SPECIAL DAILY
GAMING UPDATE
Tuesday, December 15, 2004
Pa. Gaming Control Board Concludes
Meeting, Focuses on Enforcement
HARRISBURG (Dec. 15, 2004). Pennsylvania’s
Gaming Control Board has concluded its first
meeting, and its principal concerns on the second
day of that two-day meeting were background
checks, security, enforcement and diversity.
To use the hyperlinks within this document…
Throughout this document, you will see words
highlighted by boxes.
Those are “hyperlinks” to
documents distributed at the Gaming Control Board
meeting or other helpful documents regarding gaming in
Pennsylvania. You need only click on the highlighted
word(s) to retrieve the underlying document.
The first presenter of the day was Tom
Sterling of Information Services Group, Inc., a
consultant to the board.
He focused on
procedures for background investigations,
surveillance and security (copies of the
PowerPoint® presentations he used to discuss
background investigations and surveillance and
security are attached). He based his presentation
on evaluations conducted by Information
Services Group of the best practices now
employed in other jurisdictions.
Consultant describes background
checks
With respect to background investigations,
Mr. Sterling outlined the types of investigations
the board might use to investigate license
applicants, slot-machine manufacturers and
suppliers and “key employees” and other
“qualifiers” of those organizations, as well as the
process the board might employ to conduct those
investigations. Mr. Sterling also addressed the
scope of investigation the board might use with
respect to gaming employees and non-gaming
vendors and employees.
The background investigation process Mr.
Sterling outlined would entail extensive
investigation of license applicants, slot-machine
manufacturers and suppliers and “key employees”
and “other qualifiers” (officers, directors) of
those organizations, and less extensive
investigation of gaming employees and nongaming vendors and employees. Mr. Sterling
repeatedly pointed to New Jersey and Nevada as
potential models to follow in the design of the
background-investigation process, and he
characterized those states as setting the “gold
standard.”
The board recognized that background
investigations of certain subjects (non-gaming
employees and non-gaming vendors) are
discretionary, but Chairman Thomas “Tad”
Decker suggested that the “sense” of the board at
this time is that it would require some
background investigation of those subjects, in
addition to the higher standards of investigation
for those directly involved in gaming operations.
Mr. Sterling also presented a conceptual
model allocating responsibilities for the conduct
of the investigation activities, including the
potential allocation of work between civilian
analysts and lawyers (both categories, presumably,
comprised of board employees) and the
Pennsylvania State Police.
With respect to surveillance and security, Mr.
Sterling told the board that, with some
exceptions, it has the discretion to allocate
responsibility for surveillance and security among
gaming operators, the board’s own bureau of
investigation and enforcement and the
Pennsylvania State Police. He suggested that the
board might ask the state police to perform
surveillance. Alternatively, he said, the board
might look to the state police to regulate
SPECIAL DAILY
GAMING UPDATE
December 15, 2004
Colonel Perlandi noted that, in Section 1102 of
the gaming act, the General Assembly set out its
policy that “[s]trictly monitored and enforced
control over all limited gaming authorized by this
part shall be provided through regulation,
licensing and appropriate enforcement actions
….” Lt. Col. Perlandi recommended that, in the
interests of protecting the public and ensuring
confidence in the integrity of the industry, the
board employ a broad interpretation of the
statutory provision in order to make the industry
as “transparent” as possible.
Lt. Col. Perlandi compared this aggressive
approach with that taken in other states such as
New Jersey, Missouri and Connecticut. He
contrasted the approach taken by those states
with that employed in Delaware and New
Mexico, which he characterized as focusing their
policing efforts principally on ensuring the
accounting of slot revenue.
Lt. Col. Perlandi told the board that part of
that aggressive approach would be to require
background checks of any entity or individual
involved directly in the gaming industry.
Captain Ronald P. Petyak, director of the
state police Office of Gaming Enforcement,
explained in detail the process the state police
propose to use for the background checks. He
proposed that the state police assume
responsibility for all background checks. He
suggested that, once the board ensures that an
application is technically complete, the board
forward the application to the state police for a
background check.
Capt. Petyak recommended that the board
approve a plan in which all applicants for a
license, regardless of whether the applicant is a
“key” employee or a maintenance worker, must
submit to a background check. He noted,
however, that there would be different levels of
scrutiny for different sorts of employees. If the
board approves the plan, Capt. Petyak explained,
the state police would offer three levels of
background checks: the “shortcut” for low-level
employees, the “limited” for any employee that
handles money and the “intensive” or “full”
background check for manufacturers, suppliers,
operating entities and “key” employees. The state
surveillance conducted by gaming operators
themselves or work with gaming operators to
improve their internal surveillance. Mr. Sterling
recommended that the board provide for some
state police presence at every gaming facility,
although he noted that the board would need to
decide on the precise nature of such a presence.
Mr. Sterling also emphasized the importance
of minimum internal-control standards that
would be adopted by each operator and approved
by the board. He commented that New Jersey
and Nevada represent the “gold standard” in this
area as well. At the same time, he characterized
West Virginia’s requirements as “minimal” and
not a model he would recommend that
Pennsylvania follow. Mr. Sterling offered a
similar observation with respect to the way in
which other jurisdictions approach the threat of
money laundering, noting that New Jersey and
Nevada have the most rigorous enforcement
provisions.
Mr. Sterling described to the board the use of
technology in areas of surveillance and security.
He observed that some gaming entities are
exploring the use of facial-recognition technology
as a way of identifying and barring unwelcome
gamblers. He concluded his presentation by
proposing a process by which the board would be
able to evaluate surveillance and security options
from an operational perspective and to prepare
regulations reflecting the board’s conclusions
regarding such matters as allocation of
enforcement responsibility.
The board did not take any action with
respect to Mr. Sterling’s recommendations.
State police recommend broad
interpretation of statutory provision for
policing industry
Two commissioned Pennsylvania State Police
officers presented to the board the
implementation plan prepared by the state police
Office of Gaming Enforcement (a copy of the
PowerPoint® presentation they used is attached).
Lt. Colonel Ralph M. Perlandi, the deputy
commissioner of operations for the state police,
described to the board the anticipated state police
role in regulating gaming in Pennsylvania. Lt.
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SPECIAL DAILY
GAMING UPDATE
December 15, 2004
police would then forward to the board the
information discovered, and the board could
determine how to proceed.
Capt. Petyak told the board that, in all cases,
applicants would be fingerprinted. He explained
that the fingerprints would then be stored in a
central database.
The state police would
periodically cross-reference that database with
existing criminal databases.
Board member
Kenneth T. McCabe (a former FBI agent)
questioned whether this database could be crossreferenced with those in other states. Capt.
Petyak responded that he would find out and
report back.
The state police proposed that the
background-check process would begin at least
four to six months before any facility opened.
Capt. Petyak told the board that, based on the
state police’s research of other states’ experiences,
he anticipates 700-1,400 checks per licensed
facility, with the exact number varying based
upon geographic location.
state police to conduct background checks on
manufacturers and suppliers, the first gaming
entities that must submit applications.
More than 27,500 licenses anticipated
At the conclusion of the state police
presentation, Lynn Stelle, consultant to the
Department of Revenue, made a brief
presentation regarding licensing (a copy of the
PowerPoint® presentation he used is attached).
He noted that all resorts; tracks; manufacturers
and suppliers; “key” employees of manufacturers,
suppliers and gaming operators; other employees
of manufacturers and suppliers; certain nongaming entities and their employees and actual
gaming employees must be licensed.
He
estimated that, including all of those persons and
entities, there would be more than 27,500 licenses
issued. Mr. Stelle told the board that
manufacturers and suppliers must be licensed 90
days before the other applicants and that, once
those licenses are approved, the board could
review other applications.
Mr. Stelle advised the board that he is
working with the Department of Revenue and the
Pennsylvania State Police to develop the
necessary application forms. He anticipated that
the form for manufacturers and suppliers would
be presented for board review at its January
meeting. He said that the application form for all
other applicants would be presented to the board
for review at its February meeting. He said that,
in the interim, the board must develop its own
processes and procedures for the review of these
applications. Board Member Mary DiGiacomo
Colins suggested that the board should develop
regulations governing this and other issues before
its January meeting.
The agenda for today’s meeting included two
additional presentations (one on forms by Matt
Kelly and one on cash management and auditing
by Eileen McNulty). However, Chairman Decker
announced that they would be postponed.
State Police recommend that they
assume enforcement responsibility
Lt. Col. Perlandi and Capt. Petyak also
recommended to the board that the state police
assume all responsibility for enforcement of the
gaming regulations. Those enforcement activities
would include maintaining a floor presence in
each facility and using undercover intelligence
officers when necessary.
The state police
representatives told the board that their officers
would both work with and observe the facilities’
internal-security operations.
Capt. Petyak
explained that, with respect to incidents that
might occur outside gaming establishments, the
state police would work to develop memoranda
of understanding with local police.
The state police told the board that the intent
of the sort of enforcement they recommend is,
among other things, to discourage and eliminate
slot cheats, organized crime, employee theft and
counterfeiting. The board voted unanimously to
submit the names of all of its staff members for
background checks. Because there is not yet a
formal arrangement between the board and the
state police, the board also voted to authorize the
Board adopts diversity plan but reveals
no details
At the conclusion of the meeting, the board
addressed two motions.
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SPECIAL DAILY
GAMING UPDATE
December 15, 2004
The first addressed the diversity plan that was
tabled yesterday. Chairman Decker explained
that the plan had been amended, but he offered
no details regarding the contents of the plan or of
the amendments to the plan. Board member
Jeffrey W. Coy noted that the plan is a work in
progress. The board voted and unanimously
approved the plan, although it was not made clear
to the public or the media what is included in the
plan (board members said details of the plan
would be posted on the board’s web site, but they
had not been at press time for this special daily
gaming update). One board member commented
privately that the plan adopted today did not
provide details regarding what would need to be
included in any application to the board.
Second, the board unanimously approved the
hiring of Price Waterhouse Coopers LLP to
advise it regarding policy and staffing issues.
The board adjourned after noting that its next
meeting would be in January 2005.
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***
If you missed K&L’s December 14, 2004,
Special Daily Gaming Update, you can find it
here.
For more information about important
aspects of gaming in Pennsylvania, please see the
following K&L client alerts:
David R. Overstreet
717.231.4517
doverstreet@kl.com
David R. Fine
717.231.5820
dfine@kl.com
Pittsburgh
Sanford B. Ferguson
Gaming Law Under Attack: What’s Next?
The Pennsylvania Gaming Act: The World of
Procurement
412.355.6494
ferguson@kl.com
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indicated, are not certified by the Texas Board of Legal
Specialization.
The Gaming Act and Diversity: Legislative
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This publication/newsletter is for informational
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advice. The information herein should not be
used or relied upon in regard to any particular
facts or circumstances without first consulting a
lawyer.
©2004 KIRKPATRICK & LOCKHART LLP.
ALL RIGHTS RESERVED.
The Gaming Act: Pennsylvania Supreme Court
Jurisdiction I
Indian Involvement Thwarted
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