New Jersey might ease its strict casino-licensing rules

New Jersey casino regulators - known for two generations as the strictest in the country - will soon be evaluating two license applications that could put that reputation to the test. The current economic struggles of casinos in Atlantic City would appear to be a factor in the Casino Control Commission's decision to consider both applicants, where historically they may have been less inclined, New Jersey.com reported.

The state Casino Control Commission agreed last week  to allow MGM Resorts International to reapply for a state license, three years after the company agreed under pressure from state officials to sell its half-share of the Borgata Hotel Casino Resort & Spa. And state officials are in the preliminary stages of vetting the Rational Group, the parent of offshore gambling company PokerStars, which wants permission to buy the struggling Atlantic Club casino.

Officials and industry analysts acknowledge that both firms have problems in their pedigrees that would have made them unlikely licensees in the past. But with annual Atlantic City casino revenues down about 40 percent from six years ago in the face of a bad economy and competition from neighboring states, many are questioning whether it’s necessary to maintain that hard line when it could keep potential investors away and hurt the state’s gambling mecca.

“Our reputation was earned when there was a real concern about mob influence in New Jersey, but that’s not an issue here,” said state Senator Ray Lesniak.

David G. Schwartz, the director of the Center for Gaming Research at the University of Nevada Las Vegas, said it will be hard for New Jersey officials to ignore the struggles of the Atlantic City casinos since the casinos’ peak in the mid-2000s. “I think they do have to be a little more pragmatic about that, even with their overall history of being more stringent than other states,” he said.

State regulators in 2010 found MGM unsuitable for partial ownership of the Borgata because of its partnership in a Macau casino with Pansy Ho, the daughter of alleged Asian mobster Stanley Ho. The family has denied that it has ties to organized crime.

And one of the executives listed on the Rational Group application is Mark Scheinberg, son of PokerStars founder Isai Scheinberg. The elder Scheinberg has been indicted by the federal government on money laundering charges related to PokerStars’ online gambling operation. 

The overseas company also agreed last July to pay us$ 547 million to settle a civil lawsuit brought by the government accusing it of taking bets from U.S. players even though no state had implemented Internet wagering. The settlement did not include any admission of wrongdoing. “The agreement explicitly permits us to apply for licenses in the U.S. when they are offered by federal or state authorities,” PokerStars spokes­man Eric Hollreiser said in a statement.

Lisa Spengler, a spokeswoman for the Division of Gaming Enforcement, said: “The division will thoroughly examine the merits of the petition and complete an extensive background investigation of MGM and its qualifiers, which will be detailed in a report to the commission. The division will seek information from gaming jurisdictions where MGM has been licensed, or applying for a license, both within and outside the U.S.” She added that the review already under way of PokerStars is “consistent” with the MGM review.

New Jersey’s regulatory reputation was jump-started in 1977 by Governor Brendan Byrne, who famously scolded organized-crime bosses as he signed the legislation to allow casinos in New Jersey: “Keep your filthy hands off Atlantic City. Keep the hell out of our state.”

There was reason for the worry. Atlantic City had a long history as an underworld lure dating back to the 1920s and the era of “Nucky” Johnson, the corrupt political boss who was the inspiration for the HBO series “Boardwalk Empire.” Soon after casino gambling was legalized there in the mid-1970, the state Commission of Investigation reported that the Bruno crime family of Philadelphia had infiltrated the cigarette vending and nightclub industry in the city.

And in other industries long thought to have been rid of mob ties, there have been recent indications of continued organized crime involvement. Just last month, federal authorities arrested 30 reputed mobsters and associates in connection with what the government termed a racketeering enterprise that exercised illegal control over waste haulers in Bergen and Passaic counties and other locations.

But Lesniak and others diminish the worry about possible mob influence in current-day New Jersey. Frank Catania, the executive director for the Division of Gaming Enforcement from 1994 to 1999, said the chances of mob influence had waned well before he took over the agency. “We had to be very strict in the early days because of the specter of organized crime. But at this point we have to take a more business-friendly approach,” said Catania, who now runs the North Haledon-based Catania Gaming Consultants.

The list of applicants rejected by state casino regulators is long and varied, and many of the reasons for denial have fallen well short of any organized crime involvement. Playboy magazine founder Hugh Hefner and the Hilton family saw their bids to join the Atlantic City casino game initially denied in the early days. As recently as 2007, the state revoked the license of the owners of the Tropicana casino because, in part, of management’s “lack of good character, honesty and integrity.”

Longtime analysts say the background checks by state gaming officials continue to be rigorous.