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BAD BOYS AND GAMBLING

BAD BOYS AND GAMBLING. TWENTY-EIGHTH LECTURE DECEMBER 6, 2012. William R. Eadington, Ph.D. Professor of Economics, College of Business Director, Institute for the Study of Gambling and Commercial Gaming University of Nevada, Reno www.unr.edu/gaming.

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BAD BOYS AND GAMBLING

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  1. BAD BOYS AND GAMBLING TWENTY-EIGHTH LECTURE DECEMBER 6, 2012 William R. Eadington, Ph.D. Professor of Economics, College of Business Director, Institute for the Study of Gambling and Commercial Gaming University of Nevada, Reno www.unr.edu/gaming

  2. CASE 1BAD CASINO BEHAVIOR: THE HARD ROCK HOTEL AND CASINO • Issues: What is appropriate behavior in terms of advertising and marketing strategies for licensed gaming companies? • How accountable is a licensee for activities taking place on its properties? • Is there a concern for the reputation of the gaming industry or of Nevada from “bad behavior”of a licensee? • Note: The culture at Hard Rock has been to position itself as “edgy” and very attractive to young urban professionals, I.e. “bad boys”

  3. REHAB AT THE HARD ROCK

  4. ISSUES OF PUBLIC POLICY AND REGULATORY DIMENSIONS • Should advertising be required to meet some “public standard” for decency and/or good taste? • Licensees should not undertake actions that are seen as damaging to the reputation of the industry or of the State of Nevada • Concerns from members of the general public who do not want risqué public advertising to be exposed to their children • Should a licensee have to show respect to the regulator?

  5. RADIO ADS FOR HARD ROCK • "At the Hard Rock we believe in your Monday night rights: large quantities of prescription stimulants, having wives in two states ... Tell your wives you are going; if they are hot, bring them along."

  6. HARD ROCK HOTEL: EDGY MARKETING FOR TARGET CUSTOMERS

  7. ANOTHER HARD ROCK BILLBOARD, 2004

  8. HARD ROCK RESPONSE AFTER CONTROL BOARD COMPLAINT

  9. REGULATORY RESPONSE • On January 21, 2004 the Gaming Control Board unanimously approved and filed a three-count complaint alleging that the Hard Rock's sexually suggestive ads amounted to a "failure to conduct advertising and public relations in accordance with decency, dignity, good taste, honesty and inoffensiveness" • Hard Rock's management had not complied with their 2002 agreement to internally limit their sexually suggestive advertising content. • Settlement negotiated with GCB: $300,000 in fines; Hard Rock acknowledged that its commercial free speech rights are "subject to constraints imposed by federal, state or local law; and that any violation thereof may reflect on the repute of the gaming industry in Nevada“ • Rejected by a unanimous vote of the Gaming Commission: It became more an issue of Freedom of Commercial Speech and regulatory censorship than obscenity • Also pointed out considerable friction between GCB and the Commission

  10. HARD ROCK’S MAJOR COMPETITOR: THE PALMS

  11. CASE 2: WHAT RESPONSIBILITIES DO CASINOS HAVE TO THEIR CUSTOMERS BEHAVING BADLY? • Concept of Duty of Care: A company must act in the interests of its customers

  12. THE CASE OF AUSAF SIDDIQUI

  13. FACTS OF THE CASE • Siddiqui had lost $167 m in past decade to casinos • Highest of High Roller treatment • Salary at Fry’s Electronics was about $225,000 per year • IRS contends he took at least $67.5 m in kick-backs from customers of Fry’s • He had uncollected debts (markers) all over LasVegas and elsewhere (each in the millions)

  14. HIGH ROLLER TREATMENT • “Fiji water, grouped in bottles of three. Golden raisins and warmed mixed nuts. Aramis cologne and badger hair shaving brush. Lint-free towels. Dom Perignon Rose champagne and Kurosawa Sake in the fridge. And never, under any circumstances, approach him from behind.” • “…he liked his room stocked with Grey Goose vodka, Crown Royal, Johnnie Walker Black, Jack Daniels, Grand Marnier, Kahlua, Bailey's Irish Cream liqueur, Dom Perignon, Kurosawa Sake and expensive cognac bottles of Hardy Perfection and Remy Martin Louis XIII.”

  15. LEGAL AND REGULATORY QUESTIONS • Is there any liability of the part of casinos to repay Fry’s Electronics for receiving stolen money? • “Reasonable man” argument • Did casinos violate any regulations in any jurisdictions? • “Duty of Care”

  16. THE CASE OF TERRANCE WATANABE

  17. FACTS OF THE CASE • Lost $112 million to Harrah’s in a year; $14.7 million in uncollected debt • Harrah’s sued on the $14.7 million • Watanabe counter-sued, claiming illegal actions on Harrah’s part, especially at Caesars Palace and the Rio • Allegations of supplying prescription drugs, keeping him drunk, ignoring the fact that he was clearly out of control

  18. LEGAL AND REGULATORY QUESTIONS • Is there any liability of the part of casinos to repay Fry’s Electronics for receiving stolen money? • “Reasonable man” argument • Did casinos violate any regulations in any jurisdictions? • “Duty of Care”

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