The casino mirage

July 31, 2012 10:25 am

In state after state, lawmakers tout casinos as the answer to budget and job woes. But the experience of other states shows that gambling often fails to deliver the promised benefits.

Maryland Gov. Martin O’Malley is the latest lawmaker to get hooked on gambling, calling for a special session Aug. 9 to add a sixth casino in the state. But analysts say adding another casino will shift spending rather than deliver more revenue.

“There’s no doubt Maryland will generate additional revenue in the short-term, but it’s likely not sustainable over time,” Lucy Dadayan, a senior policy analyst at the Nelson A. Rockefeller Institute who studies state gambling returns, told the Washington Examiner. “The pool of gamblers really doesn’t expand. It just shifts.”

A recent study by the Pew Center on the States showed that of 13 states that legalized casinos or lotteries in the past decade, two-thirds failed to meet projections — including some that missed benchmarks by more than half. (See graphic here.) Tax rates are mostly higher in states that adopted gambling recently, analysts said, showing that casinos are relied on to raise revenue after other options have been exhausted, The Examiner reported.

“It’s kind of interesting when jobs and the economy and spending and debt are the big issues and the focus in Maryland has been on advocating for gay marriage and benefits for illegal immigrants and now it’s expanding to gambling,” Virginia Republican Gov. Bob McDonnell told The Washington Examiner. “Some people would call it a volunteer tax.” Meanwhile, Maryland’s tax collector, Democratic Comptroller Peter Franchot, called the expansion of the state’s casino network “fool’s gold.”

A fight over Indian casino money

July 31, 2012 8:46 am

As New York lawmakers push to add more casinos in the state, an unresolved issue is how to deal with the existing Indian casinos.

The compact between the state and Indian tribes prohibits competing casinos. An existing dispute has resulted in some tribes in upstate New York withholding payments to the state. In return, the state has refused to send money to the towns where the casinos are located.

Gov. Andrew Cuomo’s plan to add more casinos has already divided various casino interests. Adding commercial casinos may prompt other tribes to withhold casino payments to the state. Or at the very least, more casinos, could reduce revenue at the Indian casinos, resulting in less money coming to the state. As a result, more gamblers will have to lose a lot more money just for the state to make up for the lost revenue.

Relaying on gambling losses to fund state budgets is a bad enough economic policy. But Cuomo is steering the state into an even bigger ditch. Since the commercial casinos will result in a loss of Indian gambling revenue, the state will be adding casinos just to make up for the lost revenue from the tribal resorts. Not to mention, the promise of using casinos to help Indian tribes has not paid off.

That’s all the more reason why Cuomo and state lawmakers should not compound the situation by adding more casinos. After all, neither state lawmakers or taxpayers can gambler their way out of financial trouble.

Macau casinos lose steam

July 30, 2012 9:20 am

The booming casino market in the Macau region of China appears to be cooling off, impacting the profits of several major U.S. casino companies.

Las Vegas Sands Corp.’s earnings dropped 34 percent in the second quarter, due mainly to a slowdown in Macau, where the company has four casinos. Earlier, Wynn Resorts Inc. announced that its second quarter earnings dropped by 7 percent. Both stocks are down 30 percent since April.

The slowdown could spell trouble for the Sands, which has plans to keep building in Macau. The company, controlled by billionaire Sheldon Adelson, almost went bankrupt during the 2008 financial crisis. But the booming Macau market saved Adelson’s company and has been the main source of profits for the Sands and Wynn in recent years. The growth has also led to legal troubles for both companies, which are under federal investigation for possible violations of the Foreign Corrupt Practices Act. (See here and here.) New questions were raised last week in the probe of Adelson’s company.

Adelson has also emerged as the biggest Republican donor during this year’s election cycle, giving tens of millions of dollars to conservative causes and candidates, including Mitt Romney. Adelson traveled with Romney to Israel over the weekend, where there was a fundraiser and Romney upset Palestinians with his comments.

Olympic athletes: place your bets

July 28, 2012 4:09 pm

That didn’t take long.

The opening ceremony to the London Olympics was yesterday and already authorities are investigating an athlete who bet on a competitor and won $4,800. International Olympic Committee rules bar athletes from betting on Olympic events. (Of course, the IOC may top the NCAA when it comes to hypocrisy, corruption and money.)

Back to sports betting. We did a blog post the other day, pointing to concerns about bets during the Olympics and match fixing. As sports betting spreads, look for corruption and sports-betting scandals to become a part of all games.

Olympic fears: betting and match fixing

July 26, 2012 1:01 pm

As the Olympic Games get under way in London, officials there say concerns over doping have been replaced by fears of “match-fixing” and “betting.”

Sports betting is big in London. Illegal bookmaking in Asia and the Internet has also expanded the reach of sports betting. Coming soon: several states, including New Jersey, in the U.S. are pushing to legalize sports betting.

The boom in sports betting is likely to increase pressure on athletes to fix games. Indeed, there have been a number of sports betting scandals over the years as this list here shows.

O’Malley’s casino folly

July 26, 2012 11:40 am

Lawmakers do the darndest things when it comes to pushing more legalized gambling. Take Maryland Gov. Martin O’Malley. He has got himself so far out on the proverbial limb in his effort to round up enough votes to add another casino that he is agreeing to all sorts of convoluted deals. (Disclosure: I like O’Malley; think he is a good politician; and even shared a few pints of Guinness with him when he was a city councilman and played in his Irish rock band, which recently played the White House. But he has lost his way over gambling.)

The Baltimore Sun editorialized on O’Malley’s plan to call a special session to approve a bill to expand gambling. In effort to get enough votes to pass the bill, the governor has backed several provisions that make no sense and are virtually impossible to guarantee. The Sun called the measure a “Rube Goldberg of a bill.”

But this is often what happens when lawmakers get in bed with casinos. Like the addicted gamblers that flock to the casinos, lawmakers keep rolling the dice hoping to strike it rich.

Casino mogul buying Jewish votes

July 25, 2012 10:42 am

Casino mogul Sheldon Adelson has already demonstrated that he is ‘all in’ when it comes to helping to defeat Barack Obama in the November election. Adelson has given tens of millions of dollars to several conservative political action committees this election season and has said he will spend as much as $100 million.

Now he is backing a group that is designed to win over Jewish voters in battleground states like Florida, Pennsylvania and Ohio. The group, known as the Republican Jewish Coalition, plans a multimillion-dollar advertising campaign in the coming weeks called “My Buyer’s Remorse.”

The ads uses testimonials from people who say they regret supporting Obama in 2008 because of his economic policies and his posture toward Israel. Most Jewish voters tend to vote for Democrats, but the campaign hopes to sway enough voters to help tilt swing states in favor of Mitt Romney.

If anyone should have buyers remorse it should be the voters and lawmakers that have supported the expansion of casino gambling. Rather than generate wealth and economic spin-off, casinos are a regressive tax that strip wealth from gamblers and leave communities poorer. Adelson, whose business methods are under investigation, is laughing all the way to the bank as he uses some of the gambling profits – much of it from China - from his Sands casino empire to try to buy the presidential election.

Will MGM’s alleged mob ties scuttle Maryland casino deal?

July 24, 2012 9:46 am

Gov. Martin O’Malley has spent the summer working behind the scenes on a deal to expand gambling in Maryland. His goal is to clear the way for MGM Resorts to partner with a local developer to build a large casino in Prince George’s County.

One issue that has not been addressed: MGM is partners with a family in China that has alleged ties to organized crime? Those ties were enough for New Jersey gambling regulators to balk at MGM’s co-ownership of a casino in Macau with Pansey Ho, the daughter of China casino magnate Stanley Ho who has been linked to organized crime in China.

An investigation by New Jersey gambling regulators did not accuse Pansey Ho of illegal activity but found her “unsuitable” as a business partner because of her financial dependence on her father, who provided 90 percent of the funds she contributed to the MGM casino in Macau. The scrutiny prompted MGM to sell its stake in an Atlantic City casino, choosing instead to keep doing business with Ho in more lucrative Macau.

The question raised by The Washington Post is whether Maryland gambling authorities would have the same concerns as New Jersey regulators. Some think it won’t be an issue, pointing to Las Vegas where MGM owns casinos.

Elected officials all talk about making sure that casinos avoid doing business with organized crime. But in Maryland, where casinos are just getting off the ground, the governor is working overtime to change the state laws to pave the way for a casino company with alleged ties to organized crime. That says all you need to know about how lawmakers look the other way when it comes to doing business with casinos.

O’Malley falls for gambling

July 23, 2012 4:53 pm

As the mayor of Baltimore, Martin O’Malley described slot machines as a “morally bankrupt” way to fund education. Suddenly as governor of Maryland, O’Malley is obessed with gambling, as Baltimore Sun columnist Dan Rodricks writes.

O’Malley’s conversion is especially troubling since his rise in politics was based on doing the right thing and keeping his word.

Even more troubling is the way Curt Anderson, leader of Baltimore delegates in the Maryland General Assembly, is feeling from negotiating a casino deal with O’Malley: “This thing is all so murky, it really makes you feel kind of unclean. You need to take a shower when you get done because I think everybody is scratching everybody else’s back, you know what I’m saying?”

Welcome to what happens when lawmakers, gambling lobbyists and casino backers get in the room. Gambling is a sleazy business that often leaves everyone feeling dirty. In many states, the road to casinos is paved with positions that changes and backroom deals that get cut.

There’s a corruption influence from gambling that gets injected into the state and never goes away. Then again gambling is a business that produces little economic spinoff and thrives by making people poorer. So it’s no wonder lawmakers exit the gambling negotiations feeling dirty.

Casino push in North Jersey

July 20, 2012 10:17 am

Since Jimmy Hoffa is rumored to be buried in the Meadowlands, adding casinos there would bring history full circle. After all, Hoffa’s union, casinos and the mob share a long tangled history.

Hoffa’s Teamsters Union financed a number of Las Vegas casinos that were operated by people with ties to organized crime. And Hoffa is rumored to have been murdered by a member of the Bufalino crime family. The murder is believed to have been prompted by what Hoffa knew about mob activities in Las Vegas.

Louis DeNaples, the original owner of a casino in the Poconos, was believed to have ties to the Bufalino crime family. A Dauphin County grand jury indicted DeNaples in 2008 for allegedly lying to gaming regulators about his relationships with Bufalino and William “Big Billy” D’Elia, Bufalino’s former driver and eventual successor. The perjury charges against DeNaples were withdrawn and he agreed to transfer ownership of the casino to family members. DeNaples denies any ties to the mob.

DeNaples’ casino is one of the reasons why some lawmakers want to add casinos in the Meadowlands. Competition from casinos in Pennsylvania, New York and Connecticut have crippled casinos in Atlantic City. Lawmakers and other supporters in North Jersey say adding casinos in the Meadowlands is the only way to offset the loss in tax revenue from casinos in Atlantic City.

Gov. Chris Christie is opposed to the idea. He has invested political capital and state tax dollars in trying to revive Atlantic City. Christie, a Republican, also does not want to upset the working relationship he has with state Senate President Stephen Sweeney, a Democrat. Sweeney is a  treasurer and business agent for Ironworkers Local 399 union. That union, of course, is a big supporter of casinos in Atlantic City.

It’s all so cozy.

The argument against casinos in North Jersey is that they would cannibalize Atlantic City. The argument for casinos in North Jersey is that gambling in surrounding states has already cannibalized Atlantic City. The dilemma underscores the arms race to the bottom that many states have entered by betting on casinos to solve their budget woes. More gambling begets more gambling. In the end, the losers are the tapped out gamblers and taxpayers who ultimately pay for the economic and social costs of gambling.