By John Kindt
Illinois Gov. Pat Quinn (D) is expected to veto the 2012 gambling expansion bill, S.B. 1849, because of the refusal of the bill’s sponsors to prohibit political and campaign contributions from gambling interests. By vetoing this bill, which would create six new racetrack casinos (called “racinos”) plus five land-based casinos, Gov. Quinn will be confirming the tradition of “The Untouchables.” Today, Illinois needs “The New Untouchables” as historically embodied by such organizations as the Chicago Crime Commission established to combat Al Capone.
Pursuant to a 2012 study by the Institute of Government and Public Affairs at the University of Illinois, Chicago is the most corrupt area in the United States. Gov. Quinn’s 2009 Illinois Reform Commission, chaired by former federal prosecutor Patrick Collins, revealed that corruption costs Illinois taxpayers billions of dollars per year — as UIUC Emeritus Professor Stephen Kaufman has recently highlighted.
In this historical context. Gov. James Thompson’s administration authorized the legal granting of the 10 original casino licenses for $25,000 each to political insiders, although the total fair market value of the licenses was $5 billion ($9.5 billion in 2012 dollars). One license was granted to a political insider recently convicted in the Rod Blagojevich scandals. The 2012 gambling bill gives away another $3.5 billion to $5 billion;10 casino licenses were granted. Academics at the University of Illinois at Springfield have spent two decades documenting millions of dollars in legalized political and campaign contributions made by lobbyists to legislative supporters of gambling.
Disturbed by the spreading political corruption accompanying legalized gambling, U.S. Senator Paul Simon sponsored the bipartisan U.S. National Gambling Impact Study Commission. Co-sponsored by U.S. Rep. Henry Hyde and supported by virtually the entire Illinois congressional delegation, the Final Report of the U.S. Gambling Commission called for a moratorium on the expansion of any type of gambling anywhere in the country, and the Commission included recommendations for stringent curbs on campaign contributions (Rec. 3.5), the re-criminalization of slots/electronic gambling machines (EGMs) convenient to the public (Ref.3.6), and continued prohibitions on creating racetrack casinos (Rec. 3.12). The Illinois 2012 gambling expansion bill obviously ignores all of these recommendations and adds to the national embarrassment of Illinois.
Today’s business model for racetracks is to let the racing die, while simultaneously transforming the racetrack into a casino. For example, the Quad-City Downs racetrack has not run a live race since 1994, and by giving slots to racetracks, they are just being enabled to become slots/EGM casinos.
Confirming the U.S. Gambling Commission, the multi-volume 2009-2012 U.S. International Gaming Report, produced in large part at the University of Illinois, concluded that by 2008 “lobbying monies and gambling interests were the largest influences and dominant forces in 26 state governments” and were dictating state economic policies ruinous to state budgets. By comparison, the State of Virginia rejected casinos during the same time frame that Illinois authorized its first 10 casinos, and Virginia currently has a budget surplus, while the Illinois state budget is the nation’s worst. For the strategic perspective on Wall Street gambling, decriminalized in 2000, and its delimitation as the catalytic cause of the current economic crisis, the news video “Financial WMDs” may still be viewed at the website for 60 Minutes.
If the Illinois Legislature really needed money, it could immediately collect at least $5 billion in casino license fees which the casinos should have originally paid — instead of the mere $25,000 per license. In 2003, legislative presentations in Springfield by the Maryland Tax Education Foundation, for example, the fair market value of the Illinois casino licenses were pegged as being worth up to $500 million each.
Apparently, only troubled casino licenses have a fair market value under $500 million, as casino licenses are laundered by regulators from one casino owner to the next. In 2001, it was reported that Nevada’s Jack Binion, the tycoon of Horseshoe Gaming, was ruled unfit for his $25,000 Illinois casino license. Accordingly, Binion sold his Illinois casino interests for $465 million. In 2008, a $435 million offer was made for the troubled tenth Illinois casino license as the casino went to Des Plaines. Dogged by improprieties, Station Casinos sold its Missouri casino interests to Ameristar Casinos for $488 million. As Louisiana Gov. Ed Edwards went to jail for his part in a casino scandal, Players International Inc. sold its Louisiana casino interests to Harrah’s Entertainment for $425 million.
If Illinois needs tax revenues, the current casino license fees are a pot of gold worth billions of dollars. Until these billions are collected, authorizing racinos and new casino license giveaways to political insiders via SB 1849 is a non sequitur. By vetoing gambling expansion, Gov. Quinn will draw favorable national attention to Illinois as the home of “The New Untouchables.”
John Kindt is a contributing author and editor of the U.S. International Gaming Report. He frequently testifies before Congress and state legislatures as an expert regarding issues in business and legal policy.
From the Aug. 15-21, 2012, issue