Maryland’s backroom casino game

June 18, 2012 5:26 pm

Maryland Gov. Martin O’Malley appointed a working group to hash out the details of the state’s casino expansion plans. But as is often the case, the group is conducting its gambling business in secret. (See New York, Pennsylvania and Massachusetts.)

A Baltimore Sun reporter was kicked out of the meeting and so was a staffer for Senate Republican Leader E. J. Pipkin. The Attorney General’s office said the secret meeting was legal because the 11-member group - which included senate and house members as well as O’Malley staffers – did not meet the strict definition of a public body.

The secret meeting may be legal under the letter of the Sunshine law, but it clearly does not meet the spirit of the law. The public has a right to know what its representatives are up to. It is especially important that lawmakers conduct the casino discussions in public, given the corrupting influence gambling has had on governments over the years.

O’Malley’s group was cobbled together last month and appears poised to ram through a major expansion of casinos in Maryland with little study or debate. Major casinos interests, like MGM Resorts, are circling the state while lobbying lawmakers to lower the tax on gambling revenue – another issue that appears to be getting worked out behind closed doors. What’s to hide?

The public should be privy to the discussion. After all, the state’s expansion into gambling is a major public policy shift that could involve hundreds of millions of taxpayer dollars. Studies show that casinos come with huge social and economic costs. Those costs should be known and discussed before lawmakers rush into the expansion of gambling.

This is too important of an issue to be worked out in a backroom.

New York casino deal falls apart

June 4, 2012 10:59 am

Now that Genting, the Malaysian gambling giant, has pulled out of a deal to build a $4 billion convention center next to its slots barn in Queens, Gov. Andrew Cuomo is searching for a new sucker, er, partner.

The New York Times reported that “uncertainty surrounding Cuomo’s efforts to push through a constitutional amendment to create a framework for casinos in the state made it difficult to reach a deal.” What uncertainty? It seemed like the deal was getting rammed through with little or no public debate. The other problem is this: Genting’s desire for exclusive gambling rights in New York City also hampered the talks, according to The Times.

That detail shows that this proposal was always more about a casino than a convention center. Claims that the project would create 10,000 jobs seemed dubious at best. Who would want to travel an hour from Manhattan to a convention in Queens? Of course, it never made sense for Cuomo to be negotiating privately with a casino company while the state had yet to legalize commerical casinos. Cuomo is now claiming he will have an open process. Right.

Indeed, Cuomo said other casino companies are interested in coming to New York, including MGM Resorts. Of course, all the problems that bogged down the Genting deal remain. As The Times reported: “The breakdown of the Genting plan also highlights the challenges confronting gambling companies now: the industry has matured to such a degree, and casinos have so proliferated in the Northeast, that competitors are desperately seeking to take market share from one another or to block their entry altogether.”

Look for the other casino companies to push to locate in Manhattan, a move Cuomo and other lawmakers have previously resisted. But when it comes to gambling, lawmakers are often quick to get behind whatever deal is on the table. Update: Cuomo and others signaled they are open to casinos in Manhattan.

As for Genting, the gambling company has had two recent major setbacks in its effort to expand gambling in the U.S. A proposal to build a giant casino resort in Miami failed to gain political support. The collapse of New York deal sent shares in Gentings tumbling. Genting spent nearly $900,000 on lobbying and campaign donations in New York last year, according to an analysis by the New York Public Interest Research Group. That’s a drop in the bucket; a New York casino would like take in more a $1 million in gambling revenue a day.

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.

Casinos saddled with debt

March 1, 2012 11:14 am

The steady growth in casinos across the country is beginning to weigh on some operators who are struggling with increased debt loads.

USA Today reports that several major casino companies are wrestling with debt burdens taken on before the recession.  The increased competition will only exacerbate the financial pressure on the bottom line for many casinos.

Some of the casino companies cited included Ceasars Entertainment and MGM Resorts International in Las Vegas and the Foxwoods casino in Connecticut. The paper also said casinos in the Atlantic City and Reno markets will also continue to face financial pressure from increased competition. One takeaway: the financial troubles facing many casinos is creating lucrative work for bankruptcy attorneys.

More broadly, the financial struggles of the casinos underscores how the growth in gambling in many states is unsustainable. States that rely on gambling revenue to fund operations will likely find a shrinking pot. The problem is there is only so much money states can take from gamblers. As more and more states legalize casinos and expand other gambling operations, look for the casinos to continue to cannabilize one another.

The price of poker in Massachusetts

February 21, 2012 10:26 am

Elected officials often cite public demand for gambling as a reason for legalizing casinos. In reality, lawmakers are really just responding to the will of the lobbyists. Not the will of the people.

That was the case in Massachusetts, where a small army of lobbyists helped get casinos legalized. A review by the Associated Press found the gambling industry spent $11.4 million on lobbying on Beacon Hill over the past five years. The amount of spending grew as the gambling legislation got close to passing. 

Some of the biggest spenders are now vying for a casino license, including Steve Wynn, Penn National and MGM Resorts International. That’s why they say you have to pay to play.