Fraud, Deceit and Corruption in the Gambling Industry

Real Economics of Gambling

             FRAUD, DECEIT AND CORRUPTION IN THE GAMBLING INDUSTRY

                            by Nelson Acquilano, LMSW, CASAC, CPP, MPA

     There has been more fraud, corruption and deceit with gambling than with any other social problem.  It is inherent is the nature of gambling and the extreme greed and money associated with gambling.  The OTB and several New York racetracks were notorious for their fraud and corruption, showing that gambling and ethical corporate practice are incompatible partners.

     Governor Cuomo prides himself on running an ethical government, yet the fraud, corruption and deceit with this gambling issue has been anything but ethical.

  • Common Cause reported in 2012 that since 2005 gambling interests had spent $47 million on lobbying ($40 M) and  donations to political campaigns ($7.1 M)  in NYS http://www.commoncause.org/site/apps/nlnet/content2.aspx?c=dkLNK1MQIwG&b=5287775&ct=12188661 These outlays  included $2M  to the Committee to Save New York (a short-lived business-backed group closely aligned with Gov. Cuomo); Andrew Cuomo received $715,000; Eliot Spitzer $594,000; David Paterson $204,000; $3.9 million went to the candidates and committees of the State Legislature; and to other State Senators and Assemblyman and candidates. 

 

  • The Seneca Nation soundly voted DOWN a Gambling Compact on May 11, 1994, when Members of the Seneca Nation of Indians rejected a proposal to get into high-stakes casino gambling in an advisory referendum.  The casino proposal was defeated by a vote of 714-444; the nation’s leaders brought it back again and imposed it as “the will of the people” and it later passed on May 15th, 2002 because of passivity – not because it was the will of the people. 

 

  • Racinos now term themselves “casinos,” against the law, to increase crowds and profits; downstate racinos have now put in electronic table games in which the outcome is not determined by the Lottery’s central computer in Schenectady.  This violates the definition of lottery implicit in the opinion of the court in Dalton v. Pataki 2005 .   Deceit or fraud? http://www.nydailynews.com/opinion/doubling-casinos-article-1.1340994

 

  • The gambling syndicate tells you that gamblers generated $5.4 billion in revenue in New York State in 2010, rather than telling you that New York residents and visitors LOST $5.4 billion that year.  They also do not tell you that much of that money was not “disposable income,” but monies taken and lost from family savings and family support, from child support, money borrowed against life insurance policies or college funds, monies lost from social security or welfare support, or monies embezzled from businesses and industry.

 

  • Spokespersons for “gaming” won’t tell you that as according to a 2006 NYS OASAS (Office of Alcoholism and Substance Abuse Services)  study,  there were already 668,000 problem gamblers in New York State; and that 10% of adolescents meet DSM-IV criteria for problem gambling; and another 10% of youth are at-risk of developing a gambling problem. 

 

  • Proponents of more casinos won’t tell you that adding  seven  new casinos to  New
    York State  could (depending on siting)  create up  to 82,000 new pathological gamblers (a 47% increase), and  202,000 new problem gamblers.  They also “neglect” to say that quantifiable socioeconomic costs  related  to  ONLY new gambling addicts and problem gamblers are more than double than the tax revenues due to the state from licensing up to seven new casinos and taxing them (at 20% overall) on the take from all users. http://cagnyinf.org/wp/new-casinos-equal-1000s-of-gambling-addicts/

 

  • Slot machines are illegal under the NYS Constitution, thus, soon after 2001 they were re-termed VLTs (Video Lottery Terminals) in the courts to get around the law !

 

 

  • The May – June 2013 arrangements  re tribal casinos and exclusivity zones are expedient, intended  to  head off  opposition by the operators of tribal casinos to the proposed constitutional amendment that would legalize non-tribal casinos.  The pact with  the Oneida Nation of Indians is going to litigation,   with the towns of Verona and Vernon as plaintiffs.     Days after the Oneida agreement, Gov. Cuomo’s administration  forgave  the Senecas $209 million dollars  that the State had previously held were due  it under a compact that the Seneca Nation of Indians viewed as having been violated when VLTs came to racetracks in western New York State.  

 

  •  The very fact that the casino amendment was rushed through on the last day of teh legislative seesion without either a Health Impact Study or a formal cost-benefit study is a deceitful practice!

     Permission is hereby given by Cagnyeditor to reproduce this post by Nelson Acquilano in whole or in part as long as the permalink above is cited.  Photomontage by Nelson Acquilano

 

 

 

 

 

 

 

 

 

 

Problem Gambling Misery Summated

 

Graphic by Dave Colavito

Graphic by Dave Colavito

      The central statistic of casino finances is that 50% of taxable revenue comes from pathological and problem gamblers, about 4% of adults.  One evil of casino gambling is that almost none of the money that these unfortunate persons leave at casinos belongs clearly to them alone unless they have recently, and legally,  become very rich, without dependents.  Thus 50% of pre-tax revenue, more than 50% of profit, has been diverted from persons who may never have gambled, innocent bystanders or co-dependents.  Spouses, children, siblings, parents, employers, employees, clients – these are just a few examples.  The typical gambling addict is into eight, twelve, fifteen other people whom he or she will serially sacrifice to “the chase,” usually until it has consumed the gambler and destroyed all good social and emotional relationships.

     Most residents of the U.S. can recite that gambling addiction is a true addiction. Secretly, however, many believe it is a moral failing or a defect in reasoning that deserves catastrophe.  They rationalize that, if everyone can avoid a small increase in  personal tax outlays by the exenterating exploitation of the 4% who are problem gamblers,  that’s a win for the other 96%.   This “devil take the hindmost” approach may look utilitarian.  It does not take account of the dozen or more people around each problem gambler who are wrung out fiscally and emotionally in the quest for “more revenue to education.”  See the April 15 post “Robbing Peter” on this web site. 

      To comprehend the total misery dealt out by predatory gambling to a specified group of individuals would need much study. Consensus would be unlikely.  Economists like Earl Grinols have painstakingly  presented harm in terms of dollars.  While we respect this completely for cost-benefit analysis, we have always noted that  it understates the total impact, which is a stew of fiscal loss and emotional hurt.  Quantifying in an entire population the cumulative lifetime misery associated with problem gambling so as to reach consensus is impossible.  There are two aspects, however,  that everyone can agree on qualitatively.  First, the problem gambler alone does not sustain or mete out all the damage; second, not all the damage can be measured  econometrically.

          The graphic above, realized by Dave Colavito,  is an abstraction, not data-based.  It shows that the high casino profits due to problem gamblers,  which are taxed into “revenues to education” via gambling “regulated” or operated by state government come at the expense  — literal and figurative — of many more parties than those individual gamblers.  The “iceberg”  (actually it looks  more like a volcano rising above the waves from the ocean floor ) schematizes lifetime gambling-related cumulative misery as a function of psychosocial closeness to a problem gambler.  The problem gambler is the red apex.  The strata of adjoining locations represent lifetime cumulative misery of other parties at varying psychosocial distances from the problem gambler.  The anguish of a wife who has seen the furniture sold, the children made homeless and the husband she still tries to love gone  or jailed will be more than that of a client cheated or a friend whose loan to “help pay my kid’s doctor bill” is never repaid.  There are, however,  more clients and friends around a problem gambler than spouses.  Integrated  over all these more distant persons, the totality of hurt and loss is likely to exceed that of the very nearest and dearest. 

          However we define misery –as pure fiscal deprivation or that plus emotional damage  — it is not “just” the problem gambler who loses something lifelong  in the havoc of out-of-control gambling.  It is a dozen or more other people, whether innocent,  trusting, co-dependent or any combination. To the  casinos that prey on problem gamblers and governments that get income therefrom, these people are chopped liver.

Three references about impact on families http://s3.amazonaws.com/publicationslist.org/data/philip.darbyshire/ref-36/JGS%20gambling%20paper.pdf 

http://www.problemgambling.ca/gambling-help/support-for-families/effects-on-families.aspx

http://www.ncbi.nlm.nih.gov/pubmed/17667890 

Permission is given by Cagnyeditor to reproduce this in full or part as long as the permalink above is cited and the graphic is attributed to Dave Colavito.