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Jack Abramoff and Internet gambling

Guy W. Farmer

No one should have been surprised to learn that corrupt Washington lobbyist Jack Abramoff was deeply involved with virtually unregulated Indian and Internet gambling. After all, shady activities and characters go together like birds of a feather.

The Wall Street Journal recently revealed that “foes of Internet gambling are experiencing a renaissance on Capitol Hill (because) lobbyist Jack Abramoff is now facing prison time instead of working against them.” In January, the mega-lobbyist pleaded guilty to mail fraud, tax evasion and conspiring to bribe members of Congress on behalf of his Indian and Internet gaming clients, and is awaiting sentencing in federal district court.

The Journal also reported that nervous congressmen are rushing to co-sponsor a version of the Internet gaming ban that failed after an Abramoff-led lobbying blitz in 2000. “This demonstrates that not only are we changing the mechanisms (of lobbying), here is one tangible result,” said Sen. John Kyl (R-Ariz.). “Jack Abramoff is not going to have his way now.” This is good news for the state of Nevada, which depends heavily on revenue generated by its high-rolling casinos.

Back in 2001 our own high-powered lobbyist, Harvey Whittemore, convinced the Nevada Legislature to pass a bill permitting on-line gaming in Nevada casinos, but the measure was never implemented because as everyone knows, computer gaming simply can’t be regulated to prohibit cheating and ensure that the state collects its fair share of gambling taxes. Good riddance!

To his credit, Nevada Gaming Control Board Chairman Dennis Neilander warned casinos that on-line gaming must comply with all applicable state laws, rules and regulations. In that regard, I noted in a previous column that Gaming Commission Regulation 5.010 states that “any activity on the part of a (gaming) licensee which would reflect or tend to reflect discredit upon the state of Nevada or the gaming industry is an unsuitable method of operation.” Clearly, unregulated Internet gaming is “unsuitable” because it reflects discredit on anyone and everyone associated with it.

Make no mistake about it, Internet gaming is a huge industry. According to reliable sources, gambling Web sites raked in between $12 and $15 billion last year, with about 60 percent of the total take coming from the U.S. although all of the Web sites are based overseas – many of them on small Caribbean islands, well out of reach of U.S. law enforcement – because Internet gaming is illegal under federal law.

Although Internet casinos are outlawed in the U.S., the New York Times disclosed late last year that many blue-chip investment houses including Goldman Sachs, Merrill Lynch and Fidelity hold hundreds of millions of dollars worth of shares in online casinos and betting parlors, which are publicly traded on the London Stock Exchange. Legal scholars are divided over whether U.S. investors and investment houses that operate mutual funds might be criminally liable for their actions by providing financial backing to offshore casinos. Unfortunately, it’s not uncommon for American financiers to invest in overseas companies whose operations may be illegal in the U.S.

The boom in unregulated online gaming has spawned a “cottage” industry – Web sites that purport to tell gamblers which operations they can trust, and which of them have reputations for cheating their customers. These self-styled watchdogs publish reviews of online sportsbooks and poker sites, and maintain lists of recommended cyber-casinos. The problem is that most of these watchdogs accept ads from gaming Web sites, and some are paid commissions for generating business for online casinos. This is an obvious case of the fox guarding the henhouse, much in the same way that Indian tribes claim to “police” their casinos.

Alistair Assheton, CEO of London-based Leisure & Gaming PLC, which operates several gaming Web sites, told the Wall Street Journal that some ratings sites have said, “If you don’t pay me money, I will write bad things about you. It’s very flattering to be very high on these lists, but not very flattering to pay $10,000 to be on the list.” Duh! Well, if you want to throw your credit card numbers into cyber-space, that’s your business, but neither the state of Nevada nor the federal government should participate in such a scam.

Internet gambling is generating a worldwide “buzz,” so much so that the March/April issue of Foreign Policy magazine published a rundown on online casinos and betting sites. “The Internet is revolutionizing the way money is won and lost,” the magazine declared, “and Asia is fast becoming gambling’s destination of choice. The only sure bet: The house is raking it in like never before.” That’s for sure because Foreign Policy estimates that more than $10 billion was bet online last year and predicts that the take will double within three years.

Our Australian friends are the world’s most fervent gamblers, having wagered an average of more than $600 per person in 2003, the last year for which statistics are available. By contrast, Americans gambled “only” $300 per person. As long as there are so many suckers out there, Internet gaming will continue to thrive. But I hope Congress will step up to the plate in the wake of the Abramoff scandal and ban this unregulated form of gambling once and for all.

Guy W. Farmer, of Carson City, worked for Nevada’s gaming control agencies in the mid-1960s.