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Best of I. Nelson Rose

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Withdrawing Applications

22 November 2003

Be careful what you wish, because sometimes you can't back out.

It is always surprising to read about someone applying for a gaming license who is turned down when regulators uncover some horrendous incident in the applicant's past. These cases often involve questionable and even illegal business practices and dealings with associates of organized crime. Suspect applicants usually compound their licensing problems by failing to disclose required information or, worse, by lying.

You have to wonder how they think they can get away with it. Since regulators almost always charge the applicants themselves for the costs of investigations, these individuals know that there are staff workers checking out every statement made, or purposely not made, on the long, detailed application forms.

Sometimes would-be licensees find out too late that their past has caught up with them. This is the worst of all possible worlds in the gaming industry. Being denied a license does not mean that the applicant can say, "Oh well, so it cost me some time and money, but I'll just go somewhere else where there are casinos." Gaming licensees are forbidden, except in rare circumstances, from employing, associating or having any dealings whatsoever with a person who has been found unsuitable.

When an applicant is turned down, he or she must report it to regulators in other jurisdictions. Many states and tribes have express agreements to share findings of unsuitability. Even those jurisdictions that have not entered into these reciprocal licensing agreements will ask on the gaming license application form whether the applicant has ever been disqualified from working in any gaming industry.

The applicant who has been disqualified in another state then has no options: Many jurisdictions have rules stating that a finding of unsuitability by any government is grounds for license denial; but saying that the disqualification never occurred is lying. It is hard to imagine any surer way to be denied a license than to lie to the regulator who is supposed to issue the license.

Maybe the person seeking a gaming license simply forgot: "Oh, that felony gambling conviction." Or maybe they have always been able to talk their way out of tight spots before. Whatever the reason, by the time they are caught, they have gone through so much that they know they do not want a finding of unsuitability on their record. So, they try to withdraw their applications.

Some regulators have no problem with this. Particularly if it comes early in the process, it is easier for regulators to let a troubled applicant gracefully withdraw than to go through the unpleasant disqualification process. But in other cases, it may be too late.

The Court of Appeals of Arizona recently ruled that the Arizona Department of Gaming has the power to deny an applicant's request to withdraw his application for certification to provide gaming services. The trial court in the case has gone the other way, ordering the Gaming Department to not deny or take any further action because the applicant wanted to withdraw his application.

The case involved Jeremy E. "Jerry" Simms, who had become somewhat of a sticky problem for state regulators in Arizona. In May 2000, the Department of Racing granted Simms a license, even though it had found evidence he had made questionable payments to officials in California. AZcentral.com reported that these included paying a member of the Coastal Commission "for a permit to build a swimming pool and a scheme to stop a rival from building a hotel."

When The Arizona Republic reported that Jim Higgenbottom, Director of the Racing Department, had recommended that Simms get a license anyway, Gov. Jane Hull fired Higgenbottom and ordered that the application be reviewed.

Simms compounded his problems by applying for another license with a different regulator, the Gaming Department. Simms was co-owner and manager of Turf Paradise racetrack in Phoenix, and he wanted to expand to video off-track betting at Indian casinos.

The Gaming Department uncovered a few more questions in Simms' past. He made a couple of loans he failed to report on his application: In 1995 he loaned $2.2 million and received back nearly $2.6 million from Alan Glick. If the name Alan Glick sounds familiar, it should: He is the young man who somehow borrowed $160 million from the Teamsters Pension Fund to buy the Stardust and Fremont casinos in Las Vegas. Two of Glick's friends at the time were Frank "Lefty" Rosenthal and Anthony "Tony the Ant" Spilotro. Their story is told in the movie and non-fiction book, Casino.

Glick was never convicted, but law enforcement says he was a front for the Mafia.

There was more, but it became clear even to Simms that he was not going to get certification from the Arizona Department of Gaming to be a supplier to Indian casinos in that state. So, he tried to withdraw his application.

The Gaming Department refused. It had spent a lot of time and money on this investigation and it wanted to label Simms as unsuitable.

Simms' lawyers came up with two fairly straight-forward arguments for why the Gaming Department had to terminate its proceedings. Once Simms withdrew his application, they argued, the Gaming Department no longer had power over him, since its only power was to decide applications. Also, the state Gaming Department's power in this particular case arose from compacts Arizona had signed with tribes, and the compacts did not give the Gaming Department power to deny a license once the application had been withdrawn.

The Gaming Department's arguments had to be more circumspect. Although the compacts did not explicitly state that the Gaming Department could deny a request to withdraw, this power was inherent its duty to protect the tribes, state, and gaming public from criminal elements.

The Court of Appeals agreed. It looked to the purposes of the Indian Gaming Regulatory Act and the state legislation creating the Arizona Department of Gaming. It found the Gaming Department had the "police power" of the state, which is basically whatever power it takes to protect the health, safety, welfare and morals of its residents.

The lessons are clear: Do not apply for a gaming license unless you have nothing to hide. And do not expect that you can withdraw your application if bad things do turn up, unless the statutes or regulations specifically give you that right.

© Copyright 2003, all rights reserved worldwide GAMBLING AND THE LAW® is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

Recent Articles
Best of I. Nelson Rose
I. Nelson Rose

Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law.

Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law.

A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States.

With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic.

He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

I. Nelson Rose Websites:

www.gamblingandthelaw.com

Books by I. Nelson Rose:

Compulsive Gambling and the Law

> More Books By I. Nelson Rose

I. Nelson Rose
Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law.

Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law.

A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States.

With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic.

He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

I. Nelson Rose Websites:

www.gamblingandthelaw.com

Books by I. Nelson Rose:

> More Books By I. Nelson Rose