Exec blasts gaming rules

David Strow

Monday, Aug. 20, 2001 | 11:08 a.m.

One of the nation's top casino executives on Friday blasted the current state of gaming regulations, calling them unnecessarily intrusive and unsuited to the realities of the modern casino industry.

Gary Loveman, president and chief operating officer of Las Vegas-based casino giant Harrah's Entertainment Inc., sent the message at a luncheon of the Latin Chamber of Commerce.

It came a day after an agent of the Nevada Gaming Control Board, without explanation, went to Loveman's office and took three years of personal correspondence.

For Loveman, it was the start of a notoriously invasive process -- the extreme investigation any key executive must undergo to get a gaming license in the state of Nevada, when no personal or business documents are off-limits.

"Any of these guys who go through this process, we'll pull their files and take a look at them," said Randy Sayre, chief of investigations for the board. "This is pretty standard stuff. At this point, there are no red flags (in the Loveman investigation)."

But the level and depth of the investigation process clearly annoyed Loveman, who until three years ago was a professor of economics at Harvard University.

With few exceptions, "I don't know that there's a strong case for this kind of invasiveness," Loveman said, calling many requirements "unproductive nonsense."

Loveman argued the casino industry, now thoroughly in the hands of publicly held corporations, is simply marketing an accepted entertainment product -- one that most customers partake in for the thrill of the risk, not the hunt for riches.

"If that is what the business is about, why is it the case that we've built the most amazing regulatory structure to supervise it?" Loveman said. "This is a service that is safely consumed by the vast majority of our customers."

A solution, Loveman said, would be to reform Nevada's gaming regulatory laws at the state Legislature.

Though Harrah's isn't actively pursuing this course, "long-term, it is something I would like to pursue," Loveman said.

But gaming regulators, observers and opponents warned that rolling back the scope of gaming regulators' powers in Nevada would be a dangerous plan.

"Worldwide, we're recognized as having one of the most outstanding gaming environments in the world, and that is caused in part by strict gaming regulatory oversight," said Bobby Siller, member of the control board. "To turn around and give all that up for the uncertainty of what might lie ahead is irresponsible, as far as I'm concerned."

In Nevada and other gaming jurisdictions, a gaming license is viewed as a privilege, not a right. As a result, constitutional protections usually do not apply during investigations -- and investigators often probe even the most personal information, without warrants of any kind.

"If you're not doing anything wrong, you shouldn't be concerned about this," Siller said.

The process is so laborious that it can take years to get around to an investigation. Loveman, for example, has been the COO of Harrah's since May 1998 -- he's now the No. 2 executive in a corporation with $3.5 billion in annual revenues and 25 casinos in 12 states.

His Nevada license investigation only began this month.

Nevada permits license applicants to serve in their positions while an application is pending, though the Gaming Board can prevent this if it has concerns about an applicant.

"I get to the investigations as my time and staffing allows," Sayre said. "With the number of licensees we have out there, if we had mandatory licensing requirements (before executives could work in the industry), we would shut this industry down. It couldn't function."

Other states often go further than Nevada, Loveman said Friday. Why is it necessary, Loveman asked, to require midwestern casinos to sit in water, even though the "riverboat" never leaves the dock? Why are casino plans in New Jersey reviewed by regulators who also examine proposals for nuclear power plants? Why does an investigation in one state automatically trip investigations in other states?

'There is no explicable rationale for this kind of legislation, yet we encounter it every place," Loveman said.

Only three reasons would justify such intrusive regulations, Loveman said -- one, if legalized gambling triggers a rise in crime; two, if gambling can be linked to a rise in "personal financial distress"; and three, if it leads to a rise in problem or compulsive gambling.

As far as crime and gambling goes, "there is absolutely no evidence of a rise in crime from the arrival of gaming anywhere in the United States," Loveman said. "In general, exactly the opposite is true."

Many call the casino industry predatory, Loveman noted. But he said a good portion of personal bankruptcies filed in the United States list debts to retailer Sears.

Sears, he said, encourages shoppers to sign up for store credit cards, and gives incentives for doing so.

"And when you get home, you find that the interest rate would be appropriate for hyperinflation in Brazil," Loveman said.

Such practices produce a large chunk of Sears' profits, Loveman said.

"One could argue quite strenuously that is a business that is predatory," Loveman said. "Yet I can assure you no one at Sears had their correspondence files seized by the Nevada Gaming Control Board, nor were they licensed."

Problem gambling, Loveman said, is "the only issue with respect to public safety the industry faces." Yet he also pointed out that the portion of problem gamblers in the general population is quite low, perhaps 1 percent of all gamblers. And he noted that Harrah's has aggressive measures in place to control problem and underage gambling.

"None of us ever seek to do anything to attract those who have a compulsive gambling problem," Loveman said. "We will be the leaders with respect to what is a real problem."

Shannon Bybee, executive director of UNLV's International Gaming Institute, has been involved in the gaming industry as both a regulator and an executive. Strict regulation is necessary to keep undesirables out, Bybee said, but intrusive investigations also scare off respected companies and executives.

"It's a delicate balancing act," Bybee said. "There may be some ways of softening it without hurting the reputation. But Nevada has enjoyed a pretty good reputation as a regulated state. If it loses that, what does that mean? There would be political implications outside of Nevada, specifically in Washington."

Wall Street might also lose its appetite for casino investments, Bybee said, if investors felt they couldn't trust the numbers being provided by gaming companies.

Tom Grey, the executive director of the National Coalition Against Legalized Gambling, argues there's but one choice for gaming executives that don't like the process.

"We think regulatory bodies have been too easy on them," Grey said. "If they can't stand the heat, they ought to get another job."

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