Online poker business is too tempting for regulatory zealot
As a Gaming Control Board member, Randall Sayre was known as a regulatory tough guy.
He was Mr. Due Diligence, a real by-the-book stickler who read his backup material and wasn't shy about speaking his mind. In the highly politically charged atmosphere of Nevada gaming, his candor was refreshing. With nearly two decades with the Control Board -- more than 15 years in investigations and four more as an elite member -- Sayre knew the regulatory side of the business as well as anyone.
So, when Sayre traded in the starched collar of the Control Board in January to become a consultant and representative of the hugely successful PokerStars company, more than a few industry observers were surprised. Perhaps they believed it was a signal the online poker business was moving rapidly toward legalization. A lot of big Nevada casino players were dreaming of the multibillion-dollar pot to be won once online poker gained acceptance, not just with its millions of fanatical practitioners, but with Congress and the Department of Justice. Until then, the DOJ is duty-bound to enforce the Unlawful Internet Gaming Enforcement Act (UIGEA.)
Casino titans and Internet poker kings saw their royal flush fantasies bust out last week, when a 51-page indictment of 11 persons alleging violations of the UIGEA was unsealed in the Southern District of New York. The three biggest online poker sites, PokerStars, FullTilt Poker, and Absolute Poker, were shut down, and the feds froze bank accounts in connection with an investigation of what they say was bank fraud and money laundering.
Whether it's a poker website or online sports betting hub, the legal challenge always emerges when it comes time to move the money. Playing is the easy part; paying and taking is legally problematic.
Sayre, the Gaming Control Board veteran, would know that as well as anyone.
PokerStars wasted little time putting Sayre to work.
In March, as state legislators heard testimony in the matter of Assembly Bill 258, Nevada's Internet poker enabling bill, PokerStars was represented in part by Sayre, former Henderson police chief and Assembly Speaker Richard Perkins, and gaming regulatory attorney Scott Scherer.
While Perkins and Scherer have their own damage control issues, at least they didn't author a letter on official Gaming Control Board letterhead warning Nevada casino licensees against getting ahead of themselves mixing with the alluring, but arguably illegal, Internet poker companies.
Sayre did.
On May 28, 2010, he released a letter on the subject of a gaming licensee doing business with an Internet poker company. It reads in part, "What is clear is that the U.S. Department of Justice has shown no indication of relaxing its position and interpretation that internet gambling in any form is illegal in the United States. The lack of federal criminal prosecutions under UIGEA should not be interpreted by the gaming industry as a lack of interest by states and federal law enforcement and regulatory agencies on this issue. A number of federal statutes come into play as you advise your clients, such as UIGEA, the Wire Act, anti-money laundering statutes, the Interstate Transportation of Wagering Paraphernalia Act, and the Travel Act. These, as well as a myriad of state and tribal laws and regulations should be considered carefully in light of the federal government's currently stated position. From the Board's perspective, these assessments need to be viewed in the context of current Nevada law and regulatory language which mandate standards for conduct that go beyond gambling."
He further noted, "Speaking more directly to the issue you have raised, it is important for the industry to understand that the Board and NGC have historically taken exception to any practice whereby a company utilizes an affiliate to engage in impermissible conduct the company itself cannot engage in.
"As you are aware, the Board will not disregard the Department of Justice's interpretation of federal law and the effects that interpretation has on existing state law. "
In the wake of his work for PokerStars, Sayre might have added, "Do as I say, not as I do."
While technically Sayre didn't violate the state's one-year cooling off period that precludes ex-Control Board officials from working directly for gaming licensees -- remember, Isle of Man-based PokerStars isn't a licensee -- his rush to embrace what was surely a lucrative consulting deal violates the spirit of the law. It cries out for a revision of the statute.
It also constitutes an embarrassing moment in Gaming Control Board history. It's impossible for Sayre to contend he didn't know better.
In conclusion, the regulatory watchdog who would become an Internet poker racket lapdog wrote back in 2010, "Caution in this regard is appropriate as this regulatory system, the federal government and commercial interests navigate an environment which clearly has global implications."
If only Randall Sayre had practiced what he preached.
John L. Smith's column appears Sunday, Tuesday, Wednesday and Friday. E-mail him at Smith@reviewjournal.com or call (702) 383-0295. He also blogs at lvrj.com/blogs/smith.
