NGISC Report Part 3 - Indian Gambling
PART THREE: Gambling on reservations and main street. Also: where the money comes from.
Indian Gambling
The Commission heard extensive testimony from Native Americans about the revenues received from casino gambling on tribal lands. However, the Commission also reported important additional information regarding some of the less-publicized aspects of Indian gambling.
"The Chairman of the Hopi tribe testified before this Commission:
'One need only visit an Indian casino to realize that a significant number of casino patrons are Indian people from the reservations on which the casino is located or from other nearby reservations, including non-gaming reservations.… I believe it is also safe to conclude that most Indian people do not routinely have a surplus disposable income which should be expended on games of chance. Most of our people on most reservations and tribal communities find it difficult enough to accumulate enough income on a monthly basis to meet the most basic needs of their families. While the decision to expend those funds in gaming activities is an individual choice, the impacts on family members who frequently do not participate in that choice are nevertheless affected.'" (p. 6-16)
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"Although tribal members make up a majority of tribal casino employees in a few smaller rural tribal casinos, the great majority of tribal casino employees are not Native Americans; for example, in California, more than 95 percent of the estimated 15,000 tribal casino employees are not Indians; at Foxwoods, in Connecticut, there are a little more than 500 members of the Mashantucket Pequot Tribal Nation and more than 13,000 employees." (p. 6-18)
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"Connecticut State Senator Edith Prague, Chair of the Labor Committee for the Connecticut General Assembly, gave testimony on the relationship between tribal sovereignty and workers' rights:
'Federally recognized tribes enjoy sovereignty which is guaranteed under the Constitution of the United States. Along with sovereignty, there is a responsibility to maintain a basic respect for human rights. This is the balance we need. The reason there is no balance at Foxwoods is because of how the Mashantucket Pequots have chosen [to use] their sovereign rights….
'I am not opposed to sovereignty. I am however opposed to a tribe using sovereignty as a weapon to shield themselves from having to behave fairly and decently with their workers. There are just over 500 members of the Mashantucket Pequot Tribe, there are just over 13,000 workers at Foxwoods Casino, some of them may be Mashantucket Pequots, the great majority of them are not. And what rights do these workers have?'
"In addition, the Commission heard testimony from former employees of the Foxwoods Casino, including Fred Sinclair, who described his experience there:
"'I am part Cherokee and I support the dream of the Pequots and their success. I was at the original employer rally in 1992 and actually believed that they cared about their employees. I put my heart, soul, and thousands of uncompensated hours into Foxwoods. Even though my part may be considered small, I helped the Pequots achieve their dream, only to be severely injured, harassed, stripped of my position, my rights, my job, and my health benefits by the abusive upper management they are responsible for.'" (pp. 6-18, 6-19)
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"One perceived economic benefit to both the tribes and the general population - reduction of the reliance upon taxpayer-funded federal assistance - has not manifested itself to date. For the most part, requests for federal assistance from tribes involved in gambling have continued. As an example, the Mashantucket Pequots, whose Foxwoods facility in Connecticut is the largest casino in the world and grosses more than $1 billion in annual revenues for the 550 tribal members, still received $1.5 million in low-income housing assistance in 1996 and continues to receive other federal funds.
"While casinos have been an extraordinary economic success story for a handful of Indian tribes, for most they have brought considerably fewer benefits. Wayne Taylor, chairman of the Hopi tribe, testified, 'With the exception of a very few, very small and very fortunate tribes … who have had extraordinary success with tribal gambling, the majority of tribes across the country still find it very difficult to reconcile the obligation and responsibilities side of their ledger with the income side.' As of the writing of this report, the unemployment rate among Native Americans continues to hover around 50 percent." (pp. 7-9, 7-10)
Gambling on Main Street
The Commission expressed strong concerns about the spread of "convenience," or neighborhood, gambling. In fact, it recommended a moratorium on future operations and a rollback of existing ones.
"[T]he most prevalent forms of gambling are the ones found in most neighborhoods: lotteries and other forms of 'convenience' gambling. And in the past few years, Internet gambling sites enabled slot machine and video poker style gambling to come right into our homes. In many ways, these forms of gambling are far more troublesome than any other, as the benefits are negligible, the level of regulation minimal and the likelihood of abuse much greater. Of greater concern to parents, convenience and Internet gambling are far more accessible to children and, unlike casino and pari-mutuel gambling, far more difficult to avoid. Further, the types of games typically offered in convenience gambling facilities or over the Internet tend to be the fastest-paced and, therefore, most addictive forms of gambling." (p. 7-4)
Economic Impacts
Gambling advocates pitch casinos and other forms of legalized betting as a form of economic development. While noting that localized economic benefits have been derived in places like Las Vegas-which has been highly successful at inducing heavy gambling losses from non-residents-the Commission dispelled the idea that gambling brings widespread economic development. Further, it stressed the magnitude and the lack of knowledge regarding the social costs incurred by legalized gambling.
"In Atlantic City and elsewhere, small business owners testified to the loss of their businesses when casinos came to town. As evidence of this impact, few businesses can be found more than a few blocks from the Atlantic City boardwalk. Many of the 'local' businesses remaining are pawnshops, cash-for-gold stores and discount outlets. One witness noted that, 'in 1978 [the year the first casino opened], there were 311 taverns and restaurants in Atlantic City. Nineteen years later, only 66 remained, despite the promise that gaming would be good for the city's own.'
"Other citizens testified to the lack of job security they had encountered in tribal casinos, the absence of federal and state anti-discrimination laws, and the lack of workers' compensation benefits.
"NORC found 'no change in overall per capita income' after the introduction of casinos, 'as the increases [in certain industries] are offset by reductions in welfare and transfer payments as well as a drop-off in income from restaurants and bars.'
"In its survey of leaders in 10 casino communities, NORC found mixed perceptions about the economic impact of casinos. Respondents in 5 of the 10 communities cited new employment opportunities as a 'very positive advantage.' However, 'Respondents in the other four communities indicated that unemployment remained a problem, despite former hopes to the contrary.' Unemployment among Indian tribes remains extremely high. Respondents in six of the communities complained that the casinos provided low-paying and/or part-time jobs with no benefits.
"It bears stating the obvious in this discussion: A number of formerly struggling communities across this nation have undergone an economic renaissance in recent years without turning to gambling. It is also worth noting that much of a recent wave of casino expansion occurred in the early 1990's, when the country was mired in an economic recession. So, for example, while the Commission heard testimony of the casino-inspired 'Mississippi Miracle,' in reality the unemployment rate in Mississippi declined at about the same rate as the national average in the years from 1992 to 1998." (pp. 7-5, 7-6)
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"Even in the face of the apparent benefits touted by many in Atlantic City, at the time the Commission visited in January 1998, the unemployment rate stood at 12.7 percent, notwithstanding the legalization of gambling in 1978. That rate was considerably above both the national rate and the rate of unemployment for the rest of New Jersey at that time." (p. 7-11)
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"There is general agreement that legalized gambling has offered regulators the opportunity to locate gambling activities where incomes are depressed, thus providing, in some cases, an economic boost to needy people and places. So doing, however, has the negative consequence of placing the lure of gambling proximate to individuals with few financial resources. The Commission is concerned about the significant danger posed by the continuing expansion of legalized gambling into places where the economy is already prospering. In the extreme, the Commission can imagine competition among localities driving the extent and location of gambling toward an outcome in which most gambling establishments are just one more business in prosperous areas, most employees are people who easily could get other jobs, and therefore, the economic benefits are small. Not only are the net benefits in these new areas low, but the benefits to other, more deserving places are diminished due to the new competition. And, as competition for the gambling dollar intensifies, gambling spreads, bringing with it more and more of the social ills that led us to restrict gambling in the first place. It is easy to imagine jurisdictions competing for the gambling dollar, with the consequent overexpansion of legalized gambling; shrinking social benefits are overwhelmed by rising social costs.
"What the Commission can agree on is that analysis of the economic effects of gambling is poorly developed and quite incomplete. Further, almost all studies have been conducted by interested parties. These typically have gone no further than to estimate local jobs and income from the gambling industry. But since the economic effect of an activity is its value added above what the same resources would be adding to value if employed elsewhere, these studies are deficient and may mislead readers to conclude that the introduction of gambling activities in an area will result in significant benefits without attendant costs, which may, in fact, overwhelm the benefits. Without an estimate of the opportunity cost of the resources used in gambling, the Commission can generate no meaningful estimate of its net effect. Beyond this, the social costs of gambling are so important to regulatory decisions that even an accurate estimate of the net income generated by the gambling industry would constitute only the start of a full cost-benefit analysis. No one - not tribal leaders, governors, mayors or citizens - should make, or should be forced to make, a decision without an assessment of both economic and social benefits and costs." (p. 7-12)
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"Other economic impacts are mentioned elsewhere in this report. Costs include lost productivity of workers impaired by problem or pathological gambling and the cost to society for treatment programs. While precise dollar costs are not yet available to measure these losses, the rapid expansion of gambling into so many communities is likely to produce exponential growth in these costs with attendant burdens in business and social services." (p. 7-16)
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"Roughly 85 percent of Nevada's gambling revenues come from out-of-state tourists. Thus, Nevada receives the economic benefits of the dollars lost to gambling, while the attendant social and economic impacts of unaffordable gambling losses are visited on the families and communities in the states from which those individuals come. Every other gambling venue in the United States is far more reliant on spending by citizens in a far more concentrated geographic area. In many cases, gambling operations are overwhelmingly dependent on spending by local citizens. For instance, a survey of 800 riverboat gamblers in Illinois found more than 85 percent lived within 50 miles of the casino in which they were gambling." (p. 7-17)
Fraud, Forgery, and Felonies
The Commission found significant evidence of the long-suspected link between gambling and crime. That link is seen most clearly among addicted gamblers who turn to illegal activities to finance their craving to gamble.
"The Commission found wide-spread perception among community leaders that indebtedness tends to increase with legalized gambling, as does youth crime, forgery and credit card theft, domestic violence, child neglect, problem gambling, and alcohol and drug offenses." (p. 7-14)
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"Some of the more thorough studies examine crime and pathological gambling. Not surprisingly, the findings reveal that many problem and pathological gamblers steal or commit other crimes to finance their habit. According to the National Research Council, 'As access to money becomes more limited, gamblers often resort to crime in order to pay debts, appease bookies, maintain appearances, and garner more money to gamble.' In Maryland, a report by the Attorney General's Office stated: '[c]asinos would bring a substantial increase in crime to our State. There would be more violent crime, more juvenile crime, more drug- and alcohol-related crime, more domestic violence and child abuse, and more organized crime. Casinos would bring us exactly what we do not need - a lot more of all kinds of crime." Some commentators link crime to pathological gambling, where addicted gamblers steal or commit other crimes to finance their habit. The Commission heard repeated testimony of desperate gamblers committing illegal acts to finance their problem and pathological gambling, including a Detroit man who faked his own son's kidnapping to pay back a $50,000 gambling debt, a 14-year hospital employee in Iowa who embezzled $151,000 from her employer for gambling, and the wife of a Louisiana police officer who faced 24 counts of felony theft for stealing to fund her pathological gambling. In a survey of nearly 400 Gamblers Anonymous members, 57 percent admitted stealing to finance their gambling. Collectively they stole $30 million, for an average of $135,000 per individual. One witness before the Commission indicated that '80 to 90 percent of people in Gamblers Anonymous will tell you they did something illegal in order to get money to gamble. A lot of them do white collar crimes, fraud, credit card and employee theft.' In Louisiana, one man confessed to robbing and murdering six elderly individuals to feed his problem with gambling on electronic gambling devices." (p. 7-13)
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"The NORC study found that pathological gamblers had higher arrest and imprisonment rates than non-pathological gamblers. A third of problem and pathological gamblers had been arrested, compared to 10 percent of low-risk gamblers and 4 percent of non-gamblers. About 23 percent of pathological gamblers have been imprisoned, and so had 13 percent of problem gamblers. There are economic costs associated with arrests and imprisonment. Problem and pathological gamblers account for about $1,000 in excess lifetime police costs each. The 32 percent of pathological gamblers arrested had a lifetime arrest cost of $10,000." (p. 7-14)
Gambling on Credit
The Commission noted the key role that easy access to credit plays in the development of gambling problems. Among its recommendations to address the problem was that of removing ATM-style machines from gambling premises.
"One of the issues of most concern to this Commission is the ready availability of credit in and around casinos, which can lead to irresponsible gambling and problem and pathological gambling behavior. Forty to sixty percent of the cash wagered by individuals in casinos is not physically brought onto the premises. Each year casinos extend billions of dollars in loans to their customers in the form of credit markers. Additional sums are charged casino customers on their credit cards as cash advances. Casinos charge fees for cash advances ranging from 3 percent to 10 percent or more.
"According to the Casino Chronicle (as footnoted by I. Nelson Rose), the twelve casinos in Atlantic City issued approximately $2.13 billion in credit markers in 1997. Of this extended credit, $543,174,000 remained outstanding after customers left the casinos. However, through the banking system, an additional $434,400,000 of outstanding debt is collected, leaving only 1.3 percent left in unpaid loans, which is generally lower than other unpaid consumer debt. Still, the true debt - that is, the amount the customers owed when they walked out of the casinos, still exceeded $108 million - 20 percent of the debt." (pp. 7-14, 7-15)
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"Providing estimates on the amount of credit extended for gambling purposes through credit cards remains problematic. Unlike casinos, credit card companies do not have to report the amounts borrowed for gambling purposes. Nor do casinos report information on credit card advances, according to the president of Central Credit. Furthermore, casinos do not know how much money is received by customers directly from a credit card advance or ATM machine. Many ATM's and debit cards have limits on the amount of money dispensed within a 24-hour period and on each withdrawal. According to International Gaming & Wagering Business, 'Casinos have found a way around this dilemma by utilizing credit card cash advance services … [that] allow players to access as much cash as they want.' As a result, some individuals are able to spend far more than they can afford and incur dangerously high debts.
"In at least one tribal casino (Foxwoods), Commissioners were told that ATM machines offered cash advances without even the safeguard of a so-called 'PIN' to prevent misuse of stolen or lost credit cards. It seems clear to us that additional consideration of the restriction and regulation of credit practices permitted in and around casinos must be given by policymakers reviewing gambling activities in and near their communities.
"During the Commission meeting in Nevada, Thomas Coates, the Director for Consumer Credit Counseling Services in Des Moines, Iowa, testified on the changes in credit availability and bankruptcy in Iowa with the rise in available gambling outlets. According to his testimony, at the beginning of the project in the late 1980's, two to three percent of the people seeking counseling services attributed their credit problems to gambling. Today, approximately 15 percent of counseling goes to individuals with gambling attributed to the core of their credit concerns. The project has grown to six offices treating over 400 new cases each month. Furthermore, the agency offers a gambling hotline to provide assistance with individuals who feel they have a gambling problem. This hotline, 1-800-BETSOFF, averages almost 300 crisis calls each month.
"Coates shared with the Commission a suicide note from one man in Iowa who had accrued $60,000 in credit card debt at a local casino: 'I never thought of gambling prior to two or three years ago. I really can't blame anyone but myself but I sincerely hope that restrictions are placed upon credit card cash availability at casinos. The money is too easy to access and goes in no time. My situation is now one of complete despair, isolation and constant anxiety.'
"The Commission also heard numerous stories of pathological gamblers forced into bankruptcy as a result of problem and pathological gambling. Nearly one in five (19.2 percent) of the identified pathological gamblers in the NORC survey reported filing bankruptcy. This compares to rates of 4.2 percent for non-gamblers and 5.5 percent for low-risk gamblers. Twenty-two percent of nearly 400 members of Gamblers Anonymous surveyed had declared bankruptcy.
"Personal anecdotes were very compelling. The Commission heard about a couple along the Mississippi Gulf Coast, both of whom began gambling excessively at the casino, who lost approximately $70,000. When they received a letter from a credit card company demanding $10,000 in payment, the couple made a last-ditch effort to recoup the money at the casinos. They lost $2,000, then filed bankruptcy.
"Nineteen percent of Chapter 13 bankruptcies in the State of Iowa involved gambling-related debt. Bankruptcies in Iowa increased at a rate significantly above the national average in the years following the introduction of casinos. Nine of the 12 Iowa counties with the highest bankruptcy rates in the state had gambling facilities in or directly adjacent to them." (pp. 7-15, 7-16)
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