Gambling Glitch

June 14, 2012

Gambling glitch

The gambling conglomerate bankrolling the efforts to build a tribal casino in Taunton has become embroiled in an apparent pay-to-play scandal in New York, a fact that sheds new light on the different legal regimes Massachusetts’s new gaming law places on tribal and commercial casino operators. Because the firm at the center of the New York scandal, Genting, is partnering with the Mashpee Wampanoag Tribe, the state’s gaming commission currently has no power to scrub its business integrity -- a powerful anti-corruption check the gaming commission holds over commercial firms bidding for state gaming licenses.

The Malaysian gambling giant Genting joined forces with the Mashpee in late 2009, after the tribe’s attempt to construct a casino in Middleborough unraveled. It is common for commercial investors to partner with Native American tribes pursuing casino gaming, since gaining local, state, and federal approvals can be a long, expensive undertaking. Tribes essentially trade a slug of startup capital for a cut of future casino revenues. And Genting, which sits on top of a reported $5 billion cash stockpile, has plenty of capital to lend.

According to a recent Boston magazine story , the Mashpee have borrowed close to $17 million while chasing federal recognition and casino gaming rights. Boston reported Genting is collecting more than 16 percent interest on its investment in the Mashpee. (The tribe doesn’t comment publicly on its finances.) The Mashpee also poured $300,000 of Genting’s money into a recent nonbinding referendum that endorsed the tribe’s proposed Taunton casino. Since late 2010, Genting has also spent over $1.8 million lobbying in support of its gaming interests in Florida and New York.

That hefty lobbying bill is fully disclosed, but it doesn’t capture the full extent of Genting’s attempts to shape gambling policy across the border in New York. The New York Times recently reported that a New York gambling advocacy group founded by Genting pumped $2 million into a nonprofit coalition of business and labor groups that lobbies aggressively in Albany and has close ties to Gov. Andrew Cuomo. Genting kicked an additional $400,000 of its own funds into the nonprofit, a 501(c)4 that doesn’t have to disclose its donors publicly. 

[This is no different from Mayor Tom Menino and Senator Petrucelli have 'charities' that accomplish the same purpose.]

At the same time that business-labor coalition group was quietly taking Genting’s money, spending it on television advertisements praising the governor, Cuomo was pushing a $4 billion casino plan that would directly benefit Genting.

Genting currently operates a video slot machine complex at the Aqueduct racetrack in Queens, but it was campaigning for a state constitutional amendment that would allow it to build a full-blown casino. Company officials pitched their casino agenda to Cuomo at a fundraiser late last year; months later, the governor put his shoulder into a drive to construct a $4 billion convention center and casino at Genting’s Queens track. That plan collapsed days before the Times uncovered Genting’s undisclosed financing of Cuomo’s nonprofit. Genting has denied any wrongdoing in New York, and Cuomo has said that the company’s gambling money was not linked to his casino advocacy on its behalf.

In the eyes of the law that governs casino gambling in Massachusetts, the difference between a dirty nose and an outright pay-to-play scandal doesn’t matter -- at least as far as tribal gaming goes. As a check on casino corruption, the state’s new gaming law gives the Massachusetts Gaming Commission the power to test the “integrity, honesty, good character and reputation” of applicants seeking gaming licenses. The commission has the power to deny a license to any casino applicant that fails to “demonstrate responsible business practices,” or that the commission feels would be “injurious to the interests of the Commonwealth.”

However, that test only applies to commercial gaming applicants. The new gaming law doesn’t just give the state’s tribes an exclusive window to establish a gambling foothold in one of the state’s three casino regions. It also exempts the tribes from many of the hurdles commercial gaming applicants face, including the test of an investor’s character and reputation. The role of the state gaming commission in regulating and overseeing tribal gaming is subject to ongoing, confidential compact negotiations between the governor and the Mashpee. A spokeswoman for the state gaming commission said the group “would welcome all measures” to ensure “ethics and integrity,” although it was not immediately clear whether the commission has actually asked for such measures in compact negotiations.

In a statement, Mashpee tribal chairman drew a sharp line between the tribe and its financial partner, saying, “The entity proposing gaming in Taunton is the Mashpee Wampanoag Tribe, period. The company helping us with financing and development was chosen because they have the skill, management expertise, and knowhow necessary to run a first class destination resort casino. In addition, they have the financial resources to ensure that our Tribe will be successful in fulfilling our vision in Taunton and creating 1,000 construction and 2,500 permanent jobs as soon as possible."

PAUL MCMORROW

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