Meetings & Information


Saturday, December 31, 2011

Mohegan Sun casino fails to refinance $811M debt

Mohegans given more time in debt talks
Tribal authority owes $1.6 billion
The Bulletin

Uncasville, Conn. — The parent entity of Mohegan Sun recently received a waiver from its bankers, something the casino operator sees as a vote of confidence in its future. Yet it could be the calm before a major storm in Connecticut’s economy in 2012, an analyst said.

Foxwoods Resort Casino, whose parent also is in talks to restructure debt, and Mohegan Sun are on course for severe financial problems in the year ahead, said Clyde Barrow, a University of Massachusetts Dartmouth professor of public policy who follows the New England casino industry.

The Mohegan Tribal Gaming Authority was unable to complete a refinancing agreement during its fiscal first quarter, which ended today. With that, the authority’s auditors attached a “going concern” warning to 2011 financial statements, authority CEO Mitchell Etess said Thursday.

A filing with the Securities and Exchange Commission said lack of a resolution would materially impair Mohegan Sun’s ability to operate.

‘At the precipice’

“The waiver is very important, but it doesn’t solve the problem,” Barrow said. “They’re telling people that they’re at the precipice. Foxwoods is in an even worse situation, but they’re just not talking about it.”
[Because the debt of Mohegan Sun is publicly traded, their SEC filing is publicly available online. Foxwoods is not subject to such scrutiny and defaulted more than a year ago.]

Debt talks haven’t broken down, both casinos say.

“What I can tell you is that discussions are continuing and that we will make appropriate disclosures in due course,” said Hud Englehart, a spokesman for Foxwoods President and CEO Scott Butera. The Mashantucket Pequot Tribal Nation owns Foxwoods and its sister MGM Grand at Foxwoods property.

Back in the black

“We are ... pleased with the progress made in recent weeks toward finalizing our refinancing plan,” Etess said in releasing fiscal fourth-quarter results showing net income attributable to the authority rose to $46.7 million from a loss of $26.3 million a year earlier. “Though we were not able to complete the plan during our first quarter of fiscal 2012 and, as a result, our auditors issued a ‘going concern’ opinion’ for our 2011 financial statements, we have obtained a waiver from our bank group addressing the opinion which we believe reflects the group’s continued confidence in and support of the authority and the Mohegan Tribe.”

The matter will be discussed further during the authority’s conference call Wednesday, something Etess said he looks forward to.

Distributions to Mohegan Tribal Nation members were nearly doubled in the quarter ended Sept. 30 to $23.4 million from $12.8 million a year earlier.

Major employers

Foxwoods and Mohegan Sun are two of Connecticut’s largest employers and major sources of revenue to the state government. Both are members of the Chamber of Commerce of Eastern Connecticut. Chamber President and CEO Tony Sheridan declined to comment on the Sun’s finances Friday, saying he was still studying them.

Mohegan’s total debt as of Sept. 30 was $1.6 billion, the authority reported. Of that, $811.1 million comes due within the next 12 months, including $535 million that needs to be paid by March 9 and $250 million in 8 percent notes that mature on April 1. This debt will need to be refinanced before the due dates, the authority said Thursday.

Blackstone Advisory Partners L.P., hired in November 2010, and Credit Suisse Securities, hired in January 2011, have been working for months on formulating a refinancing package, but to no avail, so far.

“While the authority’s efforts to refinance or replace its outstanding indebtedness, including its fiscal 2012 maturities, at or prior are ongoing, it can provide no assurances in this regard,” the Mohegan authority’s press release said Thursday.

Greater cash flow

The authority’s cash flow rose to $90.5 million in the latest fourth quarter from $73.1 million a year earlier. Net revenue fell 0.1 percent to $373.5 million from a year earlier, while gaming revenue was up 0.2 percent to $337.2 million, the Uncasville-based entity said. Nongaming revenue was off 6.9 percent to $67.1 million.

The improved cash flow was attributed to higher table games revenue, the authority said. Net income growth was helped by reduced operating costs and increased efficiencies at Mohegan Sun Connecticut and Mohegan Sun at Pocono Downs, a Pennsylvania racetrack/casino.

Mohegan Sun Connecticut’s slot machine handle was down 8 percent for the fourth quarter compared with a year earlier, while gross revenue was down 4.3 percent. Connecticut table game revenue was up 6.9 percent to $78.1 million, the authority said.

“We could not be more pleased with our earnings for the quarter,” Etess said. “The results were quite impressive, particularly given the impact of Hurricane Irene and persisting economic concerns.”

Mohegan Sun casino fails to refinance $811M debt
By The Associated Press

UNCASVILLE, Conn. - (AP) -- The parent company of the Indian-run Mohegan Sun casinos in Connecticut and Pennsylvania says it has failed to reach an agreement to refinance $811 million in debt, but lenders have waived a possible default.

The Mohegan Tribal Gaming Authority said Thursday that a delay in refinancing debt was among conditions that "raise substantial doubt about our ability to continue as a going concern."

Mitchell Etess, chief executive of the authority, which owns and operates the Mohegan Sun in Uncasville and Mohegan Sun at Pocono Downs in Wilkes-Barre, Pa., told The Associated Press on Friday that the dire warning is only a financial requirement of auditors.

"Auditors have no choice," he said. "They must put in that language."

Etess cited the waiver as a vote of confidence by lenders and cited fourth-quarter income of $46.7 million, compared with a $26.3 million loss in the same quarter last year.

Etess said refinancing is taking a long time because of the weak recovery following a deep and prolonged recession that has sharply cut into consumers' entertainment spending.

He also cited the "status of Native American gaming financing" generally.

"Those impacts that have happened in the outside world have impacted our bondholders' thoughts as we go through the process," Etess said.

The neighboring Mashantucket Pequot Tribal Nation in eastern Connecticut has worked to restructure billions of dollars in debt after its Foxwoods casino was hit hard by the economic downturn and increased competition in the Northeast.

Last month, the Mississippi Band of Choctaw Indians received a six-month extension on loans to May.

And in Washington state, revenue at some tribal casinos fell as much as 30 percent at the start of the recession, forcing tribes to struggle with ways to refinance debt on new casinos and other ventures.

A report issued in March said that for the first time, revenue fell in 2009 at American Indian gambling casinos nationwide as the recession forced consumers to curtail spending. The report by economist Alan Meister of Nathan Associates Inc. said casinos generated about $26.4 billion in 2009, down 1 percent from 2008.

Mohegan Discloses ‘Going Concern’ Risk as It Works to Refinance
By Beth Jinks

Dec. 29 (Bloomberg) -- Mohegan Tribal Gaming Authority, the operator of Mohegan Sun casinos in Connecticut and Pennsylvania, said it has yet to reach an agreement to refinance $811 million in debt, raising the risk of being unable to continue operating.

The delay in refinancing fiscal 2012 maturities is among conditions that “raise substantial doubt about our ability to continue as a going concern,” the Uncasville, Connecticut-based casino operator said today in a regulatory filing. Mohegan said it received a default waiver from its bank lenders yesterday.

Mohegan is being advised by Blackstone Group LP and Credit Suisse Group AG as it tries to refinance much of $1.61 billion in debt owed as of Sept. 30. The debt includes $535 million outstanding under a bank credit facility maturing March 9, and $250 million of senior subordinated notes due April 1.

Mohegan is “pleased with the progress made in recent weeks toward finalizing our refinancing plan,” Chief Executive Officer Mitchell Etess said today in a statement.

PricewaterhouseCoopers LLP is the auditor.

Closely held Mohegan and Foxwoods Resort Casino, which is owned by the Mashantucket Western Pequot Tribe in Connecticut, were hurt by the 18-month recession that ended in 2009 and face competition from neighboring states as casino gambling expands.

--Editors: Romaine Bostick, Jeffrey Tannenbaum

Outgoing Muscogee chief, Broken Arrow residents fighting proposed casino by Kialegee

Outgoing Muscogee chief, Broken Arrow residents fighting proposed casino by Kialegee

BROKEN ARROW, Okla. — The outgoing chief of the Muscogee (Creek) Nation and residents of Broken Arrow are fighting a proposed casino by the Kialegee Tribal Town.

The casino would be built on land leased to the Kialegee, but a judge has withheld approval of the lease and the National Indian Gaming Commission has said it's reviewing whether the land is eligible for gambling.

Chief A.D. Ellis, whose term ends at midnight Saturday, told the Tulsa World ( ) that plans for the casino must be stopped.

"They just don't have the expertise to do anything like this," he said. "If they get by with this, there will be somebody else, then somebody else."

Local residents also oppose the casino, saying it would be built near a planned early childhood center, a church and a Tulsa Technology Center campus.

Current Chief A.D. Ellis told the Tulsa World that the Kialegee have no experience with casinos and that the facility would hurt his tribe's casino in nearby Tulsa .

Tiger Hobia, the Town King of the Kialegee Tribal Town, has declined interview requests, but issued a statement on Dec. 24.

"The Kialegee Tribal Town project is the epitome of the Congressional vision for Indian economic development. The Kialegee Tribal Town, to date, has had no viable economic development opportunities. As such, the Kialegee Tribal Town is dependent on limited allocations and subsidies to fund its tribal operations. Consequently, the Kialegee Tribal Town does not possess the resources to provide any programming to serve the needs of its members. This is one of the very reasons the Indian Gaming Act was enacted," the statement said.

Ellis, who did not seek re-election because of term limits, said he believes the planned casino would be detrimental to his tribes' River Spirit Casino in nearby Tulsa, which employs about 1,000 workers.

"We worked hard. This was a battle getting this built. A lot of things depend on it, and a lot of things depend on how successful this is," Ellis said. "I'd hate to see layoffs."

Ellis also said he believes another casino in the metro area would hurt the tribe's gaming-funded programs for seniors, children and college students who are Creek citizens including the Kialegees, who have dual citizenship.


Information from: Tulsa World,

Broken Arrow Opposition

Tulsa County Commissioner, State Rep Oppose BA Casino
Russell Hulstine,

BROKEN ARROW, Oklahoma - Tulsa County Commissioner Fred Perry and State Representative Mike Ritze (Republican - Broken Arrow)announced Friday they are opposed to the proposed casino in Broken Arrow.

In a statement, Perry agrees with nearby residents of the proposed casino about it being a poor location near 129th East Avenue and 110th Street South.

"The location is a poor one for the reasons mentioned by the residents. In addition, while the proponents of casinos like to talk about jobs created, they ignore the fact that, without casinos, disposable income could be spent on other goods, services and entertainment which would create jobs or sustain existing jobs," Fred Perry said.

State Representative Mike Ritze also voiced his opposition to the casino on Friday. He issued the following statement:

"There is no doubt the proposed casino would be detrimental to the quality of life in Broken Arrow, including creating a hazard for children attending school and pre-school in the area where the facility would be built," said Ritze, R-Broken Arrow.

"The local community does not support the project and an official with the National Indian Gaming Commission has suggested the project may be in violation of the Indian Gaming Regulatory Act and other federal laws. I and the hundreds of Broken Arrow residents who protested the project this week appreciate the support of Muscogee (Creek) Nation Chief A.D. Ellis, U.S. Rep. John Sullivan and Tulsa County Commissioner Fred Perry.

"We find it inexcusable that a handful of monied individuals continue their attempts to ram it through without buy-in from local citizens," he said.

Ritze said that societal problems associated with casinos, such as gambling addiction and criminal activity, can impose significant additional costs for the surrounding community and its taxpayers.

Fred Perry says while he was in the Oklahoma Legislature, he opposed casino gambling in the state.

"This is why I voted and spoke against casino gambling while in the Oklahoma legislature. Additional casinos in the Tulsa metro area and especially in locations such as the one proposed by the Kialegee Tribal Town in Broken Arrow, will be detrimental," Fred Perry said.

12/29/2011 Related Story: Broken Arrow Residents Fight To Stop Casino

Earlier this month, the Kialegee Tribal Town is building the Red Clay Casino just north of the Creek Turnpike in Broken Arrow.

Rhode Island's Race To The Bottom

Can Online Gambling Save RI?
Dan McGowan, GoLocalProv News Editor

With $350 million in annual gambling revenue potentially at risk as Massachusetts moves forward with plans to build three resort-style casinos and a slot parlor, Rhode Island will look into internet gambling as a way to generate extra cash, the state’s Lottery Director Gerald Aubin said this week.

The issue was raised after the Department of Justice (the DOJ) ruled that online gambling does not violate existing federal law, opening the door for cash-strapped states to expand gambling revenues through internet lotteries and potentially, online poker.

The decision came after New York and Illinois sought a legal opinion over whether each state could begin selling lottery tickets online. Because it would not involve sports betting, the DOJ said the states’ proposals would not violate the Federal Wire Act.

Biggest Policy Failure

But critics say the DOJ’s ruling will do far more harm than good for states, arguing that it will be far easier for addicts and young people to gamble if they can do it online. And while the DOJ’s ruling was meant to address lotteries, it also opens the door for online poker, which made international headlines earlier this year when the two largest websites in the world (PokerStars and Full Tilt Poker) were closed to American players.

In a blog post written this week, Les Bernal, the executive director of Stop Predatory Gambling, blasted the ruling.

“It essentially allows state governments to open a lottery retailer in every home, office, dorm room and handheld phone with an internet connection, twenty-four hours a day, seven days a week,” he wrote.

Bernal continued: “It is time the DOJ and other government agencies whose purpose is to promote more fairness and equality in American society take aim at one of the country’s biggest policy failures in the last forty years- government’s predatory gambling program.”

For additional information about the flawed DOJ opinion: Who will fight for America’s Lottery Class if not the Department of Justice?

Gambling suspect says he has Macau casino income

Gambling suspect says he has Macau casino income
Written by Brett Kelman
Pacific Daily News

A suspect accused of being a central figure in an alleged illegal gambling ring has claimed to have partial ownership of a legal casino in the Chinese peninsula of Macau.

Shortly after FBI agents raided the MGM Spa in Tamuning last year, Wai Kam Ho allegedly justified his income by claiming that he owned about two percent of the VIP room in a Macau casino, according to District Court of Guam documents.

Macau is the gambling hub of Asia, and has grown to rival Las Vegas in recent decades.

The court documents don't state which casino Ho was referencing, but documents do say it was Macau's "original casino." Macau's original casino is the Casino Lisboa.

Wai Kam Ho and about six other people were indicted this month as part of a yearlong federal investigation into a suspected crime ring, which allegedly orchestrated illegal gambling under the guise of legal, nonprofit bingo. The ring also allegedly hosted illegal poker games at the shuttered spa, which Wai Kam Ho owns.

As part of the investigation, the Internal Revenue Service agents have repeatedly argued that Wai Kam Ho and his wife, Betsy Ho, appear to live larger than either can afford by legal means. Federal prosecutors have frozen their bank accounts and are attempting to seize cars and a California condo from the couple.

"Wai Kam Ho and Besy Ho appear to live an upper-middle-class lifestyle with access to large amounts of U.S. currency. However, they do not appear to have a corresponding source of legal ... income from within the U.S. which would justify their affluence," IRS agent Todd Peterson wrote in recent court documents. "... It does not appear that Wai Kam Ho and/or Betsy Ho are using funds from a foreign source income to support their lifestyle."

According to court documents, Wai Kam Ho said he made a profit on his Macau investment two years ago, but admitted he did not file taxes on the income. Wai Kam Ho also said he has investments in Four Seasons Corporation, which generate $400,000 a year, although no other details are provided.

Wai Kam Ho pleaded not guilty earlier this month. An arrest warrant has been issued for Betsy Ho, who did not show up for her first court appearance.

Strip club in casino an act of desperation

Strip club in casino an act of desperation

Way to stay classy, Atlantic City.

The state Division of Gaming Enforcement ruled last week that it would be OK to have a strip club inside the Taj Mahal Casino Resort. It would be Atlantic City’s first “gentlemen’s club” inside a casino. The ruling would permit Scores to open a $3 million club inside the Taj, provided the company can apply for and get a liquor license. Can’t you just feel the pride?

This move raises any number of questions: Exactly what is Atlantic City trying to become these days? If the answer is “a premier destination resort,” the question then becomes: Who, exactly, is the city trying to attract with this sort of entertainment? Gamblers? Folks already get their gambling fix in neighboring states. Strip club enthusiasts? In certain parts of New Jersey, you can’t swing a sparkly thong without hitting a half-dozen strip joints.

Scores told regulators its club would charge “a significant admission fee” and that private dance rooms would be available, at a cost of $300 for 30 minutes. And that only covers the use of the room. That’s one heckuva lot of quarters. Not the sort of money day-tripping seniors are dropping.

In describing the plans for the strip joint, Robert Griffin, CEO of Trump Entertainment Resorts, said, with an apparently straight face: “This multifaceted project will give us additional entertainment, food, beverage, and retail amenities that will be great additions to the property.”

A strip club won’t rescue Atlantic City, but it could provide jobs for up to 200 dancers. Touting Scores as a big deal is just embarrassing.

Almost as embarrassing as if Gov. Chris Christie were to attend the ribbon-cutting ceremony.

Is Gambling More Addictive Online?

Is Gambling More Addictive Online?
Researchers Study Whether Easy Access, Isolation Of Computer Gambling Make Things Worse

By WILLIAM WEIR, The Hartford Courant

Before the advent of online gambling, a person with gambling addiction usually had to leave their house and go somewhere to indulge their habit.

But when gambling becomes accessible online, simply passing the computer at home can trigger the impulse to place a bet, said Marvin Steinberg, executive director of the nonprofit group Connecticut Council on Problem Gambling.

Earlier this week, Gov. Dannel P. Malloy announced that he was exploring the possibility of legalizing various forms of online gambling in Connecticut. The announcement drew mixed reactions, some wary of the state getting involved in anything that could foster more problem gambling.

Researchers have studied the psychology of gambling for decades. The field of online gambling research, though, is still new, and researchers say there are a number of questions about its potential dangers and whether online gambling poses psychological problems different from those related to traditional forms of gambling.

Nancy Petry, a psychologist at the University of Connecticut, said a few patterns have so far emerged.

"We're finding that only a small proportion of gamblers do so online, but of these people, the vast majority do have gambling problems," said Petry.

She said one of the main questions is whether online gambling is creating more gambling addiction or simply serving as another outlet for addicts. Petry, one of the first researchers to study online gambling, said gambling addicts may have problems that parallel those of problem drinkers.

"It's similar to drinking — when you're developing a drinking problem you're doing it socially," she said, but many alcoholics eventually turn to drinking alone at home. When gambling at home on a computer, "there are none of the social sanctions" of real-world settings, she said, and that makes it easier to go overboard.

One of her studies looked specifically at online gambling and adolescents. She and fellow researchers found a strong parallel between the young gamblers and binge-drinking among teenagers. While those who did partake in online betting had a higher rate of gambling addiction — just as young drinkers have a higher rate of binge drinking — those problems didn't necessarily lead into adulthood.

David Hodgins, a professor of psychology at the University of Calgary, said one of the next questions to tackle is what role online gambling has in a developing an addiction. "It's not clear where the chicken or the egg is," he said.

More online gambling, he said, will likely complicate the treatment of those with a gambling addiction.

"It makes [gambling] more accessible, and when people are struggling to overcome gambling, putting distance between you and gambling online makes that difficult," he said.

Steinberg said online gambling tends to attract the same personality type who gravitate toward slot machines in casinos — a subset of gamblers particularly susceptible to gambling problems.

"Problem gamblers are people who like to escape and isolate themselves," he said. "When they get into casinos, they go to slot machines where they're in their own world and don't get interrupted. Online gambling is pretty much you and the machine and you're alone. People don't have parties to gamble online — psychologically, it's more isolated."

Gambling Addict Embezzles $800,000 From Nonprofit

No prison time for Long Khong, who embezzled $800,000 from nonprofit
By John Ingold
The Denver Post

A man who embezzled more than $800,000 from the Colorado Association of School Executives was sentenced Friday to five years of supervised release but avoided the prison term prosecutors were seeking.

As part of the sentence, Long Khong will not be able to make credit-card charges or obtain new credit cards. He must get a job, build a budget and put at least one-quarter of his salary toward paying full restitution to the association and an insurance company. He must continue with gambling- addiction therapy and he is not allowed to place any bets, including playing the lottery.

Senior U.S. District Judge John Kane didn't sentence Khong to prison, saying that doing so would be "gratuitous and cruel."

The unusual sentence ran against the request of federal prosecutors that Khong be sent to prison. Sentencing guidelines call for imprisonment for a minimum of nearly three years for the type of bank fraud Khong pleaded guilty to.

"His employer had great trust in him," said Assistant U.S. Attorney James Allison. "It's a lot of money taken over a long period of time."

The association, known as CASE, is a nonprofit that provides professional training to school leaders. Bruce Caughey, CASE's executive director, said he was shocked by the sentence. Since the theft was discovered, the association has reduced professional staff by 25 percent and had to cut programs for members, in part because of the missing money.

"It seems to me that the punishment doesn't fit the crime," Caughey said. "I'm almost speechless, to be quite honest."

As part of the plea agreement, Khong admitted to embezzling $815,254 from the school executive association while he worked there as the manager of business services between 2001 and 2008.

In a choked-voice statement to Kane on Friday, Khong apologized to the association, to his family and to prosecutors for having to spend the time pursuing the case.

"I am very deeply sorry," Khong said. "These people put their trust in me, and I betrayed them."

Khong said he spent the money on a gambling addiction and on trips to Thailand to visit his former stepson.

In making the sentence, Kane noted Khong's difficult childhood in Vietnam, where his father was imprisoned for his political affiliations. Court papers say Khong escaped Vietnam by boat as a 10-year-old, then lived for six months in a Japanese refugee camp.

Kane also pointed to the large number of Khong's family members who sat in the courtroom during the hearing, saying that support made it less likely that Khong would re-offend.

When the hearing concluded, Kane had a simple message to Khong: "Go say thanks to your family."

Gambling corruption trial captivated state in 2011

Gambling corruption trial captivated state in 2011
By: Lance Griffin Dothan Eagle

The gambling corruption trial held in Montgomery in the summer of 2011 had all of the ingredients of a John Grisham legal thriller.

» Legislators accused of agreeing to accept bribes

» Casino owners charged with concocting a scheme to buy the state Legislature

» Former defendants on the witness stand jousting with high-priced defense attorneys

» Occasional jaw-droppers delivered on the witness stand

» An ending that made national headlines

What had originally been 11 defendants were whittled to nine when the trial began in U.S. District Court in June. Two defendants had pleaded guilty and agreed to testify against many of the nine remaining.

Charges ranged from bribery to aiding and abetting to lying to investigators to money laundering. Prosecutors claimed all were involved in a conspiracy designed to ensure the passage of pro-gambling legislation. Prosecutors said a crackdown on gambling establishments had made the owners desperate to make sure their investments were secure, and sought to craft legislation to end the debate over whether electronic bingo machines were legal or simply slot machines in a thin disguise. Then, prosecutors said they set out to buy enough votes to make sure the legislation passed, and found legislators willing to sell their votes.

The defense, however, claimed the only guilty people in the alleged conspiracy had already admitted to their crimes. Former Country Crossing developer Ronnie Gilley and his chief lobbyist, Jarrod Massey, had already pleaded. Defense attorneys claimed the two were willing to make up stories against their clients in exchange for a reduced sentence.

The motives of legislators who wore recording devices in an attempt to preserve any evidence were questioned by defense attorneys who claimed the legislators were politically motivated. The racial motivation of some witnesses was also challenged.

The trial lasted three months, almost all of it involving the prosecution’s case. The government used 17 witnesses, played more than 125 recorded conversations involving defendants and legislators who cooperated with the investigation. It introduced contracts, financial documents and other evidence in an attempt to establish a conspiracy.

The defense called only one witness before resting the case and none of the defendants took the stand. The jury deliberated for more than a week. On Aug. 11, it reached a not-guilty consensus on many of the charges, but failed to come to a consensus on others.

Two defendants, lobbyist Robert Geddie and Sen. Quinton Ross, D-Montgomery, were cleared of all charges. Seven defendants, however, are set for retrial on the remaining charges beginning Jan. 30. They are Sen. Harri Anne Smith, I-Slocomb; VictoryLand owner Milton McGregor, former Country Crossing spokesperson Jay Walker, lobbyist Tom Coker, former Sens. Jim Preuitt and Larry Means and legislative analyst Ray Crosby.

Much of the same evidence introduced in the first trial is expected to be introduced again in the second trial. However, one new wrinkle is the possible testimony of former Gov. Bob Riley. Defendants attempted to subpoena Riley to testify in the first trial, but a judge quashed the subpoena. Recently, however, a federal judge granted the subpoena request based on new evidence. Riley’s attorneys are expected to continue to challenge the subpoena.

Gambling is an institutional disaster

Gambling is an institutional disaster

Thinking about what is wrong with the Indiana Legislature sometimes has centered on gambling. That is gambling not in the gestalt but in the specific -- state sanctioned, licensed and taxed. And no, this is not a sermon.

Moral concerns are only part of it. A citizenry putting its faith in numbers, the flip of cards or the roll of a dice makes for a weak economic, social and political base. Or conversely, a society providing its citizens no more hope of meeting aspirations than a stroke of luck is a stagnant society.

State-sponsored gambling once was a certain definer of third-world status. Now, though, the Indiana Legislature accepts without serious dissent the various justifications for its gambling operations -- all of them promising increased revenue for an inarguable common good.

Absent from the Legislature's discussions, predictably, is the corrupting influence to its own process, institutions and incentives -- its soul, if you will.

"Proposed bans on political contributions from gambling interests are tacit admissions, in case anyone still doubted it, that the licensure process is particularly vulnerable to corruption," wrote Guy Galvert for the Cato Institute. "Government piles on the regulations and then holds open the door to those seeking differential gains through political means."

Note the pressure on the Statehouse to exempt casinos from any statewide smoking ban. Such pressure will increase with gambling income lagging during this recession.

The Legislative Services Agency estimates that

Indiana would lose more than $180 million per year in taxes if gamblers

couldn't light up. A Senate GOP leader told The

Associated Press last session that a hearing on a smoking ban was conditional on an exemption for casinos. "That's just shooting ourselves in the foot," he said in reference to losing revenue from sanctioned gambling.

But whose foot? Indiana citizens or career politicians? One can only wish that the Legislature protected other businesses with as much vigor. It was not long ago that our representatives in Indianapolis considered their top priority the creation and then strengthening of jobs and industries that provided salaries to support young families. It now seems most intent on creating more gamblers.

Officially licensed casinos and lotteries dominate our advertising mediums. Drop into a convenience store for a gallon of milk and you stand in a queue of the marginally employed waiting to buy or cash lottery tickets -- that or cigarettes taxed at a rate just below what would support contraband.

"If we have to pay taxes," the voice in our other ear argues, "we might as well pay them on something that brings enjoyment and relaxation."

It is true that most of us can appreciate the challenge and occasional exultation of beating the odds, the sense of abandon that comes with spending a paycheck in defiance of that oppressive weekly budget. But that is to confuse apples (gambling) with oranges (officially sanctioned gambling).

An individual choosing to gamble can be a personal, family, moral or social problem. Official sanction, though, is an institutional disaster. It gives politicians an incentive to capitalizing on our lesser impulses -- increasing the size and scope of government in the process, exorbitantly so.

On Nov. 8, 1988, Indiana voters approved a lottery referendum by 62 percent. They consequently and unintentionally created a new type of government revenue, one without political complaint.

Before, when the Legislature abused the power to tax our groceries, home or paycheck, we tended to gather in groups to march on Indianapolis to exercise legislative or judicial remedy. Gambling revenue, though, proved different.

Gamblers don't organize. An incumbent is unlikely to be challenged at election time for squandering money diverted from money that itself was being squandered. Only the inheritance tax, a tax on dead people, is less activating, and it generates but a fraction of the revenue.

The politically powerful rightly see state gambling as revenue without accountability -- the rarest of commodities in Indianapolis, money that can be spent however the leadership sees fit. As such, it is a chief financier of political ambition and the expansion of government beyond the public's ability to monitor it.

So place all the bets you wish, fellow Hoosiers, officialdom still wins. We are learning that this was the worst deal Indiana ever made.

Craig Ladwig is editor of The Indiana Policy Review.

Friday, December 30, 2011

Is it gambling?

Is it gambling?

Supporters of Internet cafés say they are nothing more than a fun way to spend an evening playing games while opponents call them gambling houses and are intent on banning them from the state
By Dan Harkins
For Hometown News

DAYTONA BEACH - On a recent quiet Saturday evening, Charlotte Odegaard is manning the register at her U Lucky Dog Internet café on North Atlantic Avenue and playing a game of Angry Birds on her iPad.

In the small strip mall space that could house a diner or consignment shop, two long rows of computer terminals flash silently, each displaying the colorful graphics of different games of chance. One elderly customer is silently playing keno, known to aficionados as "the other poker." A sunset view of the beach glows dimly through the open front door.

"This is a relaxing place to meet friends," Ms. Odegaard said. "I don't have any problems with the city and they haven't had any problems with me."

But not everyone likes the plethora of Internet cafés springing up lately. What Ms. Odegaard refers to as a "relaxing place to meet friends," many others refer to as thinly veiled gambling houses intent on skirting the state's anti-gambling laws and bringing in lucrative returns for café owners from the pockets of their usually working class or retired customers.

The state and many area cities seem intent on getting rid of them.

Dueling bills in the Florida legislature would either ban or require strict state regulation of businesses like Ms. Odegaard's. Daytona Beach, Port Orange, South Daytona and many other cities have passed moratoriums on new permits for the cafés. Other cities, like Ponce Inlet and Daytona Beach Shores, wasted no time in banning the storefronts outright.

Ms. Odegaard's not going to fret just yet, though.

"They change their minds more than I change my underwear," she said of lawmakers. "Until I see something passed, I'm not getting worried."

Gambling or 'relaxation'?

Internet cafés, also known as cyber cafés, got their start in the early 1990s, with the advent of the Internet. Back then, most people did not have a home computer and the cafés offered a way for people to browse the Internet and check e-mail and also have a cup of coffee or a meal (hence "café" in the name). Now, because most people have home computers, simply browsing the Internet is no longer the lure, according to opponents.

"It is the simulated gambling that brings people in the door," South Daytona Community Development Director John Dillard said.

The city recently placed a moratorium on new cafés.

The businesses, now also known as Internet sweepstakes cafés or convenience casinos, still sell Internet time, typically through the purchase of phone cards. But that purchase doesn't just get customers Internet time, it earns them credits toward Vegas-like computerized sweepstakes games.

Customers pay for their time, sit down at an assigned terminal and either surf the Internet or seek cash prizes by playing a game - from poker and slots to roulette and blackjack.

What makes it legal, supporters say, is the games are just a fun way to find out what predetermined sweepstakes amount the customers have won - they don't actually win money because of their great poker hand. There is a predetermined number of winning entries paid out over a finite period.

State Rep. Scott Plakon, R-Longwood, sponsored a House bill that would ban the cafés.

"The café owners say it's not really gambling because the outcome is predetermined, but tell that to the person in the seat," Mr. Plakon said.
"They believe they're gambling. Slot machines are known as the most destructive form of gambling. I call it the crack of gambling."

Ms. Odegaard disagrees. She has worked at U Lucky Dog for three years. She and her husband bought the place in September 2010.

"I don't see any negativity with this," she said. "It's a safe, fun place to hang out and make friends. It's no different than people playing scratch-offs or looking under the cap of a 7-Up can to see if you win something. Some people justify a ban by saying we prey on people, but we don't force anybody to come in here."

She replies to the question of whether it's gambling or not with a joke.

"We don't use the 'G' word here," she said.

But her customers do.

At one of a few center terminals, Ina LaPointe of Daytona Beach is catching up on some computerized Keno. Normally, she goes to another storefront closer to her house, but she uses this one on days she has to drop off her granddaughter at work nearby.

"I like to gamble," she said. "I enjoy it. I work. I pay my bills. So this is my fun."

They could do it online at home, says a 61-year-old woman sitting near Ms. LaPointe, who didn't want to share her name. But, "you can't meet anybody sitting at home on the computer," she said. "And it's cheaper than a shrink."

What harm?

When many of the local cities discuss banning Internet cafés, they talk about the "element" they bring with them and how they will be detrimental to the neighborhoods they open in. In a zoning dispute last May, Port Orange Vice-Mayor Dennis Kennedy said he would like to keep them out of the city altogether.

"... Frankly, I think the better areas for these aren't in Port Orange," he said.

The city is currently being sued by Allied Veterans of the World, a company that owns several Internet cafés throughout the state, for what a spokesperson calls "descrimination." The lawsuit, one of several Allied Veterans is involved in throughout the state, is pending.

Though Police Chief Mike Chitwood has publicly stated his desire to keep Internet cafés on a tighter leash, police investigator Jimmy Flint said last week that "we have not had any problems at those Internet cafés. I even talked to the chief, who would know specifically if these places were a problem, and he said, 'No.'"

That's not to say they haven't been a problem for other law enforcement agencies. South Daytona and Port Orange officials say the Internet cafes in their cities have more than the normal number of police reports filed from their locations.

Many of the state's county sheriff's have asked legislators for a statewide ban, citing the large pots of cash that accumulate in the businesses during an average day. Recently, a three-man armed robbery at one Apopka café ended in one death.

According to a statement from the Seminole County Sheriff's Department, crime increased 14 percent after nine of the businesses sprouted up in that county.

And while law enforcement dislikes the immediate harm of increased crime, gambling support groups say Internet cafés cause indirect harm to those who patronize them

Brian Kongsvik, the director of the 1-888-ADMIT-IT helpline for the Florida Council on Compulsive Gambling, said more than 1,000 Internet cafés have sprung up around the state in the last half-dozen years.

Two years ago, when the organization started tracking them, 68 callers to the help line cited Internet cafés as their primary addiction. Last year, it was 122. The number is on pace to be higher this year, he said.

"We know there is a significant population that's affected by these establishments," Mr. Kongsvik said. "And it's our opinion, not the state's or anybody else's, that they may very well be attracting a population of people that would not necessarily drive to a destination casino to gamble, but now, they're right there on their street."

In defense of the establishments, gaming lobbyists and owners regularly compare the cafés to playing the Monopoly game at McDonald's. Mr. Kongsvik finds this to be misguided.

"Never, in my 22 years of dealing with problem and compulsive gamblers, has anybody called us and told me that they're losing their house, have lost their job, are getting a divorce or are in financial dire straits because of the Monopoly game at McDonald's," he said.

Future restrictions

State Rep. Plakon said banning the businesses outright as opposed to regulating them is the right thing to do.

"To merely regulate these businesses would create thousands of gambling establishments around the state," Mr. Plakon said. "Wouldn't that be the largest single expansion of gambling in the state?"

The bills are still in committee review and Mr. Plakon said it is uncertain whether they will make it to the floor for a vote in the upcoming legislative session.

Several owners of Internet cafés in the Daytona area refused to comment for this story. Managers running storefronts for the Allied Veterans of the World referred calls to the company's St. Augustine headquarters where a receptionist referred questions to Jacksonville attorney Kelly Mathis.

That call was forwarded to Sarah Bascum, spokeswoman for the Florida Internet Café Coalition, who didn't return several calls for comment.

Accessibilty increases Gambling Addiction


The recent increase in online gambling options may spell trouble for many individuals who might have never opted to drive to a casino. The accessibility of online gambling makes it appealing for a portion of the population for whom convenience is an important factor in decision-making.

Several provinces in Canada have introduced the idea of implementing government-run online gambling establishments. The concept has had mixed reception across the national population. A recent study by researchers at the University of Calgary indicates that there is reason for concern when introducing state-run gambling online.

Led by professor David Hodgins, the study examined the effects of gambling using online sites. The study determined that the introduction of increased online gambling could result in higher rates of gambling addiction in Canada.

Hodgins explains that online gambling provides a new way for people to access gambling in way that is extremely convenient. The result is that many people who would never gamble otherwise may be introduced to the activity.

To support this idea, Hodgins says that there is already evidence of increased gambling addictions where there is increased accessibility to gambling. For instance, provinces that have Video Lottery Terminals in drinking establishments exhibit a higher level of addiction than those provinces that do not allow the terminals. Accessibility is one of the main factors involved in the development of a pathological gambling problem.

Accessibility may be even further emphasized through the use of phone applications that give gamblers the ability to visit their favorite sites at any time, and at any place.

Hodgins is also concerned that the nature of a government-run gambling program adds to its perception as a normal activity. Online accessibility to gambling in general has already increased the normalizing of gambling, but government-run sites may add to the problem.

British Columbia and Quebec have already introduced government gambling programs online, but other provinces have held back. There have been reports that the expected social consequences associated with gambling addiction have caused the provinces to opt out of a government-sponsored gambling program.

Hodgins’ study indicates that pathological gamblers are found to have an increased risk for other addiction problems, such as those related to alcohol and drugs. In addition, those with pathological gambling disorder were also more likely to be diagnosed with other mental illnesses such as depression or anxiety.

Most Canadian provinces have programs in place to treat those with a gambling addiction, but Hodgins warns that government-run online gaming may introduce an epidemic and provinces may not have the resources to treat the high number of individuals needing help.

Promoting Something For Nothing Schemes

We've all stood in line at a check-out register behind someone who purchases an inordinate amount of lottery tickets, appearing unable to afford their purchase. Those are Gambling Addicts.

At least by forcing CASH only purchases, there is some minor protection from self-destruction.

Having reviewed Massachusetts Lottery sales by community, it reveals the sad demographics of poor neighborhoods, lacking education and employment opportunities or a hand up, seeking the Something for Nothing Scheme to Riches being promoted by Massachusetts State Treasurer Steve Grossman. Having watched a community self-destruct after Gambling was promoted by the State, it's not a pretty picture.

Something is wrong with a governmental policy that promotes Gambling and supports enhanced Gambling Addiction.

(For the sake of full disclosure our household has never purchased a scratch ticket.)

Online lottery sales a safe bet
Mass. treasurer leery, but feds clear the way
By Chris Camire,

BOSTON -- Massachusetts residents may soon be able to buy lottery tickets from the comfort of their homes, after a recent Department of Justice opinion opened the doors to legalized Internet gambling.
[Translation: You can bankrupt yourself sitting in your pajamas.]

The ruling could be a windfall for cash-strapped states that are counting on the Internet to reach the lottery's untapped market of young, tech-savvy people in their 20s and 30s.

But before Massachusetts cashes in on an online lottery sales, state Treasurer Steve Grossman is stressing that there are several serious potential downsides to the proposal.

Grossman, who oversees the state Lottery, is concerned that online sales will hurt the 7,500 retailers across the state whose businesses depend on profits made from selling lottery tickets. Lottery retailers, such as convenience stores, make about $37,000 per year from the Lottery.

"Many of them are family-owned businesses, so if you were to sell Lottery products online, using the Internet, paid for by credit card, and the business did not go through the agent, that's a lot of income that might not flow to those agents," Grossman said. "I'm very concerned about small businesses and jobs and the health of that industry. That's a lot of people, a lot of employees, a lot of business."

The Massachusetts Retailers Association has reached out to several of its members, as well as Grossman, to figure out how brick-and-mortar retailers will be affected by the ruling.

"In light of the decision, we're looking at the issue and trying to determine what kind of impact it could have on our members who sell Lottery tickets," said Bill Rennie, the group's vice president.

The Justice Department's opinion, which was released Friday, [December 23] reversed its 1961 ruling that bets through telecommunications that cross state lines or international borders were illegal. Its new interpretation, written by Justice Department attorneys in response to requests for clarification from New York and Illinois, concluded that such wagering on sports is outlawed, but that other wagers, such as lotteries, are not.

Some say the opinion will help states cope with shrinking tax revenues and ballooning pension and health-care costs. The Massachusetts Lottery, which generates more than $4 billion in sales each year and sends about $900 million of that to cities and towns as local aid, is also facing competition from the prospect of casinos coming to Massachusetts.

Gambling critics say the Justice Department's ruling will hurt people who can least afford to lose money.

"I think it underscores how the Massachusetts Lottery is a failed government program," said Les Bernal, executive director of Stop Predatory Gambling. "This is a government program that actively encourages people to go deeper into personal debt. It's creating addiction in order to feed off of it."

Grossman voiced similar concerns. He said an online gaming task force will meet next month to begin analyzing the pros and cons of online Lottery sales.

"I'm concerned about excessive gambling, gambling addiction, overuse of credit," said Grossman, adding that he expects it to take at least six to nine months before a decision is reached on the matter.

Earlier this month, Grossman endorsed allowing customers to buy lottery tickets with debit cards, starting as early as Jan. 1. Grossman said the move would make it easier for customers to play the Lottery, particularly in retail stores without ATMs.

Lottery officials said 33 of 42 state lotteries around the country already permit debit-card purchases.

"The use of debit cards is something that I don't think is at all controversial because debit cards are really cash," Grossman said. "It's a 21st century form of cash."

Credit cards are a different story.

"With credit cards, you're borrowing money," he said. "Borrowing money means you can borrow too much. When you borrow too much, you end up paying interest rates that can get up to 25 plus percent. It could put people behind the financial eight ball in ways debit cards would never do."

Thursday, December 29, 2011

Michigan Gambling Addict Spends Stolen $$ At MGM Detroit and Gun Lake

Man turns self in for allegedly embezzling $700K with help of former casino host
Written by Lisa Roose-Church DAILY PRESS & ARGUS

A Conway Township man turned himself in today on charges he embezzled more than $700,000 from his employer, which authorities allege he spent primarily on gambling at the MGM Casino in Detroit.

Ralph Edward Staelgraeve, 45, the former director of Michigan operations for Pasta Per Trio which operated out of Staelgraeve’s home on Sober Road, was arraigned this afternoon. He is free on a $100,000 personal bond and returns to District Court on Jan. 3 for an exam conference before Judge Carol Sue Reader.

Former MGM casino host Lee Sadek, 37, of West Bloomfield, also faces the same charge. He is free on a $100,000 bond and he returns to District Court Wednesday for an exam conference.

The investigation led by Livingston County Sheriff’s Detective Sgt. Gary Childers began in December 2009 when an employee of the Wisconsin-based Pasta Per Trio’s contacted the department regarding the misuse of funds.

Company officials believe Staelgraeve stole nearly $1 million, but they can only prove more than $700,000, Childers said.

It is alleged Staelgraeve stole more than $700,000 from the company and spent it on personal purchases, including spending nearly $300,000 at the MGM Grand Casino in Detroit.

Police further allege that Sadek, who allegedly used the title casino host/marketing director for MGM, helped Staelgraeve try to hide the theft by sending emails referring to specific checks as “advertising expenses.” Police said the billboard and direct mailing advertising referenced in the emails exchanged between Sadek and Staelgraeve “never existed” and that Staelgraeve used Pasta Per Trio funds to gamble at the MGM Grand Casino and to make personal purchases.

MGM officials told police that MGM Grand does not provide advertising to Pasta Per Trio, which is the umbrella company for Noodles and Company restaurants throughout Michigan, and that Sadek was not the marketing director.

Sadek, who has not spoken with police since his arrest on Dec. 21 at Gun Lake Casino in Wayland, told detectives in May 2010 that the emails from him to Staelgraeve were altered and he denied using the marketing director title, police said.

Authorities also allege that Staelgraeve cashed and kept more than $140,000 in rebate checks from soft drink manufacturers and other vendors to Pasta Per Trio.

Neither Staelgraeve nor Sadek have spoken with police since the charges. However, police said Staelgraeve “does not deny” the allegations during a May 2010 phone conversation with a detective and Sadek claimed at that time police said.

Native American Loan-Sharking

Tribe's high-interest online lending venture booms
As states rein in risky lending, Indian tribes use sovereignty, Internet to make loans
By Matt Volz, Associated Press AP

HELENA, Mont. (AP) -- An Indian reservation in the heart of Montana's farm country may seem an unlikely place to borrow a quick $600, but the Chippewa Cree tribe says it has already given out more than 121,000 loans this year at interest rates that can reach a whopping 360 percent.

As more states pass laws to rein in lenders who deal in high-interest, short-term loans, Indian tribes like the Chippewa Cree and their new online lending venture, Plain Green Loans, are stepping in to fill the void. The Internet lets them reach beyond the isolated Rocky Boy's Indian Reservation to borrowers across the nation, while tribal immunity has allowed them to avoid bans and interest-rate caps several states have set.

To Neal Rosette, Plain Green Loans CEO and the Chippewa Cree's former executive administrative officer, it's a win-win. The online lending venture is a resource for people who can't or won't borrow from banks, while it gives the tribe a steady revenue stream and jobs with unemployment on the reservation at nearly 40 percent.

Rosette said this model could be the successor to gambling for tribes looking for an economic boost. Some tribes have owned online lending businesses for several years, and Rosette said the Chippewa Cree and three other tribes have started the Native American Lenders Alliance to encourage more.

"I believe this is the new outlook for Indian Country, not just Rocky Boy," Rosette said. "We are sovereign nations and we have the ability to create our own laws that regulate our businesses such as this."

That's a problem for consumer groups and the states that have tried to bring such lending under control. The issue with these loans, consumer advocates say, is that their high interest rates make it too easy for a borrower to become trapped in a cycle of debt as they have to borrow more to repay their original loans.

Forty-two states and the District of Columbia have taken different regulatory approaches, from outright bans to interest-rate caps. Montana voters last year passed a ballot initiative that capped such loans at a 36 percent annualized interest rate, which has led to a nearly 83 percent drop in so-called deferred deposit lenders, according to Montana banking and financial institutions director Melanie Griggs.

But as the cap drives lenders out of the state, more people are turning to the Internet, which adds the danger of passing along personal bank account information that can be distributed to other lenders and brokers and can lead to overdrafts.

"When they were getting it from brick-and-mortar businesses it was easy to monitor how many people were getting payday loans. Now that it's all on the Internet, it's harder to monitor," Griggs said.

The Chippewa Cree tribe says its loans are not payday loans, those two-week loans with annualized interest rates of more than 600 percent or more. Instead, the tribe says, its highest annualized interest rate is 360 percent. Payments are made over a period of months, usually in monthly or biweekly installments.

By any account, those rates are still very high. By the company's own example, a first-time borrower who takes out a $600 loan would end up paying $1,261.32 over 12 bi-weekly payments.

Less than a year old, Plain Green Loans already has an F rating by the Better Business Bureau after the agency received 20 complaints mainly dealing with billing and collection issues. Eleven of the complaints were resolved, but the company didn't respond or failed to resolve the other nine, according to the BBB.

Rosette said those complaints are relatively few when compared to the thousands of loans the company has administered.

"We've got a process in place that we believe is very quick at handling any type of complaint that we get. That's part of this industry, complaints, regardless of who you are," Rosette said.

As long as it doesn't make any loans to Montana residents, state prosecutors plan to let Plain Green Loans and the Chippewa Cree tribe be.

"We haven't looked specifically at the tribe," said assistant attorney general Jim Molloy. "We've not pursued it based on the understanding with the tribe that they're not lending to Montanans."

Rosette confirmed that the tribe is not lending to Montana residents, but he bristled at the idea that the state could enforce its rate cap even if the tribe were lending in the state.

"If we wanted to defend our position in Montana, we could. But why? It's a small market. It wasn't worth the fight if there was one," Rosette said.

Other states have entered legal battles with lending businesses owned by tribes. A closely watched case is playing out now in Colorado, where the state is attempting to sue Western Sky Financial, an online lender owned by North Dakota's Cheyenne River Sioux Tribe.

Colorado is trying to prevent Western Sky from making loans within its borders, while the tribe counters that the state is attempting "to reach into the reservation and regulate commercial activity."

Other legal battles are being fought or have been fought in California, West Virginia, Missouri, New Mexico and Maryland, creating an unsettled regulatory environment, said Jean Anne Fox, director of financial services at Consumer Federation of America, a consumer advocacy group in Washington, D.C.

"It's a real threat to the ability of state regulators to enforce the loan market to police caps and other consumer protection measures," Fox said.

Some non-tribal businesses have seen tribal immunity as a shield that they can use to make high-interest loans outside of the regulatory spotlight and a way to avoid state law enforcement, Fox said. So they affiliate themselves with the tribe and conduct business under that shield, she said.

It can be difficult to obtain records that define the relationship between a tribe and non-tribal entity. That's the case with Plain Green Loan's relationship to a Fort Worth, Texas-based company called Think Finance Inc.

Think Finance says on its website that Plain Green Loans is one of its "products," along with online lenders owned by two other tribes.

"Our latest product, Plain Green, launched in April. Customers in need of emergency cash can apply online in minutes, get an answer in seconds, and get cash as soon as the next day," a Think Finance press release from September reads.

Neither the tribe nor Think Finance returned calls and emails for comment on the relationship between the companies. Better Business Bureau spokeswoman Chelsea Dannen said her agency also tried to contact Think Finance to clarify the relationship but received no response.

Rosette said Plain Green Loans is wholly owned by the tribe, though he acknowledged that his staff of 25 isn't equipped to handle the volume. It employs a Las Vegas call center and uses brokers to provide it with databases of potential borrowers. It borrows just enough money each day to cover its loans.

There are a lot of things the tribe won't disclose. Rosette says the default rate is on Plain Green loans is proprietary information. He won't name the companies the tribe is involved with or say where company borrows its money or at what rate.

If it turns out that Plain Green Loans is not a bona fide tribal lender, that could change state prosecutors' laissez-faire approach to the company, Molloy said.

But just the obscurity and the uncertain relationship between the tribe and the Texas company exemplify the underlying problem with tribal online lending businesses, Fox said.

"We're not sure who's doing what here," Fox said.

Cowlitz approval challenged

Cowlitz Tribe denies claims by plaintiffs in lawsuit
Federal approval of reservation near La Center challenged
By Stephanie Rice Columbian Staff Reporter

The Cowlitz Indian Tribe, which earlier this year filed as an intervenor in Clark County’s lawsuit against the federal government over the decision to allow the tribe to establish a reservation near La Center, has filed its answer to the claims made by plaintiffs.

The response was filed last week in U.S. District Court in Washington, D.C.

The tribe’s response, filed by attorneys from the Washington, D.C. firm of Patton Boggs LLP, was similar to the response filed June 10 by Assistant U.S. Attorney General Ignacia S. Moreno.

Both were 19 pages long and offered a point-by-point denial of all allegations made by Clark County and other plaintiffs in the lawsuit filed Jan. 31, 2011.

U.S. District Judge Richard W. Roberts has set an initial scheduling conference for Feb. 10.

During the conference, attorneys will agree on a timeline for how the case will proceed.

Added significance
The challenge has taken on special significance after the Obama administration chose to make the Cowlitz land trust case a test case of a 2009 ruling by the U.S. Supreme Court.

In that ruling, known as Carcieri, the high court said the government can only put land into trust for tribes that were under federal jurisdiction in 1934.

In saying the Cowlitz could establish a reservation, Assistant Secretary for Indian Affairs Larry Echo Hawk addressed Carcieri at some length in his December 2010 decision.

“For purposes of our decision here, I need not reach the question of the precise meaning of ‘recognized Indian tribe,’ as used in the (Indian Reorganization Act), nor need I ascertain whether the Cowlitz Tribe was recognized by the federal government in the formal sense in 1934, in order to determine whether land may be acquired in trust for the Cowlitz Tribe,” Echo Hawk wrote in his ruling.

The Cowlitz were federally recognized in 2000; that ruling was challenged and reaffirmed in 2002.

“The Cowlitz Tribe’s federal acknowledgment in 2002, therefore, satisfies the IRA’s requirement that the tribe be ‘recognized,’” Echo Hawk wrote.

Joining Clark County in the challenge of Echo Hawk’s decision: the city of Vancouver; nearby property owners Al Alexanderson and Greg and Susan Gilbert; Dragonslayer Inc. and Michels Development, operators of the four La Center cardrooms; and Citizens Against Reservation Shopping, a group that includes Scott Campbell, publisher of The Columbian.

Other tribes watching case

The plaintiffs also argue, and the defendants and the tribe deny, that the current plans have inadequate mitigation for stormwater, traffic, light and noise issues.

The defendants are the U.S. Department of the Interior, the Bureau of Indian Affairs and the National Indian Gaming Commission.

Earlier this year, Cowlitz Tribal Chairman William Iyall said the legal challenge was not a surprise and other landless tribes will be watching to see what happens.

The plans for the Cowlitz site, which would be west of the Interstate 5 interchange in La Center, call for a two-story casino with 3,000 slot machines, 135 gaming tables, 20 poker tables and a 250-room hotel, plus an RV park, 10 restaurants and retail shops.

But that $510-million complex was proposed before the economy tanked, and the Connecticut-based Mohegan Tribal Gaming Authority, which partnered with Cowlitz tribal member and real estate developer David Barnett of Seattle to operate the casino, has been struggling.

Bad bet for Eastie

Bad bet for Eastie
By Peter A. Gravallese

Wal-Mart would bring hundreds of jobs to Boston, but Mayor Tom Menino has been vehemently opposed, citing unfair competition to smaller local businesses.

Now our same mayor favors a casino complex at Suffolk Downs, citing the need to create jobs. Where is our protection? A casino complex would have a greater impact on our small businesses. Money won at the casino stays there.

And the traffic that a casino would bring would be horrific on roads already congested with airport traffic and tankers. As a lifelong resident of Eastie for 87 years, I ask how much more is my small community expected to support?

— Peter A. Gravallese, East Boston

Third conviction made in case of abducted racino winner

Third conviction made in case of abducted racino winner
Written by Gary McLendon and Victoria E. Freile Staff writers

A third Rochester man has been convicted in connection to the kidnapping of a racino winner.

A Monroe County Court jury on Friday found Crandele Fitzpatrick guilty of second-degree criminal possession of a weapon.

He faces a minimum of 7 years and a maximum of 15 years when sentenced on Jan. 18, said Assistant District Attorney Patrick Farrell.

Fitzpatrick was acquitted of kidnapping and robbery charges. The jury was hung on an assault charge.

The verdict comes after Christopher F. Arnold, 31, was sentenced to 20 years to life in prison after being convicted of kidnapping, pistol-whipping and robbing George Graham, 58, outside a Lyell Avenue store on Oct. 21, 2010.

Meetings aside, little support found for plan

Meetings aside, little support found for plan
By Eric Moskowitz
Globe Staff

FOXBOROUGH - The “casiNO’’ signs scattered through town are in some places as common as telephone poles. But their procasino counterparts seem to appear only at meetings, planted in few if any yards.

Chris Bartick grabbed one of those “JOBS YES’’ signs when a supporter was handing them out. But when he got home, the bartender and laid-off construction worker merely stashed it on his porch.

“I’m waiting to see if there’s any of my neighbors that want to rally around me before I put it out,’’ said Bartick, 40, a lifelong Foxborough resident, counting himself among those who believe that a casino would bring more good than harm. “They’re out there, but they’re being quiet about it.’’

Away from the emotionally charged meetings that have drawn hundreds to Foxborough High School, residents interviewed yesterday said the debate has been civil, quiet, and, well, not much of a debate. Vocal supporters of the casino proposal are hard to find in this town of nearly 17,000.

Some said they knew no one who supports the casino plan; others knew only one or two. And even then, they said, that support often amounts less to wholehearted endorsement than to a desire to learn more before dismissing a plan that could bring tax relief to the community.

Town selectmen voted 3 to 2 Tuesday in an early blow to the still-emerging casino plan pitched by Las Vegas magnate Steve Wynn for land held by New England Patriots owner Robert Kraft. Selectmen declared themselves unwilling to negotiate the details of a development that would ultimately need the support of a townwide referendum to succeed.

“I don’t know where the people are that want it,’’ said Lori Dunbar, 43, a resident and the owner of the Pawsmopolitan pet boutique, opposite the town common. The nascent casino proposal has been a frequent subject of discussion among her customers, mostly parents with school-age children, but not one has favored it.

Carpenter Mike Lynch said he has encountered just one friend so far who thought the casino was worth exploring. “He thought it would bring a lot of work to the town,’’ Lynch, 62, said as he left Spoodles Soup Factory, a downtown lunch spot. Their debate did not last long.

“Bring work to the town?’’ Lynch said, scoffing in a cheerful Irish brogue. “Yeah, minimum-wage jobs.’’

At nearby Loewen’s Deli, a middle-aged couple waiting for takeout acknowledged their own casino support, something they had not, to that point, shared with anyone other than family, assuming that most were opposed.

“I just like the tax benefits,’’ said Nick DiMartino, who works at a car dealership. “That’s basically it.’’ His wife, Debbie, who works for an internist, agreed, but not before kidding him about outing them as casino supporters.

“Now, we’re in trouble,’’ she laughed, shooting him a look.

Dan Flynn, chairman of the procasino group Jobs for Foxboro, said he has been greeted away from meetings with a mix of support and hostility. After a recent Mass at St. Mary’s Church, Flynn received a few thumbs up when he returned from taking communion but also garnered some dirty looks, he said.

“Then when I was walking out to my car, a group of guys a little younger than me spat on the ground, and I could hear them mumbling,’’ said Flynn, 52, a carpenter and union representative who wants the full proposal to go to a town vote. “The people that are against it - oh, my God, they’re blood-thirsty about it. I’m not going to be blood-thirsty about anything other than my rights.’’

But others said they have seen nothing like that, aside from the few public meetings on the subject, when the rhetoric has been pitched.

Steve and Lynne Powers have split their attendance at those meetings, one staying home with their two young daughters, the other texting updates

“It’s certainly become a very contentious and emotionally charged issue,’’ said Lynne, 45, a Foxborough native who works in marketing. “Everybody is very well intentioned in their positions, but the positions are just so far apart that it’s becoming very divided.’’

Still, the strain seemed to be showing only on the major players in the matter. Selectman Mark Sullivan, seen as the board’s swing vote, said at the meeting that the pressure he felt was so great that it spoiled his Christmas and prompted him to hide his phone to avoid the calls.

Lynne Powers said her friends all oppose the casino, so there has not been much to debate outside of meetings.

And Steve Powers, 55, a self-employed construction worker, said it was not until this week that he discovered he had two relatives who support the casino, an unemployed couple in their 60s, when one stopped by the house.

“She knows it’s not the best thing for the town, but [they] are looking at it like, ‘I need a job,’ ’’ said Steve, taking a break from building the stairwell and deck that would finally allow him and his wife to rent the apartment above their Main Street home. “After she left, I think we had her voting against it.’’

Wednesday, December 28, 2011

Martha Coakley: We’re watching

Martha Coakley: We’re watching
Attorney general warns prospective operators
By Chris Cassidy

Hawkeyed Attorney General Martha Coakley has a stern warning for casino operators planning to bring the multibillion-dollar industry and its troubling track record of corruption, crime and legal hijinks to the Bay State: We’re watching you.

“If you’re looking to do business in Massachusetts, you better be prepared,” Coakley told the Herald in an exclusive interview yesterday. “We intend to ... make sure everyone plays by the rules and the rules are tough enough to make sure we do this successfully. Otherwise, it won’t work in Massachusetts.”

The Herald yesterday detailed the corruption, fraud and damaging political scandals that have plagued other states with casinos. The long rap sheet even included casino developers hoping to do business in the Bay State.

Among the findings of the Herald report: A scathing grand jury report in May slammed Pennsylvania’s new gaming board as a secretive patronage haven that’s failed to properly screen casino investors; two casino investors in Iowa were charged last year with making illegal campaign donations to the state’s former governor to influence a gambling license; and a federal probe launched last summer into a $1 million consulting contract between a casino and a company owned by a Florida congressman’s mother.

“It’s extremely important that we send the message to the industry, from Massachusetts, that we intend to do this right,” Coakley said. “That we’ll be monitoring it, hold accountable those who violate the law, and if I feel we don’t have the tools we need, I’ll be the first to ask the Legislature for the tools to do this right.”

Asked whether the corruption and fraud seen elsewhere are a foregone conclusion in a state where three successive speakers have been convicted of felonies, Coakley said: “I’d like to think it’s not inevitable, but I think it’s potentially inherent in the nature of the industry.”

By statute, Coakley must appoint someone with a strong law-enforcement background to the five-member Massachusetts Gaming Commission. She also plans to staff a new gaming enforcement division with state police and civilian investigators smart enough to keep up with the ever-evolving sophistication of white-collar crime.

Campaign finance and conflict-of-interest violations are also a concern, she added.

“We’ve really stressed the need for transparency and disclosure,” Coakley said. “If we don’t have that, we will have the problems seen coming out of Pennsylvania, Iowa and the other states outlined in the Herald (yesterday).”

Coakley said she’s had long talks with the attorneys general in Nevada — the nation’s casino capital — and New Jersey, as well as Pennsylvania Gov. Tom Corbett, who as attorney general launched a probe into that state’s scandal-ridden gambling industry.

“We need to learn from each of these states what has worked and what hasn’t,” Coakley said.

Asked whether casinos will go any more smoothly than the grotesquely mismanaged Big Dig, Coakley said Massachusetts has learned its lessons and they’re fresh in regulators’ minds.

“We saw a phenomenal lack of oversight and appropriate management,” she said of the public works fiasco. “We’re not going to make that mistake with this.”

Residents on both sides berate Foxboro pols

Residents on both sides berate Foxboro pols
By Chris Cassidy

A packed house of divided Foxboro residents wrangled over a casino proposal from Patriots [team stats] owner Robert Kraft and Vegas mogul Steve Wynn last night. Some were worried about crime and losing the character of their town while others praised the thousands of jobs promised and urged selectmen to at least hear the sales pitch.

Selectmen were expected to consider a recommendation from the town’s advisory committee to have residents vote on a casino before a town forum with Kraft and Wynn.

But former Foxboro Selectman Paul Mortenson said the people have already spoken — several town boards have already said no to gambling.

“That’s democracy,” said Mortenson, who worried the town would be no match for the Wynn/Kraft legal and public relations machine.

The meeting nearly erupted into chaos when 82-year-old Helen Merigan refused to leave the podium after Chairman Larry Harrington tried to end a lengthy public comments section.

Harrington summoned the police chief to remove the senior but eventually relented and let her speak. Merigan then compared Wynn and Kraft to “great white sharks” circling Foxboro.

Local physician David Egilman predicted the casino would be “good for my business” because it would lead to an influx of patients with STDs, gambling addiction and alcoholism.

Before the meeting, a few dozen casino supporters, including several union carpenters, held signs outside the high school and touted the jobs a resort would bring.

Foxboro holds meeting to debate building of casino

Foxboro holds meeting to debate building of casino

FOXBORO, Mass. -- Foxboro town leaders are laying their cards on the table. They’re talking about what some are calling a risky bet: allowing a casino to be built in their town.

The casino debate in Foxboro is pitting neighbors against neighbors.

“I have a right to speak as a tax payer of this town,” one Foxboro resident said.

“As a physician, this is going to be good for my business. Really good. I’m going to have many more people with sexually transmitted disease to treat and see,” one resident said.

“I’m concerned about emotion derailing an informed democracy,” said another resident.

Seven hundred people came out to the board of selectmen's meeting on Tuesday night.

Of the 30 who spoke, two thirds said they're worried a resort casino would tax their public safety, schools, and hospitals.

“This is irrevocable change. Socially, economically, it’s irrevocable,” said one woman.

“I thought it was financial gambling that got us into this economic mess that we’re talking about right now, so the rhetorical question is, ‘Why do we think that gambling is going to get us out?’” said one man.

While one third said they either wanted to hear more about the proposal before voting, or they're willing to gamble; casinos would mean jobs.

“I am for the casino,” said one man.

“Every friend I have in the town wants to engage in a positive dialogue about the potential for job creation and new revenue for local school,” said one woman.

It was a heated with meeting with applause and jeers. One many say - is tearing their town apart.

Even if the selectmen want to move forward into looking to have a resort casino being built in Foxboro, they first have to reverse a gaming ban that they initiated back in 2004.

The meeting ended after a four hour debate. The board voted three to two to not enter discussions with Mr. Wynn and Mr. Kraft to build a casino in their town. The vote, however, is non-binding because there was no official proposal on the table.


New York State ranks high on the list of fiscally mismanaged and corrupt states that seek the Folly of Expanded Gambling to conceal their historically flawed decisions.

The Niagara Casino promised streets paved with gold, as the meaningless rhetoric repeated elsewhere does. It never delivered, as always happens.

This summer, we happened to encounter Massachusetts visitors (tourists. if you will), who lived in the Niagara area and highlighted the blight and community destruction its presence had caused.

Keep looking for that community that is better off 5 years after a Slot Barn is constructed in its midst. You won't find it.

By Frank Parlato Jr.

We aren't quite as stupid -- we Americans -- as the Seneca leadership thinks we are.

Leaders from the Sovereign Seneca Nation of Indians released the results of a poll last week they claim suggests area residents support Seneca's efforts to maintain exclusive rights to casino-style gaming in Western New York.

In reality, it was not a poll, but a push poll, filled with leading questions -- meant to lead people to respond to get the results Seneca wanted.

In announcing the findings of their crooked-up poll, tribal leaders apparently wanted to persuade state officials and the public to let Seneca keep their exclusive rights to gaming operations in the region in lieu of letting regular everyday Americans have the same opportunity.

Seneca Nation President Robert Odawi Porter said the results of the poll found nearly two-thirds of Western New Yorkers surveyed opposed a constitutional amendment to legalize gambling for Americans in New York.

"Our neighbors know what we know," the self-serving Seneca leader said, "that our contributions to this area are strong, are dominant, are successful, and if our nation is not doing (exclusive gambling) everyone is going to be hurt," Porter said.

The poll, paid for by Seneca and conducted by a New York City firm specializing in propaganda called Central Marketing, called 1,000 respondents from 14 counties in Western New York (but interestingly, almost excluded Niagara County residents, where the Seneca Niagara Casino is located) in mid-November and plied them with questions clearly meant to draw out the answers they wanted to hear.

The Niagara Falls Reporter got a hold of the crooked poll, perhaps much to the chagrin of Seneca leaders, who did not want the questions broadcast, just the results.

The results of their push poll showed 10 percent of Western New Yorkers favor an amendment to allow statewide gaming, while 63 percent said they want only people born of Seneca blood to be allowed to operate and profit from gambling.

But these skewed responses -- that Americans want preferences for Seneca over themselves and their children -- were achieved only after respondents were told that these new non-Seneca casinos would be "on every corner" and possibly operated by Malaysians, well known to operate criminal gaming operations overseas.

Respondents were also told a series of facts disguised as questions to show how well Seneca was doing in the area before they were asked about Seneca performance and the public's desire to keep the status quo.

"It shows overwhelming support for (Seneca-exclusive) gaming operations. Eighty-four percent of those polled show continued support for Seneca casinos in our exclusivity zone," Porter said. "Our profits do not go to the owners or shareholders of Las Vegas or Malaysian casinos. They stay right here in Western New York."

The Seneca poll was clearly meant as a device to head off Gov. Andrew Cuomo, who suggested last week that statewide legalization of gaming should be pursued to help spur economic development, with facilities operated by private-sector, non-Indian operators.

In other words, the racist world of New York gambling, where only Indians can make a fortune, might come to end.

A state constitutional amendment is needed to allow Americans to operate casinos in New York.

Naturally, Seneca leaders are upset. Yet Seneca is not known for sharing with Americans. Look around the area surrounding the casino and you will see vacant, blighted buildings falling into ruin as crime rises, and people and businesses move out. There has not been one new major business startup around the boundaries of the casino, and more than a dozen businesses have closed.

The city of Niagara Falls has not seen the economic spin-off promised. Only Seneca has grown wealthy since the casino opened in 2003.

Contrarily, Las Vegas is largely successful because anyone -- if they have the ability, the money and the guts, regardless of race -- can operate a casino, and the whole city has grown instead of only one ethnic group.

The Seneca poll claimed 84 percent "favored continued operation of Seneca Nation gaming in its Western New York exclusivity zone," which their Seneca news release says is "superior to wide-open, Las Vegas- or Malaysian-owned commercial casinos."

Here are some of the leading questions in the 31-question Seneca poll.

Did you know Seneca Nation operations total $1.1 billion a year?

Did you know Seneca Nation employs 6,000 Western New Yorkers, more than half of whom are non-Indians?

Did you know Seneca Nation is Western New York's sixth-largest employer, ahead of M&T and HSBC banks?

Using a scale of 1 to 5, where 1 equals "Not at all valuable," and 5 equals "Very valuable," please rate how valuable Seneca Nation businesses are to Western New York. (Not surprisingly, after these lead-up questions, 66.6 percent said Seneca businesses are valuable.)

In general, how do you view the Seneca Nation's influence on Western New York's economy?

Do you think the Seneca Nation economy helps Western New York's economy? (Seventy-seven percent said yes.)

Would you favor the continuous growth of the Seneca Nation economy through future development?

Are you aware of the fact that some Albany leaders want to legalize commercial casino gambling statewide?

Next came the granddaddy of all leading questions:

How likely are you to favor such a wholesale approval of "casinos on every corner"? (Now, of course, no one suggested a casino on every corner.)

Did you know that the Seneca Nation has paid $476 million to the state for the right to operate (their three) casinos?

Given that New York state promised the Seneca Nation exclusivity, should other casinos be permitted in Western New York?

If new casinos were to open in some areas of New York state, do you prefer a New York Indian nation to open them or a Las Vegas- or Malaysia-based commercial company? (Why should the choices be only Seneca, Las Vegas- or Malaysia-owned companies? Why not include local New York entrepreneurs?)

Do you favor continued operation of Seneca Nation gaming, and payments from it to the state, or do you prefer Las Vegas-type gaming statewide? (That's not really an either/or question. There could be state-regulated gaming without necessarily having it Las Vegas-style, where any drugstore can have slots.)

I don't know about you, but those questions seem to me like pretty leading questions.

Suppose I reword the questions and we do the poll again. Do you think the results would be different?

Are you aware of the fact that because of their ethnicity, Seneca has the exclusive right to operate casinos in Western New York?

Are you aware that Seneca can open any business on the 50 acres of land granted them in Niagara Falls and pay no property taxes, sales taxes, excise taxes or state income taxes?

Are you aware of the fact that Seneca Nation gaming and state and local tax-free entertainment operations earn for them $1.1 billion a year, netting certain people in the tribe more than $1 million per day?

Did you know that the host city, Niagara Falls, remains one of the poorest cities in America, as it struggles "on every corner" to keep libraries open, roads paved and children from leaving Western New York?

Do you think Americans should have the same legal rights in New York as Seneca?

Do you think Americans could run casinos as well as people who are born Seneca?

Did you know the Seneca Nation employs 6,000 Western New Yorkers, more than half of whom are non-Indians, and that most work for Seneca at near-minimum wage and at part-time jobs?

Did you know that -- according to their employment manual, and by Seneca law -- a person born a Seneca may replace an American employee at any time if a Seneca wants the job?

Did you know the Seneca Nation, with their tax-free status, has become Western New York's sixth-largest employer, overtaking longtime, tax-paying companies like M&T and HSBC banks?

Do you like the fact that so many proud Americans have to work for a foreign, or as they call it, a Sovereign Nation, instead of American-owned companies?

Using a scale of 1 to 5, where 1 equals "Not at all harmful," and 5 equals "Very harmful," please rate how harmful Seneca Nation tax-free businesses are to Western New York.

Judging from "every corner" surrounding the Seneca Niagara Casino, do you think Seneca Nation reinvests its profits in Western New York?

Did you know that the Sovereign Seneca Nation has not paid their agreed-upon slot machine revenue to Albany in two years, withholding more than $330 million in revenue-sharing payments since 2009; $53.1 million of which is due to Niagara Falls?

Do you favor continued exclusive operation of Seneca Nation tax-free gaming, or do you prefer to allow American-owned gaming that gives Americans equal rights to start a casino like they do in Las Vegas?

Do you think we should allow the people of the Sovereign Seneca Nation to have more rights than our own children?

Should Seneca have legal superiority over Americans?

The people of New York should ignore the Seneca self-serving survey.

Casino Workers on Welfare

Massachusetts lawmakers swallowed the low wage jobs propaganda of the Gambling Lobbyists, yet the New York Times article at the bottom contains this curious comment:

Congress extended the program for two months, but its future beyond that is up in the air. If Congress provides additional welfare money, it is likely to come with new conditions.

Many states deliver cash assistance using electronic benefit transfer cards. The House has voted twice this month to forbid use of the cards at any liquor store, casino or strip club — any “retail establishment which provides adult-oriented entertainment in which performers disrobe or perform in an unclothed state for entertainment.”

Several states have been embarrassed by the disclosure that welfare recipients were claiming benefits at such places.

Representative Gwen Moore, Democrat of Wisconsin, opposed the restriction, saying it would “humiliate and marginalize” poor people.

“In many neighborhoods,” she said, “the closest A.T.M. is located in a nearby liquor store.”

Some state officials also question the provision. Miki Allard, a spokeswoman for the Nevada Department of Health and Human Services, said: “It may be very appropriate for our public assistance recipients to access benefits from casino machines. A large proportion of our clients work in casinos. They are not there to gamble. They are there to work.”

American taxpayers are subsidizing wealthy casino owners because they pay their workers so poorly, they qualify for welfare.

Political Struggle in Congress Delayed, Not Resolved

WASHINGTON — When Congress handily passed a bill to set payroll tax rates, jobless benefits and Medicare doctors’ fees for the next two months, it seemed to end an epic political struggle between President Obama and Republicans on Capitol Hill. In fact, that was just the beginning.

Every issue in dispute remains unresolved, waiting to be addressed when Congress returns next month for an election-year session in which agreements could be even more elusive.

Basically, the new law, signed on Friday by Mr. Obama, preserves the status quo through February, so House and Senate negotiators can try to reach longer-term agreements on the Social Security payroll tax, unemployment insurance, Medicare and a few other issues, like the shape of the welfare program that provides cash assistance to more than 4.6 million poor people.

The law says that Mr. Obama shall grant a permit within 60 days for construction of the Keystone XL oil pipeline, from Canada to the Gulf Coast, unless he finds that the project “would not serve the national interest.” Republicans in Congress are already looking for additional ways to put pressure on Mr. Obama if he blocks the pipeline or delays a decision.

Under growing political pressure, House Republican leaders accepted the two-month extension of payroll tax relief. But many rank-and-file members of the House Republican caucus said they doubted that the tax break would do much to stimulate the economy and saw no urgent need to continue it for 10 more months. By contrast, Mr. Obama and Congressional Democrats say the payroll tax cut is needed to bolster the economy.

An extension of the tax cut and jobless benefits “should be a formality,” Mr. Obama said. But he added, “We have a lot more work to do,” and said he expected “some tough fights.”

Even if Democrats and Republicans could agree on extending the payroll tax cut, they fundamentally disagree about how to offset the additional cost, $100 billion for the last 10 months of 2012.

The Senate majority leader, Harry Reid of Nevada, made clear on Friday that Democrats would keep pressing for a tax surcharge on individual income over $1 million — a demand dropped by Democrats in talks that led to the two-month compromise.

“There should be a fair tax on rich people,” Mr. Reid said.

With a few exceptions, Republicans in Congress have opposed a “millionaires’ tax,” saying it would hurt the economy and people who create jobs.

House Republicans would pay for the legislation, in part, by freezing the pay of federal employees through September 2013.

Democrats generally oppose that idea.

A 20-member conference committee will try to work out differences between the House and the Senate on a yearlong bill. Mr. Reid said he had appointed Senator Benjamin L. Cardin of Maryland to the panel because he knew that Mr. Cardin would guard the interests of federal employees. More than 275,000 federal workers live in Maryland.

The fate of the main federal-state welfare program, Temporary Assistance for Needy Families, was largely overlooked in the fight over payroll taxes. Money and the legal authority for the welfare program were due to run out on Dec. 31.

Jennifer Hrycyna Wagner, the welfare director in Illinois, said state officials around the country feared a possible interruption in benefits and services for “our most vulnerable residents.”

Congress extended the program for two months, but its future beyond that is up in the air. If Congress provides additional welfare money, it is likely to come with new conditions.

Many states deliver cash assistance using electronic benefit transfer cards. The House has voted twice this month to forbid use of the cards at any liquor store, casino or strip club — any “retail establishment which provides adult-oriented entertainment in which performers disrobe or perform in an unclothed state for entertainment.”

Several states have been embarrassed by the disclosure that welfare recipients were claiming benefits at such places.

Representative Gwen Moore, Democrat of Wisconsin, opposed the restriction, saying it would “humiliate and marginalize” poor people.

“In many neighborhoods,” she said, “the closest A.T.M. is located in a nearby liquor store.”

Some state officials also question the provision. Miki Allard, a spokeswoman for the Nevada Department of Health and Human Services, said: “It may be very appropriate for our public assistance recipients to access benefits from casino machines. A large proportion of our clients work in casinos. They are not there to gamble. They are there to work.”

A bigger fight looms over unemployment insurance. House Republicans want to reduce the maximum duration of benefits to 59 weeks, from 99. They would allow states to require drug testing. And they would require most recipients of jobless benefits to search for work and to enroll in G.E.D. programs if they had not completed high school. Republicans also want to allow waivers of federal law so some states could divert money from the payment of benefits to the retraining of workers. Democrats oppose most of those ideas, saying they would cut a lifeline for millions of people who have been out of work for a year or more.

Senator Jack Reed, Democrat of Rhode Island, will be a member of the House-Senate conference committee. In picking him, Mr. Reid noted that Rhode Island had high unemployment and said “no one in the Senate has been more protective of the unemployed.”

The negotiators will also try to find a new way to pay doctors treating Medicare patients, to avoid the continual threat of deep cuts in fees.

Unless Congress steps in, doctors will see a 27 percent reduction in Medicare reimbursements in March. As a result of such cuts, lawmakers say, many older Americans could lose access to their doctors, because doctors would be less willing to take Medicare patients.

One of the five House Democrats named to the conference committee, Representative Allyson Y. Schwartz of Pennsylvania, is drafting legislation to scrap the current payment formula, which penalizes doctors if Medicare spending on physician services exceeds annual goals linked to growth of the nation’s economy.