Indeed, Simon's statement has abundant basis in fact. Gambling-related political corruption became so widespread in the 1800s that every state in the union eventually outlawed lotteries and all other forms of gambling. Today, history appears to be repeating itself. The recent wave of gambling expansion in the United States has spawned another epidemic
of political corruption.
Big New Tax ... Corrupting Political Influence
In every state to have legalized them, casinos and legislators develop excessively close and unseemly relationships.
First, unlike any enterprise now allowed in Massachusetts, hundreds of million dollars in tax money would be collected from just four businesses (3 casinos and 1 slot barn). This would make the legislature dangerously dependent on just four businesses for a substantial portion of state taxes.
Second, unlike any enterprise now existing in our state, casino profits would be almost wholly determined by government policy. In sum, these policy choices create a recipe for casino gambling interests to exert extraordinary political influence:
- Tax rates
- Casino locations
- Number and location of competitors
- Number of allowed slot machines
- Manufacturer, model number, payout ratio, and design of slot machines
- Number and type of allowed table games
- License and license renewal fees and terms
- Alcohol and smoking regulations
- Inspections and enforcement
- Casino owner, manager, and investor background checks
- Infrastructure construction and subsidies
And on and on...
"The notion that somehow Massachusetts is going to do it differently is naive, and it's not based in reality," said Les Bernal, executive director of the Stop Predatory Gambling Foundation, which opposes the state's casino legislation. Bernal points out that many of the casino operators in Pennsylvania have shown active interest in opening casinos in Massachusetts.
In all casino states, gambling interests become the dominating political influence. State houses are filled with gambling lobbyists, and the gambling industry fills campaign war chests. In state after state, excessive mutual dependency between casinos and legislators is followed by bribery and corruption, with legislators getting led off in handcuffs.
Casinos industry spent millions lobbying in Massachusetts
February 20, 2012
In just the past five years, the tally for all that lobbying topped $11.4 million, according to a review of state lobbying records by The Associated Press.
Overall spending on lobbying steadily increased year after year as the pressure built to approve a bill.
In 2007, the total lobbying tab on the casino issue was nearly $1.3 million. By 2011, that grew to more than $3.1 million.
Many of the companies that lobbied hardest for the expanded gambling law are now actively pursuing the three casino licenses created by the legislation.
Gambling Corruption in Pennsylvania in 2011
The word about the real Pennsylvania casino experience is now in from a grand jury which spent two years investigating casino regulation there. The PA grand jury's scathing report found that the state's gambling regulator "neglected or wholly ignored" its duty to protect the public from financially-shaky casino operators and from casino operators with organized crime backgrounds, and failed to maximize revenues promised for local property tax relief.
The report also found that the Pennsylvania Gaming Control Board:
- staffed itself with political cronies and failed to recruit and hire qualified staff
- rushed to award casino licenses to politically-connected applicants
- blocked board investigators as they attempted to conduct background checks on a politically-connected applicant
- forced changes to investigative reports to protect the politically-favored
- failed to hold meetings in public as required by law
The grand jury also found that gambling lobbyists had a heavy influence in writing state gambling laws and singled out several Pennsylvania House and Senate leaders as sources of the political influence over the GCB.
From a PA Independent news story
on the report:
The GCB "... was influenced by political leaders from both sides of the aisle in the General Assembly. Those leaders - particularly state Rep. Mike Veon, then-House Minority Leader and former House Speaker Bill DeWeese - regularly sent lists to the GCB of people "recommended" for employment. Veon is serving a six-year prison sentence for public corruption, and DeWeese is under indictment on similar charges. The report also singled out former state Senate President Bob Jubilerer and Senate Minority Leader Bob Mellow for apparently meddling in GCB affairs. Mellow and Jubilerer have since left the Senate, and Mellow is under investigation by the FBI."
Gambling corruption in Alabama in 2010
On October 4, 2010 the US Justice Department arrested 12 people charged in a massive vote-buying scheme intended to legalize electronic bingo (slot) machines in Alabama.
"The alleged criminal scheme was astonishing in scope ... [T]he defendants' corrupt conduct infiltrated every layer of the legislative process in the state of Alabama," said Assistant Attorney General Lanny Breuer in a Monday press conference in Washington.
Four state senators (both parties), a legislative staffer, two casino owners, and five lobbyists were charged in the case.
One of the lobbyists has already plead guilty to offering a state senator $2 million, use of country music stars in his campaign, and the purchase of multiple cars from his auto dealership in return for his vote to legalize slots.
Another accused state senator is charged with demanding $100,000 from a casino owner and his lobbyist in return for his vote.
A third state senator demanded $25,000 from a gambling lobbyist in return for his continued support.
The fourth state senator solicited a campaign contribution in return for lobbying other members of the legislature to vote for slots.
A legislative employee was paid $3,000 per month by a casino lobbyist to draft gambling legislation.
Several years before gambling legislation was signed here in Massachusetts, attempts by the gambling industry to expand here were already tainted by corruption.
Lies and fall of a Mashpee Leader
By George Brennan and Stephanie Vosk
Appearing in the Cape Cod Times
May 03, 2009
During the same period, Marshall hired political consultant Stephen Graham, who put together a team of lobbyists and lawyers to push the federal recognition cause politically. That team included associates of disgraced Washington lobbyist Jack Abramoff.
Even after Abramoff admitted in 2006 to fraud, tax evasion and conspiracy to bribe public officials in his representation of tribal clients, Marshall made no apologies for using the powerful firm to keep the tribe's bid for federal recognition and the ultimate prize of a casino on track.
Mashpee Wampanoag Mystery Man Revealed
By George Brennan and Stephanie Vosk
Appearing in the Cape Cod Times
January 18, 2009
When Middleboro and the Mashpee Wampanoag hammered out their casino deal, Graham was in the room with Larry Deitch, a Detroit attorney associated with initial casino investor Herb Strather.
In court documents released last month, Graham is referenced as "Political Consultant A," the person who orchestrated the illegal campaign contributions that are the center of the federal case against Marshall.
In other parts of the country:
Four of Atlantic City's last seven mayors have been found guilty of or pleaded guilty to corruption charges.
Two former West Virginia Senate Presidents were sentenced to prison for taking money from gambling interests. One was charged with soliciting $15,000 from a casino company to help pass a bill that would have allowed casinos in the state. The other was convicted for accepting an illegal $10,000 payment from gambling interests.
Nineteen Arizona legislators and lobbyists were caught on videotape taking money after agreeing to vote for legalized gambling. Six lawmakers eventually accepted plea bargains; another was convicted of conspiracy for taking $25,000 from an undercover agent.
The FBI launched a two-year investigation into the activities of more than a dozen Louisiana legislators suspected of accepting bribes from gambling interests. One former state senator, who chaired the senate committee overseeing gambling matters, has been convicted of racketeering-related charges in the investigation. A representative who sat on a similar committee in the Louisiana House resigned after admitting to using his influence to help two organized-crime-controlled video poker companies in exchange for gifts.
Missouri's House Speaker of 15 years resigned in 1996 in the wake of a federal investigation induced by charges of gambling-related dealings. According to media reports, the ex-speaker demanded that a gambling company direct payments of $16 million toward the ex-speaker's friends and business associates in order to secure a casino license in the state.
In Kentucky, 15 state legislators were eventually convicted or pled guilty to charges stemming from Operation Boptrot, an FBI investigation centering on influence peddling and bribery involving the state's horse racing industry.
Three Hilton Hotels executives - one a board member - resigned in the wake of an investigation regarding the corporation's attempts to obtain a riverboat license in Kansas City, Missouri. Hilton allegedly paid $250,000 to a business headed by the former chairman of the Kansas City Port Authority, whose approval Hilton needed to lease city property for the casino. The former chairman later cast the deciding vote awarding Hilton the lease.
Seventeen South Carolina lawmakers were convicted of or pled guilty to charges related to a federal sting operation labeled "Operation Lost Trust." The investigation centered around allegations that legislators accepted gambling money in exchange for pro-gambling votes on horse racing legislation.
In 1997, the former chairman of the Indiana House Ways and Means Committee was indicted on charges of bribery, perjury and filing false finance reports. The charges stemmed from allegations that the former chairman took bribes from the lead engineering firm in a riverboat casino project in the state.
EXCERPT:THE FAILURE TO REGULATE THE GAMBLING INDUSTRY EFFECTIVELY: INCENTIVES FOR PERPETUAL NON-COMPLIANCE *
by John Warren Kindt **
The United States has periodically experimented with legalized gambling activities. In each historical "wave," the social costs related to gambling became both apparent and overwhelming, consistently leading to the criminalization of all gambling activities.
Historically, policymakers rediscovered that the social costs of gambling were enormous1
and experts concluded that applying those costs "to the adult population of the United States [in 1994) implie[d] losses equal to . . . an additional Hurricane Andrew, the most costly disaster in American history, every year."2
Yet legalized gambling had no significant social or economic benefits as it "involves simply sterile transfers of money or goods between individuals. creating no new money or goods, Although it creates no output. gambling does nevertheless absorb time and resources, When pursued beyond the limits of recreation,... gambling subtracts from the national income."3
In addition to these enormous social costs, gambling in the United Stales remained extremely difficult, if not impossible to regulate effectively. This situation was essentially due to two factors,
First, the regulatory scheme in place in many States provided a larger incentive for gambling operators to skirt the law than to comply with it. As legalized organized gambling spread throughout the United States during the 1990's, gambling operators often preferred to pay a fine when caught violating regulations rather than simply complying with them on a regular basis.4
Second, the gambling industry formed powerful lobbies as soon as it was established in a given state, making large political contributions and compromising any significant opposition.'5
These efforts created a climate of corrupt decision-making that influenced legislators to weaken the regulatory scheme then in place and to refuse to address gambling issues in a manner consistent with the public interest.6
Each of these factors was driven by the large, almost unlimited supply of cash generated by gambling operations and available to finance the interests of the gambling industry. As long as these factors remained unchanged, effective regulation of the gambling industry was a practical failure.
Economic history has demonstrated that legalized gambling activities corrupted government decision-making and destabilized the strategic economic base.
Due to rapidly developing issues, current periodicals were necessarily utilized. This analysis attempted to filter out publications which were too influenced by the gambling industry.
Professor, Univ. Ill. At Urbana-Champaign. A.B., Coll. William and Mary; JD., MBA, Unive. Ga.; LL.M. SJD, Univ. Va.; Associate, Program in Arms Control, Disarmament, and Internatinal Security, Univ. Ill. Tom Asmar and Stephen W. Joy provided valuable assistance in editing and cite-checking this analysis.
See generally CHARLES CLOTFELTER & PHILLIP COOK, Selling Hope (1989). See also John Warren Kindt, The Economic Impacts of Legalized Gambling Activities, 43 Drake L. Rev. 51, 59 (1994) [hereinafter Economic Impacts].
Earl L. Grinols, Gambling as Economic Policy: Enumerating Why Losses Exceed Gains, Ill. Bus. Rev., Spring 1995, 7 (emphasis added) [hereinafter Economic Losses Exceed Gains].
Paul A. Samuelson, Economics 425 (10th ed. 1976) (Samuelson won the Nobel Prize in Economic Science in 1970); see John Warren Kindt, U.S. National Security and the Strategic Economic Base; The Business/Economic Impacts of the Legalization of Gambling Activities, 39 St. Louis U.L.J. 567 (1995). See also Economic Losses Exceed Gains, supra note 2, at 6, 8 ("Gambling beyond the point of recreation, or entertainment reduces national income.").
See discussion of fines, infra Part IV.
See generally Better Gov't Ass'n, Staff White Paper: Casino Gambling in Chicago 95-101 (1992) [hereinafter BGA Report]. "A regulation [was] strong onlly if it [was] enforced. Our research indicate[d] that the cash flow involved in the casino business, as well as the nature of the buiesess itself, encourage[d] corruption and undermine[d] the most well-intentioned regulations." Id. At 101.
See generally, "The Backlash Against the Gambling Industry and Associated Government Officials," infra Part V.A.