Like the rookie cop who gives a traffic ticket to the richest man in town, New Jersey casino regulators are attacking their new job with gusto -- making trouble for some of the most powerful figures in the nation's gambling industry and causing considerable embarrassment among veteran casino overseers in Nevada.
In the past 10 weeks, New Jersey agencies regulating Atlantic City's new casinos have ousted top executives of two of the nation's leading gambling companies, Bally Manufacturing Corp. and Caesars World Inc., and ordered key officials of two other outfits to take no part in running their new Atlantic City casino-hotels.
These steps were taken because of allegations that the executives had ties to organized crime or had taken part in questionable financial deals.
This systematic decimation of the titans of the gambling industry is leaving some in that industry agog -- it is a little like Michigan banning Lee Iacocca and Henry Ford.
New Jersey also is throwing down the gauntlet to Nevada. All of the men affected by New Jersey's recent actions were considered leaders in Nevada's gambling industry, where they had been licensed casino operators for years. While New Jersey officials declined publicly to criticize their western counterparts, privately they say Nevada state officials are too comfortable with the casinos they are supposed to regulate.
"We're trying to avoid the Nevada experience," said one New Jersey official involved in gambling regulation. In Nevada, he said, there is "a strong confluence of interests" between the casino industry and the state government, which gets approximately 60 percent of its revenues from casinos. "The state can't afford to get too tough. Regulators and casino executives speak of a common 'we.'"
"It's fair to say we're the strictest casino regulator in the world now," said New Jersey Attorney General John Degnan. The 450-employe Division of Gaming Enforcement -- an arm of Attorney General Degnan's office -- investigates casino executives, employes and service companies and presses its cases before the Casino Control Commission, an independent five-member body appointed by the state governor's office.
The two agencies had a busy autumn, overseeing the opening of three new Atlantic City casinos -- increasing the current total to six -- and ordering casino executives to clear out:
On Dec. 23, the Casino Control Commission ordered William T. O'Donnell, Bally's long-time chairman and president, to resign and sell his company stock as a condition for licensing Bally's Park Place, a $300 million casino-hotel. The commission took the action after finding that O'Donnell had had business dealings with several organized-crime figures and had taken part in a bribery scheme in Kentucky in 1968. The decision was, in fact, a compromise: the Division of Gaming Enforcement had recommended that both O'Donnell and Bally be ruled "unsuitable" for casino licenses. Bally does not own a casino in Nevada, but as the nation's largest slot machine manufacturer it dominates that market in Nevada.
In November, the division forced Steven A. Wynn, chairman of Golden Nugget Inc., to resign temporarily from his directorship of Golden Nugget's New Jersey subsidiary. The division says it took the action pending an investigation of allegations of insider stock deals at Golden Nugget and of reports that key employes of Golden Nugget's Las Vegas casino have dealt in cocaine.Wynn's removal was shocking to many people in Nevada because, at 38, Wynn is one of the best-known and most respected casino executives in Nevada.
In October, the commission ousted Caesars chairman and vice chairman, respectively Clifford Perlman and his brother Stuart, and ordered them to sell their $70 million in Caesars stock as a condition for licensing the company's Boardwalk Regency casino-hotel. As was the case with Bally, the division had recommended that Caesars be ruled unfit along with the Perlmans and other executives, because of past associations with reputed Florida mobsters.
That same week, the division forced two executives of Harrahs Marina casino-hotel, General Manager William Dougal and Operations Director Paul Syphus, to resign pending an investigation. Their departure was a condition to the opening of Harrahs, one of the chain of casinos bought last year by Holiday Inns. The division declined to state publicly why it demanded the executives' ouster, but sources said it was because of alleged questionable financial deals in which the executives participated when they were working for another casino company in Nevada.
New Jersey based these moves largely on the same information that Nevada officials possess but have not acted upon. Nevada gambling authorities say that they require virtual proof that a given casino executive is a knowing ally of the underwood before they deny him a license.
Further, Nevada officials say they are constrained by court decisions that make it extremely difficult for the state to take away a casino license once it is granted -- what one Nevada regulator called the "caught-raping-a-nun" standard. In effect, once a casino has a license, only the discovery of some massive malfeasance -- such as a mob "skimming" casino profits -- has prompted Nevada to revoke a license.
But New Jersey's gambling statute states that a casino applicant bears the burden of proving "good character, honesty and integrity" to get a license. And New Jersey officials say they are ready to take away any casino's license if damaging material comes out in an annual reinvestigation.
One reason for New Jersey's aggressiveness in the last several months is the FBI's "Abscam" investigation. The resignation of Casino Control Commissioner Kenneth MacDonald last February, following charges that he witnessed a $100,000 bribe attempt, and reports of New Jersey politicians secretly taped as part of the Abscam probe, bragging about their influence on the commission, galvanized Attorney General Degnan and New Jersey Gov. Brendan T. Byrne to take action.
Fearing that the state's casino experiment was about to be completely discredited (British gambling authorities, in fact, refused to share intelligence with New Jersey for several months after Abscam broke), Byrne named four new members of the Casino Control Commission and made the jobs full-time instead of part-time.
The most hard-charging of the new members, Martin Danziger, a former Justice Department prosecutor and Immigration and Naturalization Service official, has angered casino lawyers with his intense cross-examination of many casino witnesses at commission hearings.
In turn, Degnan named a new director for the Division of Gaming Enforcement, G. Michael "Mickey" Brown. Brown had been the state's top mob prosecutor, and his last achievement before taking the casino post was convincing a mob hit man to testify against his ex-colleagues.
Another change after Abscam broke was New Jersey's ending the practice of granting temporary licenses to casinos pending investigation and permanent license hearings. The state originally had granted temporary licenses to speed up opening the casinos. But state officials say now that the fact that a casino already is operating puts too much pressure on regulators to license it despite potential problems.
New Jersey authorities also have been criticized harshly by casino companies on charges that they overregulate. The division takes up to a year to complete investigations to license low-level employes such as dealers. New Jersey officials have inserted themselves into such minor areas as waitresses' uniforms and the color of hotel bathroom tile. Industry spokesmen charge that such practices will drive away future investment, especially if other eastern states approve legalized gambling.
In addition to recent actions on Bally, Caesars and others, New Jersey officials say their investigations show that a number of Nevada casinos and their executives are virtually impossible to license under New Jersey's present standards because of past questionable dealings or mob ties. Some in this category had plans to expand into Atlantic City but have dropped them recently with the state's recent stance, according to New Jersey officials.
Degnan frequently has compared organized crime's attraction to the casino industry to that of frenzied sharks preying on a bloody torso and says that the state must be prepared to fight off the underworld attackers as long as there are casinos.
Flying solo in establishing their own business ethics for casinos, New Jersey officials say their goal is establishing an Atlantic City casino industry based mostly on publicly held corporations. They say they want companies without the tie-ins to such reputed organized-crime figures as Meyer Lansky and Moe Dalitz, central figures in establishing many Nevada casinos or the much-investigated Teamsters Union Central States Pension Fund.
"The mob got in from the ground up when it built the first Las Vegas casinos," said one ranking New Jersey law enforcement officials, harkening back to 1946, when Benjamin "Bugsy" Siegel opened Las Vegas's first large casino, the Flamingo. "We aren't going to give them that chance here."
For their part, Nevada gambling officials say they do not feel obligated to follow New Jersey's lead by starting new probes or denying anybody a license.
"Just because New Jersey says we are weak," said Jack Stratton, a member of the Nevada Gaming Control Board, "We're not going to start jerking around licensed casinos here."