Casinos are gold mine, regulatory headache

THE BALTIMORE SUN

Gov. Parris N. Glendening says he doesn't much like the idea of statewide casino gambling.

But his 12-year record as Prince George's County executive makes it clear that Mr. Glendening has learned to live with a slice of Las Vegas in his own back yard.

Alone among Maryland counties, Prince George's has allowed nonprofit groups to operate full-fledged casinos.

Seventeen volunteer fire companies, boys and girls clubs, and Jaycees groups have tapped into a fund-raising gold mine in Prince George's, running twice-a-week casinos in lodges and fire halls across the county that raked in more than $30 million in 1994 alone. A table is waiting for avid gamblers nearly every night.

The casinos have proved to be part jackpot, part snake eyes -- producing millions of dollars for worthwhile community projects, but spawning allegations of law enforcement and regulatory headaches.

After expenses, the casino organizations reported net proceeds of $7.5 million last year, but many officials, including Mr. Glendening, said they believe that profit-skimming at some casinos makes that number artificially low.

Despite repeated allegations of skimming, tax evasion and other violations, the county provided almost no oversight of its booming gambling industry until two years ago, a decade into Mr. Glendening's tenure.

Mr. Glendening, and many of the county's other elected officials, tolerated the problems, focusing instead on the fire trucks and Little League uniforms purchased with the proceeds, according to supporters and opponents of the casinos.

Mr. Glendening acknowledged he had little success trying to rein in the casinos, which he said have grown far too big. In an interview last week, the governor vowed to push for major reforms in the next couple of years.

"If I had my choice, I would put through tough restrictions to eliminate a couple of them that have become just gambling operations and return the others to real community fund raising," Mr. Glendening said.

This year, the General Assembly sent a signal that it, too, is dismayed by the continuing reports of mismanagement and impropriety. The legislature voted to shut down the casinos in 1997, giving the nonprofit groups two more years to earn money before closing shop.

But many in the county say the deadline is merely symbolic. With so much money at stake, the politically powerful nonprofit groups that run -- and benefit from -- casinos will fight aggressively to remain open, and nobody is betting against them.

Whenever the casino issue came up in Annapolis or Upper Marlboro, it was not gamblers who turned out to testify. Rather, the hearing would be packed with uniformed firefighters and aged users of the day care center built with gambling proceeds.

Political pressure from such groups "can be intimidating," Mr. Glendening acknowledged.

"People know how to use this threat of political retaliation," he said. "I think that's why several reform efforts started out strong and vanished like smoke."

The real betting is fast and furious in places such as the Knights of Columbus hall in Forestville, just off the Capital Beltway. The hall is rented twice a week by the Hyattsville Volunteer Fire Department.

Its casino, one of the biggest in the county, attracts players in almost equal numbers from Virginia and Maryland, as well as some from the District of Columbia.

Though the hall looks like an oversized club basement -- with linoleum floors and fluorescent lighting -- squint a little, and the casino resembles the more polished versions in Atlantic City. The operation offers valet parking, free food and drinks, check-cashing services and a bank machine (with the casino collecting a $5 fee on each cash withdrawal). Bettors casually order free hamburgers, soup and sandwiches from strolling waitresses who bring the food to the gaming tables.

From noon until 2 a.m. on weekends, players can hunker down at dozens of tables to try to beat the odds at poker, blackjack, roulette, baccarat and pai'gow poker, an Asian card game.

About 2 p.m. on a recent Tuesday, 250 people hunted grimly for a bonanza. Several players plunked down $50 and $100 per hand of blackjack. At the poker tables, bettors dropped $30 or more a hand.

The payoff for the fire company is impressive. On a particularly good day in March, the casino grossed more than $114,000, with net proceeds totaling $83,000, according to the casino's filing with the county.

Last year, after expenses that included $233,000 for food and $53,000 for door prizes, the Hyattsville fire company reported net proceeds of $475,000. The company moved into a bigger hall last fall, and business has gotten better, with the fire company reporting net proceeds of more than $867,000 in the first six months of 1995.

No figures are available for how much gamblers won, but countywide, losers left nearly $31 million in the 17 casinos that operated regularly last year, according to reports. The gambling activity dwarfs the take for slot machines in dozens of fraternal clubs on the Eastern Shore or the wagering on tip jars popular in parts of Western Maryland.

Some officials are skeptical of Prince George's revenue figures because they are reported by the casino operators with minimal oversight from the county and none from the state. The county sheriff's department, which was given jurisdiction over the gambling in a 1993 reform effort, has stepped up supervision, sending auditors to monitor some of the casinos' activities. But even the director of the effort said his unit can't ensure that casinos are reporting their earnings accurately.

"The only way I could guarantee it is to have somebody in there the whole time they're open, the way they do it in Atlantic City and Las Vegas," said Carlton R. Yowell, director of the casino unit in the Sheriff's Department. "The only thing I've done is kept it from getting worse."

Nobody envisioned such a big industry in 1973, when the legislature legalized casino events for nonprofit groups in Prince George's. The idea was to run low-key games of chance a couple of times a year to make a few dollars for good causes.

But the law had few limits. The casinos grew more popular in the 1980s, and the numbers exploded.

Eight years ago, other jurisdictions, including Baltimore and Howard counties, banned casino nights after it became clear that out-of-state operators were taking over and collecting much of the profit.

While local officials had similar concerns in Prince George's, little was done to police the gambling.

Until 1993, the casinos were loosely regulated by a county agency that also regulated everything from electricians to taxicabs. Agency employees were unequipped to deal with the casino phenomenon.

In the past seven years, county prosecutors have warned in two reports that some casino operators were skimming profits and there have been several arrests.

In a 1989 case, a Laurel man pleaded guilty to violating gambling laws in an operation police said had skimmed $250,000 in six months from revenues that should have been going to two fire companies.

Police also have cracked down occasionally on outsiders who have been involved in running casinos, a violation of the state law that requires operators to be members of the nonprofit sponsor.

A 1990 report by the Prince George's state's attorney's office said that nearly all groups were violating state and county law by paying workers. Often, workers were receiving untaxed salaries of as much as $800 a week, the report said.

The Internal Revenue Service cracked down on many operations, saying the gambling revenue was taxable income. Some nonprofit groups had trouble producing audits.

Mr. Glendening sought stricter oversight, but not abolition. Two reform efforts that he helped pass through the County Council were thrown out after courts ruled the county lacked regulatory authority.

In Annapolis, reform efforts also sputtered. Lawmakers didn't want to do anything that would threaten the flow of casino proceeds into community projects back home.

"People can look at Prince George's County and and say why don't you fix the problem," said Anne McKinnon, chairwoman of the Prince George's County Council. "It's a difficult one to fix when you see the benefits to the community."

Fire companies have spent about $16 million in gambling proceeds to update their firefighting equipment, according to Steve Novak, a spokesman for some casino operators. One of Mr. Novak's groups, the Crescent Cities Jaycees in Oxon Hill, has used gambling proceeds to build a senior citizens' day care facility.

The Prince George's Council this year imposed a 20 percent tax on the casinos' gross revenues -- the first time the county has taken a share of gambling proceeds. The state does not tax the proceeds.

But the casinos already have served many times as a backup revenue source for the government.

In the midst of a 1991 budget crunch, for example, Mr. Glendening's administration asked the Jaycees to assume the cost of publishing the county's newsletter for the elderly. The Jaycees were glad to do a political favor, and the group continues to publish it today, at a cost of about $30,000 a year.

"We couldn't do any of this if it weren't for our charity nights," Mr. Novak said.

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