NYS casino licenses

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Law suit slams integrity of New York casino selections

Posted by noonante on February 1, 2016
Posted in: Horse Racing, Political/Social commentary, Politics. Tagged: , , , , , . Leave a comment

A group of plaintiffs including the Oneida Nation and individual residents of Tyre in New York have filed litigation assailing the integrity of the decision by New York’s Gaming Commission to award a casino license to Lago Resort and Casino.  The Oneidas operate a near-by casino, and the individual plaintiffs are long-time residents of the primarily rural community with a permanent population of 950.  Lago estimates that its casino will attract 9,000 vehicles per day.

The essence of the litigation is that the Facility Location Board appointed by the Gaming Commission violated the law authorizing casinos in multiple respects, and the Commission simply rubber-stamped the Board’s recommendations without discussion or explanations.  The 66-page complaint presents a compelling case that the decision to award a license was arbitrary and capricious, and reeks of incompetence or worse.

The Oneida Nation claims that locating a casino only 75 miles from their existing casino will “cannibalize” their business, contrary to the purpose of the legislation and the standard the Board used in disqualifying other bidders.  Finger Lakes Racetrack is only 35 miles away and, while not a plaintiff, is seriously concerned that the competition will put them out of business.  That would be a devastating development for the New York breeding industry that has been on the rise in recent years.

Indeed, the Board declined to award a second casino in any of the three regions because a “second competing new gaming facility in any of the regions would make it significantly more difficult for any gaming facility to succeed in that region.”

From my perspective, one of the most troubling aspects of this shoddy and sloppy decision is the refusal of the Gaming Commission to accept any responsibility for the recommendations of its own appointees.   In the transcript of its December 21, 2015 meeting awarding three casino licenses, the Commission’s General Counsel advised the commissioners of their responsibilities:

“It is important to note that your role is not to reevaluate all of the applications, compare applicants, or to consider or reconsider the selection criteria the Gaming Facility Location Board considered and applied.  Your role is no [sic] to substitute your judgment for that of the Gaming Facility Licensing Board….

You are not appellate body exercising review of the Gaming Facility Location Board’s processes or decision-making.”

There are several curious aspects of this reticence to exercise authority.  First, it runs counter to the traditional bureaucratic tendency to absorb as much power and authority as possible.  Second, the purpose of establishing the Gaming Commission four years ago was to consolidate all oversight for gambling activities in a single agency with authority to regulate.  Third, it is contrary to elemental common sense.  One does not set up a permanent agency with the power to appoint temporary bodies, and then deprive the permanent agency of the ability to review the decisions of a temporary one.

Then there is the matter of the language of the law.  The statute creating the casino selection process specifically states the Commission has the “power … to deny an application … for any cause that the commission deems reasonable.”

The Commission began the bidding process in a pristine, if not antiseptic, manner.  They did not even allow the Facility Location Board members to attend a Q&A with bidders.  But subsequent events have tainted the integrity of the process:

  • The Facility Location Board used a secret evaluation criterion with no notice to the bidders, let alone the public.  This is in despite of detailed criteria required by the law.
  • Although the law required a quantitative weighing of evaluation criteria, the Board decided to apply a qualitative analysis, giving primacy to its secret criterion.
  • Even with these major defects, the Board still applied its standards differently to competing proposals.
  • After deciding that the Southern Tier of the state could not support more than one casino, an unsuccessful bidder complained that he had donated $800,000 to the effort to pass the casino law  – according to him, at Andrew Cuomo’s request.  The Board  –  and then the Commission  –  promptly caved when the Governor said he thought there should be a second bidding process for a second casino in the region.  To the surprise of no one, the Board last week decided to make that second award in a meeting lasting less than two minutes.  The Board gave no explanation for its flip-flop.

At the risk of belaboring the obvious, New York’s state government has been under a cloud of rampant corruption.  When the leaders of both the Senate and the Assembly are convicted of major corruption in just the past year, one would think those remaining might be a little more careful in the conduct of their business.

One of the more obvious sources of possible corruption is in the award of contracts.  Indeed, the same United States Attorney who brought the corruption cases against Sheldon Silver and Dean Skelos is looking at contract awards in the Buffalo area that were made to implement a high-profile priority of the Governor.

Because of the possibility of corruption and undue influence, government contracting has developed widely-recognized standards to ensure that the awarding of contracts is beyond reproach:

  • The process must be open, transparent and fair to all bidders;
  • There is a documented record explaining why decisions were made, so that anyone can go back and determine the process was fair and free of improper influence;
  • Those making decisions are publicly known and accountable;
  • Applicable laws are followed.

The casino process met none of those standards.  Not when a secret evaluation criterion is used, not when criteria are not applied uniformly, and certainly not when the law is being ignored.  And we do not know who really made what decisions and why.

The Gaming Commission owes it to the citizens of New York to take a position on the casino decisions and not hide behind a ludicrous legal claim that they lack authority.  The Commission, which also has oversight authority for New York’s horse racing, also owes it to that industry to explain why a decision that could devastate  both a race track and the breeding industry is one that is justifiable.  Anything short of that will further erode any remaining confidence in the ability of New York’s state government to act with integrity.

Significant challenges to integrity of NY casino selections

Posted by noonante on May 21, 2015
Posted in: Political/Social commentary. Tagged: , , , . Leave a comment

There are two serious challenges to the integrity of the decision recommending three casino licenses in New York.  While there is not yet litigation attacking the recommendations of the Facility Location Board, separate letters from attorneys, one representing the Oneida Indian Nation and the other on “behalf of several clients,” should cause New York’s regulators to pause.  The letters are typical of those seeking redress prior to litigation being filed.

New York’s Gaming Commission has the decision-making authority on awarding licenses for up to four casinos.  The Facility Location Board, appointed by the Commission to conduct a procurement and evaluate bids submitted by 16 applicants, published its recommendations on December 17.  After the Board reached its decisions, Governor Andrew Cuomo stepped in, implicitly criticizing the Board and “recommending” that a new procurement be done to select a fourth site.  The Board and the Commission apparently saw the wisdom of the Governor’s suggestion and promptly acceded to his request.

The essence of each letter is that the Facility Location Board’s recommendations are arbitrary and capricious because they did not follow their own rules and did not evaluate competing proposals in the same way.  It is a charge that goes to the heart of government procurement practices:  evaluation of bids should be open, accountable and capable of withstanding public scrutiny.  The Board’s recommendations meet none of these standards.

The law authorizing awards of casino licenses specified the evaluation criteria that had to be used in making decisions.  The law further specified the weight to be accorded each of the three broad categories.  Thus, “Economic Activity and Business Development” was a factor to be weighted as 70 per cent of all the factors.  Within each of the general categories, there were a number of specific criteria that had to be considered.  In “Economic Activity and Business Development,” for example, there were nine specific factors the Board had to consider and evaluate, such as maximizing revenues to the state and creating the highest number of quality state jobs.

The law clearly requires that a quantitative assessment be made of each proposal.  The Board further committed to making public its scoring of the proposals.  Then, they shifted gears.  Even though the evaluation criteria were set forth in the law, the Board decided to add an additional criterion.  It created this new factor in secret, neither announcing it during its evaluation nor informing bidders of the need to address it in their proposals.  It also decided to give their new criterion “substantial weight.”  While the law did allow the Board to create additional criteria, it should be obvious that the authority was for fine-tuning, not a secret process that would ignore the specific directives of the law on evaluating proposals.

Instead of factoring their new criterion into the weighted quantitative system mandated by the law, the Board further decided to abandon the quantitative aspect altogether in favor of a “qualitative” one.  If this were not enough of a divergence from what they were required to do, the challenge letters assert that even then the Board did not apply their new approach consistently in assessing the merits of each proposal.

In short, a Board that had its responsibilities specifically set forth in a law decided to ignore the dictates of that law and embark on their own determination of how things should be.  In doing so, they have called the integrity of this particular bidding process into question.  Their work product is now before the Gaming Commission that appointed them and must now make the actual decision on awarding casino licenses.  The Commission is meeting on Tuesday, but the meeting agenda has not yet been posted.  (The Commission’s staff is in assessing the financial viability of the bidders recommended by the Board.)  Update:  The Facility Location Board recommendations are not on the agenda.

To this point, the Commission has been fastidious in protecting the integrity of the procurement.  It would mark a substantial departure if it now accepted the incompetent and sloppy product of its appointees.  The flaws in the recommendations of the Facility Location Board are so significant that their decision is unlikely to survive independent scrutiny.  If the Gaming Commission does not remedy the problem, a court will.

The last time a gambling license was put out for bid, it resulted in the odiferous selection of an operator for Video Lottery Terminals at Aqueduct Racetrack that could not survive the light of day.  While I am not suggesting that this decision is akin to that one, I would be particularly cautious knowing there is a sitting grand jury with a zealous prosecutor seemingly eager to go after the Governor.