“Who will guard the guards themselves?” —Juvenal
It would have been so simple for Brin Gibson, chairman of the Nevada Gaming Control Board to address the issue of a potential conflict of interest on the morning of February 2, 2022, with a statement that he had sought out and received a written opinion from a credible authority as to the absence of a conflict, followed by a request that the document be placed on the meeting record. After all, he was chairman of a body adjudicating a transaction of over $6 billion, and there was a great deal of curious history surrounding many of the actors in it. There was also a book, court reports, and articles – all of which were in the public domain, that painted a sometimes unflattering picture of past actions involving Apollo, David Sambur, and others. Plus, Chairman Gibson’s previous employer was Brownstein Farber Hyatt Schreck, LLP, and Frank Schreck was the gentlemen standing before him representing the applicant.
Instead, it appears Chairman Gibson chose to dismiss the topic of a potential conflict by fiat, stating that he had previously worked for the Schreck law firm for a short time and he had not worked on gaming cases. Moreover, Chairman Gibson, aside from his apparent belief that he can be only a little bit pregnant, conflict-wise, after a few months of employment with the Schreck firm before he became chairman of the NGCB, seems to believe that he is an expert on what reasonable people would conclude, for during his conflict discussion he used the “reasonable people” defense. He also seemed to believe that because he had not had a pecuniary interest with the applicant there could be no conflict—as if that is the ultimate test. It is worth noting that Frank Schreck seemed eager to agree with him.
It is also interesting to note that when Mr. Gibson was hired by the Schreck firm, the press release announcing that fact stated: “He’ll work closely with our gaming, data privacy/security, water, and government relations groups.”
The press release by Brownstein Hyatt Farber Schreck also noted that Brin Gibson would be a shareholder. One would think this status could somewhat muddle the whole discussion of pecuniary interest.
It has long been my observation that the use of the term conflict of interest is generally only used by people in Nevada to accuse another person of violating it. There is also the notion, however, as generally taught by ethicists, that when in doubt one should disclose, and it is always good policy to involve others in that decision—and be able to document it. This is pretty simple stuff about covering one’s butt that Chairman Gibson apparently did not believe applied to him. Again, this was a transaction involving over $6 billion, and damn near anyone familiar with the case other than, it seems, the Nevada Gaming Control Board, thought there was more than a minor amount of controversy surrounding it.
A very curious aside to this meeting was the demonstration that Nevada is a very small town, so to speak. As mentioned, Chairman Gibson worked for the law firm of Brownstein Hyatt Farber Schreck, LLP., prior to his appointment as Chairman of the Nevada Gaming Control Board. This firm, according to a February 5, 2018, Wall Street Journal article, under the byline of Kate O’Keeffe, was the registered agent for an LLC named Entity Y. The WSJ article also indicates that Entity Y was a vehicle whose sole purpose was to help conceal a $7.5 million payment from casino mogul Steve Wynn to an employee who accused Mr. Wynn of forcing her to have sex with him. The article also notes that not only was Mr. Schreck’s firm the registered agent for Entity Y, but also Mr. Schreck was the outside regulatory counsel for Mr. Wynn.
This gets fascinating when it is noted the listed manager for Entity Y was James Pisanelli, a lawyer who once worked for the Schreck firm. Mr. Pisanelli is now with the firm Pisanelli Bice, PLLC, the firm where Dr. Brittnie Watkins was employed before she was appointed to the Gaming Control Board by the same governor who appointed Chairman Gibson.
I am not trying to cast aspersions about the members of the Board here, but it is illustrative of the reality that Nevada is a very small town when two members of an very important three-member board have this interesting degree of connection to Entity Y, an entity the Wall Street Journal suggests was created to conceal a payment associated with an allegation of sexual abuse. And this coincidence is enhanced when one understands that this hearing would also feature discussions of Leon Black, the largest individual shareholder and a founder of Apollo, who paid convicted sex offender Jeffrey Epstein over $150 million for something, and who is presently in litigation and possible criminal investigation for “…sexual assault, rape, and participating in Jeffrey Epstein’s sex ring” according to Gabriel Sherman, writing for Vanity Fair. Like I said, Nevada is a small town.
Disclosing potential conflicts and getting outside opinions are but a few of the tools that can be used to ensure that a regulatory agency has not been captured by the industry it is supposed to be regulating. An almost universal concern about regulatory agencies is they will become the pawn of the industry they are supposed to be regulating. The notion that an agency will fail to protect the public’s interest and rather work to enhance the interests of the industry under regulation is one that is shared by economists and others on both sides of the political spectrum and is represented by a great deal of literature under the heading of capture theories.
A reality of many regulated industries is they tend to focus on capturing the regulatory machinery and this task is often successful for the industry because its interests are much more focused, intense, and better financed than those of the general public, who want to prevent it. Politicians often assist in enabling the capture process so they can secure larger political contributions from the industry under regulation, as well as securing future employment opportunities for the politician and his or her friends and kin.
Politicians can further assist in the capture process by ensuring that the regulatory positions have unimpressive pay packages, and this often implies that there are clear asymmetries in talent between the regulators and the members of the industry they are attempting to regulate. In essence, one group wears Brooks Brothers, the other, Sears Best. If one understands markets, it would be suggested that the best talent is associated with the higher levels of remuneration.
Furthermore, those governments that have relatively short cooling-off periods for the regulators create an ideal environment for capture by lubricating the revolving door from the regulatory agency to the industry being regulated—quickly increasing the ex-regulator’s earning power as the industry embraces him or her in their post-regulatory career. There is always the fear that in preparing for this transition, the regulator may work to be careful not to annoy any potential future employers.
It probably bears mentioning that the state of Nevada, especially considering the importance of gambling to the state, pays its politically appointed regulators relatively poorly, but makes this up to them by having a very short cooling-off period, thus allowing them to quickly transition to the big money within the industry. It is also noted that the revolving door from a regulatory career to the gaming industry is one of the most used portals in Nevada.
If one sifts through the databases of Nevada’s public employees, one will find hundreds of people paid more than the chair of the Nevada Gaming Control Board. It seems that it is not considered important by the state to pay the position well, a strange approach given the importance of the industry to the state.
The NGCB has also proven to be somewhat unstable over the last half-decade. In December 2017, A.G Burnett was chair of the NGCB. In December 2018, Becky Harris was the chair of the NGCB. In December 2019, Sandra Morgan was the chair of the NGCB, and in December of 2020 Brin Gibson was the chair of the NGCB. It does not take a management wizard to conclude this level of turnover in the top regulatory position in Nevada is not organizationally healthy. It is also interesting to note that all of the above listed individuals, with the exception of the existing chair, are in one capacity or another, now involved in the gaming industry. It seems to be the Nevada way.
Other controls to slow or prevent the seemingly inevitable capture of the regulatory machinery are weaknesses in the appointment process. This seems to have gotten more prevalent across the U.S. where board members and commissioners are often appointed from the political ranks or for political reasons. This is often done to assist those politicians who need an income because they have termed out, to help politicians to stay in the system to qualify for higher government retirement benefits after they have lost elections, and the like. These people often do not possess the technical or professional skills that could help a regulatory agency understand the industry they are regulating, but they simply possess the right political connections.
One notes Nevada does not run advertisements to source the most qualified candidates for these key regulatory positions—they are political appointments by the governor. As a historical note of interest, the present governor of Nevada was sworn in on January 7, 2019. There was a news release the next day revealing the prior governor had joined MGM Resorts as a senior executive. I believe I mentioned that Nevada is a very small town.
Politicians can also make these appointments to reward a political party, a decision that seems to imply that political affiliation is an important attribute of regulatory leadership. In Nevada, a regulatory board or commission position can generate the name awareness that assists in launching a political career, and a great many Nevada politicians have a regulatory gig on their bios.
When Governor Sisolak was elected, he was about to inherit a Board chair that had served less than one year in the position. She was not of Gibson’s political party. He basically threw that experience away to appoint a new chair that was from his own party, an appointment that stayed in the position for less than two years, and who now sits on the board of directors of Caesars. He then appointed Brin Gibson from the Schreck law firm. Another Nevada historical tidbit is that Brin Gibson’s father, a Democrat, is the chairman of the Clark County Commission, the government entity that oversees the jurisdiction where the Las Vegas Strip casinos are located. What was that I said about Nevada being a very small town?
Other controls that can reduce the tendency towards capture are solemn oaths and background investigations of the board members and commissioners. The background check is designed to ensure that the person being considered to fill a regulatory role has lived a life that is consistent with possessing character, honor, and integrity. These investigations include criminal and civil background checks, interviews, and the like. An effort is also made to follow the person’s money, so to speak, to ensure that the person’s financial history makes sense and they have not been involved in paying people to hide things such as sexual assaults or other such inappropriate activities.
The solemn oath is mainly a reminder that the regulators are representing a higher purpose than themselves. This is a bit of a throwback to an age when there was a belief that a person’s word was their bond.
Open meeting laws are another critical component in slowing capture. I don’t know if the NGCB members still have a “meeting before the meeting” which they used to call the “rump session.” They would park a government lawyer in the midst of this, apparently believing this cleansed it. If this is still happening and is considered cool, Nevada might want to think about tightening up its open meeting laws. This may be a reason that watching a NGCB meeting can sometimes give the impression it has been rehearsed.
One of the challenges of open meeting laws, given the often rigorous investigations that gaming applicants are supposedly subjected to, is that personal information on applications and investigations are collected for the regulator to see and understand, and factor into a suitability decision—but this information should not become part of the public record. This makes total sense—but is also subject to abuse.
All regulatory agencies have provisions to keep some types of information away from the public. Outside of this excluded information, it is generally understood that the hearing will take place in public. In this vein, I was fascinated that in the February 2 meeting of the NGCB there was no mention of Richard J. Davis, who was the bankruptcy trustee for the Caesars bankruptcy, a company that Apollo had acquired in the past.
Mr. Davis is a very well-respected lawyer with roots all the way back to the Watergate Special Prosecution Force. Within his analysis of the Caesars bankruptcy, he took a very hard look at the actions of Apollo, as well as David Sambur and others. His work was also discussed in the book Caesars Palace Coup, by Max Frumes and Sujeet Indap. I have even heard one of the authors of that book refer to Mr. Davis as the third author, and I believe that this is because of the incredible job Mr. Davis and his team seemed to do on the report prepared for the bankruptcy court.
In reading the bankruptcy documents produced by Mr. Davis and listening to Mr. Davis on a podcast (all in the public domain), it seems that he addressed a great many instances that may challenge the notion that Apollo, David Sambur, and others were behaving in a fashion consistent with the attributes of character, honesty, and integrity as they navigated Caesars into and through its bankruptcy. Mr. Davis’ report, with attachments, was over 1,800 pages and is at times seems scathing.
Another public document that deals with the past behavior of Apollo, David Sambur, and others is the book by Fromes and Indap. These two highly skilled financial journalists spent four years working on the book, and again they seemed to provide some rather critical analyses, to say the least, to describe the behaviors of Apollo, David Sambur, and others. Yet there was not a peep about any of this at the NGCB meeting. Moreover, there was no mention of the restructuring (the Good Caesars/Bad Caesars issue), no mention of the legacy bond issues, no mention of the disappearing bond guarantee, and so on and so forth. Fascinating.
It is also important to understand that much of the public documents suggest that Mr. Sambur was one of the architects of the Caesars plan, which would seem to make it a relevant topic of the February 2 meeting if his background was considered important to the Board. One of the reasons that regulatory agencies spend so much time with the background investigations is contained in the notion that past behaviors are a good indication of future behaviors. The theory is that people that have led pristine lives tend to behave in a like fashion in the future, whereas those folks that have misbehaved in the past offer a higher probability of misbehaving in the future.
A Board member did comment on an “investigative report” during the meeting, as if it were some secret thing. It seems that the Board members were comfortable turning a blind eye during the meeting to all of the public information concerning the Caesars restructuring and Mr. Sambur’s role and behavior in that process. The content of this meeting reminded me of the old joke: “Other than that, Mrs. Lincoln, how was the play?”
In short, this meeting left me lost. Has the Board looked at the work of Mssrs. Frome, Indap, and Davis? Is the Board aware that the products these gentlemen produced were not particularly complimentary to Apollo, Mr. Sambur, and others? Is the Board aware that the Caesars restructuring is relevant to this meeting because Mr. Sambur has generally been attributed with a material role in what happened within that restructuring and bankruptcy? Does the Board believe that these gentlemen who have written about Apollo, Mr. Sambur, and others did bad research or were dishonest? I guess none of that is for us to know.
The Board’s attitude regarding open meetings seems to be: “Trust us” and pretend that the elephant in the room in this meeting was Mr. Black, whereas there seemed to have been a herd of elephants rampaging through that meeting concerning the Caesars restructuring, the bankruptcy, Mr. Sambur, and others. And it seemed that no one wanted to go even remotely close to that herd.
Even the discussion of Mr. Black was interesting in that the group presenting to the Board seemed confused as to what percentage of Apollo Mr. Black controlled. One would have thought that this question would have been anticipated.
The NGCB should offer a bit more credence and respect for the work of journalists for a few writers at the Wall Street Journal seemed to have had a much better understanding as to what was happening at properties run by Mr. Wynn than did the much larger staff at the Board, armed with much more significant investigative powers. The Board needs to understand that there are people who think a few journalists from the Wall Street Journal had much better insight as to what was going on with Mr. Wynn’s properties than did the Board. A general rule for regulators is that they do not like seeing big damaging stories in significant publications about their licensees. Makes them look bad, especially if the stories have merit.
Given this, one would think the NGCB would not want to create the possible suggestion that the journalists know more about what is going on than the Board. This can result in them having to file legal actions against a past licensee after a breaking newspaper story. When this happens, it looks like they are entering the battlefield after the battle to shoot the wounded. The Wynn situation comes to mind.
There are other standards imposed on regulators to keep capture at bay. In gaming, jurisdictions have prevented or limited political contributions by the gaming industry to politicians. There are also limits on gifts, payments, and in-kind transfers to regulators. Good regulatory boards are also subject to strict limits on ex-parte communications.
Two major protections against capture are whistleblowing statutes and an engaged press. The importance of whistleblowers is obvious, and it has been the source of securing valuable information that may not have been otherwise discovered in a number of instances.
When I was a casino operator, my best source of information about inappropriate conduct was someone picking up the phone and whispering something to me—not the massive surveillance network within the building and the exhaustive compliance tests and audits. All of that surveillance, compliance testing and audits are cool tools, and they really become valuable when you know where to look. Dana Gentry, the award-winning author working with the Nevada Current gets this, but then unlike most appointed regulators, Gentry understands the casino business.
I am a strong believer that regulatory entities should lobby for strong whistleblowing provisions and a safe method to file a complaint is front and center on the relevant regulatory websites. It should also be posted in the heart of the house of the casino operations so as to be available and understood by all casino employees. It sends a strong message that the regulators care about stopping bad things from happening. There also need to have a trusted channel for people within the regulatory environment to blow the whistle.
An engaged press, operating as the Fourth Estate, can also be a valuable tool in reporting to the public what is going on within the workings of a regulatory entity. This check can work to ensure that bad, unethical, and illegal behaviors can be noted and communicated to the public. This leads to better regulation and hinders industry capture of the agency.
Regarding an engaged press, this is a challenge in Nevada. The largest newspaper in Nevada is the Las Vegas Review-Journal. It is owned by the family of Dr. Miriam Adelson, the majority shareholder of Las Vegas Sands Corp. One would think the owner of this news source had a material interest in the transaction of this Board meeting in that the assets being approved for transfer were those of the Sands.
It is also the case that Las Vegas has suffered the same plight of much of the journalism industry with the changing economic conditions affecting the production of news over the last few decades. When I was actively engaged in casino operations in Las Vegas, we had gaming beat reporters and they followed things closely, were often aggressive, and worked to secure good sources. Folks like the late Dave Palermo and Gary Thompson knew the industry, had great insights and sources, and were at times complete pains in the butt – especially when they knew something about a property I ran – and the story told me something I did not know. Much of the local journalism today seems less intense and often missing.
All of this helps to explain why much of the good journalistic work that is being done in gaming is being done by people outside of the state of Nevada. This would include the work of the Wall Street Journal, Vanity Fair, and writers like Max Frumes and Sujeet Indap.
It is also important to note an April 21, 2021, edition of Vanity Fair, contains an article authored by William D. Cohan and titled “‘The Truth Turns Out to be Ugly’: How Paul, Weiss Tried to Thwart Reporting on Caesars Collapse.” Here, the author discusses an apparent attempt by Apollo’s seemingly codependent law firm of Paul, Weiss to keep the work of the authors of Caesars Palace Coup away from the public through threats. Mr. Cohan, in the Vanity Fair article, seems to suggest that what was going on here was an attempt by a very well-known law firm with strong linkage to Apollo, working to kill a story by intimidation. The authors and the publisher did publish the book, and Paul, Weiss has failed to keep the material from the public. I would suggest that this article be read in its entirety and then understand that this action was not even worthy of a comment at the meeting. It would seem that a Board member might have an interest if understanding if David Sambur had any insight regarding actions of Paul, Weiss, who paid the freight for this work, who authorized it, and questions of that sort.
The Board should find these types of questions to be critically important, for, after all, the press seems to be a much better investigative institution than the Board, and I am sorry to keep rubbing salt in this wound, but a few writers from the Wall Street Journal basically made the Board look like rubes in the Wynn matter, understanding that one challenge the Board apparently had in understanding what was happening was hindered because people were paid by Mr. Wynn to keep things quiet, and a number of his executives and managers became a bit tight-lipped and neglected to report things that probably should have been reported.
One reporter who was covering the NGCB meeting of February 2, that went beyond the reasonably formulaic press release details of the meeting was the previously mentioned Dana Gentry. Gentry has a long resume in Nevada news and media. She also has a good understanding of gaming and its regulation, and she understands gaming and its regulation partly because she grew up as the daughter of Ash Resnick.
I will not go into much detail as to who Ash Resnick was, but I would suggest you fire up the Google Machine and check him out by following his name with the search term “Las Vegas.” Let it be said here that Mr. Resnick was one of those early generation casino guys who has been noted as famous – and who is also been noted as infamous.
Many moons ago I was having a discussion with Ms. Gentry about her father, for he and I crossed paths in the 1980s when we both worked for Mr. Wynn. She told me that as a child she used to travel with her father on gambling debt-collection trips. She also indicated that her father would hide the cash he collected in her Barbie Doll cases. The point is that when a young child is going on gambling debt-collection trips with her father and he is hiding the cash in her Barbie cases, that child will grow up knowing things about gambling and its regulation that they do not teach in journalism school.
It also appears that Ms. Gentry may have collected some great news sources during her long career.
An article under Ms. Gentry’s byline published on February 2, 2022, by the Nevada Current makes the statement: ‘“A state official who asked not to be named said investigators were ‘uncomfortable’ about proceeding with the Apollo item but were overruled by Gibson, who the official says was directed by Gov. Steve Sisolak to move ahead.”’
I would suggest that this, if true, is a big deal. A very big deal. Also, if this is true, this could help better explain the conflict of interest issue.
I have been around gambling for about 50 years. I entered the business in the early 1970s working at Bill Harrah’s casino in Reno at night, while I was working on my undergraduate and master’s degrees during the day. After that experience, I moved to Utah to attempt to secure a Ph.D. in economics, and I spent over two years working on a dissertation on the development of the Nevada gaming regulatory system from 1945 to1966.
I have written keno, dealt cards, dice, worked in casino finance, casino marketing, casino operations, and been a CEO of a Las Vegas casino company. I was appointed twice to the gambling commission in California by Governor Brown and was the executive director of the gambling commission in Bermuda. I have taught casino management and regulation in Europe, China, and across the U.S., and published a great many articles on the topic. I have also filed gaming applications in over 120 jurisdictions around the world without incident. I mention this to help frame my comments.
The life experience that continued to haunt me as I watched the NGCB meeting of February 2, 2022, was the time I spent with the people who built the Nevada regulatory system.
While working on my dissertation in the 1970s, I spent hours visiting with Robins Cahill, the Nevada official responsible for gambling in the 1940s and early 1950s. I spent time with Alan Bible who was constantly fighting to keep the feds out of Nevada’s gaming industry and constantly working for quality regulation. I spend much of a summer with Ed Olsen, the chair of the NGCB from 1960 to1966, while he was approaching the end of his life in Reno. He even interrupted his last rites to make a clarification for me on an issue involving Jimmy Hoffa. He also shared wiretap transcripts with me that his chief investigator had stolen from an FBI undercover operation in Southern Nevada, and he talked about how difficult it was dealing with the notion that there was an FBI plant in the NGCB offices in the 1960s. I also believe that I am one of the few people alive that has met every chair of the NGCB from 1955 to 2018.
I bring all of this up because I think I have witnessed a lot of history regarding the development of the Nevada Gaming Control Board, and those who made it into an entity that once deserved being identified by the term “gold standard.” Over the years I have also met many of the men and women employees of the Nevada Gaming Control Board and found them to be amazing.
After watching the meeting of February 2, I think the men and women employees of the NGCB and the many people who preceded them have been let down by a group of appointed officials who seem to have lost the plot. Whenever I view a Nevada Gaming Control Board meeting in operation, I think of the present Board members standing on the shoulders of the giants that preceded them over the many decades of the Board’s existence. I thought the Board meeting of February 2, 2022, was terribly disrespectful of these giants.
In the post-Steve Wynn era, one would think that it would become a mission-critical goal to ensure that the regulatory assets of the state were more alive to what was happening in the gaming industry than a small group of journalists. I am not sure that is the case.
This all now heads to the Nevada Gaming Commission which has a new chairperson recently appointed by the same governor who appointed the chair of the NGCB, and the same governor who the source in the Nevada Current article of February 2, 2022, suggested ordered the hearing to move forward in spite of the investigators feeling uncomfortable.
Should be an interesting challenge for the new Commission chair. Maybe she can help bring back the spirit of the gold standard. I believe that everyone involved with the industry should want that, including everyone involved in the February 2, 2022, Nevada Gaming Control Board meeting. They just may not understand that now.