Keynote Address: The AGA's Role in the Industry

Thank you very much. I’m delighted to be here this morning.

Although I no longer live in Nevada, I will always consider it my home; and therefore, I want to join in welcoming you to Las Vegas. I know those of you who have been here before will join me in marveling at the incredible changes in this city. As you can imagine, I visit here frequently, and even so, every time I come something new and fantastic is added.

In my various professional incarnations, I have had the privilege of traveling all over the world—from the crowded vibrant streets of Tokyo, to the exciting lights of the Champs Elysees in Paris, to the spectacular beauty of Monte Carlo. The world truly has much to offer in the way of entertainment, but there is still no place quite like Las Vegas.

It is here that the bright lights, the excitement and the opportunity that is our industry is displayed in its most spectacular fashion. Frankly, you have a wonderful exhibition here, but I have always considered this city a year-round, open-all-hours, never-ending trade show for the industry. And what you see in Las Vegas is a demonstration of the tremendous potential for gaming-entertainment in this country and around the world.

Ladies and gentlemen, I don’t need to tell you that America’s gaming-entertainment industry has experienced phenomenal growth in recent years. Just look around - the fact that so many of us are here is a testament to gaming’s popularity with the American people. Last year more than 125 million visits were made to casinos in the United States. More than 1 million American jobs depend on the gaming-entertainment industry; state and local governments in 1994 reaped $1.4 billion in tax revenue from casinos alone; we have become the fastest growing industry in the nation.

That’s why a group of leaders from our industry decided last year to form the American Gaming Association. AGA’s mission is to represent the interests of the gaming industry nationwide. On regulatory issues in Washington, the AGA is a zealous advocate and defender of the industry. On issues of concern to our industry - problem gaming, underage gaming, and consistent regulation and law enforcement - the AGA will be resolute in seeking common ground and promoting industry-wide solutions.

Finally, no issue is more important to the AGA, and to me personally, than helping to shepherd our industry into the mainstream of American life and commerce. This requires effective, aggressive communications with the American public - dispelling myths and responding to uninformed rhetoric. It is also going to be important that everyone in this audience get acquainted with the issues. It means nationwide outreach, not only to support our allies, but also to convince our skeptics.

The challenges that confront the AGA and our industry are varied and come from many directions. They are also reflective of an industry that is spreading rapidly. Our industry is on the cutting edge of new technologies, innovative entertainment and, yes, changes in national lifestyle. Because of these circumstances, we are today faced with great challenges in our nation’s capital.

In the United States Supreme Court, two cases on the docket this fall will impact the gaming industry. In these cases, the Supreme Court will be deciding nothing less than the division of power between the states and the federal government. In a case that was argued last week, the Seminole case, the Court considered the constitutionality of the Indian Gaming Regulatory Act and its power to require states to negotiate in “good faith” with tribal governments to create gaming compacts. I know there will be some of my Native American friends in this audience who will disagree with me, relying on the Cabazon case. Until the Supreme Court unequivocally states what Native Americans can legally do on native lands, and what restrictions federal and/or state governments can place on that activity by way of regulation or taxation, the controversy that surrounds Indian gaming will continue.

There is also a Rhode Island case in the Supreme Court involving state-imposed restrictions on liquor advertising. The larger picture, in this case, is the state’s ability to regulate commercial speech that the state deems to be socially unacceptable—such as alcohol, tobacco and gaming advertising. As you know, many states have laws that mirror those in Rhode Island, and this case is an important one to watch.

Other Washington challenges to gaming involve that certainty of American life: the tax man. The Internal Revenue Service has challenged the extent to which complimentary rooms, meals and drinks can be deducted by hotels and those in the gaming industry. What they are actually saying is that there can be no deduction for complimentaries. The IRS has even gone so far as to challenge the deductibility of free meals provided by our industry to its employees. Additionally, the IRS is taking the position that all casinos must tally their outstanding chips each year as of December 31 and declare the same as income for the year, assuming, I guess, that those chips will never be redeemed. The AGA is at the forefront of working with the leaders of the industry and the IRS to resolve these matters.

At the other end of Pennsylvania Avenue, the Congress is also active. The House Ways and Means Committee has proposed withholding on bingo and keno awards in excess of $5,000. Importantly, when the bill first came out, the Chairman’s mark included slot machine payments, but they have since been removed. The bill also proposes to impose a federal tax on Indian gaming revenues and to fund a study by the Treasury Department of charitable and Indian gaming. I noticed in newspapers distributed today that Chairman McCain and others have announced their opposition to that tax. This bill, of course, must now be considered by the full House and the United States Senate.

As critical as these issues are to our industry, they are irrefutable evidence of how dynamic our industry has become. We are growing, and these are, for the most part, problems that come to all growing and expanding industries. While they must be addressed, and we are doing so, there is no need to fear them, for it is not these problems that are the real threat to our industry.

Ladies and gentlemen, gaming today is under unprecedented attack from an unlikely alliance—in effect, our success over the past few years has galvanized our adversaries.

On the one hand are the federal regulators and taxers who see in our industry an opportunity for Federal regulation (translated to mean more jobs for Washington bureaucrats) and a candidate for federal taxes (translated to mean more money for Washington to waste and less money for state and local governments to spend on things such as education, social services, recreation and local infrastructure). Those people have been out there for a long time, and the industry has been meeting those challenges.

On the other hand, you have the moral crusaders who see gaming-entertainment as inherently evil. These people, make no mistake about it, have but one agenda: the complete abolition of the gaming-entertainment industry.

This is a battle we must win. Survey after survey and the incredible growth of our business show that the public is on our side, but the combination of a greedy federal government and moral zealots on a mission are formidable opponents. I am here this morning to raise this warning: Our industry is under attack and we, as an industry, must join together to counter the threats that are raised against us.

Ladies and gentlemen, the subtle means to accomplish our opponents’ objectives is concealed in the form of a rather innocuous-sounding bill creating something called “The National Gambling Impact and Policy Commission.” Introduced in the House of Representatives by Congressman Frank Wolf and in the Senate by Senators Paul Simon and Richard Lugar, this bill is nothing more than the first step on the road to federal regulation. If the moralists have their way, the ultimate abolition of our industry—and with that, the livelihood of many, if not most, in this audience—will be at stake.

Some observers, particularly my friends in the media, have asked, “If gaming is such a good thing, why are you afraid of a study? All they are seeking is an innocent little study. After all, what could be wrong with gathering more information and data?” It sounds so reasonable on its face. I respond by saying, “Look carefully at the motivation of the advocates for such a study. Frankly, it is a lot like someone telling you, “We’re going to appoint a special counsel to look into your tax returns and personal finances, and you ought to welcome it; because if you are innocent and have nothing to hide, it will clear your name.” That’s a ridiculous approach.

Proponents of a national gaming study claim that state and local lawmakers just don’t have enough information to make informed decisions on the issue; however, they have yet to identify the state and local lawmakers who are complaining about the alleged lack of information and requesting assistance from the ranks of the Potomac. In fact, most governors and most state legislators feel they are the best judges of what is in the best interest of their states. For at least two decades, state after state has competently considered the pros and cons of gaming-entertainment without the Federal government’s help.

There really is no need for this so-called study. In recent years, hundreds of studies have been done on every aspect of the gaming-entertainment industry. These studies have been prepared by independent, reputable firms such as Andersen Consulting, Ernst & Young, KPMG Peat Marwick and Smith Barney, and by many state legislatures or state research institutions in such states as Illinois, Wisconsin, Massachusetts, New York and Minnesota. These studies have rightfully been accomplished on a state-by-state basis, taking into consideration the particular economic conditions, tax base, unemployment rate, labor pool, infrastructure needs and other matters unique to each state. There just cannot be a federal study that will fit or meet the needs of every state or local jurisdiction considering gaming matters.

This is also not the first attempt by opponents of gaming to use a study to further their cause. Some years ago, Congress created a national commission to study gaming.

The Commission on the Review of the National Policy Toward Gambling, after three years and millions of dollars, drew a primary conclusion in 1976 that remains valid today. The key conclusion of that study was:

“Because it is a social issue, the Commission has determined that gambling policy is the proper responsibility of the government entity closest to the lives of citizens—the state. …States should have the primary responsibility for determining what forms of gambling may take place within their borders. …The Commission does not believe that the Federal Government, which represents the Nation as a whole, should substitute its judgment for that of the individual States in this area.”

Not only is a study unwarranted and unnecessary, but the federal government has no jurisdiction on this matter. Gaming clearly falls into the category of a right retained by the states in the 10th Amendment to the Constitution, and 200 years of legislative history support that conclusion.

So, the argument that the gaming industry needs another study - particularly another Federal Government study - is ludicrous. It’s like saying that the problem with TV’s coverage of the O.J. trial was that the networks needed more expert commentators. Ridiculous.

Alright, that’s the problem. So what can we, as an industry, do to combat these and other threats to our livelihood? First, everyone—your employees, families, friends, etc.,—should write to their U.S. Senator and Congressman and express their opposition to this study. I can assure you the proponents of the study are writing their legislators and Congressmen. Second, I can assure you that the AGA will be zealous in its efforts to combat any and all government attempts to roll back and abolish our industry. Equally important, we will energetically take our case to the American people.

But these actions alone will not be enough. It is vital that, in the coming months, the industry position itself correctly - and speak with one voice - on some of the major issues affecting gaming.

I said when I came on board that this industry must admit when it has warts and must face the issues. That’s what I’m talking about here. First and foremost, we must face the issues of problem and underage gaming. Our opponents position themselves as “opposed” to them, the presumption being that we, the industry, are somehow “in favor” of them. Nothing could be further from the truth. As good corporate citizens, we are meeting our responsibility head-on through the creation of an AGA task force to develop a three-fold strategy of formulating industry-wide policies and training programs, raising public awareness, and acting as a resource for state and local jurisdictions seeking information. We have also established a national foundation to research improved treatment methodologies, hold national conferences and seminars, and develop and fund 1-800 hotlines for those seeking assistance. In other words, we will put our money where our mouth is.

As you know, our industry is totally dependent for its integrity on tough regulation and enforcement. That is a lesson learned through experience here in Nevada and in New Jersey. It is a lesson that has been passed on in most other jurisdictions as the industry has grown. But, as we are seeing with the corruption scandals in Louisiana, it only takes one bad example to wreck havoc for us all. I told a New York Times reporter recently that if a little mud is splashed in one place, it splatters us all.

I know that where there is money there is the potential for corruption, and that it is by no means confined to gaming interests. All one needs to do is look at the various scandals in our nation’s capital that had nothing to do with gaming to confirm that. The point is, where there is corruption and wrongdoing, it needs to be aggressively rooted out and the culprits prosecuted. And the leaders of our industry must be the loudest in demanding that action.

The fact is, as an industry, we must be vocal in our support of enforcement and regulation, and we must insist that states and jurisdictions install and implement tough regulatory and enforcement policies. Paul Dworin talked about the future, and I know there are a few seminars here on the next topic. It is a subject that is hard to get your arms around.

The next frontier for gaming is not in Utah or in Hawaii, but wagering on the Internet. The legality of many of these activities is subject to considerable uncertainty, and the technology raises controversial issues of privacy, security and enforcement. Cyberspace gaming may not be in the best interests of the American people and of our industry. The AGA will try to stay a step ahead of these important developments.

Our industry has a proud tradition of avid competition. It has been a key factor in our growth. And I would never suggest that competition be set aside when in pursuit of business opportunities, but the organizations that formed the American Gaming Association have agreed to work together through the AGA because they know the future of the industry depends upon cooperation. And believe me, if these highly competitive industry leaders can take that step, the rest of the industry can also. We expect that the membership qualifications for the AGA will be modified in the next few days so that all people, all companies who have an economic stake in the gaming industry, can become a part of our organization.

In conclusion, like any other part of the entertainment industry, or any other industry for that matter, gaming is first and foremost a business. If our businesses prosper we provide the means for mothers and fathers to put food on the table, buy clothing, educate their children and save for the future. The people who work in our industry raise families, go to church, buy homes, TVs and refrigerators and contribute to their community. Our employees are a part of the American mainstream.

Many challenges lay ahead as we move the industry toward that same level of acceptance. The “moralists” will continue to condemn and criticize us; but, if we do the right things, if we are aggressive advocates, if we communicate the real facts through effective education programs, and if we respond openly and honestly to industry problems, I believe in the end we will prevail.

We will prevail just as surely as we have seen the gaming-entertainment industry move far beyond the borders of Nevada and New Jersey and have seen some form of gaming legalized in practically every state. If, as an industry, we do the things I have attempted to outlined today, our future will be secure, bright and profitable for our employees and our families.

I promise you the American Gaming Association will do its part.