Thursday, February 12, 2004
Copyright © Las Vegas Mercury

Backstory: Gambling with gaming

By Michael Green

Harrah's CEO Gary Loveman thinks Nevada's gaming regulators are overly intrusive. He's right. And we should be eternally grateful.

At the American Gaming Summit, Loveman returned to a complaint he voiced at the time of his licensing. Granting that the Gaming Control Board investigated him for one of the industry's most important jobs, he felt agents delved too deeply into his past and his privacy.

This time, he said it in front of Gaming Commission chairman Peter Bernhard. Loveman saw comparisons to how Sen. Joseph McCarthy of Wisconsin infested the lives of those he accused--often wrongly and always maliciously--of communist connections in the 1950s. Bernhard disagreed, pointing out that it would take only one scandal under looser regulations to cause endless trouble.

Loveman's feelings are understandable. No one enjoys that kind of probe. And he comes from academe. As a Harvard business professor, Loveman had few opportunities to mingle with mobsters. Going through the wringer is bad enough. It's worse when you feel the investigators could find better things to do.

Loveman and Bernhard know and understand history. Organized crime long since has been banished from Nevada gaming, through government action and the ravages of age. Gaming agents spend more time now on issues like cheating, computers and securities than who wears pinstripes and a fedora.

But organized crime still exists. Some experts worry about what might happen in Macau, where the boys make Bugsy Siegel look like Mr. Rogers. Nevada officials carefully watch other jurisdictions to make sure they are cautious about who's licensed and how everyone behaves.

And consider the McCarthy comparison. He destroyed lives by claiming guilt by association. About the only person who sees good in him is noted liar Ann Coulter, who defends him in her recent putrid excuse for a book.

Fewer discuss another set of hearings by another senator in the same context. Estes Kefauver seems heroic in comparison because his organized crime investigation took on corrupt politicians and businessmen. While McCarthy abused the Bill of Rights by assailing free speech, Kefauver went after lawbreakers. But he also engaged in guilt by association and hearsay. Nor were his motives pure: Kefauver wanted to be president and could get it only by overcoming the party machinery, which often was connected to those he investigated.

The Kefauver hearings brought Nevada bad publicity, but hardly affected gaming regulation. The Thunderbird case was far more important. Summarizing this is like condensing Harry Potter into an index card, but it's enough to know that the Las Vegas Sun reported that Meyer and Jake Lansky had a hidden interest in the hotel. One of the Thunderbird's co-owners was Cliff Jones, then the lieutenant governor and enough of a wire-puller to bear the nickname "Big Juice."

Whatever anyone knew about Lansky's involvement, it's clear that in Las Vegas, Frank Sinatra may have been the chairman of the board for entertainment, but Meyer Lansky was the chairman of all other things. To the extent it was organized crime, he was the organizer.

That wasn't necessarily bad. Lansky committed fewer securities violations than Enron. His diplomatic efforts were more honest than the Bush administration's. But Las Vegas was the only place in the country with legal gambling. Many considered a controlled vice better than an uncontrolled one, but the Thunderbird showed the controls were weaker than state officials thought.

The state tried to revoke the casino's license, prompting a Nevada Supreme Court case. In Tax Commission vs. Hicks, Justice Charles Merrill wrote that "Nevada gambling, if it is to succeed as a lawful enterprise, must be free from the criminal and corruptive taint acquired by gambling beyond our borders. If this is to be accomplished not only must the operation of gambling be carefully controlled, but the character and background of those who would engage in gambling in this state must be carefully scrutinized."

That was 1957--the year casino owners bullied and bribed Nevada legislators into passing a bill to gut the state's regulatory power. Gov. Charles Russell vetoed it and barely escaped being overridden.

Much has changed since. Today, the gaming industry is corporate, making it far cleaner, at least in terms of the backgrounds of its top executives.

Another change is that Republicans receive more support from casinos than when they were the minority and Democrats the majority. Not to overgeneralize, but Republicans are more inclined to let business do as it wishes. That party is in power these days, in Washington and Nevada. Corporations have enjoyed considerable freedom. If gaming is a legitimate business, shouldn't it enjoy the same freedom as other businesses?

The question is reasonable. It's tempting to answer yes--all business should be as closely regulated as gaming. Indeed, gaming should be a model for how to keep some would-be thieves honest. Reasonable people may differ on that, and today's casino owners may be more reasonable than some of their predecessors--or me, for that matter. But if they want to be compared with other businesses, they might want to be careful. Guilt by association runs in more than one direction.