Inside job at a casino

December 28, 2012 9:08 am

Usually, casinos have the upper hand on gamblers, stacking the deck with long odds that make it difficult to beat the house over the long run.

But two Arizona gamblers came up with a creative scam that turned the tables on a casino. Unfortunately, the scam was illegal. Once caught, the gamblers were indicted.

Mark Allen Lomayestewa and Henrietta Wagner now face dozens of counts of embezzlement and theft in U.S. District Court, stemming from a scheme to boost the gambling credits on a rewards card. Rewards cards are similar to frequent flier memberships used by airlines. Casinos use rewards cards as an effective way to create loyalty and induce gamblers to keep on playing. It is also a lucrative method for casinos to track how often a customers enters the casino, how much they spend and keep them spending.

Lomayestewa worked at Casino Arizona, an Indian casino. His duties included keeping track of bets by gamblers, including the amounts they wagered and the time they spent gambling, according to court documents. Lomayestewa filed the player’s information into a database that would update the reward points for each player.

Sometime in September 2010, Lomayestewa began filing falsified data for Wagner, his onetime girlfriend, according to court documents. The monetary gains were small but added up. In 50 instances from September 2010 to July 2011, Wagner received credits totaling more than $20,000.

Casino competition hits state coffers

December 27, 2012 9:37 am

As more and more states legalize casinos, the competition for gamblers is beginning to impact government coffers.

Indiana is projecting a 9 percent drop in tax revenue from casinos in the coming budget year. The decrease in revenue is attributed to new casinos opening in neighboring Ohio. Casino competition has cut into the tax revenue at other states, including Delaware, Michigan, New Jersey and Pennsylvania.

The drop in tax revenue shows that casino revenue is not a sustainable or reliable way to fund state budgets. Not to mention, the opening of local convenience casinos in state after state does not generate any new spending, a study by the Federal Reserve Bank in Boston found. “Casinos that cater to a local market generally do not bring outside money into the economy through the spending of its patrons,” the study said. ”Residents patronizing such casinos may simply substitute gambling for other goods and services.”  

Of course, once hooked on casinos or lotteries, states face pressure to find new ways to get residents to gamble once the tax revenue falters. In Delaware, gambling accounts for more than 7 percent of state budget, making it the state’s fourth biggest revenue stream. So when new casinos in Maryland and Pennsylvania began to lure away gamblers, the state enacted new gambling measures.

First it legalized a form of sports betting. Then it allowed table games including blackjack, craps and roulette. But its gambling revenues have continued to fall. In June, Gov. Jack Markell signed a law that could make Delaware the first state to offer Internet gambling. The state also reduced the tax rate on its casinos, who complained that competition was cutting into their bottom lines. To offset the loss in tax revenue, the state legalized keno machines in other bars and restaurants.

With each step, Delaware lawmakers essentially continue to bet against their residents. Rather than building a sustainable economy, the state is making a bad bet on gambling. It is an unstatinable arms race to the bottom.

New Hampshire is one state that has not fallen for the casino gimmick. An anti-casino group there has done a good job of making the case as to why casinos are a bad bet.

Casino license as corporate welfare

December 26, 2012 9:32 am

Two Maryland think tanks said the state should charge $500 million for a casino license, rather than practically give it away for $18 million.

The think tanks correctly argue in a study that a casino is essentially a monopoly license to print money. That’s why casino operators lobby so hard to get into a state. Jeff Hooke, who heads the Maryland Tax Education Foundation, said the $50 million MGM spent to back a voter referendum to legalize the casino underscores how lucrative a license is for a company.

Given the value of the license, the state should be charging a premium of at least $500 million. Anything less would be “would be a giveaway, corporate welfare or taxpayer rip-off,” according to the study by Maryland Tax Education Foundation, which published by the Maryland Public Policy Institute.

According to Hooke, the National Harbor Casino, planned to open outside of Washington, D.C., could generate $148 million a year in operating profits, even after all expenses including a 56 percent state tax rate. Most of that money will come from the pockets of Maryland taxpayers, many of whom will likely visit the casino several times a week.

Of course, states would be wise to state out of the casino racket. But at the very least, states that legalize casinos should auction off the licenses to ensure the best and highest price. Christopher Summers, president of the Maryland Public Policy Institute, said Maryland has left $1.6 billion on the table by its failure to conduct auctions for the casino licenses. As such when it comes to casinos, taxpayers get ripped off coming and going.

New York casino vote in the dark

December 19, 2012 9:38 am

Gov. Andrew Cuomo made clear that voters will have to decide whether to legalize casinos without knowing where the gambling halls will be located.

Nothing like going to the polls without all of the basic information. If New Yorker are going to vote on a major policy shift – that requires changing the state Constitution – all of the cards should on the table. After all, casinos will have a major impact on residents and communities, considering studies show that where casinos locate there is an increase in crime, bankruptcy, divorce and suicide. Not to mention the added traffic from locals visiting three to five times a week, which is the average at some other convenience casinos that have opened in other states.

Maybe that explains why Cuomo would prefer to treat voters like mushrooms – which are grown in the dark and fed manure. That’s because it is much easier to get gullible voters to change the state Constitution if they don’t think a casino will be in their back yard. Lawmakers will make that key decision in the backroom. Plus, it is much better for Cuomo to dangle all the tax revenue in front of voters without mentioning the money comes from gambling losses and is essentially a regressive tax stripped from the pockets of the voters he needs to support the casinos.

But here is one sure bet: there will not be a casino located anywhere near Cuomo’s house. Same goes for the legislative leaders in Albany.

New York’s renewed casino push

December 18, 2012 9:47 am

Albany lawmakers are planning to resume their stealth push to legalize commercial casino in New York in the coming year.

There has been little discussion or debate surrounding casinos in New York and state lawmakers hope to keep it that way. It’s always better to ram through a major policy change with as little attention as possible. Especially a policy that about half of state residents oppose, polls show. Not to mention, a gambling policy that requires changing the state Constitution and will essentially create a regressive tax.

Call it a poor tax. Because that’s what casinos mainly are at the end of the day. Especially the convenience casinos like the ones Gov. Andrew Cuomo and Albany lawmakers want to add around New York. In other states, such convenience casinos attract mostly poor, elderly, minority and working class residents who tend to come gamble several times a week.

Changing the Constitution in New York requires two votes in Albany and then a referendum that goes before voters. The first vote in Albany sailed through in the dark of night earlier this year with little debate or discussion about the policy implications of such a major expansion of gambling. A second vote will likely take place in early 2013.

Cuomo is pushing casinos as a way to generate more tax revenue for New York. Coincidentally, he never even mentioned casinos when he campaigned for governor but became interested as casinos began spending millions on lobbying. Nor has the state completed an independent cost-benefit analysis that determines the added expense of creating more problem gamblers. They don’t want such a study, and instead will just tout the tax revenue and jobs that comes from casinos.

That’s because other research shows that casinos generate more crime, bankruptcy, divorce and suicide. Casinos also do not generate much new spending, but instead divert spending from other businesses. But the allure of the easy tax money prompts lawmakers to turn a blind eye to the destruction they will enable by allowing more casinos.

About those casino benefits

December 17, 2012 1:58 pm

One of the main selling points for casinos is the tax revenue the gambling halls generate for states and local municipalities. But the claims of lower taxes or other benefits from casinos rarely materialize. Instead, the casinos end up offering nothing but fool’s gold to gamblers and lawmakers alike.

Bethlehem, Pa. offers the perfect cautionary tale. A Sands casino opened there four years ago on the site of a former steel mill. At the time, the mayor predicted the casino would enable the city to lower taxes and build up a cash reserve.

Instead, Bethlehem raised property taxes more than 5 percent last year and is projecting another 8.5 percent hike next year. The city has had to borrow millions to pay for a budget shortfall. Meanwhile, Bethlehem’s budget has increased from $47 million in 2004 to next year’s proposed $72 million.

Bethlehem is not alone. Of the nearly two dozen states that get revenue from casinos, all of them have cut spending and half raised taxes, an analysis by the Lexington Herald-Leader found.

Some fired thousands of their public workers, including educators and police, and gutted their basic classroom funding, the paper said. The problem, according to experts the paper interviewed, is that casinos are a poor substitute for a strong, stable tax base.

“Casinos will almost certainly increase your revenue to some extent. But there will be offsets and costs that you also need to consider,” Alan Mallach, a visiting scholar at the Federal Reserve Bank in Philadelphia, told the paper.

That’s because casinos cannibalize other forms of spending, which cancels out some of the states’ financial gain. “Casino gambling does not create a single new dollar. Every dollar dropped into a slot machine is a dollar not spent on something else,” Mallach said. “It’s not like you’ve got an auto plant and you’re building cars to be shipped and sold around the world.”

A study by the Rockefeller Institute also found that casinos do not solve state budget woes and provide unpredictable revenues. That is something for lawmakers in Cincinnati to keep in mind as it gets ready to open a casino. Many there are trying to figure out how to spend the “windfall.” While some towns have managed their finances better most have fretted away any benefits from casinos.

Mayor’s casino flip, flop and flip

December 14, 2012 9:45 am

Come on kid, make up your mind.

The 23-year-old mayor of Holyoke, Mass. has reversed his position again and is now opposed to building a casino in the struggling blue-collar town. Perhaps he was trying to do his best Mitt Romney impression on key issues. But at least, Alex Morse appears to have come to his senses.

Morse was elected mayor last year largely on his opposition to a casino in Holyoke. But he shocked supporters last month by changing his position and throwing his support behind a casino. This week Morse reverted back to his initial stance in opposition to casinos. He apologized to city residents for briefly backing a casino and said it was a mistake that stemmed from the allure of increased tax revenue.

“Ultimately, I hope to build on this humbling moment and to ­become a better mayor as a result,” Morse said.

Casino issue divides state and local lawmakers

December 12, 2012 10:18 am

As New York lawmakes get set to move forward on a vote to legalize commercial casinos, a City Councilman in Queens wants residents to be able to decide if they want a gambling hall in their backyard.

City Councilman Peter Koo (D-Flushing) wants any effort to allow more casinos in the state to include an amendment that gives local residents more input. “We want an open, transparent process,” Koo said.

If Councilman Koo wants an open and transparent process, he has come to the wrong place. The initial casino vote in Albany last year occurred in the dark of night with no debate. The next one will probably be just as murky. In fact, the initiative was cooked up in a back room after Big Money from casino operators poured into Albany.

That may explain why Assemblyman Phil Goldfeder dismissed Koo’s proposal. “It adds a layer of bureaucracy that people are sick and tired of seeing,” said Goldfeder (D-Ozone Park). “Councilman Koo should focus on those challenges that lie ahead in New York City and allow us in the state legislature to do our job,” he said.

Yes, voters will eventually get to decide if the state Constitution should be changed to allow casinos. But that decision will be made mostly in a vacuum. In fact, Koo is missing the real issue. That is the lack of real information and public debate surrounding the policy impact of more gambling.

That’s why the Councilman and others should instead demand that Gov. Andrew Cumo and Albany lawmakers conduct an independent and impartial cost-benefit analysis to determine if the state Constitution should be changed to allow casinos. Such a study would show that casinos may add some jobs and generate tax revenue, but produce little new spending, while creating more gambling addiction and stripping wealth from the most vulnerable citizens. In the end, the increased social and economic costs will be passed on to all taxpayers. The only real winners are the casinos operators. In short, legalizing casinos in New York is a bad bet.

As it stands, about half the residents in the state oppose casinos. But if residents were better informed about the negative impact of more gambling, there would be even less support for the measure. That explains why state lawmakers want less, not more, input from taxpayers.

St. John’s dean liked to gamble

December 11, 2012 9:13 am

A gripping yarn about a former St. John’s University dean who committed suicide, also details her penchant for gambling away thousands of dollars at a casino in Connecticut. The story underscores one of many tales of how casinos play a role in person’s downfall, leading to crimes, divorce and suicide.

According to The New York Times, Cecilia Chang, a dean at St. John’s University in New York, “associated with a whirlwind of characters: Catholic priests, Chinese gangsters, American lawmakers, a Taiwanese general and a fantastically corrupt city politician, to name a few. She had been married three times. One husband, she had told several people, was involved in organized crime; another told the police before succumbing to gunshot wounds that she was behind the attack.”

Despite her lofty title, Chang was no academic. Her role was to bring in millions of dollars in contributions to the university from her native Taiwan. But she also enjoyed the high life. To support her lavish lifestyle, federal prosecutors accused Chang of stealing over $1 million from the university and taking $250,000 from a Saudi prince to organize academic conferences that never happened.

According to Chang’s handwritten notes, she wrote that she once had an intimate relationship with then-St. John’s president Rev. Joseph T. Cahill that included another woman employed by the university. In addition to the sexual liaisons, Chang wrote that Father Cahill took her to the racetrack and to Atlantic City, usually removing his clerical garb, the Times reports. Father Cahill died in 2003 and a university official said there are no records to support Chang’s claim.

Chang’s embezzlement and fraud coincided with more frequent trips to gamble. “In 2001, she began spending more time at Foxwoods, where she found solace at the baccarat tables, drinking Hennessy at dinner and coffee at the high-stakes tables,” the Times reports. “A federal agent testified at her trial that Dr. Chang would call her office at St. John’s from a casino suite and request bank withdrawals just shy of $10,000, the amount at which financial institutions must report a transaction to the government. The agent, Kenneth Hosey, said that students would come to Connecticut to deliver the money, and that she subsequently bought into casino games for the same amounts. (Chang’s use of students as servants earned her the moniker Dean of Mean.)

“When a prosecutor asked her in court about the transactions, Dr. Chang said that they were intended to bring good fortune; the dollar amounts coincided with her lucky numbers: nine, eight and six. People at Foxwoods remembered that she lent as much as $30,000 to fellow gamblers, and that she favored a dubious wagering strategy: doubling her bet each time she lost.”

The day after her pathetic court testimony, Chang killed herself after first starting a fire in a bedroom fireplace and closing the flue. She then went downstairs to the kitchen and turned on the gas and then slit her wrists. Eventually, she took some speaker wire back upstairs, lowered an attic ladder, and hanged herself from it.

Casinos are back in Florida

December 10, 2012 9:45 am

When we last left sunny Florida earlier this year, a bid to legalize commercial casinos had died in the legislature - thanks mainly to fierce opposition from the state Chamber of Commerce, Disney and several influential business leaders in South Florida.

But like the zombies that rise up from the grave in the movie Night of the Living Dead, Malaysian-based casino giant, Genting, is back pushing an effort to bring casinos to Florida. After losing in Tallahassee, the firm launched a petition drive to get a casino amendment on the state ballot. Genting backed off of that effort last week and instead is once again lobbying, er, working with lawmakers to craft a measure to legalize casinos.

Genting had spent $905,000 on a possible petition drive and hired Nation Voter Outreach, a Nevada-based political consulting firm that specializes in organizing signature drives. It also hired constitutional scholar, Bruce Rogow, of Fort Lauderdale, to work on amendment language and paid political consultant and pollster Tony Fabrizio to start a setting up a political strategy, according to the Miami Herald.

A lobbyist for Genting said the company abandoned those plans because the next two years provides “a good opportunity to look at all aspects of the regulatory and strategic environment.” Translation: Genting would rather try to control state lawmakers than let voters decide the fate of casinos.

According to the Herald: “A pivotal player in the debate will be the Broward-based Seminole Tribe, the owner of the Hard Rock Casinos in Hollywood and Tampa and five other casinos in Florida. Its agreement with the state gives the Seminoles the exclusive right to offer blackjack and other table games in Miami Dade and Broward counties through 2015 in exchange for annual payments to state and local governments.”

Genting’s return to Florida is nothing new. Casino firms routinely get turned away by state lawmakers and voters. But rather than go away, the casino companies often just hire more lobbyist and spend more money trying to influence lawmakers and voters until they get their way. When it comes to legalizing casinos, no never means no.