Controversy over ex-regulators landing casino jobs

Brett Pulley

Wednesday, Oct. 28, 1998 | 12:17 p.m.

As the interim director of the Mississippi Gaming Commission, Bruce Nourse authorized the opening of the state's first casino in 1992. But a year later, as casino neon began to flicker with opportunity all along the Gulf Coast and north into the Delta region, Nourse traded roles.

Instead of continuing to police the casino operators, he joined them, doubling his salary and becoming a senior vice president for Casino Magic, a casino hotel owner.

Within a matter of months, the government body formed to keep Mississippi's casino industry honest was virtually wiped out. Nourse's successor, Lorenzo Creighton, resigned to become general manager of a riverboat casino in St. Louis. Nine of the commission's 10 law-enforcement agents also left.

As fast as the gambling business has spread across the country, a fast-spinning revolving door has also developed.

From Raymond "Skip" Avansino Jr., the Nevada Gaming Commission member who went on to become president and chief operating officer of Hilton hotels and casinos; to James E. Thompson, the Illinois governor who first signed riverboat gambling into law in his state and then, after leaving office, became one of the industry's key lobbyist, the officials who wrote the rules and picked the casino operators are reaping rewards from the industry.

Gambling is one of many regulated industries that have for years lured government officials into their camps.

"If you own the politicians, regulators, judges or whoever you need to do what you need to do, you totally control your environment," said Don Williams, a political strategist in Las Vegas and a former senior executive and part owner of casinos. "It's always best to have these people on your side, so why not hire these people?"

Convincing government officials to join forces with the gambling industry is usually easy, Williams said, adding: "They hang around wealth, they investigate wealth, they see money being made in areas that they never dreamed of before. And they're learning how people made this money."

To an outsider looking in, he said, joining the industry is like becoming "a part of the king's court."

Subhead: Federal gaming commission concerned

The high crossover rate, coming as many states are writing laws that will govern the industry for years to come, has raised concerns about the impartiality of the people who oversee gambling.

"It certainly raises doubts about the objectivity and the credibility of some of those individuals," said Kay Coles James, chairwoman of the National Gambling Impact Study Commission, the presidential committee that is studying the effect of legalized gambling on the United States.

Though states like Nevada and New Jersey have "cooling-off" periods that prohibit some government employees from immediately going to work for casinos within their own jurisdictions, other casino states, including Mississippi, have no such waiting periods. And in those states that do have cooling-off periods, officials regularly get around the prohibitions by working for subsidiaries in other states.

"The big fear is that they'll be overly friendly with the companies they're going to go work for in the future," said Nelson Rose, a gambling law professor at Whittier Law School in Costa Mesa, Calif. "They may think deep down subconsciously that if they make decisions against the industry they won't get hired if they choose to leave government."

The industry's revolving door has become so promising that Rose said he advises his students that the best way to get ahead in the gambling business is to first become a regulator because they "learn the regulatory system" and "of course, you make contacts."

No one has been able to prove a direct exchange of a job for favorable treatment from regulators. But critics of the revolving door contend there are many cases illustrating lax regulation.

For example, although Bally Gaming several years ago entered into a partnership in Louisiana with a company that was later found to have ties to organized crime, officials in New Jersey and Nevada -- where Bally is also licensed -- allowed the company to keep its license.

And last August, Hilton Hotels Corp. entered into an agreement with federal prosecutors to avoid an indictment on charges that Hilton executives paid money to a public official in Kansas City, Mo., as a reward for his support for the Flamingo Hilton casino project in that city. Hilton still has its gaming licenses.

"Even though they call themselves heavily regulated, it's a good-old-boys network that is taking care of gambling companies throughout the United States," said Tom Grey, executive director of the National Coalition Against Gambling Expansion.

Philip Hannifin, a career bureaucrat who was a longtime member of the Nevada Gaming Control Board before going on to help operate some of the industry's largest casino companies, said the gambling business has been very good to him. "My family and I have been well-treated from a monetary standpoint," said Hannifin, now an executive vice president at Fitzgeralds in Nevada. "I have no complaints."

Some former government officials have truly hit the jackpot in the casino industry. Avansino, for example, was a Nevada tax lawyer and gaming commission member who was named president and chief operating officer of Hilton Hotels in 1993.

For nearly three years Avansino led the company through a worldwide expansion of its gambling operations. His salary and bonuses over those years totaled $2.6 million, plus generous stock options, according to the company's financial statements.

After resigning abruptly in 1996, Avansino is now chairman of a nonprofit foundation in Nevada, teaches gaming law at the University of San Francisco School of Law, and shuttles on a private plane between homes in Reno and in Santa Barbara, Calif.

Many former regulators contend the influx of former government officials into the industry has only helped to clean up a once-notorious business.

"It's good because it brings people with honesty, ethics and integrity into the industry," said Shannon Bybee, a former member of the Nevada Gaming Control Board who went on to become president of the Golden Nugget in Atlantic City and chairman and chief executive officer of the Claridge casino. Bybee is now a UNLV gaming professor.

Others, including former regulators, say the revolving door has created an incestuous culture in which the lines separating gambling and the people responsible for overseeing it are often blurred, or even nonexistent.

Not surprisingly, gambling's courtship of regulators began in Las Vegas, where former officials have long cashed in on ties to gambling. Today, in many of the 26 casino gambling jurisdictions around the country, some of the most powerful gaming lawyers and executives are people who started as regulators in Nevada, where cooling-off laws did not exist until 1987 and are still less restrictive than in other states.

Frank Schreck, for example, left the Nevada Gaming Commission in 1975 and immediately began building his law practice by providing counsel to gaming clients. Today he is one of the most prominent and influential gaming lawyers in the country.

Subhead: The Ritchie example

Of all the many former government and law-enforcement officials who have chosen to stake their futures on the casino industry, probably none has evolved so completely as that of James Ritchie.

Twenty-six years ago, Ritchie was a federal prosecutor earning less than $35,000 a year. He worked on the West Coast and, according to former colleagues, his investigations included the gambling business in Nevada, where organized crime was still deeply entrenched.

Then, in 1973, Ritchie left the Justice Department to become executive director of the Congressional Commission on the Review of the National Policy Toward Gambling, which was organized to help establish guidelines on legalized gambling. But when the commission issued its report in 1976, Ritchie's former colleagues at the department lashed out at him for being too partial to the casino bosses.

"We had several strong differences of opinion," recalled William Lynch, who, as head of the organized crime and racketeering section, had been Ritchie's boss.

"The commission was very influenced by, or in agreement with, the gambling industry," Lynch added. "Basically, the whole thrust of the commission as it developed became pretty clear. They were in the 'let's repeal all laws against gambling' attitude."

For the next decade or more, as state laws were changed and casinos began to open around the country, Ritchie worked as the industry's top lobbyist in Washington. In those years, said associates who spoke on the condition of anonymity, Ritchie owned his own boat and had a lavishly appointed Capitol Hill office decorated with expensive artifacts that underscored the lush life the gambling business had afforded him.

Reached on his cellular phone recently, Ritchie, 62, refused to discuss why he switched jobs or how his life has changed since he traded in his federal credentials for a career in the casino industry.

After lobbying for the industry, Ritchie moved to Las Vegas, where in 1990 he became executive vice president of development at Mirage, helping to analyze new casino development opportunities. After four years in that job he left the company, taking more than $6 million in stock options on his way out, according to Mirage records.

Two months ago, Ritchie's evolution was nearly complete. At that time he went before Nevada regulators seeking a license to own 12.3 percent of the CasaBlanca Resort, a privately held casino and 700-room hotel with a luxury spa and championship golf course, 80 miles north of Las Vegas in Mesquite, Nev. The former prosecutor of organized crime, which once controlled the casino business, was about to become a casino operator himself.

Despite the clean background Ritchie had when he joined the casino industry, his years in gambling have led to relationships and business associations that have brought him scrutiny. At the hearings in August, Nevada regulators questioned Ritchie about some of his past business relationships, specifically about what one gaming commission member called "questionable associations" with two men.

One of the men, whom Ritchie had lent $400,000 in 1994 for a casino investment, was said by regulators to have a history of problems and allegations of impropriety in the gambling industry. Ritchie, according to his testimony, said he was unaware of the full nature of the man's past problems when he gave him the loan.

Another man who had been a partner of Ritchie's earlier this year in a plan to buy the Desert Inn casino in Las Vegas was described by regulators as a "flim-flam man" and "the world's biggest flake." Ritchie testified that he now recognized that he was "used" by the partner.

"I'm no longer in government," told the regulators. "I no longer have access to law-enforcement records. I'm sitting in my kitchen with a fax machine and a telephone and enough of a bankroll to try to become involved in some of these projects."

Despite their misgivings, both the state Gaming Board and the state Gaming Commission voted unanimously to give Ritchie a two-year license as co-owner of the CasaBlanca.

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