Key facts on casino owners withheld, grand jury claims
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HARRISBURG -- State investigators uncovered gambling convictions, connections to organized crime, drug arrests and questionable political contributions from employees of casino applicants but weren't allowed to present that information to the state Gaming Control Board as it considered awarding slots licenses.
That was among many startling findings a statewide investigating grand jury outlined in a 102-page report released Tuesday. The grand jury is empaneled in Allegheny County.
"The Pennsylvania Control Board, through its administration and regulatory process, neglected or wholly ignored [its] public policy objectives and in particular engaged in conduct that: failed to thoroughly protect the public from unlawful gaming practices," the grand jury said in its report.
The scathing report also accuses the gaming officials of conducting public business in secret, bypassing qualified job candidates in favor of political hires, rushing background investigations and ignoring evidence of wrongdoing by casino applicants.
Gaming board Chairman Greg Fajt downplayed the report as a rehash of "old news" that proved no criminal wrongdoing.
"After this grand jury met for more than two years, there were no arrests, no presentments, no indictments. They found no criminal activity because there was, in fact, no criminal activity to be found," he said in a statement Tuesday.
House Gaming Oversight Committee Chairman Curt Schroder, though, said his committee will hold hearings this summer to review the grand jury's findings.
"The lack of a criminal indictment does not in any way dilute the impact of the overall indictment of the actions of the Gaming Control Board throughout its existence," said Mr. Schroder, R-Chester.
He also is calling for legislation that would move the Bureau of Investigations and Enforcement out from the control of the Gaming Control Board and under the auspices of the attorney general.
According to the grand jury report, supervisors meddled in background investigations, ordered information scrubbed from reports and discouraged agents' attempts to conduct interviews.
In some cases, dozens of pages of investigators' findings were deleted from suitability reports used to determine eligibility for casino licenses. Some of the deleted information involved allegations of illegal gambling, questionable campaign contributions in other states and affiliations with organized crime, grand jurors said.
The report focused on casino licenses to operate Majestic Star and Station Square casinos in Pittsburgh, Presque Isle Downs in Erie and Mount Airy Casino Resort in the Poconos, whose owner, Louis DeNaples, was later indicted on allegations of perjury and other charges related to his license application.
According to the report, gaming board employee Don Shiffer regularly called Mr. DeNaples' daughter, Lisa, during meetings in 2007 when he was present for closed-door discussions about revoking the Mount Airy license.
Mr. Shiffer later went to work for Mount Airy -- secretly, in order to skirt a requirement that gaming officials wait at least a year between working for the board and taking a casino job. Mr. Shiffer testified before the grand jury that he officially worked for the private law firm Wright and Reihner, but spent 95 percent of his time as in-house counsel to Mount Airy, occupying an office at the casino.
The grand jury, according to the report, "finds that his employment with Wright and Reihner was ... a subterfuge to hide the fact that he left the board to immediately work for Mount Airy."
In the case of Majestic Star, the grand jury found that supervisors told agents to purge references to owner Don Barden's $1.9 million in gambling debts and $11.1 million in gambling losses between 2001 and 2006.
"Barden's financial history and corresponding level of risk was wholly ignored," grand jurors reported.
Mr. Barden, who died last week, was never able to secure financing to complete construction on the slots parlor, which now is owned by Chicago billionaire Neil Bluhm, who renamed it Rivers Casino.
Reached Tuesday, former Barden spokesman, Bob Oltmanns, said the grand jury did "an awful lot of Monday morning quarterbacking."
He said 200 state auditors and forensic accountants poured over "every shred" of Mr. Barden's personal and business financial records and deemed him suitable. He added that financial suitability was only one of many factors, the others being location, impact to the community, and the gambling revenue to be generated, that was considered by the gaming board.
"Neither the gaming board nor anybody associated with [Mr. Barden's company] has anything to defend or apologize for. That this is going on five years after the fact is nothing more than a witch hunt," he said.
In the case of Station Square, grand jurors found that the final report omitted nearly three pages of details about campaign contributions from casino associates to lawmakers who were the staunchest supporters of legislation that legalized casino gambling.
Contributors included Charles Zappala and William Lieberman, who were acting as consultants in exchange for a 7.5 percent share each in the proposed Station Square casino.
In the case of Presque Isle Downs, the grand jury found that supervisors in the Bureau of Investigations and Enforcement instructed agents not to conduct particular interviews or to request additional information concerning payments to vendors.
Rather than disqualifying Presque Isle because of apparent problems with several of its key employees, the gaming board allowed the applicant to "carve out the 'unsuitables,' " according to the report.
Email messages between investigating agents demonstrate their concerns.
"Are there just a few of us that believe something is fishy here? Is this not a license suitability situation or must we prove the entire gang is guilty beyond a reasonable doubt or, worse yet, beyond any doubt?" supervisory agent Thomas Brletic wrote in one message that was quoted in the grand jury report.
In response, Liz Brady, a spokeswoman for MTR Gaming Group, Presque Isle's owner, said the company "respectfully disagrees with many of the conclusions contained in the report, which are clearly based on a unilateral presentation."
She said individuals cited as concerns in the grand jury report are either no longer affiliated with the company or no longer employed or involved in the operations of the company or its affiliates.
Another agent told the grand jury that Tad Decker, then gaming board chairman, accused him of "picking on" Mount Airy and asked him why he was "pestering" the applicant for vendor information.
Mr. Fajt said the board's efforts to regulate a new industry were successful, although he admits "minor missteps along the way, none of which affected the final judgments and integrity of the board."
He said the board already has made improvements.
"The board has steadfastly and repeatedly said that we did our work well, we have protected the public, and the citizens of Pennsylvania are reaping tremendous dividends from our work," he said.
The grand jury said the board can do better.
Among its recommendations:
• Replace board attorneys and other employees with people more experienced in gaming.
• Establish the Bureau of Investigations and Enforcement as an independent agency.
• Ensure that all information uncovered by the bureau is reported to the board.
• Require casino vendors go through background investigations.
• Rewrite the crimes code to criminalize intentional violations of the 2004 gaming act.
• Annually list the number of executive sessions conducted and provide an agenda for each session.
• More narrowly define what topics can be discussed at executive sessions of the Gaming Control Board.
• Keep minutes of executive sessions.
• Prohibit agency employees from seeking jobs with any casino entity for four years after termination.
Since slots parlors were legalized in 2004, Pennsylvania casinos have provided $5.1 billion in licenses and fees. That money has been used to reduce property taxes, support the horse racing industry, supply grants for fire companies, fund water and sewer projects, and fund local initiatives in communities near the casinos.
First Published May 25, 2011 12:00 am