Why gambling is such fertile ground for corruption
After decades of resisting easy-money promises by gambling moguls, New York State and City plan to license casinos in Midtown Manhattan, Coney Island and near Citi Field in Queens. Promoters and politicians alike promise a cornucopia of jobs and new tax revenues, but even more certain is what they dare not admit: more corruption. Indeed, the last great wave of legal American gambling ended more than a century ago in a corruption scandal run out of Manhattan.
I know, because more than three decades ago I wrote a book exposing the public policy fraud of supposedly strictly regulated New Jersey casinos. Politicians, regulators and casino owners and executives sold the public a big lie captured in their endlessly repeated mantra that “Atlantic City casinos are the most heavily regulated industry in the history of the world.”
Instead, what I documented was the ugly story of a facade built to hide how casinos corrupted the Garden State government, just like the late 19th century Louisiana Lottery scandal, in which New York promoters in 1868 hired former Confederate generals to attract gamblers, bribed key Pelican State lawmakers — and when they needed more in 1890, basically bribed the entire legislature in Baton Rouge. That corruption ended America’s second wave of legalized gambling.
Politicians, regulators and casino owners and executives sold the public a big lie captured in their endlessly repeated mantra that “Atlantic City casinos are the most heavily regulated industry in the history of the world.”
With it looking increasingly likely that a full-fledged casino will come to the five boroughs, New Yorkers should expect a replica of New Jersey’s public-policy fraud. The pattern plays out predictably.
First, we see the relentless and ruthless pursuit of the relative small fry to create the appearance of strict law enforcement. For example, regulators publicized denying a blackjack-dealer license to a woman who didn’t disclose that as a teenage retail clerk she gave unauthorized discounts to friends. Second, when casino owners themselves commit crimes or violate regulations, these regulators must be sightless sheriffs, not unlike Claude Raines’ Captain Renault in Casablanca. Third, the regulators have a habit of spoon-feeding gullible journalists good stories heralding aggressive enforcement actions but without the essential context about who is let off the hook.
This and much more comes from records of the New Jersey Division of Gaming Enforcement and the misnamed Casino Control Commission.
Reporting the hard facts about misregulation requires hours in windowless rooms sifting through mountains of government paperwork for gold nuggets of fact buried there. It also requires understanding the intentionally opaque language of regulatory agencies, which frustrates so much public engagement. (After retiring from The New York Times, I taught regulatory law for eight years on the faculty of Syracuse University College of Law — even though I’m not a lawyer.)
My pursuit of casinos and institutional corruption began with a 1987 U.S. Supreme Court decision allowing Indigenous people to operate casinos, then confined to Nevada and the Jersey Shore. Soon casinos would spread across America because the Holiday Inn and Ramada Inn companies, having saturated the market for roadside motels, had expanded into casinos in those two states and wanted more.
And so in 1988, having devoted years at the Los Angeles Times to documenting corruption and brutality in the Los Angeles Police Department, I headed east to cover Atlantic City for The Philadelphia Inquirer.
Had New Jersey, I wondered, actually turned a vice into a virtuously regulated industry that served the desires of many people to gamble while defeating the corruption that marred all previous legal gambling in America? If so, that would be a vital story with important policy lessons for the rest of the country.
The short answer: No, the beast could not be so easily tamed.
I titled that exposé “Temples of Chance” because high rollers and degenerate gamblers alike told me in often painful detail that betting was a religious experience, the gods of odds passing judgment on their sins, venial and mortal. At times, I felt like I was taking confession. Without any hope of redemption, the bettors faced a lifelong hell once their (or other people’s) money ran out.
Gambling is a vice that harms those with compulsions the most. We’ve been allowing it more and more in the United States in recent years — not just through ever more prevalent casinos, but lotteries, daily “fantasy sports,” and now ubiquitous sports gambling.
The economic harm done to ordinary people, including family members and workers at companies bosses looted to feed their compulsive gambling, is well documented, but the connection to official corruption is less well known. New Jersey didn’t allow crime families to skim off the top, littering the land with victims of mob justice. In Atlantic City, it was only publicly traded companies or, in the case of Donald Trump, companies with publicly traded debt, who could operate casinos. So would these corporate casinos be better than mob-owned joints? And to what extent would any taint extend to government?
The regulatory scheme encouraged crime and corruption, which thrived openly or were thinly disguised. Consider the case of George Snyder III, the elected tax collector for Abington, a prosperous Philadelphia suburb.
In the 80s, Snyder pumped $13 million of cash into Trump Castle slot machines, ultimately losing at least $800,000. Trump rewarded Snyder, the town’s police chief and their pals with lavish dinners, hotel suites and limousine service as rewards for their money-losing ways.
Nobody asked where Snyder got all that money. Al Luciani, a casino executive who helped write New Jersey’s Casino Control Act, explained why. When it comes to the source of betting money, he told me, “casinos aren’t required to pay any attention to that unless, perhaps — and this is only a perhaps — the guy is playing on credit. Then there might be an issue.”
And what if some enterprising reporter reveals that the cash a gambler wagers came from embezzling tax dollars? “A story in the newspaper that some guy is embezzling public money isn’t any kind of notice at all,” Luciani said. The regulators I interviewed agreed.
One day, Snyder was steaming, his juices flowing as he made bet after bet until he ran out of cash. Instead of going home, Snyder rang Abington Town Hall. Soon, a police car arrived with tens of thousands of dollars taken from the municipal vault. Eventually Snyder was convicted of stealing $200,000, a fraction of what he took.
In contrast, consider the case of Diane Pussehl, a cocktail waitress rousted from her bed before dawn and charged with a felony after a surveillance camera captured her gracefully bending down and picking up a $500 purple chip on the carpeted walkway near a blackjack table.
Her arrest and prosecution made headlines, but a judge dismissed the case. Regulators then charged Pussehl with a misdemeanor, also thrown out. Next, the state went after her license, claiming the single mother was a thief and, therefore, morally unfit. That failed, too, because Pussehl violated no law, not even her employer’s policies.
Contrast this harsh treatment with casino owners laundering dirty money for drug traffickers, Trump Castle cheating novice roulette players, and several casinos plying children as young as 12 with liquor, limousines and suites. No one mistakes a 12-year-old for a 21-year-old. The regulators working the casino floors were reliably and willfully blind to this behavior. One parent, an Atlantic City police detective, later testified that when he begged casino managers to bar his underage daughter from their facility, they laughed at him.
In one case, I documented how a casino granted millions of dollars in credit to a Colombian national whose business was a narrow stall in an open-air Medellin Mercado. I traced the flow of money from a Miami bank to an Aruba casino owned by an Atlantic City casino operator, back to another Miami bank and through more transactions until it reached a New Jersey gambling hall. A casino regulator sent to investigate that Aruba casino told me that cocaine dust coated his hotel bureau dresser drawers. He said his bosses in Trenton said it wasn’t their concern.
How did New Jersey’s chief casino law enforcer respond? He said that because not every document was accessible, the state could do nothing.
Again and again, Atlantic City casinos did extraordinary business with and favors for heavyweight crooks, including mob assassins. A Montreal bank clerk lost millions while wearing $2 pants bought at thrift stores. Caesars gave him private jet service but never asked the source of the money, embezzled from his employer.
New Jersey hadn’t cleaned up gambling. Instead, it had created a protection racket for casino owners. The state insulated casino owners from mobsters and from their own misdeeds, especially the money laundering that federal officials later uncovered, which began at Trump’s Taj Mahal the day it opened. When two low-level casino regulators figured out a Trump scheme to illegally inject $3.5 million into one of his casinos to make a bond interest payment, an act for which he was later fined, those diligent public servants found themselves in career-ending hot water with their bosses.
Perpetuating the fraud of strict casino regulation will be easier in New York City in the days ahead because the ranks of journalists are depleted. Journalism is the fastest-disappearing white-collar job in America. Focusing news exactly where the industry and its regulators point, and away from casino operators corrupting law enforcement, gamblers and others, should be easy in our emerging era of journalism lite as news as thin as low-calorie beer becomes the norm.
Perpetuating the fraud of strict casino regulation will be easier in New York City in the days ahead because the ranks of journalists are depleted.
An earlier round of gambling regulation in New York, which involved legislators in Albany including a state senator named Eric Adams, was fraught with corruption, a scathing 308-page report by the state Inspector General report found. I’m not suggesting the current casino selection process itself is corrupt — but I sure wouldn’t be surprised if wining and dining and wheeling and dealing crosses the line into graft.
And what do the surrounding communities get for all this risk?
Almost a half-century after New Jersey politicians promised voters that authorizing casinos in Atlantic City would revive that fabled Boardwalk town with jobs and taxes galore, that city and its suburbs have endured America’s highest unemployment rate during the pandemic. Casino owners like Donald Trump were allowed to skip out on paying tens of millions of dollars in taxes; the casinos themselves got property tax refunds so huge the debt will weigh on city residents for decades. With the casino market now oversaturated by almost any reasonable measure, lawmakers and regulators keep easing those supposedly strict regulations so there are more and more places for more suckers to bet, and more and more fertile ground for corruption to spring up.
The American gambling market is saturated. In recent years more than 50 Las Vegas casinos have either closed or development was halted, with others closing around the country as competition to attract gamblers drove costs above profitability.
By extending credit, casinos prey on compulsive gamblers for whom betting is an emotional or religious experience. Many big losers surely will turn to embezzling and other crimes to pay off their debts.
Law enforcement will pursue many petty cases to create an image of strict regulation while looking the other way at wrongdoing by rich and powerful casino executives and owners — which can be career-ending for green-velvet-jungle detectives.
The odds are stacked against integrity and casino gambling going together.
If you want more corruption, you can place a sure bet: Legalize casinos in New York City.