If convicted card-room loan shark Hollman Cheung believes California should clamp strict controls on the state's burgeoning gambling industry, who wouldn't?
Very few, most agree, and the Legislature is trying again this year to create an Honest John commission free of corrupting influences to watch over California's 256 card clubs. No poker emporium could operate without scrutiny by the powerful, independent panel.
As a repentant Cheung put it, writing to Atty. Gen. Dan Lungren from his federal prison cell two weeks ago, a gambling commission "is desperately needed. . . . I have seen money-laundering on many occasions and I have seen it take many different forms."
He should know. Last year, after running the Asian games section of the Bicycle Club in Bell Gardens for several years, Cheung was convicted of loan sharking, extortion and racketeering. He was sentenced to 12 1/2 years for his sideline activities at the card club.
But despite widespread support--from anti-gambling moralists, Las Vegas interests, many card room proprietors and a convicted felon--the lead gambling-control bill as now drafted invites a seeming paradox.
Proponents of a commission are also urging enactment of measures that could actually expand the opportunities for legally laying a bet in California. Additionally, critics question whether the state's new gambling environment would be as clean as is claimed.
At its first substantive hearing last week, a bill sponsored by Lungren and authored by Assemblyman Phillip Isenberg (D-Sacramento) was approved 11-3 by an Assembly committee with the expansion provisions intact.
Besides setting up the California Gambling Control Commission, the proposed legislation drops the barriers to publicly traded corporations, repealing laws that--except on Indian reservations--have kept their gambling activities out of the state. Big casino corporations such as Caesars World, Circus Circus and Hilton Hotels could qualify for a California card club license, and each has a lobbyist in Sacramento pursuing its interests.
Also allowed in as card club operators would be any company, publicly traded or not, that is now banned because it runs gambling operations elsewhere that California prohibits. That provision is part of the reason that Hollywood Park racetrack in Inglewood cannot operate the card club on its own grounds. Because it is both a publicly traded company and because of board chairman and major stockholder R. D. Hubbard's dog-racing interests in Oregon, the track is prohibited from operating the year-old club, and must lease it to outside interests.
According to state Senate leader Bill Lockyer (D-Hayward), the desires of Hollywood Park lie at the center of the seeming contradiction: New, more restrictive controls on the industry on one hand; opening the state to major gaming interests on the other.
To win legislative support for the new controls, Lockyer said Lungren is again supporting a bill containing elements sought by Assemblyman Curtis Tucker Jr. (D-Inglewood) that would allow Hollywood Park to own and operate its card club.
Tucker is carrying a bill this year that would do little more than lift restraints on Hollywood Park, a major moneymaker and employer in his district. The Assembly committee that approved the Lungren bill also approved the Tucker bill, 13-0.
Motivating Lungren, at least in part, is his desire "to become California's gambling czar," Lockyer said. Along with the tough new controls over gaming at the state level, a new division of 70 investigators would be created in the attorney general's office.
Lungren acknowledged that, like last year, he is working with Tucker "and all sorts of groups to try to get the adequate votes necessary to pass the bill, and we have not compromised our principle in any regard." But he denied he was maneuvering to become a "gambling czar."
With the creation of a licensing commission, Lungren said, he would be giving up power--"a strange way to become czar." He referred to the small unit in his office that now licenses card clubs, an authority it would surrender to the commission.
Last year, the major battle over new gaming laws featured a standoff between Gov. Pete Wilson and powerful Democrats over the composition of the proposed five-member commission. The governor demanded the authority to appoint all five; legislative leaders sought authority to appoint at least two.
Isenberg has agreed to delete provisions from his bill that give the governor all five commissioner appointments, but all signs point to a renewal of the fight. A Wilson spokesman said the governor still demands the power to appoint all five commissioners.
Lockyer said he will continue to insist that one appointment be made by the Senate Rules Committee. Likewise, Assembly Speaker Willie Brown (D-San Francisco), who would control the other legislative appointment, said he will object to the bill if it bows to Wilson's demand.
Brown has said repeatedly that he favors allowing full casino gambling in California, within geographical limits to protect gaming already established on Indian lands, and that the casinos should be taxed to help support state services. Card clubs are taxed now, but the revenues go to local governments.
"I think gaming is here to stay," Brown said last week. "I support gaming, I participate in gaming, I believe in gaming and"--he joked--"I know I'm going to win the lottery."
Meanwhile, on the issue of expanding gaming, Isenberg conceded that by relaxing prohibitions on who runs gambling, "there could be more of it." But gambling in California is growing anyway, he said, citing applications for new clubs that could double the volume of card club gambling activity.
Publicly traded gaming companies, Isenberg said, already are regulated by the Securities and Exchange Commission and longtime industry overseers such as the Nevada Gaming Commission. In California, there would be yet another layer of control over gaming.
The alternative, he said, is continuing to allow card club operators, once they pass background checks by the state, to answer only to local governments often heavily dependent on their revenues, which commission backers say has led to lax law enforcement as well as outright scandals.
Card club owners respond by saying their clubs are safe and generally crime-free. But Isenberg and Lungren cite a litany of violent crime, money-laundering, loan-sharking and corruption of local officials, all associated with card clubs in recent years.
Without closer controls, Isenberg said, many of the card room operators are "just a bunch of mysterious people floating around. We have no way of checking them unless they have criminal records."
The fact that "cleaner" publicly traded companies are banned now, he said, is the result of an "old turf protection law (obtained) by existing card room operators who didn't want any competition."
State Sen. Tom Hayden (D-Santa Monica), who is also the author of gaming control legislation, said state lawmakers as well as local governments can be influenced by the well-heeled gaming industry. He pointed to the $5.3 million in political contributions and lobbying spending in Sacramento by gambling interests since 1990.
With gaming legislation still undecided, the "constant presence" of industry money is expected to keep flowing, he said.
Hayden also said he questions the view that the highly regulated major casino companies are assured of being clean operations. I. Nelson Rose, a Whittier College law professor and gambling expert, agrees.
The "degree of honesty and competence does increase" as publicly traded gaming corporations replace private gambling concerns, Rose said. But in pursuing their interests, these companies often weigh the risks of committing a violation and "if they can make more money than the fine they have to pay, they go ahead and do it," he said.
The largest fines levied by the New Jersey Casino Control Commission were slapped on the large publicly traded corporation Caesars World, according to Jack Mozloom, a spokesman for the New Jersey Division of Gaming Enforcement. It was fined $600,000 in 1991 for illegally paying cash incentives to high rollers, and $477,000 in 1985 for a comparable violation.
As for the reputations of the regulators, Paul Coffey, chief of the U.S. Justice Department's organized crime and racketeering section, said that "rules regulating gambling in Nevada and New Jersey appear to have the requisite teeth to identify and remove criminal conduct in the gaming industry."
But another federal official in Washington familiar with the industry said, "Nevada has the most experience in regulating gaming. In some areas: pretty good, but not in others. (There is a) sense that gaming is such a large part of the Nevada economy that they're not going to be tough if it is clearly adverse to casino interests."
Bill Curran, chairman of the Nevada Gaming Commission, said that it is the players, not the industry, that the panel is set up to protect. As a first priority, Curran said, "the gaming patron . . . needs to be assured of the integrity of the games."
Times staff writers Jerry Gillam in Sacramento and Ronald J. Ostrow in Washington contributed to this story.
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The Vested Interests
Differing agendas are being sought by gambling concerns and politicians regarding proposed regulation of their industry:
* Caesars World--Though the company has "no immediate plans" to operate card rooms in California (other than in a Native American casino venture), a spokesman said Caesars would want "to compete for business" if the state ever went to full casino gambling.
* Circus Circus--A spokesman said the company "supports what the attorney general is doing." Atty. Gen. Dan Lungren has emphasized the need for a gambling regulatory commission.
* Ladbroke Group Ltd.--The British-owned wagering firm, barred from operating a planned card club at its Golden Gate Fields racetrack in the Bay Area, seeks removal of the ban and will "take advantage of the expansion of gambling in California if and when it comes," said lobbyist Parke Terry.
* Hollywood Park--Barred by law from operating a card room at the racetrack, board Chairman R.D. Hubbard calls for repeal of the ban on public companies and supports creation of control commission.
* Bicycle Club--Part owner George Hardie says he favors regulation but calls it "bizarre" if public corporations were allowed to run card rooms, which would "open the door" to Bicycle Club competitors.
* Commerce Club Casino--Lobbyist Rodney J. Blonien said the club favors removing the ban on public companies because it may want to become one. But "it would take us about two years to convert to a (public company)." An amendment removing the two-year wait is being considered.
* Gov. Pete Wilson--Insists that all appointments to proposed gaming control commission be made by governor "to limit influence of outside groups."
* Assembly Speaker Willie Brown (D-San Francisco)--Favors phasing in--and taxing--full-scale casino gambling but not near Native American casinos that would suffer from the competition.
* Atty. Gen. Dan Lungren--Argues for stringent state controls over card clubs and their owners. Also approves removing prohibition against corporate casino operators.
* Assemblyman Phillip Isenberg (D-Sacramento)--The author of Lungren's gambling bill favors strict licensing and oversight control, as well as dropping ban on public corporations.
* Assemblyman Curtis Tucker Jr. (D-Inglewood)--Seeking to benefit Hollywood Park in his district, he favors an exemption for racetracks to the ban on public companies.
* Sen. Tom Hayden (D-Santa Monica)--Authored his own gambling control bill calling for strict conflict-of-interest rules for commission members and barring out-of-state interests.
* Senate Pro Tem Bill Lockyer (D-Hayward)--Has no objection to limited expansion of gambling but is at odds with Wilson over composition of the control commission.