Vegas fronts for online firms

May 18, 2012 3:35 pm

One of the arguments legalizing online gambling is to regulate the business and weed out questionable operators.

But the so-called legit firms that are forming don’t look much better than the offshore operators. Indeed, several big name Las Vegas casino operators are getting in bed with sleazy online gambling firms with dubious pasts, according to a report by Reuters.

MGM Resorts International has teamed up with Bwin.Party Digital Entertainment Plc, a London-listed, Gibraltar-based firm. In 2009, an earlier incarnation Bwin.Party Digital paid $105 million and admitted to federal prosecutors that it ran an illegal gambling operation and engaged in bank and wire fraud.

Caesars Entertainment Corp is partnering with an Israeli company that in 2007 acknowledged settlement talks with the U.S. Justice Department over alleged breaches of anti-gambling laws. A group of Native American tribes in California has signed up to use software from another Israeli company, run by a man who served prison time for stock manipulation and bribery.

Reuters reports that video game maker Zynga has been in talks with Bwin.Party and others that have had brushes with the law. Meanwhile, PokerStars is considering buying its chief offshore rival, Full Tilt, and making a run at the U.S. market even though founders of both were indicted by the Justice Department last year on charges of illegal gambling, bank fraud and money laundering, according to people familiar with the situation.

The moves echo a modernized real-life business strategy that was used in The Godfather. Recall the classic exchange between Michael Corleone and Moe Greene.

Michael: My credit good enough to buy you out?
Moe Greene: Buy me out?
Michael: The hotel, the casino. The Corleone Family wants to buy you out.
Moe Greene: The Corleone Family wants to buy me out? No, I buy you out, you don’t buy me out.
Michael: Your casino loses money, maybe we can do better.
Moe Greene: You think I’m skimmin off the top, Mike?
Michael: [Michael shakes his head] You’re unlucky.
Moe Greene: You goddamn guineas you really make me laugh. I do you a favor and take Freddie in when you’re having a bad time, and now you’re gonna try and push me out!
Michael: You took Freddie in because the Corleone Family bankrolled your casino, and the Molinari Family on the Coast guaranteed his safety. Now we’re talking business, let’s talk business.
Moe Greene: Yeah, let’s talk business, Mike. First of all, you’re all done. The Corleone Family don’t even have that kind of muscle anymore. The Godfather’s sick, right? You’re getting chased out of New York by Barzini and the other Families. What do you think is going on here? You think you can come to my hotel and take over? I talked to Barzini – I can make a deal with him, and still keep my hotel!
Michael: Is that why you slapped my brother around in public?
Fredo: Aw, now that, that was nothin’, Mike. Moe didn’t mean nothin’ by that. Yeah, sure he flies off the handle every once in a while, but me and him, we’re good friends, right Moe?
Moe Greene: I got a business to run. I gotta kick asses sometimes to make it run right. We had a little argument, Freddy and me, so I had to straighten him out.
Michael: You straightened my brother out?
Moe Greene: He was banging cocktail waitresses two at a time! Players couldn’t get a drink at the table! What’s the matter with you?
Michael: I leave for New York tomorrow, think about a price.
Moe Greene: Sonofabitch! Do you know who I am? I’m Moe Greene! I made my bones when you were going out with cheerleaders!
Fredo: Wait a minute, Moe, Moe, I got an idea. Tom, you’re the Consiglieri and you can talk to the Don, you can explain…
Tom Hagen: Now hold it right there. The Don is semi-retired and Mike is in charge of the Family business now. If you have anything to say, say it to Michael.
Fredo: [Moe Greene leaves] Mike! You do not come to Las Vegas and talk to a man like Moe Greene like that!
Michael: Fredo, you’re my older brother, and I love you. But don’t ever take sides with anyone against the Family again. Ever.

Michael made Greene an offer he couldn’t refuse. In the end, it didn’t turn out too well for Moe who got a bullet in the eye.

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Horse racing’s drug problem and the influence of casino cash

May 18, 2012 6:06 am

The second leg of the Triple Crown is Saturday and all eyes will be on Kentucky Derby winner, “I’ll Have Another,” and his troubled trainer Doug O’Neill.

The New York Times detailed how O’Neill’s horses break down or show signs of injury at more than twice the rate of the national average. He has also been punished more than a dozen times for giving horses improper drugs over 14 years.

O’Neill denies giving horses improper drugs. But one can’t help but wonder if he is the Barry Bonds of horse racing?

The racing industry has been slow to investigate issues and instead has mostly turned a blind eye. But O’Neill’s dangerous record undermines the integrity of horse racing, and puts jockeys and horses, like “I’ll Have Another,” at risk. Trainer Rick Dutrow also has a horse in the Preakness, despite questions of past steroid use in other horses and facing a 10-year suspension from racing in New York.

More broadly, the Times has detailed how the growth in casinos at racetracks has increased purses, creating “dangerous incentives to run sore, tired or otherwise unfit horses in pursuit of that big score.” The New York Observer said it best in a recent editorial: “The lure of casino cash has corrupted tracks around the country.”

O’Neill appears driven by the financial gain and fame that comes from winning. His record also casts a shadow over one of horse racing’s best days. Andrew Cohen details in The Atlantic why he is not rooting for “I’ll Have Another” tomorrow. Likewise, the negative impact casinos are having on the horse racing industry is one more reason to oppose the spread of casinos.

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Pete Rose: casino sideshow

May 17, 2012 3:21 pm

Pete Rose belongs in the Hall of Fame for his accomplishments on the baseball field, but off the field Rose is an embarrassment.

Rose is appearing in a one-man show at a cheesy casino in Florence, Ind. titled “An Evening With Pete Rose,” or “4,192—The  Making of the Hit King.” Rose, of course, was banned from baseball for life for betting on games. If Rose was interested in getting back in the good graces of Major League Baseball, it would make sense for him to stay away from casinos.

Of course, this is nothing new for Rose. He makes frequent appearance and signs autographs at casinos in Las Vegas and elsewhere. He is also often spotted in Cooperstown, N.Y. hawking his autograph on the same weekend other players are getting inducted into the Hall of Fame. Rose is free to make money any way he wants, but such appearances don’t help his tarnished image.

It would seem a casino is the last place Rose would want to be, since gambling wrecked his life. But perhaps it shows the powerful pull casinos have on Rose and others who love to gamble.

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The looming casino glut

May 17, 2012 1:22 pm

Casino operators are shameless.

Maryland casino operator David Cordish is a few weeks away from opening his slots barn and already he is complaining about the saturation in the gambling market and the high tax rate on gambling in his state. He sounds like the resident who buys a McMansion and then opposes any further development because of traffic concerns and the impact of suburban sprawl on the environment.

Cordish’s company is opening a $500 million gambling hall on June 6 with 4,750 slot machines near a mall in Anne Arundel County. But he is already warning that the casino expansion can’t go on forever. Cordish is right, of course, but his timing is breathtaking. He blamed the expansion on lawmakers’ unquenchable thirst for tax revenue.

“I don’t know how we can control the politicians; they certainly don’t understand the word ‘over-saturation,’ “ Cordish said. “They think you can have casinos like Starbucks.”

The Baltimore developer is right about that as well, but fails to mention the government’s willing partners in the gambling industry who will open a casino wherever they can. It takes two to strip wealth from residents, many of whom are unsophisticated, elderly and/or struggling to make ends meet. Then again Cordish is not afraid to blame others for any troubles or rush in to court when needed, as seen in this piece about a recent legal dispute.

While other casino operators lament the competition the piece goes on to talk about plans to casinos in a number of other markets. At some point the casino bubble will pop. For now, the casino operators will keep rolling the dice.

 

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Lottery contract leads to lawsuit

May 16, 2012 11:01 am

A federal judge has ordered the mayor of Washington, D.C. to testify in a lawsuit that alleges misconduct in the awarding of a lottery contract.

The lottery dispute is at the center of a legal dispute that is shining a light on dubious deals by D.C. officials. The lottery case alleges Mayor Vincent C. Gray and other officials wanted a different minority partner to get a piece of the $38 million contract.

The city’s former contract officer, Eric W. Payne, alleges he was fired because he opposed efforts to scrap the lottery contract. The fallout killed the lottery deal. Allegations of extortion and vendatta’s threaten to upend the mayor’s administration.

More broadly, the suit underscores the corrupting influence the lottery can have on governments. The river of money that flows from the lottery is a tempting honeypot for elected officials when it comes to awarding contracts and jobs. That issue is all the more troubling as more states look to privatize the lucrative lottery operations. Look for more shady deals and hookups as lawmakers and their friends jockey for control of the lottery.

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Gov. Christie avoids Atlantic City

May 16, 2012 9:21 am

Elected officials are such hypocrites when it comes to gambling. They salivate over the tax revenue that comes from casinos and lotteries, but they distance themselves from the economic and social costs that come from government’s role in enabling more and more gambling.

Take New Jersey Gov. Chris Christie. He was the scheduled keynote speaker at the East Coast Gaming Congress in Atalntic City. But he backed out of the commitment and is sending his luitenent governor in his place. Christie’s spokesman said the change was due to a scheduling conflict.

Critics believe Christie doesn’t want to be seen cozying up to the gambling industry in advance of his presumed national political ambitions. Ironically, the gambling conference is being held at the new Revel Casino, a $2.4 billion resort that was only completed after Christie provided a $260 million taxpayer bailout.

Christie may run from his gambling ties but he can’t hide. The governor has been deeply involved in trying to prop up Atlantic City’s sagging fortunes. The state has scaled back regulations of the casinos, a move that is saving the casinos millions of dollars. Christie has also been a supporter of legalizing sports betting and online gambling.

But a Fairleigh Dickinson University PublicMind poll released on Monday found the majority of Garden State residents oppose online wagering based at Atlantic City casinos. The move would enable a virtual casino in everyone’s home computer and mobile phone. Such easy access to gambling would surely increase the social and economic costs that come from gambling, and make it easier for technology-crazed teens to gamble.

That policy may not go over well with some conservative groups. Maybe that’s why Christie doesn’t want to be seen schmoozing with the casino operators in Atlantic City.

 

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Casino capitalism & the London Whale

May 15, 2012 11:52 am

Many financial experts have said that Wall Street has been turned into a giant casino. The more than $2 billion in losses on a risky trade by JP Morgan are helping to underscore that point. (Hat tip to Philadelphia Daily News cartoonist Signe Wilkinson for her fine cartoon today that illustrates Wall Street’s casino mentality.)

The giant losses by the Wall Street bank involved a bad bet in the derivatives market. The esoteric and complex investment vehicles were at the heart of the 2008 financial meltdown and led to the Great Recession. JP Morgan’s risky trading shows that casino capitalism remains in vogue on Wall Street and nothing was learned from the financial crisis.

Most of the bad bets center around JP Morgan derivatives trader Bruno Iksil who was known as the “London whale.” A whale is a term casinos use to describe big gamblers.

JP Morgan and other Wall Street banks have fought efforts by the federal government to impose regulations that would prevent banks from making such risky bets. But like the lobbyists for the banks have been able so far to keep lawmakers from passing key regulation, including the so-called Volcker Rule. (Sounds a lot like the influential sway the casino industry lobbyists hold over misguided lawmakers who have turned to casino gambling to balance state budgets. In short, some argue the entire country is turning into a giant casino.)

New York Times columnist Joe Nocera makes the case today why the Wall Street banks need to be protected from themselves. Like addicted casino gamblers, the Wall Street banks chase risky bets looking for outsized payoffs. In both instances, it is the taxpayers who are ultimately on the hook for their gambling losses.

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Teaching future gamblers

May 15, 2012 10:37 am

This is just what college students burdened with debt and desperate to find a job don’t need: a course on how to gamble at a casino. A professor at the University of Akron is teaching a one-credit course titled “Mathematics of Casino Gambling.” Professor Timothy Norfolk’s class began on the same day Ohio’s first casino opened.

One could argue that the class at least gives students some helpful gambling tips. But it also may give students the false impression that can win. Or that gambling is harmless fun. The hard truth is the odds are stacked against them. Over time, the house always wins.

Norfolk said the point of the class is “to have people enjoy themselves without losing too much  money.” That’s fine, but Norfolk should also teach how gambling can become addictive. He should make clear that a large chunk of customers in a casino are problem gamblers who go to the local casino several times a week. And he should teach students about the social and economic costs of gambling.

Instead of teaching kids how to gamble, the University of Akron should be teaching students how gambling is a problem that gets overlooked at most college campuses. Studies show that a higher percentage of students - especially males – are hooked on gambling than older adults. Research shows teenagers and college-aged young adults are more impulsive and at higher risk for developing gambling disorders than adults.

Statistics also show that where casinos open there is an increase in crime, divorce, bankruptcy and suicide. So while casinos may be fun entertainment for some, gambling is also very destructive and costly to many who frequent casinos. That would be a lesson worth teaching in college.

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Minnesota’s bad bet

May 14, 2012 3:01 pm

Taxpayer funding for sports stadiums has been well documented as a losing investment. It produces little in the way of economic spinoff or jobs. A football stadium, in particular, is only open a handful of days a year.

That’s why enabling gambling in bars and restaurants across the state in order to help fund a sports stadium is a double loser. But that is how Minnesota lawmakers plan to help fund a new stadium for the Vikings. Tom Prichard of the Minnesota Family Council details why this is a bad public policy. Prichard’s argument against gambling applies to other states that have legalized casinos or other gambling measures.

Some lawmakers oppose the plan, but they are in the minority. In the face of pressure from Vikings fans and labor unions, most lawmakers ignore or deny the social and economic costs of gambling. It’s sad to see how gambling has become the answer for states in search of revenue. Even sadder, the sweetheart stadium deal for rich football team owners will be funded by a regressive tax that strips wealth from mostly poor, elderly and minority gamblers.

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The gambler’s fallacy

May 14, 2012 9:31 am

The first casino is set to open in Ohio today, prompting two papers to offer stories that remind gamblers the house always wins. Read here and here.

But that will not be enough to keep gamblers from lining up to give their money to the casinos. The sad truth is the Ohio casinos will make it easier for residents there to gamble more often. That means Ohio residents will lose more money, especially senior citizens who tend to frequent convenience casinos. (See post below of Pennsylvania gamblers going to casinos there as often as six times a week.)

Sure, there will be occasional winners, but over time the odds favor the house. The upshot will be more gambling addiction, leading to more social problems such as crime, divorce, bankruptcy and suicide. Those are the statistics the casinos and their government enablers don’t like to talk about.

Ironically, several state agencies in Ohio are preparing for the expected increase in problem gamblers. In other words, the state has legalized an industry that will lead to more social and economic problems that taxpayers will ultimately pay for. How is that a good public policy?

One study found that 252,000 Ohioans currently suffer from a gambling addiction. Meanwhile, the opening of seven casinos in Ohio will lead to an additional 109,000 residents developing a gambling disorder. Yet, the state currently provides less than $400,000 to treat problem gambling. That is a pittance when you consider that most casinos take in about $1 million a day.

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