Slots get little or no state review

Slots get little or no state review
Article by: TONY KENNEDY , Star Tribune

The state's biggest casinos have gone years without inspections, even with three agents on the job. In contrast, Wisconsin, with a staff of 15, follows detailed procedures and audits every casino once every 18 months.

Slot machines and blackjack tables at Minnesota's Indian casinos have been operating with little to no state scrutiny since at least 2008, records show, including zero slot machine inspections at Mystic Lake Casino in Shakopee, by far the state's biggest gambling house.

Slots at Grand Casino Hinckley and Grand Casino Mille Lacs have gone four years without inspections, which are supposed to guarantee compliance with state-mandated payout ratios. And there were no blackjack inspections at any of the state's casinos in 2008, 2009 and most or all of 2011, according to documents reviewed by the Star Tribune.

The state agency with authority to inspect tribal casinos -- the Alcohol and Gambling Enforcement division of the Department of Public Safety -- has attributed the decline in inspections to budget constraints. But even with three full-time agents assigned to Indian casinos, it has not reviewed any tribal casino audits since 2005. And unlike its counterparts in neighboring states, the agency has no manual of procedures for slot and blackjack inspections.

"Who is looking out for the people of Minnesota here? It's not happening," said Rep. Steve Drazkowski, R-Mazeppa, whose staff has been investigating the matter since last June.

Sen. Mike Parry, R-Waseca, chairman of the State Government Innovation and Veterans Committee, said he will call a hearing on the issue this year.

"I just feel we need to get to the bottom of this," Parry said. "It's absolutely uncalled for that our enforcement department is not fulfilling its obligation."

John McCarthy, executive director of the Minnesota Indian Gaming Association, said there has never been any question about the integrity of Minnesota's tribal gaming and that the tribes have complied with all regulations. Besides oversight from the state, Indian casinos in Minnesota are regulated by the tribal governments themselves, the Bureau of Indian Affairs, the U.S. Department of Justice and the National Indian Gaming Commission.

"There just is no problem,'' McCarthy said. "It's the most regulated gambling in the country.''

Wisconsin, where a similar industry of Indian casino gambling is thriving, has a much more rigorous inspection protocol.

Using a staff of 15, the Wisconsin Division of Gaming follows detailed procedures and a tight schedule of five-day compliance audits at every casino once every 18 months.

Wisconsin agents inspect 10 percent of slot machines on those visits while also observing and inspecting card games. They always do a follow-up audit, the state's compliance chief said in an e-mail to a Minnesota legislative staffer.

Protecting games' integrity

Steve Knudson, administrator of Wisconsin's Gaming Division, wouldn't comment on specific inspection findings but said they are "necessary to maintaining the integrity of casino gaming in our state."

Parry and Drazkowski said the purpose of sending state inspectors to the floors of the casinos is to protect the integrity of the games.

"It's to provide deterrents for mischief in a variety of areas," Drazkowski said.

Slot machine payouts, which are controlled by software, are mandated by law to be a minimum of 80 percent to 95 percent of what goes in over the lifetime of the game. Among other things, inspectors are supposed to ensure that casinos follow control standards on removal and replacement of the software.

When blackjack games are reviewed, inspectors are supposed to run a variety of checks on cards in use by dealers, storage of cards, security of cards, dealing practices, table bets, tipping by patrons, table supervision and other elements.

A fresh start

Michele Tuchner, the new director of Minnesota's Alcohol and Gambling Enforcement, said she is considering a fresh approach to fulfilling the agency's casino inspection obligations. Hired in October from the State Patrol, she has been discussing how to accomplish more with limited resources.

After talking with the staff, she said, she has concluded, "We've kind of been a little neglectful of casino inspections.''

For starters, she said, inspectors immediately will resume the practice of reviewing audited tribal financial reports on gambling. The first stop will be Mystic Lake, which recently notified the agency that its latest reports are available.

To be sure, state inspectors have reported few problems, even when they were doing hundreds of game inspections a year, Tuchner said. When concerns have risen, the tribes have worked to address them.

Jim Arlt, Minnesota's former acting director of gambling enforcement, said in a letter to Drazkowski last August that since 2008 the agency had limited its inspections to "primarily being reactive to complaints."

The result was the near elimination of slot machine inspections. In the four-year period stretching to the end of 2007, just 35 of 15,150 slot machines at the state's seven largest Indian casinos were inspected, according to Department of Public Safety records obtained by Joe Marble, committee administrator for the Minnesota House.

Arlt had put a priority on blackjack inspections for 2011 after they were revived in 2010, but by mid-year no blackjack inspections had been completed. In October, when Tuchner took over, Arlt's goal was unmet, she said.

As recently as 2007, the state had a different strategy for casino inspections, putting slot machines first.

"Video games of chance [slots] are the largest form of gambling in the tribal casinos and inspections of those devices are given priority,'' then-Public Safety Commissioner Michael Campion wrote in a January 2008 letter to a state representative who inquired about card game inspections. Campion said there had not been recent inspections of blackjack because of the emphasis on slots.

100 percent inspections

Like Wisconsin, South Dakota invests heavily in on-site casino visits, Marble's research showed. Even if a tribal gaming commission operates its own testing program, the state tests 20 percent of gambling devices at a casino. When South Dakota audits privately owned casinos, it inspects all slot machines.

When Minnesota signed gambling compacts with the state's 11 Indian tribes starting in 1989, the tribes agreed to pay $13,636 each year for state oversight.

The combined annual payment to the state is $150,000.

Parry said it might be appropriate to review whether the contribution is still adequate. The compacts were signed in perpetuity with no revenue sharing for the state.

"If Gambling Enforcement has a problem, they need to talk to the Legislature about it or else get out there and do their job," he said. "Just saying, 'Well, we don't have the time or we don't have the manpower,' that just doesn't cut it."

Tuchner, the new enforcement director, said her staff is already striving for more efficient ways to oversee tribal gaming.

A pilot project in cooperation with the Red Lake Band of Chippewa is giving state inspectors access to a computer database that tracks slot payouts en masse at the tribe's casinos. If it goes well, the Leech Lake Band of Chippewa is prepared to join the effort.

"I do feel that the inspections are a responsibility of this division," Tuchner said.