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Pennsylvania gaming board spends thousands on probe defense

| Thursday, May 26, 2011

The state Gaming Control Board spent hundreds of thousands of dollars in staff time and outside legal fees in responding to a two-year investigation by the Attorney General's Office that ended with no criminal charges.

The board paid $325,000 for lawyer's fees to Reed Smith — about as much casino tax money as Ligonier Valley School District will get for property tax relief this year. Complying with the attorney general's investigation required more than 4,000 man-hours to produce 2.7 million pages of documentation, costing hundreds of thousands of dollars more, said board Chairman Greg Fajt.

"While we respect the right of the attorney general to investigate and provide recommendations that we will take seriously as we strive to do our job better, there is no doubt that significant resources of this agency, both time and money, were diverted from other important tasks," agency spokesman Doug Harbach said.

The 102-page grand jury report, released Tuesday, portrayed an agency beholden to political influence, reflexively secretive and determined to protect wealthy casino owners from embarrassing details unearthed in background checks. The panel recommended 21 changes to state law but no criminal charges.

"God only knows what (former Attorney General Tom) Corbett spent pursuing this, and this is all they could come up with?" said Rep. Bill DeWeese, D-Greene County, a criminal defendant in a separate case the office is prosecuting. The gambling investigation began under Corbett, a Shaler Republican who became governor this year.

The Attorney General's Office could not say how much it spent in investigating the board, which formed in 2005 and is charged with overseeing the multibillion-dollar gambling industry. Nils Frederiksen, the office's spokesman, disputed the idea that the lack of criminal charges exonerates the board.

"If you want to call 100 pages of documented failures a success, if it's a success to you that you hired unqualified people and apparently their redeeming quality is that they didn't get arrested, if that's the bar you set for success, then the people of Pennsylvania have really lost," Frederiksen said.

Asked why no criminal charges were filed, Frederiksen said that was up to the grand jury. He declined to comment on their reasoning.

Fajt called allegations in the report "old news." Only one of the seven board members who awarded 11 casino licenses in 2006 remains on the board.

Republican lawmakers in the House and Senate promised to craft laws enacting the grand jury's recommendations. Those include establishing an independent investigative bureau, requiring annual reports on the board's closed-door sessions, and barring agency officials from working for casino companies for four years after leaving the board.

"This report provides a valuable public service," said Rep. Curt Schroder, R-Chester County, who chairs the House Gaming Oversight Committee. "Now the public knows how (the board's Bureau of Investigations and Enforcement) reports were scrubbed of negative findings or how individuals were allowed to withdraw their application without prejudice."

Schroder was referring to former casino owners Don Barden, the late Detroit businessman whose financial troubles were taken out of his final report, and Louis DeNaples, the Scranton businessman whose alleged mob ties were deleted from his report.

"It makes us look like New Jersey," said Chris Dolan, a political science professor at Lebanon Valley College in Annville. The report undermines the legitimacy of a major revenue producer at a time when the state is struggling with a severe budget deficit, he said. "It sort of feeds into that public preconception that gambling is this seedy business."

The problem isn't gambling; it's the corrupt system set up to regulate it, said Janice McDonald, 64, a voter from Herminie.

"Mario Puzo could've written this," McDonald said, referring to allegations in the grand jury's report. "I don't think it's ever going to change. It's just unfortunate."

Whether the report was worth doing depends on whether it changes anything, said John Burkoff, a professor at the University of Pittsburgh Law School.

"The recommendation here is for systemic change, and maybe that's not a bad result at all," Burkoff said. Grand jury reports are infrequent, and there is no obligation to change anything, he said.

The state's 10 casinos have generated $5.1 billion in taxes and license fees, and the industry employs 14,000, according to the gaming board.

"In the end, the public will judge our success through the tremendous tax revenue and employment benefits this industry is delivering under our watch," Harbach said. "In other words, the proof is in the pudding."

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