Turzai Legislation Aims to Fix Flaws in Gaming Law
7/17/2008
On the heels of the recent problems regarding the construction and license of the Pittsburgh casino project, Rep. Mike Turzai (R-Allegheny) has introduced legislation to help bring integrity, honesty and accountability to the Pennsylvania Gaming Control Board’s (PGCB) awarding of gaming licenses – and, when the need arises, take over a license.
 
“As a former prosecutor, I felt from the very beginning that the gaming law’s language lacked a proper amount of oversight by the Gaming Control Board over the financial suitability of applicants,” said Rep. Mike Turzai (R-Allegheny), chairman of the House Republican Policy Committee. “Various weaknesses in the law, as well as questionable actions of the board, were highlighted during Policy Committee hearings. Unfortunately the public was deprived of any Gaming Board responses or explanations because they refused to participate in all but one public hearing.”
 
Turzai’s legislation gives the PGCB the express authority to appoint a trustee in the event a license is revoked, suspended or not renewed. If enacted, House Bill 2720, would allow the PGCB to ensure, on behalf of the interests of the Commonwealth, compliance with the law and any conditions imposed on the slot machine license. According to Turzai, this is a much-needed step in ensuring proper regulatory oversight procedures and law enforcement measures are in place in Pennsylvania’s gaming industry.
 
Since the passage of Act 71 of 2004, the Slots Law, which expanded gaming in Pennsylvania, four of the five Category 2, or stand-alone casino, licenses issued by the PGCB are riddled with concerns. The PGCB’s gaming license application process has been questioned by law enforcement experts, gaming experts, financial experts and legislators. 
 
Over the past two years, the House Republican Policy Committee has held multiple hearings on the gaming license process in Pennsylvania. The hearings have raised serious questions about the PGCB’s process for background checks – both criminal and financial as testifiers have repeatedly confirmed that blatant flaws in the gaming law have led to licenses being awarded without thorough background.
 
Among the issues raised are:
 
  • The two Philadelphia casinos have little local support for their proposed location and have not started construction.
  • The Mount Airy casino license was approved amid serious flaws in the PGCB’s background check process.
  • The Pittsburgh casino license was issued to businessman Don Barden even though he apparently had accumulated personal gambling debts of more than $11 million, had no personal stake in the project and his other casino operations in other states had encountered financial problems.
 
House Republicans have also introduced legislation aimed at closing the existing loopholes to keep organized crime out of Pennsylvania’s new gaming industry. Further legislation would bring more openness to the licensing process by requiring public hearings on the qualifications of applicants and tightening the license and permit disqualification criteria.  
 
These bills have been referred to the Democrat-controlled House Gaming Oversight Committee where they have sat languishing. Neither House Democrat leadership, nor Gov. Rendell, has advocated any serious fixes or controls to the obvious problems at the PGCB.
 
“House Republicans have held numerous hearings, meetings and discussions about the problems in the gaming law, the licensing process of the Gaming Board, and the lack of public input to the board’s decisions,” Turzai said. “Since gaming is here in Pennsylvania, House Republicans want to ensure the PGCB is looking out for the interests of Pennsylvanians, not being advocates of the gaming industry. Pennsylvania taxpayers deserve nothing less.”
 
House Republicans recently sent a letter to the PGCB, asking for a detailed description of the board’s licensing procedures and a list of all conditions for licenses.
 
Attachment: July 14, 2008 letter to Pennsylvania Gaming Control Board
 
July 14, 2008
 
The Honorable Mary DiGiacomo Colins
PA Gaming Control Board
P.O. Box 69060
Harrisburg, PA 17106-9060
 
 
Dear Judge Colins:
 
Rightly or wrongly, the Pennsylvania Gaming Control Board (PGCB) approved licenses for slots casinos on December 20, 2006 – a date chosen solely by, and the discretion of, the board.
 
Ironically, the original intent of allowing slots in Pennsylvania, to help the state’s horse racing industry, has been lost in the tumultuous din raised by the problems facing most of the stand-alone casinos – Category 2s. The facilities located at the horse race tracks appear to be operating relatively trouble-free. The stand-alone facilities, on the other hand, have been beset with a myriad of issues.
 
The two Philadelphia casinos have almost no local public support and have not started to build. It has become such a problem that even Governor Rendell has acknowledged a growing concern for these casino projects.
 
As demonstrated at House Republican Policy Committee hearings (several of which the PGCB chose not to attend), the Mt. Airy casino license was approved amid serious flaws in the Gaming Board’s background check process.
 
The Pittsburgh stand-alone license was issued to businessman Don Barden, who created a company called PITG Gaming, LLC to build and operate the casino. The Gaming Board issued Barden the license even though the applicant had accumulated personal gambling debts of more than $11 million; regardless that his other casino operations in other states had major financial problems; and despite the fact that Barden himself planned on having absolutely no personal stake in the project . According to media reports, Barden and his business endeavors have had a long history of financial problems. Was the Board aware of these issues at the time Barden was granted his license?
 
With the exception of the license granted to Sands Bethworks Gaming, the Category 2 stand-alone licenses issued by the PGCB are riddled with questions of one sort or another. Only one of the Category 2 casinos is open and it was the subject of a grand jury investigation in which charges were filed.
 
We have noted with interest the PGCB’s recent proposed rulemaking 125-87, in which the Board has suggested the adoption of regulations to add new chapters concerning trusteeships over gaming facilities whose license has expired or has been suspended or revoked. Since there is no express statutory authority for these regulations, it is our intention to introduce legislation based on New Jersey’s law to clarify the PGCB’s authority to install trusteeships consistent with the power to revoke or suspend a license.
 
Financial backing for the Pittsburgh casino project, at least according to media reports, changes with the wind. At present, it may be important to consider whether the time has come to put the Pittsburgh Category 2 license in a trusteeship via revocation or other available procedures in order to protect all of the interests involved. The fact that Barden has apparently defaulted on his borrowed financing and has sought to change the terms of his license raises significant questions about whether this project can be completed in any reasonable period of time. 
 
Why should a trusteeship be considered? In this case, the old adage “haste makes waste” may be the appropriate response. The arbitrary timeline for the issuance of original licenses apparently did not give enough time for consideration of the issues surrounding many of the Category 2 facilities. A trusteeship may offer a means to actually continue construction and opening of the casino while pursuing the most advantageous options for ALL involved, including Pennsylvania taxpayers and the licensee himself. It would be a mistake to categorically rule out any option, including a process to allow public bidding on the license by parties which can pass the appropriate background and financial suitability checks.
 
With the exception of the PGCB, the fact that Barden’s finances were troubled left many to question whether the Pittsburgh casino would ever be an asset. With that in mind, when was the PGCB first made aware of Barden’s financial difficulties? Did Barden violate any of the “conditions” of his licensure with his financial problems? How and when did PGCB communicate the problems with Barden's financial issues? Was Barden fined for the financial problems or any violations of his “conditions?”
 
In addition, we are writing to request a copy of the terms and conditions that have been imposed on the PITG Gaming, LLC license by the Pennsylvania Gaming Control Board – the original terms and conditions imposed upon the granting of the original license and any subsequent additions or deletions since that date. Please include all terms and conditions imposed by the PGCB on license approvals for the remaining Category 1 and Category 2 licensees as well. Furthermore, we would request an explanation of the process which the PGCB is using to monitor other licensees financial positions. 
 
We are fully aware of the legislative intent of Act 71, The Pennsylvania Race Horse Development and Gaming Act. We hope the Board fully understands its fiduciary responsibilities and uses its authority to ensure that approved gaming facilities become reality to generate revenue.
 
Thank you for your prompt attention to this matter. If any of these information requests will take longer than the end of business this Friday, we would ask that you contact Garth Shipman, Acting Executive Director of the House Gaming Oversight Committee (R), concerning this delay. 
 
Sincerely,
 
Mike Turzai
State Representative
House District 28
Chairman, Republican Policy Committee
 
Paul I. Clymer
State Representative
House District 146     
Republican Chairman,                                                
Gaming Oversight Committee     
 
Doug Reichley
State Representative  
House District 134
Member, House Appropriations Committee  
 
Mike Vereb
State Representative
House District 150
Member, Task Force on Gaming
 
Curt Schroder
State Representative
House District 155
Vice Chairman, Gaming Oversight Committee
 
Rep. Mike Turzai
28th District
Pennsylvania House of Representatives

(412) 369-2230
Contact: Tricia Graham
House Republican Public Relations
(717) 260-6296
FOR IMMEDIATE RELEASE
July 17, 2008