On July 15, 2016, the United States Financial Crimes Enforcement Network (FinCEN) announced a .8 million assessment against Hawaiian Gardens Casino, Inc., located in Hawaiian Gardens, California. The press release provided by FinCEN noted a number of long-term chronic failures by the card room and an apparent indifference on the part of the operator to do anything about it.
The acting FinCEN director noted: “The Gardens lacked the culture of compliance required to effectively manage its anti-money laundering responsibilities. It ignored the IRS findings – and the findings of its own consultant—thus allowing these violations to go on for years.” One wants to clearly understand that the U.S. government attaches much importance to anti-money laundering controls because they are an important tool in the government’s arsenal to combat organized crime and the funding of terrorist activities.
The FinCEN release noting the Hawaiian Gardens issues followed a release by fewer than six months earlier from the U. S. Attorney’s Office for the Central District of California in which the operator of the Normandie Casino in Gardenia, California agreed to plead guilty to and pay the government almost $2.4 million for violations of the anti-money laundering provisions of the Bank Secrecy Act. And this release came about five weeks after another release by FinCEN where the Oaks Card Club of Emeryville, California was assessed a payment of $650,000 for its apparent disrespect of laws designed to combat the financing of terrorism.
A rather interesting eight months for a California gambling sector that includes fewer than 80 operating environments. But this was not all. As was reported in the Mercury News on June 6, 2016, Casino M8trix co-owner Eric Swallow was stripped of his gaming license and the gaming authorities imposed a $13.7 million penalty upon him for a variety of inappropriate behaviors.
And in a story in the San Diego Union Tribune dated May 16, 2016, it was reported that the ex-head gaming regulator for the state of California, who upon retirement went to work for the card room industry, will lose his gaming license and give up his ownership shares in two California card rooms in a deal with the state for admissions listed by a Department of Justice attorney quoted in the story “…that he solicited and received confidential information from bureau personnel, and that he failed to disclose violations of the Gambling Control Act.”
Also in December was a raid on two California card rooms led by federal authorities involving indictments being issued for 25 individuals for such items as anti-money laundering related transgressions, sports betting, and prostitution. The card rooms raided were the Palomar in San Diego, and Seven Mile Casino in Chula Vista, California. Yes, a very busy eight months.
During my tenure as a member of the California Gambling Control Commission, I became somewhat known for continually making the point that the California card room sector was the worst regulated sector in the U.S. gaming space, and over the last eight months it seems that this sector is dead set on proving me right. What I have noticed most about the complaints I made is that basically no one in the political environment of the state seemed to want to hear them, or care. In fact, I seemed to have really annoyed some of them. It does appear that the federal government cared, for it has brought many actions against the California card rooms.
In addition, there are a group of attorneys within the California Department of Justice and other individuals in both the California Gambling Control Commission and the Bureau of Gambling Control that appeared to care; but the politicians do not appear too interested. In fact, those who follow gaming matters within the California legislature might note that during the same eight months of news chronicled above, the legislature, in an effort championed by Assembly Member Adam Gray has worked to make the most significant expansion of gambling products in many years for the state of California.
Speaking of the legislature, and let’s throw in the governor and the attorney general for extra measure, how many of these people do you believe will return the political contributions received from these entities that have admitted they violated the controls set in place to combat the financing of organized crime and terrorism? My guess is zero. I suspect they will argue that they got the money after it was cleaned.
The state of California has a gambling addiction problem, and the addiction is held by the politicians who are hooked on contributions from the card room industry. Unfortunately those of us who believe that the California gambling regulatory scene needs a major reset involving a restructuring, better funding, and better training do not have the funds to give to these politicians to get their attention, and it appears that if you do not give them money, with the exception of Assembly members Jim Cooper and Marc Levine, they really do not have the time to listen.
While working in gambling regulation in California I once was asked by a high-ranking official of the state as to what would be the quickest way to improve the regulatory effectiveness of the state. My answer was to eliminate the ability of the card room industry to give the politicians money, a tactic employed by many states across the nation. The response was: “That will be the day.”
