As plans to overhaul the state’s casino regulatory system gained bipartisan support last week, questions arose over how the new system would work in practice and what would happen when violations occur.
The sweeping reorganization of casino regulations has been laid out in a bill that repeals or alters 250 parts of the
In the proposed new system, powers to create and enforce rules over casinos would shift from the Casino Control Commission to the Division of Gaming Enforcement. Casino Control Commission officials and industry observers said they wonder how the changes, which loosen requirements for licensing and inspectors’ presence in casinos, would affect key regulatory processes.
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The reforms have been met with enthusiasm by casino heads, whose industry association suggested many of the changes six years ago. But regulators within the commission say the plan also scraps the due process now guaranteed for casino companies at hearings. Other controversial provisions include cutting out thorough background checks for casino workers and, as in criminal cases, allowing for plea bargain deals between violators and enforcement agencies to not be made public.
One industry analyst fears that New Jersey’s system of checks and balances is in danger of being gutted. He said Atlantic City’s regulatory structure may be transformed into a mirror image of the casino-friendly Las Vegas model.
“It seems we are running toward the regulatory environment in Las Vegas, which is laissez-faire,” said Jim Wortman, a former Atlantic City casino executive who serves as the director of gaming and research at the University of Houston.
CCC review ‘scrapped’
When casinos break the rules, they currently enter a system that works much like the judicial process. Investigators from the Division of Gaming Enforcement look into the case and decide whether to press charges. The DGE presents evidence before the CCC, which can rule on the case and then decide what, if any, punishment is merited.
That system would be “scrapped,” commission chair Linda Kassekert said.
“Having the commission act partly as a judicial entity has meant transparency and fairness. In short, getting rid of that means a potential loss of due process,” Kassekert said last week.
Under the proposal, the DGE would not only investigate and prosecute the case but would decide on the outcome. State Sen. Jim Whelan, D-Atlantic, who is a supporter and co-sponsor of the bill, did not deny the impact of that change Thursday.
“The process will not mirror the judicial system exactly,” he said. “If the commission wants to make that charge, they’re right.”
Casinos unhappy about having the same agency prosecute and rule on their case may appeal a ruling to the CCC. Fines for Casino Control Act violations can run into high figures: A casino that knowingly allows an underage patron to gamble, for example, can expect to pay about $100,000, based on past decisions. Whelan at first denied casino violations were comparable to other kinds of charges.
“These aren’t crimes,” he said.
However, parallels exist: A bar that serves alcohol to an underage patron would be prosecuted. While commission rulings are always made public, the DGE, as an arm of the state Attorney General’s Office, is not prohibited in the bill from making plea bargain deals. In criminal cases, those agreements are not made public.
Casino executives have complained that the state’s regulations are too expensive and too onerous. Casinos pay the cost of regulation in New Jersey. Robert F. Griffin, president of the Casino Association of New Jersey, said the proposed changes will save the industry money at a time when the weak economy and competition from casinos in surrounding states have cut deeply into gaming revenue.
Among changes being proposed is the removal of the 8 percent casino tax on $90 million in complimentary vouchers the industry issues each year. That tax funds senior citizen programs through the Casino Revenue Fund.
Griffin, who also is chief executive officer of the three Trump Entertainment Resorts Inc. casinos, asserted that regulatory reform does not mean that gaming operators and state regulators will become too cozy.
“There is a distance between the operator and the regulator,” he said.
Griffin would not comment on any specific proposals in the legislation, saying it is up to lawmakers to decide which regulations should be changed. Casinos have shared their ideas with the Legislature but have not been directly involved in crafting the bill, Griffin added.
“There will be a lot of changes as it works its way through the system. At the end of the day, I think it will make our operations more efficient and more customer-friendly,” he said.
Atlantic City Alliance
Casinos have pledged $30 million a year to finance a new nonprofit organization, known as the Atlantic City Alliance. The alliance would be a key part of Gov. Chris Christie’s plan for a public-private partnership between the state and the casinos to revitalize Atlantic City’s slumping tourist economy.
“Clearly, what the industry has said is that we are looking forward to participating in a public-private partnership,” Griffin said.
The $30 million would be used to promote the city and help fund a master plan for the governor’s proposed state-run tourism district. The proposed funding for the Atlantic City Alliance is casino money that had gone to New Jersey’s financially ailing horse-racing industry for racetrack subsidies. Casinos now want that money to stay in Atlantic City.
Another bill to be considered by the Senate on Monday would put the Casino Reinvestment Development Authority, a state agency that invests casino funds in redevelopment projects statewide, in charge of running an Atlantic City tourism district. Another bill up for consideration would allow the casinos to run Internet gaming, with a tax on that revenue potentially funding racetrack purses.
The requirement that gaming inspectors be constantly present on casino floors would disappear under the proposal.
Casino inspector Philip Albanise, who has worked in New Jersey for eight years and previously worked in Nevada, said the always-present inspectors would be missed. Not only do they serve as independent sets of eyes, but they handle patrons’ complaints as well as look into criminal activity, he said.
“A person can have a problem at a table game Christmas morning — or Sunday at 3 a.m. — and there’s an inspector present there,” Albanise said.
Inspectors have to be present in rooms where huge sums of cash from slot machines and table games are counted to prevent theft and make sure the state gets its proper share of tax revenue. They are separate from casinos’ own surveillance staff. The bill does not require that inspectors’ duties be picked up by the DGE.
Wortman, of the University of Houston, said the loss of round-the-clock coverage by gaming inspectors concerns him. He said the proposed legislation means that casinos might rely more heavily on surveillance cameras in place of the gaming inspectors.
“Without having inspectors in the count rooms, other than having a surveillance camera run by the casinos, how can you maintain and ensure integrity? There is no way,” Wortman said.
Background checks
For licensing, dealers, security officers, slot machine mechanics and many other casino floor workers currently undergo a process that includes criminal and financial background checks. It also examines whether a person has been involved in any litigation and looks at other factors, such as whether academic credentials were fabricated.
Under the proposed legislation, only “key” casino employees, such as top executives and supervisors, would still have to be licensed. Dealers and the other gaming employees who currently must hold a license simply would have to be fingerprinted and registered.
The registration process involves less extensive background checks and does not include an investigation of an employee’s personal finances. Currently, registration is re-quired for employees who have access to the casino floor but do not perform gaming-related jobs. Examples include cocktail servers, cleaning personnel and carpenters.
John Russo, a longtime inspector and Somers Point resident, said he wondered why New Jersey was dismantling a provision that had given credibility to an industry previously regarded as shady.
“In a way, that makes New Jersey citizens comfortable with having an industry once considered corrupt, and even viewed as one that could have a criminal element,” Russo said.
Senior employees would only undergo licensing in certain cases. Kassekert said the relaxation of those restrictions could mean a chain of unlicensed people handling money.
“The person counting the money is not licensed and is overseen by a person who may not be licensed,” she said.
Wortman characterized New Jersey’s regulatory system as the “Ralph Nader of the casino industry” because of the strict protection it gives to gaming customers. He warned that some of those protections would disappear under the proposed regulatory reforms.
“Why are they going to change that?” he asked. “Believe me, I have no idea. It makes absolutely no sense to me.”
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Major casino reforms over the years
1992: A sweeping regulatory reform bill signed by Gov. Jim Florio allows 24-hour casino gambling. Previously, casinos had to close at 4 a.m. on weekdays and 6 a.m. on weekends, reopening at 10 a.m.
1995: Gov. Christie Whitman signs into law a landmark casino deregulation bill that lifts the ban on companies owning more than three casinos. Harrah’s Entertainment Inc., the dominant gaming operator in Atlantic City, now owns four casinos in the resort.
1996: The Legislature abolishes New Jersey’s requirement that casino gaming space be confined to a single room or a single building. The bill allows the Casino Control Commission to approve casino space spread over two or more rooms or even two or more buildings that are physically connected. The 1997 opening of the Wild Wild West Casino annex at Bally’s Atlantic City is an example of the benefits of the new regulation.
2001: The Casino Control Commission approves a new regulation allowing compulsive gamblers to voluntarily exclude themselves from the casinos for one year, five years or a lifetime. The self-exclusion program currently has more than 1,000 people enrolled in it.
2008: In another round of major regulatory reform, New Jersey lawmakers allow casinos to deduct promotional credits from their taxes once they hit a $90 million threshold. Regulations also change to make it easier for the smallest and the largest firms to do business with the gaming halls.
Feb. 3: Gov. Chris Christie puts the future of casino gaming on his immediate agenda for the next six months, signing an executive order for a new advisory commission to study the state’s gambling, horse-racing and entertainment industries.
July 21: Christie endorses the recommendations of the advisory commission, including a call for casino regulatory reform and a new state-run tourism district to oversee Atlantic City’s gaming and entertainment zones.
Nov. 15: A Senate committee approves two bills to create the new state-controlled tourism district and to overhaul casino regulations. The legislation transfers the powers to regulate casinos from the Casino Control Commission, an independent agency created in 1977, to the Division of Gaming Enforcement, which is overseen by the New Jersey Attorney General’s Office.
Monday: The legislation is scheduled for a vote by the full state Senate.
Compiled by Staff Writer Donald Wittkowski
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