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Grand jury's scathing casino report sparks state hearings

HARRISBURG — The House Gaming Oversight Committee will hold hearings this summer on developing legislation stemming from a blistering grand jury report on casino regulation.

Republican Rep. Curt Schroder, the panel's chairman from Chester County, said the hearings would address numerous recommendations made by the grand jury -- from ending a culture of secrecy to improving hiring practices at the Pennsylvania Gaming Control Board.

A report from a two-year grand jury investigation released Tuesday found that the board charged with regulating the state's casino industry and protecting taxpayers instead protected casino interests, provided patronage jobs for lawmakers to deal out, mollified the politically powerful and thwarted the public's right to know.

The investigation into the control Board, which the state Attorney General's Office initiated, recommended no criminal charges. But it described an agency operating largely in secret and hiding criminal allegations or financial troubles of politically connected casino applicants.

"It's our job to take people and companies that are unsuitable and make them suitable," Michael Schwoyer, the board's former chief enforcement counsel, told three investigators in July 2006, five months before the board awarded 11 casino licenses, according to the grand jury report.

Employees cut 51 pages from the financial suitability report of former North Shore casino owner Don Barden, including damaging information such as the $11.1 million he lost at other casinos during the five years preceding his being awarded the Pittsburgh license in 2006, and the poor performance of his other casinos. Barden, who died last week, had to give up the license when his financing collapsed in 2008.

Board Chairman Gregory Fajt, who was appointed in 2009, issued a statement saying the board has been an "unmitigated success."

"The board has steadfastly and repeatedly said that we did our work well, we have protected the public, and the citizens of Pennsylvania are reaping tremendous dividends from our work," Fajt said. "After this grand jury met for more than two years, there were no arrests, no presentments, no indictments. They found no criminal activity because there was, in fact, no criminal activity to be found."

The report rehashes "old news," Fajt said.

The Tribune-Review reported in October 2007 that internal documents called Barden's bid a "very high risk" and that some employees believed he hadn't been fully vetted.

Among the stable of lawyers tasked with preparing reports on the casino applicants' financial suitability, "virtually every" one told the state grand jury that they couldn't remember anything about preparing the final reports. The person in charge of the reports, Director of Licensing Susan Hensel, "admitted that she did not read the content of the financial suitability reports and that she had no involvement in many key decisions in the licensing process."

"If selective amnesia was a crime, there'd be people going to jail," said Rep. Mike Vereb, R-Montgomery County, a critic of the control board.

The investigation began while Republican Gov. Tom Corbett served as the state's top prosecutor. It continued under his successor, acting Attorney General William H. Ryan Jr.

The General Assembly authorized casino gambling in 2004. The board awarded 11 slot licenses in 2006. Since then, 10 casinos opened.

"Changing investigative reports at the gaming board was as commonplace as apple pie to the average family in Pennsylvania," Vereb said.

Former board member Ken McCabe of Cranberry denied that he was told who should get licenses.

"Nothing was predetermined, at least not in my book, and I think I can speak for (former Commissioner Sanford Rivers, of Churchill)," McCabe said.

Vereb sponsored a bill that would transfer the board's investigative arm, the Bureau of Investigations and Enforcement, to the Attorney General's Office. The grand jury recommends separating the bureau from the rest of the board, too, but said it should be an independent agency.

Other recommendations include criminalizing intentional violations of the Gaming Act, and requiring greater transparency. According to the report, the board used the gaming law's confidentiality provision "as a sword rather than a shield," and exhibited a "desire to conceal, obfuscate and disguise its process rather than to seek transparency and inclusion."

The report says the Legislature's Black Caucus threatened to vote against the Gaming Act unless leaders guaranteed blacks would get a seat on the control board and at least one casino license. According to the report, DeWeese and former Rep. Mike Veon said ex-board member Jeffrey Coy "would be responsive to their needs." Coy could not be reached.

Veon is in prison on unrelated felony convictions. DeWeese could not be reached.

Barden was the only minority to win a casino license.

State Rep. Joe Preston, D-East Liberty, remembered the maneuvering differently.

"We met with the governor as a caucus, which is what we're supposed to do," to ensure minorities got equal consideration for jobs and casino licenses, said Preston, who is black.

Board members weren't interviewed until just a few weeks ago, McCabe said.

"By the time the grand jury got to us, they'd already made up their minds," McCabe said. "It was apparent to me that they didn't want to hear the truth. ... We were taking a lot of things into consideration, versus just one report from one tentacle of our agency, but that didn't seem to matter" to the grand jury.

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