o s would know--or be a b l e t o c o n t r o l - -

which d e b t s were u n c o l l e c t e d , b u t it would s e r v e to remove

t h e i n c e n t i v e f rom t h e c a r e l e s s g r a n t i n g of c r e d i t . The

i n v o l v e m e n t o f o r g a n i z e d c r i m i n a l s i n t h e c a s i n o s would h a v e

to be d e a l t w i t h a s a s e p a r a t e i s s u e b e c a u s e t h e t h r e a t f rom

t h e s e i n d i v i d u a l s i s n o t t h a t t h e y w i l l be p o o r r i s k s i n a n y

t r a d i t i o n a l s e n s e , b u t r a t h e r t h a t t h e y w i l l u s e t h e c r e d i t

i n i l l i c i t a c t i v i t i e s or b e i n v o l v e d i n l a r g e s c a l e scams t o

d e f r a u d t h e c a s i n o s u s i n g c r e d i t p r a c t i c e s a s t h e v e h i c l e

f o r t h e i r schemes .

T e s t i m o n y a t t h e c r e d i t h e a r i n g s i n c l u d e d a l e n g t h y

l i s t i n g o f t h e known o r g a n i z e d c r i m e f i g u r e s who have

r e c e i v e d documented amounts o f c r e d i t and "comps" f rom

v a r i o u s A t l a n t i c C i t y c a s i n o s or who used t h e c a s i n o s t o

d e p o s i t l a r g e sums o f money.

L i e u t e , n a n t C o l o n e l J u s t i n D i n t i n o o f t h e o f t h e New J e r s e y

S t a t e P o l i c e s t a t e d :

I n 1 9 7 8 , Former G o v e r n o r Brendan T. Byrne warned o r g a n i z e d crime t o ' k e e p t h e h e l l o u t o f A t l a n t i c C i t y ' . I t is r a t h e r e m b a r r a s s i n g t o w i t n e s s members o f o r g a n - i z e d crime r e c e i v i n g b o t h c r e d i t and

"comps" f rom t h e v e r y c a s i n o s which w e have l a b o r i o u s l y i n v e s t i g a t e d . The s t a t e d e n i e d l i c e n s u r e t o a number o f p e r s o n s w i t h s i g n i f i c a n t l y f e w e r c r i m i n a l p r o c l i v i t i e s and y e t w e a l l o w p a i d k i l l e r s , c o n v i c t e d m u r d e r e r s , d r u g t r a f f i c k e r s , and known l o a n s h a r k s to e n t e r t h e c a s i n o s and r e c e i v e p r e f e r e n t i a l t r e a t m e n t . I t is a n a f f r o n t . t o t h e s t a t e o f N e w J e r s e y and makes a mockery o f o u r r e g u l a t o r y p r o c e s s . 1 0 8

To f u r t h e r s u b s t a n t i a t e t h i s e v i d e n c e r e g a r d i n g t h e l a x

c a s i n o c r e d i t p o l i c i e s , D e t e c t i v e S e r g e a n t G r e g o r y W a l l a c k

o f t h e New J e r s e y S t a t e P o l i c e , a s s i g n e d t o t h e D i v i s i o n o f

Gaming E n f o r c e m e n t , r e c o u n t e d a few of t h e c a s e s where t h e

c a s i n o s had i n t h e i r f i l e s documented d e r o g a t o r y i n f o r m a t i o n

which w a s i g n o r e d by t h e c r e d i t m a n a g e r s .

v ) The C o u r t i n g o f Big-Time G a m b l e r s

M u l t i - m i l l i o n d o l l a r c a s i n o g a m b l e r and loser David

Z a r i n s u e d t h e A t l a n t i c C i t y c a s i n o s u n d e r t h e t r i p l e damage

c l a u s e o f t h e R I C O l e g i s l a t i o n f o r t h e i r h a v i n g r e p e a t e d l y

and k n o w i n g l y c a u s e d him t o g o i n t o d e b t and b a n k r u p t c y

t h r o u g h g r a n t i n g c r e d i t and "cornps". H e e v e n t u a l l y s e t t l e d

o u t o f c o u r t . The Z a r i n c a s e s e r v e s t o i n d i c a t e t h e

s t r e n g t h o f t h e t i e s be tween t h e g a m b l e r s and t h e c a s i n o s

who are s u p p o s e d t o r e m a i n t o some e x t e n t n e u t r a l i n t h e

c r e d i t d e c i s i o n s t h a t t h e y make. Z a r i n ended up owing 3 . 4

m i l l i o n d o l l a r s ( $ 4 . 6 m i l l i o n i f you i n c l u d e what was u n d e r

a n o t h e r name which Z a r i n e v e n t u a l l y t o o k r e s p o n s i b i l i t y

f o r ) . Much o f t h e c r e d i t t h a t he r e c e i v e d was o b t a i n e d f rom

R e s o r t s I n t e r n a t i o n a l .

The C r e d i t Manager a t Resorts I n t e r n a t i o n a l seemed

s u r p r i s e d t h a t t h e r e s h o u l d h a v e b e e n a n y q u e s t i o n a s t o why

h e had r e p e a t e d l y g r a n t e d s u c h e x t e n s i v e c r e d i t to t h i s man

who "was so p r o m i n e n t i n town", " g e n t l e m a n l y " , and " d e a l t

w i t h t h e F e d e r a l and S t a t e g o v e r n m e n t s " . The manager

a c k n o w l e d g e d t h a t h e knew Z a r i n w a s d a i l y t a k i n g c a s h away

f r o m t h e c a s i n o a n d o n numerous o c c a s i o n s Z a r i n was a l l o w e d

t o c a s h non-gambl ing c h e q u e s up t o $ 5 0 , 0 0 0 . The non-

g a m b l i n g c h e q u e s w e r e u s e d to k e e p t h e c y c l e o f c r e d i t / d e b t s

mov ing . A s a ' c o u r t e s y ' t o Z a r i n , Resorts I n t e r n a t i o n a l

acted a s h i s bank c a s h i n g a g e n c y . T h i s makes i t more

s u r p r i s i n g t h a t t h e c a s i n o was n o t u n d u l y s u r p r i s e d when

Z a r i n a n n o u n c e d t h a t h e was o p e n i n g a C a n a d i a n bank a c c o u n t

a t t h e R o y a l Bank o f Canada . The r a t i o n a l seems t o h a v e

b e e n t h a t it wou ld t a k e l o n g e r f o r c h e q u e s t o c lea r t h r o u g h

~ a n a d a a n d t h e r e f o r e he would h a v e some a d d i t i o n a l d a y s i n

w h i c h t o o b t a i n f u n d s .

By t h i s t i m e , i n order to c o m p e t e w i t h C a e s a r s a n d t h e

o t h e r c a s i n o s , Z a r i n h a d f u l l "comps" a t Resorts a n d had

r e c e i v e d ' g i f t s , s u c h as a w a t c h . C e a s a r s had g i v e n b o t h

Z a r i n a n d a f r i e n d o f h i s l a r g e - s c r e e n T.V.s and a b o a t t r i p

t o t h e Bahamas o n a p r i v a t e C a e s a r s y a c h t . When Z a r i n

r e t u r n e d f r o m t h e c r u i s e , Resorts a n n o u c h e d t h a t h e now had

u n l i m i t e d c r e d i t a t t h e i r c a s i n o p l u s c l f eques w o u l d b e

c o n s i d e r e d g o o d as s o o n as t h e y w e r e w r i t t e n . By A p r i l 3 0 ,

1 9 8 0 c h e q u e s were b e i n g r e t u r n e d f r o m Canada NSF a n d se t t le -

m e n t s were b e i n g made b e t w e e n t h e v a r i o u s c a s i n o s . O v e r $3

M i l l i o n were w r i t t e n - o f f .

v i ) T h e C o m p u l s i v e Gambler

Gambl ing r e s e a r c h i n t h e p a s t h a s b e e n a m b i v a l e n t

r e g a r d i n g t h e c o m p u l s i v e g a m b l e r - - a t t i m e s t a k i n g h i s claims

o f e x p l o i t a t i o n s e r i o u s l y a n d i n o t h e r r e p o r t s d i s c o u n t i n g

h i s c o n c e r n s . T h i s is now c h a n g i n g . The g a m b l i n g i n d u s t r y

is h a v i n g t o t a k e more s e r i o u s t h e claims o f c o m p u l s i v e

g a m b l e r s d u e t o t h e i n c r e a s i n g number o f l a w s u i t s t h a t a r e

b e i n g f i l e d a g a i n s t t h e c a s i n o s . To d a t e , f o u r cases

a l l e g i n g t h a t i l l e g a l a n d / o r u n c o n s c i o u s a b l e e x t e n s i o n s of

c r e d i t c a u s e d t h e a c c u m u l a t i o n o f g a m b l i n g d e b t s , h a v e b e e n

f i l e d . One s u c h c a s e ( R e s o r t s I n t e r n a t i o n a l H o t e l , I n c . v .

David Z a r i n a n d M a r t h a Nemt in , D o c k e t N o . L-14602-80,

S u p e r i o r C o u r t o f New J e r s e y , Law D i v i s i o n , A t l a n t i c C o u n t y )

h a s b e e n s e t t l e d w h i l e t h r e e o t h e r c a s e s are s t i l l

p e n d i n g . 109

R e p e a t e d l y t h r o u g h o u t t h e t e s t i m o n y o f a l l of t h e

c o m p u l s i v e g a m b l e r s t h e r e was t h e theme t h a t t h e c a s i n o s

made them f e e l i m p o r t a n t - - t h e e x e c u t i v e s a t e w i t h them a n d

t o l d them t h a t t h e y were " h i g h - r o l l e r s " . The l u x u r i o u s

rooms, t h e $300-400 m e a l s a n d e n t e r t a i n m e n t a n d t h e company

o f e x e c u t i v e s a n d p r e s i d e n t s o f t h e c a s i n o s a l l r e i n f o r c e d

t h e f e e l i n g o f b e i n g "somebody". T h i s a p p e a r e d to be a

c r i t i c a l t e c h n i q u e u s e d by t h e c a s i n o s i n o r d e r t o e n c o u r a g e

t h e e x c e s s i v e g a m b l i n g t h a t t o o k p l a c e .

v i i ) C o n c l u s i o n o n C r e d i t

.. C a s i n o c r e d i t i s " p a p e r money" u n t i l i t is " w a l k e d "

f r o m t h e c a s i n o , and is t h e r e f o r e n o t t h e same a s c r e d i t

g r a n t e d i n o t h e r b u s i n e s s e s . As alter R e i d , C h a i r m a n o f

t h e C a s i n o C o n t r o l Commiss ion s t a t e d :

C r e d i t i n c a s i n o s is n o t a n a l o a o u s t o t h e c r e d i t e x t e n d e d by t r a d i t i o n a l e l e n d e r s s u c h a s b a n k s . I t is n o t b a c k e d by c o l l a t e r a l and when i t g o e s b a d , it r e p r e s e n t s l o s t o p p o r - t u n i t y more t h a n l o s t a s s e t s . 11°

The c o n c l u s i o n seems to b e t h a t t h e A t l a n t i c C i t y

"mode l " c a s i n o resort, d e s i g n e d t o a v o i d a l l o f t h e p i t f a l l s

i n h e r e n t i n Nevada , is p r e s e n t l y p o r t r a y e d a s a haven f o r

o r g a n i z e d c r i m i n a l s , a n d a Mecca f o r t h e c o m p u l s i v e

g a m b l e r . Much o f t h e a b u s e is s e e n to r e l a t e to t h e l e n i e n t

a n d i r r e g u l a r c a s i n o c r e d i t r e g u l a t i o n s . Law e n f o r c e m e n t

I a g e n c i e s i n N e w J e r s e y h a v e t e s t i f i e d t h a t t h e n e c e s s a r y

monitoring of credit operations used up over one-half of

their regulatory resources and that 65% of the prosecutions

involved casino credit fraud.

While acknowledging that credit gambling had produced

one-fifth of the total casino win and that the existence of

credit had served to attract casino operators into ~tlantic

City, the overall recommendation by the Commission served to

emphasize that the negative consequences were more signifi-

cant than what was gained from the existing credit

practices. When the casino Control Act was being drafted,

the.State Commission of Investigation had warned that allow-

ing casinos to grant credit would result in "substantial

social and law enforcement problems including improper

credit collection practices, loansharking and gaming

scams". In the 1983 redommendations from the public hearing

on casino credit, the Commission listed as their first

recommendation the need to "repeal all statutory provisions

which authorize the extension of credit at casinos.lll

However, if the legislature is not prepared to repeal afl

credit, the following list of recommendations by the

Commission are aimed at providing better control over credit

practice:

1. elimination of tax write-offs for debts,

2. the exclusion of undesirables,

3. a new system by which a patron must pay markers

before leaving a gaming table with chips,

4. restrictions on gratuities,

5. a 14 day deadline for depositing markers, and

6 . an increase in civil penalties from $10,000 to

$100,000 for an individual and from S50,000 to

$1,000,000 for a corporation. ll2

- 116 -

4. C a s i n o T a x a t i o n R e v e n u e

A t l a n t i c C i t y now h a s n i n e c a s i n o s i n o p e r a t i o n a n d a t

l e a s t f o u r o t h e r s a re u n d e r c o n s t r u c t i o n . The n i n e

commenced o p e r a t i o n s w i t h i n t h e f i r s t t h r e e y e a r s o f t h e

c a s i n o l e g i s l a t i o n . I n 1 9 7 8 , w h i l e e n j o y i n g a monopo ly

p o s i t i o n , t h e f i r s t c a s i n o , Resorts I n t e r n a t i o n a l , was t h e

b u s i e s t a n d m o s t p r o f i t a b l e c a s i n o i n t h e w o r l d . By 1 9 8 0 ,

h o w e v e r , t h e r e was c o n c e r n t h a t some o f t h e o p e r a t i o n s m i g h t

a c t u a l l y b e l o s i n g money a n d t h e r e b y f a i l t o p r o d u c e t h e

e x p e c t e d t a x r e v e n u e . W h e r e a s i t is t r u e t h a t d o l l a r

a m o u n t s s p e n t on g a m b l i n g c a n n o t m u l t i p l y i n a n u n l i m i t e d

f a s h i o n w i t h t h e i n c r e a s e i n numbers o f c a s i n o s a n d t h a t

t h e r e is a l e v e l l i n g o f f p o i n t t h a t m u s t he e s t i m a t e d i n

o r d e r t o d e c i d e how numerous a n d c o m p e t i t i v e t h e c a s i n o s

w i t h i n a g a m b l i n g resort c a n b e - - i t would a p p e a r f r o m t h e

a v a i l a b l e 1 9 8 2 f i g u r e s t h a t t h i s s a t u r a t i o n p o i n t h a s n o t

y e t b e e n r e a c h e d i n N e w J e r s e y .

The r e v e n u e rrom t h e c a s i n o s is d i r e c t e d t h r o u g h t w o

f u n d i n g s y s t e m s : The C a s i n o Revenue Fund a n d t h e C a s i n o

C o n t r o l Fund.

A. C a s i n o R e v e n u e F u n d

The r e v e n u e i n t h i s f u n d is g e n e r a t e d f r o m t h e a n n u a l

8% t a x w h i c h is imposed on t h e g r o s s r e v e n u e s o f t h e

o p e r a t i n g c a s i n o s .

The t a x r e v e n u e scheme a s set o u t i n t h e Gaming S t a t u t e

s p e c i f i e d :

I n a d d i t i o n to t h e r e v e n u e s g e n e r a t e d by i n c r e a s e d c o r p o r a t e b u s i n e s s t a x e s , p r o p e r t y t a x e s , S t a t e a n d F e d e r a l i ncome t a x e s a n d l o c a l t a x e s , t h e C a s i n o C o n t r o l A c t i m p o s e s a t a x on t h e g r o s s r e v e n u e o f t h e c a s i n o s . The

t a x on c a s i n o r e v e n u e w a s o r i g i n a l l y 8 % t o 1 2 % when t w o or t h r e e c a s i n o s were l i c e n s e d a n d i n o p e r a t i o n ; 10% when f o u r or f i v e c a s i n o s were l i c e n s e d a n d i n o p e r a t i o n ; a n d , 8% when s i x or more w e r e l i c e n s e d a n d i n o p e r a t i o n . T h e r e f o r e , w i t h n i n e c a s i n o s , t h e 8% r a t e is c u r r e n t l y a p p l i e d . l 1 3

T h e g r o s s r e v e n u e s t a x is d e p o s i t e d i n t o a s p e c i a l

a c c o u n t known as t h e C a s i n o Revenue Fund a n d is t o b e u s e d

e x c l u s i v e l y f o r r e d u c i n g p r o p e r t y t a x e s , r e n t a l s a n d u t i l i t y

c h a r g e s f o r e l i g i b l e s e n i o r c i t i z e n s and d i s a b l e d r e s i d e n t s

o f New J e r s e y .

A s o f 1 9 8 2 , f o u r s p e c i f i c p r o g r a m s had b e e n e s t a b l i s h e d :

1. p r o p e r t y t a x ( H o m e s t e a d ) r e b a t e s f o r s e n i o r c i t i z e n s a n d d i s a b l e d p e r s o n s

2. L i f e l i n e - a s s i s t a n c e w i t h u t i l i t y b i l l s o f t h e e l d e r l y a n d d i s a b l e d

3 . P h a r m a c e u t i c a l A s s i s t a n c e f o r t h e a g e d a n d l e g a l l y d i s a b l e d

4. B o a r d i n g House R e n t a l A s s i s t a n c e - t o assist t h e e l d e r l y a n d d i s a b l e d to p a y t h e i r i n c r e a s e d r e n t s o n b o a r d i n g h o u s e s , w h e r e t h e i n c r e a s e s a r e c a u s e d b y t h e e x p e n s e s i n c u r r e d by l a n d l o r d s who h a v e i n s t a l l e d s a f e t y i m p r o v e m e n t s .

The f o l l o w i n g d i a g r a m s show t h e p e r c e n t a g e d i s t r i b u t i o n

o f t h e f u n d s to e a c h o f t h e programmes . 114

CASINO REVENUE FUND DISBURSEMENTS ( $ I N MILLIONS) *

30, 1982

Homestead Exemption

$141.2 Million

Pharmaceutical Assistance $1.5 Million

0 . 7 %

Lifeline Credit Against Utilities $78.1 Million Boarding House

Rent Assistance $0.8 Million

0.4%

J U L Y 1, 1981 THROUGH JUNE 30, 1982

Homestead

Pharmaceutical Assistance $1.5 Million

House stance llion

* New Jersey Casino Control Commision, Annual Report. Dec. 31, 1982. p. 21.

B. C a s i n o C o n t r o l Fund

C o s t s o f g o v e r n m e n t a l r e g u l a t i o n o f t h e c a s i n o i n d u s t r y

a re b o r n e by t h e i n d u s t r y i t s e l f t o c o v e r t h o s e e x p e n s e s

g e n e r a t e d f r o m t h e . f e e s f o r t h e i s s u a n c e and a n n u a l r e n e w a l

o f c a s i n o l i c e n s e s . T h i s r e v e n u e is u s e d t h e r e f o r e to f u n d

t h e o p e r a t i o n s o f t h e C a s i n o C o n t r o l Commiss ion and t h e

D i v i s i o n o f Gaming E n f o r c e m e n t . The f o l l o w i n g t a b l e

i n d i c a t e s t h e r e v e n u e g e n e r a t d a n d t h e e x p e n d i t u r e f o r 1 9 8 1

a n d 1 9 8 2 . T h e r e was a $ 4 , 1 9 9 , 9 0 0 . 0 0 d e f i c i t i n 1 9 8 2 w h i c h

w i l l b e made u p by t h e " a c r o s s - t h e - b o a r d " b i l l i n g p r o v i s i o n

w h e r e b y e a c h o f t h e n i n e c a s i n o s a c c e p t p o r t i o n o f a n y

d e f i c i t t h a t m i g h t b e r e a l i z e d a t t h e e n d o f t h e year .115

CASm (xlr?ImL FUND S- CF m, EXPENDITURES, AND

(3AAN(;ESINFUM)BALANCES FOR 'IIE FISCAL E R R S ENDED JUNE 30, 1982 AM) 1981

EXHIBIT 11 (in $000)

Revenues : Licenses

Casino Casino lhployees S l o t Machine Casim Service Industry Alcoholic Beverage

Wrk Permits Special Assessment Fines and Penal t ies Other Revenues

Tota l Revenues,

Expenditures: Public Safety and Criminal J u s t i c e

(Division of Gaming Enforcement- Schedule 1)

Government Direction, Management and Control (Cas im Control Cmission-Schedule 1)

Tota l Expenditures

Other Decreases : I n t e r e s t (Note 11)

Total Other Decreases

To ta l Expenditures and Other Decreases

N e t Increase (Decrease ) in Ebnd Balances f o r the Year

Fund Balances - Beginning of Period

Fund Balances - End of Period

( 1 Denotes minus f igures

I t is r e v e a l i n g t o c o m p a r e t h e c a s i n o win f i g u r e s

b e t w e e n L a s Vegas and A t l a n t i c C i t y .

P r o j e c t e d # o f . P r o j e c t e d C a s i n o Win 1 1 I C a s i n o C a s i n o Win

L a s V e g a s 1 . 8 B i l l i o n 9 0 1 . 9 B i l l i o n 90 a p p r o x .

A t l a n t i c C i t y 11 .7 B i l l i o n 1 9 112.1 B i l l i o n 110

A s t h i s t a b l e i n d i c a t e s , w i t h o n l y a p p r o x i m a t e l y 1 0 % o f t h e

number o f c a s i n o s t h a t L a s V e g a s h a s , A t l a n t i c C i t y is

p r o j e c t e d t o p r o d u c e almost t h e same c a s i n o win d u r i n g 1 9 8 3

a n d is p r o j e c t e d t o h a v e a l a r g e r win f i g u r e f o r 1 9 8 4 .

T h e e s t i m a t e d r e v e n u e to b e r e c e i v e d by t h e S t a t e o f

N e w J e r s e y f o r F i s c a l Year 1 9 8 4 is as f o l l o w s :

C a s i n o Revenue Fund - $135 ,000 .000

C a s i n o C o n t r o l Fund - 3 8 , 5 0 0 . 0 0 0 ~ ~ ~

T h e most r e c e n t c a l e n d a r y e a r r e v e n u e f i g u r e s are t h e

1 9 8 2 s t a t i s t i c s , a n d b e c a u s e t h e v a r i o u s q u a r t e r s o f t h e

y e a r p r o d u c e d i f f e r e n t v o l u m e s o f g a m b l i n g , t h e s e c o m p l e t e

f i g u r e s a r e t h e most r e l i a b l e . F o r c a l e n d a r y e a r 1 9 8 2 , t h e

t o t a l g r o s s c a s i n o r e v e n u e f rom A t l a n t i c C i t y was

$ 1 , 4 8 4 , 1 6 5 , 0 0 0 . The n e t income to t h e c a s i n o s f rom t h i s

f i g u r e was $ 5 6 , 8 3 3 , 0 0 0 . 0 0 . W h e r e a s t h e r e is no j u s t i f i c a -

t i o n f o r e x p e c t i n g a d e c r e a s e i n t h e 1 9 8 3 g a m b l i n g r e v e n u e

f i g u r e s , t h e f i r s t q u a r t e r o f 1 9 8 3 r e s u l t e d i n o n l y

$364 ,010 ,000 .00 w i t h a n e t i ncome o f $ 4 , 0 2 4 , 0 0 0 , 0 0 . The

w i n t e r m o n t h s d r a w smaller c r o w d s t h a n t h e summer o c e a n

cl imate and may b e a c o n s i d e r a t i o n to o t h e r j u r i s d i c t i o n s

c o n s i d e r i n g c a s i n o s .

and r e l a t e d tax f i g u r e s f o r each sepa ra t e cas ino . l17

Resorts 1982 1981 1980 1979 1978

Tot dl

Caesars 1982 1981 1980 1979

Total

Total

Tot dl

Gross N&r of Daily Adjustment meme Days in Average £or after

F&venue vratian Revenue Una,llectibles Adjustment - Tax

a Includes a $319,392 penalty imposed by the Casino Control Cuninission a d paid by Resorts. Includes $19,653 i n delinquent taxes ard $2,800 i n in te res t wid by Sards.

Casino-Hotel

Golden Nugget 1982 1981 1980

Tota l

Playboy 1982 1981

Tota l

Total

Tota l

Industry lbtdl 1982 . 1981 1980 1979

Nm&r of Daily Days in ?+srerqe

m u e . Operation Revenue

(;ross Adjustment Revem

for after Unmllectibles Adjustment - Tax

a Includes a $319,392 penal ty imposed by t h e Casino Control Camnission ard paid by R e s r t s . Inc ludes $1 9,653 i n del inquent taxes ard $2,800 i n i n t e r e s t p i d by Sards.

C Does not inc lude $2,114,401 i n t e r e s t earned from April through December 1982.

The f o l l o w i n g f i v e t a b l e s p r e s e n t c u r r e n t f i g u r e s on

c a s i n o r e v e n u e . The f i r s t t a b l e shows t h e t o t a l " d r o p " f o r

1 9 8 2 f o r c a s i n o s , r a c e - t r a c k b e t t i n g and l o t t e r i e s . 118

T a b l e 2 shows t h e d i r e c t r e v e n u e b e n e f i t t o t h e S t a t e f r o m

t h e s e same t h r e e f o r m s o f l e g a l i z e d gambling.119 T a b l e 3

s h o w s t h e b r e a k d o w n i n c a s i n o w i n s as d e r i v e d f r o m t h e s l o t

m a c h i n e s , c a s h t a b l e , a n d c r e d i t t a b l e c a s i n o a c t i v i t i e s ,

f o r a t h r e e - y e a r p e r i o d . 1 2 0 T a b l e 4 c o m p a r e s e a c h a u t h o r -

i z e d game a n d r a n k s them o n t h e ba s i s o f t h e c o n t r i b u t i o n

t h e y make t o t h e t o t a l c a s i n o win .121 The f i n a l t a b l e ,

number 5 , f o c u s e s s p e c i f i c a l l y on t a b l e gaming and p r o v i d e s

a c o m p a r i s o n b e t w e e n amoun t b e t a n d amount won by t h e

c a s i n o . 1 2 2

TABLE 1

NEW J E R S E Y LEGALIZED GAMBLING TOTAL DROP FOR 1 9 8 2

TOTAL DROP $11.3 B I L L I O N

CASINOS $ 9 . 8 B I L L I O N

RACE TRACK LOTTERY $ 9 2 4 MILLION $ 5 9 3 M I L L I O N

8.1% 5 . 2 %

- 127 -

TABLE 2

N.J. LEGALIZED GAMBLING ACTIVITY AND DIRECT BENEFIT TO STATE

IN CALENDAR 1982

RAC I NG LOTTERY

Handle $924 million $593 million

Drop $924 million $593 million

Credit Portion

Direct Revenue Benefit to N.J. $9.2 million $250 million

N.J. Direct Revenue As A % of Drop 10% -

CASINOS

???

$9.8 billion

($1.5 billion)

$117 million

1.2% of Drop (8% of win)

1 .5 -

1 . 4 - 1.3 - 1 . 2 -

1.1 -

1 . 0 - B I L L I O N

9 0 0 -

8 0 0 -

7 0 0 -

6 0 0 -

5 0 0 -

4 0 0 -

3 0 0 -

2 0 0 -

1 0 0 =

M I L L I O N

TABLE 3 CASINO INDUSTRY

SLOT WIN, TABLE WIN, TABLE C R E D I T WIN

TOTAL WIN $ 6 4 2 MILLION

CASH-SLOTS $ 2 6 7 M I L L I O N

4 2 %

CASH-TABLES $ 2 7 9 M I L L I O N

4 3 %

:REDIT-TABLES $ 9 6 M I L L I O N

15%

1 9 8 0

TOTAL WIN $ 1 . 0 9 7 B I L L I O N

CASH-SLOTS $ 4 6 6 MILLION

4 2 %

CASH-TABLES $ 4 5 5 MILLION

4 2 %

:REDIT-TABLES

$ 1 7 6 M I L L I O N 1 6 %

TOTAL WIN $ 1 . 4 9 3 B I L L I O N

CASH-SLOTS $ 6 9 4 MILLION

4 6 %

CASH-TABLES $553 MILLION

37%

:REDIT-TABLES $ 2 4 6 MILLION

17%

GAME

Bix Six

6.05 Slols

Baccarat

Roulette

$1.00 Slots

Olher Slots

Craps

Blackjdck

$.25 Slols

($1

THE NEW JERSEY CASINO INDUSTRY COMPARISON OF CONTRlBUTlOPJ T 0 TOTAL CASINO WIN BY AUTHORIZED GAME

FOR THE YEARS 1982 AND 1981

($ in Miillons)

Legend

011111'1981 Total Casino Win 1981: $1.099.8 1982 Total Casino Win 1982: $1.493.2

TABLE 5

CASINO INDUSTRY TABLE DROP ( C H I P S PURCHASED AT T A B L E S ) AND TABLE WIN

2 . 0 $ 2 . 2 8 5

B I L L I O N 1 . 6

1 . 2 B I L L I O N

8 0 0

M I L L I O N

TABLE DROP $ 3 . 7 0 1

B I L L I O N

TABLE WIN $ 6 3 1 MILLION

TABLE DROP $ 4 . 7 1 5

B I L L I O N

TABLE WIN $ 7 9 9 MILLION

1 7 %

V. NEW YORK: THE DECISION REGARDING CASINOS

1. Background

New York officials, like those of other States,

seriously questioned entering the casino business, and have

postponed a decision. An examination of the studies that

led to that decision is informative because first, the

investigation into the pros and cons was more detailed than

in other States; second, the political pressures in favour

of the introduction of casinos were very strong. Given

these two factors, the rejection of casinos is all the more

significant.

The New York State Legislature has been considering

casinos seriously for approximately a decade. In 1972, Earl

Brydges Sr., the Senate Majority Leader, recommended consti-

tutional amendments authorizing all forms of State-operated

gambling. A year later, according to Janice Prindle: "they

then discovered they had practically mailed an engraved

invitation to organized crime, and refused to give the

constitutional amendment the required second passage in

1973". 123

In 1973, Assembly Speaker Stanley Steingut revived the

casino controversy by directing the New York State

Legislature Institute at Baruch College, of the City

University of. New York, to prepare a comprehensive study of

estimated direct revenue and other economic consequences of

casino gambling. Steingut apparently believed that a

"creditable" study (which included as principal economic

advisor Nobel prizewinner Wassily Leontief) would promote

casinos as a boost to economic conditions at the State and

local government levels. Instead, 'the study estimated only

modest gains while ignoring most of the major costs and I

c o n c e r n s i n v o l v e d . D u r i n g t h i s p e r i o d , a t t e m p t s were

made by v a r i o u s i n t e r e s t g r o u p s and p o l i t i c i a n s t o i n t r o d u c e

c a s i n o s . T h e s e e f f o r t s were f o l l o w e d by i n v e s t i g a t i v e

s t u d i e s w h i c h d i f f e r e d i n some r e s p e c t s , b u t u n i f o r m l y

c o n c l u d e d t h a t :

1) c a s i n o s w i l l n o t p r o d u c e g r e a t r e v e n u e g a i n s - -

e s p e c i a l l y i f t h e y a r e r u n by t h e s t a t e ;

2 ) c a s i n o s e n c o u r a g e o r g a n i z e d c r i m i n a l a c t i v i t y - - p a r t i c u -

l a r l y i f t h e y a r e p r i v a t e l y r u n ;

3 ) c a s i n o s d o n o t c rea te j o b s b u t m e r e l y s h i f t employmen t

f r o m o n e i n d u s t r y t o a n o t h e r .

The i n t e r e s t g r o u p s t e n d e d to q u o t e r e v e n u e s t a t i s t i c s

b a s e d o n Nevada c a s i n o s a n d m u l t i p l i e d t h e f i g u r e s f o r e a c h

p r o j e c t e d c a s i n o . T h e i r a r g u m e n t a l so i n c l u d e d t h e p o s i t i v e

g a i n s t o N e w York o f b e i n g " f i r s t " on t h e E a s t e r n s e a b o a r d

t o e s t a b l i s h c a s i n o s . G o v e r n o r C a r e y , d u r i n g t h i s p e r i o d ,

v o i c e d s t r o n g s u p p o r t f o r t h e l e g a l i z a t i o n . The f a c t s known

a b o u t c a s i n o g a m b l i n g were l a r g e l y i g n o r e d as t h e p r o - c a s i n o

f a c t i o n c a m p a i g n e d f o r l e g a l i z a t i o n , f o r w h a t p e o p l e l i k e

M o n s i g n o r J o s e p h A. Dunne, P r e s i d e n t o f t h e C o u n s e l on

C o m p u l s i v e G a m b l i n g , a r g u e are t h e wrong r e a s o n s :

. . . f o r r e v e n u e , t o u r i s m , i n s h o r t f o r p o s s i b l y i l l u s i o n a r y b e n e f i t s t o t h e s t a t e r a t h e r t h a n t o p r o t e c t t h e g a m b l e r , a n d t h

I p u b l i c , f r o m e x p l o i t a t i o n or c o r r u p t i o n ... 725 N o a c t i o n was t a k e n on t h e p r o p o s e d B i l l b e c a u s e t h e r e w a s

no s p o n s o r i n t h e R e p u b l i c a n - d o m i n a t e d S e n a t e and t h e

Democrats a l so w e r e h e s i t a n t .

~ Even as t h e o f f i c i a l s d e b a t e d , o r g a n i z e d c r i m i n a l s

a t t e m p t e d t o s t a k e o u t a r e a s of c o n t r o l o f t h e new m a r k e t .

Be tween B r y d g e s t . 1 9 7 2 p r o p o s a l f o r c a s i n o l e g a l i z a t i o n and

d u r i n g t h e v o t e r r e f e r e n d u m s , t h e N e w York S t a t e

i I n v e s t i g a t i o n Commiss ion w a t c h e d t h e j o s t l i n g of o r g a n i z e d

c r i m e p e r s o n a l i t i e s i n t o S u l l i v a n County--a o n c e p r o s p e r o u s

area i n t h e C a t s k i l l s m o u n t a i n s . T h i s a r e a seemed l i k e l y t o

b e c h o s e n f o r " r e v i t a l i z a t i o n " b e c a u s e it was b e i n g aban-

d o n e d by t h e t o u r i s t i n d u s t r y a n d y e t was close e n o u g h t o

New York C i t y t o a t t r a c t l a r g e numbers o f p a t r o n s . The

number o f h o t e l s h a d d e c l i n e d f r o m 500 t o 80 , w i t h n u m e r o u s

f o r e c l o s u r e s , t a x sa les a n d a l l e g e d a r s o n f o r i n s u r a n c e .

P r i n d l e s t a t e s :

Over a t w o - y e a r p e r i o d S . I .C . p i e c e d t h e s t o r y t o g e t h e r , u n c o v e r i n g a m u l t i - m i l l i o n d o l l a r r ea l e s t a t e r a c k e t a n d c o n c l u s i v e e v i d e n c e o f c o n n e c t i o n s w i t h o r g a n i z e d crime. A t t h e c e n t e r o f a maze o f f r a u d u l e n t l o a n s , s u s p i c i o u s e x c h a n g e s o f p r o p e r t y and sham c o n s t r u c t i o n c o n t r a c t s , was B e r n a r d Tolkow, t h e "boss" o f a u n i o n o f u n s k i l l e d w o r k e r s , Amalgamated L o c a l 355. To lkow managed t h e w e l f a r e f u n d f o r Amalgamated , w h i c h had b e e n o u s t e d f r o m t h e U n i t e d A u t o W o r k e r s i n 1 9 5 4 a l o n g w i t h i t s o r g a n i z e r a n d Tolkow associa te J o h n D i o g a r d i , a c o n v i c t e d l a b o r r a c k e t e e r . The u n i o n f u n d w a s t h e s o u r c e o f t h e f r a u d u l e n t l o a n s , many o f w h i c h w e r e made t o s u c h r e p u t e d f i g u r e s i n t h e New York C i t y u n d e r w o r l d as J o s e p h Columbo, A n g e l 0 B r u n o , C a r l o Gambino and J o s e p h P a l e r n o . 1 2 6

New York State Studies Pertaininq To Casino Gamblinq

I n t h i s a n a l y s i s o f t h e New York i n v e s t i g a t i o n i n t o

l e g a l i z i n g c a s i n o s , f o u r s t u d i e s w i l l be b r i e f l y o u t l i n e d :

A, 1975 - Easy Money: Report of the Task Force on Leaalized Gamblina

Two s e p a r a t e g r o u p s - - t h e T w e n t i e t h C e n t u r y Fund a n d

The Fund f o r t h e C i t y o f New Y o r k - - t o g e t h e r f o r m e d t h e

T a s k F o r c e o n L e g a l i z e d Gambl ing . T h e i r f i n d i n g s w e r e

p r e s e n t e d i n a d o c u m e n t e n t i t l e d E a s y Money. T h i s

r e p o r t p r e s e n t e d f i v e m a i n c o n c l u s i o n s : 1 2 7

1 ) T h e r e is no j u s t i f i c a t i o n f o r t h e h i g h l y p u b l i c i z e d e x p e c t a t i o n t h a t t h e l e g a l i z a t i o n of gambling w i l l p r o v i d e an i m p o r t a n t new s o u r c e of r evenue f o r S t a t e t r e a s u r i e s . Al though lotteries and o t h e r l e g a l i z e d gambl ing games c a n produce s o m e r evenue f o r t h e S t a t e s , t h e amounts would n o t be l a r g e and t h e y cou ld be a t t a i n e d o n l y t h r o u g h a c t i v e and a g g r e s s i v e government p romot ion o f l e g a l i z e d gambling.

n e i t h e r t h e e a r l y f i n a n c i a l r e t u r n s from t h e l o t t e r i e s and from o f f - t r a c k b e t t i n g nor t h e economics o f t h e i l l e g a l gambling i n d u s t r y s u p p o r t t h e o p t i m i s t i c a s sumpt ions t h a t a r e now s o widespread . Even a l l o w i n g f o r a wide margin of e r r o r and f o r d i f f e r - e n c e s i n t h e volume of a c t i v i t y from one S t a t e t o a n o t h e r , t h e Task Force is convinced t h a t t o t a l r evenues from compre- h e n s i v e l e q a l i z a t i o n of qambl ing would make o n l y a r e l a t i v e l y s m a l l c o n t r i b u t i o n t o S t a t e t r e a s u r i e s . Al though l e g a l i z a t i o n might expand t h e volume of gambling i n t h e n a t i o n s u b s t a n t i a l l y , w e do n o t b e l i e v e t h a t t h i s expans ion would be g r e a t enough t o a l t e r s i g n i f i c a n t l y o u r c o n c l u s i o n t h a t t h e r evenue y i e l d would be minor .

According t o t h e b e s t e s t i m a t e s a v a i l a b l e , Americans wager between $30 and $40 b i l l i o n a n n u a l l y on t h e major i l l e g a l games-- numbers, s p o r t s b e t t i n g , o f f - t r a c k h o r s e r a c e b e t t i n g , and o r g a n i z e d c a s i n o games. Of t h a t amount, t h e i l l e g a l o p e r a t o r s r e t a i n a p p r o x i m a t e l y $ 3 t o $4 b i l l i o n b e f o r e expenses--a g r o s s p r o f i t w e l l below t h a t commonly supposed. Lega l qames seek - i n q t o c a p t u r e some o r a l l of t h e r e v e n u e s g e n e r a t e d by i l l e g a l games w i l l f a c e s e v e r e

- .

c o m p e t i t i v e d i s a d v a n t a q e s . I l l e g a l winnings a r e n o t r e p o r t e d t o t h e I n t e r n a l Revenue S e r v i c e . I l l e g a l o p e r a t o r s can o f f e r b e t t o r s c o n f i d e n t i a l i t y , c r e d i t , t e l e p h o n e s e r v i c e , and o t h e r a m e n i t i e s . To o f f set t h e s e a d v a n t a g e s and to compete s u c c e s s f u l l y , l e g a l games must o f f e r b i g g e r p r i z e s , e x p e r i e n c e h i g h e r o p e r a t i n g c o s t s , and t a k e lower p r o f i t s . I n t h e u n l i k e l y e v e n t t h a t i l l e g a l gambling d i s a p p e a r e d , l e g a l i z a t i o n would work g r e a t changes i n o u r s o c i e t y , b u t t h e amount of p u b l i c r evenue it produced would be , a c c o r d i n g t o

o u r c a l c u l a t i o n s , less t h a n 1 p e r c e n t of t o t a l government r evenues .

Ano the r q u e s t i o n t h a t mus t be a s k e d a b o u t t h e r e v e n u e p o t e n t i a l of qambl ing is , who pays? Accord ing t o some o b s e r v e r s , gam- -

b l i n g is h i g h l y r e g r e s s i v e i n i t s impac t , a f f e c t i n g t h e poor p r o p o r t i o n a t e l y more t h a n t h e r i c h . I f t h a t were t h e c a s e , o f f i c i a l s who p ropose t o l e g a l i z e gambl ing i n o r d e r t o p roduce revenue f o r government would i n f a c t be m e r e l y a d v o c a t i n g a n o t h e r form of r e g r e s s i v e t a x a t i o n . The e v i d e n c e a v a i l a b l e t o t h e Task Force was i n c o n c l u - s i v e on t h i s s c o r e . Taxes on some forms of gambl ing , though n o t n e c e s s a r i l y on a l l , may w e l l be r e g r e s s i v e .

F i n a l l y , t h e q u e s t i o n has been r a i s e d a s t o whe the r gambl ing s h o u l d be l e g a l i z e d i n o r d e r t o r a i s e S t a t e r e v e n u e s , or whe the r it s h o u l d be r e g a r d e d a s an amusement o r e n t e r t a i n m e n t t h a t t h e S t a t e s h o u l d c o n t r o l q u i t e a p a r t from i t s r evenue p o t e n t i a l . The c o s t s of o p e r a t i n g and promot ing gambl ing a b s o r b a l a r g e p e r c e n t a g e of t h e income t h a t a g i v e n game may r a i s e ; hence qambl inq is a n i n e f f i c i e n t way t o r a i s e p u b l i c f u n d s compared t o t h e l o w c o s t o f c o l l e c t i n g income, r e a l e s t a t e , and o t h e r t a x e s . But i f government c o n t r o l of gambling is s e e n a s a p u b l i c a m e n i t y , a k i n t o o p e r a t i n g a swimming p o o l , p a r k , or museum, t h e n t h e c o s t s of i ts o p e r a t i o n s w i l l n e c e s s a r i l y be f a r h i g h e r t han t h e c o s t s o f s t r a i g h t t a x c o l l e c t i o n w i t h o u t b e i n g an i n e f f i c i e n t way of r a i s i n g money. I t a l s o is a g r e e d t h a t l e g a l i z e d gambl ing may p roduce s o c i a l b e n e f i t s i n t h e form of j o b s f o r t h e hand icapped , v e t e r a n s , and members of m i n o r i t y g roups who a r e n o t r e a d i l y employable .

A f t e r c o n s i d e r i n g a l l t h e e v i d e n c e , t h e Task Fo rce b e l i e v e s t h a t l e g a l i z a t i o n of gambl ing w i l l p roduce r e l a t i v e l y s m a l l amounts o f r e v e n u e and w i l l r a i s e it f rom t h e wronq p e o p l e i n t h e wronq way. W e r e c o g n i z e t h a t i l l e g a l gambling is b i g b u s i n e s s i n t h e Uni ted S t a t e s , b u t it a l s o is an e x c e e d i n g l y complex and s o p h i s t i c a t e d b u s i n e s s t h a t l e g a l i z e d gambling is u n l i k e l y t o c a p t u r e . Thus r evenues d e r i v e d

from legalized gambling will be minor when compared to total revenues as well as in comparison with the profits from illegal operations.

2) Although legalization of gambling may be a useful weapon in combatting illegal gambling activity in some circumstances, it is no substitute for a broad and sustained assault on all aspects of organized crime. There is little evidence that legalized gambling will be able to compete effectively with illegal games to deprive them of much or all of their revenue; even if they did, organized crime would still have considerable capacity to engage in other illegal activities.

A policy of selective legalization, primarily designed to drive organized crime out of the qambling market rather than to raise revenues, could reduce the income and disrupt the operation of some crime syndicates, at least temporarily. But orqanized crime, which demonstrated its ability to survive and grow after the repeal of prohibition, is both resilient and resourceful. There is little reason to believe that legalization of gamblinq would bring about a substantial diminution in the activities of orqanized crime.... Our analysis indicates that illeaal gambling-profits are smaller than they are generally believed to be but that they are nonetheless a very significant source of income for organized crime in some areas of the nation. Many law enforcement officials take the view that gambling revenues underwrite other more episodic activities, such as hi jacking and traffic in narcotics. Other officials--a minor- ity--hold that gambling is merely one of a number of major criminal activities. But there is general agreement that gambling is a regular source of income for organ- ized crime.

3) Legalized gambling probably cannot simultaneously - serve-the objectives of both maximum gains in reven;es and improved law enforcement. A policy designed solely to maximize public revenue from gambling may conflict with other policies in the public interest.

Legalization is an effective law enforcement strategy only to the extent that legal games draw customers away

f rom e x i s t i n g i l l e g a l games. T h i s o b j e c t i v e r e q u i r e s a h igh p r i z e s t r u c - t u r e , which means lower prof i t s or r e v e n u e s ; o t h e r w i s e , t h e game may a t t r a c t nov ice p l a y e r s , bu t it w i l l no t draw e s t a b l i s h e d cus tomers away from i l l e g a l games. C l e a r l y , such a game is no s o l u t i o n f o r law en fo rcemen t problems.

4 1 The l a w en fo rcemen t b e n e f i t s of l e g a l i z a t i o n are m o r e i m p o r t a n t t h a n t h e r evenue p o t e n t i a l . But even though l e g a l i z a t i o n of c e r t a i n s p e c i f i c games may make a n o t i c e a b l e d e n t i n t h e volume of i l l ega l gambl ing , l e g a l i z a t i o n o f m o s t fo rms of gambling--unless accom- p a n i e d by g r e a t l y i n c r e a s e d l a w en fo rcemen t e f f o r t s - - w i l l n o t e l i m i n a t e i l l e g a l gambling o p e r a t i o n s .

The Task Force h a s examined t h e p r o p o s i - t i o n t h a t p u b l i c l y o p e r a t e d games, i f c o o r d i n a t e d w i t h law enforcement a c t i v i - t i e s , can h e l p d r i v e o r g a n i z e d crime o u t of t h e gambling b u s i n e s s . Here a g a i n , e x p e r i e n c e s u g g e s t s t h a t , a l t h o u g h l e g a l games can r e d u c e t h e p r o f i t s o f t h e i r i l l e g a l c o u n t e r p a r t s by o f f e r i n g h i g h e r p r i z e s a t e q u a l convenience t o b e t t o r s , i t w i l l be d i f f i c u l t t o d i s l o d g e i l l e g a l o p e r a t i o n s s imp ly by government compet i - t i o n . O f f - t r a c k b e t t i n g i n New York has f a i l e d t o do so, ma in ly because it d o e s n o t o f f e r s i g n i f i c a n t l y h i g h e r p a y o u t s or many o f t h e a m e n i t i e s o f f e r e d by i l l e g a l bookmakers. The same is t r u e of d a i l y s t a t e l o t t e r i e s ; t h e y .do n o t o f f e r more a t t r a c t i v e odds t h a n i l l e g a l numbers games, and u n l i k e t h e i l l e g a l games, t h e y do n o t g i v e p l a y e r s t h e s a t i s f a c t i o n of be ing a b l e t o se lect t h e i r own numbers.

I f l e g a l games a r e made c o m p e t i t i v e , t h e y may o f f e r a u s e f u l o u t l e t f o r t h e p u b l i c ' s a p p a r e n t l y i r r e p r e s s i b l e u rge to gamble. But w i t h o u t a w i d e r law en fo rcemen t commitment, e n t a i l i n g more a r r e s t s , more c o n v i c t i o n s , and h a r s h e r s e n t e n c e s f o r i l l e g a l o p e r a t o r s , l e g a l games a r e u n l i k e l y t o d r i v e o u t t h e i r i l l i c i t c o u n t e r p a r t s . Of c o u r s e , i n c r e a s e d law enforcement e f f o r t s a r e p o s s i b l e now, w i t h o u t l e g a l i z i n g gambling. The Task Force has n o t found

t h a t l e g a l i z i n g gambling has been accom- pan ied by more a g g r e s s i v e e f f o r t s t o e n f o r c e t h e law.

The r evenue d e r i v e d from i l l e g a l gam- b l i n g is a p r i n c i p a l s o u r c e of p o l i c e g r a f t and p o l i t i c a l c o r r u p t i o n . I l l e g a l gambling o p e r a t o r s r e g u l a r l y earmark s u b s t a n t i a l sums t o b r i b e and suborn law en fo rcemen t o f f i c i a l s . Like t h e c o s t o f a d v e r t i s i n g f o r a l e g i t i m a t e e n t e r p r i s e , b r i b e r y can be c o n s i d e r e d a ma jo r r e c u r r i n g b u s i n e s s expense . I n some c i t i e s , c o r r u p t i o n is p e r v a s i v e , s t r e t c h i n g from weekly p a y o f f s f o r pa t ro lmen t o l a r g e p o l i t i c a l c o n t r i b u - t i o n s f o r t h e e l e c t i o n o r appoin tment of judges . But gambling is n o t t h e s o l e s o u r c e of o f f i c i a l c o r r u p t i o n , and l e g a l i z a t i o n w i l l n o t e l i m i n a t e a l l g r a f t . What is more, e x p e r i e n c e i n t h i s c o u n t r y and abroad d e m o n s t r a t e s t h a t t h e r e g u l a t o r y p r o c e s s e s i nvo lved in l e g a l - i z e d gambling a r e t hemse lves s u b j e c t t o c o r r u p t i o n .

The t endency of governments t o c r e a t e new low p r i z e games such a s d a i l y l o t t e r i e s , w h i l e p e r m i t t i n g t h e de f a c t o d e c r i m i n a l i z a t i o n of i l l e g a l games, h a s demons t r ab l e d e f e c t s - - l i m i t e d r evenues , c o n t i n u e d i l l e g a l i t y , c o n t i n u e d p o l i c e p a y o f f s , and i n c r e a s e d hypoc r i sy .

A d i s t i n c t i o n must be made between a r e a s where i l l e g a l gambling is a s e r i o u s and u r g e n t problem f o r law enforcement and a r e a s where i t is no t . An a r e a cha rac - t e r i z e d by a h igh volume of i l l e g a l gambling run by members of t h e s y n d i c a t e who a r e pay ing l a r g e sums f o r c o r r u p t i o n o f law enforcement o f f i c i a l s has a s e r i o u s gambl i n g - r e l a t e d law enforcement problem. (Undeniab ly , i l l e g a l gambling e n c o u r a g e s o t h e r c r i m i n a l a c t i v i t y . )

Al though t h e e x i s t e n c e of any i l l e g a l a c t i v i t y c r e a t e s law en fo rcemen t problems, an a r e a w i t h r e l a t i v e l y l i t t l e i l l e g a l gambling a c t i v i t y , run by p u r e l y l o c a l i n d i v i d u a l s w i th no c o n n e c t i o n s t o o t h e r c r i m i n a l a c t i v i t i e s , is l i k e l y t o

have relatively less serious gambling- related law enforcement problems.

This point is important because it indicates that some

judgement regarding the seriousness to the community may

have to be made before government policies should be

implemented. Illegal gambling activity, on a small scale,

run by locals, perhaps should not, from a law enforcement

perspective, be interfered with by the state since the

alternative might not be no illegal gambling or only legal

gambling, but rather a vacancy into which outside organized

crime figures will move. 12*

5 ) The federal government should not engage directly in the gambling business. The Task Force is unanimous in opposing the initiatinq of federal qamblinq activities, such as a lottery. Fundamentally, any direct qovern- mental role in qamblinq--city, state, or federal-- raises serious questions about whether such activities are proper and appropriate. State and local govern- ments are involved in gambling operations at present, but serious reconsideration of governmental participa- tion in the gambling 'business is needed. If it is determined that some State or local gambling will be legalized for revenue or law enforcement purposes, Federal and State tax laws should be amended so that taxation does not penalize legal games in such a way that they cannot compete against their illegal coun tergarts . In looking at the question of how State legalized

gambling should be operated, there was firm agreement that a

direct State-run gambling enterprise could pose severe

problems--not in theory but in the practical aspects of

running such an industry. For example the authors conclude:

. . .a State government engaging in legaliz- ing gambling requires a bureaucracy that, once established, acquires a life of its own. In addition to assuring the continua- tion of its own jobs and responsibilities, the bureaucracy will look fo; expansion of its jurisdiction--thus placing excessive and migplaced reliance on qamblinq activi- ties for revenue production--instead of. developing more effective and more equi- table a1 ternative sources of revenue.

The r e p o r t a c k n o w l e d g e s t h a t t h e r e are t w o ways i n

w h i c h t h e S t a t e c a n be i n v o l v e d i n t h e l e g a l i z e d g a m b l i n g

i n d u s t r y - - i t c a n r e g u l a t e and t a x p r i v a t e g a m b l i n g o p e r a -

t i o n s , or i t c a n r u n t h e g a m b l i n g b u s i n e s s f o r i t s e l f . The

a u t h o r s t a k e t h e v i e w t h a t t h e r e are d i f f i c u l t i e s w h i c h e v e r

c h o i c e is t a k e n . T h e y s t a t e :

F o r some f o r m s o f g a m b l i n g , p a r t i c u l a r l y f o r s p o r t s bookmak inq , g o v e r n m e n t o p e r a t i o n w o u l d b e d i f f i c u l t , l a r q e l y b e c a u s e o f t h e . . - . . -

i n h e r e n t f i n a n c i a l r i s k s a n d t h e e n t r e p r e - n e u r i a l s k i l l s r e q u i r e d t o r u n s u c h e n t e r - p r i s e s e f f i c i e n t l y . B u t i f i t c h o o s e s t o l i c e n s e o p e r a t i o n s , t h e g o v e r n m e n t m u s t c u r b i t s demand f o r h i q h t a x e s i n o r d e r t o q i v e p r i v a t e l i c e n s e e s a f a i r s h a r e o f t h e r e l a t i v e l y t h i n p r o f i t m a r q i n s t h a t p r e v a i l i n i l l e g a l games . I n s h o r t , g o v e r n m e n t w o u l d h a v e t o s p l i t t h e p r o f i t s a n d , more t h a n t h a t , t a k e a m i n o r s h a r e . O t h e r w i s e , l i c e n s e e s would b e h a n d i c a p p e d i n c o m p e t i n g a g a i n s t i l l e g a l c o m p e t i t o r s , w i t h a corres- p o n d i n g loss o f r e v e n u e to t h e g o v e r n m e n t .

I n some cases, l e g a l i z a t i o n o f g a m b l i n g w i l l p r o d u c e v a r y i n g a m o u n t s o f r e v e n u e u n d e r d i f f e r e n t m e t h o d s o f o p e r a t i o n . Government-owned a n d - o p e r a t e d c a s i n o s are l i k e l y t o b e less e f f i c i e n t i n r a i s i n g r e v e n u e s t h a n p r i v a t e c a s i n o s , b e c a u s e p u b l i c l y owned c a s i n o s c a n n o t o f f e r t h e c r ed i t 'and o t h e r a m e n i t i e s a v a i l a b l e i n p r i v a t e l y owned e n t e r p r i s e s . I n f a c t , t h e g o v e r n m e n t ' s r e v e n u e from a t a x o n t h e p r o f i t s o f p r i v a t e c a s i n o s m i g h t w e l l e x c e e d t o t a l p r o f i t s f r o m a s t a t e - o w n e d o p e r a t i o n . Y e t p r i v a t e l y owned c a s i n o s are more v u l n e r a b l e t o c r i m i n a l i n f l u e n c e . T h u s , a p o l i c y d e s i g n e d t o m a x i m i z e p u b l i c r e v e n u e f r o m g a m b l i n g may c o n f l i c t w i t h o t h e r p o l i c i e s i n t h e p u b l i c i n t e r e s t . Gove rnmen t m u s t b a l a n c e t h e g r e a t e r d i r ec t r e v e n u e p r o v i d e d by p r i v a t e o p e r a t i o n s as w e l l as t h e g r e a t e r p o t e n t i a l f o r r e h a b i l i - t a t i o n o f d e p r e s s e d resort areas a n d i n c r e a s e d t o u r i s m a g a i n s t t h e g r e a t e r r i s k s o f e n c o u r a g i n g a n d e n r i c h i n g c r i m i n a l e l e m e n t s .

The r e p o r t emphas i ze s t h a t t h e government s h o u l d n o t

. a d v e r t i s e o r promote gambl ing a c t i v i t y - - p e r h a p s p a r t i c u l a r l y

i f t h e a c t i v i t y is S t a t e - r u n or i f t h e S t a t e b e n e f i t s

d i r e c t l y from t h e t a x r evenue .

A d v e r t i s i n g of gambl ing is no t o n l y an unseemly b u t a l s o an u n n e c e s s a r y a c t i v i t y f o r government t o u n d e r t a k e . I n o r d e r t o be s u c c e s s f u l , a l e g a l game must o f f e r a l a r g e r r e t u r n to a b e t t o r t h a n an i l l e g a l game. I f t h e game p r o v i d e s a l a r g e r r e t u r n , t h e n it w i l l need no a d v e r t i s i n g . I f p u b l i c s e n t i m e n t s t r o n g l y f a v o r s a l e g a l i z e d game, and no s t r o n g r e a s o n s a g a i n s t l e g a l i z a t i o n p r e s e n t t h e m s e l v e s , a d v e r t i s i n g by l e g a l o p e r a t o r s is w a s t e f u l and unneces sa ry . We d o n o t t h i n k t h a t qovernment s h o u l d s u p p o r t p r o m o t i o n a l a c t i v i t i e s whose e f f e c t is e i t h e r t o c r e a t e

-

new c u s t o m e r s o r t o i n c r e a s e t h e amount o f money t h a t i s waqered by p l a y e r s who a r e now c l i e n t s o f i l l e q a l o p e r a t o r s . Promo- t i o n of gambling games by government s h o u l d t h e r e f o r e be p r o h i b i t e d . Of c o u r s e , t h i s p r o h i b i t i o n i n i t s e l f would s e v e r e l y r e s t r i c t t h e s i t u a t i o n s i n which it would a p p e a r u s e f u l f o r a S t a t e t o o p e r a t e a form of gambling.

With s p e c i f i c r e f e r e n c e to c a s i n o s , t h e Task F o r c e conc luded :

The m a j o r argument advanced f o r l e g a l gambl ing c a s i n o s is t h a t t h e y can p r o v i d e a needed s t i m u l u s to d e p r e s s e d a r e a s i n need of a d d i t i o n a l t o u r i s t b u s i n e s s . The example of Nevada is c o n s t a n t l y h e l d o u t , and v o t e r s i n t w o S t a t e s a r e c u r r e n t l y b e i n g a sked t o approve e s t a b l i s h m e n t of c a s i n o s i n t h e i r S t a t e s . But t h e r e is s u b s t a n t i a l e v i d e n c e t h a t t h i s kind of economic deve lopment is p u r c h a s e d a t h i g h c o s t .

The c e n t r a l i s s u e is t h e mode of opera- t i o n s . P u b l i c l y o p e r a t e d c a s i n o s a l m o s t c e r t a i n l y w i l l n o t be a b l e t o o f f e r t h e a m e n i t i e s which make ;as Vegas, f o r

inclide credit; junkets for big gamblers, free liquor or entertainment, and other attractive inducements. Successful casino operation is an intricate and sophisticated business, requiring highly skilled personnel ; private operation offers def i- ni te advantages over public ownership and management. However, casinos have a history of attracting the participation of organized crime and thereby producing a difficult regulatory problem.

In addition, it is not clear that the economic benefits from legal casinos are other than short-term, if that. The special situation of Nevada cannot easily be duplicated in New Jersey's Atlantic City or in New York's Catskills, and the evidence indicates that competitive forms of gambling can quickly nullify the tempor- ary advantage obtained by the first community to set up a legal casino.

In the summing up, the report emphasizes:

Legalization is not a panacea for the fiscal problems of State and local government: it will not by itself do away with criminal involvement, nor will it eliminate official corruption..."

In sum, our study of qamblinq indicates that the current movement to extend legalization is based on false hopes and misconstrued evidence. It is not a

- healthy or promising trend in public policy, he Task Force has no dispute with the objectives of raising revenues for State and local governments from gambling and reducing the power and profits of illegal operators. Rut we are convinced that qamblinq is an inefficient generator of revenues and, in the main, a limited device for combatinq organized crime. For that reason, we have identified the difficul- ties involved in legalized gambling, and we have posed the hard questions that must be asked about every proposal that gambling be legalized in a community. We have proposed decriminalization of social gambling' and legalization, with

careful regulation, of charitable gambling.

~ l t h o u ~ h our recommendations may not square with the temper of the times, we believe they are strongly supported by the facts: as a revenue measure, leqal- ized gambling raises relatively small -

amounts of money in the wronq way from the wronq people; as a law enforcement weapon, legalized qambling is no substi- tute whatsoever for a vigorous and sustained assault on orqanized crime."

B. 1979 - Final Report of the Casino Gamblinq Study Panel ( Lynch Report 1

After the Legislature of New York State approved three

concurrent resolutions which proposed constitutional amend-

ments legalizing casino gambling, Governor Hugh Carey

appointed a Casino Gambling Study Panel--not to consider

whether or not casinos should be legalized, but rather to

make recommendations and suggestions for "legislative

actions" to effectively implement casino gambling.

The report listed the aims of casino gambling. What is

noticeable in this list is the absence of any mention of

organized crime control or loss of revenue to criminal

elements: 129

a) economic competitiveness for tourism and convention markets:

b) economic development and revitalization;

C) casinos should remain auxiliary to New York's other tourist attractions, i.e., an added recreational attraction within an area rather than an attraction of themselves; -

d) casinos should not proliferate in the State and their operations should be strictly licensed and en£ orced.

The Lynch Report identified certain geographical areas

where the officials ought to decide by local referendum

w h e t h e r or n o t t h e y s h o u l d i n t r o d u c e c a s i n o g a m b l i n g . T h o s e

areas w e r e :

- t h e C a t s k i l l s , S u l l i v a n , Ulster a n d G r e e n e c o u n t i e s ;

- t h e N i a g a r a F r o n t i e r i n c l u d i n g t h e c i t i e s of N i a g a r a F a l l s a n d B u f f a l o ;

- t h e c i t y o f Long B e a c h ;

- t h e c i t y o f N e w York.

The s t u d y p a n e l recommended t h a t t h e c a s i n o h o t e l s s h o u l d be

" p r i v a t e l y owned a n d o p e r a t e d a n d s u b j e c t t o s t r ic t S t a t e

l i c e n s i n g r e g u l a t i o n a n d e n f o r c e m e n t " . The p r o p o s e d c o n t r o l

s t r u c t u r e w a s s i m i l a r t o t h a t wh ich was i m p l e m e n t e d i n N e w

J e r s e y - - a f i v e member C a s i n o Gaming C o n t r o l Commiss ion w i t h

f o u r p a r t - t i m e members a n d a f u l l - t i m e C h a i r m a n d e s i g n a t e d

b y t h e G o v e r n o r , a n d a s p e c i a l O f f ice o f C a s i n o Gaming

E n f o r c e m e n t w h i c h would b e r e s p o n s i b l e f o r i n v e s t i g a t i o n a n d

p r o s e c u t i o n o f c r i m i n a l matters.

A t w e n t y p e r c e n t t a x was recommended f o r t h e f i r s t f i v e

y e a r s , d r o p p i n g t o f i f t e e n p e r c e n t i n t h e s i x t h y e a r . Among

t h e n i n e t e e n r e c o m m e n d a t i o n s w e r e a number o f p r o h i b i t i o n s .

1) n o p o l i t i c a l c o n t r i b u t i o n s by c a s i n o h o t e l s , t h e i r o w n e r s , o f f i c e r s o r e m p l o y e e s ;

2 ) o n l y l i m i t e d a d v e r t i s i n g f o r c a s i n o s ; -

3 ) C a s i n o Gaming C o n t r o l Commiss ion s h o u l d n o t be empowered t o i s s u e a t e m p o r a r y o p e r a t i n g l i c e n s e f o r a c a s i n o h o t e l ;

4 ) no p e r s o n employed by t h e Commiss ion s h o u l d b e p e r m i t t e d t o b e employed by a c a s i n o h o t e l o r r e l a ted i n d u s t r y f o r f o u r y e a r s a f t e r l e a v i n g t h e employ o f t h e Commiss ion ;

5 ) i n h e a v i l y p o p u l a t e d areas o f t h e s t a t e , c a s i n o s s h o u l d n o t b e p e r m i t t e d t o o p e r a t e i n t h e d a y t i m e , d r e s s c o d e a n d t a b l e minimum a n d o t h e r m e c h a n i s m s s h o u l d be a d o p t e d t o d i s c o u r a g e i m p u l s e g a m b l i n g by the l o c a l p o p u l a t i o n ;

6 ) n o more t h a n f o r t y c a s i n o h o t e l s s h o u l d be a u t h o r - i z e d i n t h e f i r s t t e n y e a r s .

I t is s i g n i f i c a n t t h a t t h e Chairman of t h i s Cas ino

Gambling Study P a n e l , D r . Ge ra ld W. Lynch, h a s spoken o u t

q u i t e s t r o n g l y a g a i n s t c a s i n o s . I n a pape r e n t i t l e d "Casino

Gambling: I ts C o r r u p t i o n P o t e n t i a l , " Lynch s t a t e s :

I am p e r s o n a l l y convinced t h a t l e g a l i z e d c a s i n o gambling i n N e w York would be a m i s t a k e , t h a t no m a t t e r how it might be implemented, it w i l l be c o r r u p t . . . The problem is two-fold: t h e r e is t o o much c a s h money invo lved and t h e r e a r e t o o many ways t o be c o r r u p t .130

C. 1979 - Casino Gaminq for New York State: The Potential Market and Implications for Economic Development (Reuter-Ruth Study)

T h i s s t u d y by R e u t e r and Ruth was commissioned by t h e

N e w York S t a t e Cas ino Gambling S tudy Pane l (Lynch R e p o r t ) t o

p r o v i d e an e s t i m a t e of t h e marke t f o r gaming i n New York and

an e s t i m a t e of t h e impact of gaming on economic deve lopment ,

such a s on employment. They s t a t e d t h a t :

The c e n t r a l f i n d i n g is t h a t t h e p o t e n t i a l marke t is a v e r y s u b s t a n t i a l one and t h a t bo th t h e economies of t h e a r e a s c o n s i d e r e d and t h e revenue of t h e S t a t e government cou ld be s i g n i f i c a n t l y and p o s i t i v e l y a f f e c t e d by i n t r o d u c t i o n of l e g a l i z e d gaming. 131

The a u t h o r s s p e c i f i e d l a t e r i n t h e r e p o r t t h a t :

. . . t h e e s t i m a t e s a r e n o t p r e d i c t i o n s of what - w i l l o c c u r i n a g i v e n t i m e p e r i o d , f o r much w i l l depend on t h e l i c e n s i n g p o l i c i e s adopted by N e w York S t a t e , t h e s i t i n g p o l i c i e s o f l o c a l governments , and e v e n t s beyond t h e c o n t r o l of t h e S t a t e government. I n s t e a d , t h e e s t i m a t e s , p r e s e n t e d i n the form of r a n g e s , s u g g e s t t h e maximum marke t t h a t might be tapped i n t h e long run i f :

1 ) The v a r i o u s governmenta l a u t h o r i t i e s of N e w York S t a t e s adop t r e l a t i v e l y u n r e s t r i c t i v e p o l i c i e s toward c a s i n o development; and

2) no a d d i t i o n a l n e i g h b o r i n g j u r i s d i c t i o n s ( o t h e r t h a n A t l a n t i c C i t y , N e w J e r s e y ) e n t e r t h e c a s i n o gaming m a r k e t . 1 3 *

I n a d d i t i o n to t h i s r e l i a n c e on u n r e s t r i c t i v e p o l i c i e s

a n d nea r -monopo ly c o n t r o l o f t h e m a r k e t , t h e a u t h o r s u s e d

Nevada as t h e b a s i s f o r e s t i m a t i n g t h e gaming b e h a v i o r i n

N e w York S t a t e . U s i n g t h i s f o r m o f d a t a is u n d e r s t a n d a b l e

s i n c e t h a t w a s t h e o n l y A m e r i c a n c o m p a r i s o n a v a i l a b l e ,

h o w e v e r , g r e a t e r e m p h a s i s a n d a c k n o w l e d g e m e n t o f t h e l i k e l y

d i f f e r e n c e s b e t w e e n t h e S t a t e s m i g h t h a v e s e r v e d t o c l a r i f y

t h e h y p o t h e t i c a l n a t u r e o f t h e r e s u l t s . T h e r e f o r e , t h e

R e u t e r / R u t h e s t i m a t e s are c o r r e c t :

I F w e h a v e u n r e s t r i c t i v e p o l i c i e s ; - I F n o new c a s i n o s are o p e n e d i n n e i g h b o r h o o d s ; - I F New Y o r k e r s g a m b l e a s h i g h a p e r c e n t a g e o f t h e i r -

i ncome as t h e Nevada r e s i d e n t d o e s ;

I F t h e d i s p l a c e m e n t ( o r s u b s t i t u t i o n ) o f c u r r e n t - c o n s u m e r e x p e n d i t u r e s are a s t h e y were c a l c u l a t e d - -

b a s e d , a s t h e r e p o r t s t a t e s , s o l e l y on i m p r e s s i o n s

s i n c e no d a t a o n t h e c o m p e t i t i v e n e s s o f v a r i o u s

f o r m s of r e c r e a t i o n a l e x p e n d i t u r e s was a v a i l a b l e .

I n n e a r c o n t r a d i c t i o n o f t h e s e r e q u i r e d c o n d i t i o n s , t h e

a u t h o r s m e n t i o n e d as a f i n a l c a v e a t t h a t M a s s a c h u s e t t s ,

P e n n s y l v a n i a a n d t h e P r o v i n c e o f O n t a r i o a l l h a d i n t e n s e

l o b b y i n g f o r c a s i n o d e v e l o p m e n t . A l s o , t h e y m e n t i o n e d

e l s e w h e r e i n t h e r e p o r t , b u t d i d n o t c a l c u l a t e i n t o t h e i r

es t imates, t h e f a c t t h a t N e v a d a ' s l a c k o f n o n - c a s i n o a l t e r -

n a t i v e s a n d t h e l e g a l i t y o f j u n k e t s to t h e Nevada c a s i n o s

m i g h t e n c o u r a g e a g r e a t e r amount o f g a m b l i n g t h a n New York ,

- i n c o m p e t i t i o n w i t h n e a r b y s ta tes a n d p r o v i n c e s c o u l d g e n e r a t e . 1 3 3

I n 1 9 7 9 , t h e c a m p a i g n was o n i n New York f o r l e g a l

c a s i n o s . A r t h u r K r e m e r I a C h a i r m a n o f t h e Commi t t ee On Ways

a n d Means o f t h e N e w York S t a t e Assembly s t a t e d t h a t :

t h e r e is no q u e s t i o n t h a t c a s i n o s d o a t t r a c t a c e r t a i n amount o f crime. But crime a l r e a d y e x i s t s i n N e w York S t a t e and e l s e w h e r e t o d a y and I h a v e no r e a s o n t o b e l i e v e t h a t c a s i n o g a m b l i n g is g o i n g to c a u s e a s h a r p u p s u r g e . 1 3 4

I n a d d i t i o n , K r e m e r b o l d l y s t a t e d wha t had p r e v i o u s l y o n l y

b e e n i n d i r e c t l y r e f e r r e d to:

I f A t l a n t i c C i t y d i d n o t e x i s t a s a s i p h o n f o r N e w York S t a t e r e v e n u e s , t h e c a s e f o r c a s i n o gaming m i g h t b e less c o m p e l l i n g .135

New York S t a t e o f f i c i a l s f e l t p r e s s u r e t o h a v e , i f n o t

t h e f i r s t c a s i n o c i t y i n t h e E a s t , t h e n a t l e a s t t h e

s e c o n d . I f N e w York c o u l d g a i n c a s i n o s b e f o r e o t h e r S t a t e s

t h e n it would h a v e t h e b e n e f i t - - a n d a l a r g e b e n e f i t it would

be--of c o n t r o l l i n g a l a r g e s e g m e n t o f t h e m a r k e t . The f e a r

seemed t o b e t h a t New York S t a t e would f a l l e c o n o m i c a l l y

b e h i n d t h e n e i g h b o u r i n g S t a t e s and t h a t t h e s e S t a t e s would

d r a w money away f r o m N e w York.

D. 1981 - Report of Attorney General Robert Abrams in Opposition to Leqalized Casino Gamblinq in New York

z L

P e r h a p s t h e most s i g n i f i c a n t s t u d y l e a d i n g t o t h e

p o s t p o n e m e n t o f a r e f e r e n d u m t o l e g a l i z e c a s i n o g a m b l i n g i n

New York S t a t e was t h e r e p o r t o f A t t o r n e y G e n e r a l

R o b e r t Abrams. W i t h e x t e n s i v e d o c u m e n t a t i o n f rom Nevada and

New J e r s e y , Abrams s p e c i f i e d t h r e e key f a c t o r s wh ich l e d him

t o c o n c l u d e t h a t c a s i n o g a m b l i n g i n N e w York S t a t e would n o t

be i n t h e p u b l i c i n t e r e s t : -

1. The evidence from Nevada and Atlantic City conclusively

indicates that legalized casino gambling in New York would

be accompanied by a debilitating upsurge of crime in areas

where casinos are located.

Abrams q u o t e d s t a t i s t i c s f rom A t l a n t i c C i t y a n d

comments by t h e l o c a l p o l i c e , S t a t e p o l i c e , a r s o n s q u a d a n d

t h e D i r e c t o r o f New J e r s e y ' s D i v i s i o n o f Gaming

E n f o r c e m e n t . H e c o n c l u d e d t h a t :

. . . t h e a c t u a l A t l a n t i c C i t y a n d Nevada e x p e r i e n c e s h a v e c o n c l u s i v e l y d e m o n s t r a t e d to me t h a t l e g a l i z e d c a s i n o g a m b l i n g , by i t s v e r y n a t u r e , creates a n e n v i r o n m e n t i n w h i c h c r i m e s o f a l l t y p e s w i l l f l o u r i s h . T h i s m e a n s , i n e f f e c t , t h a t l e g a l i z a t i o n o f c a s i n o g a m b l i n g i n New York w i l l i n c r e a s e s i g n i f i - c a n t l y t h e l e v e l o f crime i n t h o s e areas o f t h e S t a t e w h e r e c a s i n o s would b e l o c a t e d . W i t h l a w e n f o r c e m e n t a g e n c i e s a n d o t h e r e l e m e n t s o f t h e c r i m i n a l j u s t i c e s y s t e m b a r e l y ab l e to h o l d t h e i r own a g a i n s t e x i s t - i n g c r i m i n a l i t y , i t is d i f f i c u l t f o r m e t o c o n c e i v e how t h e y c a n b e e x p e c t e d to h a n d l e t h e t r e m e n d o u s i n c r e a s e i n s t r e e t a n d p e t t c r i m e t h a t w i l l accompany c a s i n o g a m b l i n g . Y37

2. Gambling casinos are a magnet for organized crime and

New York lacks the sophisticated law enforcement system

required to keep organized crime out of the casino gambling

industry. 1 3 8

I n r e l a t i o n t o c a s i n o o p e r a t i o n s , Abrams l o o k e d a t

o r g a n i z e d c r i m i n a l i n f i l t r a t i o n i n t o :

( i ) r ea l e s t a t e - i t is c l a i m e d i n t h e r e p o r t t h a t o n e

C a n a d i a n o r g a n i z e d crime g r o u p h a s b o u g h t 7-8% of

t h e l a n d i n t h e A t l a n t i c C i t y a r e a t h r o u g h dummy

c o r p o r a t i o n s . A r s o n h a s f a c i l i t a t e d t h e c l e a r i n g

o f some of t h e l a n d f o r c a s i n o d e v e l o p m e n t . +-

( i i ) l a b o u r u n i o n s - t h e A t l a n t i c C o u n t y P r o s e c u t o r is

q u o t e d as s a y i n g : "Based o n w h a t w e h a v e s e e n ,

t h e m o s t l i k e l y t a r g e t f o r m o n o p o l i s t i c c o n t r o l , *

b y o r g a n i z e d crime, o f a s i g n i f i c a n t s e g m e n t o f

t h e c a s i n o economy would b e t h r o u g h t h e s e u n i o n s .

3. Legalized casino gambling poses a danger to the

integrity and credibility of government institutions and .

public officials. 139

brani is quotes from a New York Times editorial:

. . .therevs no telling anymore who is really regulating whom.. .the casinos simply have too much money to make and spend to avoid the legal corruption of government. 140

For example:

a. Former head of New Jersey's Gaming Enforcement

Division on June 17, 1980 called "official

corruption" a bigger threat than organized crime in

Atlantic City..."I am frankly shocked New Jersey is

as much for sale as it is."

b. Fifty local officials and government employees in

Atlantic City own stock in casino gambling companies

or involved in property for casino use.

c. Five of the nine members of Atlantic City's Planning

Board have invested in, or had property or financial

dealings with, the casino industry...the Planning

Board Chairman will participate in a $6 million

profit on the rezoning by the Board of a 2.2 acre

tract for casino use.

d. Casinos have employed at least 16 former high-level

State officials, i.e., former Budget Director,

Director of the Division of Criminal Justice,

Chairman of the State Racing Commission, former

Attorney General, Deputy Attorney General, Counsels

and Assistant Counsel to the overn nor.

I f c a s i n o s a r e demanded and n e i t h e r Nevada nor N e w

J e r s e y o f f e r s a s a f e , p r o f i t a b l e , e t h i c a l model t o be

emula t ed , i t may be n e c e s s a r y t o look beyond t h e Uni ted

S t a t e s f o r a l t e r n a t i v e s . D e c i s i o n s must be made n o t o n l y on

how t h e c a s i n o w i l l be r e g u l a t e d , b u t a l s o on who w i l l be i n

c o n t r o l .

1. S t a t e v e r s u s P r i v a t e Control: Problems of State-Owned Casinos

I n t h e New York d e b a t e o v e r c a s i n o s , t h e New York

Assembly was d i v i d e d o v e r how t h e y shou ld be o p e r a t e d . The

Democrats f avoured S t a t e - o p e r a t e d c a s i n o s . They a rgued t h a t

t h e S t a t e would be b e t t e r a b l e t o keep o u t o r g a n i z e d cr ime.

The Repub l i cans f avoured p r i v a t e l y - r u n c a s i n o s on t h e

g rounds t h a t t h e y would be more e f f i c i e n t and t h e r e f o r e more

p r o f i t a b l e f o r r evenue pu rposes . I n 1978, t h e l e g i s l a t u r e

approved t h r e e v e r s i o n s of c o n s t i t u t i o n a l amendments t h a t

would l e g a l i z e gambling:

One would l e g a l i z e gambling i n r e s o r t a r e a s w i t h t h e c a s i n o s t o be run by t h e s t a t e . A second would l e g a l i z e r e s o r t a r e a c a s i n o s run by p r i v a t e e n t e r p r i s e s . The t h i r d would a u t h o r i z e bo th p u b l i c l y and p r i v a t e l y - o p e r a t e d gambling o p e r a t i o n s t h roughou t t h e s t a t e . A l l t h r e e amendments s p e c i f i e d t h a t t h e gamblin would be s u b j e c t t o l o c a l a p p r o v a l . 14g

I n a d d i t i o n t o t h e two a l t e r n a t i v e s (and a c o m b i n a t i o n )

which N e w York pondered , a t h i r d c h o i c e was r a i s e d by

Sko ln i ck who argued t h a t due t o t h e i n t e r - s t a t e c l i e n t e l e

f o r c a s i n o gambl ing , and t h e 1977 l e g i s l a t i o n p e r m i t t i n g

Nevada l i c e n s e e s t o conduc t gaming o p e r a t i o n s o u t s i d e

Nevada, F e d e r a l i n t e r v e n t i o n is i n e v i t a b l e and pe rhaps mught'

to be even more encompassing. A s Sko ln i ck s t a t e s :

... it would be f a i r e r and more d e s i r a b l e i f c o n t r o l o v e r l e g a l c a s i n o gambling were r e c o g n i z e d a s a n a t i o n a l i s s u e . I t is r h e t o r i c a l l y a t t r a c t i v e - - b u t u l t i m a t e l y i n c o n s i s t e n t - - t o s u g g e s t , a s t h e N a t i o n a l Commission on Gambling d o e s , t h a t b e c a u s e S t a t e a g e n c i e s can be f l e x i b l e and r e s p o n s i v e to l o c a l demands, gambling c o n t r o l s h o u l d be pre-empted by them. 143

A. Issue of Corruption -

The s t r o n g e s t argument i n f a v o u r of S t a t e o p e r a t e d and

owned c a s i n o s is t h e view t h a t t h e S t a t e would e n s u r e t h a t

o r g a n i z e d c r i m i n a l s would n o t be i nvo lved . Rose a r g u e s t h a t

t h e r e is l i t t l e r e a s o n t o b e l i e v e t h a t S t a t e employed c a s i n o

o p e r a t o r s and d e a l o r s would be any more h o n e s t or compe ten t

t h a n p r i v a t e employees . I n a d d i t i o n , o f f i c i a l s w i t h i n a

S t a t e b u r e a u c r a c y migh t be a b l e t o a l l o w i l l e g a l a c t i v i t i e s

t o go u n d e t e c t e d , u n r e p o r t e d and u n p r o s e c u t e d l o n g e r f o r

v a r i o u s s e l f - i n t e r e s t and p o l i t i c a l r e a s o n s :

Any s c a n d a l t h a t h i t s a government-owned c a s i n o would n a t u r a l l y become a p o l i t i c a l problem f o r S t a t e l e a d e r s . P o l i t i c i a n s know t h a t a quas i -governmenta l body may p r o t e c t t h e S t a t e from l e g a l res o n s i b i l i t i e s b u t n o t from p o l i t i c a l s c a n d a l . l g 4

A r e l a t e d f a c t o r ha s t o do w i t h h i r i n g w i t h i n a govern-

ment agency. I f employees of a State-owned c a s i n o would be

p r o t e c t e d by c i v i l s e r v i c e r e g u l a t i o n s t h e s t a n d a r d of

e v i d e n c e r e q u i r e d to f i r e an employee s u s p e c t e d of d i s -

h o n e s t y might be d i f f i c u l t t o o b t a i n . T h i s i s s u e was

acknowledged by Governor Carey i n N e w York when, a t one

p o i n t , he f a v o u r e d S t a t e c a s i n o s w i t h p r i v a t e o p e r a t o r s . 1 4 5

B. Conflict of Interest

State-owned c a s i n o s would a p p e a r to p r e s e n t t h e

u l t i m a t e t es t of an a g e n c y ' s a b i l i t y t o s u p p r e s s i t s own

s e l f - i n t e r e s t s i n t h e name o f t h e p u b l i c good . O p e r a t i n g a

c a s i n o is by n e c e s s i t y a b u s i n e s s p r o p o s i t i o n - - i f it f a i l s

to make money it would become a d r a i n on t h e S t a t e and would

b e c l o s e d . I n order t o s u c c e e d , it would n e e d t o grow a n d

c o m p e t e . T h i s would be e s s e n t i a l e v e n w i t h o u t r e v e n u e

p r o d u c t i o n a s a c h i e f a i m . G i v e n t h e d y n a m i c s o f o p e r a t i n g

as a s u c c e s s f u l b u s i n e s s p l u s t h e l i k e l y s e c o n d a r y (or

p r i m a r y ) i n t e r e s t i n r e v e n u e , it wou ld b e h a r d to a s s u r e

t h a t t h e S t a t e c o u l d a l s o s e r v e as a n a d e q u a t e r e g u l a t i n g

a g e n c y . A s Rose s t a t e s :

P r e s s u r e f o r e x p a n s i o n would b r i n g t h e S t a t e o p e r a t i o n i n t o d i r e c t c o n f l i c t w i t h t h e con- t r o l i s s u e s o f l i m i t i n g a d v e r s e s i d e e f f e c t s a n d p r e v e n t i n g undue e c o n o m i c harm to e s t a b - l i s h e d i n t e r e s t s . Q u i c k e x p a n s i o n wou ld a l s o l e a d to more p r o b l e m s o f d i s c r e t i o n , c o n t r o l o f c o r r u p t i o n a n d i n c o m p e t e n c e b e c a u s e t h e a g e n c y wou ld h a v e to r u s h t h r o u g h a p p l i c a - t i o n s f o r k e y c a s i n o p o s i t i o n s or s w i t c h t o a s y s t e m o f a t l e a s t p a r t i a l o p e r a t i o n by p r i v a t e lessees. 1 4 6

C. Funding F o r The F a c i l i t i e s

I n b o t h New York a n d New J e r s e y , it w a s a r g u e d t h a t

S t a t e owned c a s i n o s wou ld p r o v e to be less s u c c e s s f u l t h a n

p r i v a t e c a s i n o s b e c a u s e t h e h o t e l s h o u s i n g t h e c a s i n o s wou ld

n o t s p e n d t h e n e c e s s a r y money r e q u i r e d on t h e f a c i l i t i e s

s i n c e t h e y wou ld n o t d i r e c t l y g a i n f rom t h e s u c c e s s f u l

c a s i n o o p e r a t i o n . I f t h e S ta t e owned c a s i n o s w e r e t o be

h o u s e d i n S t a t e b u i l d i n g s or S t a t e h o t e l s , a g a i n it was

b e l i e v e d t h a t t h e n e c e s s a r y e x t r a v a g e n c e would n o t be f o r t h -

coming . The S t a t e - r u n e n t e r p r i s e s m i g h t b e s e e n as a m a t e u r

o p e r a t i o n s i n c o m p a r i s o n t o p r i v a t e e n t e r p r i s e s . 14' he S t a t e would a l so h a v e t r o u b l e c o m p e t i n g w i t h t h e l e v e l o f

c o m p e n s a t i o n e a r n e d by t h e t o p c a s i n o m a n a g e r s a n d e x e c u -

t i v e s o f p r i v a t e c a s i n o s w h i c h p a y l a r g e s a l a r i e s a n d

b e n e f i t s f o r s k i l l e d c a s i n o o p e r a t o r s .

D. The State as Casino Boss

W i t h o u t becoming e n t w i n e d i n a d e b a t e r e g a r d i n g t h e

m o r a l i t y o f g a m b l i n g , t h e r e is a more n e u t r a l a r g u m e n t a s t o

w h e t h e r or n o t t h e S t a t e o u g h t t o a c t i v e l y e n c o u r a g e a n y

f o r m o f c o n s u m p t i o n . T h e r e are a d d i t i o n a l e t h i c a l i s s u e s

i n v o l v e d i n l e g a l i z i n g a p r e v i o u s v i c e and t h e n making a

S t a t e monopoly o f t h e newly l e g i t i m a t e i n d u s t r y . High

p r o f i t s r e c e i v e d f rom t h i s monopoly a r e q u e s t i o n e d p a r t i c u -

l a r l y i f t h e y a r e s e e n to be d e r i v e d f rom t h o s e s e g m e n t s o f

t h e p o p u l a t i o n less a b l e t o pay. The r e g r e s s i v e n a t u r e o f

c a s i n o g a m b l i n g i n terms o f t h e l o c a l p o p u l a t i o n becomes

more c r i t i c a l d u e t o t h e l i k e l y i n a b i l i t y o f a S t a t e - r u n

c a s i n o to f o r b i d p a r t i c i p a t i o n by n o n - t o u r i s t s b e c a u s e of

t h e v a r i o u s d u e p r o c e s s or r i g h t s p r o t e c t i o n s . P u e r t o Rico

a t t e m p t e d q u i t e u n s u c c e s s f u l l y t o restr ict c a s i n o g a m b l i n g

t o t o u r i s t s and Eng land i n d i r e c t l y a t t e m p t e d to e x c l u d e t h e

p o o r e r classes w i t h v a r i o u s r e g u l a t i o n s r e g a r d i n g d r e s s and

l o c a t i o n o f c l u b s , e tc . T h e s e r e s t r i c t i o n s would n o t b e

a p p l i c a b l e i n p o p u l a t e d a r e a s w i t h i n N o r t h America s u c h a s

N e w York, N e w J e r s e y and a r e a s i n Canada w i t h i n close p r o x -

i m i t y to l a r g e r c i t i e s .

The New York C a s i n o Gambl ing S t u d y P a n e l a r g u e d t h a t a

s t a t e monopoly o f a l l c a s i n o h o t e l s would " p r e c l u d e t h e

e s s e n t i a l economic i n g r e d i e n t o f c o m p e t i t i o n to t h e de t r i -

ment o f t h e optimum d e v e l o p m e n t o f t h e i n d u s t r y " . 1 4 * T h i s

f a c t , a l o n g w i t h i n e x p e r i e n c e d o p e r a t o r s and management,

p l u s government s u p p l i e d f a c i l i t i e s would i n c r e a s e t h e

economic r i s k s o f t h e S t a t e o p e r a t i o n .

S k o l n i c k c l a i m e d t h a t Nevada r e j e c t e d S t a t e - r u n c a s i n o s

n o t b e c a u s e o f a n y moral f e e l i n g a g a i n s t g a m b l i n g b u t

b e c a u s e o f a m o r a l r e a c t i o n a g a i n s t s o c i a l i s m , i .e . , t h e

a r g u m e n t b e i n g t h a t a l u c r a t i v e i n d u s t r y o u g h t to be open to

c o m p e t i t i o n and m a r k e t c o n d i t i o n s r a t h e r t h a n p r o t e c t e d and

c o n t r o l l e d by t h e The c o n c l u s i o n o f t h e New York

s t u d y p a n e l was:

. . . s h o u l d t h e p e o p l e v o t e f o r c a s i n o s i n N e w York, t h e p r o p e r and m o s t s i g n i f i c a n t ro le o f g o v e r n m e n t is t o a s s u r e t h a t t h e ' h o u s e ' p e r f o r m a l l o f i ts f u n c t i o n s i n a c c o r d a n c e w i t h t h e l a w and i t s l i c e n s e r e q u i r e m e n t s , a n d n o t t o s e e k a d e v i c e whereby t h e s ta te c a n become t h e ' house ' . 150

B r i t i s h v e r s u s A m e r i c a n Model

Some s i g n i f i c a n t d i s t i c t i o n s e x i s t be tween t h e so-

c a l l e d Nevada " f r e e e n t e r p r i s e " model and t h e New J e r s e y

" t o u r i s t - a r e a r e v i t a l i z a t i o n " mode l ; however , b o t h o f t h e s e

t y p e s o f c a s i n o s o p e r a t e p r i m a r i l y f o r t h e r e v e n u e t h a t can

b e g e n e r a t e d - - e i t h e r to be u s e d f o r i n d i v i d u a l p r o f i t p l u s

t a x a t i o n and employment a s i n Nevada, or resort re j u v e n a -

t i o n , t a x a t i o n and employment a s i n N e w J e r s e y . The E n g l i s h

s y s t e m which Rose r e f e r s t o a s " s t r i c t s o c i a l c o n t r o l c l u b

mode l"151 is b a s e d on t h e v i e w t h a t g a m b l i n g is a n e c e s s a r y

e v i l t h a t c a n n o t b e i g n o r e d b u t d e f i n i t e l y o u g h t n o t to be

e n c o u r a g e d . The ' c l u b ' is s e e n as a way o f r e s t r i c t i n g a

v i c e to a p a r t i c u l a r a r e a and c l a s s , so a s n o t to a l l o w t h e

' s o c i a l p r o b l e m ' t o s p r e a d . I f t h e g a m b l i n g c l u b s closed

d u e to l a c k o f b u s i n e s s t h e S t a t e would n o t be c o n c e r n e d and

i n f a c t t h e c l o s u r e would b e v iewed p o s i t i v e l y .

Any c o u n t r y t h a t is now c o n s i d e r i n g c a s i n o g a m b l i n g and

is q u e s t i o n i n g wha t fo rm of c o n t r o l to e s t a b l i s h , mus t

r e a l i z e t h a t some o f t h e a p p a r e n t " a l t e r n a t i v e s @ ' may n o t

work i n a p a r t i c u l a r 'society. Each o f t h e s e "mode l s" f i t

i n t o a set o f s o c i e t a l a t t i t u d e s and v a l u e s which may b e

r e i n f o r c e d by economic p r e s s u r e s . A model c a n n o t t h e r e f o r e ,

b e s e l e c t e d f r e e f rom t h e s e f a c t o r s .

A, Economic Constraints

S k o l n i c k e m p h a s i z e s t h e p o w e r f u l d i c t a t e s t h a t e c o n o m i c

m o t i v e s a n d p r e s s u r e s c a n e x e r t upon c a s i n o g a m b l i n g deci-

s i o n s . 15* S k o l n i c k s t a t e s , i n r e f e r e n c e to t h e recommenda-

t i o n by t h e Commiss ion o n t h e Review o f t h e N a t i o n a l P o l i c y

Toward G a m b l i n g , t h a t S t a t e s c o n s i d e r i n g l e g a l i z a t i o n m i g h t

l o o k t o E n g l a n d r a t h e r t h a n Nevada a s t h e mode l :

I n t h e o r y t h a t s o u n d s q u i t e s e n s i b l e . I n p r a c t i c e it w o e f u l l y u n d e r e s t i m a t e s t h e f o r c e o f t h e e c o n o m i c m o t i v e s a n d p r e s s u r e s a s s o c i - a t e d w i t h l e g a l c a s i n o g a m b l i n g w h e r e r e v e n u e is t h e r e a s o n f o r l e g a l i z a t i o n . . . t h e r e a l q u e s t i o n is n o t w h e t h e r t o a d o p t t h e major o u t l i n e s o f t h e E n g l i s h model, b u t w h e t h e r i n t h e A m e r i c a n c o n t e x t , local g o v e r n m e n t s c a n r e a l i s t i c a l l y c o n t e m p l a t e s u c h a c h o i c e .

H e c o n c l u d e s :

t h e c o m b i n a t i o n o f a r e v e n u e - p r o d u c i n g m o t i v e , c o u p l e d w i t h t h e power o f a l r e a d y e x i s t i n g e c o n o m i c i n t e r e s t s i n t h e c a s i n o g a m b l i n g i n d u s t r y , added to t h e c u l t u r a l a n d l e g a l c o n s t r a i n t s o f A m e r i c a n s o c i e t y w i l l e n s u r e t h a t i f e v e r c a s i n o g a m b l i n g i s a d o p t e d by a n A m e r i c a n S t a t e , t h e Nevada mode l - -wi th i t s e c o n o m i c i m p e r a t i v e s - - w i l l d o m i n a t e . 153

B. Legal Constraints

I n a d d i t i o n to e c o n o m i c i m p e r a t i v e s , t h e t r a d i t i o n s of

t h e s o c i e t y i n t e r m s o f d u e p r o c e s s a n d c i t i z e n r i g h t s may

p l a c e l e g a l r e s t r a i n t s on t h e r e g u l a t o r s o f t h e p r o p o s e d

c a s i n o s . T h e a r b i t r a r y p o w e r s g r a n t e d to t h e B r i t i s h Gaming

B o a r d to make secret , u n d e f e n d e d , u n a p p e a l a b l e d e c i s i o n s ,

w o u l d l i k e l y f a l l w e l l o u t s i d e o f a n y b o u n d s o f d u e - p r o c e s s

i n N o r t h America. S k o l n i c k s ta tes :

G i v e n i ts autonomy and its g r e a t power , it is f r a n k l y r e c o g n i z e d among members and s t a f f t h a t t h e B r i t i s h Gaming Board u n d e r t h e 1 9 6 8 A c t c o n s t i t u t e s t h e most a u t o c r a t i c B r i t i s h i n s t i t u t i o n s i n c e t h e S t a r Chamber. 1 5 4

Some o f t h e key f e a t u r e s t o t h i s a u t o n o m y - - a l b e i t

p a t e r n a l i s t i c autonomy--would i n c l u d e :

1. t h e g a m b l e r m u s t b e p r o t e c t e d f rom h i s own i m p u l s e s -- n o o n e is a l l o w e d t o gamble f o r t h e f i r s t t i m e i n a

B r i t i s h gaming c l u b w i t h o u t f o r m a l l y a p p l y i n g , i n

w r i t i n g , i n p e r s o n , 48 h o u r s b e f o r e game t i m e .

2 . no c r e d i t - p e r s o n a l c h e q u e s a r e a c c e p t e d b u t e a c h

c h e q u e w r i t t e n m u s t g o t h r o u g h t h e bank e v e n i f t h e

g a m b l e r w i n s and is, t h e r e f o r e , a b l e t o buy back h i s

cheque . The a r g u m e n t f o r t h i s is t h a t t h e r e is s o c i a l

e m b a r r a s s m e n t a t t a c h e d t o h a v i n g to write c h e q u e s f o r

g a m b l i n g p u r p o s e s - - p a r t i c u l a r l y i f more t h a n o n e c h e q u e

g o e s t h r o u g h i n o n e e v e n i n g . I t i m p l i e s t h a t t h e

i n d i v i d u a l is g a m b l i n g more t h a n he h i m s e l f a n t i c i p a t e d

a n d , t h e r e f o r e , may be s e e n a s a p o o r c r e d i t r i s k by

h i s bank.

3 . c a s i n o gaming c l u b s a r e n o t p e r m i t t e d i n w o r k i n g c l a s s

d i s t r i c t s i n London and r e q u i r e payment o f a ' c l u b '

membersh ip f e e o f b e t w e e n $10 - $100, p l u s t h i s

membersh ip mus t b e " s p o n s o r e d " . T h e s e a r e c l u b s

t h e r e f o r e , t h a t a r e d e s i g n e d to e x c l u d e c e r t a i n

s e g m e n t s o f t h e p o p u l a t i o n .

4. t h e Gaming Board h a s u n c h a l l e n g e a b l e power i n terms o f :

- l i c e n s i n g d e c i s i o n s ;

- d e c i s i o n s r e g a r d i n g v i o l a t i o n s ;

- c o n t r o l o f e n t r y ;

- d i s c i p l i n e w i t h i n t h e c l u b .

5. - n o j u n k e t s a re a l l o w e d ; - no a d v e r t i s i n g ' ; - l i m i t e d c l u b h o u r s ; - no a l c o h o l is s e r v e d i n gaming rooms; - - n o e n t e r t a i n m e n t ; - n o t i p p i n g .

Canada m i g h t select t h e E n g l i s h f o r m a t a n d t h e n d i s -

c o v e r t h a t l e g a l l y t h e same t y p e or d e g r e e o f c a s i n o c o n t r o l

m i g h t n o t b e p o s s i b l e . I n a d d i t i o n to t h e r i g h t s t h a t

C a n a d a h a s e n t r e n c h e d i n t h e c o n s t i t u t i o n , N o r t h Amer i ca

m i g h t n e i t h e r t o l e r a t e t h e b l a t a n t a t t i t u d e s i n h e r e n t i n

some o f t h e B r i t i s h c o n t r o l s t r a t e g i e s , n o r t r u s t t h e

o f f i c i a l s t o b e h o n e s t a n d a b o v e c o r r u p t i o n i n a s y s t e m i n

w h i c h t h e r e g u l a t o r s a re n o t t h e m s e l v e s r e g u l a t e d . T h e

f o l l o w i n g s e c t i o n l o o k s a t l e g a l i z e d g a m b l i n g i n E n g l a n d i n

g r e a t e r d e t a i l .

V I I . LEGALIZED GAMBLING I N GREAT BRITAIN

1. Introduction

Gambl ing , i n i ts v a r i o u s f o r m s , is p o p u l a r i n G r e a t

B r i t a i n . I n a s a m p l e o f a d u l t s a g e d 1 8 a n d o v e r , 9 4 % ,

r e p r e s e n t i n g some 39 m i l l i o n p e o p l e , s a i d t h e y e n g a g e d i n

some f o r m o f g a m b l i n g . Most ( 6 3 % ) o f t h o s e s u r v e y e d

c o n f i n e d t h e i r g a m b l i n g t o a n o c c a s i o n a l b e t on a major r a c e

or to b u y i n g a r a f f l e or a l o t t e r y t i c k e t . l S 5 ~ r i t i s h l a w

p e r m i t s v a r i o u s f o r m s o f c o m m e r c i a l g a m b l i n g u n d e r s t r i c t

l e g a l o b l i g a t i o n . The m a i n f o r m s o f l e g a l g a m b l i n g a r e :

Gaminq ( i n c l u d e s b i n g o , s l o t m a c h i n e s , c a r d g a m e s , a n d

c a s i n o s ) ; B e t t i n q , ( h o r s e and g r e y h o u n d r a c e s , a n d soccer

games; L o t t e r i e s .

The n a t u r e a n d e x t e n t o f g a m b l i n g h a s c h a n g e d g r e a t l y

s i n c e t h e Gaminq A c t 1 9 6 8 . I t w a s e s t i m a t e d t h a t i n 1 9 7 2

a b o u t E2,350 m i l l i o n w a s w a g e r e d . The amount o f money l o s t

t h r o u g h g a m b l i n g was a b o u t £397 m i l l i o n . The h i g h e s t p r o -

p o r t i o n was s t a k e d o n h o r s e - r a c e s , ( £ 9 2 8 m i l l i o n ) f o l l o w e d

by s l o t m a c h i n e s (E260 m i l l i o n ) , c a s i n o s ( £ 2 2 5 m i l l i o n ) ,

f o o t b a l l p o o l s (£200 .6 m i l l i o n ) , a n d f i n a l l y b i n g o ( E l 8 4

m i l l i o n ) . The f o l l o w i n g c h a r t p r e s e n t s t h e f i g u r e s . lS6

G e n e r a l b e t t i n g ( £ m i l l i o n ) 1. O f f - c o u r s e bookmaker s :

( a ) H o r s e - r a c i n g 9 2 8 . 1 ( b ) O t h e r s ( d o g s , c r i c k e t , b o x i n g ,

M i s s W o r l d , e l e c t i o n s , e t c . ) 3 0 9 . 4 2. On-cour se b o o k m a k e r s 1 2 0 . 1 3. Horse-race T o t a l i s a t o r

( o n a n d o f f - c o u r s e ) 2 6 . 1 4. Doq r a c e T o t a l i s a t o r ( o n - c o u r s e 1 58.6 - -

5. ~ o o t b a l l p o o l s ( i n c l u d i n g f i x e d o d d s ) 200 .6 1 , 6 4 3

Gaming 6 . C a s i n o s 7. B i n g o

O t h e r s 9. P r i z e b i n g o , c o m p e t i t i o n s ,

l o t t e r i e s , e tc . ( e s t ima te )

T h e A n n u a l R e p o r t s o f t h e Gaming Board show s u s t a i n e d

g r o w t h o f c a s i n o g a m b l i n g f r o m £225 m i l l i o n i n 1 9 7 2 t o £930

m i l l i o n i n 1 9 7 9 a n d r e v e n u e f o r b i n g o i n c r e a s e d f r o m £184

m i l l i o n i n 1 9 7 2 t o £456 m i l l i o n i n 1 9 8 0 . The f o l l o w i n g

c h a r t i n d i c a t e s t h e g r o w t h f rom 1 9 7 2 t o 1 9 8 0 . ~ 5 8

Money S t a k e d i n C a s i n o s Year 1 9 7 2

R e v e n u e f r o m B i n g o H a l l s 1 9 7 2 1 8 4 . 0

2. G a m b l i n q P o l i c y i n G r e a t B r i t a i n : T h e A t t i t u d e T o w a r d s Gambling A c t i v i t i e s

B r i t i s h p u b l i c p o l i c y t o w a r d s m o s t t y p e s o f g a m b l i n g

a c t i v i t i e s i m p l i e s t h a t t h e y are u n d e s i r a b l e ; s h o u l d n o t be

p r o m o t e d ; a n d , i f a l l o w e d a t a l l , m u s t b e c a r e f u l l y r e g u -

l a t e d a n d c o n t r o l l e d so as t o g u a r d a g a i n s t f r a u d , c h e a t i n g ,

The Gaming B o a r d f o r Great B r i t a i n h a s made i t s i n t e n -

t i o n s c l e a r i n i t s 1st a n n u a l r e p o r t :

a n d o t h e r f o r m s o f c o r r u p t i o n a n d s o c i a l v i c e s . I n c o n t r a s t

t o U.S. j u r i s d i c t i o n s s u c h as Nevada a n d New J e r s e y , t h e

B r i t i s h are r e l a t i v e l y u n i n t e r e s t e d i n t h e r e v e n u e p o t e n t i a l

o f g a m b l i n g t a x e s . here is a n a p p a r e n t a d v e r s i o n to ra i s -

i n g g o v e r n m e n t r e v e n u e s f r o m a c t i v i t i e s w h i c h are r e g a r d e d

as b e i n g s o c i a l l y e v i l a n d d i s r u p t i v e . B r i t i s h g a m b l i n g

l a w s are t h e r e f o r e n o t i n t e n d e d to p r o v i d e new t a x

r e v e n u e s . The p r i m a r y p u r p o s e o f t h e l e g i s l a t i o n is t o

c o n t r o l t h e t y p e s a n d amoun t o f g a m b l i n g and t h e r e b y r e d u c e

t h e h a r m f u l e f f e c t s upon B r i t i s h s o c i e t y .

. . . t h e m a i n m o t i v e f o r a l l o w i n g l e g a l c o m m e r - c i a l g a m i n g i n B r i t a i n is t o make t h e l a w e n f o r c e a b l e . T h i s u n d e r l i e s t h e need f o r a s t r o n g c o n t r o l . Is9

The p r e v a i l i n g a t t i t u d e t h a t most v a r i e t i e s o f g a m b l i n g

a c t i v i t i e s a re u n d e s i r a b l e h a s p r o f o u n d l y i n f l u e n c e d t h e

s u b s t a n c e o f B r i t i s h g a m b l i n g l e g i s l a t i o n .

Recent History of B r i t i s h Gaminq Law

B e f o r e 1 9 6 0 , t h e B r i t i s h a t t i t u d e t o w a r d s gaming w a s

e x p r e s s e d i n 1 9 t h c e n t u r y laws w h i c h i n t h e c o n t e x t o f

modern s o c i e t y w e r e o b s c u r e , i l l o g i c a l and d i f f i c u l t t o

e n f o r c e . L e g a l g a m b l i n g was c o n f i n e d to t h e c i r c u l a t i o n o f

f o o t b a l l p o o l s f o r c r e d i t , and t o c a s h b e t t i n g on h o r s e a n d

d o g races a t p r o p e r l y l i c e n s e d p r e m i s e s . The u s e o f a n y

r e v e n u e , or l o i t e r i n g i n s t r ee t s , f o r t h e p u r p o s e s o f

b e t t i n g a n d g a m b l i n g , or f o r t h e p r o m o t i o n o f c a s h b e t t i n g

. w a s p r o h i b i t e d . P l a y i n g games f o r s t a k e s was n o t u n l a w f u l .

I t was b r o u g h t w i t h i n t h e a m b i t o f t h e c r i m i n a l l a w e i t h e r

by r e a s o n o f t h e game p e r se b e i n g u n l a w f u l , o r b y b e i n g

c a r r i e d o u t i n a common gaming h o u s e or i n a p u b l i c p l a c e .

- 1 6 1 -

N e i t h e r a s p e c t c o u l d b e c l e a r l y d e f i n e d , n o r c o u l d t h e l a w s

b e e f f i c i e n t l y z n d i m p a r t i a l l y a d m i n i s t e r e d . T h e r e was o p e n

t o l e r a t i o n o f b r i d g e a n d w h i s t c l u b s a n d a p l e t h o r a o f

t e m p o r a r y gaming s t a n d s , w h i c h t o g e t h e r made a m o c k e r y o f

t h e gaming l a w s . As t h e C h i e f M a g i s t r a t e o f London s t a t e d

b e f o r e t h e R o y a l Commiss ion o f 1949-51 , "it is p r a c t i c a l l y

i m p o s s i b l e f o r t h e o r d i n a r y man t o know w h a t t h e l a w is".160

A. The Royal Commission (1949-51) on Bettinq, Lotteries and Gaminq

I n t h e f a c e o f t h e s u s t a i n e d g r o w t h i n g a m b l i n g ,

p a r t i c u l a r l y i l l e g a l g a m b l i n g , t h e B r i t i s h G o v e r n m e n t

a p p o i n t e d t h e R o y a l Commiss ion ( 1 9 4 9 - 5 1 ) t o i n v e s t i g a t e a n d

r e p o r t o n t h e s t a t e o f g a m b l i n g a n d g a m b l i n g l a w . The ma in

c o n c e r n o f t h e 1949-51 Commiss ion was t o i n d i c a t e new

p r i n c i p l e s o f l a w t o r e p l a c e t h e o u t d a t e d 1 9 t h c e n t u r y

l e g i s l a t i o n . The Commiss ion p r e f a c e d i ts r e p o r t w i t h t h e

f o l l o w i n g w o r d s :

we d o n o t t h i n k i t c o u l d b e d e n i e d t h a t t h e r e are many amusemen t s w h i c h , i f t h e y t o o k t h e p l a c e o f g a m b l i n g , wou ld l e a v e t h e g a m b l e r b o t h a h a p p i e r a n d a b e t t e r man. . . .no s e n s i b l e man c o u l d b u t w i s h t h a t g a m b l i n g p l a y e d a less p r o m i n e n t p a r t i n t h e l i f e of t h i s c o u n t r y t h a n it d o e s . 1 6 1

D e s p i t e t h i s b l a n k e t d i s a p p r o v a l o f g a m i n g , t h e

Commiss ion r e a s o n e d t h a t o v e r t l y r e s t r i c t i v e l e g i s l a t i o n w a s

n o t j u s t i f i a b l e or wise. The Commiss ion s a w t h e s p r e a d o f

g a m b l i n g is o n e o f t h e symptoms o f a n a g e i n w h i c h p e o p l e

h a v e m o r e l e i s u r e a n d c a n n o t , or d o n o t know how, t o make

good u s e of it. I t r e a s o n e d t h a t t h e a p p r o p r i a t e remedy was

n o t r e s t r i c t i v e l e g i s l a t i o n , b u t e d u c a t i o n and- t h e p r o v i s i o n

of a l t e r n a t i v e r e c r e a t i o n f a c i l i t i e s . 162

The Commiss ion a r g u e d t h a t t h r e e b a s i c p r i n c i p l e s would

h a v e to b e a c c e p t e d i f r e f o r m e d g a m b l i n g l e g i s l a t i o n was t o

b e s u c c e s s f u l . The p r i n c i p l e s were: t h e r e s h o u l d b e a

s t r ic t c o n t r o l o v e r c o m m e r c i a l g a m i n g , a n d l i c e n s i n g o r

r e g i s t r a t i o n o f a l l who p r o v i d e d s u c h f a c i l i t i e s ; t h e l a w

s h o u l d a p p l y f a i r l y t o a l l s e c t i o n s o f t h e communi ty ; i n f o r -

m a t i o n s h o u l d b e p r o v i d e d to t h e p u b l i c a b o u t t h e e x t e n t ,

a n d c o n d u c t o f t h e v a r i o u s f o r m s o f g a m b l i n g . le3 T h e y

b e l i e v e d t h a t t h e m a i n p r o b l e m w i t h t h e o l d l e g i s l a t i o n was

t h a t i t made i l l e g a l many i n n o c e n t f o r m s o f d o m e s t i c g a m i n g ,

w h i l e r e m a i n i n g h a r d t o e n f o r c e a g a i n s t s e r i o u s commercial

gaming . The e n f o r c e m e n t o f t h e l a w d e p e n d e d upon t h e

d i s c r e t i o n o f t h e p o l i c e , a n d t h e s i t u a t i o n t h a t e v o l v e d was

t h a t h a r m l e s s a c t i v i t i e s w e r e u n c o n t r o l l e d b e c a u s e t h e

p o l i c e t o l e r a t e d them, and h a r m f u l a c t i v i t i e s were o f t e n

i g n o r e d b e c a u s e u n d e r t h e l e g i s l a t i o n t h e y w e r e v e r y d i f f i -

c u l t t o p r e v e n t . T h u s t h e l o n g h i s t o r y o f u n e n f o r c e d and

u n e n f o r c e a b l e gaming l aw .

The Commiss ion n o t e d t h a t a s o c i a l h a b i t as d e e p l y

i n g r a i n e d a s g a m b l i n g c o u l d n o t b e e f f e c t i v e l y p r e v e n t e d by

o v e r t l y r e s t r i c t i v e l e g i s l a t i o n . I t r e a s o n e d t h a t s u c h a n

a p p r o a c h wou ld e n c o u r a g e p o l i c e r e t i c e n c e to e n f o r c e

i l l o g i c a l a n d u n r e a s o n a b l e l e g i s l a t i o n , and s u c h t o l e r a t i o n

o f i l l e g a l p r a c t i c e s would l e a d t o d i s r e s p e c t f o r t h e p o l i c e

a n d f o r t h e l aw . The Commiss ion , b e l i e v e d t h a t t h e p r i n c i -

p a l o b j e c t o f g a m b l i n g l a w s s h o u l d b e t o p r e v e n t i n d i v i d u a l s

f r o m b e i n g i n d u c e d t o p l a y f o r h i g h s t a k e s f o r t h e p r o f i t o f

t h e g a m b l i n g p r o m o t e r , i .e . , c o m m e r c i a l g a m b l i n g . I t n o t e d

t h a t c o m m e r c i a l g a m b l i n g combined a s p i r i t o f c o m p e t i t i o n , a

r a p i d i t y o f t u r n o v e r , a n d t h e e x c i t m e n t o f c h a n c e . T h e s e

c o n d i t i o n s r e s u l t i n a s t r o n g i n c e n t i v e f o r t h e p l a y e r t o

The Commiss ion i d e n t i f i e d t h r e e p a r t i c u l a r p r o h i b i t i o n s

a s t h e b a s i s o f r e f o r m e d gaming i a w s . T h e r e s h o u l d be a

s t r ic t p r o h i b i t i o n a g a i n s t :

1. games o f u n e q u a l c h a n c e i n w h i c h t h e h o u s e h a s an a d v a n t a g e a g a i n s t t h e p l a y e r s ;

2 . c h a r g e s fo r g a m i n g ;

3 . l e v i e s on s t a k e s o r w i n n i n g s . 1 6 5

B. Betting & Gaminq Act 1960 and Betting, Gaminq and Lotteries Act, 1963

The B e t t i n q & Gaming A c t 1 9 6 0 was e n a c t e d i n r e s p o n s e

t o r e c o m m e n d a t i o n s o f t h e R o y a l C o m m i s s i o n ' s o f 1949-51.

(The A c t was l a t e r c o n s o l i d a t e d w i t h o t h e r l e g i s l a t i o n i n

t h e B e t t i n g , Gaminq & L o t t e r i e s A c t 1 9 6 3 , w h i c h r e m a i n s t h e

major s t a t u t e c o n t r o l l i n g l o t t e r i e s a n d t h e d i f f e r e n t f o r m s

o f b e t t i n g on h o r s e s , g r e y h o u n d s , s p o r t s e v e n t s , e t c . ) .

Most o f t h e o l d s t a t u t e s r e l a t i n g t o gaming w e r e r e p e a l e d .

The A c t was i n t e n d e d to c o n t r o l t h e g r o w t h o f i l l e g a l gaming

b y a l l o w i n g l e g a l g a m b l i n g w i t h i n a r e g u l a t o r y f r a m e w o r k .

Gaming as a s o c i a l a c t i v i t y i n g e n u i n e members ' c l u b s w a s t o

, b e p e r m i t t e d , b u t c o m m e r c i a l e x p l o i t a t i o n o f gaming w a s t o

b e r e g u l a t e d a n d c o n t r o l l e d . Gaming would o n l y become

u n l a w f u l i f it v i o l a t e d t h e r u l e s s u g g e s t e d by t h e R o y a l

C o m m i s s i o n ' s . T h e r e c o u l d be no games o f u n e q u a l c h a n c e

( t h e h o u s e m u s t n o t h a v e a n a d v a n t a g e a g a i n s t t h e p l a y e r ) ;

no c h a r g e s f o r gaming ; n o l e v i e s on s t a k e s o r w i n n i n g s .

The 1 9 6 0 A c t was b a d l y d r a f t e d and c o n t a i n e d many ' l o o p -

h o l e s . The A c t f a i l e d t o d i s t i n g u i s h b e t w e e n members ' c l u b s

( s u c h a s s p o r t s c l u b s , socia l c l u b s , w o r k i n g m e n ' s c l u b s )

o p e r a t e d p u r e l y f o r t h e b e n e f i t o f members, and c o m m e r c i a l

c l u b s , w h i c h , w e r e o p e r a t e d p r i m a r i l y f o r p r o f it. E x p l o i -

t a t i o n of t h e l o o p h o l e s l e d t o t h e p r o l i f e r a t i o n o f

c o m m e r c i a l g a m i n g a n d b i n g o c l u b s a n d t o gaming a c t i v i t i e s

i n d r i n k i n g c l u b s , cabaret c l u b s and r e s t a u r a n t s . Many

p e o p l e were i n t r o d u c e d by p r o m o t e r s t o c a s i n o games wh ich

were c o n d u c t e d u n d e r c o n d i t i o n s o f minimum s u p e r v i s i o n w i t h

n o s t a n d a r d r u l e s o f p l a y . G a m b l e r s w e r e b e i n g e x p l o i t e d ,

a n d it was e v i d e n t t h a t c r i m i n a l s w e r e d rawn t o t h e o p e r a -

t i o n o f c a s i n o s by t h e e a s y money. 166 L a r g e p r o f i t s w e r e

made o n b i n g o ( a n e q u a l c h a n c e game) by c h a r g i n g s u b s t a n t i a l

e n t r a n c e or s e s s i o n f e e s .

O p e r a t o r s o f C o m m e r c i a l c a s i n o s d e v i s e d i n g e n i o u s

m e t h o d s t o g e t a r o u n d t h e e q u a l c h a n c e r u l e s . I n some

c l u b s , f o r e x a m p l e , h i g h c h a r g e s w e r e imposed f o r e a c h s h o e

o f c h e m i n - d e - f e r , w h i c h i n some c a s e s amoun ted t o E20 f o r

a p p r o x i m a t e l y h a l f a n h o u r o f gaming . O t h e r b a n k e r games ,

s u c h as r o u l e t t e , b l a c k j a c k a n d c r a p s ( d i c e ) , were a l so

p r o v i d e d c o m m e r c i a l l y w i t h v a r y i n g d e v i c e s t o t r y to make

t h e s e i n h e r e n t l y u n e q u a l c h a n c e games e q u a l o n e s . 1 6 7

I n a d d i t i o n t o t h e l o o p h o l e s , o t h e r p r o b l e m s p l a g u e d

t h e e n f o r c e m e n t o f . t h e s t a t u t e . T h e r e w e r e i n a d e q u a t e

r e s t r i c t i o n s o n a d v e r t i s i n g a n d t h e p o l i c e had no r i g h t o f

e n t r y t o t h e c l u b s . F u r t h e r , t h e r e w e r e n o a d e q u a t e p r o v i -

s i o n s t o p r e v e n t u n i d e n t i f i a b l e a n d o f t e n c r i m i n a l

o r g a n i z e r s a n d p r o m o t e r s f r o m g a i n i n g c o n t r o l o f c a s i n o s and

c l u b s .

The R o y a l Commiss ion 1 9 7 8 saw t h e r e s u l t s o f t h e 8

y e a r s o f t h e 1 9 6 0 A c t i n t h e f o l l o w i n g t e r m s :

I n 1 9 6 8 t h e s t a t e o f t h e c a s i n o i n d u s t r y was t h o r o u g h l y a l a r m i n g . ... L o o p h o l e s i n t h e l a w made c a s i n o g a ~ i n g so. p r o f i t a b l e f o r t h e p r o p r i e t o r s t h a t o v e r a t h o u s a n d c a s i n o s s p r a n g u p a l l o v e r t h e c o u n t r y . C i t i z e n s whose i n t e r e s t i n gaming m i g h t n e v e r h a v e g o n e beyond a R o y a l B r i t i s h L e g i o n w h i s t

o f r o u l e t t e and chemin-de-f er . Worse s t i l l , t h e i n d u s t r y was b e i n g i n f i l t r a t e d by - c r i m i n a l s and o t h e r u n d e s i r a b l e c h a r a c - ters. 1 6 8

C. The Gaming A c t 1968

The m a s s i v e d e v e l o p m e n t o f c o m m e r c i a l gaming ( t h e r e

were o v e r 1 , 0 0 0 c a s i n o s i n 1 9 6 7 ) t h a t o c c u r r e d u n d e r t h e

weak c o n t r o l s o f t h e B e t t i n g a n d Gaminq A c t 1960 l e d t o

c o n s i d e r a b l e p u b l i c and P a r l i a m e n t a r y d i s q u i e t . One g o v e r n -

men t r e p o r t had t h e f o l l o w i n g p e r s p e c t i v e :

The gaming s c e n e i n G r e a t B r i t a i n was a h o t c h p o t c h . I t had grown up u n c o n t r o l l e d and c o n s i s t e d o f gaming s i d e - s h o w s i n b i n g o h a l l s ; gaming i n c a r d c l u b s d e v o t e d to b r i d g e and p o k e r ; gaming i n b e t t i n g c l u b s ; gaming i n d r i n k i n g c l u b s ; gaming i n c a b a r e t c l u b s ; gaming i n r e s t a u r a n t s and gaming i n c a s i n o c l u b s o f a l l s h a p e s and s i z e s . A f e a t u r e o f t h e d e v e l o p m e n t was t h e l a r g e number o f r e s t a u r a n t c a b a r e t c l u b s which r e l i e d on gaming t o s u b s i d i z e e x p e n s i v e c a b a r e t a r t i s t e s . The mix o f d a n c i n g , c a b a r e t , d r i n k i n g and gaming c r e a t e d an u n d e s i r a b l e t e m p t a t i o n t o young p e o p l e and an u n n e c e s s a r y c o n f u s i o n . The Board r e c e i v e d s u b s t a n t i a l e v i d e n c e t h a t t h e demand f o r gaming was s t i m u l a t e d by t h e b i g name a t t r a c t i o n s of a r t i s t e s and t h e a v a i l a b i l i t y o f i n e x p e n s i v e m e a l s and d a n c i n g . 169

The need t o r e d u c e t h e e x t e n t o f c o m m e r c i a l gaming and

t o c o n t r o l g a m b l i n g o p e r a t i o n s l e d t o t h e p a s s i n g o f t h e

Gaming A c t 1968 . E x p e r i e n c e w i t h t h e 1960 a n d 1 9 6 3 l e g i s l a -

t i o n i n d i c a t e d t h a t gaming c o n t r o l l e g i s l a t i o n s h o u l d be

d i r e c t e d a t t h e f o r m s o f gaming which w e r e open to commer-

c i a l e x p l o i t a t i o n . The f r a m e r s o f t h e Gaming A c t 1 9 6 8

r e c o g n i z e d t h a t c o m m e r c i a l gaming had d e v e l o p e d t o t h e

e x t e n t t h a t it c o u l d n o t b e s u p p r e s s e d , b u t it s h o u l d be

s u b j e c t t o s t r i c t r e g u l a t i o n and c o n t r o l .

The A c t e s t a b l i s h e d a s t r i c t y e t f l e x i b l e a p p a r a t u s

c a p a b l e o f c u r b i n g a l l f o r m s o f gaming which were l i a b l e t o

b e c o m m e r c i a l l y e x p l o i t e d or a b u s e d , to r e d u c e d r a s t i c a l l y

t h e numbers o f c o m m e r c i a l gaming c l u b s , and t o e n s u r e t h a t

o t h e r games s u c h as b i n g o , b r i d g e , e t c . were n o t e x p l o i t e d

by c o m m e r c i a l gaming p r o m o t e r s .

Control of Gaming in Great Britain

A. Enforcement Under the Gaming Act 1968

The o b s e r v a t i o n s o f Lord R o t h s c h i l d on t h e d i f f i c u l t y

o f e n f o r c i n g g a m b l i n g l e g i s l a t i o n a r e w o r t h y o f r e p e t i t i o n :

From t h e s t a n d p o i n t o f e n f o r c e m e n t , g a m b l i n g l e g i s l a t i o n h a s had a c h e c k e r e d and unhappy h i s t o r y , s t a r t i n g w i t h t h e a t t e m p t t o d e p r i v e t h e p u b l i c o f o p p o r t u n i t i e s t o e n g a g e i n f o r m s o f g a m b l i n g , n o t a b l y o f f - c o u r s e b e t t i n g , which t h e y c l e a r l y wan ted and i n s i s t e d on h a v i n g w h a t e v e r t h e l aw m i g h t s a y . The f o l l y o f t h i s was r e c o g n i z e d i n t h e B e t t i n g & Gaminq A c t 1960 which e s t a b l i s h e d b e t t i n g o f f i c e s . A n o t h e r l e s s o n p a i n f u l l y l e a r n e d and a p p l i e d i n t h e Gaming A c t 1968 w a s t h e d i f f i c u l t y i n c o n t r o l l i n g a c t i v i t i e s f r o m which t h e r e were l a r g e amounts o f money t o b e made by t h o s e a s t u t e enough to f i n d ways r o u n d t h e l e g a l o b s t a c l e s , by r e l y i n g s o l e l y on s t a t u t o r y p r o v i s i o n s which w e r e n o t b a c k e d by r e g u l a t i o n making powers .

... a l e s s o n which it seems h a s s t i l l n o t been l e a r n e d , however , is t h e d a n g e r o f g r a n t i n g c o n c e s s i o n s t o p a r t i c u l a r g r o u p s or i n t e r e s t s w i t h o u t p r o v i d i n g a d e q u a t e m a c h i n e r y f o r s u p e r v i s i o n , an o m i s s i o n which h a s o f t e n l e d to t h e a b u s e o f t h e p r i v i l e g e s or t h e i r e x t e n s i o n w e l l beyond t h e o r i g i n a l i n t e n t i o n b e f o r e t h e a u t h o r i t i e s become a w a r e o f wha t is h a p p e n i n g . Deve lopments o f t h i s k i n d b r i n g t h e l a w i n t o c o n t e m p t . W e a r e s o r r y t o s a y t h a t t h e l o t t e r i e s l e g i s l a t i o n p a s s e d a s r e c e n t l y a s 1 9 7 5 , and t h e r e g u l a t i o n s made u n d e r it i n 1 9 7 7 , d i s p l a y j u s t t h i s so r t o f l a x i t y . 1 7 0

E n f o r c e m e n t is t h e r e s p o n s i b i l i t y o f t h e p o l i c e , b u t

t h e Gaming Board I n s p e c t o r a t e a l s o is g i v e n some e n f o r c e m e n t

a u t h o r i t y . The p o l i c e and t h e I n s p e c t o r a t e a r e g i v e n

u n r e s t r i c t e d r i g h t s o f e n t r y i n t o t h e l i c e n s e d c o m m e r c i a l

gaming c l u b s w i t h f a r r e a c h i n g powers t o i n s p e c t e q u i p m e n t ,

r e c o r d s , and o t h e r r e l e v a n t documents . At t h e same t i m e i t

is a n o f f e n c e f o r a n y p e r s o n who h o l d s a l i c e n s e u n d e r t h e

A c t , o r f o r a n y p e r s o n a c t i n g on b e h a l f o f a l i c e n s e h o l d e r

t o r e f u s e a d m i s s i o n t o an i n s p e c t o r ( c o n s t a b l e ) who demands

a d m i s s i o n to t h e c a s i n o t o i n s p e c t t h e p r e m i s e s o r e q u i p m e n t

and m a c h i n e s found on i t , o r r e f u s e t o p r o d u c e any book o r

document u n d e r h i s c o n t r o l which r e l a t e s t o t h e p r e m i s e s o r

r e f u s e t o f u r n i s h a n y i n f o r m a t i o n r e l a t e d t o , t h e p r e m i s e s

which t h e i n s p e c t o r ( c o n s t a b l e ) r e q u i r e s . 171

S e a r c h w a r r a n t s may b e d i r e c t e d t o a n y c o n s t a b l e by a

j u s t i c e o f t h e p e a c e when t h e r e a r e r e a s o n a b l e g r o u n d s f o r

s u s p e c t i n g t h a t a n o f f e n c e u n d e r t h e A c t is b e i n g , h a s b e e n

o r is a b o u t t o be commi t ted on t h e p r e m i s e s . Wi th a

w a r r a n t t h e c o n s t a b l e may e n t e r ( w i t h o r w i t h o u t i n s p e c t o r s )

w i t h f o r c e i f n e c e s s a r y , a t any t i m e w i t h i n 1 4 d a y s f rom t h e

t i m e o f i s s u e . An i n s p e c t o r ( c o n s t a b l e ) who e n t e r s u n d e r

t h e a u t h o r i t y o f a w a r r a n t may s e i z e and remove any docu-

m e n t , money o r a n y t h i n g w h a t s o e v e r found on t h e p r e m i s e s

which he h a s r e a s o n a b l e c a u s e t o b e l i e v e may be r e q u i r e d a s

e v i d e n c e f o r t h e p u r p o s e s of p r o c e e d i n g s i n r e s p e c t o f a n

o f f e n c e u n d e r t h e A c t , and a r r e s t and s e a r c h any p e r s o n

found on t h e p r e m i s e s whom he h a s r e a s o n a b l e c a u s e t o

b e l i e v e to be c o m m i t t i n g ( t o have c o m m i t t e d ) any s u c h

o f f e n c e .

. - ( i ) R e s t r i c t i o n s Upon Gaminq Under The Gaminq A c t 1 9 6 8

The A c t e s t a b l i s h e d a c o m p l e t e ban on gaming i n

streets and a l m o s t a l l o t h e r p l a c e s of p u b l i c a c c e s s ,

b u t d i d n o t a b s o l u t e l y p r o h i b i t a n y f o r m o f gaming . I t

d e f i n e d gaming by d i f f e r e n t c a t e g o r i e s , a n d r e q u i r e d

f a c i l i t i e s o f f e r i n g commercial gaming and t h e more

s e r i o u s f o r m s o f gaming t o s u b m i t t o r i g o r o u s l i c e n s -

i n g , r e g i s t r a t i o n a n d o p e r a t i o n a l c o n t r o l .

N o money or f e e s may b e c h a r g e d f o r t a k i n g p a r t i n

gaming t h a t o c c u r s o u t s i d e r e g i s t e r e d or l i c e n s e d

c l u b s . N o l e v y may b e a s s e s s e d on s t a k e s or w i n n i n g s

f rom s u c h gaming . I n o t h e r w o r d s , when gaming t a k e s

p l a c e o u t s i d e l i c e n s e d or r e g i s t e r e d c l u b s , no c o m m e r -

c i a l c h a r g e s may b e a s s e s s e d . Commerc ia l gaming is

r e s t r i c t e d t o l i c e n s e d or r e g i s t e r e d c l u b s . F u r t h e r ,

no gaming is p e r m i t e d w h i c h i n v o l v e s p l a y i n g or s t a k i n g

a g a i n s t a b a n k , o r w h e r e t h e c h a n c e s i n t h e game a r e

s p l i t u n e q u a l l y among t h e p l a y e r s . However , i f t h e

gaming is p r i v a t e gaming- - i . e . , it t a k e s p l a c e on a

d o m e s t i c o c c a s i o n i n a h o s t e l , r e s i d e n c e , or p r i v a t e

d w e l l i n g , p r i m a r i l y among r e s i d e n t s - - t h e n t h e restric-

t i o n s o n b a n k i n g games a n d u n e q u a l c h a n c e games d o n o t

a p p l y

T h e r e s t r i c t i o n s are s u p p o r t e d by s t r i c t p e n a l -

t ies . The p e n a l t y o n c o n v i c t i o n f o r d e a l i n g i n a n

u n l i c e n s e d c a s i n o is a n u n l i m i t e d f i n e , o r i m p r i s o n m e n t

f o r u p t o 2 y e a r s , or b o t h . The p e n a l t y f o r s t reet

g a m i n g v i o l a t i o n s is a f i n e o f o n l y £50 or less,

b e c a u s e s t reet g a m i n g or gaming i n o t h e r p u b l i c p l a c e s

w a s n o t o r i g i n a l l y t h o u g h t t o b e as s e r i o u s a matter as

i l l e g a l c a s i n o gaming . I n c o n t r a s t t o t h e o r i g i n a l

s u p p o s i t i o n , h o w e v e r , t h e R o y a l Commiss ion ( 1 9 7 8 )

recommends t h a t s t r ee t gaming o f f e n c e s receive more

s e v e r e p e n a l t i e s b e c a u s e t h e r e is s e r i o u s a n d w i d e

a b u s e o f t h e p r o h i b i t i o n s . 172

Two types of licenses are granted to commercial

gaming clubs:

(a) General licenses - Clubs with general licenses may provide all gaming facilities authorized by the

Act and its Regulations, but may not provide

bingo.

(b) Binqo only licenses - Clubs with bingo only licenses are prohibited from providing any gaming

facilities other than those for bingo.

(ii) Bingo Clubs

The rationale for the separation of bingo from

casino gaming is to preserve bingo as a "neighbourly"

game. There are restrictions on bingo operators to

ensure that the game is not adulterated and abused as

it was under the Bettinq and Gaming Act 1960. Under

the 1968 Act, there are restrictions on the amounts

which may be charged for admission and participation.

Except for a government bingo duty, all money staked on

bingo cards must be returned to winning players. Bingo

clubs may not provide credit to players.

(iii) Commercial Casinos

The more important restrictions placed by the Act

upon commercial casinos may be summarized as follows:

(1) participants must either be members of the club or

genuine guests of members, and membership becomes

effective only where an application has been made

out at least 48 hours before participating in

gaming;

p e r s o n s u n d e r 1 8 a re f o r b i d d e n i n gaming c a s i n o s ;

c a s i n o s are p r o h i b i t e d f r o m a l l o w i n g a n y f o r m o f

c r e d i t t o members o r g u e s t s , b u t t h e y are a l l o w e d

t o c a s h c h e q u e s i n o r d e r t h a t a p a r t i c i p a n t b e g i n

p l a y i n g . I f t h e c a s i n o c a s h e s s u c h a c h e q u e i t

m u s t t h e n d e l i v e r t h e c h e q u e t o a bank f o r payment

or c o l l e c t i o n w i t h i n two b a n k i n g d a y s ;

t h e r e m u s t b e no i n t e r n a l access to p r e m i s e s u s e d

f o r gaming f r o m a n y o t h e r p r e m i s e s ;

g a m i n g c l u b s a re f o r b i d d e n to a d v e r t i s e e x c e p t on

t h e i r own p r e m i s e s ;

no o n e is a l l o w e d t o p l a y on b e h a l f o f someone n o t

p r e s e n t i n t h e c a s i n o or c l u b a t t h e t i m e o f t h e

g a m i n g ;

t h e h o l d e r o f a c a s i n o l i c e n s e may n o t p l a y n o r

may a n y o n e a c t i n g on h i s b e h a l f or employed i n t h e

c a s i n o ;

no p e r s o n may b e employed i n a gaming f u n c t i o n i n

a l i c e n s e d c a s i n o or a r e g i s t e r e d c l u b u n l e s s h i s

employmen t h a s b e e n a p p r o v e d by t h e Gaming B o a r d .

The t y p e s o f games w h i c h may be p l a y e d i n commer-

c a s i n o s a re r e g u l a t e d by law. Bank games--

b a c c a r a t , b l a c k j a c k , c h e m i n d e f e r , c r a p s , p u n t o b a n c o

a n d r o u l e t t e - - a r e s u b j e c t t o r e g u l a t i o n s s t a t i n g t h e

r u l e s u n d e r w h i c h t h e games are t o be p l a y e d . The

r u l e s a l l o w t h e c a s i n o s t o make a r e a s o n a b l e p r o f i t and

are i n i n t e n d e d t o p r e v e n t e x p l o i t a t i o n o f t h e games by

t h e c a s i n o o p e r a t o r s . B l a c k j a c k and c r a p s are a l l o w e d

o n l y i n a f o r m t h a t does n o t o f f e r u n r e a s o n a b l e

a d v a n t a g e t o t h e b a n k ; r o u l e t t e may b e p l a y e d o n l y w i t h

o n e z e r o , r a t h e r t h a n t w o , a g a i n t o e x c l u d e a n o v e r -

w h e l m i n g a d v a n t a g e to t h e bank.

A c a s i n o may p r o v i d e f a c i l i t i e s s u c h as c a r d rooms

f o r members t o game among t h e m s e l v e s , b u t bank games

a re n o t a l l o w e d . The c a s i n o may e s t a b l i s h a c h a r g e to

p a r t i c i p a n t s f o r t h e p r o v i s i o n o f s u c h f a c i l i t i e s , b u t

t h e d e t a i l s o f s u c h c h a r g e s m u s t b e g i v e n to t h e loca l

l i c e n s i n g a u t h o r i t i e s , a n d t h e c a s i n o is r e s t r i c t e d i n

t h e f r e q u e n c y w i t h w h i c h it c a n a t t a c h s u c h c h a r g e s .

( i v ) Gamina i n R e a i s t e r e d (Non-Commerc ia l ) Members ' C l u b s

Some u n e q u a l c h a n c e games are p e r m i t t e d i n r e g i s -

t e r e d ( n o n - c o m m e r c i a l ) members ' c l u b s . P a r t i c i p a t i o n

i n gaming a t s u c h c l u b s is l i m i t e d to members a n d t h e i r

g u e s t s . G u e s t s may n o t b e c h a r g e d f o r t h e i r p a r t i c i p a -

t i o n . Non-commerc ia l members ' c l u b s t h a t p r o v i d e

f a c i l i t i e s f o r games o f u n e q u a l c h a n c e , or w i s h t o

c h a r g e p a r t i c i p a t i o n f e e s ( a minimum f e e is r e g u l a t e d )

f o r games s u c h a s b r i d g e , m u s t b e r e g i s t e r e d t h r o u g h

t h e Gaming Board a n d t h e loca l a u t h o r i t i e s . P a r t i c i p a -

t i o n i n gaming a t s u c h c l u b s is l i m i t e d t o members a n d

t h e i r g u e s t s ; g u e s t s may n o t b e c h a r g e d f o r t h e i r

p a r t i c i p a t i o n .

Chemin d e f e r a n d b l a c k j a c k are t h e o n l y b a n k

games p e r m i t t e d i n r e g i s t e r e d c l u b s , and t h e - c l u b is

n o t a l l o w e d t o h o l d t h e bank . T h e r e are no res t r ic-

t i o n s upon t h e e q u a l c h a n c e games members may p l a y

among t h e m s e l v e s , b u t u n d e r n o c i r c u m s t a n c e s may t h e

c l u b i t s e l f p l a y . A r e g i s t e r e d c l u b may t a k e money f o r

p r o v i s i o n o f g a m i n g f a c i l i t i e s o n l y by means of a

s i n g l e f e e ( s e t by r e g u l a t i o n ) p e r d a y p e r member i n

r e s p e c t o f a l l games i n w h i c h t h e member p a r t i c i p a t e s .

S l o t - M a c h i n e s - P a r t I11 o f T h e Gaming A c t 1 9 6 8

The s a l e a n d u s e o f s l o t - m a c h i n e s is c l o s e l y

r e g u l a t e d by t h e Gaming Board u n d e r t h e p r o v i s i o n s o f

t h e Gaming A c t 1 9 6 8 . U n t i l 1 9 6 0 , s l o t m a c h i n e s f o r

p l a y i n g games o f c h a n c e were i l l e g a l i n B r i t a i n .

o ow ever, t h e l a w w a s n o t , s t r i c t l y e n f o r c e d by t h e

p o l i c e a n d p r i z e m a c h i n e s were o p e r a t e d w i d e l y i n

a r c a d e s a n d h a l l s .

The B e t t i n g a n d Gaming A c t 1 9 6 0 l e g a l i z e d s l o t -

m a c h i n e s fo r t h e f i r s t t i m e b u t d i s t i n g u i s h e d b e t w e e n

s l o t - m a c h i n e s , w h e r e t h e m a i n i n c e n t i v e f o r p l a y i n g was

t o make money, a n d amusement m a c h i n e s , w h e r e t h e e n t e r -

t a i n m e n t v a l u e was t h e i n c e n t i v e . A l t h o u g h b o t h

m a c h i n e t y p e s w e r e s u b j e c t e d t o a r e g u l a t e d maximum u s e

c h a r g e , s l o t - m a c h i n e s o f t h e f i r s t t y p e w e r e a l l o w e d t o

o f f e r u n l i m i t e d c a s h p r i z e s . No t s u r p r i s i n g l y , t h e

l e g a l i z a t i o n o f s l o t - m a c h i n e s a n d t h e l a c k o f l i m i t s o n

c a s h p r i z e s l e d t o a r a p i d i n c r e a s e i n t h e s u p p l y o f

s u c h m a c h i n e s . S l o t m a c h i n e s , p o p u l a r a n d p r o f i t a b l e

" l e n t t h e m s e l v e s t o p r o t e c t i o n r a c k e t s u n d e r wh ich c l u b

p r o p r i e t o r s w e r e c o m p e l l e d , by means o f t h r e a t s , t o

i n s t a l l t hem o n p r o f i t - s h a r i n g t e r m s " . 1 7 3

T h e a b u s e s r e s u l t i n g f r o m t h e 1 9 6 0 A c t d i c t a t e d

t h e n a t u r e a n d s e v e r i t y o f t h e r e s t r i c t i o n s a p p l i e d i n

t h e Gaming A c t 1968 . T h e r e is a r e q u i r e m e n t t h a t t h o s e

who se l l , s u p p l y or c o n t r a c t t o m a i n t a i n m a c h i n e s

w i t h i n t h e mean ing of t h e A c t must be a p p r o v e d and

g r a n t e d c e r t i f i c a t e s by t h e Gaming Board. No more t h a n

two m a c h i n e s may b e made a v a i l a b l e f o r gaming i n any

l i c e n s e d o r r e g i s t e r e d c l u b . T h e r e is t o be no p r o f i t -

s h a r i n g or any o t h e r u n d e r t a k i n g between t h e machine-

s u p p l i e r and a r c a d e owner d e p e n d e n t upon m a c h i n e

p r o f i t s . S u p p l i e r s may make r e n t a l c h a r g e s o n l y . The

d i s p o s a l o f s t a k e s and t h e k e e p i n g o f a c c ' o u n t s a n d

r e c o r d s a r e s u b j e c t t o t h e c o n t r o l of t h e Gaming

Board. Types o f .mach ines which o f f e r an i n c e n t i v e t o

i n d i v i d u a l s t o c o n t i n u e p l a y i n g i n t h e hope o f

i n c r e a s e d w i n n i n g s a r e p r o h i b i t e d .

Armed w i t h t h e Gaming A c t 1 9 6 8 , t h e Gaming Board

h a s had c o n s i d e r a b l e s u c c e s s i n e s t a b l i s h i n g o r d e r and

p r o p r i e t y i n t h e sa le and u s e o f s l o t - m a c h i n e s a n d

amusement m a c h i n e s . The Annual R e p o r t s o f t h e Gaming

Board f rom 1969-1980 r e f e r t o s u c c e s s £ u l l y e x e c u t e d

a g r e e m e n t s be tween t h e Board and t h e mach ine d i s t r i b u -

t o r s , m a n u f a c t u r e r s and e n t r e p r e n e u r s a s t o t h e

o b s e r v a n c e of p r o p e r g u i d e l i n e s f o r s l o t - m a c h i n e s .

However, t h e Annual R e p o r t s a l s o a s s e r t t h e c o n t i n u i n g

need f o r s u r v e i l l a n c e and i n s p e c t i o n o f t h e i n d u s t r y by

t h e Gaming Board.

The c o n c e r n o f t h e Gaming Board w i t h s l o t m a c h i n e s

is t h a t m a n u f a c t u r e r s o f m a c h i n e s a r e c o n t i n u a l l y p ro -

v i d i n g new " c u s t o m e r a p p e a l " f e a t u r e s on t h e m a c h i n e s .

T h e s e f e a c t u r e s s o m e t i m e s are i n v i o l a t i o n of t h e law.

S e c o n d l y , many m a n c h i n e s a r e found t o o f f e r p a y o u t p e r -

c e n t a g e s which a r e less t h a n t h o s e r e q u i r e d . P l a y e r s . - on t h e m a c h i n e s are n o t r e c e i v i n g a f a i r chance.174

B e c a u s e t h e s l o t - m a c h i n e i n d u s t r y is s o c o m p e t i t i v e and

a t t h e same t i m e p o t e n t i a l l y q u i t e l u c r a t i v e , i n t h e

began to appear. In some cases, the Board noted that

odds were so long as to be unfair to the player, and of

questionable social desirability. 175 As a result of

expressions of concern the Board in 1978 it received a

commitment from machine manufacturers and suppliers

that no machines with jackpots in excess of £100 would

' be made.176

That the Gaming Act 1968 and the Gaming Board have

been relatively successful in ensuring that the demand

for slot-machine' gambling is not artificially stimu-

lated and abused is born out by statistics on machine

supply and utilization.

A comparison of the 1974 and 1980 Gaming Board

Annual Reports show that the number of Jackpot (large

cash prize) machines has been held fairly constant.

There has been a large decline in penny slot-machines.

Only the amusement-with-prizes machines (limited to

small prizes in money or equal value) 'have increased

significantly. The following table presents these

figures. l77

Number of machines covered by gaming machine licenses for the licensing years:--

1973/74 1978/79 1979/80 Jackpot machines (as permitted on premises licensed or registered under the Gaming Act 1968) 32,400 37,100 36,900

Amusement-with-prizes ' -

machines (as commonly found in public houses, cafes, arcades and pleasure fairs 73,500 93,200 106,400

Penny machines (on premises with holiday season licenses) 52,471 45,535 24,929

TOTALS 158,371 175,835 l68,229*

B. Regulatory Structure: The Gaminq Board

The Act defines the different categories of gaming to

be permitted in different circumstances, lays down the basic

restrictions to be observed, and provides that clubs author-

ized to operate the more potentially exploitable forms of

gaming must be licensed or registered. The discretion as to

what detailed regulations should be made to control the '

operation of gaming activities within licensed or registered

clubs was left to the discretion of the Home Secretary.

The Gaming Board assists the Home Secretary in the

making of detailed regulations to control the operation of

gaming activities within licensed or registered clubs.

Following an investigation of existing gaming activities, it

made a series of recommendations on the control of gaming

within licensed premises, which formed the basis of existing

regulations made pursuant to the Act. The Gaming Act 1968

attempts to blend national and local gaming control

systems. The courts, the police, local licensing magis-

trates and in some cases local authorities, are involved in

gaming regulation. The Gaming Board, however, is the

central agency of the process. The Board is charged with

acquiring a detailed knowledge and understanding of the

industry.

At the national level, the Gaming Board has several

powers and responsibilities. According to the Home Office

interpretation of the Gaming Act the Board was charged by

the Act with maintaining a general oversight of the extent,

character and location of gaming facilities. Its duties as

listed were:

(a) To investigate the trustworthiness of all applicants for licenses for commercial gaming with a view to issuing certificates

o f c o n s e n t , w i t h o u t w h i c h t h e a p p l i c a t i o n s may n o t b e c o n s i d e r e d by t h e j u s t i c e s . I t w i l l s i m i l a r l y a p p r o v e gaming s u p e r v i s o r s , a l l g a m i n g o p e r a t i v e s i n t h e c a s i n o s a n d selected classes o f o p e r a t i v e i n t h e b i n g o c l u b s , a n d r e t a i l e r s o f gaming a n d amusemen t m a c h i n e s . T h e s e p o w e r s it w i l l e x e r c i s e on i t s own a u t h o r i t y , a n d w i t h o u t a p p e a l f r o m i ts d e c i s i o n s .

( b ) T o a d v i s e t h e S e c r e t a r y o f S t a t e on a l l r e g u l a t i o n s t o b e made u n d e r t h e A c t .

( c ) To a d v i s e t h e j u s t i c e s on t h e p u b l i c demand f o r c o m m e r c i a l g a m i n g f a c i l i t i e s , t h e s u i t - a b i l i t y o f p r e m i s e s t o be u s e d by l i c e n s e d c l u b s a n d r e s t r i c t i o n s t o be a t t a c h e d to l i c e n s e s . The j u s t i c e s w i l l n o t be bound by t h i s a d v i c e , b u t t h e A c t r e q u i r e s them t o t a k e a c c o u n t o f i t .

( d ) I f it so w i s h e s , t o a p p e a r b e f o r e t h e j u s t i c e s t o o p p o s e a n a p p l i c a t i o n f o r t h e g r a n t o r r e n e w a l , o r t o move f o r t h e c a n c e l l a t i o n o f a l i c e n s e or c e r t i f i c a t e o f r e g i s t r a t i o n . It w i l l h a v e no power t o o v e r r i d e t h e j u s t i c e s ' d e c i s i o n s , b u t is empowered t o a p p e a l a g a i n s t them to q u a r t e r s e s s i o n s a n d may t a k e up a n d champion on a p p e a l o b j e c t i o n s r a i s e d by o t h e r p a r t i e s .

( e l T h r o u g h i t s I n s p e c t o r s - - w h o w i l l h a v e t h e same r i g h t s o f e n t r y i n t o l i c e n s e d c l u b s as t h e p o l i c e --to assist t h e p o l i c e i n t h e d e t e c t i o n o f b r e a c h e s o f c o n d i t i o n s or o f f r a u d u l e n t p l a y . 178

I t is i m p o r t a n t t o e m p h a s i z e t h e " w a t c h d o g " p l a y e d b y

t h e Gaming B o a r d i n commercial c a s i n o o p e r a t i o n s . Anyone

d e s i r i n g to o p e r a t e a c a s i n o c o m m e r c i a l l y , o r a n y o n e s e e k i n g

employmen t i n s u c h a c a s i n o m u s t b e f o r e he c a n o b t a i n a

l i c e n s e f r o m local m a g i s t r a t e s , a p p l y to t h e Gaming B o a r d

f o r a p e r m i t o f c o n s e n t . I n s u c h a n a p p l k a t i o n , t h e o n u s . - is upon t h e a p p l i c a n t to p r o v e t o t h e Boa rd t h a t he is

l i k e l y t o b e c a p a b l e o f , a n d d i l i g e n t i n , c o m p l y i n g w i t h t h e

p r o v i s i o n s o f t h e A c t a n d i ts r e g u l a t i o n s , t h a t gaming on

t h e p r e m i s e s w i l l be f a i r l y and p r o p e r l y c o n d u c t e d , and t h a t

t h e p r e m i s e s w i l l b e c o n d u c t e d w i t h o u t d i s o r d e r o r

d i s t u r b a n c e .

S h o u l d t h e a p p l i c a n t b e u n a b l e t o s a t i s f y t h e Board

t h a t he is a f i t and p r o p e r p e r s o n to o p e r a t e or be employed

i n a c a s i n o t h e Board h a s t h e d i s c r e t i o n to d e n y him a

C e r t i f i c a t e o f C o n s e n t . On ly i f an a p p l i c a n t r e c e i v e s a

C e r t i f i c a t e o f C o n s e n t f rom t h e Gaming Board may t h e l o c a l

l i c e n s i n g m a g i s t r a t e s c o n s i d e r t h e a p p l i c a t i o n f o r a

l i c e n s e . I f t h e Board g r a n t s a C e r t i f i c a t e o f C o n s e n t , t h e

l o c a l l i c e n s i n g m a g i s t r a t e s are o b l i g e d t o c o n s i d e r a n y

a d v i c e f rom t h e Board r e g a r d i n g t h e a p p l i c a t i o n . A c e r t i f i -

c a t e 'of c o n s e n t r e l a t e s t o t h e f u n c t i o n s s p e c i f i e d i n it and

t o p a r t i c u l a r p r e m i s e s , so t h a t a new o n e is r e q u i r e d f o r

a n y c h a n g e e i t h e r i n t h e n a t u r e o f , o r i n t h e p l a c e o f

employment . The Board may r e v o k e a c e r t i f i c a t e a t a n y t i m e

i f i t c o n s i d e r s t h a t t h e h o l d e r is no l o n g e r a f i t and

p r o p e r p e r s o n t o r e t a i n it.

I n d e c i d i n g w h e t h e r t o g i v e c o n s e n t t o a l i c e n s i n g

a p p l i c a t i o n , t h e b o a r d n e e d n o t g i v e r e a s o n s f o r d e c i s i o n s

n o r d i s c l o s e s o u r c e s o f i n f o r m a t i o n to an a p p l i c a n t , b u t it

m u s t a c t w i t h f a i r n e s s and a c c o r d i n g to t h e r u l e s o f n a t u r a l

j u s t i c e . 179 The b o a r d m u s t i n p a r t i c u l a r t a k e i n t o c o n s i -

d e r a t i o n t h e c h a r a c t e r , r e p u t a t i o n and f i n a n c i a l s t a n d i n g o f

t h e a p p l i c a n t and o f a n y o t h e r p e r s o n by whom t h e c l u b would

b e managed o r f o r whose b e n e f i t it would b e c a r r i e d o n . 180

I n f o r m a t i o n s u p p l i e d t o t h e b o a r d is immune f r o m

d i s c l o s u r e on t h e g o u n d s o f p u b l i c policy.181

I n R. v. Gaminq B o a r d f o r G r e a t B r i t a i n ; e x p. Benaim

a n d K h a i d a , t w o F r e n c h n a t i o n a l s c o n t r a c t e d t o buy t h e

c o n t r o l l i n g s h a r e s i n C r o c k f o r d ' s Gaming C l u b and l a t e r

became j o i n t m a n a g i n g d i r e c t o r s . They a p p l i e d t o t h e Gaming

B o a r d f o r a c e r t i f i c a t e o f c o n s e n t t o e n t i t l e them t o a p p l y

fo r a l i c e n s e f o r t h e p r e m i s e s . The Roard r e f u s e d t h e

c e r t i f i c a t e . The a p p l i c a n t s moved t h e C o u r t o f A p p e a l f o r

orders o f c e r t i o r a r i t o q u a s h t h e B o a r d d e c i s i o n a n d

mandamus t o r e q u i r e t h e Boa rd to g i v e them s u f f i c i e n t i n f o r -

m a t i o n t o a n s w e r a n y case a g a i n s t ' them.

A t t h e h e a r i n g t h e B o a r d s t a t e d t h a t t h e a p p l i c a n t s

were g i v e n t h e b e s t p o s s i b l e o u t l i n e o f m a t t e r s t r o u b l i n g

t h e Boa rd b u t t h a t t h e s o u r c e s and c o n t e n t o f c o n f i d e n t i a l

i n f o r m a t i o n w e r e n o t d i s c l o s e d w h e r e t h i s was i n c o n s i s t e n t

w i t h t h e i r s t a t u t o r y d u t y a n d t h e p u b l i c i n t e r e s t . I t was

h e l d by t h e C o u r t o f A p p e a l , d i s m i s s i n g t h e m o t i o n , (1) t h a t

t h e Boa rd had t o a c t f a i r l y by g i v i n g a n a p p l i c a n t i n d i c a -

t i o n o f t h e o b j e c t i o n s a g a i n s t him to e n a b l e him to a n s w e r

them; ( 2 ) t h a t t h e B o a r d had d o n e s o i n t h i s case; and ( 3 )

t h a t t h e Board was n o t o b l i g e d t o d i s c l o s e s o u r c e s or

d e t a i l s o f i ts i n f o r m a t i o n t o a n a p p l i c a n t who was n o t b e i n g

r e q u i r e d to m e e t c h a r g e s b u t o n l y t o s a t i s f y t h e Boa rd as to

h i s f i t n e s s to a p p l y f o r a l i c e n s e .

T h e r e is no r i g h t o f a p p e a l f r o m a d e c i s i o n o f t h e

Gaming Board . D e c i s i o n s by t h e Boa rd c a n n o t be s e c o n d -

g u e s s e d by a h i g h e r c o u r t l a c k i n g t h e B o a r d ' s e x p e r t i s e i n

g a m i n g o p e r a t i o n s , a n d more c o n c e r n e d w i t h s t r i c t matters o f

l a w t h a n w i t h e f f e c t i v e r e g u l a t i o n o f t h e gaming i n d u s t r y .

D e s p i t e t h e l a c k o f a r i g h t o f a p p e a l , a n u n s u c c e s s f u l

a p p l i c a n t may make a p p l i c a t i o n f o r j u d i c i a l r e v i e w of t h e

B o a r d ' s d e c i s i o n s . A c o u r t s i t t i n g i n j u d i c i a l r e v i e w may

n o t c o n s i d e r t h e m e r i t s o f t h e Gaming B o a r d d e c i s i o n , b u t

may c o n s i d e r s u c h q u e s t i o n s as: d i d t h e Boa rd ac t f a i r l y ? ;

decision?; did it decide on issues not within its jurisdic-

tion?; was the applicant given an opportunity to be heard?

Only if the procedure of Gaming Board decision offends a

question of fairness and natural justice, will the decision

be rendered inoperative by a court sitting in judicial

review.

C. Licensinq: Licensinq Procedure and Local Licensinq Authorities

( i) Licensing Authorities

As discussed in Schedule 2 to the 1968 Act, the

responsible authority for the granting, renewal,

cancellation and transfer of licenses is the "Licensing

Authority". A "Licensing Authority" in any petty

sessions area in England would be a committee. consti-

more than fifteen of the Justices acting for that

area. A quorum at any meeting of the committee would

be three justices.

Before a person may apply for a license he must

obtain from the Gaming Board a certificate of consent

for the purpose of making such application. The ques-

tions the Gaming Board will consider in this respect

have already been reviewed. On any application for the

granting of a license, the licensing authority may

grant the license without hearing the applicant if no

objection to the grant has been made or every such

objection has been withdrawn before the time of hear-

ing. If an objection is made the licensing authority

will hear the persons concerned and also hear any

representations made by the Gaming Board, the appropr i-

ate of f icer of police, the appropriate local authority,

the Commissioners of Customs and Excise, or the

appropriate fire authority.

The l i c e n s i n g a u t h o r i t y may r e f u s e t o g r a n t a

l i c e n s e i f t h e r e is n o demand f o r t h e p r o p o s e d g a m i n g

f a c i l i t i e s , or t h e p a r t i c u l a r demand is a l r e a d y b e i n g

m e t . I n d e t e r m i n i n g w h e t h e r a l i c e n s e s h o u l d b e

r e f u s e d o n t h e a b o v e g r o u n d s , t h e l i c e n s i n g a u t h o r i t y

m u s t t a k e i n t o a c c o u n t a n y a d v i c e g i v e n t o them by t h e

Gaming Board . A p a r t f rom t h e n e c e s s i t y f o r a s u b s t a n -

t i a l demand, a n d t h e e x i s t e n c e o f f a c i l i t i e s t o meet

t h a t demand, t h e l i c e n s i n g a u t h o r i t y may r e f u s e t o

g r a n t a l i c e n s e o n a n y of t h e f o l l o w i n g g r o u n d s :

u n s u i t a b i l i t y o f t h e premises; a p p l i c a n t n o t a f i t and

p r o p e r p e r s o n t o h o l d a l i c e n s e ; t h a t a p e r s o n m a n a g i n g

t h e c l u b ( o t h e r t h a n t h e a p p l i c a n t ) is n o t a f i t and

p r o p e r p e r s o n to h o l d a l i c e n s e ; t h a t t h e a u t h o r i t y a n d

Gaming B o a r d h a v e b e e n r e f u s e d r e a s o n a b l e f a c i l i t i e s t o

i n s p e c t t h e p r e m i s e s ; t h a t gaming l i c e n s e d u t y p a y a b l e

o n t h e p r e m i s e s r e m a i n s u n p a i d . The l i c e n s i n g

a u t h o r i t y s h a l l r e f u s e t o g r a n t a l i c e n s e i f t h e

a p p l i c a n t h a s b e e n c o n v i c t e d o f c e r t a i n t y p e s o f

c r i m i n a l o f f e n c e s s u c h as f r a u d , or i f t h e p r e m i s e s

h a v e b e e n h a b i t u a l l y u s e d for a n u n l a w f u l p u r p o s e o r as

a resort of c r i m i n a l s o r p r o s t i t u t e s .

On g r a n t i n g or r e n e w i n g a l i c e n s e t h e l i c e n s i n g

a u t h o r i t y may impose c o n d i t i o n s on t h e h o u r s d u r i n g

w h i c h g a m i n g may b e p e r m i t t e d , t h e p a r t o f t h e p r e m i s e s

w h e r e gaming may b e c a r r i e d o u t , and t h e p a r t i c u l a r

k i n d o f games t h a t may b e p l a y e d . I n d e t e r m i n i n g

w h e t h e r to i m p o s e a n y s u c h r e s t r i c t i o n s , t h e l i c e n s i n g

a u t h o r i t y m u s t t a k e i n t o a c c o u n t a n y a d v i c e g i v e n t o

them by t h e Gaming Board and a n y r e p r e s e n t a t i o n s made

by t h e Gaming B o a r d . Where a l i c e n s i n g a u t h o r i t y

g r a n t s o r r e n e w s a l i c e n s e a f t e r h e a r i n g a n y o b j e c t i o n s

or r e p r e s e n t a t i o n s made by t h e Gaming B o a r d , a n d t h e

a C o u r t a g a i n s t t h e d e c i s i o n o f t h e l i c e n s i n g

a u t h o r i t y .

An a p p l i c a t i o n f o r t h e c a n c e l l a t i o n of a l i c e n s e

may b e made by a n y p e r s o n a t a n y t i m e to t h e c l e r k t o

t h e l i c e n s i n g a u t h o r i t y . Where a l i c e n s i n g a u t h o r i t y

r e f u s e s t o c a n c e l a l i c e n s e t h e Gaming Board may a p p e a l

a g a i n s t t h e d e c i s i o n o f t h e l i c e n s i n g a u t h o r i t y t o a

C o u r t o f Q u a r t e r S e s s i o n s .

An a p p l i c a t i o n f o r t h e t r a n s f e r o f a l i c e n s e f rom

o n e p e r s o n t o a n o t h e r is o f no e f f e c t u n l e s s t h e Gaming

Board h a s i s s u e d t o t h e a p p l i c a n t a c e r t i f i c a t e

c o n s e n t i n g to h i s a p p l y i n g f o r a t r a n s f e r o f t h e

l i c e n s e t o t h a t o t h e r p e r s o n . The Gaming Board , i n

d e t e r m i n i n g w h e t h e r to i s s u e s u c h a c e r t i f i c a t e , must

have r e g a r d t o t h e c a p a c i t y o f t h e t r a n s f e r e e t o s e c u r e

t h e p r o v i s i o n s o f t h e A c t , and t h e p r o p e r c o n d u c t of

t h e p r e m i s e s .

Where t h e h o l d e r o f a l i c e n s e is a body c o r p o r a t e

and t h e r e is a c h a n g e i n t h e p e r s o n s who are d i r e c t o r s ,

o r who a c t u n d e r t h e d i r e c t o r s , t h e body c o r p o r a t e m u s t

s e r v e t h e Gaming Board w i t h a n o t i c e g i v i n g p a r t i c u l a r s

o f t h e c h a n g e .

Where t h e l i c e n s i n g a u t h o r i t y r e f u s e s t o g r a n t a

l i c e n s e , o r imposes r e s t r i c t i o n s on s u c h g r a n t , t h e

a p p l i c a n t may a p p e a l to a C o u r t i n t h e a u t h o r i t y ' s a r e a

a g a i n s t s u c h r e f u s a l o r i m p o s i t i o n o f c o n d i t i o n s . 1 8 *

(ii) Renewal of Licenses

Any application for the renewal of a license shall

be made to the licensing authority in January or

February in the year in which the license is due to

expire. At any time in March in each year, every

licensing authority must advertise in a local newspaper

a notice stating the date, time and place where appli-

cations for renewal will be considered, and information

on making objections against the renewal of a license.

On any application for the renewal of a license,

the licensing authority may renew the license without

hearing the applicant if no objection to the renewal

has been made or if every such objection has been

withdrawn. If objections are made and not withdrawn,

the licensing authority must hear the applicant and the

objector, and also any representations made by the

Gaming Board, the police, the appropriate local

authority, the Commissioners of Customs and Excise or

the appropriate fire authority. 183

The grounds on which the renewal of a license may

be refused are generally the same as those on which an

original application for a license may be refused,

i.e., the unsuitability of the premises by reason of

their layout, condition or location; the applicant is

not a fit and proper person to hold a license; the

person who will manage or carry on the club (other than

the applicant) is not a fit and proper person to hold a

license, etc. The licensing authority shall refuse to

renew a license if, by virtue of a disqualification

order, such a license is prohibited from being held in

respect of the premises.184 A license may be refused

i n r e s p e c t o f p r e m i s e s w h e r e t h e r e is d i r e c t a c c e s s t o

t h e p r e m i s e s f r o m o t h e r p r i v a t e p r e m i s e s n o t i n c l u d e d

i n t h e l i c e n s e .

( i i i ) R e s t r i c t i o n s A t t a c h e d t o a L i c e n s e o n R e n e w a l

On r e n e w i n g a l i c e n s e t h e l i c e n s i n g a u t h o r i t y may

impose r e s t r i c t i o n s o n t h e h o u r s d u r i n g w h i c h g a m i n g

w i l l b e p e r m i t t e d t o t a k e p l a c e ; a n d a l s o r e s t r i c t i o n s

l i m i t i n g t h e g a m i n g to a p a r t o f t h e p r e m i s e s , t h e

p a r t i c u l a r k i n d s o f games t h a t may b e p l a y e d , a n d t h e

p u r p o s e s ( o t h e r t h a n g a m i n g ) f o r w h i c h t h e p r e m i s e s may

Where a l i c e n s i n g a u t h o r i t y r e f u s e s a n a p p l i c a t i o n

to r e n e w a l i c e n s e , or i m p o s e r e s t r i c t i o n s , t h e a p p l i -

c a n t may a p p e a l t o a C o u r t a g a i n s t t h e d e c i s i o n .

Where a l i c e n s i n g a u t h o r i t y r e n e w s a l i c e n s e a f t e r

h e a r i n g a n y o b j e c t i o n o r r e p r e s e n t a t i o n s made by t h e

G a m i n g . B o a r d , a n d t h e B o a r d c o n t e n d s t h a t t h e l i c e n s e

o u g h t n o t t o h a v e b e e n r e n e w e d or t h a t t h e l i c e n s i n g

a u t h o r i t y o u g h t t o h a v e imposed r e s t r i c t i o n s or more

s t r i n g e n t r e s t r i c t i o n s , t h e B o a r d may a p p e a l a g a i n s t

t h e d e c i s i o n t o a C o u r t .

D, The Gaminq Act 1968 and T h e Gaminq Board: How E f f e c t i v e H a v e T h e v Been

How e f f e c t i v e t h e Gaminq A c t 1 9 6 8 a n d t h e Gaming B o a r d

h a v e b e e n i n r e g u l a t i n g c a s i n o gaming is a matter o f some

c o n t r o v e r s y i n B r i t a i n . The R o y a l Commiss ion o n G a m b l i n g

( T h e R o t h s c h i l d R e p o r t ) a d d r e s s e d t h e q u e s t i o n i n 1 9 7 8 , The

Commiss ion p e r c e i v e d t h e s i t u a t i o n as f o l l o w s :

The 1 9 6 8 A c t h a s b e e n s u c c e s s f u l i n o p e r a - t i o n . . . .The gaming s c e n e is now v e r y d i f f e r e n t a n d it h a s i n a l m o s t e v e r y r e s p e c t i m p r o v e d s i n c e t h e t i m e when p u b l i c a n d P a r l i a m e n t a r y c o n c e r n l e d t o t h e p a s s i n g o f t h e Gaming A c t a n d t h e e s t a b l i s h m e n t o f t h e Gaming Board .

.. . The B o a r d h a s b e e n p a r t i c u l a r l y s u c c e s s - f u l i n d e a l i n g w i t h c a s i n o s i n w h i c h , b e f o r e t h e 1 9 6 8 A c t , t h e c r i m i n a l t h r e a t w a s p e r c e i v e d to b e g r e a t e s t . The s i t u a t i o n h a s now c h a n g e d m a r k e d l y and i n f u ' t u r e w e e n v i - s a g e t h a t t h e B o a r d ' s r o l e w i l l h a v e t o c h a n g e a n d d e v e l o p somewhat away f r o m t h e c r i m e - b u s t i n g o n e w i t h w h i c h i t now t e n d s t o b e i d e n t i f i e d . l s 6

I n common w i t h t h i s p e r c e p t i o n o f t h e s u c c e s s e s o f t h e A c t

a n d t h e ~ a r n i n g B o a r d i n o v e r c o m i n g c r i m i n a l i n v o l v e m e n t i n

t h e gaming c a s i n o s , t h e R o y a l Commiss ion recommended t h a t i n

t h e f u t u r e t h e Gaming Board s h o u l d become more o f a

" r e g u l a t o r " a n d " l e v y - r a i s e r " a n d less c o n c e r n e d w i t h

crime.187 The R o y a l Commiss ion s a w no n e e d t o e x t e n d t h e

p o w e r s o f t h e Gaming B o a r d or to d e a l w i t h t h e t h r e a t o f

c r i m i n a l e l e m e n t s i n g a m i n g c a s i n o s a n d / o r i n o t h e r g a m b l i n g

a c t i v i t i e s . 1 8 8 The R o y a l Commiss ion was c l e a r l y o f t h e v i e w

t h a t t h e p r o b l e m o f c r i m i n a l i n v o l v e m e n t i n gaming c a s i n o s

a n d o t h e r g a m b l i n g a c t i v i t i e s had b e e n s u c c e s s f u l l y d e a l t

w i t h or c o u l d b e d e a l t w i t h u s i n g t h e e x i s t i n g s t a t u t o r y

b o d i e s .

I n c o n t r a s t t o t h e o p t i m i s m of t h e R o y a l Commiss ion are

t h e s u b m i s s i o n s made b y t h e Gaming Board a n d o t h e r s . 1 8 9 I n

r e s p o n s e t o t h e C o m m i s s i o n ' s s u g g e s t i o n t h a t t h e Gaming

B o a r d s h o u l d become a " l e v y - r a i s e r " , The B o a r d made t h e

f o l l o w i n g s u c c i n c t r e s p o n s e i n i t s 1 9 7 9 Annua l R e p o r t :

. . . t h e B o a r d c o n s i d e r t h a t t h e r e are sub- s t a n t i a l p o l i c y o b j e c t i o n s t o t h e i r b e c o m i n g t a x col lectors . T h e r e would b e a r i s k o f t h e

Board becoming c o n c e r n e d w i t h t h e l e v e l o f p r o f i t a b i l i t y o f gaming , a d e v e l o p m e n t which c o u l d c o n f l i c t w i t h t h e i r f u n c t i o n s f o r l a w e n f o r c e m e n t . ... t h e Board b e l i e v e t h a t i t s h o u l d be f o r t h e r e v e n u e d e p a r t m e n t s t o be r e s p o n s i b l e f o r c o l l e c t i n g a l l t h e t a x a r i s i n g f rom t h e o p e r a t i o n o f c a s i n o s . 190

The Gaming Board a r g u e d s t r e n o u s l y t h a t t h e r e is a need f o r

a n o v e r a l l g a m b l i n g a u t h o r i t y w i t h s u b s t a n t i a l powers t o

s u p e r v i s e t h e whole g a m b l i n g f i e l d . The Board e x p l a i n e d

t h e i r a r g u m e n t a s f o l l o w s :

L e g a l g a m b l i n g which is n o t p r o p e r l y s u p e r - v i s e d and c o n t r o l l e d c a n be j u s t a s l u c r a t i v e and a l m o s t a s h a r m f u l t o s o c i e t y a s i l l e g a l g a m b l i n g . T h e r e mus t be c o n s t a n t v i g i l a n c e t o e n s u r e t h a t a n y l e g a l i s e d g a m b l i n g a c t i - v i t y is n o t p e n e t r a t e d by c r i m i n a l i n t e r e s t s , who i n t h i s c o n n e c t i o n c o m p r i s e s o p h i s t i - c a t e d , i n t e l l i g e n t , h i g h l y o r g a n i s e d , w e l l b r i e f e d and c l e v e r o p e r a t o r s w i t h enormous money r e s o u r c e s which e n a b l e them t o h i r e t h e b e s t b r a i n s i n t h e l e g a l , a c c o u n t a n c y , m a n a g e r i a l , c a t e r i n g and show b u s i n e s s w o r l d . Gambl ing is a complex , i n t e r n a t i o n a l , m u l t i - m i l l i o n pound a c t i v i t y w i t h a m u l t i - l e v e l s t r u c t u r e o f o r g a n i s a t i o n . The f a c t t h a t g a m b l i n g h a s many a s p e c t s and t h a t t h e c r i m i n a l e l e m e n t c a n be p r e s e n t a t d i f f e r e n t l e v e l s r e q u i r e s t h a t it be c o n t r o l l e d by a s t r o n g and e f f e c t i v e s u p e r v i s o r y body w i t h c l e a r and c o m p r e h e n s i v e powers , c a p a b l e o f m a t c h i n t h e p o w e r f u l g a m b l i n g cong lomer - a tes. . . 9 9 1

The a r g u m e n t o f t h e Board is r e i n f o r c e d by t h e f a c t

t h a t g a m b l i n g i n d u s t r y t a k e - o v e r s d u r i n g t h e p a s t d e c a d e

h a v e r e s u l t e d i n t h e b u l k o f t h e i n d u s t r y b e i n g c o n t r o l l e d

by f o u r g a m b l i n g c o n g l o m e r a t e s , C o r a l , L a d b r o k e ' s , W i l l i a m

H i l l , and Mecca. lg2 Meanwhi le , r e g u l a t o r y c o n t r o l o f t h e

d i f f e r e n t g a m b l i n g s e r v i c e s - - h o r s e - r a c e b e t t i n g , l o t t e r i e s ,

s p o r t s p o o l b e t t i n g , b i n g o and c a s i n o s - - i s s p l i t among a

number o f s e p a r a t e s t a t u t o r y b o d i e s . F u r t h e r , i n e v i d e n c e

b e f o r e t h e Roya l Commiss ion, and i n a number o f i ts a n n u a l

r e p o r t s , t h e Boa rd i d e n t i f i e d s p e c i f i c p r o b l e m s w i t h t h e

Gaming A c t w h i c h i n h i b i t t h e B o a r d ' s e f f e c t i v e n e s s i n

s u p p r e s s i n g c o r r u p t p r a c t i c e s i n gaming c a s i n o s .

A s t h e A c t s t a n d s , o n c e a c e r t i f i c a t e o f c o n s e n t is

p r o p e r l y o b t a i n e d f r o m t h e B o a r d it c a n o n l y b e r e v o k e d i f

t h e loca l l i c e n s i n g a u t h o r i t y w h i c h i s s u e d t h e gaming

l i c e n s e makes a d i s q u a l i f i c a t i o n o r d e r . S u c h a n o r d e r h a s

b e e n r a r e l y made by t h e l i c e n s i n g a u t h o r i t i e s , d e s p i t e c lear

e v i d e n c e o f p e r s i s t e n t b r e a c h e s o f t h e A c t . The Board h a s

a r g u e d t h a t b e c a u s e o f t h e u n w i l l i n g n e s s o f l i c e n s i n g

a u t h o r i t i e s t o i s s u e d i s q u a l i f i c a t i o n o r d e r s , a n d b e c a u s e o f

t h e l o n g d e l a y s i n v o l v e d i n o p p o s i n g t h e r e n e w a l o f a

l i c e n s e or a p p l y i n g f o r t h e c a n c e l l a t i o n o f a l i c e n s e , i t s

p o w e r s are i n s u f f i c i e n t t o c o p e w i t h t h e m a l p r a c t i c e and

c o r r u p t i o n w h i c h h a s b e e n d i s c o v e r e d . T h e r e f o r e , t h e B o a r d

w a n t s t h e A c t amended to: (1) r e q u i r e h o l d e r s o f c e r t i f i-

ca tes o f c o n s e n t t o r e n e w them a t r e g u l a r i n t e r v a l s , d u r i n g

w h i c h p r o c e s s t h e Board would be i n a p o s i t i o n to i n v e s t i -

g a t e t h e i r a c t i v i t i e s c l o s e l y ; a n d ( 2 ) a l l o w it to r e v o k e

t h e c e r t i f i c a t e o f c o n s e n t i f e v i d e n c e o f ' c o r r u p t i o n or

m a l p r a c t i c e is f o u n d . The Board b e l i e v e s t h a t t h e s e p o w e r s

wou ld p r o v i d e a s t r o n g i n c e n t i v e f o r c a s i n o o w n e r s a n d

m a n a g e r s t o k e e p t h e i r own o p e r a t i o n s i n l i n e .

A s e c o n d a s p e c t of c a s i n o o p e r a t i o n s w h e r e t h e B o a r d

a r g u e s f i r m e r c o n t r o l m e a s u r e s are r e q u i r e d i n v o l v e s t h e

t a k e - o v e r o f t h e company h o l d i n g t h e c e r t i f i c a t e o f c o n s e n t

b y a n o t h e r company. So l o n g as t h e p u r c h a s i n g company

p r e s e r v e s t h e l e g a l p e r s o n a l i t y o f t h e company h o l d i n g t h e

c o n s e n t c e r t i f i c a t e , it is n o t r e q u i r e d to o b t a i n new

c e r t i f i c a t i o n f r o m t h e B o a r d . The l e g i s l a t i o n t h e r e f o r e

a l l o w s a company or a n i n d i v i d u a l who would n o t s u c c e e d i n

a n a p p l i c a t i o n f o r c o n s e n t f r o m t h e Gaming Board t o c i r c u m -

- 187 -

v e n t t h e Board by a c q u i r i n g a l e g i t i m a t e c a s i n o o p e r a t i o n .

A s i m i l a r s i t u a t i o n e x i s t s where s u b s t a n t i a l c h a n g e s i n t h e

s h a r e h o l d i n g r e s u l t i n a c h a n g e o f c o n t r o l o f t h e company

h o l d i n g t h e c e r t i f i c a t e . A l t h o u g h t h e A c t r e q u i r e s t h a t

c h a n g e s i n t h e d i r e c t o r a t e o f a company mus t be r e p o r t e d to

t h e Board , t h e r e is no r e q u i r e m e n t t o n o t i f y t h e Board o f

c h a n g e s i n s h a r e h o l d e r s and t h e Board is t h u s u n a b l e t o

p i e r c e t h e c o r p o r a t e v e i l .

The Commission a g r e e d w i t h t h e Board a r g u m e n t s r e g a r d -

i n g t h e p i e r c i n g o f t h e c o r p o r a t e v e i l , and made recommen-

d a t i o n s to t h a t e f f e c t . l g 3 But a s n o t e d p r e v i o u s l y , t h e

Commission d i s a g r e e d w i t h t h e m a j o r i t y of t h e B o a r d ' s o t h e r

a r g u m e n t s , i n c l u d i n g t h e " r e v o c a t i o n o f p e r m i s s i o n " i s s u e ,

a n d i n e f f e c t recommended t h a t some o f t h e e x i s t i n g powers

o f t h e Board s h o u l d b e c u r t a i l e d . l g 4 The Commission a l so

recommended t h a t t h e d e c i s i o n s o f t h e Gaming Board s h o u l d be

o p e n t o a p p e a l . The r e s u l t o f t h i s would b e t o l e a v e t h e

Board open t o s e c o n d g u e s s i n g by h i g h e r c o u r t s more

c o n c e r n e d w i t h j u d i c i a l p r e c e d e n t and less e x p e r t i n gaming

o p e r a t i o n s .

A l t h o u g h t h e Roya l Commission d i d n o t a g r e e w i t h t h e

Board on t h e need f o r g r e a t e r c o n t r o l o f t h e g a m b l i n g

i n d u s t r y t h e Commission r e p o r t is n o t t h e end o f t h e

q u e s t i o n . I n c o n t r a s t t o t h e Royal Commiss ion ' s o p t i m i s m ,

t h e Gaming Board n o t e d t h a t o r g a n i z e d crime's i n t e r e s t i n

g a m b l i n g w h e t h e r l e g a l o r i l l e g a l is s o p h i s t i c a t e d , p e r s i s -

t e n t , h i g h l y o r g a n i z e d and w e l l - f u n d e d -- t h u s t h e need f o r

c o n s t a n t close s u p e r v i s i o n and i n v e s t i g a t i o n by t h e Gaming

~ o a r d . lg5 The Board a r g u e d s t r e n u o u s l y t h a t t h e a d d i t i o n o f

a c a s i n o t a x - r a i s i n g role t o i ts e x i s t i n g s u p e r v i s o r y and

l a w - e n f o r c e m e n t role c r e a t e s a c o n f l i c t o f i n t e r e s t s - - t h e r e

would be a r i s k o f t h e Board becoming c o n c e r n e d w i t h t h e I

I I

1 I

A

l e v e l o f p r o f i t a b i l i t y o f g a m i n g , w h i c h c o u l d c o n f l i c t w i t h

i ts l a w e n f o r c e m e n t f u n c t i o n s . 1 9 6

The Gaming Board h a s a l s o p o i n t e d o u t g r o w i n g weak-

n e s s e s i n t h e p r e s e n t c o n t r o l scheme.

1. When e v i d e n c e o f c o r r u p t i o n or m a l p r a c t i c e a t a c a s i n o

is f o u n d , t h e p r o c e d u r e i n v o l v e d i n r e v o k i n g t h e

c a s i n o ' s l i c e n s e is too c o m p l i c a t e d and t i m e consum-

i n g . 1 9 7

2. When a c e r t i f i c a t e is h e l d by a c o r p o r a t i o n a n d t h e r e

i s a t a k e o v e r , so l o n g as t h e p u r c h a s i n g company

p r e s e r v e s t h e l e g a l p e r s o n a l i t y o f t h e company h o l d i n g

t h e c o n s e n t c e r t i f i c a t e , it is n o t r e q u i r e d to o b t a i n

new c e r t i f i c a t i o n f r o m t h e Board . T h i s , l e g i s l a t i o n

a l l o w s a company or a n i n d i v i d u a l t o c i r c u m v e n t t h e

B o a r d ' s c o n s e n t s a f e g u a r d s . lg8

R e c e n t e v i d e n c e o f w i d e s p r e a d c o r r u p t i o n i n t h e c a s i n o

i n d u s t r y t e n d s t o s u p p o r t t h e a r g u m e n t s o f ' t h e Gaming

Board . S e v e r a l London a r e a c a s i n o s ( L a d b r o k e ' s , Coral , a n d

Norwich E n t e r p r i s e s ) h a v e b e e n c h a r g e d w i t h s u c h o f f e n c e s as

sk imming , j u n k e t i n g , f r a u d a n d t h e p r o v i s i o n o f u n l a w f u l

c r e d i t . T h e d i s c o v e r i e s o f m a l p r a c t i c e h a v e b e e n so e x t e n -

s i v e as t o l e a d n o t a b l e gaming i n d u s t r y a n a l y s t s t o c o n c l u d e

t h a t t h e Gaming A c t 1 9 6 8 a n d t h e Gaming Board h a v e n o t by

a n y means e l i m i n a t e d t h e c o r r u p t i o n t h a t had b e e n a s s o c i a t e d

w i t h t h e c a s i n o s i n t h e 1 9 6 0 ' s . The l a r g e p r o f i t s o f

c a s i n o s , t h e f a s t movement o f money a n d t h e n e e d to a t t r a c t

r e g u l a r h i g h - s t a k e s c u s t o m e r s w i l l i n d u c e t h e c a s i n o s t o

v i o l a t e t h e s t r i n g e n t B r i t i s h gaming l a w s , a n d w i l l a l w a y s

b e a t t r a c t i v e t o c r i m i n a l i n t e r e s t s . lg9

C a s i n o costs a re

some c a p i t a l costs i n

r e c u r r e n t e x p e n d i t u r e

f i x e d f o r t h e m o s t p a r t , t h e y i n v o l v e

f u r n i s h i n g a c a s i n o b u t no s i g n i f i c a n t

s. O v e r h e a d does n o t i n c r e a s e as a

l a r g e r c l i e n t e l e is a t t r a c t ed . Due to t h e o d d s o f t h e

g a m e s , c a s i n o s c a n e x p e c t t o r e t a i n 19-20% o f t h e money

s t a k e d . Assuming t h a t a c a s i n o is a b l e t o c u l t i v a t e c l i e n t s

who g a m b l e r e g u l a r l y f o r h i g h - s t a k e s , it w i l l be c u s h i o n e d

a g a i n s t t h e o c c a s i o n a l h e a v y loss a n d it w i l l make s t e a d y

p r o f i t s . 200

I n t h e l a t e 1 9 7 0 1 s , B r i t i s h c a s i n o s m a r k e t e d t h e i r

s e r v i c e s a g g r e s s i v e l y t o o b t a i n a n d k e e p r e g u l a r h i g h - s t a k e s

p a t r o n s . Many o f t h e a g g r e s s i v e m a r k e t i n g t e c h n i q u e s o f t h e

c a s i n o s were p a t e n t l y u n l a w f u l . The h i g h - s t a k e s London

c a s i n o s c o n t i n u a l l y e n g a g e d i n s u c h o f f e n c e s as i l l e g a l l y

p r o v i d i n g credi t f o r g a m i n g , t i p p i n g , p r o v i d i n g compl imen-

t a r y p a s s e s t o c a s i n o s a n d ' o t h e r " j u n k e t " a m e n i t i e s , paymen t

o f c o m m i s s i o n s t o members f o r e n t i c i n g new p a t r o n s t o j o i n

t h e c a s i n o , i m p r o p e r c h e q u e - c a s h i n g p r o c e d u r e s , a n d i l l e g a l

* sa l e s o f f o r e i g n c u r r e n c y . To t h e e x t e n t t h a t t h e s e p r a c -

t ices s u c c e e d e d i n a t t r a c t i n g a n d k e e p i n g more r e g u l a r

h i g h - s t a k e s g a m b l e r s , t h e c a s i n o s a c h i e v e d v e r y p r o f i t a b l e

o p e r a t i o n s . 2 0 1

The f a c t o f s y s t e m a t i c i l l e g a l i t i e s h a s i m p o r t a n t

i m p l i c a t i o n s f o r g a m i n g p o l i c y i n B r i t a i n . F i r s t , t h e

p o l i c y o f v i g o u r o u s l y r e g u l a t i n g l e g a l gaming o p e r a t i o n s ,

a n d c u r t a i l i n g t h e g r o w t h o f "a g a m b l i n g e t h i c " i n s o c i e t y

i s b r o u g h t i n t o q u e s t i o n . T h e r e would seem to be a n

i n h e r e n t c o n t r a d i c t i o n b e t w e e n t h e p o l i c y o b j e c t i v e a n d t h

i n t e r e s t s o f c a s i n o s . I f c a s i n o s d o i n g e n e r a l f a c e t h e

m a r k e t s t r u c t u r e a n d p r o f i t s i t u a t i o n t h a t h a s b e e n

d e s c r i b e d t h e n t h e i n t e r e s t o f t h e c a s i n o i n h i g h e r p r o f i t s

w i l l a l w a y s b e f u r t h e r e d by t h e u s e o f " j u n k e t s " , i l l e g a l

c r e d i t , p a y m e n t o f c o m m i s s i o n s , e t c . , t o a t t r a c t new

c u s t o m e r s t o h i g h - s t a k e s gaming . B u t e n t i c i n g n o n - g a m b l e r s

a n d l e i s u r e - g a m b l e r s t o become r e g u l a r , h i g h - s t a k e s c a s i n o

g a m b l e r s g o e s d i r e c t l y a g a i n s t t h e p o l i c y o f B r i t i s h s t y l e

g a m i n g laws. M o r e o v e r , t h e m a r k e t i n g m e t h o d s u s e d

( " j u n k e t i n g " c r e d i t a b u s e s , e tc . ) a r e u n l a w f u l . Any j u r i s -

d i c t i o n c o n t e m p l a t i n g l e g a l c a s i n o gaming would be w i s e t o

c o n s i d e r t h e e x t e n t t o w h i c h t h e s e c o n t r a d i c t i o n s b e t w e e n

p o l i c y a i m s a n d c a s i n o i n t e r e s t s r e s u l t i n d i f f i c u l t

e n f o r c e m e n t p r o b l e m s f o r p u b l i c a u t h o r i t i e s .

A s e c o n d i m p l i c a t i o n r e l a t e s d i r e c t l y t o c o n t r o l

a g e n c i e s s u c h a s t h e Gaming B o a r d . I f it is i n e v i t a b l y i n

t h e b e s t f i n a n c i a l i n t e r e s t s o f c a s i n o s t o v i o l a t e B r i t i s h

g a m i n g l a w i n a t t e m p t i n g t o p r o m o t e a " g a m b l i n g e t h i c , " and

i n u s i n g u n l a w f u l o r u n e t h i c a l m e t h o d s c a n a c o n t r o l a g e n c y

s u c h as t h e Gaming B o a r d e v e r a c h i e v e much s u c c e s s ?

5. Bettinq, Bookmakinq, and Lotteries in Great Britain

T h e r e are t h r e e major f o r m s o f l e g a l p o o l b e t t i n g i n

Great B r i t a i n ; Soccer P o o l s , t h e T o t e , a n d Greyhound R a c i n g

T o t a l i s a t o r s . T h e s e f o r m s o f p o o l b e t t i n g h a v e a l o n g

e x i s t e n c e i n B r i t a i n a n d are r e l a t i v e l y n o n - c o n t r o v e r s i a l .

The R o y a l Commiss ion o n Gambl ing ( 1 9 7 8 ) c o n c l u d e d t h a t t h e

l e g a l f r amework f o r t h e s u p e r v i s i o n o f soccer p o o l s h a s

worked e f f e c t i v e l y , a n d t h e r e w a s no n e e d to c h a n g e e i t h e r

t h e fo rm o f t h e r e g u l a t o r y c o n t r o l s n o r t h e c o n t e n t o f t h e

g o v e r n i n g l e g i s l a t i o n . 202 The R o y a l Commiss ion d i d however

recommend t h a t a n u p p e r l i m i t (E500,OOO) f o r p r i z e s s h o u l d

b e e s t a b l i s h e d . The R o y a l Commiss ion a p p e a r e d to a c c e p t

a r g u m e n t s t h a t l a r g e p r i z e s e n c o u r a g e d g r e e d a n d e n v y , a n d

t h a t l a r g e soccer p o o l p r i z e s wou ld c o m p e t e w i t h l a r g e - o d d s

l o t t e r i e s . 203

The Tote sys tem (The Horse- race T o t a l i s a t o r ) , ho r se -

r a c e poo l b e t t i n g i n G r e a t B r i t a i n , p r o v i d e s an i n t e r e s t i n g

example of t h e i n t e r d e p e n d e n c y of some of t h e d i f f e r e n t

forms of b e t t i n g and gambling. S i n c e t h e 1 9 6 0 1 s , and

p a r t i c u l a r l y s i n c e t h e 1968-69 r a c i n g season t h e Tote has

been i n f i n a n c i a l t r o u b l e . Its problems a r o s e when The B e t t i n q and Gaminq A c t 1960 p e r m i t t e d Bookmakers t o a c c e p t

c a s h b e t s a t o f f - t r a c k b e t t i n g o f f i c e s . T h i s had t h e e f f e c t

o f d e c r e a s i n g t h e amount o f money b e t a t t h e t r a c k ( i . e . t h e

T o t e m a r k e t ) . Moreover, bookmakers cou ld o f f e r an u n l i m i t e d

v a r i e t y of b e t s ( h o r s e - r a c e s , g reyhounds , beau ty c o n t e s t s ,

g e n e r a l e l e c t i o n s , e t c . ) w i t h s e v e r a l t y p e s o f odds ( f i x e d

odds , Tote odds , o r m u l t i p l e b e t s ) . The f i n a l r e s u l t of t h e

l e g a l i z a t i o n o f o f f - t r a c k bookmakers was to make pool -

b e t t i n g w i t h t h e To te r e l a t i v e l y less a t t r a c t i v e .

I n t h e f a c e of t h e c o m p e t i t i o n from t h e o f f - t r a c k

b e t t i n g o f f i c e s , a p o s s i b l e a l t e r n a t i v e open t o t h e T o t e

would have been t o o f f e r more e x o t i c pool b e t s such a s

"Da i ly ~ o u b l e s " " T r i f e c t a s " , e tc . These a r e long-odds b e t s

where t h e b e t t o r s chances of winning a r e v e r y s m a l l bu t

p o t e n t i a l winnings a r e v e r y l a r g e . However, t h e long-odds

b e t t i n g marke t was a l r e a d y s e r v e d i n B r i t a i n by t h e soccer

p o o l s , s m a l l l o c a l l o t t e r i e s , and by t h e proposed N a t i o n a l

L o t t e r y f o r Good Causes .

I n view of t h e l e g a l i z a t i o n of bookmakers and t h e

growth of long-odds s p o r t s , b e t t i n g p o o l s and l o t t e r i e s , i t

a p p e a r s t h a t t h e To te sys tem of poo l b e t t i n g has been

squeezed from many d i r e c t i o n s . I n an a t t e m p t t o meet t h e

c o m p e t i t i o n t h e To te a l t e r e d i ts o b j e c t i v e s and c h a r a c t e r .

I n a d d i t i o n t o t r a d i t i o n a l on - t r ack o p e r a t i o n s , t h e T o t e

s i n c e 1972 h a s o p e r a t e d o f f - c o u r s e b e t t i n g shops i n d i r e c t

c o m p e t i t i o n w i t h t h e bookmakers. The To te has a l s o

d i s c a r d e d somewhat i t s o r i g i n a l o b j e c t i v e o f p r o v i d i n g p o o l

b e t t i n g s e r v i c e s to h o r s e - r a c e e n t h u s i a s t s . 2 0 4

I The f a c t t h a t t h e T o t e now t r e a t s t h e p r o v i s i o n o f p o o l b e t t i n g s e r v i c e s as s e c o n d a r y t o t h e e x p a n s i o n o f i t s book-

m a k i n g b e t t i n g s h o p s , i n d i c a t e s t h a t t h e r e is a n i n t e r -

d e p e n d e n c y b e t w e e n d i f f e r e n t f o r m s o f l e g a l a n d i l l e g a l

g a m b l i n g . C r e a t i o n o f new o r u n i q u e l e g a l g a m b l i n g o p p o r - I t u n i t i e s may c a u s e t h e d e c l i n e o f a n e s t a b l i s h e d v a r i e t y o f

l e g a l g a m b l i n g . B e f o r e e m b a r k i n g o n new f o r m s o f l e g a l

g a m b l i n g , or new g a m b l i n g - b a s e d r e v e n u e s c h e m e s , it may be

a d v i s a b l e t o s t u d y c a r e f u l l y w h a t t h e e f f e c t s w i l l b e o n

e x i s t i n g f o r m s o f l e g a l a n d i l l e g a l g a m b l i n g .

A. Bookmakinq i n B r i t a i n

P r i o r t o 1 9 6 0 , i l l e g a l bookmaking w a s r a m p a n t i n

B r i t a i n . M o r e o v e r t h e p re -1960 p r o h i b i t i o n s on o f f - t r a c k

b e t t i n g a n d bookmak ing w h i c h d i s c r i m i n a t e d a g a i n s t w o r k i n g -

c l ass p e o p l s , w e r e i l l o g i c a l a n d h o p e l e s s l y i n e f f e c t i v e .

T h e l a w s p r o d u c e d r e s e n t m e n t a n d s u c c e s s f u l a t t e m p t s t o

c o r r u p t t h e p o l i c e r e s u l t e d i n c o n t e m p t f o r a u t h o r i t y .

M o r e o v e r , t h e bookmak ing t r a d e o p e r a t e d o u t s i d e t h e l a w a n d

w a s s u b j e c t t o p r o t e c t i o n r a c k e t s a n d g a n g v i o l e n c e . 205

T h e B e t t i n g a n d Gaminq A c t 1 9 6 0 was e n a c t e d to a l i e n a t e

a n d r e c t i f y t h e p r o b l e m s i n h e r e n t i n t h e o l d laws. The A c t

s a n c t i o n s t h e e s t a b l i s h m e n t o f l i c e n s e d b e t t i n g s h o p s w h i c h

a r e a l l o w e d to e n t e r t a i n o f f - t r a c k c a s h b e t s . Bookmaking is

now a l a w f u l t r a d e s u b j e c t to a n e f f e c t i v e s y s t e m o f l i c e n s -

i n g a n d c o n t r o l .

The A c t p r o h i b i t s t h e p l a c i n g or t a k i n g o f b e t s i n a n y

s t ree t o r p u b l i c p l a c e . However , a u t h o r i z e d bookmaker s a r e

p e r m i t t e d t o a c c e p t c a s h b e t s i n a l i c e n s e d b e t t i n g s h o p .

The b e t t i n g s h o p s a r e s u b j e c t t o s t r ic t r e g u l a t i o n s s i m i l a r

t o t h e c a s i n o r e s t r i c t i o n s . A b e t t i n g o f f i c e is p e r m i t t e d

o n l y where an unmet demand is shown t o e x i s t . They mus t be

c l o s e d between t h e h o u r s o f 6 .30 p.m. and 7.00 a.m. and

b e t t i n g o f f i c e p e r s p n n e l may n o t e n c o u r a g e p e r s o n s t o b e t .

N o f a c i l i t i e s may be p r o v i d e d f o r t h e r e c e p t i o n o f a n y

p u b l i c t e l e v i s i o n o r sound b r o a d c a s t ; no m u s i c o r e n t e r t a i n -

ment o f any k i n d is p e r m i t t e d ; no r e f r e s h m e n t s may b e

s e r v e d ; a n d t h e r e m u s t b e no access t h r o u g h a l i c e n s e d

b e t t i n g o f f ice t o a n y p r e m i s e s u s e d f o r any o t h e r p u r p o s e .

The o b j e c t i v e o f t h e b e t t i n g s h o p r e s t r i c t i o n s is t o

p r e v e n t c o n t i n u o u s b e t t i n g , l o i t e r i n g , and i n d u c e m e n t s t o

b e t . Whi le b e t t o r s a r e a l l o w e d t o p a s s t h e a f t e r n o o n i n a

b e t t i n g s h o p and a r e p e r m i t t e d t o b e t c o n t i n u o u s l y upon o n e

r a c e a f t e r a n o t h e r , it is b e l i e v e b t h a t t h e c h a r a c t e r o f t h e

b e t t i n g s h o p s d o e s n o t i n d u c e s u c h c o n d u c t .

A s a r e s u l t o f t h e l e g a l i z a t i o n o f b e t t i n g s h o p s ,

i l l e g a l bookmaking h a s b e e n v i r t u a l l y unknown. Moreover ,

a c c o r d i n g to t h e p o l i c e , u n d e r t h e p r e s e n t l a w , b e t t i n g

s h o p s r e q u i r e v e r y l i t t l e s u p e r v i s i o n . 206 Only s i n c e t h e

i n t r o d u c t i o n o f b e t t i n g t a x e s o f 8 .5% ( o n t h e amount b e t )

h a s t h e r e been a r e s u r g e n c e o f i l l e g a l bookmaking. The

Roya l Commision on Gambl ing ( 1 9 7 8 ) n o t e d t h a t s u c h a t a x

r a t e makes i l l e g a l bookmakers (who do n o t pay s u c h t a x e s and

t h e r e f o r e have more money a v a i l a b l e f o r h i g h pay- o f f s f o r

w i n n e r s ) more a t t r a c t i v e . 2 0 7 T h i s is a c o n c r e t e example o f

t h e l e g a l g a m b l i n g t r a d e o f f . L e g a l g a m b l i n g c a n n o t r a i s e

s i g n i f i c a n t government r e v e n u e s and c u r t a i l i l l e g a l g a m b l i n g

m a r k e t s a t t h e same t i m e ; t h e t w o p o l i c y g o a l s a r e i n

c o n f l i c t . The Roya l Commission t h e r e f o r e recommended t h a t

i f t h e c o n t r o l and c u r t a i l m e n t o f i l l e g a l g a m b l i n g is t h e

main p o l i c y g o a l o f l e g a l g a m b l i n g i n B r i t a i n , t h e g o v e r n -

ment o u g h t n o t o v e r - t a x l e g a l g a m b l i n g o p e r a t i o n s . *08

B. L o t t e r i e s i n G r e a t B r i t a i n

The e f f e c t i v e r e g u l a t i o n and c o n t r o l o f l o t t e r i e and

t h e p r o p e r ro le o f lo t te r ies i n B r i t i s h s o c i e t y h a v e been

t h e s o u r c e o f much c o n t r o v e r s y . S i n c e t h e 1 9 3 0 ' s s e v e r a l

c o m m i s s i o n s and a number o f l e g i s l a t i v e e n a c t m e n t s have been

u n s u c c e s s f u l i n a d d r e s s i n g t h e l o t t e r y i s s u e s . The

L o t t e r i e s a n d Amusements A c t 1 9 7 6 , and t h e L o t t e r y

R e g u l a t i o n s o f 1977 c o n s t i t u t e t h e c o n t e m p o r a r y B r i t i s h l a w

o n t h e s u b j e c t . E x p e r i e n c e s i n c e 1977 i n d i c a t e s t h a t b o t h

o f t h e s e m e a s u r e s h a v e p r o v e n i n a d e q u a t e a s w e l l .

The i m p o r t a n t u n d e r l y i n g i s s u e s i n B r i t a i n h a v e

i n v o l v e d f i n a n c i a l , p o l i t i c a l and l aw e n f o r c e m e n t ques -

t i o n s . C h a r i t i e s , c l u b s and l o c a l g o v e r n m e n t s i n B r i t a i n I

p e r c e i v e lo t t e r i e s t o be a s i g n i f i c a n t s o u r c e o f r e v e n u e .

I I n t h e i r e f f o r t s t o c a p t u r e g r e a ' t e r amounts o f r e v e n u e I

s e v e r a l o t h e r w i s e l e g i t i m a t e o r g a n i z a t i o n s h a v e g o t t e n

i n v o l v e d i n l o t t e r i e s which h a v e been i l l e g a l . The q u e s t by

c h a r i t i e s and c l u b s f o r move and l a r g e r e v e n u e c r e a t i n g

l o t t e r i e s h a s r e p e a t e d l y o u t s t r i p p e d t h e l e g i s l a t i o n t h a t I was s u p p o s e d to c o n t r o l t h e s i t u a t i o n .

The l a w - e n f o r c e m e n t p r o b l e m h a s stemmed f rom t w o

s o u r c e s . F i r s t , much o f t h e l e g i s l a t i o n h a s been q u i t e

complex , w i t h t h e r e s u l t t h a t it h a s o f t e n been d i f f i c u l t

f o r e i t h e r p r o m o t e r s or p o l i c e to a s c e r t a i n when a p a r t i c u -

l a r fo rm of l o t t e r y is u n l a w f u l . S e c o n d , b e c a u s e many o f

t h e l o t t e r i e s h a v e b e e n f o r good c a u s e s , t h e p o l i c e h a v e

t e n d e d to b e r e t i c e n t i n e n f o r c i n g t h e l o t t e r y l aws . The

p o l i t i c a l p r o b l e m r e f l e c t s t h e t r a d e o f f be tween e f f e c t i v e

l a w e n f o r c e m e n t and g r e a t e r r e v e n u e s t h a t l o t t e r i e s

i n v o l v e . Governments h a v e found t h a t l e g i s l a t i o n aimed a t

c a r e f u l l y s u p e r v i s i n g and c o n t r o l l i n g l o t t e r i e s , and

- 195 -

en fo rcemen t measures d i r e c t e d a t implement ing such l e g i s l a -

t i o n have been p o l i t i c a l l y u n p a l a t a b l e . Clubs and c h a r i t i e s

r e g a r d l o t t e r i e s a s a main s o u r c e of revenue and r e s e n t

s t r i c t government c o n t r o l and s u p e r v i s i o n measu res .

~ The l a c k of agreement on t h e p r o p e r role of l o t t e r i e s

i n B r i t i s h s o c i e t y , and t h e i n a d e q u a t e l e g i s l a t i o n and 1 en fo rcemen t measures h a s meant t h a t l o t t e r i e s i n B r i t a i n i n I

t h e l a t e 1 9 7 0 ' s were i n a c h a o t i c s t a t e . Annual r e p o r t s of

t h e Gaming Board n o t e t h a t t h e marke t was r e a c h i n g t h e I s a t u r a t i o n p o i n t . The number of l o t t e r i e s be ing run was

l e a d i n g t o i n c r e a s i n g c o m p e t i t i o n f o r a p r o g r e s s s i v e l y

s m a l l e r p i e c e of t h e p i e . A s a r e s u l t a c c o u n t i n g checks by

t h e Board r e v e a l e d t h a t a l a r g e p r o p o r t i o n of l o t t e r i e s were

i n b r e a c h o f p e r m i t t e d l e v e l s f o r expenses and p r i z e s . Some

l o t t e r y a g e n t s w e r e engaging i n d i s r e p u t a b l e promot ion

methods. I n o t h e r c a s e s , even where t h e consequences of

d e c l i n i n g s a l e s w e r e a p p r e c i a t e d , t o o many s o c i e t i e s and

l o c a l a u t h o r i t i e s c o n t i n u e d t o run l o t t e r i e s i n b reach of

t h e law, i n t h e o f t e n v a i n e x p e c t a t i o n t h a t m a t t e r s would

improve. *09 The Board ' s 1980 r e p o r t no ted t h a t o v e r 4 8 % of

a l l l o c a l a u t h o r i t y l o t t e r y a c c o u n t s and o v e r 39% o f a l l

c h a r i t y l o t t e r y a c c o u n t s showed v i o l a t i o n s of t h e l e g i s l a -

t ion . 210

The "Compet i t ion F a c t o r " and t h e "Novel ty Aspec t" h e l p

t o e x p l a i n what h a s happened w i t h l o t t e r i e s i n B r i t a i n . I f

a c h a r i t y or government is t h e f i r s t to i n t r o d u c e a l o t t e r y

i t may i n i t i a l l y have a v e r y p r o f i t a b l e marke t . L a t e r when

o t h e r c h a r i t i e s , g r o u p s , or governments d e v e l o p t h e same o r

a ' s i m i l a r l o t t e r y , c o m p e t i t i o n f o r t h e a v a i l a b l e marke t may

r e s u l t i n s u b s t a n t i a l l y lowered p r o f i t f i g u r e s f o r a l l o f

l o t t e r i e s i n a g i v e n j u r i s d i c t i o n r e a c h t h e i r m a t u r e m a r k e t

s t a g e s . Lotter ies h a v e b e e n p r o m o t e d i n B r i t a i n t o a s i g n i -

f i c a n t d e g r e e s s i n c e t h e 1 9 3 0 ' s . What many c h a r i t i e s , c l u b s

a n d loca l g o v e r n m e n t s e a r l i e r p e r c e i v e d t o be a l u c r a t i v e

m a r k e t h a s become a v e r y c o m p e t i t i v e o n e . The i n t e n s e

c o m p e t i t i o n f o r g r e a t e r r e v e n u e h a s l e d t o t h e many a b u s e s

o f t h e l e g i s l a t i o n .

F o l l o w i n g i t s d e t a i l e d i n v e s t i g a t i o n o f t h e B r i t i s h

l o t t e r i e s s c e n e , t h e R o y a l Commiss ion made o v e r 60 recommen-

d a t i o n s r e g a r d i n g reform o f t h e e x i s t i n g l e g i s l a t i o n . The

f o l l o w i n g comments i l l u s t r a t e t h e g e n e r a l c o n c l u s i o n t h e

R o y a l Commiss ion a r r i v e d a t w i t h r e s p e c t to l o t t e r i e s :

... Most G o v e r n m e n t s t a k e t h e v i e w t h a t l o t t e r i e s are a h a r m l e s s f o r m o f g a m b l i n g a n d $lso p r o v i d e h a r m l e s s e n t e r t a i n m e n t . *11

T h e r e is a good d e a l o f j u s t i f i c a t i o n f o r t h i s v i e w t o

w h i c h w e s u b s c r i b e s u b j e c t t o two i m p o r t a n t q u a l i f i c a t i o n s .

The f i r s t is t h a t a l l l o t t e r i e s m u s t b e s t r ic t ly

c o n t r o l l e d . L o t t e r i e s may b e s o c i a l l y h a r m l e s s b u t t h e y

p r e s e n t g r e a t e r p o s s i b i l i t i e s f o r f r a u d t h a n e i t h e r b e t t i n g

o r g a m i n g , b e c a . u s e t h e p u n t e r d o e s n o t see w h a t is h a p p e n i n g

t o h i s money. M o r e o v e r , l o t t e r y f r a u d s o f t e n g o u n d e t e c t e d

b e c a u s e most p e o p l e h a v e l i t t l e e x p e c t a t i o n o f w i n n i n g a

p r i z e a n d t a k e f o r g r a n t e d t h e i n t e g r i t y o f t h o s e who

o r g a n i s e t h e l o t t e r y . T h e s e p o i n t s were c l e a r l y made i n t h e

e v i d e n c e t o t h e R o y a l Commiss ion o f t h e M e t r o p o l i t a n P o l i c e

C o m m i s s i o n e r , e n d o r s e d by t h e A s s o c i a t i o n o f C h i e f P o l i c e

O f f i c e r s o f E n g l a n d a n d Wales.

... T h e s e c o n d q u a l i f i c a t i o n is t h a t p e o p l e s h o u l d n o t b e i n d u c e d t o s p e n d more o n l o t t e r i e s t h a n t h e y c a n a f f o r d . W i t h a c o n v e n t i o n a l l o t t e r y t h e r e is no p a r t i c u l a r d a n g e r o f t h i s h a p p e n i n g . A p e r s o n buys o n e o r more t i c k e t s , d e p e n d i n g o r wha t h e o r s h e

c a n a f f o r d , a n d t h e n w a i t s f o r t h e r e s u l t o f t h e d raw. . . The a d v e n t o f i n s t a n t l o t t e r i e s i n t h e i r l a t e s t f o r m h a s i n t r o d u c e d a new d i m e n s i o n . 21 2

The R o y a l Commiss ion was o f t h e v i e w t h a t some r e s t r i c t i o n s

m u s t be p u t on i n s t a n t l o t t e r i e s i f t h e y are to . r e m a i n a

h a r m l e s s f o r m o f g a m b l i n g . 213

I n i ts c o n c l u s i o n t h e R o y a l Commiss ion n o t e d t h a t i t

f o u n d t h e l o t t e r i e s s i t u a t i o n o f B r i t a i n i n 1 9 7 8 t o be

s c a n d a l o u s . I n t h e e f f o r t t o c o m p e t e f o r g r e a t e r l o t t e r y

r e v e n u e t h e r e was w h o l e s a l e d i s r e g a r d o f t h e l a w ; t h e l a w

was i n a d e q u a t e a n d c o n f u s e d ; c o m m e r c i a l e x p l o i t a t i o n to a

t o t a l l y u n a c c e p t a b l e d e g r e e e x i s t e d ; g r o s s l a c k o f s e c u r i t y

was f o u n d a n d much d i s h o n e s t y s u s p e c t e d . The R o y a l

Commiss ion s e r i o u s l y c o n s i d e r e d recommending t h a t a l l o f t h e

e x i s t i n g l a w ( 1 9 7 5 A c t a n d 1 9 7 1 R e g u l a t i o n s ) be s c r a p p e d a n d

r e p l a c e d w i t h new t i g h t e r c o n t r o l s . * 1 4

The B r i t i s h e x p e r i e n c e w i t h l o t t e r i e s p o i n t s o u t t h e

n e c e s s i t y o f e x a m i n i n g l o t t e r y m a r k e t s w i t h g r e a t care.

O t h e r w i s e t h e p o t e n t i a l r e v e n u e o f s u c h m a r k e t s c a n be

g r e a t l y o v e r e s t i m a t e d w i t h t h e r e s u l t t h a t s e v e r a l c h a r i -

t i es , i n s t i t u t i o n s a n d g o v e r n m e n t s c h e m e s may e n t e r t h e

m a r k e t . Once t h e n o v e l t y o f t h e i n i t i a l l o t t e r i e s h a s worn

o f f a n d t h e m a r k e t r e a c h e s t h e s a t u r a t i o n p o i n t , t h e i n t e n s e

c o m p e t i t i o n f o r g r e a t e r r e v e n u e may l e a d t o numerous v i o l a -

t i o n s o f t h e c o n t r o l l i n g l e g i s l a t i o n s u c h as t h e s e n o t e d i n

B r i t a i n .

The f o l l o w i n g a t t a c h e d t a b l e s i l l u s t r a t e t h e i n c r e d i b l e

i n c r e a s e i n t h e number a n d v a r i e t y o f l o t t e r i e s f o l l o w i n g

t h e 1 9 7 5 A c t a n d t h e i n e f f e c t u a l 1 9 7 7 L o t t e r y R e g u l a t i o n s .

A s would b e e x p e c t e d , w i t h o u t a d e q u a t e s t a t u t o r y a n d admin-

i s t r a t i v e c o n t r o l t h e p r o m o t i o n o f l o t t e r i e s h a s m u l t i p l i e d

throat competition for sales likely contributed to further

abuse of the Act and Regulations.

TABLE 1

A l l L o t t e r i e s Promoted i n En land and Wales, and Scotland between 1 May, 1977 and 30 A p r i l , 1978 under Schemes Regis tered with t h e Board. 215

SOCIETY LOTTERIES

Number of T o t a l T i c k e t Expenses P r i z e s Balance L o t t e r i e s S a l e s (£1 ( f 1 (%> (£1 ( % > (£1 (21

England and Wales .. . .. . 1,280 9,484,882 1,877,331 19.79 3,298,563 34.78 4,308,988 45.43

Scot land . . . . . . . . . . . . 17 108,466 17,219 15.87 36,951 34.07 54,296 50.06

T o t a l . . . . . . . . . . . . . . . 1,297 9,593,348 1,894',550 19.75 3,335,514 34.77 4,363,284 45.48 I

LOCAL AUTHORITY LOTTERIES

England and Wales ... ...

Scot land . . . . . . . . . . . . T o t a l . . . . . . . . . . . . . . .

Number of T o t a l T icke t L o t t e r i e s S a l e s (£1

1,190 9,239,698

TABLE 3

A l l L o t t e r i e s Promoted i n En land and Wales, and Scotland between 1 May, 1979 and 30 A p r i l , 1980 under Schemes Regis tered wi th t h e Board. 219

SOCIETY LOTTERIES

England and Wales ... .. . Scot land . . . . . . . . . . . . T o t a l .. . .. . .. . .. . .. .

Number of T o t a l T icke t Expenses P r i z e s L o t t e r i e s S a l e s (£1 ( £ 1 ( 2 > (E > ( % >

LOCAL AUTHORITY LOTTERIES

Number of T o t a l T icke t Expenses P r i z e s Balance L o t t e r i e s S a l e s (£1 ( f ) (XI (£1 ( 2 ) ( £ 1 ( % >

England and Wales .. . .. . 2,936 17,807,430 3,887,997 21.83 7,385,596 41.48 6,533,837 36.69

Scot land . . . . . . . . . . . . 64 711,398 163,348 22.96 296,058 41.62 251,992 35,42

T o t a l . . . . . . . . . . . . . . . 3,000 18,518,828 4,051,345 21.88 7,681,654 41.48 6,785,829 36.64

6 . C o n c l u s i o n s - B r i t i s h Scheme of G a m b l i n q C o n t r o l

The f o l l o w i n g g e n e r a l c o n c l u s i o n s seem to b e t h e most

i m p o r t a n t i n s i g h t s o f f e r e d by t h e B r i t i s h e x p e r i e n c e w i t h

g a m b l i n g c o n t r o l .

A. Wheneve r new f o r m s o f g a m b l i n g a r e t o b e a l l o w e d u n d e r

new l e g i s l a t i o n it is o f p a r a m o u n t i m p o r t a n c e t h a t t h e

r e f o r m i n g l e g i s l a t i o n b e d r a f t e d w i t h e x t r e m e care. Most

f o r m s o f g a m b l i n g ( g a m i n g , l o t t e r i e s , b e t t i n g ) are e x t r e m e l y

p r o f i t a b l e . T h e r e f o r e , t h e r e is c o n s i d e r a b l e f i n a n c i a l

i n c e n t i v e f o r g a m b l i n g p r o m o t e r s . t o s t r e t c h l i b e r a l i z e d

g a m b l i n g l a w s t o t h e l e g a l l i m i t a n d beyond . T h i s was

e x a c t l y t h e e x p e r i e n c e w i t h t h e B e t t i n q a n d Gaminq A c t 1 9 6 0

a n d t h e L o t t e r i e s A c t 1 9 7 5 .

The f o r m e r A c t w a s i n t e n d e d t o make p r o v i s i o n s f o r

s o c i a l g a m b l i n g ; n o o n e c o n t e m p l a t e d or was p r e p a r e d f o r t h e

e x p l o s i o n of c o m m e r c i a l c a s i n o s , t h e a d u l t e r a t i o n o f s o c i a l

a c t i v i t y games ( b i n g o , w h i s t , b r i d g e , e t c . ) , a n d t h e q u i c k l y

i n c r e a s e d i n v o l v e m e n t o f c r i m i n a l i n t e r e s t s .

The l a t t e r A c t a l o n g w i t h t h e L o t t e r y R e q u l a t i o n s 1 9 7 7

w a s i n t e n d e d to b r o a d e n t h e s p h e r e o f l e g a l l o t t e r i e s f o r

c h a r i t a b l e soc i e t i e s , spor t s g r o u p s a n d loca l g o v e r n m e n t s .

The new laws h a v e b e e n shown t o h a v e i n s u f f i c i e n t i n s p e c t i o n

a n d e n f o r c e m e n t p r o v i s i o n s t h u s o p e n i n g t h e way t o m a l p r a c -

t i c e a n d f r a u d i n t h e o p e r a t i o n o f some lo t te r ies . T h e

f a i l u r e of l i b e r a l i z e d q a m b l i n g l e q i s l a t i o n t o p r o v i d e

police a n d a r e g u l a t o r y b o d y ( T h e Gaming B o a r d ) w i t h s t r o n q

i n s p e c t i o n a n d e n f o r c e m e n t p r o v i s i o n s wou ld b e a s e r i o u s

d e f i c i e n c y .

B. L e g i s l a t i o n w h i c h l i b e r a l i z e s q a m b l i n q s h o u l d p r o v i d e

p o l i c y - m a k e r s w i t h power t o make w i d e - r a n g i n g r e g u l a t i o n s i n

r e s p e c t o f g a m b l i n g a c t i v i t i e s . The B e t t i n g and Gaming A c t

1960 d o e s n o t have t h e s e p r o v i s i o n s . A s a r e s u l t , when

g a m b l i n g p r o m o t e r s and c r i m i n a l i n t e r e s t s e x p l o i t e d loop-

h o l e s t h e r e g u l a t o r y body d i d n o t have t h e power to make

s p e c i f i c r e g u l a t i o n s which c o u l d have a r r e s t e d t h e m a l p r a c -

t i c e and c o r r u p t i o n t h a t was o c c u r r i n g . A t t h e same t i m e

t h e p o l i c e were f a c e d w i t h a d e m o r a l i z i n g and l o n g l ist o f

u n s u c c e s s f u l p r o s e c u t i o n s a s t h e p r o m o t e r s and c r i m i n a l

i n t e r e s t s found and e x p l o i t e d more and more l o o p h o l e s .

I n t h e e n d , t o a d d r e s s t h e s i t u a t i o n it was n e c e s s a r y

n o t o n l y t o d r a f t a n e n t i r e l y new a c t ( T h e Gaming A c t 1 9 6 8 1 ,

b u t t o i n c l u d e i n t h e new A c t , b r o a d powers t o make r e g u l a -

t i o n s i n r e s p e c t o f s p e c i f i e d g a m b l i n g a c t i v i t i e s , and a l s o

p r o v i s i o n f o r t h e Gaming Board one of whose t a s k s is t o

p r o v i d e on-going a d v i c e r e g a r d i n g t h e n e c e s s i t y f o r , c o n t e n t

o f , and s c o p e o f f u r t h e r r e g u l a t i o n s .

C. The c r e a t i o n o f a n e x p e r t q u a s i - j u d i c i a l r e q u l a t o r y

body t o a d m i n i s t e r a n d s u p e r v i s e t h e whole s p h e r e o f

g a m b l i n q o r s e l e c t e d a r e ' a s o f q a m b l i n q is a d v i s a b l e .

S t u d i e s o f t h e g a m b l i n g i n d u s t r y i n B r i t a i n and else-

where i n d i c a t e l e g a l g a m b l i n g is f i n a n c i a l l y l u c r a t i v e . I t

a t t r a c t s . i n t e r e s t s which i n t h e words o f t h e Gaming Board

a r e " s o p h i s t i c a t e d , i n t e l l i g e n t , h i g h l y - o r g a n i z e d , w e l l -

b r i e f e d and c l e v e r o p e r a t o r s w i t h enormous money r e s o u r c e s

which e n a b l e them t o h i r e t h e b e s t b r a i n s i n t h e l e g a l ,

a c c o u n t a n c y , m a n a g e r i a l , c a t e r i n g and s h o w - b u s i n e s s wor ld . "

To a d e q u a t e l y e n s u r e t h a t g a m b l i n g o p e r a t i o n s s t a y

w i t h i n t h e l i m i t s o f t h e l aw; t o e n s u r e t h a t g a m b l i n g e n t e r -

p r i s e s a r e n o t c l a n d e s t i n e l y o p e r a t e d , or i n f l u e n c e d by

c r i m i n a l i n t e r e s t s ; a n d t o e n s u r e t h a t t h e r e is a d e q u a t e

k n o w l e d g e o f t h e e x t e n t a n d c h a r a c t e r o f g a m b l i n g a c t i v i t y ,

i t is a d v i s a b l e t h a t a n e x p e r t q u a s i - j u d i c i a l r e g u l a t o r y

body b e created.

T h i s t a s k is too l a r g e , a n d too s p e c i a l i z e d to b e l e f t

t o t h e p o l i c e .

D. The d e c i s i o n s o f a n e x p e r t q u a s i - j u d i c i a l g a m b l i n q

r e g u l a t o r y b o d y s h o u l d n o t be o p e n t o a p p e a l t o h i g h e r

c o u r t s ; r a t h e r i t s d e c i s i o n s s h o u l d be j u d i c i a l l y r e v i e w a b l e

o n l y o n q u e s t i o n s s u c h as e x c e s s o f j u r i s d i c t i o n , a b u s e o f

p o w e r , n a t u r a l j u s t i c e , e t c .

I t is i l l o g i c a l t o al low t h e d e c i s i o n s o f a n e x p e r t

q u a s i - j u d i c i a l r e g u l a t o r y body t o b e s e c o n d - g u e s s e d by a

h i g h e r c o u r t o f l a w t h a t is i n e x p e r t i n g a m b l i n g p o l i c y -

m a k i n g a n d r e g u l a t i o n , a n d is more c o n c e r n e d w i t h l e g a l

p r e c e d e n t a n d f i n e p o i n t s o f l aw . I f a n u n s u c c e s s f u l a p p l i -

c a n t to t h e r e g u l a t o r y body b e l i e v e s he h a s b e e n d e a l t w i t h

i n a n a r b i t r a r y or u n j u s t m a n n e r t h e n h i s r e c o u r s e s h o u l d b e

a n a p p l i c a t i o n f o r j u d i c i a l r e v i e w . The c o u r t i n s u c h a n

i n s t a n c e s h o u l d .be l i m i t e d to r e v i e w i n g t h e d e c i s i o n o f t h e I

r e g u l a t o r y b o d y f o r b i a s , e x c e s s o f j u r i s d i c t i o n , a b u s e o f

p o w e r , e tc . ; t h e c o u r t s h o u l d n o t b e a l l o w e d to q u e s t i o n t h e

r e g u l a t o r y b o d y ' s e x p e r t i s e .

E. O v e r a l l r e q u l a t i o n a n d c o n t r o l o f l i b e r a l i z e d l e q a l

g a m b l i n g s h o u l d b e somewha t d e c e n t r a l i z e d . The wisdom o f

t h e B r i t i s h a p p r o a c h h e r e is r e a d i l y a p p a r e n t . w i t h l i c e n s -

i n g d e c i s i o n s v e s t e d i n l o c a l m a g i s t r a t e s ; p e r m i t c o n t r o l ,

i n s p e c t i o n p o w e r s , l i m i t e d e n f o r c e m e n t p o w e r s , a n d o v e r a l l

e x p e r t i s e v e s t e d w i t h t h e Gaming B o a r d ; a n d e x t e n s i v e

i n s p e c t i o n and e n f o r c e m e n t powers v e s t e d i n t h e p o l i c e , s u c h

a r e g u l a t o r y ne twork is n o t e a s i l y s u s c e p t i b l e t o c o r r u p -

t i o n . Too many i n d e p e n d e n t p e r s o n a l i t i e s a r e i n v o l v e d f o r

c r i m i n a l i n t e r e s t s to e f f e c t i v e l y i n f l u e n c e o r c o r r u p t t h e

c o n t r o l ne twork f o r a l o n g p e r i o d o f t i m e .

F. Government schemes t o ra ise r e v e n u e v i a t a x a t i o n of

l e g a l g a m b l i n g a c t i v i t e s s h o u l d t a k e c a r e t o e n s u r e t h a t a

h e a v y t a x l e v y d o e s n o t c r e a t e a n i n c e n t i v e f o r t h e g a m b l e r

t o b e t i l l e g a l l y i n o r d e r t o a v o i d a heavy t a x on g a m b l i n g

w i n n i n g s .

I f t h e m o t i v a t i o n f o r a p a r t i c u l a r v a r i e t y of l e g a l

g a m b l i n g is t o d e c r e a s e t h e i n c e n t i v e p e o p l e may h a v e t o

gamble i l l e g a l l y t h e n t a x r a t e which d e c r e a s e s t h e g a m b l e r s '

w i n n i n g s t o o s u b s t a n t i a l l y may recreate an i n c e n t i v e f o r t h e

g a m b l e r ( e s c a p i n g t a x e s on w i n n i n g s ) t o r e t u r n t o t h e

i l l e g a l b o o k i e s . The i n s t a n t example o f t h i s d i l e m a is t h e

B r i t i s h e x p e r i e n c e w i t h t h e t a x s t r u c t u r e s imposed on l e g a l -

i z e d b e t t i n g s h o p s . I

G. F i n a l l y , a n d o b v i o u s l y , n o r e g u l a t o r y s y s t e m , n o m a t t e r

how s t r a t e g i c a l l y a n d t e c h n i c a l l y s o u n d , is e f f e c t i v e when

it l a c k s a d e q u a t e f i n a n c i a l r e s o u r c e s . T h i s is p e r h a p s t h e

c r i t i c a l weak- l ink i n t h e B r i t i s h scheme o f g a m b l i n g r e g u l a -

t i o n . The government h a s n o t g i v e n t h e Gaming Board t h e

f i n a n c i a l means t o h i r e a d e q u a t e s t a f f t o p e r f o r m a l l of i ts

t a s k s .

To t h e B r i t i s h , e x p e r i e n c e seems t o p r o v i d e t h e m o s t

e x t e n s i v e i n s i g h t s as t o t h e r e l a t i o n s h i p between l e g a l

g a m b l i n g and e n f o r c e m e n t o f l a w s re i l l e g a l g a m b l i n g . The

B r i t i s h e x p e r i e n c e shows t h a t f o r t h e p u r p o s e o f e v a l u a t i n g

e f f e c t i v e e n f o r c e m e n t o f g a m b l i n g l a w , it is i m p o r t a n t t o

d i s t i n g u i s h b e t w e e n t h e d i f f e r e n t t y p e s o f g a m b l i n g i. e.

c a s i n o g a m b l i n g , b e t t i n g s h o p s , s p o r t s p o o l s , l o t t e r i e s ,

e tc . Each t y p e e m p l o y s a d i f f e r e n t method o f m a r k e t i n g ,

a p p e a l s t o d i f f e r e n t sectors o f s o c i e t y , a n d i n v o l v e s

d i s t i n c t i v e e n f o r c e m e n t q u e s t i o n s .

L i c e n s e d B e t t i n g S h o p s i n B r i t a i n seem t o p r o v i d e

e v i d e n c e t h a t u n d e r c e r t a i n c o n d i t i o n s , a s p e c i f i c mode o f

l e g a l g a m b l i n g ( l o w - s t a k e s b e t t i n g on r a c e s , s p o r t s e v e n t s ,

e t c . ) may r e s u l t i n less i l l e g a l g a m b l i n g a n d i m p r o v e d

e n f o r c e m e n t e f f e c t i v e n e s s .

B e f o r e t h e B e t t i n g a n d Gaming A c t 1 9 6 0 , b e t t i n g f o r

c a s h was a l l o w e d o n l y on a c r e d i t b a s i s - i.e. o n l y t h o s e

w e a l t h y e n o u g h t o o b t a i n c r e d i t c o u l d b e t o f f - t r a c k . I n

e f f e c t , p e o p l e who c o u l d n o t a f f o r d c r e d i t , s i m p l y b e t

i l l e g a l l y e i t h e r by means o f r u n n e r s o r u n l a w f u l b e t t i n g

h o u s e s . The R o t h c h i l d R e p o r t n o t e d t h e e f f e c t o f t h e l a w

as:

I n s t e a d o f s u p p r e s s i n g b e t t i n g among p o o r e r p e o p l e , t h e l a w p r o d u c e d r e s e n t m e n t a n d a t t e m p t s t o c o r r u p t pol ice, c o n t e m p t f o r a u t h o r i t y a n d a bookmak ing t r a d e o p e r a t i n g o u t s i d e t h e l a w , p 5 ~ g t o p r o t e c t i o n r a c k e t s a n d g a n g v i o l e n c e .

F o l l o w i n g t h e p r o c l a m a t i o n o f t h e B e t t i n g a n d Gaming

A c t 1 9 6 0 a n d u n t i l 1 9 6 6 , B r i t i s h a u t h o r i t i e s b e l i e v e t h a t

i l l e g a l b e t t i n g was v i r t u a l l y n o n - e x i s t e n t . However , s i n c e

t h e i n t r o d u c t i o n o f , a n d i n c r e a s e i n t h e B e t t i n g Du ty i n

1 9 6 6 , a n d s u b s e q u e n t i n c r e a s e s i n i t s r a t e , t h e r e h a s b e e n a

r e c u r r e n c e o f i l l e g a l bookmaking . The R o y a l Commiss ion s a w

t h e s i t u a t i o n as f o l l o w s :

The i n t r o d u c t i o n o f t h e b e t t i n g d u t y m e a n t . . . t h a t b e t t i n g o f f i c e s b e g a n t o make d e d u c t i o n s f r o m w i n n i n g s a n d t h i s g a v e i l l e g a l book-

r e l a t i v e l y s m a l l when t h e b e t t i n g d u t y was 2.5%, b u t s u c c e s s i v e i n c r e a s e s t o t h e p r e s e n t o f f - c o u r s e r a t e o f 7.5%, t o g e t h e r w i t h a l e v y o f j u s t u n d e r 1% maximum, means t h a t most b e t t i n g o f f ices now d e d u c t 8 .5% f r o m w i n n i n g s . T h i s g i v e s a f o r m i d a b l e a d v a n t a g e t o t h e bookmaker who c a n o f f e r t h e same o d d s w i t h o u t a n y d e d u c t i o n s . 219

I n t h e v i e w o f t h e Commission, t h e r e c e n t i n c i d e n c e o f

i l l e g a l b e t t i n g is s i m p l y a f u n c t i o n o f t h e combined r a t e s

o f d u t y and l e v y on b e t t i n g .

W h i l e t h e Royal Commission made t h e above o b s e r v a t i o n s ,

i t was c a r e f u l t o n o t e t h a t t h e e v i d e n c e a b o u t i l l e g a l

b e t t i n g is i m p o s s i b l e to q u a n t i f y b e c a u s e it is a l m o s t

e n t i r e l y a n e c d o t a l . However, t h e Commission n o t e d t h a t

u n d e r t h e p r e s e n t l aw g o v e r n i n g b e t t i n g o f f ices, p o l i c e

e v i d e n c e shows t h e b e t t i n g o f f i c e s r e q u i r e h a r d l y a n y s u p e r -

v i s i o n a t a l l , a n d t h a t b e t t i n g " t o d a y " is s t i l l v i r t u a l l y

f r e e f rom c r i m i n a l a c t i v i t y .

L e g a l c a s i n o g a m b l i n g and e n f o r c e m e n t o f c a s i n o l a w

i n v o l v e s d i f f e r e n t p r o b l e m s . Once a g a i n , t h e aim of t h e

B r i t i s h l e g i s l a t i o n is t o r e g u l a t e and c o n t r o l g a m b l i n g as a

s o c i a l phenomena r a t h e r t h a n t o r a i s e p u b l i c r e v e n u e s from

it. A s a r e s u l t , t h e r e g u l a t o r y a u t h o r i t y - - T h e Gaming

B o a r d , is g i v e n v e r y g r e a t powers (some s a y " D r a c o n i a n " )

o v e r n e a r l y a l l a s p e c t s o f c a s i n o l i c e n s i n g and o p e r a t i o n s .

I n a d d i t i o n , t h e p o l i c e have b r o a d powers o f i n s p e c t i o n and

e n f o r c e m e n t . Between t h e 1968 i n c e p t i o n o f t h e Gaming Board

a n d t h e mid 1 9 7 0 t s , t h e Board and t h e p o l i c e were q u i t e

e f f e c t i v e i n s h u t t i n g down i l l e g a l l y - r u n c a s i n o s and i n

g e t t i n g u n d e s i r a b l e e l e m e n t s o u t of B r i t i s h c a s i n o

g a m b l i n g . However, e v e n t s s i n c e t h e n have shown a new

c h a r a c t e r and e x t e n t o f e f f e c t i v e c a s i n o g a m b l i n g law

e n f o r c e m e n t . On t h e o n e h a n d , The Gaminq A c t 1 9 6 8 p r o h i b i t s

- 208 -

c a s i n o s f r o m e n g a g i n g i n e n t i c i n g i n d i v i d u a l s t o g a m b l e by

means o f p a y i n g c o m m i s s i o n s , p r o v i d i n g c o m p l e m e n t a r y p a s s e s ,

j u n k e t s , a n d e x t e n s i v e c r e d i t . On t h e o t h e r h a n d , d u e t o

t h e c o s t - p r o f i t s t r u c t u r e o f t h e c a s i n o b u s i n e s s , c a s i n o s

a re s u r e t o i n c r e a s e t h e i r p r o f i t s by d o i n g t h e p r o s c r i b e d

ac ts . T h u s o n e o b s e r v e r o f t h e B r i t i s h c a s i n o s c e n e

c o n c l u d e s t h a t d u e to t h e m a r k e t s t r u c t u r e o f t h e c a s i n o s ,

u n d e r t h e p r e s e n t l e g i s l a t i o n t h e y w i l l a l w a y s h a v e a n

i n c e n t i v e to e n g a g e i n i l l e g a l b e h a v i o u r , a n d as a r e s u l t ,

t h e r e w i l l b e a n e e d f o r c o n t i n u i n g s u r v e i l l e n c e by t h e

Gaming B o a r d , w i t h p e r h a p s some i n c r e a s e i n , a n d b r o a d e n i n g

o f t h e B o a r d ' s p o w e r s .

I n a d d i t i o n , t h e c a s i n o l e g i s l a t i o n a n d its s t r i c t

e n f o r c e m e n t f a i l e d t o d e a l w i t h t h e p r o b l e m o f gaming i n t h e

s t reets . I n r e s p o n s e t o t h e c o n t i n u i n g p r o b l e m o f i l l e g a l

s t reet g a m i n g , t h e 1 9 7 8 R o y a l Commiss ion recommended a

p e n a l t y o f i m p r i s o n m e n t f o r p e r s i s t e n t o f f e n d e r s .

VIII. APPLICATION OF GREAT SRITAIN'S LEGALIZED GAMBLING EXPERIENCE

1. Gambling Leqislation in the Bahamas

After examining legalized gambling in Great Britain, it

is instructive to turn to three countries which were guided

in part by the British experience. The Bahamas can be seen

to emulate most of the British casino model, and Australia

and New Zealand follow the tradition but alter it to match

the varying cultural conditions.

A. Comparison Between British and Bahamas' Gamblinq Legislation

The principle gambling control legislation in the

Bahamas consists of The Lotteries and Gaming Act, 1969, the

regulations pursuant to the Act, The Gaminq Requlations,

1971, and The Lottery and Gaming (Amendment) Acts, 1971,

1972, 1974, and 1978. Several similarities exist between

the provisions of Bahamas gambling legislation and the

provisions of the principal British legislation, The Gaminq

~ c t 1968. Both countries:

(i) prohibit all commercial gaming other than on

licensed premises, but allow non-commercial

gaming on domestic occasion in private homes,

hostels, and education residence;

(ii) establish a Gaming Board with powers substan-

tially similar to those of the Gaming Board for

Great Britain;

(iii) require that the Gaming Board consider two main

factors when deciding whether to recommend the

granting of a license:

p r o p o s e d ? ;

( 2 ) is it i n t h e p u b l i c i n t e r e s t i n a l l t h e

c i r c u m s t a n c e s t h a t a l i c e n s e s h o u l d b e

g r a n t e d ? (s. 3 1 )

B. Licensing in the Bahamas

C a s i n o l i c e n s e s a r e n o t g r a n t e d t o n o n - r e s i d e n t s o f t h e

Bahamas, or t o a n y o n e who h a s been c o n v i c t e d a n y w h e r e o f an

o f f e n c e i n v o l v i n g f r a u d o r d i s h o n e s t y . E v e r y r e p o r t made b y

t h e Gaming Board r e g a r d i n g a l i c e n s e a p p l i c a t i o n m u s t be

c o n s i d e r e d by t h e M i n i s t e r i n m a k i n g a d e c i s i o n . The

M i n i s t e r ' s d e c i s i o n as t o t h e g r a n t i n g o f a l i c e n s e is

f i n a l . A c o n d i t i o n o f t h e g r a n t i n g o f a l i c e n s e is a u t h o r -

i z a t i o n by t h e l i c e n s e e o f e v e r y bank w h e r e he h a s a c c o u n t s

t o d i s c l o s e f u l l y t o t h e Gaming Board f u l l p a r t i c u l a r s o f

t h e a c c o u n t ( s ) .

L i k e t h e Gaming B o a r d f o r G r e a t B r i t a i n , t h e Bahamas '

Gaming Board is a lso c h a r g e d w i t h a p p r o v i n g t h e p e r s o n n e l

e m p l o y e d i n t h e g a m b l i n g c a s i n o s . The r a t i o n a l e i n b o t h

cases is t h e same--to e l i m i n a t e u n d e s i r a b l e p e o p l e f r o m

c a s i n o g a m b l i n g o p e r a t i o n s . The Gaming Board and p o l i c e o f

t h e Bahamas s h a r e t h e e n f o r c e m e n t r e s p o n s i b i l i t i e s o f t h e

A c t . A g a i n , as i n B r i t a i n , t h e Gaming Board a p p o i n t s

i n s p e c t o r s who a l o n g w i t h t h e p o l i c e h a v e v i t u r a l l y

u n l i m i t e d p o w e r s o f e n t r y and i n s p e c t i o n o f c a s i n o p r e m i s e s .

C. Restrictions On Casino Gambling

The m o s t i n t e r e s t i n g c h a r a c t e r i s t i c o f Bahamas ' c a s i n o

g a m i n g is t h e f a c t t h a t Bahamian c i t i z e n s , r e s i d e n t s , l a n d e d

i m m i g r a n t s , t h o s e employed by t h e Governmen t o f t h e Bahamas ,

or t h o s e d o i n g b u s i n e s s i n t h e Bahamas, a r e p r o h i b i t e d f rom

gaming . I n o t h e r w o r d s , c a s i n o gaming i n t h e Bahamas i s

l i m i t e d s t r i c t l y t o t o u r i s t s a n d v i s i t o r s t o t h e i s l a n d s .

Though t h e r a t i o n a l e f o r s u c h a p r o s c r i p t i o n is n o t g i v e n i n

t h e l e g i s l a t i o n , it may b e c o n c l u d e d t h a t p o l i c y - m a k e r s o f

t h e Bahamas r e g a r d c a s i n o - t y p e g a m b l i n g to b e a s o c i a l - e v i l

t o t h e e x t e n t t h a t it m u s t b e p r o h i b i t e d among c i t i z e n s a n d

r e s i d e n t s o f t h e c o u n t r y . However , s i n c e i t is a n i m p o r t a n t

r e v e n u e s o u r c e , it is a l l o w e d a n d a c t i v e l y p r o m o t e d f o r

t o u r i s t s a n d v i s i t o r s .

A s i n P u e r t o Rico, i f t o u r i s m p l u s r e v e n u e is a n a i m ,

i t is d i f f i c u l t t o e l i m i n a t e c a s i n o g a m b l i n g by t h o s e l oca l s

who h a v e t h e n e c e s s a r y money t o g a m b l e - - e s p e c i a l l y i f t h e y

h a v e t h e c a s h t o g a m b l e l a v i s h l y . W e know e n f o r c e m e n t o f

t h i s r e g u l a t i o n is o f t e n o v e r l o o k e d i n P e r t o Rico and w e

m i g h t a s s u m e t h e same t o b e t r u e i n t h e Bahamas.

D. Amendments to the Lotteries and Gaming Act, 1969: Tiqhteninq up the British Mode l

S i n c e T h e L o t t e r i e s a n d Gaming A c t , 1 9 6 9 was p a s s e d ,

t h e G o v e r n m e n t o f t h e Bahamas h a s p a s s e d T h e Gaminq

R e q u l a t i o n s , 1 9 7 1 a n d s e v e r a l amendments t o t h e o r i g i n a l

A c t . T h e most n o t e w o r t h y a s p e c t s o f t h e R e q u l a t i o n s are

p r o v i s i o n s s e t t i n g o u t t h e p o w e r s o f t h e Gaming B o a r d

I n s p e c t o r a t e , a n d s p e c i f i c r u l e s f o r t h e c a s i n o games .

T h e L o t t e r i e s a n d Gaminq Amendment A c t s o f 1 9 7 1 , 1972 ,

1 9 7 4 a n d 1 9 7 8 h a v e t h e f o l l o w i n g i m p o r t a n t c h a r a c t e r i s t i c s :

(1) t h e M i n i s t e r i n v i e w o f t h e p u b l i c i n t e r e s t a n d

a f t e r c o n s u l t a t i o n w i t h t h e Gaming Board may, w i t h

1 4 d a y s n o t i c e , s u s p e n d a c a s i n o l i c e n s e ;

( 2 ) t h e Gaming Board m u s t b e n o t i f i e d o f a l i c e n s e e ' s

i n t e n t i o n t o a c q u i r e f o r e i g n gaming i n t e r e s t s ;

t h e M i n i s t e r may ban a n i n d i v i d u a l ( o t h e r w i s e

a l l o w e d t o g a m b l e ) f r o m e n t e r i n g c a s i n o s ;

a p p r o v a l by t h e Gaming Board is r e q u i r e d f o r t h e

e m p l o y m e n t , n o t o n l y of t h o s e who a c t u a l l y c o n d u c t

t h e gaming i n c a s i n o s , b u t a l so o f i n d i v i d u a l s who

are e m p l o y e d i n c a p a c i t i e s s u c h as h o s t e s s i n g ,

w a i t i n g ( w a i t r e s s i n g ) , b a r t e n d i n g , e tc . , i n

c a s i n o s ;

f i n g e r p r i n t s are r e q u i r e d o f a l l c a s i n o m a n a g e r s ,

p r o m o t e r s , s u p e r v i s o r s , a c c o u n t a n t s , c r o u p i e r s ,

c a s h i e r s , i n s p e c t o r s , s e c u r i t y s u p e r v i s o r s , e t c . ;

a n d ,

p o l i c e a n d Gaming Board i n s p e c t o r s h a v e t h e

a u t h o r i t y to a r r e s t w i t h o u t w a r r a n t , p e r s o n s

r e a s o n a b l y s u s p e c t e d o f h a v i n g c o m m i t t e d an

o f f e n c e u n d e r t h e A c t .

The g e n e r a l c h a r a c t e r o f t h e s e amendments i n d i c a t e t h a t

t h e G o v e r n m e n t o f t h e Bahamas h a s f o u n d it n e c e s s a r y t o

l e g i s l a t e more s t r i n g e n t c o n t r o l a n d e n f o r c e m e n t m e a s u r e s

u p o n t h e c a s i n o i n d u s t r y s i n c e t h e o r i g i n a l A c t was p a s s e d

i n 1969 . W h e t h e r t h e s e m o r e s t r i n g e n t c o n t r o l a n d e n f o r c e -

m e n t m e a s u r e s are d u e to a b u s e o f t h e o r i g i n a l A c t a n d / o r

t h e p e n e t r a t i o n o f c r i m i n a l i n t e r e s t s is d i f f i c u l t t o ascer-

t a i n .

E. Casino Taxation in the aha am as

T a x a t i o n o f c a s i n o s i n t h e Bahamas is c o v e r e d by t h e

p r o v i s i o n s o f The C a s i n o T a x a t i o n A c t , 1 9 6 7 , a n d T h e C a s i n o

T a x a t i o n (Amendment) A c t s , 1 9 6 7 a n d 1974 . A t t h e p r e s e n t

t i m e , o p e r a t i n g c a s i n o s i n t h e Bahamas are s u b j e c t t o a

B a s i c Tax o f $ 2 0 0 , 0 0 O / y e a r p l u s t h e f o l l o w i n g Tax o n Gross

W i n n i n g s :

- On g r o s s w i n n i n g s up to a n d i n c l u d i n g $ 1 0 , 0 0 0 , 0 0 0 = 25%

- On g r o s s w i n n i n g s i n e x c e s s o f $ 1 0 , 0 0 0 , 0 0 0 u p t o a n d i n c l u d i n g $ 1 6 , 0 0 0 , 0 0 0 = 20%

- On g r o s s w i n n i n g s i n e x c e s s o f $ 1 6 , 0 0 0 , 0 0 0 up t o a n d i n c l u d i n g $ 2 0 , 0 0 0 , 0 0 0 = 1 0 %

- On g r o s s w i n n i n g s i n e x c e s s o f $ 2 0 , 0 0 0 , 0 0 0 = 5%

As o f J a n u a r y 1, 1 9 7 4 , t h e l o w e s t amoun t owing p e r c a s i n o

p e r y e a r w a s deemed t o b e $2 m i l l i o n . T h e r e f o r e , i f a

c a s i n o owed less o n t h e b a s i s o f t h e a b o v e f o r m u l a , $ 2

m i l l i o n was a s s i g n e d as t h e t a x o w i n g . 2 2 0

2. Leqalized Gamblinq in Australia

A, Control of Gamblinq in Australia

I n t h e Commonwealth o f A u s t r a l i a , t h e r e s p o n s i b i l i t y

f o r l e g a l g a m b l i n g f a l l s w i t h i n t h e j u r i s d i c t i o n o f t h e

i n d i v i d u a l S t a t e s . T h e r e f o r e , e a c h S t a t e h a s i ts own r u l e s

a n d r e g u l a t i o n s g o v e r n i n g l e g a l gaming .

- 214 -

L e g a l i z e d G a m b l i n q i n A u s t r a l i a

- -

S t a t e

A u s t r a l i a n C a p i t a l T e r r i t o r y

N e w S o u t h Wales

N o r t h e r n T e r r i t o r y

Q u e e n s l a n d

S o u t h A u s t r a l i a

T a s m a n i a

V i c t o r i a

West A u s t r a l i a

T y p e s o f L e g a l i z e d G a m b l i n g

On- a n d o f f - c o u r s e h o r s e - r a c e b e t t i n g ( i n c l u d i n g t r o t t i n g ) and g r e y h o u n d r a c i n g ;

Amusement m a c h i n e s ; P o k e r m a c h i n e s ; L o t t e r i e s , i n c l u d i n g Local R a f f l e s ,

A r t U n i o n s a n d I n t e r s t a t e L o t t e r i e s .

On- a n d o f f - c o u r s e b e t t i n g on h o r s e - r a c i n g a n d g r e y h o u n d r a c i n g ;

L o t t e r i e s ; P o k e r m a c h i n e s .

On- a n d o f f - c o u r s e b e t t i n g on h o r s e - r a c i n g and g r e y h o u n d r a c i n g ;

Lo t t e r i e s , i n c l u d i n g R a f f l e s a n d S w e e p s t a k e s , T e r r i t o r y S p o r t s L o t o and I n s t a n t S p o r t s L o t t e r y ;

C a s i n o s . On- a n d o f f - c o u r s e b e t t i n g o n

h o r s e - r a c i n g ( i n c l u d i n g t r o t t i n g , a n d g r e y h o u n d r a c i n g .

On- a n d o f f - c o u r s e b e t t i n g on h o r s e - r a c i n g and g r e y h o u n d r a c i n g ;

L o t t e r i e s , i n c l u d i n g Lot to , B i n g o , F o o t b a l l P o o l s a n d S w e e p s t a k e s .

On- a n d o f f - c o u r s e b e t t i n g on h o r s e - r a c i n q ; -

C a s i n o s .

On- a n d o f f - c o u r s e b e t t i n g on h o r s e - r a c i n g a n d g r e y h o u n d r a c i n g ;

L o t t e r i e s , i n c l u d i n g F o o t b a l l and S o c c e r P o o l s , B ingo .

On- a n d o f f - c o u r s e b e t t i n g o n h o r s e - r a c i n g and g r e y h o u n d r a c i n g ;

L o t t e r i e s .

D e s p i t e t h e s e v a r i a t i o n s , s e v e r a l g e n e r a l comments c a n

b e made a b o u t A u s t r a l i a n l e g a l g a m b l i n g .

A u s t r a l i a n s are a v i d g a m b l e r s . More g a m b l i n g o c c u r s i n

A u s t r a l i a , on a per c a p i t a b a s i s , t h a n i n a n y o t h e r n a t i o n

i n t h e wor ld .221 I n t h e 1 9 7 0 s , t h i s f i g u r e f o r a l l o f

A u s t r a l i a was e s t i m a t e d to b e b e t w e e n $160 a n d $250 p e r

p e r s o n w i t h g a m b l i n g i n T a s m a n i a s h o w i n g a much h i g h e r

a v e r a g e . 222 I n 1 9 8 1 , f i g u r e s f o r T a s m a n i a show a n amount of $ 5 1 2 p e r p e r s o n .

Even e x c l u d i n g t h e amoun t g a m b l e d a t t h e two c a s i n o s i n

T a s m a n i a , w h i c h ca te r i n p a r t t o t h e t o u r i s t m a r k e t , t h e

f i g u r e is s t i l l a p p r o x i m a t e l y $ 3 7 3 p e r p e r s o n . 2 2 3

B. Types of Gamblinq

( i R a c i n g : Each S t a t e and T e r r i t o r y h a s b o t h on-

t r a c k a n d o f f - t r a c k race b e t t i n g . T h o r o u g h b r e d ,

h a r n e s s a n d g r e y h o u n d r a c i n g , i n t h a t o r d e r , are a l l

p o p u l a r . R a c i n g is g e n e r a l l y c a r r i e d o u t a t t h e c l u b

l e v e l w i t h v a r i o u s " a s s o c i a t i o n s " g o v e r n i n g t h e s p o r t

a n d g o v e r n m e n t s s u p e r v i s i n g t h e gamhl i n g . O n - t r a c k b e t t i n g is c a r r i e d o u t by " l i c e n s e d

bookmaker s" and o n - c o u r s e t o t a l i s a t o r s . 2 2 4 The book-

m a k e r s are l i c e n s e d by t h e g o v e r n m e n t s t h r o u g h t h e body

c o n t r o l l i n g race g a m b l i n g ( f o r e x a m p l e , t h e R a c i n g a n d

Gaming Commiss ion i n T a s m a n i a ) and o n - c o u r s e t o t a l i s a -

t o r s are a l l o w e d as r e q u i r e d b y t h e gaming a u t h o r i t y .

W i t h r e s p e c t t o l i c e n s e d b o o k m a k e r s , i n t h e A u s t r a l i a n

C a p i t a l T e r r i t o r y , f o r e x a m p l e , t h e b o o k m a k e r s c a n o n l y

a c c e p t b e t s a t b o n a f i d e race m e e t i n g s . They may

a c c e p t b e t s o n l o c a l a n d i n t e r s t a t e r a c e s . A 1% t u r n -

o v e r t a x is l e v i e d by t h e Gaming and L i q u o r A u t h o r i t y

a n d a 1 . 5 % t u r n o v e r t a x is l e v i e d by i n d i v i d u a l r a c i n g

c l u b s . 225

T o t a l i s a t o r Agency B o a r d s (T.A.B.s) are, s i n c e

less t h a n o n e - h a l f o f race g a m b l i n g is c a r r i e d o u t o n

t h e c o u r s e , u s e d t o c o n t r o l o f f - t r a c k b e t t i n g . They

w e r e f i r s t e s t a b l i s h e d i n W e s t e r n A u s t r a l i a a n d

Vic tor ia i n 1 9 6 1 , a n d T a s m a n i a i n 1 9 7 5 . ~ ~ ~ ~ h e s e b o a r d s

(T.A.B.s) a r e g o v e r n m e n t - a p p o i n t e d b o d i e s t h a t c o n t r o l

o f f - t r a c k b e t t i n g and p r o v i d e a s s i s t a n c e t o t h e s p o r t

a n d r e v e n u e to t h e a u t h o r i t i e s . B e t t i n g by p o s t , t e l e -

g ram a n d t e l e p h o n e is g e n e r a l l y p e r m i t t e d i f t h e

c u s t o m e r h a s a d e p o s i t o n a c c o u n t ( n o c r e d i t is

a l l o w e d ) . I n t e r s t a t e b e t t i n g is a lso p e r m i t t e d . F o r

e x a m p l e , i n t h e A u s t r a l i a n C a p i t a l T e r r i t o r y t h e s y s t e m

is s u c h t h a t a l l m o n i e s w a g e r e d on a p a r t i c u l a r t y p e o f

b e t on a s p e c i f i c r a c e are p o o l e d , a 1 5 % l e v y is t a k e n

o f f a n d t h e r e m a i n d e r d i s t r i b u t e d t o a l l w i n n i n g

b e t tors .

Of t h e 1 5 % l e v y , 2% is r e t u r n e d t o t h e r a c i n g

i n d u s t r y a n d 13% r e t a i n e d by t h e T.A.B. t o c o v e r admin-

i s t r a t i v e costs . Any e x c e s s or p r o f i t is f o r w a r d e d t o

t h e Community Deve lopmen t Fund f o r a l l o c a t i o n by t h e

M i n i s t e r o f t h e C a p i t a l T e r r i t o r y t o c h a r i t i e s a n d

o t h e r communi ty g r o u p s . I n t h e y e a r A u g u s t 1, 1980 t o

J u l y 3 1 , 1 9 8 1 , t h e t u r n o v e r o f t h e T.A.B. was a p p r o x i -

m a t e l y $ 2 9 , 0 0 0 , 0 0 0 . The T.A.B. d u r i n g t h i s p e r i o d

m a i n t a i n e d two o u t l e t s a t race t r a c k s a n d t w e n t y - f o u r

o u t l e t s i n s u b u r b a n s h o p p i n g c e n t r e s . 2 2 7

( i i ) P o k e r M a c h i n e s : O n l y New S o u t h Wales and t h e

A u s t r a l i a n C a p i t a l T e r r i t o r y ( C a n b e r r a ) h a v e p o k e r o r

s l o t m a c h i n e s . T h e s e a r e l o c a t e d i n l i c e n s e d o r

r e g i s t e r e d "c lubs1 ' which a l s o p r o v i d e e n t e r t a i n m e n t and

o t h e r social a c t i v i t i e s .

O f t h e money p u t i n t o poke r mach ines , 87% must b e

r e t u r n e d to t h e p l a y e r , 1 .3% is forwarded t o t h e

Community Development Fund and t h e r e m a i n d e r r e t a i n e d

by t h e Club. I n t h e y e a r August 1 , 1980 t o J u l y 3 1 ,

1981 , t o t a l p o k e r machine t u r n o v e r w a s a p p r o x i m a t e l y

$ ~ O , O O O , O O O .228

The re h a s been much cri t icism of t h e poke r

mach ines d u e t o t h e f i n a n c i a l h a r d s h i p s u f f e r e d by t h e

f a m i l i e s o f compu l s ive g a m b l e r s , t h e r e f o r e , a t t e m p t s to

l e g a l i z e them i n o t h e r s ta tes have f a i l e d . 2 2 9 his

cri t icism i n c r e a s e d due to t h e f i n d i n g s o f t h e M o f f i t t

Commission which i n c l u d e d a l l e g a t i o n s of an i n f i l t r a -

t i o n by o r g a n i z e d crime i n t o t h e poker machine gambling

b u s i n e s s . 230 I n t e r e s t i n g l y , Tasmania , which h a s l e g a l -

i z e d c a s i n o s , d o e s n o t p e ~ m i t s lo t machines e v e n i n t h e

c a s i n o s t h e m s e l v e s . 231

( iii) Lotteries: Lot ter ies seemed to have d e c l i n e d i n

p o p u l a r i t y b u t s t i l l show a s i g n i f i c a n t p r e s e n c e i n t h e

gambl ing m a r k e t . L o t t e r i e s are u s u a l l y government - run i

b u t t h e r e are some l o t t e r i e s t h a t are r u n j o i n t l y w i th

p r i v a t e companies .232 L o t t e r i e s t a k e s e v e r a l forms--

o r d i n a r y l o t t e r i e s , l o t t o games and a new " I n s t a n t

L o t t e r y n . O f t e n , r e l i g i o u s and c h a r i t a b l e o r g a n i z a -

t i o n s are p e r m i t t e d to conduc t such games a s b i n g o ,

"Lous ie -Lous ien and t ombo lan .

( i v ) S o c c e r P o o l s : S o c c e r p o o l s seem to have been

i n t r o d u c e d i n t h e 1 9 7 0 ' s and are based on t h e Un i t ed

Kingdom mode1.233 S e v e r a l o f t h e states have them b u t

it sesms t h a t thGy ha"e n e v e r commanded much o f t h e

gaming market .234

( v ) M i n o r Gaming: L i k e o t h e r c o u n t r i e s , A u s t r a l i a n

S t a t e s a l l o w g r o u p s a n d o r g a n i z a t i o n s o f a c h a r i t a b l e

n a t u r e t o r u n l o t t e r i e s , b i n g o , " h o u s i e - h o u s i e " , " t o m b o l a " , " l u c k y e n v e l o p e s R , r a f f l e s , e t c . , t o ra ise

f u n d s . T h e y a re l i c e n s e d and c o n t r o l l e d by some

g o v e r n m e n t a l a u t h o r i t y a n d t h e e m p h a s i s is on non-

p r i v a t e , non-commerc ia l f u n d - r a i s i n g f o r "good c a u s e s " .

( v i ) C a s i n o s : C a s i n o s are p r e s e n t l y located i n

T a s m a n i a a n d t h e N o r t h e r n T e r r i t o r y and s e v e r a l o t h e r

s t a t e s a re i n v e s t i g a t i n g t h e p o s s i b i l i t y o f e s t a b l i s h -

i n g c a s i n o s .

T a s m a n i a was t h e f i r s t s t a t e t o p a s s t h e e n a b l i n g

l e g i s l a t i o n w i t h r e g a r d t o c a s i n o s 2 3 5 a n d h a s had i ts

t w o c a s i n o o p e r a t i o n s s t u d i e d by t h e N o r t h e r n T e r r i t o r y

Governmen t . T h i s s t u d y r e s u l t e d i n t h e p a s s a g e by t h e

N o r t h e r n T e r r i t o r y o f t h e C a s i n o D e v e l o p m e n t A c t , 1 9 7 8 ,

a n d t h e C a s i n o L i c e n s e a n d C o n t r o l A c t , 1979 . The

l a t t e r A c t c o n t a i n s t h e a g r e e m e n t s wh ich w e r e r e a c h e d

b e t w e e n t h e N o r t h e r n T e r r i t o r y Government and t h e

p r i v a t e d e v e l o p e r s who wou ld erect a n d o p e r a t e t h e

c a s i n o s .

The Casino Industry i n A u s t r a l i a

( i ) T a s m a n i a :

C a s i n o s are a l l o w e d i n T a s m a n i a i n H o b a r t ( i n t h e

s o u t h e r n p a r t o f t h e i s l a n d ) a n d L a u n c e s t o n ( i n t h e

n o r t h e r n p a r t o f t h e i s l a n d ) . The o r i g i n a l a g r e e m e n t

f o r t h e W r e s t P o i n t c a s i n o g i v e s as a s t a t ed p u r p o s e

t h e e s t a b l i s h m e n t o f a t o u r i s t h o t e l o f i n t e r n a t i o n a l

s t a n d i n g a t H o b a r t . L i k e w i s e , t h e L a u n c e s t o n c a s i n o is

p a r t o f a h o l i d a y resort c o u n t r y ~ u l b . ~ ~ ~ The a t t r a c -

tion of tourists was the main aim of the Government's

decision to allow casino gambling in Tasmania.

Standard casino games are played (with the above-

mentioned exception of poker machines) such as

Roulette, Punto Banco and Black jack.

The casinos are under the control of a non-police

Government Inspectorate, exercising control under the

Wrest Point Casino (License and Development) Act, 1968.

(ii) Northern Territory

In late 1978, the Northern Territory Government

approved the erection and licensing of casinos in the

Northern Territory. To enable the Government to

proceed, a short - Act (No. 133 of 1978) was introduced

and the principal Act (No. 62 of 1979) commenced on June 29, 1979.

There are two casinos; one located at Alice

Springs and the other at Darwin. The former has only

been in operation since July of 1981 and no data are

presently available concerning its operation. The Don

Casino at Darwin has been in operation since September

22, 1979, and the conclusion reached to date, is that

the Darwin way of life does not seem to have been

adversely affected by the casino's operations, nor has

there been an adverse effect on police operations; no

specif ically-related increase in crime has been

noted.237 ,

- The successful licensee is selected by a panel

consisting of a Racing and Gaming Commission represen-

tative, a senior Treasury Official and the Crown

solicitor. The Don Casino is managed by the licensee

a n d is u n d e r t h e u l t i m a t e c o n t r o l of t h e g o v e r n m e n t

t h r o u g h t h e C a s i n o L i c e n s e a n d C o n t r o l A c t , 1 9 7 9 .

A good dea l o f s e c u r i t y is p r o v i d e d by t h e

l i c e n s e e a n d t h e f o l l o w i n g o b s e r v a t i o n s h a v e b e e n made

by t h e e m p l o y e e s a n d t h e p o l i c e . I t is a p p a r e n t f r o m

t h e l i s t t h a t t h e r e is c o n c e r n r e g a r d i n g t h e amount o f

g a m b l i n g d o n e b y t h e l o c a l s b u t t h e c o n c l u s i o n seems to

b e t h a t c a s i n o g a m b l i n g is n o t p r o v i n g to b e o v e r l y

c o n s u m i n g f o r t h e n o n - t o u r i s t p o p u l a t i o n .

The number o f p e o p l e i n t h e c a s i n o d u r i n g t h e d a y t i m e o p e r a t i o n s is m i n i m a l and t h o s e g a m b l i n g g e n e r a l l y p l a y on t h e low s t a k e s t a b l e s .

D u r i n g n i g h t o p e r a t i o n s , t o u r i s t s are more p romi - n e n t a n d are i d e n t i f i e d t h r o u g h t h e i r n e r v o u s a p p r o a c h t o t h e games a n d i n t h e a m o u n t s o f money t h e y w a g e r .

L o c a l s t e n d t o b e m o r e c o n £ i d e n t b u t b e t i n much smal ler a m o u n t s .

L o c a l s a p p e a r to d o m i n a t e t h e o t h e r f a c i l i t i e s i n t h e c o m p l e x s u c h a s t h e r e s t a u r a n t , c a b a r e t and l o u n g e b a r s .

The cost o f d r i n k s is s i g n i f i c a n t l y h i g h e r t h a n a n o r m a l c l u b o r h o t e l a n d , . t h e r e f o r e , t e n d s n o t to a t t r a c t a f t e r work d r i n k e r s .

. -

C a s i n o a c t i v i t y seems t o o n l y g a t h e r momentum a b o u t 7 p.m. - 8 p.m. a n d a p p e a r s t o r e a c h a peak a b o u t 11 p.m. - m i d n i g h t .

L o c a l s i n t h e c a s i n o d e c l i n e d r a m a t i c a l l y a f t e r m i d n i g h t .

C a s i n o management is v e r y c o n s c i o u s o f t h e s o c i a l c o n s e q u e n c e s w i t h l oca l s a n d k e e p s a close e y e o n t h e i r a c t i v i t i e s .

The s t a n d a r d s o f d r e s s r u l e s t h a t a p p l y are s t r i c t l y e n f o r c e d .

( j ) A h i g h p e r c e n t a g e o f p e o p l e i n t h e c a s i n o a p p e a r t o be o b s e r v e r s a n d o f t e n l e a v e w i t h o u t g a m b l i n g o n t h e t a b l e s .

( k ) T h e r e is no e v i d e n c e o f u n d e s i r a b l e s a n d l i t t l e e v i d e n c e o f i n t o x i c a t e d p e r s o n s i n t h e c a s i n o .

(1) The g e n e r a l i m p r e s s i o n is o n e o f a soc i a l g e t - t o g e t h e r , e s p e c i a l l y w i t h l o c a l s , as t h e y a p p e a r t o be t h e r e i n g r o u p s o f 3 t o 4 .

As w e l l , t h e N o r t h e r n T e r r i t o r y P o l i c e h a v e c o n c l u d e d :

( a ) T h e r e h a s b e e n no e v i d e n c e o f r e l a t ed c r i m i n a l a c t i v i t y o r c a s i n o m a l p r a c t i c e .

( b ) T h e r e h a s b e e n n o i n d i c a t i o n o f i n c r e a s e i n crime s i n c e t h e o p e n i n g o f t h e c a s i n o .

( c ) On t h e q u e s t i o n o f d r u g s , w e are o f t h e o p i n i o n t h a t a n y p e r s o n g a m b l i n g s e r i o u s l y would w a n t to b e sober a n d c l e a r - h e a d e d , w h i c h t e n d s t o r u l e o u t t h e q u e s t i o n o f d r u g s c h a n g i n g h a n d s i n t h e c a s i n o .

( d ) The e f f e c t of t h e c a s i n o o n t h e economy o f t h e N o r t h e r n T e r r i t o r y h a s b e e n b e n e f i c i a l a n d it h a s ,

had no s i g n i f i c a n t , d e t r i m e n t a l e f f e c t o n t h e soc ia l a n d e c o n o m i c w e l l - b e i n g o f t h e communi ty .

P u r s u a n t t o s. 50 o f t h e - A c t , t h e T r e a s u r e r o f t h e

N o r t h e r n T e r r i t o r y h a s c a u s e d t o b e i s s u e d a number o f

" D i r e c t i o n s " t o t h e l i c e n s e e . T h e s e D i r e c t i o n s a re

q u i t e d e t a i l e d a n d l e n g t h y . The l i s t i n c l u d e s :

1. N o c r e d i t b e t s - - b u t p e r s o n a l c h e q u e s may b e c a s h e d

a t t h e c a s h i e r ' s d e s k .

2. N o c o u n t o f t h e d r o p b o x e s s h a l l t a k e p l a c e e x c e p t

i n t h e p re sence -o f a Gaming Commiss ion i n s p e c t o r

who s h a l l b e seated n e x t t o t h e s h e e t c a s h i e r a n d

who s h a l l s i g n t h e c o m p l e t e d c o u n t f o r m .

0

3 . N o company e m p l o y e e who is a member o f t h e gaming

s t a f f s h a l l a c c e p t a t i p f r o m a n y p e r s o n .

4 . T h e r e s h a l l b e d i s p l a y e d a t e a c h b l a c k j a c k t a b l e

d u r i n g t h e a p p r o v e d h o u r s o f gaming a n " a d v i c e t o

p l a y e r s " n o t i c e o u t l i n i n g a d v a n t a g e o u s c a r d r u l e s

f o r g a m b l i n g .

5. N o p e r s o n s h a l l b e s e r v e d w i t h i n t o x i c a t i n g l i q u o r

a t t h e gaming t a b l e s a n d no p e r s o n i n p o s s e s s i o n

of i n t o x i c a t i n g l i q u o r s h a l l be p e r m i t t e d t o p l a y

a n y game.

( i i i ) C o n t r o l o f Gaming Areas

The b a s i c t e n e t o f t h e s e c u r i t y m e t h o d s u t i l i z e d

is t o a n t i c i p a t e a n d p r e v e n t i n c i d e n t s r a t h e r t h a n

e n d e a v o u r i n g t o d e a l w i t h p r o b l e m s o n c e t h e y h a v e

a r i s e n . A l l g a m i n g areas are c o n t r o l l e d by t h e f o l l o w -

i n g m e t h o d s :

" P i t - b o s s " c o n t r o l s b e t w e e n t h r e e and s i x t a b l e s

d e p e n d i n g on t h e game b e i n g p l a y e d i n t h e a r e a .

A f l o o r m a n a g e r s u p e r v i s e s a l l p l a y w i t h i n t h e

gaming room.

E i t h e r t h e C a s i n o Manager or h i s a s s i s t a n t is . -~

p r e s e n t t h r o u g h o u t a l l h o u r s o f gaming .

G o v e r n m e n t i n s p e c t o r s i n p l a i n c l o t h e s are p r e s e n t

t h r o u g h o u t t h e h o u r s o f o p e r a t i o n o f t h e c a s i n o .

H o t e l - C a s i n o s e c u r i t y o f f i c e r s , a l so i n p l a i n

c l o t h e s , are p r e s e n t t h r o u g h o u t t h e gaming p e r i o d .

U n i f o r m e d s e c u r i t y doormen c h e c k a l l p a t r o n s

e n t e r i n g a n d l e a v i n g t h e s i n g l e a c c e s s d o o r t o

e a c h gaming area.

R e g u l a r i n s p e c t i o n s o f a l l c a s i n o a r e a s a r e made

by p l a i n c l o t h e s o f f i c e r s o f t h e N o r t h e r n

T e r r i t o r y P o l i c e F o r c e .

S e c u r i t y c a m e r a s , mounted on t h e c e i l i n g s o f e a c h

c a s i n o a r e a and i n c l e a r v i e w o f t h e p a t r o n s ,

a l l o w a l l games t o be s u p e r v i s e d f rom a c e n t r a l

s e c u r i t y c o n t r o l a r e a .

F a c i l i t i e s f o r i n s t a n t v i d e o t a p e a r e a v a i l a b l e t o

t h e S e c u r i t y C o n t r o l S u p e r v i s o r and i n t h e o f f i c e

o f t h e C a s i n o Manager t o a l l o w s u s p e c t e d

m a l p r a c t i c e s t o be c a r e f u l l y c h e c k e d a t a n y t i m e .

P u r c h a s e o f gaming c h i p s is c o n f i n e d to t a b l e s and

a l l c a s h t r a n s a c t i o n s a r e s u p e r v i s e d b y a n

i n s p e c t o r .

C h i p s c a n o n l y b e redeemed a t o n e c e n t r a l c a s h

d e s k w i t h i n t h e c a s i n o a r e a .

P a t r o n s w i n n i n g s u b s t a n t i a l amounts o f money a r e

o f f e r e d t h e c h o i c e o f c a s h o r a H o t e l - C a s i n o

c h e q u e .

Cash b o x e s which a r e l o c k e d i n t o p o s i t i o n on e a c h

t a b l e a t t h e b e g i n n i n g o f p l a y a r e removed regu-

l a r l y u n d e r escort t o a t o p s e c u r i t y a r e a .

They a r e t h e n opened i n t h e p r e s e n c e o f Government - s u p e r v i s o r s .

- C o u n t i n g o f a l l r e c e i p t s f r o m t h e t h r e e gaming

a r e a s d o e s n o t b e g i n u n t i l s e c u r i t y c o n t r o l

a c t i v a t e s a v i d e o t a p e T.V. c a m e r a w h i c h c o v e r s

t h e e n t i r e c o u n t room.

- V i d e o t a p e s o f e a c h c o u n t become a p e r m a n e n t

r e c o r d a n d are a v a i l a b l e t o t h e Gaming Commiss ion

a n d t h e T r e a s u r y a t a l l t i m e s .

- A l l i n s t r u m e n t s o f g a m i n g - - p l a y i n g c a r d s , d i c e ,

r o u l e t t e b a l l s , e t c . - - a r e h e l d u n d e r s t r i c t

s e c u r i t y by Governmen t i n s p e c t o r s , e x c e p t d u r i n g

h o u r s o f o p e r a t i o n . A l l c a r d s a r e d e s t r o y e d a t

t h e close o f e a c h d a y ' s p l a y . The Governmen t

u n d e r t a k e s r e g u l a r c h e c k s o f d i c e a n d r o u l e t t e

b a l l s b y m i c r o s c o p e and w e i g h t e q u i p m e n t .

D. B e t t i n g Behaviour and Tax Revenue Gains

L e g a l g a m b l i n g i n A u s t r a l i a is r e l a t i v e l y w i d e o p e n a n d

p r o v i d e s a n e x t e n s i v e l is t o f c h o i c e s f o r ' t h e a c t i v e

A u s t r a l i a n g a m b l e r . T h e r e are t h r e e t y p e s o f r a c i n g w i t h

" n o r m a l " a n d " e x o t i c " b e t s , o f f - t r a c k b e t t i n g , s e v e r a l t y p e s

of l o t t e r i e s , a w i d e v a r i e t y o f m i n o r games , as w e l l a s

soccer p o o l s . T h e r e seem t o b e f e w p r o b l e m s w i t h t h e s e more

" t r a d i t i o n a l " f o r m s o f g a m b l i n g . C a s i n o s i n T a s m a n i a a n d

t h e N o r t h e r n T e r r i t o r y seem to p r e s e n t f e w p r o b l e m s . The

o n l y o b v i o u s p r o b l e m w h i c h h a s o c c u r r e d h a s b e e n w t t h t h e

p o k e r m a c h i n e .

- A s m e n t i o n e d a b o v e , p o k e r m a c h i n e s h a v e c a u s e d c o n c e r n s

a b o u t soc ia l cos t s ( g a m b l i n g a d d i c t s ) a n d o r g a n i z e d crime.

N e w S o u t h Wales h a s had them s i n c e 1956-57 a n d s i n c e t h e n

o n l y o n e T e r r i t o r y h a s f o l l a w e d s u i t - - t h e A u s t r a l i a n C a p i t a l

T e r r i t o r y . S i n c e 1 9 5 6 , S t a t e s h a v e l e g a l i z e d o f f - t r a c k

b e t t i n g , a d d e d l o t t e r i e s , and a l l o w e d s o c c e r p o o l s , b u t no

S t a t e h a s a c c e p t e d p o k e r m a c h i n e s . The a b o v e - m e n t i o n e d

p r o b l e m s and t h e d r a m a t i c a m o u n t s b e t no d o u b t are t h e

r e a s o n s f o r t h i s . I n 1974 /75 i t was e s t i m a t e d t h a t $ 2

B i l l i o n was s p e n t on p o k e r m a c h i n e s i n N e w S o u t h Wales

a l o n e . T h i s was b a s e d on a t a x f i g u r e o f $72 M i l l i o n . I n

1981 /82 , t h e t a x f i g u r e was $150 M i l l i o n w h i c h would s e e m t o

i n d i c a t e t h a t o v e r $3 B i l l i o n was s p e n t o n s l o t m a c h i n e s

t h a t y e a r . 238

T h e r e seems t o be l i t t l e c o n c e r n o v e r t y p e s o f g a m b l i n g

( w i t h t h e e x c e p t i o n o f c a s i n o s and s l o t m a c h i n e s wh ich as

s t a t e d a b o v e h a v e l i m i t e d S t a t e a c c e p t a n c e ) , b u t t h e r e a re

c o n c e r n s o v e r t h e amoun t b e t i n A u s t r a l i a . To c o u n t e r t h e

c o n c e r n a b o u t c o m p u l s i v e g a m b l i n g , some o f t h e S t a t e s h a v e

come to r e l y upon t h e r e v e n u e f rom l e g a l g a m b l i n g f o r

s u p p o r t o f "good c a u s e s " . F o r e x a m p l e , W e s t e r n A u s t r a l i a

e a r m a r k s a c e r t a i n p e r c e n t a g e ( 2 0 % o f r e v e n u e s f rom

l o t t e r i e s ) t o a f u n d c r e a t e d by t h e H o s p i t a l Fund A c t ,

1 9 3 0 . 2 3 9

The f o l l o w i n g c h a r t o u t l i n e s t h e amount b e t i n e a c h

S t a t e and t h e Governmen t r e v e n u e w h i c h is g e n e r a t e d .

State G

- 226 -

AUSTRALIA: AMOUNT BET AND GOVERNMENT REVENUES.

ambling Forms Amount Bet ~overnment Revenues

Australian T.A.B. $ 29 million ? Capital Poker Machines $ 80 thousand ? Territory Lotteries: Re lotteries: unknown amounts were 1980-1981 "New South Wales" bet; unknown revenues.

"Super 66" "Tattersall Consultation" "Tattersall Instant Lotteryp1 "Lotto" "Soccer Pools" "Tatts Lotto"

However, the tax rate was approximately 30% for all types of lotteries.

New South Lotto $180 million $ 61 million Wales : 1981-82 Lotteries $100 million $ 37.5 million

T.A.R. $ 1 billion $ 85 million Licensed Bookmakers $900 million $ 13 million On-Course Totalisator $ 40 million $ 20 million Poker Machines N/A $150 million Soccer Pools $ 6 million $2 million

$368.5 million total

South Soccer Pools $ 2 million $ 1/2 million Australia Lotteries $ 60 million ?

On-course totalisators $ 24.6 million ? licensed bookmakers $174.5 million ? T.A.B. $133 million ?

Tasmania: T.A.B. $61.8 million 1981/82 On-Course Totalisators $ 5.4 million

Licensed Bookmakers $48.9 million Casino $68 million $16 million from Lotteries (Tattersalls) $35.1 million all gambling - Soccer Pools $ .9 million no breakdown Minor Gaming $17.1 million

Victoria: T.A.B. $687 million $ 36 million 1980-81 Soccer Pools $. 658 million ( includes football

( no other revenue pool revenue ) or betting information available as of 28/8/82) -

Western Australia: T.A.B. $234 million $14 million 1980-81 On-Course Totalisator $ 39 million $ 2 million

Licensed Bookmakers $105 million $ 1.4 million Lotteries $ 33 million $10 million

$18.4 million total

No information on the other States and Territories.

C a s i n o s a n d p o k e r m a c h i n e s , h o w e v e r , do seem to p r e s e n t

s o m e p r o b l e m s . T h e r e may b e a l o n g - t e r m c a u s e f o r c o n c e r n ,

i n a n y e v e n t , if t h e amount o f money b e t c a p t u r e s a huge I ~ p e r c e n t a g e o f t h e r e c r e a t i o n a l d o l l a r and c a u s e s socia l 1 d i s r u p t i o n . An i n t e r e s t i n g r e s p o n s e to t h i s p r o b l e m c a n be

f o u n d i n W e s t e r n A u s t r a l i a ' s Race B e t t i n g C o n t r o l A c t :

25. (1) Upon p r o o f b e i n g g i v e n to t h e s a t i s f a c t i o n o f a n y t w o J u s t i c e s o f t h e ' P e a c e t h a t a n y p e r s o n b y e x c e s s i v e b e t t i n g i s l i k e l y t o i m p o v e r i s h h i m s e l f t o s u c h a d e g r e e as t o e x p o s e h i m s e l f or h i s f a m i l y t o w a n t , s u c h j u s t i c e s may order t h a t no book- make r s h a l l b e t w i t h s u c h p e r s o n f o r n o t e x c e e d i n g t h e s p a c e o f o n e y e a r . 2 4 0

T h i s r e m a r k m u s t b e q u a l i f i e d by t h e comments e x p r e s s e d

b y t h e N o r t h e r n T e r r i t o r y P o l i c e , w h i c h g e n e r a l l y p a i n t t h e

Don C a s i n o a t Darwin as b e i n g a w e l l - c o n t r o l l e d e s t a b l i s h -

m e n t . The r e v e n u e g e n e r a t e d , o f c o u r s e , m u s t b e b a l a n c e d

o f f a g a i n s t a n y d i s s e r v i c e b e i n g d o n e to t h e " g a m b l i n g -

a d d i c t e d " r e s i d e n t s .

Racing

S t a t e Harness Greyhound

A u s t r a l i a n Capi t a 1 T e r r i t o r y

New South Wales

Northern T e r r i t o r y

Queensland I South A u s t r a l i a

Tasmania

V i c t o r i a 1 Western

A u s t r a l i a I I I

"X" = Yes

" ? " = Unknown

'borough- bred

On-Track B e t t i n g

Licensed 3ookmakers

h - t r a c k r o t a l i s a - t o r s

X

X

X

X

X

X

X

X

If f-Track

T.A.B. ' o t a l i s a - :or Agency

Boards

X (1964)

X (1964)

X

X (1962)

X (1967)

X (1975)

X (1961)

X (1961)

Poker lachines

( S l o t 4achines)

X

X

N 0

No

No

No

No

No

Minor Soccer Gaming Pools I

: Bingo, r a f f l e s , Lot tery)

3. Legalized Gamblinq in New Zealand

A, Forms of Legalized Gamblinq

N e w Z e a l a n d al lows s e v e r a l f o r m s o f l e g a l i z e d g a m b l i n g

b u t t h e e m p h a s i s is o n n o n - c o m m e r c i a l g a m b l i n g w i t h t h e

p r o c e e d s g o i n g to ' good c a u s e s ' . P r i v a t e , n o n - c o m m e r c i a l

g a m b l i n g ( f o r e x a m p l e a m o n t h l y p o k e r game) is n o t i l l e g a l

h o w e v e r . The m a i n s t a t u t o r y i n s t r u m e n t is t h e Gaming a n d

Lo t t e r i e s A c t , 1 9 7 7 , whose p u r p o s e is c o n t a i n e d i n its

p r e a m b l e :

a n a c t t o make be t t e r p r o v i s i o n f o r t h e c o n d u c t o f games o f c h a n c e , p r i z e c o m p e t i - t i o n s , a n d lo t t e r i e s f o r amusement a n d f o r r a i s i n g o f f u n d s f o r c e r t a i n p u r p o s e s w h i l e c o n t i n u i n g to p r o h i b i t t h e c o n d u c t o f s u c h a c t i v i t i e s f o r c o m m e r c i a l g a i n . . . 241

A c a r e f u l l y c o n t r o l l e d scheme o f o r g a n i z e d non-

c o m m e r c i a l g a m b l i n g f o r c h a r i t a b l e p u r p o s e s w i t h s t r i c t

l i c e n s i n g p r o v i s i o n s , p r i z e l i m i t s , a n d a u d i t and p r o c e e d s

d i r e c t i v e s , is p r o v i d e d f o r i n t h e Gaminq a n d L o t t e r i e s A c t ,

1 9 7 7 .

( i ) L o t t e r i e s

L o t t e r i e s are t h e m a i n f o r m o f g a m b l i n g u s e d f o r

c h a r i t a b l e p u r p o s e s . Smal l l o t t e r i e s (less t h a n 5 0 % )

d o n o t r e q u i r e l i c e n s e s . The l oca l p o l i c e c a n l i c e n s e

med ium-s i zed o n e s ( less t h a n $500 ) , a n d l a r g e l o t t e r i e s

m u s t b e l i c e n s e d b y t h e D e p a r t m e n t o f I n t e r n a l

A f f a i r s . I n 1 9 8 1 , f o r e x a m p l e , 2 , 7 8 5 o f t h e l a r g e

l o t t e r i e s w e r e l i c e n s e d b y t h e D e p a r t m e n t o f I n t e r n a l

A f f a i r s w i t h t h e f o l l o w i n g p r i z e l i m i t s : l oca l

$ 1 0 , 0 0 0 , r e g i o n a l $ 1 5 , 0 0 0 , a n d n a t i o n a l $ 2 0 , 0 0 0 . 242

The s t a t u t e a l so a l l o w s " l i c e n s e d p r o m o t e r s " t o se l l

t h e i r s e r v i c e s as o g a n i z e r s o f f u n d - r a i s i n g g a m b l i n g ( 5

were i n o p e r a t i o n i n 1 9 8 1 ) . 2 4 3 They mus t b e l i c e n s e d

by a m a g i s t r a t e a n d comply w i t h t h e g e n e r a l r u l e s a n d

a u d i t p r o v i s i o n s d e s i g n e d to e n s u r e t h a t p r o c e e d s , l e ss

e x p e n s e s a n d p r i z e s , g o t o t h e c h a r t i y e 244

N a t i o n a l o r g o v e r n m e n t l o t t e r i e s a r e a l l o w e d b y

t h e A c t a n d a re c o n t r o l l e d by t h e N e w Z e a l a n d L o t t e r y - Board . 245 The p r o c e e d s f r o m t h e "Go lden Kiwi" , f o r

e x a m p l e , are a l l o c a t e d to A r t C o u n c i l s , f i l m d e v e l o p -

m e n t , m e d i c a l r e s e a r c h , s p o r t s g r o u p s , t h e a g e d ,

e t c . 246 I n 1 9 8 1 , g r o s s p r o c e e d s f rom n a t i o n a l l o t t e r - i e s were S62 M i l l i o n . The p r o c e e d s f o r t h e "good

c a u s e s " were $ 1 2 ill ion.^^'

( i i ) B i n g o

B i n g o , known i n N e w Z e a l a n d a s " h o u s i e " , i s

a n o t h e r i m p o r t a n t f u n d - r a i s i n g f o r m o f g a m b l i n g . Any

o r g a n i z a t i o n w a n t i n g to r u n a game n e e d s t o g e t t h e

p e r m i s s i o n o f t h e D e p a r t m e n t o f I n t e r n a l A f f a i r s ,

i n f o r m t h e p o l i c e a week i n a d v a n c e a n d m e e t t h e s t r ic t

l i m i t s o n h o u r s a n d p r i z e s .

( i i i ) P r i z e C o m p e t i t i o n s

R a f f l e s or " p r i z e c o m p e t i t i o n s " are less p o p u l a r

( o n l y 5 6 l i c e n s e d i n 1 9 8 1 248 a n d t h e same r u l e , t h a t

p r o f i t s m u s t g o t o c h a r i t y , is a p p l i e d . Gaming

s e s s i o n s (commonly known as "Funny Money" or " L a s

Vegas" n i g h t s ) are i n c r e a s i n g i n p o p u l a r i t y . F i v e

h u n d r e d a n d s e v e n ( 5 0 7 ) l i c e n s e s f o r t h i s me thod of

c h a r i t a b l e f u n d r a i s i n g w e r e i s s u e d i n 1980-81. 249

( i v ) H o r s e - r a c i n g T h e R a c i n g A c t , 1 9 7 1 , a u t h o r i z e s p a r i - m u t u e l a n d

o f f - t r a c k b e t t i n g i n New Z e a l a n d . The N e w Z e a l a n d

R a c i n g A u t h o r i t y ( t h e A u t h o r i t y ) u n d e r t h e terms o f t h e

A c t , s u p e r v i s e s t h e gaming a n d t h e o p e r a t i o n o f t h e - s p o r t . 250 The A u t h o r i t y c o n t r o l s l i c e n s e s , sets r a c i n g

d a t e s , a n d settles d i s p u t e s b e t w e e n t h e R a c i n g a n d

T r o t t i n g C o n f e r e n c e s , t h e Greyhound R a c i n g A s s o c i a t i o n

a n d t h e v a r i o u s " G a l l o p i n g " , h u n t , t r o t t i n g and g r e y -

hound r a c i n g c l u b s . 251 The R a c i n g A u t h o r i t y a l s o

d i s t r i b u t e s a c c o u n t s " t a x e d " f r o m b e t t i n g t h a t are p a i d

t o u p g r a d e f a c i l i t i e s , i m p r o v e t h e b r e e d and r a i s e t h e

s t a k e s p a i d a t races ( a m e n i t i e s a c c o u n t , s t a k e s u b s i d y

a c c o u n t ) . 252 The C o n f e r e n c e s c o n t r o l t h e C l u b s a n d set

t h e r a c i n g r u l e s . T h e R a c i n g A u t h o r i t y se ts o u t t h e

number o f l i c e n s e s ( i n o t h e r w o r d s , r a c i n g d a y s ) a n d

t h e C o n f e r e n c e s a l l o c a t e t h e s e t o t h e

T h e o n - c o u r s e a n d o f f - c o u r s e b e t t i n g s y s t e m is

s u p e r v i s e d by t h e T o t a l i s a t o r Agency B o a r d (T.A.B. ) . 254

The " p r o f i t s " are p a i d to t h e N e w Z e a l a n d R a c i n g

A u t h o r i t y f o r a l l o c a t i o n to t h e C l u b s as w e l l as to t h e

v a r i o u s f u n d s . 2 5 5 ~t is a l so p o s s i b l e t o b e t on r a c e s

h e l d o u t s i d e N e w Z e a l a n d t h r o u g h t h e T.A.B. P a r i -

m u t u e l b e t t i n g o r t h e " to te" h a s b e e n i n o p e r a t i o n

s i n c e a t l e a s t 1 9 1 3 when New Z e a l a n d w a s t h e f i r s t

c o u n t r y i n t h e w o r l d e q u i p p e d w i t h a n a u t o m a t e d ,

m e c h a n i c a l t o t a l i s a t o r o r p a r i - m u t u e l b e t t i n g

s y s t e m . 256 O f f - t r a c k b e t t i n g was a d d e d i n 1 9 5 0 . 257

R a c e b e t t i n g is t a x e d a t a ra te o f 8 . 5 % f o r on-

c o u r s e a n d 9 % f o r o f f - c o u r s e b e t t i n g . 2 5 8 The T.A.B.

a n d t h e C l u b s t a k e 7 .5% i n o r d i n a r y b e t s a n d 1 0 . 1 8 % on

" e x o t i c " b e t s . 2 5 9 The " s t a k e s s u b s i d y a c c o u n t " a n d t h e

" a m e n i t i e s a c c o u n t " amoun t t o .5% o f t h e w a g e r s . T h e

C l u b s a n d t h e T.A.B. a l so r e t a i n " u n p a i d f r a c t i o n s "

( r o u n d i n g down p a y o u t s t o d e n o m i n a t i o n s o f I n

1979-80 o f f - c o u r s e b e t t i n g amoun ted t o $365 .5 M i l l i o n

a n d $136 M i l l i o n w a s b e t o n - c 0 u r s e . ~ 6 1

I n g e n e r a l , r a c i n g i n N e w Z e a l a n d is t h e m o s t

p o p u l a r f o r m o f l e g a l i z e d g a m b l i n g . W i t h g o v e r n m e n t

c o n t r o l , r e v e n u e is c o l l e c t e d b u t t h e r e is more

e m p h a s i s o n a t t e m p t s to i m p r o v e t h e s p o r t w i t h t h e

a c c o u n t s a n d to p r e s e r v e t h e o l d e r and t r a d i t i o n a l

i n s t i t u t i o n a l f r amework o f t h e s p o r t ( c l u b s , a s s o c i a -

t i o n s , e t c . ) . The c l u b s are e n c o u r a g e d t o p r o v i d e

h i g h e r s t a k e s s i n c e h i g h s t a k e s a r e - r e q u i r e d b e f o r e

t h e y q u a l i f y f o r t h e s t a k e s s u b s i d y scheme. The s t a k e s

s u b s i d y f u n d is d e s i g n e d s p e c i f i c a l l y t o r e d i r e c t f u n d s

t o t h e o w n e r s , t r a i n e r s and j o c k e y s who p r o v i d e t h e

r a c i n g . I n 1 9 8 1 , it was e s t i m a t e d t h a t r a c i n g wou ld

t a k e i n $5 M i l l i o n p e r y e a r . T h i s f i g u r e would t h e n be

d i s t r i b u t e d :

$2 .5 M t o o n - c o u r s e Deve lopmen t A c c o u n t

9 0 0 , 0 0 0 t o S t a k e s S u b s i d y Fund

9 0 0 , 0 0 0 a s e x t r a c o m m i s s i o n to T.A.B.

7 0 0 , 0 0 0 a s e x t r a c o m m i s s i o n t o . r a c i n g c l u b s 2 6 2

B. Summary and Conclusions

I n c o n c l u s i o n , N e w Z e a l a n d is a f a i r l y u r e s t r i c t i v e "

s o c i e t y a s f a r as l e g a l i z e d g a m b l i n g is c o n c e r n e d , w i t h t h e

e x c e p t i o n o f r a c i n g . The r e l i a n c e o n g o v e r n m e n t a l c o n t r o l

is n o t w h o l l y o u t o f c o n c e r n f o r t h e r a i s i n g o f r e v e n u e b u t

r a t h e r t o p r e v e n t t h e p e r c e i v e d e v i l s o f w i d e s p r e a d commer-

c i a l g a m b l i n g . I n t h e R e p o r t o f t h e D e p a r t m e n t o f I n t e r n a l

A f f a i r s f o r t h e y e a r e n d i n g March 3 1 , 1 9 8 1 , m e n t i o n is made

o f r e p e a t e d r e p r e s e n t a t i o n s t o h a v e c a s i n o s l e g a l i z e d to

b e n e f i t t o u r i s m ( f o r e x a m p l e i n t h e c i t i e s o f W e l l i n g t o n a n d

R o t o r u a ) a n d t o raise r e v e n u e . The p o l i c y o f p r o h i b i t i n g

c a s i n o s o r g a m i n g c l u b s h a s b e e n r e v i e w e d t w i c e by t h e

p r e s e n t g o v e r n m e n t a n d h a s b e e n r e a f f i r m e d . The ma in r e a s o n

i z e d crime c o u l d f l o u r i s h . T h i s t y p i f i e s N e w Z e a l a n d ' s

a t t i t u d e t o w a r d s l e g a l i z e d g a m b l i n g : a n e m p h a s i s o n g o v e r n -

m e n t a l c o n t r o l a n d l i m i t e d g a m b l i n g , w i t h o u t a d e p e n d e n c e o n

g a m b l i n g r e v e n u e . New Z e a l a n d a l l o w s "Las V e g a s " n i g h t s I

( r e f e r r e d to a s " f u n n y money" n i g h t s ) f o r f u n d r a i s i n g b u t

t h e t o l e r a n c e is r e s t r i c t e d t o t h e l i m i t e d s t a k e s a n d t h e

non-commerc ia l n a t u r e o f t h e s e g a m b l i n g e v e n i n g s .

IX. EUROPEAN CASINO MODEL

1. Introduction: Key Features

I I n c o n t r a s t t o w h a t m i g h t b e c a l l e d t h e A m e r i c a n m o d e l

o f " c a s i n o s f o r r e v e n u e " or t h e E n g l i s h model o f " c a s i n o s t o

c e n t r a l i z e a n d c o n t r o l v i c e " , t h e r e e x i s t s a t h i r d a n d

a r g u a b l y d i s t i n c t a p p r o a c h w h i c h w i l l h e r e be t e r m e d t h e

" E u r o p e a n C a s i n o m o d e l " . W h i l e s p e c i f y i n g t h e s e t h r e e

m o d e l s , it is r e c o g n i z e d t h a t t h e s e are o n l y t h e o r e t i c a l

c o n s t r u c t s and i n p r a c t i c e t h e r e a r e many a r e a s o f o v e r l a p

b e t w e e n t h e d i f f e r e n t t y p e s .

The k e y f e a t u r e o f t h e E u r o p e a n a p p r o a c h to c a s i n o s is

t h e h i g h d e g r e e o f i n t e g r a t i o n o f t h e c a s i n o s i n t o o t h e r

resor t a c t i v i t i e s w i t h i n a p a r t i c u l a r g e o g r a p h i c a l a r e a .

T h e c a s i n o s a re p e r m i t t e d i n s p a s a n d v a c a t i o n p l a c e s , b u t

t h e y a re n o t i n t e n d e d to s e r v e as a s o u r c e o f r e j u v e n a t i o n

f o r a d y i n g r e s o r t area. T h i s d i f f e r e n c e is i m p o r t a n t s i n c e

i t i n f e r s t h a t t h e c a s i n o w i l l n o t b e t h e sole r a i s o n d ' s t r e

of a c i t y o r r e c r e a t i o n a l s i t e . s t r i n g e n t ' r e s t r i c t i o n s c a n

b e p l a c e d on t h e c a s i n o ' s o p e r a t i o n s w i t h o u t t h e r e b e i n g a

c o n c e r n t h a t t h e c a s i n o w i l l t h r e a t e n to s h u t down i t s o p e r -

a t i o n s , a n d t h e r e b y b r i n g a b o u t a c r i t i c a l loss o f r e v e n u e

to t h e g o v e r n m e n t a n d unemploymen t t o t h e area.

S i n c e t h e area is n o t d e p e n d e n t on t h e c a s i n o i n d u s t r y ,

c o n t r o l p r o c e d u r e s a re less l i k e l y t o be compromised .

R a t h e r t h a n t h e gawdy r e c r u i t m e n t o f t h e L a s V e g a s t y p e o f

c a s i n o , t h e E u r o p e a n mode l e m p h a s i z e s e l e g a n c e a n d d i s c r e -

t i o n . The c a s i n o s become p a r t o f t h e resor t area a n d s e r v e

a s h o t e l s , r e s t a u r a n t s , a n d e n t e r t a i n m e n t f o r d i v e r s i f i e d

t o u r i s t a c t i v i t i e s .

2. Legalized Gambling in France

F r a n c e o f f e r s many d i f f e r e n t k i n d s o f g a m b l i n g o p p o r -

t u n i t i e s . C a s i n o games o p e r a t e i n resort c a s i n o s a n d

p r i v a t e c l u b s , p a r i - m u t u e l o n - t r a c k a n d o f f - t r a c k b e t t i n g o n

h o r s e a n d dog races is a l l o w e d a n d a n a t i o n a l l o t t e r y

e x i s t s .

A. Casino Gamblinq

C a s i n o g a m b l i n g h a s a l o n g h i s t o r y i n F r a n c e . I t is

p r e s e n t l y a u t h o r i z e d by a 1 9 0 7 l a w , b u t a s e a r l y as 1 8 0 6 ,

N a p o l e o n l e g a l i z e d c a s i n o games i n c e r t a i n resort t o w n s . 2 6 3

I n e a r l y 1 9 8 2 , t h e r e w e r e 1 4 4 c a s i n o s 2 6 4 o p e r a t i n g t h r o u g h -

o u t t h e c o u n t r y a s w e l l a s 36 g a m i n g c l u b s , 2 e 5 a n d a n e s t i -

m a t e d o n e m i l l i o n g a m b l e r s p l a y i n c a s i n o s or c l u b s e v e r y

y e a r . 266 I n 1 9 7 9 , 2 5 b i l l i o n f r a n c s were b e t a t t h e g a m i n g

t a b l e s - - 8 0 % o f i t by f o r e i g n g a m b l e r s . 267

( i ) C o n t r o l o f C a s i n o G a m b l i n g

C a s i n o g a m i n g is v e r y s t r i c t l y c o n t r o l l e d . O n l y

c a s i n o s i n l e g a l l y r e c o g n i z e d t o u r i s t areas c a n o p e r a t e

games a n d o n l y d u r i n g t h e t o u r i s t s e a s o n . C a s i n o s m u s t

r e c e i v e a gaming a u t h o r i z a t i o n f r o m b o t h t h e m u n i c i p a l

g o v e r n m e n t a n d t h e M i n i s t r y o f t h e I n t e r i o r . 268 More-

o v e r , t h e c a s i n o m u s t s i g n a c o n t r a c t w i t h t h e m u n i c i -

p a l i t y known a s a " c a h i e r d e c h a r g e s " , w h e r e i t a g r e e s

t o p u t o n q u a l i t y a r t i s t i c e v e n t s a n d to pay a c e r t a i n

p e r c e n t a g e o f i ts r e v e n u e s t o t h e m u n i c i p a l i t y . 2 6 9

A t t h e n a t i o n a l l e v e l , a s p e c i a l gaming c o m m i s s i o n

composed o f s e r v a n t s a n d e l e c t e d o f f i c i a l s f rom

b o t h t h e loca l a n d n a t i o n a l l e v e l , i n v e s t i g a t e t h e

c a s i n o ' s a p p l i c a t i o n a n d a d v i s e t h e M i n i s t e r o f t h e

I n t e r i o r a s t o i t s s u i t a b i l i t y . 2 7 0 � he M i n i s t r y w i l l

t h e n d r a f t a g a m i n g a u t h o r i z a t i o n , w h i c h i n d i c a t e s w h a t

games a r e t o b e a l l o w e d , t h e o p e n i n g a n d c l o s i n g h o u r s

o f t h e games room, a n d t h e l e n g t h o f t h e a u t h o r i z a t i o n .

I n a d d i t i o n t o t h e r e g u l a r c a s i n o s , t h e s e c o n d

t y p e o f gaming e s t a b l i s h m e n t is t h e "gaming c i rc le" .

T h e s e are p r i v a t e c l u b s w h i c h are a l l o w e d to o p e r a t e

c a s i n o - t y p e games to h e l p f i n a n c e t h e l a r g e r o r g a n i z a -

t i o n . Gaming c i r c l e s h a v e e x i s t e d s i n c e t h e b e g i n n i n g

o f t h e 1 9 t h c e n t u r y a n d were n o t e x t e n s i v e l y r e g u l a t e d

u n t i l t h e a d o p t i o n o f a l a w i n 1 9 2 3 . ~ ~ ~ T h e i r impor-

t a n c e s t e m s f rom a l a w a d o p t e d by Napo leon I11 i n t h e

m i d d l e o f t h e l a s t c e n t u r y w h i c h b a n n e d a l l c a s i n o s

f r o m t h e P a r i s a r e a 2 7 2 a n d i n 1 9 2 0 , a l a w was a d o p t e d

w h i c h p r o h i b i t e d a n y c a s i n o w i t h i n 200 km o f ~ a r i s . * ~ ~

Gaming c i rc les t h u s p r o v i d e a s u b s t i t u t e to c a s i n o s f o r

P a r i s g a m b l e r s . However , t h e d i f f e r e n c e b e t w e e n

c a s i n o s a n d gaming c i rc les w a s , and is, more t h e o r e t i -

c a l t h a n r ea l . C a s i n o s w e r e i n t e n d e d p r i m a r i l y f o r

g a m b l i n g , a n d gaming c i rc les w e r e to be o n l y o n e o f a

number o f a c t i v i t i e s a t a c l u b . S i n c e t h e Second Wor ld

W a r , g aming c i rc les h a v e become d e f a c t o c a s i n o s w i t h

t h e g a m b l i n g a c t i v i t i e s d o m i n a t i n g or r e p l a c i n g o t h e r

c l u b a c t i v i t i e s . 2 7 4 T h e r e are p r e s e n t l y f i f t e e n gaming

c i rc les i n t h e P a r i s r e g i o n w h i c h h a v e a t o t a l o f

5 0 0 , 0 0 0 members . A f u r t h e r f i f t e e n , o p e r a t i n g t h r o u g h -

o u t t h e rest o f t h e c o u n t r y , a r e m i n o r o n e s s i n c e t h e

1 5 P a r i s c i r c l e s c o l l e c t 95% o f a l l gaming c i r c l e s

r e v e n u e s . 2 7 5

The a p p l i c a t i o n f o r a gaming a u t h o r i z a t i o n a t a

g a m i n g c i r c l e is p u t f o r w a r d by t h e c l u b p r e s i d e n t , t h e

t r e a s u r e r a n d t h e games d i r e c t o r . I t is f i r s t r e v i e w e d

by t h e P r e f e c t who fo rwards it t o t h e M i n i s t e r of t h e

- I n t e r i o r who r e n d e r s h i s d e c i s i o n a f t e r t h e games

commission submi t s its o p i n i o n . Cas inos and gaming

c i r c l e s a r e n o t a l l o w e d ' t o o p e r a t e i n t h e same l o c a l -

i t y .276

I n bo th t h e gaming c i r c l e s and c a s i n o s , t h e admin-

i s t r a t i o n and a l l games room employees must r e c e i v e t h e

a p p r o v a l of t h e p o l i c e and t h e M i n i s t r y of t h e

I n t e r i o r . The M i n i s t r y must be n o t i f i e d whenever a

games room employee q u i t s or is f i r e d . 277 ~ a m e s room

employees may r e c e i v e t i p s , b u t n o t d i r e c t l y . The t i p s

a r e d e p o s i t e d i n a t i p box and a r e sha red e q u a l l y among

t h e employees. I n s i d e t h e games room, employees must

wear c l o t h e s w i t h o u t p o c k e t s and female employees may

n o t be g i v e n any gaming p o s i t i o n . 2 7 8 I n o r d e r t o

p r o t e c t t h e p a t r o n , d e t a i l e d i n f o r m a t i o n r e g a r d i n g t h e

r u l e s of p l a y must be d i s p l a y e d w i t h i n t h e games room.

T h i s i n f o r m a t i o n must o u t l i n e what employees may o r may

n o t do , what b e t s a r e a l lowed and what t h e pay-of fs a r e

f o r each b e t i n each game. 279

( i i ) P a r t i c i p a t i o n i n C a s i n o and Gaminq C i r c l e Gambling

To e n t e r t h e games room of a c a s i n o , t h e c l i e n t

must pay an admiss ion p r i c e , r e c e i v e an admiss ion c a r d ,

and show p r o p e r i d e n t i f i c a t i o n . Minors and m i l i t a r y

p e r s o n n e l a r e n o t p e r m i t t e d e n t r y . E x e c u t i v e s o r

employees may n o t p l a y any of t h e games, even when t h e y

a r e o f f work and t h e y a r e n o t a l lowed t o r e c e i v e any

p a r t of t h e winnings no r p e r s o n a l l y l o a n any money t o

t h e p l a y e r s . The M i n i s t r y of t h e I n t e r i o r compi les a

l i s t of u n d e s i r a b l e persons 'who must be b a r r e d from t h e

games room. I n v e t e r a t e gamblers or t h e i r f a m i l i e s can

a p p l y t o have t h e i r names added t o t h e l ist .280

Only c l u b members i n good s t a n d i n g may e n t e r t h e

games room o f a gaming c i r c l e . To become a member, a

p e r s o n mus t b e s p o n s o r e d by two e x i s t i n g members. H i s

a p p l i c a t i o n is t h e n r e v i e w e d by t h e c l u b ' s games

c o m m i t t e e which may l a u n c h an i n v e s t i g a t i o n i n t o t h e

a p p l i c a n t ' s m o r a l c h a r a c t e r . F r e n c h c i t i z e n s mus t w a i t

a f u l l f i v e d a y s and f o r e i g n e r s t w o d a y s b e f o r e t h e i r

membership becomes e f f e c t i v e . Women a r e l e g a l l y b a r r e d

from membership i n gaming c i rc les a s it is s t r i c t l y a

m e n ' s c l u b . 281

( i i i ) T a x a t i o n

The N a t i o n a l Government t a x e s c a s i n o gaming

r e v e n u e s p r o g r e s s i v e l y a t r a t e s b e g i n n i n g a t 1 0 % f o r

r e v e n u e s u n d e r 290,000 f r a n c s and r i s i n g to 80% f o r

r e v e n u e s o v e r 49 ,500 ,000 f r a n c s . 282 However, c a s i n o s

a r e a l l o w e d a b a s i c t a x e x e m p t i o n e q u a l to 25% of

g a m b l i n g r e v e n u e s b e f o r e c a l c u l a t i n g t h e t a x 283 and

t h e y c a n a lso q u a l i f y f o r a s p e c i a l exempt ion o f an

a d d i t i o n a l 1 0 % i f t h e y p r o v i d e c o s t l y a r t i s t i c e v e n t s

o f e x c e p t i o n a l q u a l i t y o r i n v e s t i n t o u r i s t accommoda-

t i o n s i n t h e a r e a . 2 8 4

I n a d d i t i o n to N a t i o n a l t a x e s , c a s i n o s a l s o p a y

t a x e s t o t h e m u n i c i p a l i t y which can amount t o a maximum

of 1 5 % o f gaming r e v e n u e s . I f t h e combined m a r g i n a l

t a x r a t e e x c e e d s 8 0 % , t h e n a t i o n a l t a x r a t e is r e d u c e d

u n t i l t h e combined t a x r a t e e q u a l s 80%. The m u n i c i p a l -

i t y a l s o r e c e i v e s 1 0 % o f t h e t a x c o l l e c t e d by t h e

n a t i o n a l g o v e r n m e n t , b u t t h i s amount c a n n o t i n c r e a s e

m u n i c i p a l r e v e n u e s by more t h a n 5%. 285 Tax is

c o l l e c t e d twice a month a f t e r t h e v i s i t o f a government

a c c o u n t a n t who v e r i f i e s t h e gaming r e v e n u e s and c a l c u -

Gaming c i rc les a re t a x e d ra tes b e t w e e n 1 3 % f o r

r e v e n u e s un&er 1 0 0 , 0 0 0 f r a n c s a n d 68% f o r r e v e n u e s o v e r

1 , 5 0 0 , 0 0 0 f r a n c s . U n l i k e t h e c a s i n o s , gaming c i rc les

d o n o t r e c e i v e a n y t a x e x e m p t i o n s . 287

I n 1 9 7 9 , c a s i n o s p a i d 244 .5 m i l l i o n f r a n c s i n

t a x e s o n g a m b l i n g r e v e n u e s o f 630 m i l l i o n f r a n c s . O v e r

6 1 m i l l i o n f r a n c s o f t h i s t a x money w e n t to t h e m u n i c i -

p a l i t i e s . The 1 0 l a r g e s t a n d m o s t p r o f i t a b l e c a s i n o s

p a i d b e t w e e n 52% a n d 66% o f t h e i r r e v e n u e s t o t h e

g o v e r n m e n t as t a x e s . Gaming c i r c l e s p a i d t a x e s of 29 .2

m i l l i o n f r a n c s o n r e v e n u e s o f s l i g h t l y o v e r 50 m i l l i o n

f r a n c s . 288

C a s i n o o p e r a t o r s c o m p l a i n t h a t t h e Governmen t is

d e m a n d i n g too much r e v e n u e a n d is d r i v i n g them i n t o

b a n k r u p t c y . I n 1 9 8 0 , o n e o u t o f e v e r y t h r e e c a s i n o s

w a s on t h e e d g e o f b a n k r u p t c y , o n e i n two was l o s i n g

money a n d t w o - t h i r d s had no c a s h r e s e r v e s . O n l y 10 o u t

o f 1 4 0 c a s i n o s showed a n i m p r o v e d f i n a n c i a l p o s i t i o n .

C a s i n o s a r g u e t h a t t h e s e e x c e s s i v e t a x e s are e v e n more

o f a b u r d e n b e c a u s e o f t h e numerous a n d e x p e n s i v e

o b l i g a t i o n s imposed on them. 289

( i v ) C o r r u p t i o n

D e s p i t e s t r o n g c o n t r o l m e a s u r e s , many s c a n d a l s

h a v e e r u p t e d o v e r t h e y e a r s . I n 1 9 7 9 , t h e new h e a d o f

t h e games b r i g a d e o f t h e p o l i c e l a u n c h e d a n a c t i v e

i n v e s t i g a t i o n i n t o t h e c a s i n o o p e r a t i o n s . D u r i n g an

i n v e s t i g a t i o n o f 455 games a n d 4 , 0 1 2 e m p l o y e e s , w ide -

s p r e a d e v i d e n c e o f p r o f i t s k i m m i n g , t a x e v a s i o n ,

c o r r u p t i o n a n d f r a u d w e r e u n c o v e r e d i n many o f t h e

c a s i n o s . I n t o t a l , 278 g a m b l e r s , d e a l e r s a n d o w n e r s

were i n d i c t e d . I n o n e c a s i n o , e v e r y e m p l o y e e , e x c e p t

f o r o n e c o o k , were i n v o l v e d i n a scheme to u n d e r - r e p o r t

I r e v e n u e s a n d d i s t r i b u t e them among t h e c o - c o n s p i r a -

t o r s . 290 ~ r a d i t i o n a l l y , c a s i n o s r e c r u i t e d d e a l e r s f rom

t h e f a m i l i e s o f p e r m a n e n t games roam e m p l o y e e s a n d

t r a i n e d them t h r o u g h a l e n g t h y a p p r e n t i c e s h i p p rog ram.

I n 1 9 7 5 , a s c h o o l f o r d e a l e r s w a s e s t a b l i s h e d a t Nice,

w i t h a n a i m t o w a r d p r o f e s s i o n a l i z a t i o n .

P a r i s g a m i n g c i rc les h a v e a n e v e n more c o l o r f u l

h i s t o r y . S i n c e t h e e a r l y 6 0 1 s , t h e major g a m i n g

c i r c l e s h a v e b e e n c o n t r o l l e d by a C o r s i c a n

From 1 9 6 3 t o 1 9 7 3 , a "games w a r " was f o u g h t b e t w e e n t h e

r i v a l f a c t i o n s f o r c o n t r o l of t h e c i rc les which

r e s u l t e d i n o v e r 30 d e a t h s . The two w i n n e r s d i v i d e d

t h e c i t y i n t o t w o s p h e r e s o f i n f l u e n c e i n 1 9 7 3 .

However , o n e o f t h e w i n n e r s , M a r c e l F r a n c i s c i , was

m u r d e r e d by a p r o f e s s i o n a l h i t m a n i n J a n u a r y 1 9 8 2 ,

l e a d i n g P a r i s p o l i c e t o b e l i e v e t h a t a new "games w a r "

was a b o u t t o e r u p t . 292

I n F r a n c e , e v i d e n c e r e v e a l s t h a t . c a s i n o s a n d

gaming c i r c l e s a r e u s e d f o r p a s s i n g c o u n t e r f e i t

c u r r e n c y . A case was u n c o v e r e d i n 1 9 7 9 i n t h e Nice-

Monaco c a s i n o s i n v o l v i n g 268 c o u n t e r f e i t 5 0 0 - f r a n c

n o t e s . O t h e r o n - g o i n g s w i n d l e s a n d f r a u d s c h e m e s o c c u r

p e r i o d i c a l l y i n many o f t h e F r e n c h c a s i n o s .

B, Horse-racing in France

H o r s e - r a c i n g i n F r a n c e f i r s t b e g a n s e r i o u s l y i n t h e

r e i g n o f L o u i s ~ ~ 1 2 9 3 a n d h a s c o n t i n u e d to t h i s d a y ( i t w a s

s t o p p e d t e m p o r a r i l y d u r i n g t h e F r e n c h R e v o l u t i o n ) . A s o f

1 9 7 9 , t h e r e were 3 4 2 race c o u r s e s u n d e r t h e c o n t r o l o f t h e

M i n i s t r y o f A g r i c u l t u r e a n d s u b j e c t to s u r v e i l l a n c e by t h e

M i n i s t r y o f t h e I n t e r i o r . A 1 9 8 1 l a w a u t h o r i z e s p a r i - m u t u e l

b e t t i n g a t t h e race t r a c k a n d , s i n c e 1 9 3 0 , o f f - t r a c k b e t t i n g

h a s b e e n a l l o w e d . H o r s e - r a c i n g a s s o c i a t i o n s c o n t r o l on-

t r a c k a n d o f f - t r a c k b e t t i n g . 2 9 4 T h e s e a s s o c i a t i o n s are

non-p ro f i t o r g a n i z a t i o n s whose f o r m a l g o a l is to i m p r o v e

h o r s e b r e e d i n g . 295

( i ) C o n t r o l o f H o r s e - r a c i n q

S t a t u t e s a n d r e g u l a t i o n s g i v e t h e s e h o r s e - r a c i n g

a s s o c i a t i o n s a g r e a t amoun t o f d i s c r e t i o n a r y power o v e r

many a s p e c t s o f t h e s p o r t . T h e g o v e r n m e n t m a i n t a i n s

c o n t r o l a t a n arm's l e n g t h . N e w race t r a c k s a n d new

a s s o c i a t i o n s m u s t b e a p p r o v e d by t h e M i n i s t e r o f

A g r i c u l t u r e w i t h t h e b u d g e t o f e a c h a s s o c i a t i o n b e i n g

s u b j e c t to M i n i s t r y a p p r o v a l . 296

The l e g i s l a t i o n r e g u l a t i n g h o r s e - r a c i n g h a s d e v e l -

o p e d i n a p i e c e m e a l f a s h i o n o v e r t h e p a s t c e n t u r y .

H o r s e - r a c i n g a s s o c i a t i o n s , w h i c h e v o l v e d o u t s i d e o f a n y

r e g u l a t i o n d u r i n g t h e 1 9 t h c e n t u r y , h a v e b e e n b r o u g h t

u n d e r some m e a s u r e o f c o n t r o l , b u t s t i l l r e t a i n a l a r g e

d e g r e e o f i n d e p e n d e n c e . The a s s o c i a t i o n s e x e r c i s e

d a i l y c o n t r o l o v e r r a c i n g . T h e y d r a w up t h e r a c i n g

c a l e n d a r , r a c i n g p r o g r a m , d e c i d e w h a t p r i z e s w i l l b e

a w a r d e d , h a n d i c a p t h e h o r s e s a n d h a n d l e t h e p u b l i -

c i t y . 297 They h a v e had a l e g a l monopo ly o v e r o n - t r a c k

b e t t i n g s i n c e 1 8 9 1 a n d o v e r o f f - t r a c k b e t t i n g s i n c e

1930 .

T h e r e are 5 r a c i n g a s s o c i a t i o n s i n t h e P a r i s a r e a

a n d 3 1 5 i n t h e rest o f t h e c o u n t r y . 2 9 8 he P a r i s - b a s e d

a s s o c i a t i o n s a n d a f e w o f t h o s e i n t h e o t h e r r e g i o n s

a re p o s i t i o n , b u t m o s t o f t h e r a c i n g a s s o c i a t i o n s a re

p o o r a n d d e p e n d f o r t h e i r e x i s t e n c e on s u b s i d i e s f r o m

t h e N a t i o n a l F e d e r a t i o n o f F r e n c h R a c i n g A s s o c i a t i o n s .

T h i s n a t i o n a l o r g a n i z a t i o n was c r e a t e d i n 1 9 1 9 t o coor-

d i n a t e t h e a c t i o n s o f t h e r a c i n g a s s o c i a t i o n s a n d .is

c o n t r o l l e d s o l e l y by them.299 I t is composed o f a

n a t i o n a l f e d e r a t i o n , a n d 1 0 r e g i o n a l f e d e r a t i o n s who

are r e s p o n s i b l e f o r d r a w i n g u p t h e r a c i n g c a l e n d a r s f o r

t h e r a c e t r a c k s i n t h e i r p a r t i c u l a r r e g i o n . 300

( i i ) O f f - T r a c k B e t t i n q

P a r i - m u t u e l b e t t i n g , o n a n d o f f t h e t r a c k , is

r e s e r v e d by l a w f o r t h e r a c i n g a s s o c i a t i o n . The

b e t t i n g is managed by a s p e c i a l i z e d management company

t h a t is c o n t r o l l e d by a b o a r d of d i rectors , composed o f

r e p r e s e n t a t i v e s f r o m t h e M i n i s t r y o f A g r i c u l t u r e , t h e

M i n i s t r y o f F i n a n c e , a n d t h e N a t i o n a l F e d e r a t i o n . 3 0 1

T h i s management b o a r d makes a l l t h e i m p o r t a n t d e c i s i o n s

a b o u t t h e o r g a n i z a t i o n a n d t h e d a i l y management o f

o f f - t r a c k b e t t i n g . The b o o k s o f t h e company a r e

a u d i t e d by t h e n a t i o n a l f e d e r a t i o n a n d by t h e

M i n i s t r i e s o f A g r i c u l t u r e a n d F i n a n c e . 3 0 2

T h e o f f - t r a c k b e t t i n g o r g a n i z a t i o n is v e r y l i b e r a l

a n d a p p e a r s t o e x i s t t o make it e a s y t o b e t . B e t t i n g

s h o p s are set u p i n l o c a l tobacco s h o p s , c a f s s a n d

t a v e r n s . Once a b e t t o r h a s se t up a n a c c o u n t , he c a n

p h o n e o r m a i l i n h i s b e t s , T h e r e are e v e n s p e c i a l

"race-to-race" s h o p s , w h e r e g a m b l e r s c a n b e t immed-

i a t e l y p r i o r t o t h e race a s i f t h e y w e r e a t t h e r a c e

t r a c k . 303

( i i i ) T a x a t i o n

I n 1 9 8 0 , o f f - t r a c k b e t t i n g p r o d u c e d r e v e n u e s o f

1 9 b i l l i o n f r a n c s a n d o n - t r a c k b e t t i n g p r o d u c e d r e v e -

n u e s o f 3 b i l l i o n f r a n c s . Of t h e t o t a l r e v e n u e ( 2 1 . 9

b i l l i o n ) , 7 b i l l i o n was p a i d i n t a x e s . O f f - t r a c k

b e t t i n g compr i se s 8 6 p e r c e n t of a l l F r e n c h - h o r s e - r a c e

b e t t i n g . The of f - t r a c k b e t t i n g c o r p o r a t i o n , P a r i -

Mutuel Urba in , o p e r a t e s i t s own shops which h a n d l e o n l y

r e g u l a r b e t s , b u t 85 p e r c e n t of OTB t a k e s p l a c e in

l i c e n s e d c a f & o r t o b a c c o shops .

The Government t a x e s t h e amount of money b e t ,

r a t h e r t han t h e r evenues . The t a x v a r i e s between

14.55% and 15.25% depending upon whether it is o f f -

t r a c k o r o n - t r a c k b e t t i n g , i n s i d e o r o u t s i d e of P a r i s .

However, t h e r e is a s p e c i a l t a x of 30% on t h e " t i e r c 5 "

b e t , where t h e b e t t o r must p i c k t h e f i r s t t h r e e h o r s e s

3 i n t h e r a c e . T i e r c 5 is t h e most p o p u l a r b e t w i t h

a p p r o x i m a t e l y 44% of t h e money b e t on t h i s r a c e even

though it is h e l d o n l y on Sundays and h o l i d a y s . 304 I n

a d d i t i o n , t h e r e is a 3% s tamp t a x .

T h i s t o t a l t a x revenue is sha red among many organ-

i z a t i o n s which a r e a l l o c a t e d a c e r t a i n p e r c e n t a g e o f

t h e b e t s . Racing a s s o c i a t i o n s r e c e i v e between 7.95%

and 9.5% o f t h e b e t s w i t h 1.5% set a s i d e f o r h o r s e

b r e e d i n g . The rest is s h a r e d by v a r i o u s government

a g e n c i e s : g e n e r a l f u n d , n a t i o n a l fund f o r t h e deve lop-

ment of w a t e r mains , C i t y of P a r i s , e tc .

C, Lotteries in France

Lotteries a r e a l l owed i n F rance , b u t t h e y a r e s t r i c t l y

r e g u l a t e d . A n a t i o n a l l o t t e r y run by t h e government h a s

e x i s t e d . - s i n c e 1933.305

I t is a weekly l o t t e r y , w i t h 40% of t h e p r o c e e d s g o i n g

t o t h e government. "The l o t t e r y o p e r a t e s t h rough a s a l e s

company which r e c e i v e s a 5% commission. I t is r e q u i r e d t h a t

p a r t o f t h e c o m m i s s i o n be g i v e n to c h a r i t y , w i t h p r o c e e d s

f r o m v a r i 6 u s b l o c k s o f t i c k e t s a l l o c a t e d t o s p e c i f i c c h a r i -

t i e s . ~ 3 0 6

Most p r i v a t e l o t t e r i e s are i l l e g a l . The A d m i n i s t r a t i o n

h a s t h e power t o a l l o w lo t t e r i e s t h a t h a v e a c h a r i t a b l e g o a l

o r a i m to e n c o u r a g e t h e a r t s . M u n i c i p a l i t i e s h a v e t h e l e g a l

r i g h t t o o r g a n i z e l o t t e r i e s t o h e l p f i n a n c e t h e i r f i r e f i g h t -

i n g s e r v i c e . Unde r c e r t a i n c o n d i t i o n s , l o t t e r i e s may a l s o

b e a l l o w e d a t f a i r s . 307

I n a d d i t i o n to t h e r e v e n u e t h a t is g i v e n t o t h e a g e n -

c i e s , t h e L o t e r i e N a t i o n a l e f u l f i l l s a s o c i a l f u n c t i o n by

e m p l o y i n g d i s a d v a n t a g e d g r o u p s . The sa les company l i c e n s e s

i n d i v i d u a l t i c k e t s e l l e r s , u s u a l l y p e n s i o n e r s and d i s a b l e d

p e o p l e , who o p e r a t e f r o m s t r ee t b o o t h s o r c a f 6 s . 308

I n 1 9 7 9 , " L o t o " a n d t h e " L o t e r i e N a t i o n a l e " s o l d 1 4

m i l l i o n t i c k e t s w o r t h 4 . 5 b i l l i o n f r a n c s , o u t o f w h i c h t h e

g o v e r n m e n t r e c e i v e d i t s s h a r e o f 1 . 4 b i l l i o n f r a n c s . 309

~ D, Conclusion: Importance of French Gamblinq Controls

The F r e n c h h a v e a l w a y s s e e n g a m b l i n g as a f a c t o f l i f e

t o be a c c e p t e d , a n d n o t a s a s o c i a l e v i l t o b e ' s t a m p e d o u t .

T h e i r g a m b l i n g c o n t r o l h a s grown i n c r e m e n t a l l y o v e r a l o n g

p e r i o d o f t i m e as a d j u s t m e n t s w e r e n e e d e d , a n d t h e r e f o r e

t h e i r l e g i s l a t i o n is t h e r e s u l t o f l o n g p r a c t i c a l e x p e r i e n c e

w i t h l e g a l i z e d g a m b l i n g . The p r i m a r y g o a l is to e n s u r e t h a t

t h e g o v e r n m e n t g e t s i t s s h a r e o f t a x r e v e n u e w h i l e p r o v i d i n g

h i g h q u a l i t y d i v e r s i f i e d resort f a c i l i t i e s t o t o u r i s t s ,

r a t h e r t h a n c o n t r o l l i n g t h e s p r e a d o f i l l e g a l g a m b l i n g or

d i v e r t i n g f u n d s f r o m o r g a n i z e d crime. The i n d i f f e r e n t

a t t i t u d e o f t h e a u t h o r i t i e s t o t h e f a c t o f w i d e s p r e a d

c r i m i n a l i n f l u e n c e i n c a s i n o s a n d gaming c i rc les seems to

d e m o n s t r a t e t h i s .

E, Additional Examples of Legalized Gamblinq: European Model

( i ) Monaco

O n l y l i m i t e d i n f o r m a t i o n is a v a i l a b l e on Monaco ' s

c a s i n o i n d u s t r y . P r e v i o u s l y , t h e i n d u s t r y had b e e n

c o n t r o l l e d by 'Ar i s to t l e O n a s s i s , b u t it became a s t a t e

monopo ly when P r i n c e R a i n i e r b o u g h t o u t t h e O n a s s i s

i n t e r e s t i n t h e p r i v a t e c o r p o r a t i o n . W i t h a 70% s h a r e

o f t h e s t o c k , t h e S t a t e d i c t a t e d t h e s t r ic t r e g u l a t i o n s

t h a t were imposed upon Monte C a r l o C a s i n o a n d upon a

more r e c e n t c a s i n o e x t e n s i o n se t up by S o c i G t 6 d e s

B a i n s d e Mer i n a s s o c i a t i o n w i t h t h e A m e r i c a n Loews

Company. 310

The games a l l o w e d a r e t h e same as t h o s e a l l o w e d i n

F r a n c e . Monegasque n a t i o n a l s a n d i n d i v i d u a l s h o l d i n g

Monegasque r e s i d e n c e p e r m i t s a re by c u r r e n t r e g u l a t i o n s

p r o h i b i t e d f r o m e n t e r i n g gaming rooms i n t h e P r i n c i p a l -

i t y ; h o w e v e r , t h e s e r e g u l a t i o n s a re n o t a l w a y s

e n f o r c e d . T h e r e seems to b e some e v i d e n c e t h a t t h e

Monte C a r l o C a s i n o is more s t r i c t l y r u n a n d h a s l ess

c o u n t e r f e i t i n g , f r a u d or o t h e r f o r m s o f c o r r u p t i o n t h a n

t h e n e w e r c a s i n o w h i c h w a s se t up i n a s s o c i a t i o n w i t h

t h e A m e r i c a n Loews Company.

Af t e r P r i n c e s s Grace's d e a t h , r e p o r t e r s were

q u e s t i o n i n g w h e t h e r t h e P r i n c e wou ld b e i n t e r e s t e d i n

h o l d i n g t h e c i s i n o monopo ly w h i c h w i l l come d u e i n

1987 . P r i n c e s s G r a c e a p p e a r s t o h a v e b e e n t h e s t r o n g -

est a d v o c a t e o f k e e p i n g i l l i c i t money a n d c o n t r o l o u t

o f t h e p r i n c i p a l i t y . 311

( i i ) S w i t z e r l a n d

The S w i t z e r l a n d c a s i n o s a r e a n e x a m p l e o f res t r ic-

t e d " r e c r e a t i o n a l " g a m b l e s . The s t r ic t c o n t r o l s o n

g a m b l i n g i n c l u d e t h e p l a y i n g h o u r s ( g e n e r a l l y , a

m i d n i g h t c l o s i n g t i m e ) a n d t h e l i m i t o f a s i n g l e p l a c e d

b e t ( 5 f r a n c s , o r r o u g h l y $ 3 . 0 0 1. S w i s s c a s i n o s , b y

t h e v e r y f a c t o f t h e m i n o r w a g e r i n g w h i c h t a k e s p l a c e ,

are n o t l a r g e - s c a l e o p e r a t i o n s . They seem t o b e o p e r -

a t e d m a i n l y f o r "socia l" p u r p o s e s , b o t h f o r r e s i d e n t s

a n d t o u r i s t s . R o u l e t t e i s t h e o n l y game o f c h a n c e

w h i c h is a l l o w e d to b e p l a y e d and t h e f e d e r a l

D e p a r t m e n t o f J u s t i c e h a s t h e power t o d e c i d e i f a

c e r t a i n game o f c h a n c e is c o n s i d e r e d t o be " r o u l e t t e " .

The g o v e r n i n g l e g i s l a t i o n is t h e f e d e r a l

C o n s t i t u t i o n , s p e c i f i c a l l y A r t i c l e 3 5 . P u r s u a n t t o

t h i s A r t i c l e , an o r d i n a n c e was p r o m u l g a t e d ( N o . 9 3 5 . 5 3

i n 1 9 2 9 . W h i l e t h e i n d i v i d u a l c a n t o n s h a v e a u t h o r i t y

t o l i c e n s e t h e o w n e r s o f t h e c a s i n o s , t h i s l i c e n s i n g is

s u b j e c t t o t h e f e d e r a l C o u n c i l ' s d i s c r e t i o n . The

C o u n c i l may c o m p l e t e l y f o r b i d t h e o p e r a t i o n o f a c a s i n o

w h i c h v i o l a t e s t h e r e g u l a t i o n s .

REFERENCES

S e e A p p e n d i x A o f t h i s r e p o r t f o r a* b r i e f s u n m a r y o f t h e f i n d i n g s a n d r e c o m m e n d a t i o n s o f t h e s e t h r e e s t u d i e s . More c o m p l e t e a r g u m e n t s b e h i n d t h e recomrnenda t i o n s c a n b e r e a d d i r e c t l y f r o m t h e t h r e e s t u d i e s :

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- F i n a l R e p o r t o f t h e Commiss ion o n T h e R e v i e w o f t h e N a t i o n a l P o l i c y Toward Gambl ing : G a m b l i n g I n A m e r i c a , by C h a r l e s H. M o r i n , Cha i rman ( W a s h i n g t o n , D.C. : Government P r i n t i n g O f f i c e , 1 9 7 6 ) ( h e r e a f t e r c i t e d as U.S. G a m b l i n q i n A m e r i c a ) .

- D.B. C o r n i s h , " H o m e O f f i c e R e s e a r c h S t u d y N o . 42 , Gambl ing : A Rev iew o f The L i t e r a t u r e a n d I ts I m p l i c a t i o n s f o r P o l i c y - R e s e a r c h " (London : H e r M a j e s t y ' s S t a t i o n e r y O f f i c e , 1 9 7 8 ) .

2 U.S. G a m b l i n g i n America, p. 98 .

P e t e r R e u t e r , "Easy S p o r t : R e s e a r c h & R e l e v a n c e , " J o u r n a l o f S o c i a l I s s u e s 35 , 3 ( 1 9 7 9 ) : 171 .

The f o l l o w i n g a r t i c l e s p r o v i d e a d d i t i o n a l i n f o r m a t i o n r e g a r d i n g t h e r e g r e s s i v i t y d e b a t e :

- R o b e r t G. B l a k e y , " S t a t e C o n d u c t e d L o t t e r i e s : H i s t o r y , P r o b l e m s a n d P r o m i s e s , " J o u r n a l o f S o c i a l I s s u e s 35, 3 ( 1 9 7 9 ) ( h e r e a f t e r c i t e d as B l a k e y , " S t a t e C o n d u c t e d L o t t e r i e s " ) .

- R.E. B r i n n e r a n d C.T. C l o t f e l t e r , "An Economic A p p r a i s a l o f S t a t e L o t t e r i e s , " N a t i o n a l Tax J o u r n a l , 28, 4 ( 1 9 7 5 ) .

- T.W. Ca lmus , " M e a s u r i n g The R e g r e s s i v i t y o f Gambl ing T a x e s , " N a t i o n a l T a x J o u r n a l 3 4 , ( J u n e 1 9 8 1 ) : 267-270.

- D a n i e l B. S u i t s , "Measu remen t o f Tax P r o g r e s s i v i t y , T h e A m e r i c a n Economic Review 6 7 , 4 ( S e p t . 1 9 7 7 ) : 747-752.

- D a n i e l B. S u i t s , "Gambl ing T a x e s : R e g r e s s i v i t y a n d Revenue P o t e n t i a l , " N a t i o n a l T a x J o u r n a l 3 0 , 1 ( 1 9 7 7 ) : 19-35.

- D a n i e l B. S u i t s , "Economic B a c k g r o u n d f o r G a m b l i n g P o l i c y , " J o u r n a l o f S o c i a l I s s u e s 3 5 , 3 ( 1 9 7 9 ) : 43-61.

S u i t s , * 'Gambling T a x e s - R e g r e s s i v i t y & Revenue P o t e n t i a l , " p. 20.

Note: Ca lmus , " M e a s u r i n g t h e R e g r e s s i v i t y o f G a m b l i n g T a x e s " c r i t i c i z e s S u i t s ' u s e o f t h e L o r e n z c u r v e s a n d t h e "S" i n d e x . I t wou ld seem, h o w e v e r , t h a t t h e c r i t i - cism a p p l i e s o n l y to s t a t e m e n t s S u i t s makes r e g a r d i n g r a t i n g o n e r e g r e s s i v e f o r m o f gaming a g a i n s t a n o t h e r r e g r e s s i v e f o r m i f t h e i r L o r e n z c u r v e s i n t e r s e c t - - t h e i s s u e o f a c t u a l r e g r e s s i v i t y or p r o g r e s s i v i t y is n o t q u e s t i o n e d .

S u i t s , "Economic B a c k g r o u n d f o r G a m b l i n g P o l i c y , " p. 57 .

B r i n n e r a n d C l o t f e l t e r , "An Economic A p p r a i s a l o f S t a t e L o t t e r i e s , " p. 397.

T w e n t i e t h C e n t u r y Fund , E a s y Money, R e p o r t o f t h e T a s k F o r c e o n L e g a l i z e d G a m b l i n q , ( N e w York: 1 9 7 4 ) .

F r e d e r i c D. S t o c k e r , " S t a t e S p o n s o r e d Gambl ing A s A S o u r c e o f P u b l i c R e v e n u e , " N a t i o n a l T a x J o u r n a l 25 , 3 ( 1 9 7 2 ) : 439 ( h e r e a f t e r c i t e d as S t o c k e r , " S t a t e S p o n s o r e d G a m b l i n g " ) .

B l a k e y , " S t a t e C o n d u c t e d L o t t e r i e s , 'I p. 8 1 .

S t o c k e r , " S t a t e S p o n s o r e d G a m b l i n g ," pp. 437-441.

la key, "state C o n d u c t e d L o t t e r i e s , " pp. 80-81.

D e n n i s R. Hickman, " S h o u l d G a m b l i n g Be L e g a l i z e d F o r t h e Major S p o r t E v e n t s , " J o u r n a l o f P o l i c e S c i e n c e s a n d A d m i n i s t r a t i o n 4 , 2 ( J u n e 1 9 7 6 ) : 203.

J . R . A r o n s o n , A. W e i n t r a u b a n d C. Wal sh , "Revenue P o t e n t i a l o f S t a t e a n d L o c a l P u b l i c L o t t e r i e s , * G r o w t h a n d C h a n g e 3 ( A p r i l , 1 9 7 2 ) : 8.

N e l s o n Rose , "The L e g a l i z a t i o n a n d C o n t r o l o f C a s i n o G a m b l i n g , " Fordham U r b a n Law J o u r n a l 8 ( 1 9 8 0 ) : 259 ( h e r e a f t e r c i t e d as Rose, " L e g a l i z a t i o n a n d C o n t r o l " ) ; see a l s o Vrooman, "An Economic A n a l y s i s o f t h e N . Y . L o t t e r y , " N a t i o n a l T a x J o u r n a l , 29 ( 1 9 7 6 ) : 482.

l6 S u i t s , "Gambl ing T a x e s : R e g r e s s i v i t y a n d Revenue - P o t e n t i a l , " p. 39 .

1 7 D. C o a t e , a n d G. R o s s , "The E f f e c t o f O f f - t r a c k B e t t i n g i n N e w York S t a t e On R e v e n u e s t o t h e S t a t e a n d L o c a l G o v e r n m e n t s 1871-1974 , " A m e r i c a n E c o n o m i s t 22 ( 1 9 7 8 ) : 29.

l8 T h e R a c i n g I n d u s t r y i n New York S t a t e : P r o b l e m s a n d I s s u e s , J o i n t L e g i s l a t i v e Task F o r c e to S t u d y a n d E v a l u a t e t h e P a r i - M u t u a l R a c i n g and B r e e d i n g I n d u s t r y i n N e w York S t a t e , by J o h n R. ~ u n n e & W.B. innera an ,- Co-Chairmen, ( J u n e 1, l 9 8 l ) , p. 24 ( h e r e a f t e r c i t e d a s Dunne and F i n n e r a n , T h e R a c i n g I n d u s t r y i n ~ e w York S t a t e ) .

' ~ a r i - ~ u t u a l Horse R a c i n g a n d B r e e d i n g I n New York S t a t e : An Economic P r o f i l e , J o i n t L e g i s l a t i v e T a s k F o r c e t o S t u d y a n d E v a l u a t e t h e P a r i - M u t u a l R a c i n g and B r e e d i n g I n d u s t r y i n New York S t a t e , J .R. Dunne a n d W.B. F i n n e r a n , Co-Chairmen ( A p r i l 1, l 9 8 2 ) , p. 72.

I b i d . , p. 7 3 ; S e e a lso Dunne and F i n n e r a n , The R a c e I n d u s t r y i n New York S t a t e , p. 48 .

J u d g e J o h n s o n ' s s t a t e m e n t i n C i t y o f M o v e r l y v s . D e s k i n ( 1 9 1 3 ) , c i t e d by G. G r i f f i n , " M i s s o u r i L o t t e r y Law: Of P r o m o t i o n a l G a m e s a n d P y r a m i d s , " U n i v e r s i t y o f M i s s o u r i a n d K a n s a s C i t y Law R e v i e w ( A p r i l , 1 9 8 0 ) : 322.

E.T. B i r d , " S t a t e L o t t e r i e s - A Good B e t , " S t a t e Governmen t ( W i n t e r , 1 9 7 2 ) c i t e d by B l a k e y , " S t a t e C o n d u c t e d L o t t e r i e s , " p.

H.A. B l o c k , "The G a m b l i n a B u s i n e s s : An Amer i can P a r a d o x ," crime a n d ~ e l i i ~ u e n c ~ 8 ( O c t . , 1 9 6 2 ) : 355-364; a l s o see;

G. E. Mundschau , " W i s c o n s i n L o t t e r i e s - A r e They L e g a l , I 1

W i s c o n s i n Law Rev iew ( S p r i n g , 1 9 6 7 ) : 556-566; a n d ;

R o s e , "The L e g a l i z a t i o n a n d C o n t r o l . I'

Rose , "The L e g a l i z a t i o n and C o n t r o l , " p. 253.

Thomzis M a r t e n e z a n d Marcus L a n d s b e r a , r e v i e w o f T h e ~ ~

I m p a c t o f - L e g a l i z e d Gambl ing : T h e ~ & i o e c o n o m i c -

C o n s e q u e n c e s o f L o t t e r i e s a n d O f f - T r a c k B e t t i n g , by D a v i d W e i n s t e i n a n d L i l l i a n D e i t c h , i n S o c i e t y 13

R e u t e r , "Easy S p o r t : R e s e a r c h - R e l e v a n c e , " p. 1 7 9 .

2 7 w e i n s t e i n and D e i t c h , The I m p a c t o f L e g a l i z e d Gambl ing .

28 J. Brooks , " S t a t e L o t t e r i e s : P r o f i t s & P r o b l e m s , " S t a t e Government 48 , 28 ( 1 9 7 5 ) : 29.

29 Eugene M. C h r i s t i a n s e n and M.D. Shagan , "The N e w York Of f -Track B e t t i n g Law: An E x e r c i s e I n S e l e c t i v e D e c r i m i n a l i z a t i o n , " C o n n e c t i c u t Law Review 12 ( 1 9 8 0 ) : 866.

30 I b i d . , p. 865.

31 B l a k e y , " S t a t e Conduc ted L o t t e r i e s , " p. 84.

32 M . K a l l i c k , D. S u i t s , T. Die lman, and J . H y b e l s , "A S u r v e y of American Gambling A t t i t u d e s and B e h a v i o u r , " a p p e n d i x 2 t o Gambl inq i n Amer ica .

33 J u d i t h H. H y b e l s , "The I m p a c t of L e g a l i z a t i o n on I l l e g a l Gambling P a r t i c i p a t i o n , " J o u r n a l o f S o c i a l I s s u e s 35 , 3 ( 1 9 7 9 ) : 35.

34 Gambl ing i n A m e r i c a , a p p e n d i x 3 , 92.

35 U.S., N a t i o n a l Gambl ing Commission, "The E f f e c t s o f I n c r e a s e d Enforcement of Gambling Laws," commiss ioned p a p e r .

36 F r e d e r i c k T. M a r t e n s and Marg E. B e a r e , "You P l a y The B l a c k and The Red Comes Up: O r g a n i z e d C r i m e C o n t r o l P l a n n i n g h E v a l u a t i o n i n N e w J e r s e y . " U n p u b l i s h e d p a p e r p r e s e n t e d t o American S o c i e t y o f C r i m i n o l o g y , A t l a n t a , G e o r g i a , 1977.

37 R e u t e r , "Easy S p o r t : R e s e a r c h R e l e v a n c e , " p. 175. ( T i t l e t a k e n f rom a r e f e r e n c e J.Q. Wi l son : " C r i t i c i z i n g t h e b a n a l and u n s u b s t a n t i a t e d p o l i c y v i e w s of p u b l i c c o m m i s s i o n s is good s p o r t . .." b u t a l s o r e m i n i s c e n t of t h e T w e n t i e t h C e n t u r y Fund r e p o r t on g a m b l i n g e n t i t l e d Easy Money. )

3 8 I b i d . F o r an example o f a p a n e l i s t who r e j e c t e d t h e e x t e n s i v e s u r v e y ' s r e s u l t s , b a s e d on t h e f a c t t h a t he knew an i n d i v i d u a l p e r s o n a l l y , who b e t more i n o n e month t h a n any r e s p o n d e n t i n t h e s u r v e y a d m i t t e d b e t t i n g , see pp. 175-176.

39 I b i d .

40 S e e U.S., Gambl ing i n Amer ica , p. 65 c i t e d by P e t e r R e u t e r , Easy S p o r t : R e s e a r c h R e l e v a n c e , p. 176.

-

41 A t a p u b l i c h e a r i n g b e f o r e t h e Gambl ing S t u d y Commiss ion i n N e w J e r s e y , t h e e x e c u t i v e s e c r e t a r y o f N e w J e r s e y ' s T r a v e l & Resort A s s o c i a t i o n t e s t i f i e d :

" . . . a l l o f u s are f a m i l y p e o p l e . W e d o n ' t w a n t t o create a s i t u a t i o n a n d a n e n v i r o n - m e n t t h a t is bad . I h a v e f o u r c h i l d r e n f r o m 9 t o 13. W e d o n ' t w a n t a n e n v i r o n m e n t t h a t is o t h e r t h a n h e a l t h y . . . "

. P u b l i c H e a r i n q b e f o r e G a m b l i n q S t u d y Commiss ion by S e n a t o r Wayne Dumont, Jr . , C h a i r m a n ( T r e n t o n , N e w J e r s e y , J u l y 2 6 , 1 9 7 2 ) .

4 2 From a 1 8 9 2 l e t t e r by t h e U n i t e d S t a t e s A t t o r n e y G e n e r a l to t h e p r e s i d e n t o f a r a i l r o a d a s s u r i n g him t h a t t h e i n t e r e s t a t Commerce Commiss ion was good f o r t h e i n t e r e s t o f t h e r a i l r o a d s - - c i t e d by K e n n e t h C u l p D a v i s , t a k e n f r o m J . S k o l n i c k , House o f C a r d s : T h e L e g a l i z a t i o n & C o n t r o l o f C a s i n o Gambl inq ( B o s t o n : L i t t l e Brown & Co., 1 9 7 8 ) ( h e r e a f t e r c i t e d as S k o l n i c k , House o f C a r d s ) p . 1 6 6 .

43 I n t e r i m R e p o r t , S e n a t e S p e c i a l C o m m i t t e e t o I n v e s t i g a t e O r g a n i z e d C r i m e i n I n t e r s t a t e Commerce, s. Rep. N o . 2370 , 8 1 s t Cong. 2nd s e s s i o n . 93 ( 1 9 5 0 ) q u o t e d i n U.S. D e p a r t m e n t o f J u s t i c e , N a t i o n a l I n s t i t u t e o f Law E n f o r c e m e n t a n d C r i m i n a l J u s t i c e . L.E.A.A.. The D e v e l o p m e n t o f t h e Law o f ~ a r n b l i n q : 1 7 7 6 - l 9 w ( 1 9 7 7 ) , p. 442 ( h e r e a f t e r c i t e d as U.S., T h e D e v e l o p m e n t o f t h e Law o f G a m b l i n q ) .

4 4 R e p o r t o n Gaminq C o n t r o l i n New J e r s e y , S t a t e o f Nevada Gaming C o n t r o l Boa rd ( A p r i l 1 9 , 1 9 7 9 1 , p a g e 1.

4 5 U.S., G a m b l i n g i n A m e r i c a , p . 78 .

46 J . H . S k o l n i c k a n d J. Dombrink , "The L i m i t s o f Gaming C o n t r o l ," C o n n e c t i c u t Law R e v i e w 1 2 (1980 ) : 764.

4 7 E. A r n o l d , Gold-Camp D r i f t e r 56 ( 1 9 7 3 ) q u o t e d i n U.S., T h e D e v e l o p m e n t o f T h e Law o f G a m b l i n q , p. 415 .

48 U.S., T h e D e v e l o p m e n t o f t h e Law o f G a m b l i n q , p. 427 .

49 W. T u r n e r , G a m b l e r ' s -Money ( 1 9 6 5 ) pp. 33-34, q u o t e d i n U.S., The D e v e l o p m e n t o f t h e Law o f G a m b l i n q , p. 431.

50 U.S., The D e v e l o p m e n t o f t h e Law o f G a m b l i n g , p. 452.

51 I n numerous c o u r t cases, t h e j u d g e s h a v e c o n f i r rned t h e i m p o r t a n c e of t h e c a s i n o i n d u s t r y to t h e Nevada economy,

F o r e x a m p l e s , see:

m s h a l l v . Sawyer, 3 0 1 F. 2d 639 , 648 ( 9 t h C i r . 9 6 2 ) Pope , J. c o n c u r r i n g "Nevada s i m p l y c a n n o t a f f o r d t o lose i ts g a m b l i n g b u s i n e s s . . . ". K . K e n e a l l y , " S t a t e R e g u l a t i o n o f C a s i n o Gambl ing : '

C o n s t i t u t i o n a l L i m i t a t i o n s and F e d e r a l L a b o r Law P r e e m p t i o n , " Fordham Law Rev iew 49 (May 1 9 8 1 ) : 1039.

52 S t a t e o f Nevada , Gaming C o n t r o l B o a r d , Gaming Nevada S t y l e , Nevada Gaming Commiss ion and S t a t e Gaming C o n t r o l B o a r d , ( C a r s o n C i t y , Nevada , J a n u a r y , 1 9 8 2 ) .

53 S t a t e of Nevada , Gaming C o n t r o l B o a r d , Direct L e v i e s o n Gaming i n Nevada , ( C a r s o n C i t y , Nevada. J a n u a r y 1 6 , 1 9 8 0 ) , p. 14 .

S t a t e o f Nevada Gaminq C o n t r o l B o a r d Q u a r t e r l y R e p o r t , f o r t h e q u a r t e r e n d e d J u n e 3 0 , 1 9 8 2 .

S k o l n i c k a n d Dombrink , "The L i m i t s o f Gaming C o n t r o l , " p. 772.

Nevada Gaming C o n t r o l A c t , New. Rev. S t a t . ss. 463.010-720 ( 1 9 7 9 ) ; Nev. Rev. S t a t . ss. 463 .021-120- (1979) ; ss 4 6 3 , 1 4 0 ( 2 ) , 141-142, ss .463,140-145-1594.

S t a t e o f Nevada , Gaming Nevada S t y l e , p . 1 5 .

Nevada R e g u l a t i o n s S t a t . 4 6 3 . 1 4 0 ( 1 ) ( c ) .

S t a t e o f Nevada , Gaming Nevada S t y l e , p. 21.

I b i d . , pp. 21-25,

S t a t e v R o s e n t h a l , 93 Nev. 3 6 , 42 , 559 P. 2d, 8 3 0 , ( 1 9 7 7 ) . The A p p e a l i n t h i s case w a s d e n i e d f o r l a c k o f a f e d e r a l q u e s t i o n .

Wayne A . S h a f f e r , " C o n t r o l o f Gaming i n Nevada: A Look a t L i c e n s i n g , " C a l i f o r n i a W e s t Law Rev iew 1 6 , 3 ( 1 9 8 0 ) : 515 ( h e r e a f t e r c i t e d as S h a f f e r , " C o n t r o l o f Gaming i n Nevada" ) . U s t o n v R e s o r t s I n t e r n a t i o n a l Hotel I n c . N . J . C.C.C. 79-2.

J e r o m e H. S k o l n i c k , House o f C a r d s : T h e L e g a l i z a t i o n & C o n t r o l o f C a s i n o G a m b l i n g ( B o s t o n : L i t t l e Brown & Co. , 1 9 7 8 ) , p. 229 ( h e r e a f t e r c i t e d as S k o l n i c k , House o f C a r d s ) . S k o l n i c k q u o t e s o n e Board member a s s a y i n g "We d i s p e n s e j u s t i c e , t h e y d i s p e n s e m e r c y . "

S k o l n i c k a n d Dombr ink , "The L i m i t s o f Gaming C o n t r o l , " p . 778 .

S h a f f e r , " C o n t r o l o f Gaming i n Nevada , " p. 505 .

S k o l n i c k , House o f C a r d s , pp . 164-165.

S h a f f e r , " C o n t r o l o f Gaming i n Nevada , " ; S k o l n i c k , House o f C a r d s ; S k o l n i c k and Dombr ink , "The L i m i t s o f Gaming C o n t r o l . "

L e g i s l a t i v e Commiss ion o f t h e L e g i s l a t u r e C o u n s e l B u r e a u , " R e g u l a t i o n o f Gaming," ( S t a t e o f Nevada , December 1 9 8 0 ) , A p p e n d i x B, p a g e 3 .

S k o l n i c k a n d Dombr ink , "The L i m i t s o f Gaming C o n t r o l , " p p . 773-774.

R o s e , "The L e g a l i z a t i o n and C o n t r o l , " p. 267.

N . J . S t a t u t e Ann. ss 5 : 1 2 - 1 ( 3 ) ( 5 ) W e s t Supp. 1979-1980. S i m i l a r l y , t h e Commonwealth o f P u e r t o Rico s t a t u t e s d e c l a r e t h a t l e g a l i z e d g a m b l i n g is i n t e n d e d to:

" c o n t r i b u t e t o w a r d t h e d e v e l o p m e n t o f t o u r i s m by a u t h o r i z i n g c e r t a i n games o f c h a n c e c u s t o m a r y i n r e c r e a t i o n resorts i n f amous t o u r i s t c e n t e r s t h r o u g h o u t t h e w o r l d . . . a n d a t t h e same t i m e a f f o r d i n g t h e S e c r e t r y o f t h e T r e a s u r y o f P u r e r t o R i c o an a d d i t i o n a l s o u r c e o f r e v e n u e . "

A c t o f May 1 5 , 1 9 4 8 , N q . 2 2 1 s. 221 as amended by A c t o f J u n e 2 3 , 1 9 5 6 , N o . 9 0 s. 2 ( a p p e n d e d t o P.R. Laws Ann tit. 1 5 , s. 7 1 ( 1 9 7 2 ) .

S t a t e o f New J e r s e y , S e c o n d I n t e r i m R e p o r t , S t a f f P o l i c y G r o u p o n C a s i n o G a m b l i n g , ( F e 5 r u a r y , - 1 7 , 1 9 7 7 ) .

I b i d . , p. 11.

I b i d . , p. 32.

I b i d . , p. 35.

N e w J e r s e y S t a t u t e Ann. s. 5: 12-50, -51.

N.J. Stat. Ann ss. 5:12-60. See Rose, "The Legalization and Control ," p. 279.

State of New Jersey, Casino Control Commission, Annual Report (June 30, 1979), p. 7.

New Jersey Stat. Ann. ss 5:12-80(d) (West Supp. 1979-1980).

See ss. 5:12-130.1 to -130.11. Article 9A entitled Casino License Conservatorship outlines the regulations regarding the intermediary running of these casino.

See Appendix B of this report for a copy df 6A Temporary Casino Permits.

William T. O'Donnell, "A Chief Executive's Views on the Necessity for Comprehensive Control and Regulation in the united states- ami in^ Industry, I' Connecticut Law Review lO(1980): 738. (O'Donnell, founder, former Chairman and President of Bally was later found unqualified to remain with ~ a l i ~ when New Jersey inves- tigated the company for a permanent casino license.)

N.J. Stat Ann. 5:12-1.

New York Times, "The Real Trouble with Casinos," 9 February 1980.

Australia, New South Wales, Alleqations of Orqanized Crime in Clubs, Hon. Mr. Justice Moffitt, Royal Commission, (D. West) Government Printers (August 15, 1974 ) , taken from Report to the Casino Control Commission with Regard to the Application of Bally Park Place in Trenton, N.J. (1980), p. 27.

Ibid., p. 4.

Ibid., p. 61.

N.Y. Times, 9 June 1977, 11 at 25. col. 1.

New York, "The Mob Wades Ashore In Atlantic City," 30 January 1978, p. 40. See also:

Knickerbocker News (Albany), "Atlantic City: A Mob Takeover?" 9 April 1981.

The Economist, "Corruption Jackpot," 16 February 1980.

91 S a l e r n o is r e f e r r e d to a s a f o r m e r a n t i - m o b e x p e r t f o r t h e New York C i t y P o l i c e D e p a r t m e n t and w a s q u o t e d i n N e w York , ( J a n u a r y 3 0 , 1 9 7 8 ) , p. 44 b y M i c h a e l Dorman.

92 T h e E c o n o m i s t , 1 6 F e b r u a r y 1 9 8 0 , p. 24.

9 3 G i g i Mahon, The Company T h a t B o u g h t T h e B o a r d w a l k , (New York: Random House , 1 9 8 0 ) , p . 1 8 2 . S e e a l s o New York T i m e s , "Many o f A t l a n t i c C i t y ' s O f f i c i a l s Have T i e s t o t h e C a s i n o I n d u s t r y , " 15 J u n e 1 9 8 0 .

9 4 N e w York T i m e s , " C a s i n o P l a n s Somet imes Backed by O f f i c i a l s w i t h V e s t e d I n t e r e s t , " 16 J u n e 1 9 8 0 .

95 M i c h a e l Dorman, New York ( J a n u a r y 3 0 , 1 9 7 8 ) , p. 44.

96 O r r K e l l y , U.S. News a n d Wor ld R e p o r t , r e p o r t e d i n A l b a n y K n i c k e r b o c k e r News ( A p r i l 9 , 1 9 8 1 ) , p. 12A.

97 S t a t e o f New Jersey, "The S t r u c t u r e o f O r a a n i z e d C r i m e d

i n New J e r s e y , " o r b a n i z e d C r i m e i n A m e r i c a H e a r i n q s , b e f o r e t h e C o m m i t t e e o n t h e J u d i c i a r y U.S. S e n a t e , 1983 .

98 N . J . C o n s t . A r t 4 & 7.

9 9 N e w J e r s e y G e n e r a l A s s e m b l y , L e g i s l a t i v e O v e r s i g h t C o m m i t t e e , H o u s i n g a n d C a s i n o s i n A t l a n t i c C i t y ( 1 9 7 9 ) c i t e d by M i c h a e l Hawkins , " C a s i n o s and Land U s e : Law a n d P u b l i c P o l i c i e s ," C o n n e c t i c u t Law Review 1 2 ( 1 9 8 0 : 799.

lol I b i d . , p. 806 .

lo2 I b i d . , p. 807 .

lo3 S e e New J e r s e y S t a t e Commiss ion o f I n v e s t i g a t i o n , Summary a n d Recommenda t ions f r o m S . C . I . , c a s i n o G a m b l i n g R e p o r t V I I I ( 1 9 7 7 ) ; G o v e r n o r ' s S t a f f P o l i c y Group o n C a s i n o G a m b l i n g , S e c o n d I n t e r i m R e p o r t 3 4 ( 1 9 7 7 ) .

lo4 T a k e n f r o m c o r r e s p o n d e n c e r e c e i v e d f rom R o b e r t ~ e l i k ; C o u r t A d m i n i s t r a t o r , C i t y o f A t l a n t i c C i t y , ~ u n i c i ~ a i C o u r t , A u g u s t 2 4 , 1983 .

lo5 New J e r s e y P u b l i c H e a r i n g on S t a t u t o r y and R e g u l a t o r y C o n t r o l s O v e r C a s i n o C r e d i t a n d C a s i n o I n d u s t r y C r e d i t P r a c t i c e s , ( T r e n t o n , N e w J e r s e y , March 1-4, 1983 ) . P r e p a r e d s t a t e m e n t by A t t o r n e y G e n e r a l I r w i n Kimmelman, March 1, 1 9 8 3 , p. 8 .

lo6 I b i d . , P r e p a r e d s t a t e m e n t by M r . Edwin H. S t i e r , March 1, 1983 .

10' I b i d . , P r e p a r e d s t a t e m e n t by A r t h u r S. Lane , C h a i r m a n , March 1-4 , 1983.

lo8 bid., P r e p a r e d s t a t e m e n t by L t . Co l . J u s t i n D i n t i n o , pp. 3-4.

1 0 9 I n f o r m a t i o n o b t a i n e d from Thomas R. O I B r i a n , Director, D i v i s i o n o f Gaming E n f o r c e m e n t , D e p a r t m e n t o f Law, P u b l i c S a f e t y , S t a t e o f New J e r s e y , A u g u s t 1 8 , 1 9 8 3 . The t h r e e p e n d i n g cases are: Dav id W. S i l v e r m a n v. t h e C a s i n o C o n t r o l Commiss ion and t h e D i v i s i o n of Gaming E n f o r c e m e n t ; R e s o r t s I n t e r n a t i o n a l , I n c . v. J o h n Heyman; and R e s o r t s I n t e r n a t i o n a l , I n c . v. A r t h u r Solomon.

I b i d . , W a l t e r R e i d , Cha i rman o f t h e C a s i n o C o n t r o l Commiss ion .

111 Commiss ion o f I n v e s t i g a t i o n , " d r a f t r e c o m m e n d a t i o n s on c a s i n o c r e d i t p r a c t i c e s , " (May 3 , 1 9 8 3 ) , p. 2.

112 I b i d .

113 - N . J . S t a t . Ann. s. 5-12-139 (West Supp. 1 9 7 9 ) .

114 ~ l l t a b l e s h a v e b e e n o b t a i n e d f rom t h e N e w J e r s e y P u b l i c H e a r i n g on C a s i n o C r e d i t , T r e n t o n , N. J. March 1 9 8 3 , e x c e p t f o r T a b l e 4 w h i c h w a s o b t a i n e d f rom t h e N e w J e r s e y C a s i n o C o n t r o l Commiss ion , A n n u a l R e p o r t , (December 3 1 , 1 9 8 2 ) .

115 New J e r s e y C a s i n o C o n t r o l Commiss ion , A n n u a l R e p o r t , (December 3 1 , 1 9 8 2 ) , p. 24 .

116 E s t i m a t e s r e c e i v e d f r o m Thomas R. O ' B r i a n , Director , D i v i s i o n C a s i n o E n f o r c e m e n t , D e p a r t m e n t o f Law a n d P u b l i c S a f e t y , S t a t e o f N e w J e r s e y , A u g u s t 1 8 , 1 9 8 3 .

117 N e w J e r s e y C a s i n o C o n t r o l Commiss ion , A n n u a l R e p o r t , (December 3 1 , 1 9 8 2 ) , pp . 14-15.

l I 8 P u b l i c H e a r i n g on S t a t u t o r y and R e g u l a t o r y C o n t r o l s o v e r C a s i n o C r e d i t , C a s i n o I n d u s t r y C r e d i t P r a c t i c e s . T r e n t o n , New J e r s e y , March 1 9 8 3 .

1 2 0 I b i d .

The N e w J e r s e y C a s i n o C o n t r o l Commiss ion A n n u a l R e p o r t , (December 3 1 , 1 9 8 2 ) . P u b l i c H e a r i n g s on S t a t u t o r y and R e g u l a t o r y C o n t r o l s , N e w J e r s e y , March 1 9 8 3 .

J a n i c e P r i n d l e , nA P o o r B e t ? S t e i n g u t ' s C a s i n o P r o p o s a l , " E m p i r e S t a t e R e p o r t , ( A p r i l 1 9 7 6 ) : 108-109.

J. P r i n d l e , "No J a c k p o t i n C a s i n o Gamble ," E m p i r e S t a t e R e p o r t , ( A u g u s t 1 9 7 6 ) : 266.

J . P r i n d l e , "A P o o r B e t ? , " p. 109.

I b i d .

T w e n t i e t h C e n t u r y Fund, Easy Money, pp. 6-7 ( p e r m i s s i o n o b t a i n e d t o q u o t e a t l e n g t h , A p r i l 2 1 , 1 9 8 3 ) .

I b i d . , p. 11. T h i s a r g u m e n t was s u p p o r t e d by P r o f e s s o r C h a r l e s Rogov in , A s s o c i a t e Dean o f Temple U n i v e r s i t y Law S c h o o l , i n h i s l e c t u r e g i v e n a t t h e " O r g a n i z e d C r i m e I n t e l l i g e n c e A n a l y s i s S e m i n a r " a t P r i n c e t o n U n i v e r s i t y , F e b r u a r y 21 , 1 9 8 3 , and by t h e N e w J e r s e y S t a t e P o l i c e I n t e l l i g e n c e Bureau i n t h e i r pub1 i c a t i o n e n t i t l e d O r g a n i z e d C r i m e C o n t r o l , P l a n n i n g a n d E v a l u a t i o n : I m p l i c a t i o n s F o r P u b l i c P o l i c y , ( T r e n t o n , N e w J e r s e y , J a n u a r y , 1 9 7 8 1.

F i n a l R e p o r t o f t h e C a s i n o Gambl ing s t u d y P a n e l , by G e r a l d W. Lvnch , Cha i rman ( S t a t e o f N e w York , A l b a n y , New York, ~ ; ~ u s t 8, 1 9 7 9 ) , p. 2 ( h e r e a f t e r c i t e d as- Lynch , F i n a l R e p o r t ) . See A p p e n d i x C o f t h i s r e p o r t f o r a v e r b a t i m p r e s e n t a t i o n o f t h e Summary a n d Recommenda t ions f r o m t h e Lynch r e p o r t .

G e r a l d W. Lynch, " C a s i n o Gambl ing : I ts C o r r u p t i o n P o t e n t i a l , "- p a p e r p r e s e n t e d to t h e ~ m e r i c a n s o c i e t y o f C r i m i n o l o g y , T o r o n t o , Canada (November 5 , 1 9 8 2 ) pp. 2-4.

P. R e u t e r and H. R u t h , C a s i n o Gaming F o r N e w York S t a t e : A r e p o r t p r e p a r e d f o r t h e N e w York S t a t e C a s i n o G a m b l i n g S t u d y P a n e l , ( 9 A u g u s t 1 9 7 9 ) .

I b i d . , p. 21.

I b i d . , pp. 77-78.

A r t h u r J. K r e m e r , " L e g a l i z e Gambl ing i n C a s i n o s ? , " U.S. News a n d World R e p o r t ( J u l y 2 , 1 9 7 9 ) : 45-46.

I b i d .

R o b e r t Abrams, R e p o r t I n O p p o s i t i o n t o L e g a l i z e d C a s i n o Gambl ing i n N e w York S t a t e (May 20 , 1 9 8 1 ) , p. 2 ( h e r e a f t e r c i t e d a s Abrams, R e p o r t i n O p p o s i t i o n ) . ( S e e A p p e n d i x D o f t h i s r e p o r t f o r t h e f u l l t r a n s c r i p t o f t h e - ~ b r a m s R e p o r t ) .

New York T i m e s , F e b r u a r y 1 5 , 1980.

~ b r a m s , R e p o r t I n O p p o s i t i o n , p . 20.

New York T i m e s , " G o v e r n o r F a v o r s S t a t e O p e r a t i o n o f Any C a s i n o s " , by E.J. D i o n n e , J a n u a r y 26 , 1 9 7 9 , p. B l , B4.

J. H. S k o l n i c k , "The Dilemmas o f R e g u l a t i n g C a s i n o G a m b l i n g , " J o u r n a l o f S o c i a l I s s u e s 35 , 3 ( 1 9 7 9 ) : 142.

R o s e , "The L e g a l i z a t i o n a n d C o n t r o l , " p. 297.

New York T i m e s , "Cary F a v o r s S t a t e C a s i n o s Ru t With P r i v a t e O p e r a t o r s , " March 1 3 , 1 9 7 9 , p. B3.

R o s e , "The L e g a l i z a t i o n and C o n t r o l , " p. 298.

J o s e p h J. Weiser, R e p o r t o n Recommenda t ions t o E x t e n d L e g a l i z e d G a m b l i n q , ( A l b a n y , N e w York: N e w York S t a t e Commiss ion o n Gambl ing , F e b r u a r y , 1 9 7 3 ) , p. 10 . The 1 9 7 3 New York r e p o r t a r g u e d t h a t i n o r d e r to c o m p e t e w i t h n e i g h b o r i n g states it m i g h t b e n e c e s s a r y to o f f e r p e r c e n t a g e c o n t r a c t s i n o r d e r to a t t r a c t t h e m o s t q u a l i f i e d p e o p l e . T h i s would n o t b e p o s s i b l e w i t h i n a s t a t e - o w n e d / o p e r a t e d e n t e r p r i s e .

~ y n c h , F i n a l R e p o r t .

s k o l n i c k , House o f C a r d s , p. 344.

~ y n c h , F i n a l R e p o r t , pp . 37-38.

R o s e , "The L e g a l i z a t i o n a n d C o n t r o l , " p. 267.

S k o l n i c k , "The Dilemmas o f R e g u l a t i n g C a s i n o G a m b l i n g , " p. 138 .

S k o l n i c k , House o f C a r d s , p. 346 .

I b i d . , p. 340.

Repor t of t h e Royal Commission on Gambling, by t h e Lord R o t h s c h i l d , Chairman (London, England: H e r M a j e s t y ' s S t a t i o n e r y O f f i c e , 1 9 7 8 ) , p. 11, p a r a . 2.1 ( h e r e a f t e r c i t e d a s R o t h s c h i l d , Royal Commission on Gambl inq) .

Annual Repor t o f t h e Gaminq Board f o r G r e a t B r i t a i n , 1973 (London, England: Her M a j e s t y ' s S t a t i o n e r y o f f i c e ) , p. 3 4 , f o o t n o t e s 99, 100.

I b i d .

I b i d .

Grea t B r i t a i n , Annual Repor t o f t h e Gaming Board f o r G r e a t B r i t a i n , 1969 (London, England: Her M a j e s t y ' s S t a t i o n e r y O f f i c e ) , p. 10 , p a r a s . 17 & 18.

S i r Lawrence Dunne, M.C., i n e v i d e n c e b e f o r e t h e Royal Commission on Gamblinq, 1949-51, p. 6, p a r a . 17.

C i t e d i n G.B. , Annual Repor t o f t h e Gaminq Board f o r G r e a t B r i t a i n , 1969, p. 11, pa ra . 20.

I b i d . , p. 11, p a r a . 20.

I b i d . , p. 11, p a r a . 21.

I b i d . , p. 1 2 , pa ra . 21.

I b i d . , p. 1 2 , p a r a . 21-

R o t h s c h i l d , Royal Commission on Gambling, p. 268, p a r a . 16.8.

I b i d . , p. 268, p a r a . 16.7.

I b i d . , p. 315, p a r a s . 19.2 & 19.3.

G . B . , Annual Repor t o f t h e Gaminq Board f o r G r e a t B r i t a i n , 1969 , p. 8.

R o t h s c h i l d , Royal Commission on Gamblinq, p. 9 , p a r a . 1.19.

G . B . , The Gaminq Ac t 1968 , s. 43.

R o t h s c h i l d , Royal Commission on Gamblinq, pp. 283-5, pa ra . 17.8-.11.

I b i d . , p. 396, pa ra . 24.6.

G.B., A n n u a l R e p o r t o f t h e Gaming B o a r d f o r Great B r i t a i n , 1 9 7 3 , p. 2 3 , p a r a s . 6 4 , 66 .

I b i d . , 1 9 7 8 , p. 24 , p a r a . 60 .

I b i d . , 1 9 7 7 , p. 2 4 , p a r a s . 6 9 , 70.

I b i d . , 1 9 7 4 a n d 1980 .

Great B r i t a i n . The H o m e O f f i c e . I n t r o d u c t i o n t o t h e Gaming A c t , 1 9 6 8 , pp . 1-2.

R. v. Gaming B o a r d f o r Great B r i t a i n , e x p a r t e Bena im a n d K h a i d a ( 1 9 7 0 ) 2 QB 417 ( 1 9 7 0 ) , 2 A l l ER 528 , C.A.

S c h e d u l e 2 , p a r a . 4 ( 6 ) Gaming A c t 1968 .

R o g e r s v. S e c r e t a r y o f S t a t e f o r t h e H o m e D e p a r t m e n t , Gaming Board f o r Great B r i t a i n v. R o g e r s ( 1 9 7 3 ) AC 388, ( 1 9 7 2 ) 2 A l l ER 1 0 5 7 , H.L.

Great B r i t a i n , Gaming A c t , See S c h e d u l e 2 .

I b i d . , S e e S c h e d u l e 2 , p a r a . 1 4 ( 2 ) .

I b i d . , S e e S c h e d u l e 2 , p a r a . 22.

I b i d . , S e e S c h e d u l e 2 , p a r a . 24 and p a r a . 2 5 ( 1 ) ( 2 ) .

R o t h s c h i l d , R o y a l Commiss ion o n Gambl inq , pp. 274-5, p a r a s . 1 6 . 2 2 - 16.26.

I b i d . , p. 275 , p a r a . 16 .27 .

I b i d . , p. 274 , p a r a s . 16 .23 , 16 .24 .

T h e B o a r d ' s a r g u m e n t s were s u p p o r t e d by t h e C h u r c h e s ' C o u n c i l o n Gambl ing , a n d t h e R o y a l C o l l e g e o f P s y c h i a t r i s t s , I b i d . , p. 273 , p a r a . 16 .20 .

G.B., A n n u a l R e p o r t o f t h e Gaminq B o a r d f o r Great B r i t a i n , 1979 . p. 1 0 , p a r a s . 24 , 25.

R o t h s c h i l d , R o y a l Commiss ion o n G a m b l i n q , p. 272 , p a r a . 16 .19 .

G.B., A n n u a l R e p o r t s o f t h e Gaminq B o a r d f o r Great B r i t a i n 1 9 7 6 , p. 7 , p a r a s . 4-6.

R o t h s c h i l d , R o y a l Commiss ion o n G a m b l i n g , pp. 322-323, p a r a s . 19 .31-19 .37 .

G.B., A n n u a l R e p o r t o f t h e Gaming B o a r d f o r Great B r i t a i n , 1 9 7 9 , p. 1 0 , p a r a s . 24-25.

bid., p. 323 , p a r a s . 19.35-19.37.

B r i t i s h J o u r n a l o f C r i m i n o l o g y 21 ( 1 9 8 1 ) : p. 79. "

pp. 138-139,

bid., p. 6 6 , p a r a . 8 .17 .

- 1 5 -

I b i d . , p. 320 , p a r a s . 19 .25-19 .29 , and p. 328, p a r a s . 19 .59-19 .72 .

I b i d . , p. 272 , p a r a s . 16-19.

G.B., A n n u a l R e p o r t o f t h e Gaming B o a r d f o r Great B r i t a i n , 1 9 7 9 , p. 1 0 , p a r a s . 24-25.

bid., p. 322 , p a r a s . 19 .31-19 .34 .

bid., p. 323 , p a r a s . 19.35-19.37.

avid Miers, "The Mismanagement o f C a s i n o Gaming," B r i t i s h J o u r n a l o f C r i m i n o l o g y 21 ( 1 9 8 1 1: p. 79. "

I b i d . , p . 79 .

I b i d . , p. 80 .

R o t h s c h i l d , R o y a l Commiss ion o n Gambl ing , pp. 138-139, p a r a s . 11.43-11.51.

I b i d . , p. 1 3 5 , p a r a . 11.36.

I b i d . , p. 6 6 , p a r a . 8 .17 .

bid., p. 24 , p a r a . 6 .2 .

I b i d . , p. 51 , p a r a . 7 . 3 6 .

bid., p. 25 , p a r a . 6 .4 .

I b i d . , p. 2 5 , p a r a . 6.8.

G.B., A n n u a l R e p o r t o f t h e Gaminq B o a r d f o r Great B r i t a i n , 1 9 7 8 , pp. 30-33, p a r a s . 79-95.

G.B., A n n u a l R e p o r t of t h e Gaming B o a r d f o r G r e a t B r i t a i n , 1 9 8 0 , p. 3 4 , p a r a . 119.

~ o t h s c h i l d , R o y a l Commiss ion o n G a m b l i n q , p. 25 , p a r a . 6 .8.

I b i d . , p. 1 6 4 , p a r a s . 12.6-12.8.

I b i d . , p. 1 6 4 , p a r a . 12 .8 .

I b i d . , pp. 194-195, p a r a s . 12 .135-12.139.

G.B., A n n u a l R e p o r t o f The Gaminq B o a r d f o r Great B r i t a i n , 1 9 7 8 .

I b i d . , 1979 .

I b i d . , p. 2 5 , p a r a . 6.8.

G.B., A n n u a l R e p o r t o f t h e Gaminq B o a r d f o r Great B r i t a i n , 1 9 7 8 , pp. 30-33, p a r a s . 79-95.

G.B., A n n u a l R e p o r t of t h e Gaming B o a r d f o r G r e a t B r i t a i n , 1 9 8 0 , p. 3 4 , p a r a . 119.

G.B., A n n u a l R e p o r t o f The Gaminq B o a r d f o r Great B r i t a i n , 1 9 7 8 .

I b i d . , 1979 .

217 Ibid., 1980.

218 Rothschild, Royal Commision on Gambling, p. 24, para. 6.2.

219 Ibid., p. 25. para. 614.

221 Australian Encyclopedia, 1977 ed., S.V. "Gambling," p. 131. Please note that all dollar figures are in Australian dollars.

223 See P.J. Power, Tasmanian Racinq and Gaming Commission: Twenty-eighth annual report, 1981, p. 6.

226 Australian Encyclopedia, "Gambling, " p. 133. The Boards came into the remaining States during the 1960's with the exception of the Northern Territory .which developed a system of licensed off-track bookmakers.

227 Australian Federal Police, Letter, (August 11, 1982). It is assumed that all figures coming from this letter refer to Australian dollars.

228 Australian Federal Police, Letter.

229 Australian Encyclopedia, "Gambling," p. 132.

230 Australia, New South Wales, Alleqations of Organized Crime in Clubs, Hon. Mr. Justice Moffitt, Royal Commissioner, (D. West, Government Printers, August 15, 1974 1 .

231 Tasmania, Wrest Point Casino Licence and Development Act, 1968, Section 2, schedule 4.

232 L.J. Wild, Secretary and Comptroller of Accounts, The Treasury, New South Wales, Letter. It was mentioned that "Loto" is run jointly with a private company.

233 Ibid.

234 Ibid.

235 T a s m a n i a , Wrest P o i n t C a s i n o L i c e n c e a n d Deve lopmen t A c t ( 1 9 6 8 ) .

236 P . J . Power , Cha i rman o f t h e T a s m a n i a R a c i n g a n d Gaming Commiss ion , L e t t e r .

237 L e t t e r f r o m M r . J .L . F r i e n d , Head o f A u s t r a l i a n N a t i o n a l C e n t r a l B u r e a u , I n t e r n a t i o n a l C r i m i n a l P o l i c e O r g a n i z a t i o n , C a n b e r r a , A u s t r a l i a ( J u l y 1 9 , 1 9 8 2 ) .

238 A u s t r a l i a n E n c y c l o p e d i a , "Gambl ing , " p. 132.

239 W e s t e r n A u s t r a l i a , L o t t e r i e s ( C o n t r o l ) A c t 1954-1981; L o t t o A c t 1 9 8 1 .

W e s t e r n A u s t r a l i a , B e t t i n g C o n t r o l A c t , s. 2 5 ( 1 ) .

R e f e r e n c e s h o u l d a l s o b e made to t h e N e w Z e a l a n d R a c i n g A c t , 1 9 7 1 .

N e w Z e a l a n d , R e p o r t o f t h e D e p a r t m e n t o f I n t e r n a l A f f a i r s f o r t h e y e a r e n d e d 3 1 March 1 9 8 1 , p. 7.

I b i d . , p. 8 .

N e w Z e a l a n d , Gaming a n d L o t t e r i e s A c t , 1 9 7 7 , P a r t V.

I b i d . , P a r t V I I .

N e w Z e a l a n d , R e p o r t o f t h e D e p a r t m e n t o f I n t e r n a l A f f a i r s f o r t h e y e a r e n d e d 31 March 1 9 8 1 , p. 8 .

I b i d .

N e w Z e a l a n d , R e p o r t o f t h e D e p a r t m e n t o f I n t e r n a l A f f a i r s f o r t h e y e a r e n d e d 3 1 March 1 9 8 1 , p. 8.

I b i d . , p . 7.

N e w Z e a l a n d , R a c i n g A c t , 1 9 7 1 , P a r t I.

I b i d .

I b i d .

I b i d . , P a r t 11.

I b i d . , P a r t IV.

I b i d . , P a r t IV.

W i l k i n s , "What p r i c e t h e to te? , " N e w Z e a l a n d L i s t e n e r (May 8 , 1 9 8 2 ) : 52.

257 I b i d . , pp. 52-53.

258 N e w Z e a l a n d , Gaming D u t i e s Amendment A c t , 1 9 7 6 , s. 4.

259 I b i d . , s. 6.

260 N e w Z e a l a n d , R e p o r t o f t h e D e p a r t m e n t o f I n t e r n a l A f f a i r s f o r t h e y e a r e n d e d 3 1 March 1 9 8 1 , p. 8 .

261 I b i d .

262 I b i d . , p. 8 .

263 AndrG N e u r r i s s e , L e s J e u x d e C a s i n o , 3 VendCme, ( F r a n c e : P r e s s e s U n i v e r s i t a i r e s d e F r a n c e , 1 9 7 7 ) , p. 18 .

2 6 4 I r i n a d e C h i k o f f , "La g u e r r e d e s T r o i s - E p i s , " Le F i q a r o (20-21 March 1 9 8 2 ) .

265 ~ h i l i p p e Boggio , "Les d e s s o n s d e C a r t e s d e s cercles d e j e u " , Le Monde, ( 1 2 F g v r i e r , 1 9 8 2 ) ( h e r e a f t e r c i t e d a s Boggio , "Les d e s s o n s d e C a r t e s " ) . S e e a l s o n o t e s f rom t h e F i r s t I n t e r n a t i o n a l Symposium o n Cr ime C o n n e c t e d w i t h Gambl ina . P r o s t i t u t i o n a n d V a r i o u s O t h e r

~ -,. - - - - - - - - ~

A c t i v i t i e s , h e l d i n S a i n t - C l o u d , F r a n c e (November, 1979 1.

266 J a c q u e s Derogy, " C a s i n o s : r i e n ne va p l u s , " L ' E x p r e s s 1516 ( 2 6 j u i l l e t - 2 a a u t 1 9 8 0 ) : 6 9 . .

267 I b i d .

268 F r a n c e , R B g l e m e n t a t i o n d e s j e u x d a n s les c a s i n o s e t p l a n c o m p t a b l e ( P a r i s : I m p r i m e r i e s a d m i n s i t r a t i v e c e n t r a l e s , 1 9 8 0 ) , p. 11 ( h e r e a f t e r c i t e d a s F r a n c e , R g g l e m e n t a t i o n d e s - j e u x ) .

2 6 9 I b i d . , pp. 153-155.

270 I b i d . , p. 15 .

271 F r a n c e , "Les cercles e t l e s c a s i n o s : B t u d e c o m p a r a t i v e . " U n p u b l i s h e d background p a p e r p r e p a r e d by t h e F r e n c h government , pp. 8-9 ( h e r e a f t e r c i t e d a s F r a n c e , "Les cercles e t les c a s i n o s " ) .

272 P a t r i c k S e r y "La F r a n c e d e s F l a m b e u r s ," L ' E x p r e s s 1516 ( 2 6 j u i l l e t - 1 a a u t 1 9 8 0 ) : 83.

273 F r a n c e , R g g l e m e n t a t i o n d e s j e u x , p. 13 .

274 B o g g i o , "Les d e s s o n s d e C a r t e s . "

- 19 -

275 I b i d .

276 F r a n c e , "Les cercles e t les c a s i n o s f W pp. 9-10.

277 F r a n c e , R B g l e r n e n t a t i o n d e s j e u x , p. 20.

278 I b i d . , p. 21. I I bid., pp . 51-59.

I b i d . , pp . 22-23, 43-46.

B o g g i o , " L e s d e s s o n s d e C a r t e s . "

I b i d . , s u p p l e m e n t .

I b i d . , p. 132.

I b i d . , p. 137.

I b i d . , p . 136 .

bid., pp. 111-113.

F r a n c e , "Les cercles e t l es c a s i n o s , " p. 1 3 .

D e r o g y , " C a s i n o s : r i e n n e v a p l u s , " p. 75.

I b i d . , pp . 69-70.

I b i d .

B o g g i o , "Les d e s s o n s d e C a r t e s . "

292 J e a n - C h a r l e s R i x , " D e nouveau l a ( g u e r r e d e s J e u x ) , Le - F i g a r o , ( 1 7 J a n v i e r 1 9 8 2 ) .

293 P i e r r e A r n o u l t , L e s C o u r s e s d e c h e v a u x , 2e e d . Vendame, ( F r a n c e : P r e s s e s U n i v e r s i t a i r e s d e F r a n c e , 1 9 6 7 ) , p. 23.

294 F r a n c e , " L ' o r g a n i s a t i o n d e s C o u r s e s , " U n p u b l i s h e d b a c k g r o u n d p a p e r p r e p a r e d by t h e F r e n c h g o v e r n m e n t ) , pp . 3-4.

295 A r n o u l t , L e s C o u r s e s d e c h e v a u x , p. 3 7 .

296 F r a n c e , " L ' o r g a n i s a t i o n d e s C o u r s e s , " p. 5.

297 I b i d .

298 I b i d . , p . 35.

Ibid., p. 37.

Ibid., p. 42.

Ibid., p. 43.

rbid., pp. 43-44.

weinstein and Deitch, The Impact of Legalized Gambling, pp. 14 and 118.

France, "Les jeux illicits," Unpublished background paper prepared by the French government, p. 20.

Weinstein and Deitch, The Impact of Legalized Gamblinq, p. 89.

France, "Les jeux illicites," p. 20.

Ibid., p. 89.

Derogy, "Casinos: rien ne va plus," pp. 68, 75.

INTERPOL First International Symposium on Crime Connected with Gambling, Prostitution and Various Other Activities, (November 12-14, 1979), pp. 2-3.

Toronto Star, "Mob May Muscle In To End Monaco's Period of Grace," September 26, 1982.

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. " L e g a l i z i n g C a s i n o s i n New York S t a t e , " 3 0 A p r i l 1 9 7 9 , p. B-5.

. " J e r s e y ' s E l d e r l y S a y C a s i n o Tax P l e d g e d t o Them is o f L i t t l e A i d , " 20 A u g u s t 1 9 7 9 , sec. A l , C o l . 3 .

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-~ -

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Appendix B

ARTICLE 6A. TEJIPORARY CASISO PERMITS

5:12-95.1 Ellgllllllty and requlrernantr

S o t w i t h s t r ~ ~ r d i n ~ any other provisior~ of the Casino Control Act.1 the corn- misxioll may grant a temporary cavll~o permit upon the filing by a casino li- cense ar~plicant of a formal q u e s t for same in amordance with such rules and regulutions a s may be promulgated by the commission and when, by the nfflrmative vote of four members. i t finds by clear and convincing evidence:

a. That the applicant Is a ewpeme eweCIji person, a s defined in section 37 of P.L.1977, C. 110 (C. 5:12-37);

b. That statements of compliance pursuant to sectton 81 of P.t.1977, C.

110 (C. 5:12-81) have been issued to the applicant with reapect to sections 82. We), 8%a) and %(b) of P.L.I~E. r. 110 (c. 5:12-82. ft4fe). R ( a , and (brl If the applicant is a corporation, and section S ( e ) of P.L.1977, C. 110 (C. 5:12*(e)) if the applicant is other [hall a corporation eC lUd-f+X e+ ~ ~ * ~ e n d , + w :

C. That the proposed casino hotel facility ie an approved hotel in a m r d - anee with the requirements of w t l o n 83 of P.L.1977, c. 110 (C. 5:12-R3);

d. That a voting trust agreement a s provided In thls article has been In- stltutcd In a w r d a n m with N.J.S. 14A:CL20 if the applicant 1s a corporation.

sllarlt to section 81 of P.L.1977. c. 110 (C. 5:12-611 has beeu issucul to the no- plicnnt with regnrd thereto :

C. That the applicant has deposited with the commlasion n fully executvd copy of the voting trust ngrcen~ent~ t h . ~ or the trust agreement that if the applicant la a cornrutinn, all outstunding shares have he'cn surrendered io the applicant for car~cellntion, and ekffc duplicate Icgendd shares have been reissued which a re slw?cifically mude subject to the votlng crust 9.greement In accordance with X.J.S. 14A:i-12 land S.J.S. 12.4:s-101 e t wq.; 3nd that if the amllcant is other thrtn a corporution. d l irrterests in such applicunt huve

Last addltlonr In text lndlcated by underline; last deletbns by

123

Source: New Jersg Statutes Annotated, St. Paul, Minn.: West Publishing Co.

5: 12 - 95.1 AMUSEMENTS, PUBLIC EXHIBITIONS

been assimwd by the holder or holders thereof to the t r r~stee o r trustees PUP

euant to the provisions of the trust agreement:

f. Thnt if the applicant is a corporation. all the aharee of the corpornte entity shall be subject to the voting trust agreement. and If the appllcant iw other than a corvoratlon. all Interests in such a ~ n l i c a n t shall be s u b l e t to the trust agreement :

g. That the voting trust agreement or the trust agreement may, a t the discretion of the commlsaion, become effective a t such time a s any person required to be qualified under the Casino Control Act a s a condltion of a casino license is found to be unqunllfied or a t such time a s any sanction whatsoever is imposed upon the temporary cnsino permittee by the commls- *ion; provided, however, that, In considering whether to order the voting trust or the trust to be effective In the event of the Lmposition of a a c t i o n in a particular case, the commisrlion shall, among other things, conelder:

(1) The risk to the publlc and to the integrity of gaming operations created by the cor~duct of the permlttee;

(2) The seriousnesa of the conduct of the permittee, and whether the con- duct was purposeful and with knowledge that i t was In contravention of the provlsiona of the Casino Contml Act as amended and supplemented or Rgu- laUons promulgated hereunder ;

(3) Any justificatfon or excuse for such conduct by the permlttee; (4) The prlor history of the particular permlttee lnvolved with remXt to

gaming activity;

(5) The corrective action taken by the permittee to prevent future miscon- duct of a like nature from occurring.

h. That the voting trust agreement o r the trust agreement contains such conditions a s the commission may deem necessary or desirable, Including, but not limited to. the unencumbered ability of the trustee o r trustees to vote the shares o r exerclae all rights incident to ownership of interests In the a p pllcrrnt ;

1. That the term of the voting trust agreement o r the trust agreement shall extend for the term of the temporary casino permit; and

j. That the tempornry casino permit will k t aewe the interests of the p u b lie wlth particular reference to the policies and purposes enumerated In see tion 1 of thin amendatory and eilpplementary act. L1978, c. 7. 4 21, eff. March 17. 1978. Amended by L.1980, c. 110. 8 1, eft. Sept. IS, 1980.

1 Sectlon 6:12-1 et mp.

Rr peal

Section 5:12-95.1 ir repealed by StaCs.1980, c. 110, Q 4 , e l f . January 1, 1983.

Sectlons 3 and 6 of L.1980. c. 110. AD- cally condltloned on the authority of the proved Sept. 16. 1980. provlde: commlaslon to grant a temporary caslno "3. No temporvy caalno pdrmlt ahdl permit. Any permlt In effect on July 1,

~KI Issued after July 1. 1981. ucept that 1981, or. where relevant, Dqctmber 31 auch a permlt may be l s~ued after July 1981 may be renewed. subject to s t d o n 1. 1981. but not later than December 31. 26 of P L.1978 c. 7 (C. 6:12-95.7). 1981. to an applicant who provldes evl- "5. 'Secc1or;a 1 and 2 of thls act ahlll dence that prlor to February 21. 1980. take effect Immediately. Sectlon S shall the appllcant entered Into a contractunl take effect lmmedlately m d shall explre agreement lor permanent or construe- January 1 1983. Sectlon 4 .hall take ef- tlon perlod flnanclng whlch la spectfl- fect ~ a n u i r y 1. 1983.''

Last addltlonr In text Indlcatrd by undrrllnr; last drletlons by oWkoMm

Appendix C

I. SUMMARY ALND RECOMMENDATIONS

A . Summaw

One of the major reasons f o r introducing casino gambling into New

Yo* S ta t o is the potential positive impact i t would have on the tour i s t

and related industries of the s t a t e . This considera tion has become even

more important since the introduction of casino gambling into A t lan5c

City,where i t appears likely casinos will revive a major resor t which has

suffered a calamitous decline in the Ias t decade. I t is c lear , however,

that legalized casino gambling eSposes the milieu in which i t operates to

some adverse effects . The Panel, through i t s consultants and s t a f f , has est imated what impact

casino gambling could have on the economy of New York S ta t e . Research into

the social impact of casino gambling was also done. Studies conducted Eor

the Panel Eocused on several areas where the Panel believes casino gam-

bling may be m o s t beneficial: The Catskills, the Niagara/Buffalo Front ie r

and the New York Ci ty region, including the c i ty of Long Beach on Long

Island. For each, es t imates were made of the likely scale of the market

for casino gambling and the impact t ha t introduction of casinos would have

on the local economy. The Panel also commissioned a poll in New York

S t a t e to determine a t t i tudes toward c a s k gambling and to develop certain

demographic informs tion (see Appendix E )

Source: F i n r l Repor t of t h e Cas ine G a ~ b l i n g Study P a n e l , ~ n w ynrk

S t a t z , A n g u ~ t , 1 9 7 9 , (Chairm-n, Cera ld W. Lynch)

For &e s t a t e a s a whole, consultants to the Panel est imate that poten-

tial expenditures on casino .gaming (i. e. , the amount won by casinos f tom

table games and slot machines) wuld amount to approximately $3.0 billion,

asnuninq s t a t + and local policy permit the casir;o/ho te l industzy to teach

-the potential markets. Est imates of h e high and low range a re 54.1 billion

and a. 8 biTliEr?. respec tivery , assuming no major curnpe ti k i n f n m mi&-

boring 9 ta tos in the near f u tun. ApprwGnately two-thirds of tha t ex-

penditure w u l d be made in New Yo& Cityyrfiich has t'te largest segment of

t ! e Sta t o 3 b u r i s t industry, by f a r . When combined with o ther expenditures

related b casino gaming, such a s hotel , restaurant and entertainment, the

es tima tad $3 .0 billion in casino win w u l d pmduce net new jobs f o r New

York Sta te af IO7,OOO.of which slightly more than 5,000 would be in the

cons tmc tion hrades . Since these est imates may be important in the discussion of casko gam-

bling, i t is appropriate to. explain them. They are based an the best data

available, but data which are by no means per& t.

The three cri t ical sourtes of data used by the consultants in making

these esthna tes were 1) the Panel's own n w e y on gaming by New Yo*

S ta te residents. 2) d . b collected by the National Gambling Commission

on resident gaming in Nevada and 3) a continuing m e y on gaming in Las

Vegas, particularly &e data on Los Anples resident gaming in the Nwada

city. From these data it was estimated that New Yodcers might spend as

much as 1.2 pef ient of their income on casino gaming if such gambling were

availaSle locally. I t was es tirna ted those living within a 2 t hour drive ~i

cas inoko tels ,such as the CI tskiUs and A tlantic City for residents of New

Yo* , w d d q e n d .4 porcm t of h e u income on casino gambling.

In reaching these conclusions, judgements had to be made about the

relationship batwren the inclination to gamble of New Yorkers and resilents

of California and Nevada.

While the New York City region is likely tD receive the bulk of gaming

expendihr- if all three m a a s have casino gambling, the relative econor,~ic

impact w u l d be p a t e r on the local economies of t??e Ca tskills and Lie

Niagara Frontier. Middle range e s tima t e s of employment impact ina'ica t e

M a p p m x h a t e 44 percent increase in employment in the service sector in

the Catski&. In the Niagara/Buff d o area casino gambling could add 17 per-

c e n t to the service sector employmen t. Even in Manhattan, casinoAo ceis

. may increase the number of senrire sector jobs by a s much as 9 percent.

I t should ba noted t h a t these calculations may be overstated to &e

extent t h a t some gaming eqendi tures by residents md v i s i t ~ r s am e q e n -

dituras & a t might be made on o ther recrcrtional x tivities. Of p s t i c * d a r

concern to the Panel is the potnntial knpac t casino gambling may have on

the Hew York S t a t e racing industry. The racing industry, including the

Off-Trrck Betting Corporation (OTB) , is a significant soume oE employ - ment and government revenuer in thh s t a t e , While i t is d i f f i d t t a de-

tennine from eds ting data what affec t casino gambling wbuld have on

racing, it may bo significant.

Should casino gambling be legalized, the le@sZaturc and - o t ? e r responsible

officials should closely monitor the situation and be prqared b take action

to i n r u r m d w stability and-gmwtSpo tmtial of h e racing industry. The P m e I

does M t beliwe i t would be pmduc tive simply to marrange 2 0 U m spurt withis

tho reenation indus-j.

While &a Panel agreed &at government rovenue anticipated h m a s h

gambling should not be t??e major objective of t a ~ a l i z a t k n , dutc t taxes on

casinos in t!e stata could yield signiftcant rovenuas. A w . a w of the pra-

fi tability of Nevada and New Jersey casinos s u c e s t s that New Yo* S b te

coda s u c c e r s ~ y impose a Ea r higher tax on thn of casinos than

is done in eitSer of t ? ? s e turr, s t a tos. Where Nevada imposes r tax of only

6.5 percent and New Jersey one oE 8 p e r c m t on the casino's earnings , f5e

Panel believes f o r t5e first f ive yaars tax rate of 20 percent oE casino

win should be established. In addition, an annual Eea of a, 000 per d o t

machine should be es tablished. Such a Pee w u l d protect New Yo* S t a to

against loss oE r w e m e such a s oceuz=ed in A t h n t i c C i t y &era m sue?,?

foes wiirs Gnpased and &e first casino made ort=raordimry profits w i t 5

r r d a tively small r e turn to New Jersey eoEfers .

AE b r the Eks t five years, the tw rate should be Iowersd to 25 percent ,

rd lec t ing the increased compmtitivonesr and potant ia ly lower g d i t a b i l i t y

of the industry. Changing economic conditions, as w d l as f deral and rta ta

tax policy, will t e q u b periodic assessment. The Panel does na t believe tha t

A tax of 15 g e z e n t on dm middle range es t imate of $3.0 Sillion in

casino win wbuld generato %SO million in direct tws . This amounts to

an increase of more *an 3 pefient in s t a t e tax revenues. Clearly, l e s s tax

revenua wiLl be produced until the indus- reaches t)le potential m a d e t .

Other t ax revenues aru a&o expected tp increase. Estimates pre-jarec!

for the P m e I indicate t h a t $45 million in corporate income taxes could be

generated, whaa additibnal employment dl yield about $55 million in income

taxas and $60 million in sales taxes. f t is likely t \a t counties and munici-

palities will be direct beneficiaries of a ntbstantiaI portion of these revenues

under a f o r d mandated by the l eg is lahr reas is &e case wit3 OTB.

Local g o v e r n a n t s w u l d also be e q e c t ed to benefit financially f rom

increased property t ax receipts , from new private faci l i t ies and a generai

increasa in pmperty tax receipts, resulting from an overall rise in przperty

values.

Considerable concern has been expressed tha t legalized casino gambling

w u l d r e su l t in increased organized and individual cr ime as well as otfier ad-

versa social affects. Tho Panel is very aware of the widespread public

perception d ra t c a s h gambling and orgMited crime are invariably intertwined.

1 The Panel recognize that there is r histbrical basis f o r this belief since

organized cr ime did Xiltratm and control some casinos in the ear ly days

af Las Vegas . We have investigated the development of the casinos in

Nevada since the 1950's and have concluded thr t casinos have subs tantially

moved -ward a pmEessional , regula tad induo try, largely devoid of

an all-pervasive influence by organitad crime. The movement into the i n d u s t q

of large, publicly-held companies, under the supemision of &e Security and

m a n g e Commission, has bmught about a sub# t a n t i r l impmvement in-the

integrity of the casino business. Tho Panel has in tmtiawed many -his ti-

cated law enfohernent ofricers concerned with organked crime. There

seems b be a gap between &a public perception urd the perception of en-

forcement pmf essionals in tfre field. Many law enforcement experts believe

t ha t organized crime's M u e r t c o in the casino industry is conmUable and can

be mi nimk ed or elimina tad by vigornus e n f o x emant. Evan wi& such vigilance,

&ere can be rs complete assurance * a t a l l such activity can be przvented.

E x p e ~ e n c e in Nevada and New Jersey suggests t h a t prostitution and s t r e e t

crimes, such as robbery, wi l l increase as a result of casino gambling. Larce~y,

loan shar)chg and coxmption of public oEficialm am o t h e r erimes which must

be constantly monitored by law onforcernent agencGs,which wiTl require ad-

di tional resources f o r this purposa.

Whiie these dfects and the c o s t of c o n b d i n g them a re geneally not

subject ta empirical analysis, they must be a c ~ w l o d g e d as potrntial ~ c o s t s "

of the legalization dE casino gambling, and it mus t be clearly recognized

& a t ehey may impose a significant burden upon k a l mforcernent agencies

and the popdo tion in general.

8. Recommenda tions

Should casino gambling be legalized in New York State , the Panel has

concluded tha t the basic public policy p q o s o s which i t should s e w e are:

- economic competitiveness and tourism

- ecommic devebpment

In addition, the Panel believes & a t reasonable revenue f o r government

should be duived. Numerous individuals and organizations also supported

there purposes a t public hearings held by tfre P and thraug)rou t the s t a t e .

To s e ~ e th8se purposes the Panel remmmends:

I. The f oUowing areas should be aEf orded &e opportunity of a local refer-

endum on casino gambling:

the CatskiZIs , including the counties of Sullivan, UL, ter and Greene

the Niagara Err~ntier ( the ci t ies of Niagara Fails and Buff aIo,specifica!ly)

the ci ty of Long Beach

&e Ci ty of New Yo*, including Manhattan , tfre Rockaways and Coney Island

h e p t in the Catskills , new cons- tion of casino/hot.Is should be

rwquhd. In the Catskills a minhum investment of 3 0 million should be

required f o r rehabilitation of an sadsting facility. In &an centers , casino/

hotels M d be located in underdeveloped areas in a way that minimizes dte

displacement of t!e resident population. Except in the Catskills, casino/

hotels should be "clustered" tu mudmire the economic impact and facili-

t a t e local law enforcament e f f o r t s associated with the casino industry.

2. Casino development in any designated aroa mus t first receive appmval

of the local lmgblatlve body and then, through a mandated referendum, &e

approval of the people of the city , town o r village in which it would be lo-

cated. Should tAe question be dofeated , it should not be re-submitted

until &tar the second general election. Repeal of initial approval shodd

require aition by &e local Zegisla tive body, followed by a raferendum.

However, repeal shodd not be permitted un ti1 the fourth general election

a f t e r initial appmval . 3 . Casino /ho tels should be privately ownod and opera tad and sub jec t to

s t r i c t s t a t e ' licensing, regulation and .n fo rcemwt to insum the highest

level of integrity in the c a s h i n h s w .

4. A Casino Garninp Contml Commission should be established b u g h en-

abling lepisla tion in the Executive Department. I t s duties should include

all m a t t e r s relating to licemure, h e m tigation and regulation oE th .

industry. The Commission should c o n s t t of five m e m k s appointed by

the Governor wi* 'the adviee and consent of thesenate. The C h a i z a n ,

- to be designated by the Governor, should be the ch* executive off ker

oT the Commission and should sene full-time with remuneration. The

other Pour members should be p a r t - t h o . A l l cos ts oE the Commission

should be borne by the casino Gdusm;.

5. A special Office of Casino Garninv Enforcement should be es tablished

in the Department of Law and should have the responsibility f o r investi-

ga tion and pioaecu tion of criminal ma tters relating to the industry. Its

d k b r should be appointed by ttre Governor with the advice and consent

I of tha %ate and should be a Deputy A mrney General.

6. A stat. tax on c a s k / h o t e l win of 20 percent should be imposed f o r &s

first f ive years, dmpping to 15 percent beginning in the sixth. year. A

r a to of 20 percent in the f kt five years wil l insure tha t monopoly prof its

will no t be earned. Over the long run, a r a t e of 15 percent w31 generate

reasonable rwenues f o r government while allowing suff icient profitability

to st imulate imresbnent. The casino win tax should, of course, be period-

i d l y reviewed within the context of the overall federal and s t a t e tax

s t ruc tur0 ,

The Panel also recommends tha t an annual fee of 9,000 be imposed f o r

each s l o t machine.

7. Local governments should share in the revenues generated by the state

casino "win" tax in a manner to be established by the legislature.

8. To insure maximum employment, while remaining aware of the need b

pro tec t the charac te r and anvirunment of theareas where gambling is

legalized, a minimum investment of $LO million should be required and a

minimum s tandard of 250 moms should be established f o r a ho tel/casino

The Panel also recommends tha t the r a tio. of casino space to ha t e l space be no

greater than I to 10.

The exception to the minimum room standard should be Manha ttan,where

the P anel recommends a minimum ha tel/casino size of 650 moms. A

minimum mom size of 354 square f e e t should be eo tablished f o r aXl ho teV

casinos. These standards should provide sufficient flexibility to private

investors and planning ofEicials td insure tha t the economic objec tives

could be m e t . The Panel recommends against the establishment of Eree-

standing casinos (i. e. , casiiros not physicdUy located within a hotoL.)

9 . In order to prevent the proliferation of casinos in the s t a t e , no more

than 40 casinoho tels should be authorized in the f i r s t ten years, starting

f m m the eEfec tive date of the implementing legislation. This limit should

be adap ted in the enabling legisla tiin, as should a specific provision l imi tkg

the square footage of casino space in Manhattan a t any one t ime to no

more than one-third of the total authrized , statewide casino square

footage . The l a t t e r r d e c ts the Panel's view that the economic benefits

of casino gambling should be eqiri tably distributed thmugtrou t the s t a t e . 10. Casinos in heavily papula ted areas of h e s ta t e should not be permitted

to operate h the daytime, and dress codes, table minima and other me-

chanisms sE.auld be adopted to discourage impulse gambling by the Local

population. Casino operation in all areas other than the Catskills should

be restricted f m m 8:OOpm to 4: 00am. Daytime operation in the Ca tskills , -

beginning no earlier than 10:OO am,should be permitted by enabling legislation

and lef t to the discretion of the Commission.

U. The P anal strongly recommends a prohibition against political con&-

butions by casino,'Sotels, t h e 2 owners and officers and all employees.

While this does not meet the entire prablem of potential undue political

krfluenco, the Panel believes such a pm ibi tian is very desireable.

12. In order not directly to stimulate casino gambling by New York S ta te

rssiden ts , the Panel recommends tha t advertising be re s t r i c ted wi th

regard to the casinos. Advertising of the ad joining hotel , i t s facilit ies

and entertainment should be permitted. The Panel beIieves that the en-

couragement of casino gambling by advertising should be limited. Casinos,

if authorized , should not compete in New York Sta te in an unresttic ted

manner in fie media with other leisure activities and other fo rms of legal-

ized gambling. The Panel recommends that the Casino Gaming Con-1

Commission develop guidelines f o r the l i m i t a h of advertising f o r casinos.

l3. Junkets should be specifically precluded in the enabling legislation.

14. The Casino Gaming Contml Commission should not k ampowered to

issue a temporary operating license f o r a casinofiotel. Such a power should

be specifically precluded in the enabling legisla tion.

15. The Casino Gaming Control Commission should be empowered to issue

temporary 1 icenses only to employees,other than management,performing

specific hotel functions (i. a. , maids, bellhops, maintenance personnel)

under standards tb be determined by the Commission.

16. A l l licenses should be granted f o r a period of one year. The Commission

should, however, be granted authority to increase the license term f o r

17. No person employed by the Commission should be permitted to be ern-

ployed by a casino/ho tel o r related industry f o r four years after leaving

the employ of the Commission.

18. A l l sezvices ancillary to the casinohotel should be licensed. The

owners, management and supervisory employees oE such related ir.dustries

must qualify f o r a license based on the same standards s e t f o r casino

employees.

19. The Commission should be empowered to establish a consernatorship

f o r a ces inoh tel if and when the Commission deems such action necessary.

Such a provision is an essential pa r t of the enforcemart and regditory

process and serves to protect the economic interests of the state and of

those employed in the casino gambling industry.

Appendix D Report of Attorney General Robert Abrams In Opposition to Legalized Casino Gambling

in New York State

This report, in preparation for six months, sets forth my reasons for urging postponement of a referendum on legalized casino gambling in Mew York State for an indefinite period.

Prior to becoming Attorney General in January 1979 I was a supporter of iegalized casino gambling for the State. However, as the debate intensified during the past two years, I must admit that my enthusiasm began to diminish with closer scrutiny of the issue from the unique perspective of my new office. As Attorney General, I have caref-~lly evaluated numerous reports and studies on the opportunities and problems presented by casino gambling, including the Final Report of Governor Carey's Casino Gambling Panel (1979) and the Report on Casino Gambling for Mayor Edward I. Koch (1979), prepared by John F. Keenan. My staff and I have monitored Atlantic City, New Jersey's experience with casino gambling and exmined its implications for New York based on discussior,~ withethe foriner Attorney General of New jersey, John J. Degnan, and other New Jersey state and local law enforcement officials. In September 1979 I visited the Atlantic City casinos and enforcement operations with Attorneys General from Northeastern states. I have also explored the crime issues at length with the Attorney General of Nevacia, Ricnard. H. Bryan, and lav enforcement officials f ~ c m many other areas. Finally, my staff and I have ha2 nL?lerous discussions with representatives of groups both suppcrting and opposing casino gambling for New York, and with mehbers of the public. As a result, I became increasingly well acquainted with the numerous facets of this complicated issue.

Revelations in 1980 of a myriad of problems associated with New Jersey's casino gambLing industry -- in particular, the soaring rate of casino-related crime in Atlantic City and recurring allegations of organized crime

, - infiltration and influence peddling at federal, state and I local levels -- were, for me, the final straw. I am now

persuaded that casino gambling in New York State would not be in the public interest. Specifically, I believe that the financial and economic benefits to be derived from passage of any of the eight resolutions to legalize casino gzmbling now before the Lezislature are outweighed by the added crime problems which gambling casinos would cause for the Stzte and the corrosive and disruptive effects that legalized' casino gambling is likely to have on communities where casinos are located and on the people and institutions of our State.

The factors that changed my mind about casino gambling are the following:

conclusively indicates that legallzed casino gambling in New York would be accom~anied bv a debilitatina uDsurae of crime in areas where casinos are located.

New York communities are already besieged by crime problems of unprecedented dimensions. This burden is likely to become intolerable for those counties and communities that embrace gambling casinos.

Law enforcement officials interviewed by John F. Keenan for his Report on Casino Gamblinq fcr ~ a y o f Edward I. Roch, without exception, ~redicted "a tremendous inczease in szreet crime and prostitution in areas near Casinos" (Keenan Report, page 16). Their prognosis is supported by irrefutable evizence of enormous crime problem in the two areas within the United States where casino gambling has been legalized -- Nevadz and Atlantic City, New Jerssy.

Nevada, whi~h has had 50 years to learn to live with casino gambling,' leads the united States in crime. In Las Vegas alone, there were 34,257 serious crimes last year, inclu6ing 92 murders, giving that city the nation's highest Fer capita crime rate. According to the March 9, 1981 issue of U.S. News and World Report:

"There are 10,000 prostitutes active in the City - a nunber equal, according to the Census Bureau figures to 1 out of every 9 women in the area between the ages of 15 and 39." (p. 66)

The gaming induscry in Nevada was legalized by statute in 1931.

I n A t l a n t i c C i t y t h e r e h a s been a huge i n c r e a s e i n c r ime s i n c e a m b l i n g c a s i n o s were i n t r o d u c e d t h r e e y e a r s ago -- an e x p e r i e n c e c h a r a c t e r i z e d by t h e A t l a n t i c C i t y P r e s s a s a " s t a g ~ e r i n g c r ime wa-~e i n t h e va!<e cf c a s i n o ghmbling" .l The f i r s t c a s i n o ( R e s o r t s I n t e r n a t i o n a l ) opened i n A t l a n t i c C i t y i n May 1978. Txo o t h e r s (Caesa r s ; B a l l y ' s Park P l ace ) opened i n 1979, and s i x c a s i n o s were o p e r a t i n g under r e g u l a r l i c e n s e s o r temporary p e r m i t s by t h e end o f 1 9 8 0 . ~ During t h e same t h r e e y e a r p e r i o d , o f f i c i a l 'Jniform C r i m e Repor t s o f t h e New J e r s e y S t a t e P o l i c e r v e a l e d t h e 9 fo l lowing c r h e index t o t a l s for A t l a n t i c C i t y :

Compared t o t h e r e p o r t e d crime i n d e x f o r 1977, when A t l a n t i c C i t y had no c a s i n o s , t h e s e s t a t i s t i c s r e v e a l a d r a m a t i c c r i m e i n c r e a s e o f 171% o v e r t h e p a s t t h r e e y e a r s when compared w i t h a s t a t e -wide crime i n c r e a s e of 26%. During t h e two y e a r p e r i o d 1979-1980, when t h e number of c a s i n o s went from one t o s i x , r e p o r t e d crimes i n c r e a s e d 107%. I n 1980 a l o n e , c r i m e r o s e 70% o v e r t h e p reced ing y e a r , 1979, r e f l e c t i n g an a d d i t i o n a l 5 ,000 r e p o r t e d c r imes . The i n c r e a s e i n 1980 i s i n c o n t r a s t w i t h a 10% r ise i n t h e cr ime index l a s t y e a r f o r t h e e n t i r s s t a t e o f New Zersey .

Comparison of c r ime index t o t a l s fcr ~ " l a c t i c County a s a whole w i t h t h e i ndex f o r A t l a n t i c C i t y f u r t h e r i l l c s t r a t e s t h e t r 2 n d wZthin t h e c i t y p rope r s i~ i ce t h t a ~ v e n t of gambling c a s i n o s . Frgm 1976 t o 1977, 5 e f o r e c a s i n o ?ambling, r e p o r t e d c r imes f o r t h e Count-y i n c z s a s e d 6 5 , wh i l e A t l a n t i c City's c r i m e i ndex a c t u a l l y dec reased 6 5 . From 1977 th rcuqn 1980. however, w h i l e -A t l an r i c C i t y ' s r e p o r t e d c r imes jurnped 1 7 1 % , t h e C c u n t y ' s in2e:t i2xcl::ding A t l a n t i c C i t y ) r o s e o n l y 2 6 % . T h i s does n o t mean, however,

A t l a n t i c C i t y P r e s s . December 2 2 , 1980.

2 There w i l l b e t h r e e new c a s i n o s i n 1981: a

opened i n May; t h e Ramada I n n ' s Tropicana and Webb C o r p t s C l a r i d g e a r e scheduled t o open i n mid-year, r e s p e c t i v e l y .

Playboy c a s i n o / h o t e l t h e D e l E: June and by

The &;me i n d e x t o t a l s r e f l e c t e d i n t he r e p o r t s i n c l u d e t h e fo l lowing o f f e n s e s : murder, f o r c i b l e r a p e , robbery , agg rava t ed a s s a u l t , b u r g l a r y , l a r c e n y t h e f t and motor v e h i c l e t h e f t .

t h a t s o a r i n g crime h a s been c o n f i n e d t o A t l a n c i c C i t y . Communities s u r r o u n d i n g t h e c i t y , such a s Ocean C i t y and Egg Harbor, have a l s o expe r i enced a s i g n i f i c a n t rise i n c r i m e a t t r i u t ed by l o c a l o f f i c i a l s t o t h e c a s i n o s i n A t l a n t i c C i ty , ?

The e s c a l a t i n g c r i m e t r e n d i n A t l a n t i c C i t y s i n c e t h e i n t r s d u c t i o n o f c a s i n o gambling a p p l i e s b o t h t o v i o l e n t and non-v io l en t crimes. From 1977 t o 1980, v i o l e n t c r i m e s , i n c l u d i n g murder , r a p e , robbe ry anti agg rava t ed a s s a u l t , i n c r e a s e d 130%; f o r non -v io l en t crimes t h e i n c r e a s e was 176%. An a n a l y s i s o f t h e o v e r a l l cr ime index by key c a t e j o r i e s demons t r a t e s t h e n a t u r e and magnitude of c r i m i n a l a c t i v i t y t h a t h a s accompanied c a s i n o gambl ing s i n c e 1978: a g g r a v a t e d a s s a u l t s (up 111%); robbe ry (up 1 5 1 5 ) ; s t o l e n au t cmob i l e s (up 1 6 3 % ) ; l a r c e n y t h e f t s (up 297% -- an i n c r e a s e i n 1980 o f 108% ove r t h e p r e c e d i n g y e a r ) . A f u r t h e r , r e v e a l i n g breakdown i s prav ided by u n v e r i f i e d crime s t a t i s t i c s of A t l a n t i c C i t y ' s P o l i c e Department: p i ckpocke t s (up from 1 5 t o 544 i n c i d e n t s s i n c e 1977 and an i n c r e a s e of 135B.dur ing t h e p a s t y e s r ) ; p u r s e s n a t c h i n g !up 153% s i n c e 1977 and 85% 6 u r i n g t h e Fasc y e a r ) ; s h o p l i f t i c g (up 3075 s i n c e 1 9 7 7 ) ; l a r c e n y from motor v e h i c l e s (up 374% s i n c e 1977 and 1 0 8 % d u r i n g 1 9 8 0 ) ; and l a r c e n y f r o m b u i l d i n g s (up 279% s i n c e 1 9 7 9 ) .

A s d i s t u r b i n g a s t h e s e crime s t a t i s t i c s from A t l a n t i c C i t y must be t o anyone c o n s i d e r i n g t h e i m p l i c a t i o n s of l e g a l i z e d c a s i n o gambling f o r N e w York communities, t h e c o l d nurnbers d o n o t r e f l e c t t h e d i s t r e s s i n g impac t t h a t A t l a n t i c C i t y ' s c a s i n o - n u r t u r e d crime has had on t h a t c i y y f o r r e s i d e n t s and v i s i t o r s a l i k e . S e v e r a l examples and e x p r e s s i o n s o f t h e problem Zrawn from ~ u b l i s h e d a c c o u n t s anC c o n f i d e n t i a l i n t e r v i e w s and r e p o r 2 s a r e r e v e a l i n g :

* During November 1980, a n zverage cf t h r e e persans p e r day were mugged on A t l a n t i c C i t x s treets, a c c o r d i n g t o l o c a l P o l i c e Depar tment s t a t i s t i c s . " The s e r i o u s n e s s of t h e problem was v i v i d l y p o r t r a y e d i n t h e December 22, 1980 e d i t i o n of the A t l a n t i c C i t y P r e s s :

" S t r e e t thugs--drawn t o t h e people and t h e money-- s a t u r a t e t h e avenues l e a d i n g t o t h e c a s i n o s and t h e p u b l i c p a r k i n g a r e a s . "

" V i s i t o r s u n f a m i l i a r w i t h t h e c i t y wander a b lock o r two o f f t h e b e a t e n p a t h and a r e a t t a c k e d . "

Ocean C i t y S e n t i n e l Ledger , J anua ry 22, 1981.

A t l a n t i c C i t y P r e s s , Decenber 22, 1980.

The November 1 2 , 1 9 8 0 e d i t i o n o f t h e A t l a n t i c C i t y P r e s ~ r epo r t ed :

"People a r e g s t t i n g mugged a l n o s t a s soon a s t h e y g e t o f f t h e bus a t t h e A t l a n t i c C i t y BE, T e r n i n a l .

"Macy of t h o s e who g e t s a f e l y th rough t h e t e r in ix l become v i c t i m s of c r ime on t h e i r way t o t h e c a s i n o s . "

* V i s i t o r s t o A t l a n t i c C i t y a r e n o t t h e o n l y ones t h r e a t e n e d by t h e upsurge i n c r i m e . E l d e r l y r e s i d e n t s have bscome.prime t a r g e t s f o r c r i m i n a l a t t a c k s on t h e s.treets and i n t h e i r homes. They l i v e i n f e a r o f crime, e s p e c i a l l y b u r g l a r i e s and p e r s o n a l a s s a u l t s . I n t h e South I n l e t s e c t i o n of t h e C i t y , f o r exzmple, e l d e r l y r e s i d e n t s have been a t t a c k e d t r a v e i i n g t o and from t h e i r t emple cf worsh ip on F r i d a y e v e n i n g s -- even i n s i d e t h e i r synagogue. Eecause of such s t r e e t crimes d i r e c t e d a t t h e e l d e r l y , t h e C i t y ' s Commissioner of p b l i c S a f e t y r e c e n t l y c a l l & f o r t h e u s e of c i t i z e n p a t r o l s .

* " D e v a s t a t i n g " i s how one l o c a l p o l i c e o f f i c i a l c h a r a c t e r i z e s t h e s o c i a l impac t on A t l a n t i c C i t y of t h e de luge of mugaings, p u r s e s n a t c h i n g s , c a r t h e f t s , crimes o f t r i c k e r y , dope p e d d l i n g , and p r o s t i t u t i o n s t i m u l a t e d by t h e i n t r o d u c t i o n o f c a s i n o s . Of t h o s e a r r e s t e d f o r crimes a g a i n s t t h e p e r s o n s i n c e 1978, 956 have been out-of- towners o r v i s i t o r s t o A t l a n t i c C i t y c a s i n o s , an2 of 95 . pe r sons a r r e s t e d f o r c a r t h e f t s s i n c e 1978, o n l y f i v e have been l o c s l county r e s i ~ e n r s . ~ N a r c o t i c s t e a l s a r s r o c f i n e l y be inq made cn t h e b u s i e s t of A t l a n t i c C i t y s t r e e t c o r n e r s i n broad d a y l i g h t , and r e s i d e n t s r e p o r t t h a t any th ing czn be bought a long c e l - t a i ~ avenues n e a r t h e Boardwalk, "frorn h e r o i n t o c o c a i n e , methamphetamine t o s t o l e n c a r s and t e l e v i s i o n 4 s e t s " . A t l a n t i c C i t y ' s P o l i c e Depar tnen t r e p o r t s t h a t thz ciepartment i s swamped weekly by room t h e f t r e p o r t s from t h e c a s i n o - h o t e l s ; t h a t c a r s a r e be ing s t o l e n a t an a i a r z i n g r a t e from c a s i n o p a r k i n g l o t s ; and t h a t dayt ime b u r g l z r i e s of hones and a p a r t m e n t b u i l d i n g s i n a r e a s s u r r o u r d i n q t h e c a s i n o s a r e becoming i n c r e a s i n g l y f r e q u e n t . 5

A t l a n t i c C i t y P r e s s , February 5 , 1981, q u o t i n g f r a n Repor t of S t o c k t o n S t a t e C o l l e q e (1981) on ~ r o b l e m s of ti antic C i t y ' s e l d g r l y po,pula&on.

* Newark S t a r Ledger , J a n u a r y 25, 1981. 2 a Repor t of Massachuse t t s L e g i s l a t i v e Research Burezc, February 1 9 , 1981, p. 3 .

4 ' The P h i l a d e l p h i a I n q u i r e r , 3anuary 2 5 , 1981 .- A t l a n t i c C i t y P r e s s , November 1 2 , 1980.

One h i g h - l e v e l , s t a t e law e n f o r t m e n t o f f i c i a l i n Hew J e r s e y r e p o r t s t h a t p r o s t i t u t i o n an6 "rzrnpant" i n a n 2 arcuz2 t h e c a s i r o s . The people w i t h i n e a c h c a s i n o t h a n a r e e i n ~ l o y A t l a n t i c C i t y P o i i c e D e p a r t ~ e n t , which ha

an . s h a r k i n $ a r e a re n o r e ser--lt; A by t h e e n t i r c

2 4 5 o f f i ~ e r s . ~

* Arson h a s ravaqed s e v e r a l r e s i d e n t i z l d i s t r i c t s of t h e C i t y c o n t a i n i n 5 newly v a l u a b l e l a n d e o v e t e d by s p e c u l ~ t o r s f o r c a s i n o deveicpment . T i r e o f f i c i a l s have had t o contend w i t h a s nzny a s 4 0 t o 50 ' s u s p i c i o u s f i r e s each zmntn. In . 1979, 295 f i r e s o f s u s p i c i o ~ s o r i g i n were r e s p o n s i S l e f o r more t h a n $2 m i i l i o n i n damages. I n 1990, 4 2 6 s u s p i c i o u s f i r e s were r e p o r t e d . S ince 1578, t h e t o t a l n m 5 e o f f i r e a la rms h a s i n c r e a s e d by 1 ,153 , o r 4 4 . 7 5 , and a f u r t h e r 105 rise i s p r o j e c t e d f o r 1981. ~ h e ' s o u t h I n l e t s e c t i o n , f r o n t i n g c n t h e Boardwalk, and occupied by t h e ?oar and e l d e r l y who Live i n o l d e r homes, h a s been a prime t a r g e t f o r a r s o n i s t s a s w e l l a s a n a r e a cove ted by s p e c u l a t o r s . In 1980, 6 4 0 f i r e s were r e p o r t e d Chere; s o m e b ~ i l d i n g s have been burned ove r and o v e r a g a i n ; and whole b l o c k s t h a t once were s o l i d neighborhoods now are d c t t e 2 by a house h e r e and t h e r e . Only i n r e c e n t months h a s t h e i n c i d e n c e o f I n l e t f i r e s d e c l i n e d because , acco rd ing t o one l o c s l f i r e o f f i c i a l , " t h e r e ' s s imp ly n o t h i n g l e f t t o However, f i r e an2 p c l i c e o f f i c i a l s a r e now becoming app rehens ive of a n i n c r z a s e i n s u s p i c i o u s f i r e s i n t h e Chelsea s e c t i o n , and t h e iocal P o l i c e Department h a s bee fed up i t s a r s o n s t r i k e f o r c e .

* Faced w i t h a 2000% i n c r e a s e i n Cemand f o r i t s s e r v i c e s s i n c e l e g a l i z a t i o n o f c a s i z o g a a b l l n g , A t l a n t i c C i t y ' s P o l i c e Department h a s t e e n unab le t o cope w i t h t h e r i s i n g crime i n t h e w a ~ e of c a s i n o gambling. Charges of pcor p o l i c e a d m i n i s t r a t i o n and d e p a r t m e n t a l t u r m o i l have been l e v e l e d by s t a t e o f f i c i a l s and t h e p r e s s , and it i s r e p o r t e d t h a t t h e S t a t e P o l i c e a r e r e l u c t a n t t o s h a r e w i t h t h e depar tment s e n s i t i v e i n t e l l i q e n c e i n l o r x z t i o n r e g a r d i . 2 ~ i l l e g a l between n u h e r s

j a n t l i n g and d r u g s because cf p u r p o r t e d r e i s t i o n s h i p s c e r t a i n l o a1 p o l i c e o f f i c i a l s and A t l a n c i c City 5 o p e r a t o r s . According t o one h i g h l e v s i , s t a t e law

enforcement o f f i c i a i , " t h e c a s i n o i n d u s t r y c o n t r o l s t h e l o c a l P o l i c e Department." I n a d d i t i o n , aany of che d e p a r t m e n t ' s b e s t and most e x p e r i e n c e d p o l i c e o f f i c e r s have l e f t t h e d e p a r t ~ e n t t o t a k e more l u c r a t i v e s e c u r i t y j obs w i t h t h e c a s i n o s . P r i o r t o l e a v i n g o f f i c e , former A t t o r n e y Gene ra l

1 A major i n v e s t i g a t i o n o f p r o s t i t u t i o n w i t h i n t h r e e c a s i n o s i s c u r r e n t l y be ing conducted by s t a t e and coun ty law enforcement a g e n c i e s . P h i l a d e l p h i a B u l l e t i n , March 12 , 1981.

* The P h i l a B e l p h i a B u l l e t i n , J anua ry 6 , 1981.

A t l a n t i c C i t y P r e s s , December 22, 1980.

- Degnan p u b l i c l y r e f e r r e d t o t h e l o c a l p o l l c e depar tment as " s a d l y demora l i zed , " and t h r e a t e n e d t o o rdef S t a t e P o l i c e i n t e r v e n t i o n i f c o n d i t i o n s d i d n o t improve.

* The c o s t s of l o c a l law enforcer ten t i n A t l a n t i c C i t y a r e mushrooming. I n 1977, t h e budget f o r p u b l i c s a f e t y w a s $5.7 m i l l i o n . For 1961, S i4 .2 m i l l i o n has bsen r e q ~ e s t e d -- a $5.5 m i l l i o n i n c r e a s e o v e r 1980. If approved by r e f e r e n d a m , t h i s budget w i l l add 130 o f E i c e r s t o t h e P o l i c e Department, a n i n c r e a s e o f 4 6 % , b u t cou ld a l s o push t h e c i t y ' s t z x r a t e from $4.07 t o above $6 p e r $100 of a s s e s s e d v a l u a t i o n . In a d d i t i o n , t h e c i t y r e c e n t l y had t o s h e l v e p l a n s t o b u i l d a new 200 p r i s o n e r f a c i l i t y t o r e p l a c e i t s m t i q u a t e d 100 p r i s o n e r f a c i l i t y because a 250 p r i s o n e r f a c i l i t y i s now needed. C o s t s of p o l i c i n g and r e g u l a t i n g t h e c a s i n o s are a l s o s k y r o c k e t i n g a t t h e s t a t e l e v e l . The combined budge t s of t h e Casino C o n t r o l Commission and t h e D i v i s i o n of Gaming Enforcement w i t h i n t h e A t t o r n e y G e n e r a l ' s o f f i c e , p a i d f o r by f e e s l e v i e d on t h e c a s i n o s , exceed $20 m i l l i o n f o r t h e f i s c a l yea r enQing June 3 0 , 1981. The D i v i s i o n of Gaming Enforcement h a s r e q u e s t e d a $20.8 m i l l i o n budget for t h e n e x t f i s c a l y e a r , up 4 3 % from t h e c u r r e n t y e a r . The r e q u e s t e d i n c r e a s e i s f o r new employees ( t h e D i v i s i o n now has 450) t o moni tor a c t i v i t i e s of t h r e e new c a s i n o s under c o c s t r u c t i o n . The Casino C o n t r o l Commission h a s r e q u e s t e d $ 1 3 . 4 m i l l i o n f o r nex t yea r , a l m o s t double i t s c u r r e n t budget .

G.. Michae l Brown, D i r e c t o r of New J e r s e y ' s D i v i s i o n of Gming Enforcement w i t h i n t h e A t to rney G e n e r a l ' s o f f i c e , and o t h e r law enforcemsnt o f f i c i a l s i n Kew ~ e r s e y ccncede c h a t t hey have had a v e r y d i f f i c u l t t ime t r y i n g t o moni tor and c o n t r o l c r i m e r e l a t e d t o c a s i n o gambling i n a s i n g l e pen insu la t h r e e and one-half m i l e s long and one-half m i l e wide wi th c n l y f o u r road a c c e s s p c i n t s . T h e y ' b e l i e v e t h e i r miss ion woul2 be a lmos t i m p o s s i b l e i f c a s i n o s were a u t h o r i z e 2 f o r a c-mber o f a r e a s thzouqhou: Nsw Cerssy . S ~ e c i f i c a l l y , accord ing t o M r . Srown, " t h e l c g i s t i c a l problems of s t a t s - wide r e g u l a t i o n would be enormous."

S h e a c t u a l A t l a n t i c C i t y and Nevada e x p e r i e n c e s have c o n c l u s i v e l y demons t ra ted t o m e t h a t l e g a l i z e d c a s i n o gambling, by i t s v e r y n a t u r e , c r e a t e s an environment i n which c r imes o f a l l t y p e s w i l l f l o u r i s h . 4 T h i s means, i n e f f e c t , t h a t l e g a l i z a t i o n o f c a s i n o g m b l i n g i n New York w i l l i n c r e a s e s i g n i f i c a n t l y t h e l e v e l of c r i m e i n t h o s e a r e a s of t h e S t a t e where c a s i n o s would be l o c a t e d . With l a w enforcement a g e n c i e s and o t h e r elemenLs o f t h e c r i m i n a l j u s t i c e system b a r e l y a b l e t o ho ld t h e i r own a g a i n s t e x i s t i n g c r i m i n a l i t y , i t i s d i f f i c u l t f o r me t o conce ive how t h e y can be expected t o h a n d l e t h e tremendous i n c r e a s e in s t r e e t and p e t t y crime t h a t w i l l accompany c a s i n o gambling.

A t l a n t i c C i t y P r e s s , December 2 2 , 1980.

I am especially concerned about the consequences of legalized casino gambling for New York City at this juncture of its 1zn~-term revitalizatioc efforts. I do nct believe New York City can risk exposure to the added crime burdens that gambling casinos will bring. Its health and its positive image, both adversely affected by the fiscal calamities of the early 1970s, have been restored by a herculean effort of government, business, local communities and citizens. A new, avoidable wave of criminal activity could destroy the positive results of that wark. I believe it is too high a price to pay for the economic and financial benefits of casino gambling .

2. Gambiing casinos are a magnet for organized crine and New York lacks the sophisticaced law enforcement system reauired to keen oraanized crime out of the casino gamblinq industry.

There has existed and continues to exist an incestuous relationship between the casino gambling industry and organized crime. It is an historic and deep-seated union,-nurtured by the vast amounts of money involved in casino gambling and by the extraordinary opportunities which casinos; and the environment in which they-flourish, offer for organized crime groups to engage in a wide rznge of illegal and lucrative activities.

a. Organized Crime's Attraction to Casinos

The financiel inducements of casino gambling for organized crime are immense. The gross "win", i.e., gambler loss, of the Atlantic City casinos in 1980 was $623. 1 million and will exceed one billion dollars in 1981. It is a highly liquid business where in excess of $2.2 miilion, mostly cash, can move on an average day from gamblers to casino coffzrs. For the first two nonths of 1981 the t3tal "drop and handle" (i.e., money bet) at the six Atlantic Crty casinos was $854 hiilion.

For organized crime groups, traditionally versed in the mechanics of the industry, infiltration of the casinos -- through ownership, management or even key gaming room positi ns -- can mean huge illeg~l profits from skimming operations.' New Jersey regulators question the possibility

l For the first two months of 1981, the off-season, casino "win" was $131.3 million. L

According to the February 23, 1981 edition of the. Las Veqas Sun, millions of dollars are being skimmed each year rrom Las Vegas casinos by crime syndicates from New York, Chicago and six other cities, and illegal casino skimming is more lucrative than "street" rackets such as drugs trafficking and loansharking.

of l a r g e arnoLnts of ca sh be inq removed from c a s i n o c o u n t i n g rooms b e f o r e it i s recorded f o r t a x p a r c c s e s , b u t t h e I n t e r n a l Revenue S e r v i c e , i n a . r e p c r t of an I R S Subcommittee on Casino Unreported Incone, da t ed J u l y 31, 198C, a h i t s t h a t aovernment a u t h o r i t i e s i n Nevada and t h e Uni ted Xinsaom have 2 o t been a b l e t o c o n t r o l v a r i s u s kinds cf s k i n n i n g by owners and upper manageaent of c a s i n o s a f t e r 2 2 y e a r s of t r y i n g and t h a t t h e t a x l o s s t o t h e f e d r r 7 ' government On u c r e p o r t e 2 g ~ ~ n b l i n g income i s s t a g g e r i n g . Ti

The IRS r e p o r t i d e n t i f i e d t h e f c l l o w i n g s u s ~ e c t e d skim a r e a s :

"1. Kickbacks t o owners, i n c l u d i n g hidden owners. 2. F a l s e b i l l s : F i c t i t i o u s c o s t s charged t~ t h e

games. 3 . F i c t i t i o u s gaming l o s s ( C r e d i t S k i m and Cash

Sk ims) . 4 . F i c t i t i o u s c a s h azvances . 5. Manipula t ion o f r e c e i v a b l e r e c o r d s . "

I I t s p e c i f i c a l l y found t h a t :

" F a l s e b i l l s , f i c t i t i o u s gxninq l o s s e s and fictitious c a s h advances have long been used as skimiiing mechods i n Nevada c a s i n o s . I t i s i n t e r e s t i n g t o n o t e t h a t t h e s e a r e a s a l s o r e p r e s e n t t h e major problems a s skimming d e v i c e s i n c a s i n o s o f t h e Uni ted Kingdom acco rd ing t o i n f o r n a t i o n f u r n i s h e d t h e gevenue S e r v i c e R e p r e s e n t a t i v e in cocdon."

I n conmentin5 on bo th Xevada an2 New J e r s e y c z n t r o l s y s t e i i . ~ ciesigned t o p r e v e n t c h e a t i n g , t h e r e p o r t ccnc l cd rd :

" I n t h e o p i n i o n o f t h i s s t u d y g r o w , t h e s e sys t sms o f i n t e r n a l c o n t r o l z r e n o t e f f e c t i v e t o p r e v e n t skimming by owners and upper mzinageaent dr azy p e r s o n s w i t h a u t n o r i t y t o i n i t i a t e and change e x i s t i n g r u l e s o r p rocedures . "

"Th i s s t u d y group i s o f t h e o p i n i o n t h a t c a s i n o i n t e r n a l c o n t r o l sys tems cow employed w i l l h e l p e n s u r e t h a t t h o s e o p e r a t i o n s which a r e h o n e s t will remain hones t . The remain ing o p e r a t i o n s w i l l c o n t i n u e t o d i v e r t funds r e g a r d l e s s of how e l a b o r a t e t h e w r i t t e n i n t e r n a l c o n t r o l sys tem submit+e2 t o t h e S t a t e Board may have been."

A F i n a l Repor t of t h e I n t e r n a l Revenue S e r v i c e Unique Compliance Committee, Subcornnittee on Cas ino Unreported Income ( J u l y 31, 1980).

New Jsrsey l?.w enforcement officials agree with the IRS that skins can occur in slot machine operations, 1 and they have fcund-that the casinos are hiqhly vulnerable to costly credit scams engineered by insiders and their outside conspirators. For example, a credit scam involving middle-level enployees of tially's Casino and an outside crime group dsfrauded the casino of $4 million within a two week period durins the summer of 1980. 2

Gambling casinos provide an excellent means Tor organized crime groups to launder funds from their other illegal activities. For exarnple, as reported in the Keenan Report, page 18, the federal government is currently investigating one crime family which allegedly laundered millions of dollars derive6 from illegal drugs through Caesar's Palace in Las Vegas.

The vast legitimate profits reaped by casinos -- exceeding $2 million per month in some cases -- pre ent 3 another magnet to hidden organized crime interests. Tremendous amounts o' funds are at the disposal of casino cwners and managers. Opportunities for unscrupulous opera tors to funnel casino gadling profits into front organizations for illegal organized crime activities or into legitimate businesses controlled by organized crime are numerous, according to New Jersey law enforcement authorities. Historically, hidden ownership and illegally held capital have been the most serious organized crime problems gssociated with casinos in Nevada. (Keenan Report, page 17) Other inducements to

1 TWG Las Vegas casincs were recently the subjects of slot a a c h i r , ~ department skins mounti.ng to approximately $7 million over a one and one-half year perlod. (13s Report, page 19)

2 Also, On Kay 11, 1991, Resorts Internation21 a ~ 3 six ~f its casino officials were charqaci by the Attorney General xith violations of Flew Jersey's caslno credit reqAations for their participation in check-kiting schemes that defra Res~rts of $4.1 mlliion.

3 The pretax profit of the Golden Nugget in January 1981,

its first full month in operation, was $2 million. , 4

Resorts International, Inc., for example, has in excess of $100 million in unspent profits deposited in New Jersey banks.

AS admitted by the Chairman of the Nevada Gaming Control Commission: "organized crime is still around." (U.S. News and World Report, March 9, 1981, p. 67.) In fact, oesplte official assurances -to the contrary, it is wideiy believed within law enforcement circles that large segments of the casino business in Nevada were infiltrated by organized crime figures and their associates.

organized crime are lucrative zncillary services, both legal and illeqzl: liq7~or, fad, linens, loansharki g, prsstitction, fencing stolen prcFerty and drug trafficking. 'i:

The two najor reports issued in 1979 that save quaiifid endorsernext to cas inc gmbling for New Ycrk State acknowledged thzt organize6 crine activities resulting from legalized crsino ganbling will cause law enforcement probl~ms of major dimensions for the State and its local municipalities. Law enf~rcement experts are unanimous in their agreement on this issue.

b. New Jersey's Experience

Although organized crime activities are extremely difficult to detect, an3 impossible to quantify, the prognosis of the Lynch and Keenan Xeports appears to have Seen confirmed by New Jersey's ex7erience.

In renarks Sefore a committee of the New Jersey Legislature on March 3, 1980, New Jersey's farmer Attorney ~kneral Degnan vividly portrayed the involvement of organized crime in Atlantic City. Whiie deciining to reveal specific evidence of infiltration of ktlzntic City's casinos by organized crime, Mr. Degnan said:

"But is orcjanized crime present in Atlantic City? Yes. Is it there in greater force than it was befare casincs were nassed? Yes. Are they tryinc; to buy liquor licenses? Yes. Are they crying t~ get into anciilary ind~stries? Yes. Is there a r increase in prostitution? Yes." (Kew York Times, March 4, 1980)

Mr. 3egnan ad42d that loan sharking and bookmaking hzd increase? since the first casino opened in Atlantic City and that organized crime was responsible. Subsequently, in re~.arks before the Eastern States Attorneys General Conference in Newport, Rhcde Island, on October 7, 1980, reported in the October 8, 1980 edition of the Providence Journal ~ulletin,

A Chicago crime syndicate purportedly has controlled street rackets in Las Vegas for several years. Las Vegas Sun, February 23, 1981. - L

According to the Final Report of the Casino Gambling (Lynch Xeport), esta~llshed bv Governor Carey ln

%%ary1979: " . . . it must be clearly recognized that they (organized crime activities) may impose a significant burden upon the local enforcement agencies and the population in general" ( p . 11). John J. Keenan, in his Report on Czsino Gambling, prepared for Xayor Koch in 1979, was more blunt: "Casino gaibling operations consequently present permanent attractions to organized crime. For thls reason, if New York chcoses to allow Casino Gambling, it should recognize that by doing so it is creating a new area for crimlnal and organized crime to enter." (pp. 16-17).

Mr. Degnan further revealed that orc~anized crime cocnections had been traced in real estate transactions in Atlantic City and in some infiltration of unions active in the casinos.

More recently, on March 17, 1981, G. Michas1 Brown, Director of the Division of Gaming Ecfcrcement, commented publicly on an intense fight between several arganized crime groups for dominance of cas'no-related rackets in Atlantic City (see page's 15-16) : I

"Casinos are traditional areas of attempted organized-crime infiltration, of possible illegal diversion of funds and avoidance of taxes, of prostitution, and cf-loan shazking, . ." "State police intelligence shows that New Jersey, Philazelphia and New York organized crime families are competing for inrcads in the Atlantic City area , . . the mob considers Aclantic City worth fighting over . . . it is a stru~gle over rights' to casino service industry bcsinesses."

Affiliations of Casinos Licensed: Three Atlantic City casinos have been iss ed regular licenses by New Zersey's Casino Control Commission,' and the Attorney General ' s office opposed all three applications based on its findin~s of business transactions with reputed organized crime figures. In the case of Resorts International, Inc., Atlzntic City's first casino,.the Attorney General's recomk.en2stian was ignored -- a decision which Yr. Degnan described as a " t i l c toward the concept of economic developm nt of Atlantic City . . . rather than toward crime control8'.' In the second instance, involving Caesar's World Inc., a license was awarded by the Commission on con2ition that the casino's two top officers sever their ties with the czsino an2 divest their holdings. The Commission found both the chairman and the president unfit to associate with the casino because of their connections and dealings over a number of years with alleged associates of underworld financier Meyer Lansky.

Proceedings involving the third casino licensed, Bally ~anufacturing Corp. and its subsidiary, Bally's Park

Speech before Atlantic City conference of casino industry representatives on March 17, 1981 sponsored by Public Gaxing Research Institute of Maryland.

2 The three other casinos are operating under one year permits.

New York Times, February 15, 1980.

Place, Inc., operatcr of the Park Place Czsino, are illuminating. On December 29, 1980, ihe Cornmission gave its final approval to a casino licens2 for Bally but ruled that one William T. OIDonneli, the fouzder, forner c h i m a n and president of Bally, w a s not qualified tc hold a license and directed him to sell his holdings. Earlier, in December 1979, b l r . O'Donnell had been requirsd by the Commissicn to relinquish his positions with the company 2s a condition of the casino being granted a temporary pernit. The Comission based its license decision on Mr. O'Donnellls history of associations with reputed organized crime figures and his alleged partici~ation in a scheme to bribe Kentucky legislators in 1968. The Attorney General's office .had strenuously arged rajecsion of Bally's license request based on its findings that both the company and Mr. O'Donnell were unsuitable because of their associations with criminals. S i x days of hearings before the Commission in November 1980 revealed the following: In raising money to buy Bally's predecessor company in 1963, Mr. O'Donnell had enlisted as a partner an associate of two high level, New Jersey organize2 crime figures in a New Jersey vending machine company and other businesses. One of the reputed underworld figures, a member.of the Genovese crime group, became, in fact, a hidden partner in the syndicate organized by Mr. OIDonnell to purchase Bally's predecessor. A l t h c ~ - h Mr. O'Donnell knew of these relationships long before buying Sally, he claimed 'in testimony that he did not know of the organized crime figzre's hidiien interest in the syndicate until a year after the purchase. Another member of t h e syndicate organized by ~ r . O'Gonnell to buy Bally's predecess~r was .associated with the organized crime figure in a B ~ o o K ~ Y ~ ! company that made billard tabies an2, yet ar,c.ther of Mr. O'Donnell's original partnsrs, the operator of a Cleveianl vending machine business, was ordered by the Xevsda Gamiz~ Commission in 1976 to sever his ties with Bally zfter having been seen golfing with the underworld figure. Mr. G'Donnell conceded to the Coinmission that "some past zsscc~ations have been dubious" but characterized them as "mistakes in jud~zent." However, the Attorney General's office argued that the company's associations with criminals were- so "flagrant" that Bally should not even be allowed to sell slot machines in New Jersey. The Attorney General's office further found flagrant disregard by Bally of gaming regulations of casino control bodies designed to keep out criminal elements. Specifically, when licensed by the Nevada Gaming Comission in 1975, Bally was ordered to sever all ties with the aforementioned New Jersey vending machine distributor. However, Bally substituted a company which was merely a front for the

former d i s t r i b u t o r . I n i t s 1975 o r d e r , t h e Nevada Commission a l s o o rde red B a l l y t o s e v e r a l l t i e s w i t h i t s L o u i s i a n a d i s t r i b u t o r . w h 0 had been c o c v i c t e d by t h e F e d e r a l government i n 1974 on r a c k e t e e r i n g ' c h a r g e s of p rono t ing t h e s a l e of B a l l y p i n b a l l machines f o r i l l e g a l g a r b l i n g . However, E a l l y a l lowed t h e d i s t r i b u t o r t o p i c k h i s s u c c e s s o r , a p a r t n e r s h i p which inc luded h i s f i v e c h i l d r e n , and t o c ~ n t i n u e t o p l a c e o r d e r s w i t h B a l l y . -

I n a d d i t i o n t o t h e e x p e r i e n c e o f c a s i n o s l i c e n s e d t o do b u s i n e s s i n N e w J e r s e y , t h e r e i s a l s o e v i d e n c e o f u n s u c c e s s f u l e f f o r t s by o r g a n i z e d crime groups t o buy i n t o c a s i n o - h o t e l s i n A t l a n t i c C i t y . One i n c i d e n t i n v o l v e d an a t t e m p t by a r e p u t e d member 02 t h e Gambino c r i m e f z m i l y i n - New J e r s e y t o buy i n t o t h e She lbu rne h o t e l t h rough an unsuspec t ing f r o n t man, b u t t h e d e a l a b o r t e d when t h e f r o n t man became s u s p i c i o u s o f h i s new p a r t n e r s . 1

Rea l E s t a t e : New J e r s e y law enforcement o f f i c i a l s r e p o r t t h a t o r g a n i z e d crime's i n f l u e n c e i n A t l a n t i c C i t y i s

7 widespread i n t h e v i r t u a l l y u n r e g u l a t e d r e a l es ta te i n d u s t r y . - According t o s t a t e o f f i c i a l s , one Canadian c r g a n i z e d c r i m e group has bought 7% - 8% of t h e l a n d i n t h e area th rough dunmy c o r p o r a t i o n s , and o t h e r crime groups are b e l i e v e d t o be a c t i v e i n t h e l a n d s p e c u l a t i o n t h a t has ravaged e n t i r e r e s i a e n t i a l ne ighborhoods o f t h e c i t y . A s d i s c u s s e d aSove, a t page 6, a wave of a r s o n h a s accompanied o r g a n i z e d crime's e n t r y i n t o t h e b u s i n e s s o f o b t a i n i n g and c l e a r i n g l a n d f o r c a s i n o r e l a t e d d e v e l o ~ m e n t . -,other consequence 'o f t h e o u t - of-conti-01 l a n d s p e c a l a t i o n h a s Seen p r o p e r t y tax i n c r e a s e s of 300% t o 40G% i n c a s i n o a r e a s , impos ng i c t o l r r a b l e burdens on lower and midd le income honeowners.' E x o r b i t a n t r e n t i n c r e a s e i ~ p o s e d by unsc rupu lous p r o p e r t y owners have a l s o f o r c e d 3000 f a m i l i e s o u t o f r e n t a l u n i t s , a d t h o s e who hsve remained, t h rough l c c k o f any a l t s r x i a t i v a , have expe r i enced 500% t o 1000% r e n t i n c r e a s e s s i n c e 1978. Fo r e l d s r l y pe r sons on f i x e d incomes t h e impac t of s k y r ~ c k e t i n g l a n d

Da i ly News, A p r i l 2 , 1981.

" The C h r i s t i a n S c i e n c e Moni tor , J anua ry 17 , 1981.

A t y p i c a l s i t u a t i o n i s t h a t o f t h e 80 y e a r o l d r e t i r e d t e a c h e r whose a n n u a l p r o p e r t y t a x e s jumped from $1600 b e f o r e c a s i n o gambling t o $4000 by t h e end o f 1980. Another exainple i s t h a t o f t h e e l d e r l y c o u p l e whose home w a s r e a s s e s s e 2 from $22,000 t o $139,000, r e s u l t i n g i n an i n c r e a s e i n t h e i r annua l p r o p e r t y t a x b i l l from $650 t o $5,500.

Report of M a s s a c h u s e t t s L e g i s l a t i v e Research Bureau, February 1 8 , 1981, page 3 .

2rices and rents has been devastating. In excess of 2000 '

elderly persons have been u?rooted from their hones and apartments, an2 many of then have been forced to leave the city.1

Labor unions: An area of great concern tc New Jersey's law enforcemeni authorities is organized crime's purported ties with locai unions emerging as powerful forces within the casino industry. Their primary fear is that organized crime, through control of the uniocs, will try to extort a share of the huge earnings of the casinos selling labor peace.

The New Jersey State Police report that leaders of two unions active in the casinos have close ties with

I members of a major crime group that controls illegal gamSling, loan-sharking and other rackets in Atlantic City an2 Phiiadeiphia. 2

I An official of the State Police's Casino Gaming Bureau and Intelligence Bureau states:

"We are concerned that crganize6 crime is qetting in through the back dcor with these unions. These are the key unions for casino workers and the construction industry, and it lcoks as if the - . mob is laying the groundwork to lo their thing. I, 3

According to the Atlantic County Prosecutor: "Based on what we have seen, the most likely target for monopclistic control by orqanized crine of a significant sagment of the casino econcmy would be thr~ugh these union^".^

According to the 1981 Report of Stocktcn Stnte College: "Without planning and legislative safeguards designed to protect the elderly, many officials don't see zany elderly livinq in this area in a period of four to five years. Indeed many of the elderly who resided in Atlantic City prior to passage of the casino gaming referensum have disappeared. Their numbers, and destination are yet unknown even to the service providers."

Local 54 of the Hotel, Restaurant and Bartenders International Union, which represents 7600 casino workers in.Atlantic City, and Local 30 of the Composition Roofers Union, which has become the dominant union amons the trades involved in - -

the construction of casinos. 2 2 New York Times, December 1, 1980; See also The Christian Science Mo

New Yor

X i t h i n g t h e p a s t s e v e r a i x o n t h s , casiao gamblin5 r e g u l a t o r s acd law enforcement a o e n c i e s have been c l o s e l y moni tor in5 an 2 f f o r t by t h e T e a r s t e r s t o o r z z n i z ~ t h e c a s i n o d e a l e r s . They are a l s o d i s t u r b e d by a s t r u g g l e among unions w i t h underworld t i e s t o o r g a n i z e t h e c a s i n o s ' s e c u r i t y personne l . S p e c i f i e a i l y , Cas ino P o l i c e and S e c u r i t y O f f i c e r s , Local 2 , a Long I s l a n d based c n i o n alLegeCly a f f i l i a t e 2 wick a inajor New York cr ime g roup , t h e Gambino f a m i l y , h a s g a t h e r e d

'enough s i g n a t u r e s t o mandate e l e c t i o n s t h i s s 2 r i n g a t R e s c r t s , B a l l y , Br igh ton and t h e Golden ?:usget, o u t d i s t a z c i z g two o t h e r s e c u r i t y guz rd un ions p r o r t e d l y s ~ o n s o r z d by o r g a n i z e d crime g r c u p s i n P h i l a d e l p h i a . Y F

The impcr t ance t h a t o rgan ized c r i n e g roups in N e w York, P h i l a d e l p h i a a d Nortnerx New j e r s e y a t t a c h t o i n f i l t r a t i x of t h e burgeoning c a s i n o gambling i n d u s t r y and r e l a t e d A t l a n t i c C i t y r a c k e t s i s s u c c i n c t l y demons t ra ted by t h e v i c i o u s n e s s o f t h e f i g h t t o c o n t r o l t h e s e c u r i t y gua rds . N e w J e r s e y law enforcement o f f i c i a l s b e l i e v e t h i s c o n f l i c t i s the cause o f 2s many a s seven sang-land n u r d e r s during t h e p a s t y e a r i n t h e P h i l a d e l p h i a a r e a , i n c l u d i n g t h e k i l l i n g of two l e a d e r s o f t h e P h i l a d e l ? h i a c r i m e grou? t h a t has con t r c l l ec? t h e A t l a n t i c Cizy r a c k e t s f o r g e n e r a t i o n s and o f t h e heaz of Loca l 30 of t h e P h i l a d e l p h i a R c o f s r s Union (see above) who had been t r y i n g t o o r g a n i z e t h e c a s i n o s e c u r i t y p e r s o n n e l . In a speech b e f o r e r e p r e s e n t a t i v e s of t h e c a s i n o i n & u s t r y on March 18 , 1981, Governor 3rendan T. Byrne s z i d :

" S i x peop le have been k i l l e d i n Ph i l ad . e lph ia a r g u i n g over A t l a n t i c City . . . t h e state h a s ~ c c t o a s s l a e tha t , crganizelr;, crime w ; l l ,, cnnc inue its e f i o r z s c o c o r r a p t t he casino i n d ~ s t r y ifi t h e r e s o r t . "

On N 3 y 11, 138i, the Div i s ion of G m i ? ~ Zn fo rcexen t ; ez ic ione& til* Casi::cj Contr-i ComLlssio;: to zjsL;:;21i=:- A: - r.i;c-l

5 4 from c o l l e c c i n c j dues o r s d x i n i z t e r i n q ?e:aic> and w e l f a r e funds on b e h a i f of l i censm2 casinc employees beczxse of i t s a i l e g e d a s s o c i a t i o n s w i t h organizsd c r i m figxres. Bowever, New J e r s e y s t a t e an2 l o c a l law enforcement e x p e r t s b e l i e v e they have l i m i t e d powers t o p r e v e n t o rgan ized crime's i n f i l t r a t i c l n of the c a s i n o s t h rough l a b o r un ions . Regula ted b:? t h e U.S. Labor Departxient , i t i s n o t clear whether t h e l a b o r un ions a r e s u b j e c t t o t h e s r i c t i n v e s t i g a t i o n s of t h e s t a t e ' s r e g u l a t o r y a g e n c i e s . ' Consequent ly , a c c o r d i n 9 t o N e w J e r s e y

1 Trenton Times, :4arch 8 , 1981.

The ~ h r i s t i a n Sc i ence Moni tor , February 1 8 , 1981.

intelligence sources, "the mob has tarseted F1.e unions as t h e easiest point of entry into the Atlantic City casino ind~stry."~

c. New York's Lack of an Effective Zzforc~rnent Proqram Directed At Orgarizea Crime

In assessing the advisability cf casixo gambling for New York State, I am particularly concerned that efforts to combat organized crime historically ha\~e not been qiven high priority by state and local law enforcemect agencies. As a result, New York lacks the rudinents of a state-wide enfarcement systsm able to detect and conbat organized '

crime's infiltration of the czsino gambling industry. In fact, the State does not have the basic machinery required to deal with existing, traditional organized crime zctivities. No better illustration of this void exists than the condition of the state-wide Orgz3ized Crime Task Fcrce (OCTF). Create12 in 1970 to root out pervzsive ane compiex organized crime conspiracies of a multi-county natxre, for ten years 3CTT was deniec? adequate resources and powers to investiaate and prosecute illegal activities of organized crimeL. Cozpzred to law enforcement programs dirscted at organized crime in other states, New York's state-wide program is an embarrassxent. Ten years after its creation, OCTF had a staff of less than twenty professionals. It has no intelligence gathering systm. It has almost no presence in' Sew York d i ' . ~ . L2 , - c n ~ Island, Buffalo, or other areds which are being cz~siderz5 for casino gambling. Its State Police contingent has been reduced to twenty-eight officers Zespite suspacted increased organized crime activily in many parts of t h e State.

kt the county le17el, the ability ~f X e x Y ~ r k ' s District Attorneys to confront co~ipl*:~ o r c a r . i a d crime activities is almost nonexistent in over 50 of the State's 62 counties because of their burdensome respcnsibiiities to investigate and prosecute other crimes. The 4ackets Bureaus of eight larger counties, fairly active against organized crime in the 1950s and 1960s, have been cri2pled in recent ysars because resources have been shifted to fight strezt crime. The State's overall effart, including both state an2 county, is fragnented and uncoordinated. There is no

Trenton Times, March 8, 1980.

The 1981/1982 appropriation for OCTF, just enacted by the Legislature, was $2.7 inillion. This represents the first significant funding increase in the Task Forcz's history.

state-wide system. The practical consequences are very poor intelligence, crucial to any serious prsqram intende2 to combat organized crime infiltraticn of casinos, and an inability to investigate complex crimes typical of organized crime groups.

In marked contrast to New York, New Jersey -- which has had trouble controlling casino gambling in one small area --has built and refined a highly professional law enforcement system to fight organized crime during the last decade. With its central focus in the Attorney General's Criminal Division, the program is an integrated network, involving state and county prosecutors with the expertise and resources to detect, investigate and prosecute organized crime activities. This criminal division has an experienced staff of 400, and the organized crime component alone employs 200 full-time State Police investigators (compared to OCTF's part-time State Police contingent of 28) The Gaming Enforcexer. Division within the Attorney General's office hzs 118 state ~olice personnel assigned to it, and the state police aiso has several special units assigned to Atlantic City. New Jersey's organized crime unit benefits from a witness protecfion program, access to three state-wide grand juries, which run continuously throughout the year, acd an efficient intelligence gathering program. New York has none of these essential tools.

If New Jersey, with its estzblished crlnizal enforcement nachinery, is struggling to curtail organized crime involvement in the casino L3iustry in Atlantic City, how can Sew York possibly expect to control the problm in 'a number of areas of the State with its priniti-~e law enforcmen; system devoted to organized crime? In my view, it will take ~t leasc five years for New York, at great ccst, tc buld the two tier (statewide and county) system necessary for effective regulation and control of casino s-bling. By then, I fear, organized crime groucs woul2 be so deeply entrenched in the casino gambling industry, and related businesses, and in communities where casinos are placed, that they will be virtually impossible to dislodge.

3. Leealized casino aainblins Doses a danser to the integrity and credibility of government institutions and ~ublic officials.

Gambling casinos involve the outlay of vast sums of money with the prospect of enormous profits for casino owners. The start-up costs alone for the first casino in

Atlancic City, Resorts International, were $90 million. aally paid $300 million for its facility; Xarrahs' $120 million and the Golden Nugget $106 million. The average daily take of each major casinc is $500,000 and the monthly net profit can exceed $2 million. High stakes ride on the ltcensing, regulation and control of casinos. Pressur2s exerted on government officials and icstitctions have been relentless where casino gambling has been legalized.

After only a short experience with gambling casinos in New Jersey, former Attorney ~eneral Degnan acknowledged that "the industry has become a major one and has come to have a substa tial influence on the body politic in the.last three years". f

Revelations in the spring of 1980 of influence peddling and official corruption in Hew Jersey heightened the public's awareness of the extraordinary power of the casino industry to contaminate the political prccess and tc influence government at all levels. Several officials - federal, state and local - were implicated in efforts to influence decisions relating to .the issuance of casino permits in return for favors. In one Abscam incident, the Vice Chairman of New Jersey's prixe regulating and licensing body, the Casino Control Comnission, resigned because of disclosares by federal authorities that he had allegedly failed $0 report a $100,000 bribe offer to help a'fake Arab company purchase land to build and operate a casino. The FBI's Abscam investigations also resulted in revelations that a U.S. Senator from New Jersey allegedly used his influence in an attezpt to secure favorable action fro3 ~ h e Casino Control Conmission on a2 application to'build a casino in Atlantic City. AllegatFsns also surfaced &out the lobbying activities of New Jersay state s s n a t o r s cn behalf of casino gambling interests.

Reported incidents of influence ped2ling, such as the above, convey only a sense of how the casino gambling industry is sp nning a web around government at all levels in New Jersey. i

New York Times, February 15, 1980.

2 A New York Times editorial, dated June 19, 1980, referred

to the relationship as "thicker than bloodn and cornmentsd: "There's no telling anymore who is really regulating whom." The editorial concluded that "the casinos simply hav? too much money to make and spend to avoid the legal corruption of government, "

In confidential interviews, New Jersey officials have expressed shock at the speed which the infant industry has become the dominant force in Atlantic City and County governments. One high-ranking state law enforcenient official

to the industry as having "ics tentacles everywhere . . . into everything." The former head of Yew Jersey's Gaming Enforcement Division, in a speech before a convention of casino industry executives oq Zune 17, 1480, called "official corruption" a bigger threat than organized crime in Atlantic City. He said, "Ilam frankly shocked New Jersey is as much for sale as it is."

At the local level2:

* More than 50 local officials and government employees in Atlantic City own stock in casico gambling companies, or have been involved in t'ne purchase or sale of property for casino use, or have other financial links to the casino ganbling industry. These inclcde, anon9 ethers, the Police Chief, the former Deputy Police Chief, now 2 City Commissioner, and the City Commissioner for Public Safety who oversees the Police Department.

* Five of the nine members of Atlantic City's Planning Board have invested in, or had property or financial dealings with, the casino industry. Three of sever, Zoning' Eoard menbers had similar ties. Members of the two boards, res~onsible for key zoning decisions, have routinely beer, involved in land deals with the casinos and have personally benefited from casino-related land transactions approved by the boards. For example, the Planning Board chairman will participate in a $6 million prcfit on the rezcning by the Board of a 2.2 acre tract for casino xse.

* In addition to members and staff of tke Planning and Zoning Boards, other local officials in a pcsition to regulate casino operations and enforce the laws have links to the casinos, including police officials, fire department icspectors, and staff of the law department. The New York Times, in

New York Times, June 18, 1980.

A four part series in the New York Times (June 15, 16, 17, 18, 1981) contains detailed accounts of relationships between Atfantic City government officials and the casino industry.

its series, uncovered -numerous instances of possibie ccr.r'llcts of interest involving public officials who were in a position to influence the development of g=biins casinos in v i i c h they had a personal financial interest. Some qoverxnent officials have expressed concern t h a t tke ?atLc.- +-n-n cf involvement of public officials is so pervasive that the icdependence of city efforts to regulate the gmbling industry has been jeopardized. 1

* Dozens of Atlantic City employees, including police officers, housing commissioners, budget personnel a d deoutv mayors, have flocked to the employ of the casi; Director of the Casin~ Hotel Association was 01

of Atlantic City's Housing and Urban Renewal AL,..,-, kJ , A - A

which position of public trust he helped to negotiate the sale of two urban renewal tracts to the casinos.' The Director of the Planning Board went to work for 2 casino development corporation after having suggested to the ccmpany ~ G W it could circumvent requirements of the city's %as er ?Ian prohibiting use of a site for casino develcpment. 5

The situation is not much different at the stats level, leading some state officials to chzrge that the casino industry is systenat'czlly trying to create a pattern of influence in goverment: 3

* Seven former state legislators with connecticns acd ~nfiuente at the hi~hest levels s E T c v e r m e n t h ~ v e Seen hired or retained by the casirlc iad~stry for a vazlety of jobs. These include, for ex~mple, a fomer Derr.ocratic leader in the State Senate, who was ;nade presidsnt of the Golden Nugget in Yzrch 1980; a former Atlantic County Seaator, ssonsor of the casino controi legislation, wlic wss hired as

New York Times,.June 15, 1980.

"ew York Times, June 16, 1983.

The Chairman of New Jersey's Joint Legislative Committee on Ethical Standards has cemented: "Is this whole industry going to continue wheeling and dealing in politics? . . . It is a disturbing pattern and not what the public agreed to when it voted to try casino gambling." New York Times, November 30, 1980.

New York Times, November 30, 1980.

a pa r t - t ime phys i c i a r . by R e s o r t s I ~ t e r n a t i o n a l ; and a r 'or ina A t l a n t i c C i t y A s s e r b l p a n whose f i m r e p r e s e r t e d a c z s i n o 6eve loper w h e n he v o t e d f o r t h e c a s i n c gan511ng b i l l i n 1 3 7 7 .

* Seven l e c i s l a t o r s o r t h 2 i r r e l a t i v e s h ~ i . 5 s t o c k in . - - c a s i n o s o r conipanies t h a t hoped t o 5 u 1 c c a s i n o c i n A t l a n t i c

City.

* The c a s i n o s have emplcyed st I P Z S ~ 1 6 fc-rmer high- l e v e l s t a t e o f f i c i a l s . These i n c l u 2 e such i n p o r t a n t o f f i c i a l s a s a f o r n e r budge t e i r e c t a r , d i r ~ s c t o r of th? d i v i s i c r , o f c r k i n a l j u s t i c e , c h a i m a n of +112 rac i f ig c o r i u n i c ~ i c n ~ a former a t t a r n e y g e n e r a l and depu ty a t t o r n e y g s n e r a l , c c u n s z l s and a s s i s t a n t c o u n s e l t o t h e gove rno r , e x e c u t i v e s e c r e t a r y t o t h e governor , and o f f i c i a l s of t h e e s p a r t ~ e n t o f t r a c s p o r t a t i o - s t a t e e l e c t i o n l a w enforcercent commission, d i v i s i o n o f youth and f a m i l y s e r v i c e s , and t h e szate's t r e a s i r y d e p a r t m e n r .

* F r i e n d s azd f a m i l y of Fzpor'ant New Z z r s e y f e Z e r z l and s t a t e o f f i c i a l s have n o t been q 5 j l e c t e d by t h e c a s i n c ~ n d u s t r y . O f twc l awyer s h i r e d by R e s o r t s Incerna: . ional t o handle i t s loSby ing , one w a s r e l a t e d t o t h o A s s w i b l p a n who i n t r o d u c e d t h e c a s i n o gambling S i l l and the o t h e r t o t h e S t a t e S e n z t o r who i n t r o d u c e d t h e b i l i i n t h e S e n a t e . The w i f e o f a Uni ted S t a t e s S e n z t o r s e rved a s a c o n s u l t a n t t o a corqany s e e k i n c a c t s i n s ?emit ~ n d wze a Eomer $e&er c: i t s bozrd of d i r e c t o r s . Three friezes of Governor E y r m were a p p o i n t e d a s S15,000 p e r y e a r t r u s t e e s GF F ~ l l y ' s i?c;rl; P l a c e Casino.

* The c a s i n c i n d u s t r y ' s influence f u r t h e r extends i n t o New Z ~ i s e y ' s p r e s t i g i o u s l a w f i r m s w i t h con?.ceticns iz s t z t e government. A h i g h - l e v e l Ne;,: Zersey law er,foz.cerneCt o f f i c ~ z l r e p o r t s t h a t t h e t o p t e n law f i r m s i n t h e stst? are i i ow i? t h e s e r v i c e o f t h e c a s i n o i n d u s t r y .

The c a s i n o i n d u s t r y ' s s e d u c t i v e n z t u r e and e f f c r t s t o buy i n f l u e n c e a r e f ~ r t h e r c2smozstrated by t h e f a c t t h a t i n f l u e n t i a l s t a t e and l o c a l o f f i c i a l s t h r o u s h c u t New j e r s e y have been of fe rec! s p e c i a l p r i v i l e g e s znd c o u r t e s i e s t y t h e c a s i n o s i n A t l a n t i c C i t y . T h i s l e d former A t t a r n e y Gene ra l Degnzn t o l a b e l t h e i n d c s t r y a s " i n h e r e n t l y danger pus " because or' i t s p r o p e n s i t y t o c c r ry o f f i c i a l fevor.

New York Tinies, March 4 , 1580.

Enoxcus pressures have been placed on gcverrr~ect officials ta :.ukvert and erole casino coctral mechanisms, and ths S t z t e is plasuai by rumrs 05 paycffs to people in .hish ?laces tc secure prefzicntial tr?aCamt in the z reas cf licensing and security. In rscent months, the casino ineustry has moSiliza2 an intensive lobbying effort focused on measures to ease state reguiaticn of casinos and to defeat c bill , +hat would increzse the state's share cf casino revenues,*

With 1931 being a gubernatorial eiectian year i n Kew Jersey, the casino gambling industry bas begun to fotxs its attention on the cam~aign =o select Governor %yrnels successor, and it can be anticipated that pro-casinc interests will find ways to help the campaigns cf zanZidates for office at all levels. Thra2 gubernatorial hopefuls, i r i addressing re~resentztives cf th? casins industry on March . - 18, 1981, have already indizated their wiliingcess zo conslzer e a s i n s ssxe of the regulations 2irectiy affscting casino operatiocs, 4 spokesman for Govexor 3yrne r~spcnded as follows oc the same day:

"The governor is concerned about the pressure being exerted on the candihtes for governor a n d the Leqislature by t h e casinc ' indusfry .

-- -- - i 03e n e a s a r ~ co reducz thc amiber of = ? s u i r e d :;curit:/ ~crsonnel in ezch casi~o w c u l d further open the 5aor to unsavory elenencs, accord in^ to the Executive Dirsctor 05 ?Jew Jerssy's Cornission of Investigations. Another 5111 beizg fought by the industry wouid increase cne stare's share of casino revenues from 8 5 to 10%. The icdustry's sfforts have already resulted in the Casi,?o.Contr~l Ccrrnmissi f ln 5asing regulations in several areas, including the eliminazlcn ~f a requirsnent that about o~e-half of a casincls tables pemlt bets as low as $2 or $5. See also, New York Tines, April 19, 1931.

Trenton Times, Xarch

Nevada's e x p e r i e ~ c e i s a l s o i n s t r c c t i v e . The s z a t s ' s s o l i t i c a l l e a d e r s a re repoz ted t o be " c z t r a g e d " over t h e e i f a r t s of t ! ~ e F e z e r a i S u s t i c e Deparunent ' s o r g a n i z e d zrime task f o r c e over t he 2ast y e a r t o i d e n t i f y o r g a n i z e d c r i c e l i n k s t o t h e c a s i n o s . Cnc U. S. S e n a t o r from Nevzda c a l l e d f o r f cDngres- ~ l c r i a l - review of t h e s t r i k e - f g r c e o p s r a t i o n s .

Can N e w York S t z t o a f f o r 2 t h i s k ind of t h r e a t t o t h e i z t e q r i z y o f i t s governmental i n s t i t u t i o n s ? I do n o t th ink so . ?&lic conf idence i n g o v e r m e n t i s a p r e c i o u s , r a r j ccmnodity. That t r u s t has been bad ly shaken in N e w J e r s e y w i t h t h e advent of c a s i n o gambling. I n ny view, a course of a c t i o n f o r N e w York t h a t t h r e a t e n s t o undermine and conpromise government i n s t i t u t i o n s and o f f i c i a l s i n 2

aacner s i m i l a r t o New J e r s e y should be r e j e c t e 2 -- no m a t t e r what . t h e c o s t i n l o s t revenues o r economic develcpment .

I 3 g r e e w i t h 4 s s e ~ b l - y Speaker Scanley F ink , and o t h e r s , t h a t some f o m of pzbi-c mmersh i? and opersc ion o f gambling c a s i n o s would seem t o have a b e t t s r chance 3 5 c o n t r o l l i n g c r i m e w i t h i n c a s l z o s t h a z 2 r i v a t e ownership. But the ?roblems d i s c u s s e d i n preceding s e c t i o n s would remain. I n a d d i t i o n , t h e p r s c t i t a l and lecjai problems of puhi ic . ownership and management appear t o m e t o bz insurmountable . A%- 2he ve ry l e a s t , o p e r a t i o n .of c a s i n o s b:? t h e s t a t e woillZ d r a s t i z a i l y a l t e r a prime j x t i f i c a t i o n f c r l a r s e ' s c ~ l e c a s i z o gamhlinq --its economic development ? o t e c t i z l . The huge sums of risk c a p i t a l r e q u i r e d f o r i n i t i a l i n - r e s t ~ e n t , Legal ~ r ~ b i e n s r e 2 a t s d t o t h e 2 u b l i c e x t s n s i o n o f credit, 'he d i s p a r i t y between c a s i n o pe r sonne l needs and s s t a b l i s h e d civil se rv ioz r s q u i r e n e n t s , ar5 t h e i z a b i l i t y of goverment - - t~ ~rzor5 t h e high-pricei nanaqexezt t a l e n t n e c e s s a r y t o run hcqh c t s i n o ? x t e r ? r i s e s , a r e b u t a few of the o t h e r probiens ~ r e s s n t e d by S t a t e c c n t r o l . There i s a l s o a " c r e d l b i l l t y " problex. A f e w i n s t a n c e s cf c o r r u p t i o n i n s t a t e - r u n c a s i n o s woaid q u i c k l y po l son t h e e n t i r e program and deskroy p u b l i c t r u s t i n ~ o v e r n m e n t .

For t h e fo rego ing r e a s o n s , I r e s p e c t f u l l y s u 5 a i t t h a t N e w Ycrk S t a t e and l e g a l i z e d c a s i n o gamSling a z s incompat ib le and that action on t h e v a r i o u s c a s i n o gzmbling p roposa l s s h o u l d be permanently suspended.

1 U . S . News and world Report , March 8 , 1 9 8 1 , p . 6 7 .

DATED: May 2 0 , 1 9 8 1