California Crafts Policy To Report Non-Prosecuted Cardroom Financial Crimes

October 25, 2021
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Policymakers in California are considering creating a new reporting system to make it more difficult for cardroom employees who were fired or quit their jobs for financial crimes to continue working in the gaming industry.

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Policymakers in California are considering creating a new reporting system to make it more difficult for cardroom employees who were fired or quit their jobs for financial crimes to continue working in the gaming industry.

Except for rare cases, most cardroom employees in California caught on surveillance embezzling funds from their employer are simply fired but never prosecuted, allowing them to move on to another job within the industry.

For several months, the California Gambling Control Commission’s (CGCC) Gaming Policy Advisory Committee (GPAC) has been working on developing regulations that would allow regulators to keep track of those employees.

The committee is considering adding a list of names to the Bureau of Gambling Control’s (BGC) current management system of people the industry believes should not be working after being terminated for offenses discovered by cardrooms or local law enforcement.

“The initiation of this project was really to focus on those particular [work permits] who don’t have a conviction, because we will catch those who do come through the application process if a conviction is on their record,” said Stacy Luna Baxter, CGCC’s executive director.

Baxter said what concerns her the most are the employees that have committed some form of financial crime and who were not pursued by law enforcement for prosecution.

“Hopefully, if things went in the right direction … even if local law enforcement isn’t pursuing the matter, the Bureau of Gambling Control is brought in on the matter and they’ve done an investigation,” she said.

Beyond the BGC investigation, Baxter said she expects there to also be surveillance video or the cardroom has enough documentation to confirm the matter to get the commission to the level where it is comfortable in justifying the placement of an individual on the list.

“What’s most concerning for the industry … are those individuals that have been caught stealing but local law enforcement has not pursued those charges,” Baxter said. “That is really one of the most concerning areas at least from our perspective on the commission that we find them slipping through a loophole right now in terms of not adequately notifying the other cardrooms that this has occurred.”

“I think that is one of the main processes in getting this up and running,” she added.

The nine-member committee makes recommendations on gaming policy that are forwarded to the gaming commission for final approval. The policy committee is also crafting regulations around dual licensure for gaming businesses and the state’s lawful marijuana industry.

But so far, it has been slow going developing regulations as GPAC members consider reporting requirements and who would have access to the list.

David Fried, a gaming attorney and GPAC member, said he is concerned about people being blackballed from employment in a situation where the cardroom has a reasonable suspicion, but no proof.

Fried also expressed concern over the liability the commission and a cardroom could face for putting a former employee on a list.

“I’m concerned about defining what the violations are,” Fried said. “Is it any criminal code violation? Is it a violation of a [gaming] regulation?”

Haig Kelegian Jr., president of the Crystal Casino in Compton and one of two GPAC members tasked with creating regulations, said he understood Fried’s concerns but said the cardroom had experienced employees embezzling funds only for local law enforcement not to pursue it.

Kelegian said the cardroom even informed the BGC within the state attorney general’s office, but the bureau did not do anything to investigate the employee.

“We have the proof,” Kelegian said. “We have the footage and we let the employee go. I’m not saying that individual should automatically be excluded; this is where the fine line comes in.”

Kelegian suggested only reporting those employees who get convicted of a criminal offense.

“Someone is not guilty until they are found guilty but there are cases that the local district attorney won’t take on,” said Art Van Loon, general manager of Stones Gambling Hall and GPAC member.

Luis Jaramillo, a sergeant with the Inglewood Police Department who is the second member of the work permit subcommittee, said even if lawmaker enforcement does not prosecute acts of theft and embezzlement, cardroom owners and managers should file a police report and keep it with the video evidence to be part of an official record.

Currently, there are 74 cardrooms in California, according to the BGC in Sacramento. Those cardrooms generate more than $499m in local and state tax revenue and employ some 32,425 people.

The California Gaming Association, an industry trade group, declined to comment on the possibility of a new reporting system.

Yolanda Morrow, assistant director of the BGC, said the purpose of this list was to include people without convictions so cardrooms can share the information that they currently do not have access to.

The committee is expected to submit regulations to the gaming commission by the end of the year or early next year.

Fried reiterated his concern over who goes on any list, saying there must be some evidence.

He said there is also a need to protect regulators from liability because “we are effectively denying someone the ability to work.”

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