Wednesday, June 11, 2008

Chicago Crime Commission Officials Spotlight Lax Casino Laws

As the legislative session winds down, Illinois officials are again raising the award of the 10th casino license and an expansion of gambling as the fix to the state's financial deficit. This is being considered despite our state's licensing fiascoes, the high costs associated with defending more than a dozen lawsuits and alleged organized crime infiltration of casino ownership.

We've seen this from the inside. We worked at the Illinois Gaming Board. And we believe the casino regulatory system in Illinois is ineffective—by design. Instead of adopting New Jersey's strong model, Illinois has minimal controls. It has exposed gambling oversight to influence from a corrupt political system. Transparency and accountability—the hallmarks of casino regulation—are not a key part of the picture in Illinois.

What propels casino expansion? The lure of quick money? The pressure from well-financed and highly generous national and local gambling interests? Political insiders who will profit from lucrative economic development side deals as well as casino ownership?

Here are just some of the problems Illinois has had:

•A newly incorporated, inexperienced company owned by an alleged associate of the Chicago Outfit receives a contract to install a casino air-purification system

•A consultant who "works" on a questionable potential business deal for a $1.5 million finder's fee has no tangible work product to support his generous fee

•A casino employee draws a winning raffle ticket that, coincidentally, belongs to an alleged associate of organized crime with whom the employee has a prior relationship.

Last week, Illinois Gaming Board Chairman Aaron Jaffe expressed frustration that the board could not hire its own financial adviser. Instead, the Illinois Department of Revenue selected troubled Bear Stearns on behalf of the allegedly independent board. Agency independence is required to instill confidence in the regulatory process.

What happens to the independent regulatory process if a new board member is appointed immediately after a casino sale process starts or key staff is replaced just as a vote is taken? What could a political appointee with marching orders to select a specific casino do to "encourage" staff to reach that outcome? If a professional board does not control its personnel, advisers and budget, who does? And why?

A businessman testified in the federal Family Secrets trial last year about the "street tax" he paid to the Chicago Outfit to keep his business open. One can speculate that the pizza owner did not pay it from his own pocket, passing it on to us a slice at a time. We all pay a street tax when corruption, insider deals and politics infiltrate regulatory bodies, whether we gamble or not.

A top priority for the Illinois legislature should be the legislation introduced by House Speaker Michael J. Madigan (D-Chicago). It is designed to strengthen the casino regulatory system so that situations like those cited above do not occur. The speaker proposed making the Illinois Gaming Board an independent regulatory body, in complete control of its own staff and budget. His reforms would: (1) prohibit regulatory decision-makers from working for a casino for five years; (2) require that board members meet strict qualifications and have no conflicts; (3) require full background investigations of all casino suppliers; (4) impose a fee on casinos to fund the Gaming Board so it will have full staffing and access to investigatory resources without being subject to legislative or executive branch interference; and (5) most important, prevent the issuance of the 10th license or any new casino licenses until the reforms are implemented.

Ensuring that regulators remain independent of the casino industry and the political will while casino companies have the freedom to operate competitively without political pressure are excellent first steps that must be in place before the 10th license is issued or gambling expands.

And even with these reforms, regulators still require more insulation from politics than simply one strong law.

There is a price to pay for saying "no" to political pressure, to uncontrolled gambling expansion, to potential organized crime infiltration. We know. It's very difficult. But, Illinois is worth it.

Thanks to Jeannette P. Tamayo, general counsel of the Chicago Crime Commission and a former interim administrator of the Illinois Gaming Board and James W. Wagner, president of the Chicago Crime Commission and former head of investigations for the Illinois Gaming Board.

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