Political Malpractice and the Nevada Regulatory Experience

The mix of politics and regulatory bodies is inevitable, but when politics overtakes regulation, things can get messy. Former regulator Richard Schuetz believes that’s just what happened in Nevada in the past few years.

Political Malpractice and the Nevada Regulatory Experience

Regulation creates a moral hazard—P.J. O’Rourke

Lest anyone get confused, I am of the opinion that the men and women of the Nevada Gaming Control Board are some of the most skilled and dedicated gaming regulators on the planet, and I have thought that for a very long time. I also believe they deserve more than what they have received from the politicians in the state of Nevada.

I started working in a Nevada casino in the early 1970s as a college student and was aware of the Nevada Gaming Control Board even before that experience. I had the opportunity to meet NGCB Chairman Phil Hannifin at a class I was taking from Dr. Bill Eadington at the University of Nevada, Reno. I believe that over the years, for a variety of reasons, I have met every chair since 1955, save the last two.

I have spent more than two-years of my life researching the early history of the NGCB (for the period of 1945-66) for a Ph.D. dissertation in economics, and I have submitted well over 120 applications for licensure in regulated jurisdictions around the world during my time as a casino operator and while serving on boards. I have also taught classes, published articles and lectured around the world on the topic of casino management and regulation, and I have served as both a commissioner and an executive director of two different regulatory agencies.

Allow me to provide some summary statistics of the modern NGCB. In December 2017, A.G. Burnett was the chairman of NGCB. In December 2018, Becky Harris was the chairwoman. In December 2019, Sandra Morgan was the chairwoman and in December 2020, Brin Gibson was the chairman. I dare for any student of regulation to determine such statistics are good for a regulatory authority . Why did this turnover happen? I would suggest it was because both a past state attorney general and the present governor exhibited terrible judgement by putting politics ahead of the NGCB’s real mission.

I have often joked that before anyone can become a politician or industry participant in Nevada, they need to say “gold standard” at least once a day, the logic being that if they make such a statement frequently enough that it will make it true, regardless of the reality on the ground. I would argue, however, that there is no joke associated with what both Democrat Steve Sisolak and Republican Adam Laxalt have done to damage the perception of what the NGCB is supposed to be.

The NGCB was developed to insulate the Nevada gaming industry from assaults by federal officials and politicians who suggested that the industry in Nevada was cesspool of mob involvement. Nevada worked hard to thwart these efforts by constructing a regulatory entity that would create the perception the industry was clean and well regulated. In modern parlance, an effort was made to ensure the industry was sustainable by building a regulatory apparatus that offered the industry and the state sound regulatory controls. Unfortunately, there are politicians in Nevada who apparently also see the regulatory apparatus as a political tool.

While there are a number of reasons given for why NGCB Chairman A.G. Burnett stepped down in 2017 prior to the end of his term, the fact that he thought he needed to secretly record at least one conversation with the state’s attorney general and then turn that conversation over to the FBI to see if a crime had been committed certainly came into play. This is all especially relevant in that the NGCB needs to depend on the attorney general’s office for legal support.

It seems the back story for all of this came about because the state’s attorney general wanted the NGCB to file an amicus brief that might advance the cause of a legal entanglement concerning a casino operator by the name of Sheldon Adelson. Oh, and the attorney general had apparently received some nice campaign contributions linked to Mr. Adelson, a man who was known as the largest campaign contributor for Republican causes on the planet. Moreover, the attorney general was planning on running for state governor and he may have thought the success of this venture was dependent upon receiving more contributions. Who knows? Maybe none of this had to do with Mr. Adelson’s money and Adam Laxalt was working to get an amicus brief to support a position favorable to Mr. Adelson because he thought it was simply in the best interest of the state. Right.

As more people in Nevada became aware that the chairman of the NGCB felt he needed to tape a conversation with the attorney general, to be turned over to the FBI to be evaluated for criminal conduct, the you-know-what hit the proverbial fan in Nevada. Thereafter, A.G. Burnett decided to step down from the board and pursue other interests. The attorney general, Adam Laxalt, who did receive some nice contributions from Mr. Adelson, went on to lose in the gubernatorial race, where there was more than one voter who had concerns about his independence, ethics and integrity.

With Burnett stepping down as chair of the NGCB, the state’s governor needed to appoint a new chair to complete the year left on Mr. Burnett’s appointment. The choice governor Sandoval made was Ms. Becky Harris. Toward the end of Ms. Harris’ first year, which coincided with the election of the new Democratic governor Steve Sisolak, Nevada got a demonstration of how to damage a board through politics, for the newly elected governor opted not to re-appoint chairman Harris, but rather to appoint someone else.

There are few people on the planet who would suggest that Ms. Harris was doing anything other than an exemplary job during her short tenure in the post. I would also argue that a state should be cautious in throwing away the first year of experience of an individual and replacing that with someone who then has to acquire that first year of experience all over again—especially when it is one of the most important positions in the state. The first year of any post is arguably the learning year and the real gains and contributions follow that period. Moreover, having a first year chair leads to a great deal more work for the staff of the NGCB, for they need to expend serious efforts to get the new chair up to speed and make them look like they know what they are doing. This effort should not be discarded annually for it wastes the valuable time and effort of the staff.

In Nevada, it would be a brilliant flash of the obvious to state that a key position in gaming regulation is an excellent vehicle to launch a career in politics. If you do not believe me, check with Senator Harry Reid, Governor Brian Sandoval, and a number of others. Given this, it seems that a staunch Democrat like Sisolak may have wanted to end the good press that Republican Becky Harris was receiving and replace her with a potential up-and-comer in the world of Democratic politics. This could help eliminate a potential Sisolak competitor in the next election, and also place a promising Democrat in a position to secure a great deal of free media and attention, thus building up the state’s Democratic bull-pen for future elective possibilities.

The point of all of this is that regulation is important, especially in a one-trick pony state like Nevada. I believe that two excellent regulatory leaders left government service in Nevada earlier than they should have because politicians put their own interests and the interest of their political parties ahead of what was best for the state. This is not gold standard behavior and the gaming industry, the people of the state, and those that work within the NGCB deserve better.

Articles by Author: Richard Schuetz

Richard Schuetz started dealing blackjack for Bill Harrah 47 years ago, and has traveled the world as a casino executive, educator and regulator. He is sincerely appreciative of the help he received from his friends and colleagues throughout the gaming world in developing this article, understanding that any and all errors are his own.