So Much Accomplished, So Much Yet To Do

Thank you for that kind introduction. It’s good to be here with you this morning.

As we close in on the end of a very busy year, I am reminded of a story about the great Winston Churchill. He was welcoming a number of people into his office at 10 Downing Street when a woman, whom he recognized as a member of the temperance league, stepped forward. She said snippily, “Mr. Prime Minister, we certainly have much to be grateful to you for, but I am constantly appalled by stories of your drinking habits. I am told you’ve drunk enough to fill this room from the floor to your waist.” Churchill took a long drag on his cigar and looked from the floor to his waist, and then from his waist to the ceiling. He smiled warmly at the woman and said, as only Winston Churchill could, “Madam, so much accomplished…so much yet to do.”

So much accomplished…so much yet to do. That points me in the right direction to bring you up to date on a few issues we’ve been following at the AGA, beginning with the National Gambling Impact Study Commission.

The Commission met three times this year…its first three times. Generally, the reviews are now positive after a rocky beginning. At the second meeting of the panel this summer, more than a dozen casino employees appeared as witnesses in support of the gaming industry. To give you a flavor for how this went, I’d like to pass along two bits of testimony the Commission heard from our employees. James Farber, a games supervisor at Harrah’s Atlantic City, told the Commission that, “…the most valuable way in which the gaming industry has enhanced my life is in the sense of pride and self esteem that it has given me. It has allowed me to work with people from all walks of life and from around the world. It has taught me the value of diversity and how to assimilate the best of these cultures into myself.” Steven Karaisz, a security shift manager and an 18—year employee of Bally’s Park Place, said, “Casinos are really more than just jobs…. It’s employees and their families. A company, a family away from your family.” These are fine words. You would have been very proud of how these good, hardworking people represented our industry.

The third meeting of the Commission was held in October. It saw the appointment of a competent executive director and the adoption of rules that are strong and fair, incorporating many of the suggestions offered by the AGA. For example, the rules require five votes from the 9—member panel before subpoenas can be issued, and there is strong language protecting the confidentiality of witnesses and documents. The Research Subcommittee of the Commission also reported at the meeting that it envisions three basic research tasks: conducting a national survey of gambling behavior, targeting surveys of communities and problem gamblers, and developing a 100—community database with information on “social problem indicators” and “economic indicators.” The next meeting of the panel will take place in Atlantic City in late January.

The AGA will continue to closely monitor the work of the Commission. And we will be offering the panel some groundbreaking information on an issue that is near and if not so dear to all of us — crime and gaming.

As we all know, misinterpreting, manipulating and distorting the facts about our industry is not new. It occurs with regularity and is aimed at every aspect of gaming, but the crime issue is always at the top of the list. Earlier this year, we at the AGA decided to do something about the misinterpretations, manipulations and distortions concerning gaming and crime. We commissioned a study of the issue, which is being released at this conference. The study is entitled: “Casinos and Crime: An Analysis of the Evidence.” Mr. Jeremy Margolis is the author, and those of you who attended the World Gaming Congress a few months ago might remember him from his presentation on crime at one of the seminars sponsored by the AGA. Mr. Margolis has had a very distinguished career during which he has served as Assistant United States Attorney for the Northern District of Illinois. He also served as the Inspector General for the State of Illinois as well as the Director of the Illinois State Police. Currently Mr. Margolis is Co—Chairman of the Litigation Department with the Altheimer & Gray law firm in Chicago.

Before I launch into a discussion of this comprehensive study…a word or two on what we in the gaming—entertainment industry are up against every time we deal with the crime issue. We’re up against Bugsy Siegel and the history of organized crime in the building of Las Vegas. We’re up against the perpetuation of this history in our movies and literature. Is there anybody in this room who hasn’t seen one or all of the “The Godfather” movies, or read Mario Puzo’s novel? There is also the strict Puritan strain that is so much a part of this nation’s heritage. If crime doesn’t get worked into most discussions of the gaming industry as a residue of the Siegel era, then it is assumed to be part of the industry simply because of the associations that stick with many people due to their upbringing.

A classic example of this misperception I recently heard from Jason Ader, managing director and gaming analyst for Bear Stearns. Jason recently met with a group of institutional investors to persuade them to put some of their money in the gaming industry’s strongest stock market performers. When he finished his pitch, one potential billion dollar investor raised his hand and asked the question, “Which Cosa Nostra family controls the Las Vegas casinos?” It’s amazing to me personally, but there are people who still believe this to be true.

It will be difficult to shake the image so many Americans have concerning gaming and crime. Those of us who are close to the industry know how absurd the myth is, but it’s not a myth for many people. We have a tendency to scoff at the connection, to dismiss it as…well…absurd. But that’s very dangerous. We must be dogged about this thing and keep telling our story. We have to put the facts out there for the media, for the politicians, for the American people, and for those moralists who, frankly, will never believe a word we say. The minute we become complacent or convinced that no one could possibly continue to believe the myths about crime and gaming, that is when we will find ourselves legislated out of business.

Mr. Margolis has done a remarkable job with his study. It reviews previously published literature on the subject; analyzes the data that has been collected on crime numbers; examines the experience law enforcement agencies have had with crime and gaming; investigates the connection between organized crime and gaming; and inspects various common allegations about crime and gaming that have gained notoriety in recent years. This is an exhaustive, complete report.

One of the elements of the study that will establish it as a valuable and enduring addition to the literature on the issue is the clear and compelling way in which the author explains precisely how crime numbers have been misinterpreted in some cases, or manipulated and distorted in others, to satisfy preconceived ideas of what the numbers should show.

Mr. Margolis explains that the FBI’s Uniform Crime Reporting program — a national, cooperative effort involving more than 16,000 local, county and state law enforcement agencies — provides reliable statistics for law enforcement administration, operation and management. It is in the translation of the UCR numbers that most of the damage is done in relation to our industry.

For example, Atlantic City had a population of 37,000 when casino gaming was introduced there in 1978. Almost overnight, the boardwalk became one of the major tourist attractions in the United States and soon more than 30 million visits per year were being logged. As the average daily population of this community swelled from 37,000 to as much as 120,000, increases in some specific categories of crime — as measured and reported annually by the UCR program — were recorded. I’m sure you can see where this is going. Many casino opponents used and misconstrued the UCR statistics by comparing pre— and post—casino Atlantic City crime rates without revealing that the average daily population had soared almost four—fold. In this way, the often claimed 230 percent increase in crime that came between 1977 and 1990 wasn’t credited to the relationship between crime and the increase in visitor population.

The extensive literature review conducted by the study includes a number of key works that confirm the inaccuracies in the numbers game. Dr. Jay Albanese, chair of the Department of Criminal Justice at Virginia Commonwealth University, conducted one of the first serious, scholarly studies testing the existence of a relationship between casino gaming and street crime. Among his findings was that when calculating for average daily population, there is a negative correlation between major crimes against persons and property and the existence of casino operations. That is, growth in the number of visitors to Atlantic City surpassed increases in crime to the point that the personal risk of victimization actually declined.

Perhaps even more interesting is Mr. Margolis’s discussion of the work conducted by Professor Peter Reuter for the Greater Baltimore Committee, a business leadership group. Reuter offers an analysis of the available data on the experiences of communities that have established casinos in the past decade. He concludes that casinos have had a minimal impact on crime in the jurisdictions analyzed. What makes this finding especially interesting is that it was established without accounting for the influx of visitors that accompanies casino development and without accounting for the resulting increase in the population at risk of being victimized.

Mr. Margolis also went to the people who should know the most about crime — law enforcement — and asked them in a number of gaming communities what their experience has been since the introduction of casinos. What he found was fascinating.

In Joliet, Illinois, an industrial heartland town, where two of the city’s four riverboats are literally across the street from city hall, the mayor, the city manager, the city attorney, the police chief and the sheriff all point out that despite the huge number of visitors, crime is down. In fact, in addition to city and countywide crime reductions that have been recorded, a dramatic 12 percent decrease has been seen in the six—block area adjacent to the downtown riverboat facility. Looking at the broader spectrum, a statewide study of crime and gaming in Illinois disclosed that many of the state’s police chiefs and sheriffs believe economic prosperity, lower unemployment, increased nighttime pedestrian traffic, or a combination of all three factors, have worked to reduce crime.

Confirming what was found in Illinois, the chief of the Clinton, Iowa Police Department is quoted in the study as saying that, “…our experience (with riverboat gambling) has been a most positive one.” The police chief in Natchez, Mississippi said that, “The most significant law enforcement problem, currently, is traffic….”

Other researchers have also consulted with the law enforcement personnel in various gaming jurisdictions and Mr. Margolis includes their findings in his study. Among these is the Wharton Econometric Forecasting Associates analysis, “Current Information on the Link Between Casinos and Crime.” This document notes that, “Police officials (in Davenport, Iowa) report `no increase in crime and no negatives.’ The Riverboat Development Authority reports that the two new police officers hired after casinos were legalized were `not needed as crime has decreased.’”

Mr. Margolis also deflates the myth about organized crime and gaming. He catalogues a number of comprehensive studies that debunk this nonsense, but his most compelling argument cites the multi—levels of regulation that our industry is subjected to at the local, state and federal levels. He notes that more than 1,000 regulators are at work in Nevada and New Jersey alone watching over the industry. And the 90 publicly traded gaming—entertainment companies comprising the modern casino sector are subjected to another level of regulation by the SEC. There is also the court of public opinion that acts as a regulator. Large publicly traded corporations are extremely sensitive to negative publicity or to any issue that might raise concerns with stockholders, stockbrokers and investment analysts. Bugsy Siegel would have trouble cashing a check in most casinos today, if he could even gain admittance. He would no doubt be listed in Nevada’s Black Book. Organized crime and gaming? Not a chance.

Perhaps the most exasperating aspect of the crime and gaming issue has been the half—baked theories and outrageous claims that have surfaced, been accepted and used by opponents and the media to spread unverified and down—right false information about our industry. Mr. Margolis tackles these matters as well.

I’m sure that most of us here this morning have heard much — far too much — about the “casino factor theory,” which contends there is a combination of crime—causing, negative, human qualities that are attracted by casino gaming. This is very much like the gaming opponents’ so—called “substitution theory,” based solely on economic models. This theory claims every $1 spent in a casino is $1 taken away from the local economy. As we learned from Arthur Andersen’s Economic Impacts of Casino Gaming in the United States, which was released last year at the Gaming Summit, the opponents’ arguments don’t hold up to the hard facts. Arthur Andersen found that in most places where gaming exists, local retail businesses and restaurants actually thrive in revenues.

The casino factor theory is of the same caliber as the substitution theory. It was derived from a study which claimed that a mathematical computation based on a “crime equation” could accurately predict the amount of crime that would automatically result from the presence of casino gaming in any city in America. A complex formula was involved, but the basic claim was that criminal activity would increase as gaming revenues went up. This sounds ridiculous but a lot of people bought it…and they were wrong to do so. As Mr. Margolis shows, a side—by—side comparison of increasing gaming revenues in Las Vegas and decreasing crime rates directly contradicts the theory. In Atlantic City, between 1982 and 1987, the number of casinos grew by 33 percent, yet crime remained fairly constant. Crime rates dropped measurably in 1984 and 1987, years in which additional casinos became operational. Between 1982 and 1990, casino revenues in Atlantic City almost doubled while crime remained relatively constant. Since 1991, the number of casinos has remained constant, yet crime has been decreasing steadily. So much for the “casino factor theory.”

Then there is the infamous American Insurance Institute study, which was widely quoted as having estimated that 40 percent of all white—collar crime is related to gambling. Well guess what? There is no such organization and there is no such study. The organization and the magical “40 percent” figure first surfaced when Robert Goodman used it in his first publication on gaming. This statistic was trumpeted as gospel by our opponents and by newspapers and magazines across the country. It has even been quoted on the floor of the Congress of the United States. It took on a life of its own in the Lexus—Nexus computer world in which we live, despite the fact that academics, journalists and other researchers, have proven the claim to be false. In the words of Prof. Gilbert Geis, professor emeritus in criminal justice at the University of California in Irvine, the statistic is “utter nonsense.” And the kicker to this story is that, despite being informed of this error, Mr. Goodman, as evidenced in his later book, and others continue to use the statistic.

Sometimes unraveling reality is a test. Another example of how a claim can become many people’s reality is assertions that were made regarding the influx of Asian gangs into Central City, Colorado after casinos opened there. Comments made by a former chief of police in Central City, alluding that there was a presence of identified Asian gang members frequenting the Central City casinos, is thought to be the source for this information. This faulty information was reported in the Illinois State Police report of 1992. It then appeared in the Florida Law Enforcement Summary Report of 1994, which expanded on the matter by indicating there was a concern these gangs might spread their operations to other states. The report said that “Vietnamese gangs have been investigated for counterfeiting, credit card fraud and other offenses both within and external to the casinos.” It even was repeated in a report prepared by the Attorney General of Maryland in 1995. His report of Asian gangs in Central City cited as its authority both the Florida and Illinois reports.

The moral to this story is that one should always check the facts. Discussions with the Central City police department revealed it has no idea where the assertion originated, but that there is not and never has been an Asian gang problem in Central City. This incident reminds me of that party game where everyone sits in a circle and someone whispers a story to the person sitting beside them. By the time it circulates through all the players, the information is so distorted the original story isn’t recognizable. In the case of the Asian gangs, research on the incident shows that the Central City Police Department has no record or reports of Asian gangs, and there were never any calls for assistance due to the alleged visits of gangs to the casinos. There were no investigations and no arrests. There is also no truth to this particular incident, or — more accurately — this non—incident.

It is comforting to have so many of the misinterpretations and distortions about crime and gaming set straight. And I believe another gaming—related issue will soon be receiving a more balanced hearing. I am referring to the matter of problem gambling, which is the subject of a study released last week by Harvard Medical School’s Division on Addictions, entitled, Estimating the Prevalence of Disordered Gambling Behavior in the United States and Canada. The study is a complete analysis of 120 of the most significant problem gambling prevalence studies conducted in the U.S. and Canada during the past two decades. I’ll leave an explanation of the details to our next speaker, associate professor and director of Harvard Medical School’s Division on Addictions, Howard Schaffer. Dr. Shaffer is an author of the study, which was made possible with funds provided by the National Center for Responsible Gaming. As many of you know, the Center was established last year as the first nationwide funding source for scientific research on problem and pathological gambling.

I would like to briefly note that the findings of the study are, for the most part, consistent with what we in the industry have believed for some time: that a very small percentage of the public — approximately 1 percent of the adult population — has serious pathological problems related to gambling and that the quality of gambling prevalence studies has not improved during the past 20 years. The Harvard study clearly places the prevalence rate of problem gambling far below the outrageous claims of many of our harshest critics. Furthermore, the results put into serious question another myth perpetuated by gaming opponents. One of the key findings reveals that “there is no significant regional variation in the rates of gambling disorders identified across regions of Canada and the United States.”

The temptation after reading the crime study, and the Harvard report, is to point a finger and say, “See, I told you so.” A perfectly understandable reaction given all the ridiculous accusations we have weathered in recent years. Understandable but not very productive.

What we should hope is that these findings will inject some reason into the debate. And if we want to take that beyond hope, we must make sure that the information is made part of any future consideration of the issues. We must be the voices that constantly call attention to the new information. We must be the ones who indicate that neither party has a monopoly on the truth; that both parties must continue to study the issues with an eye on finding solutions to the problems. We must be the ones who point out that there is nothing to be gained by one—upsmanship.

And with the Harvard and the Margolis studies, we are certainly demonstrating that we are willing to open our industry to inspection and that we are comfortable the facts will shine a good light on what we do. We are legitimizing what we have been saying about our business but we mustn’t ever believe — like so many of our opponents — that we command the truth. Which brings to mind another Winston Churchill story. After listening to a political opponent go on and on rather self—righteously regarding a contentious issue, Churchill leaned back in his chair and observed, “There but for the grace of God, goes God.”

Thank you for asking me to join you.