Interview: Frank Fahrenkopf

Q: What is the most misunderstood thing about the gaming industry?

Frank Fahrenkopf, President, American Gaming Association and former chairman of the Republican National Committee. He was interviewed in the early spring of 1997. Fahrenkopf: There are stereotypes that are out there, that look back 30, 40 years ago which are perpetuated by some movies that come out of Hollywood. "Casino." The "Godfather" movies. For years the FBI and major law enforcement have said there is not an organized crime penetration. It's not there. A lot of the opponents love to drag up the old stereotype and throw it out. So, that's number one.

Secondly is the question whether or not having a casino or gambling in a particular community attracts what we call street crime. That there's something inherent, something endemic about gambling that creates street crime. People are going to get mugged. There's going to be larceny and so forth. And I think that's been proven over the years, by law enforcement, to be not true.

It's nothing inherent in gaming. Any enterprise that attracts large numbers of people. The crime rate at Orlando went up. It wasn't anything that Mickey and Minnie were doing that caused it, it was just that it was a draw of people to a community. Branson, Missouri is one that I use quite often. A wonderful, wonderful town in the Ozarks with country music. They pride themselves as being the buckle of the bible belt. And very limited alcohol, certainly not in any of the theaters that are there. It's now a country-western Mecca. And their crime rate went up. It wasn't because of anything that's happening there. It's a very safe place. But when you draw large numbers of people to a community, you are going to have street crimes. It doesn't have anything to do with gambling, inherently.

The one that I worked the hardest on, however, has to do with the so-called problem of the compulsive or problem gamblers. The experts tell us -- the counseling groups and physicians who spend time on it -- that it's somewhere between 1 - 5% of the population. People who can't help themselves and will go in and gamble away their money.

The opponents of gaming say, "Well, these people then, they go out and they commit crimes and they go on welfare and therefore they are a drain on society. And therefore we shouldn't allow this to go on. And that's the reason to stop gambling.

Forgetting for a moment the fact that 95% or more, of the American public doesn't have a problem. Our approach to this was we should take this on head on. And the industry has. When we started the American Gaming Association, one of the first things our board did is said, "Look, if there's a problem out there -- regardless of how small it is -- we have an obligation as corporate citizens to do something about it." And they are doing something about it. They're putting a million dollars a year into what we call the Center for Responsible Gaming, which is located on the campus of the University of Missouri in Kansas City.

The Board of Directors of the Center is half industry and half -- the leading people, today, in this country, dealing with problem or compulsive gaming -- physicians, doctors. The people who really work with this.

Now, we don't do research ourselves, because we know, any study that we do that says American Gaming Association on it, people are going to throw it up on the shelf. What we do is we take that money and we make grants to institutions that are, hopefully, beyond reproach in anyone's mind to do work and study.

The first grant was just recently given to Harvard University's Medical School Addiction Center to look at all the evidence that's out there to try to find solutions to this problem. This is different.

There is no analogies that can be made with tobacco or alcohol or drugs.

In those addictions, people are ingesting a foreign substance into their body. With problem or compulsive gaming, it's more akin to the problems -- I read more and more about and see on television more -- of people who have those little plastic cards, called credit cards and can't control their spending. It's compulsive behavior. And not enough study has been done of that.

Q: Tell me about the Arthur Anderson Job Study. What did it tell you?

Fahrenkopf: One of the arguments that anti-gaming activists have made for years, is that gambling tends to be -- they use the word, cannibalistic. That when it comes into a community, it doesn't create any new wealth or doesn't bring any new money, it just takes money away from other business. That argument has been out there for a long time and kept being pushed by anti-gaming opponents.

We wanted to take a hard look at that because we didn't believe it was true. Arthur Anderson did a macro economic study of the United States, going into those new jurisdictions and found that that is not the case. That overwhelming what's happened, is the disposable of the income of the American people has gone up dramatically, and gaming is only taking a very, very small part of that. And so it is not driving. It is not cannibalistic.

And, in fact, what it has done -- in most of the markets where it's been looked at--it has actually helped other businesses. Now, that's not to say, that if a casino comes into a community and opens up and it has wonderful restaurants that, you know, some guy who's had a family restaurant down the road for a hundred years, hasn't been able to compete.

But that's no different than if a new mall comes into a community. And in that new mall there's modern motion picture center where there's six or seven screen. There's a new shoe store. There's a new restaurant. When that new mall comes into a community, that old theater that was once there; the old shoe store; the old restaurant are likewise going to suffer. I mean, it happens to be a free market, capitalist system.

And so why the Arthur Anderson study was important -- not only was to show that there's a tremendous, positive financial impact to businesses and to the state and local jurisdictions by way of taxation -- but that it is not cannibalizing other businesses as the opponents have said for so many years.

Q: Critics who have looked at that study say, Arthur Anderson -- 'that's the same firm these guys have been using for years. Those are made- up numbers because they were paid to make the study.'

Fahrenkopf: Of course they're going to say that. What we say is fine-- take a look at the Arthur Anderson numbers. If you think they're wrong, show where they're wrong.

Likewise, what I want to do is when a community -- and this is normally how this comes to a head -- if a state or local community are considering a gaming expansion, you have the opponents of gaming who have been out there for five or six years, putting out this false economic information. What I'm saying to people who make that decision, look, make a decision. Whatever you decide is fine. If you don't want new gambling in your state, that's great. But make an informed decision. Have before you all the facts. Go out, talk to people in Tunica, Mississippi. Talk to the Mayor in Juliet. Talk to the people who are involved. What has it meant to their city?

Now, we really have the proof in the pudding, in many ways. For a long time, the opponents used economic models that were created by a couple of university professors that ....led to the conclusion that the social costs of gaming exceeded the economic benefit.

You don't need to rely on economic models anymore. Go to where the rubber meets the road, where we've had gaming in some of these jurisdictions. And talk to those people. Look at welfare rates. Look at unemployment rates. Look at AFDC. Look at all these factors. And make up your own mind. And then, cast an informed vote. That's all we're saying.

Q: But is there not a certain type of crime, though, that does gravitate towards gambling?

Fahrenkopf: I have seen no evidence of it, at this point of time. We've looked at the studies -- and a lot of studies have been done. And I'm not an expert in that particular field. But, I know that the opponents say that, that there is a specific type of crime. They usually say it'll be larceny. But that's true with all crimes -- or crowds. I mean, you do have lar- I mean, pick pockets and people who want to steal have to go where there's people. Because where there's people, there's money.

The prostitution question...I have seen no evidence that would indicate that prostitution is any more of a problem here than in any other place. Now, the difference, I guess is, is that here you have, you know, many hotels and so forth.

Q: This was always called Sin City for a reason. They were all the sins that you could do in one single place. That happened to be one of them.

Fahrenkopf: But, you know, I've lived in a couple places around the country. There are prostitutes in New York. There are prostitutes in Orlando. There are prostitutes in Miami. There are prostitutes in a lot of places.

And that's also an industry that's been around a long, long time. And, as to whether or not it's more attractive to places where's there's gambling, inherently, than there where are other -- I mean, many military bases there's not a lot of gambling going on, but you'll find a lot of prostitutes around military bases where you have large numbers of men. So I'm not sure you can make that statement.

Q: You're not a gaming man, but if you had a choice of playing the slots, playing the craps tables, or buying a lottery ticket, which one would you do?

Fahrenkopf: Well, you got to throw in the stock market, because I'll tell you, that's the biggest crap shoot of all time. I'm a sports nut, so what I probably would do is, I would go to one of the sport books that we have here in Nevada, and bet on my favorite football team or baseball team on the ball game here where it's legal.

Q: The odds on the lottery are horrendous.

Fahrenkopf: Well, statistical odds are that -- I'm quoting from some studies that have been done by some of the gaming magazines -- that, if you walk into a casino, the casino out of a hundred dollars is gonna owe maybe eight or nine dollars. You're going to walk out over a period of time gaming with more than ninety percent that you walked in with. If you go to a horse track or dog track, they're gonna hold about thirty three dollars, and you'll walk home with about sixty six dollars. But lotteries -- the odds of winning the lotteries are around fifty percent.

But again, people gamble for different reasons. Some like to go in a casino and like to hear the bells going off. Others like to go to their seven-eleven and buy a lottery ticket picking the numbers of their childrens' birthday, their anniversary day, or whatever. So different strokes for different strokes.

Q: Tom Grey says, "You people are predators. You're predators." Are you predatory?

Fahrenkopf: T that's part of the cannibalization argument that he's constantly making. I always say to Tom, "Tom, it's easy to say that, but put your money where your mouth is from the standpoint, what evidence do you have? Let's put it up. Let's look at it. Let's let this commission decide it. You come in, Tom, with whatever evidence you have -- or anti-gaming opponents. Make your case to this commission. We'll come in with ours. And they can get independent people to look at -- and I'm willing to let the cards lay on the table. And what it shows is what it shows."

But, again, the anti-gaming people represented by Frank Wolfe and the Tom Greys of the world..... It's primarily moralistic. Now, they changed their tune. They learned, about three or four years ago, that arguing that it's unmoral to gamble -- that wasn't selling with the American people. Most American's resent other religious leaders or other -- trying to tell them what they should or should not do.

I'm a Knight of Malta in the Catholic church. I mean, I don't need Tom Grey or some other people in religion telling me what's right or wrong. You know? I think I have my own moral code. Hopefully, it's one that the good Lord will, will pass favorably on when I get to see him.

Most of what Tom or other opponents will say -- their evidence is these economic models that have been created by come anti-gaming university professors. And I say, "Look, those models were fine when there was no track record. But there is a track record now. We don't have to rely on it. Let's make sure that the mayor of Joliet is before that commission, with his city council, with their numbers. Have the welfare people from there come in. Do the same in Mississippi. Do the same in Louisiana. Do the same in Missouri." And the facts are going to be what they are. And let's not just hurl charges of how they have predators and cannibalistic.

Q: Is gambling going to continue to grow the way it has been growing recently?

Fahrenkopf: The true answer to your question, I think, will depend on the economy.

Right now the economy is very healthy in the United States and most state treasuries are in pretty good shape. But if we get a downturn in the economy over the next four, five, six, seven years, you're going to have jurisdictions, perhaps, that don't have one form of gambling or another; who don't want to raise taxes on their citizens; and where there's high unemployment rate, they're going to be looking for jobs. Then I think you may see more action out there in the states.

But what I think you see, is the industry's still growing. What's happening is you're having a recommitment of resources and capital investment in proven markets. You know, someone said not too long ago, that in the state of Nevada, the state bird is a construction crane. And, when you look around and see all the constructing that's going on, it's a pretty good line.

And you're seeing a tremendous investment of Atlantic City. You will not recognize Atlantic City in the next three years.

Q: But, if there is a bad economy, you would expect that more types of gaming would happen in more places?

Fahrenkopf: I think the real answer is -- where some people make a mistake about gaming...gaming is not a panacea for economic woes. It's not a magic bullet. Communities and states, if they're looking to gamble, it has to be part of a very integrated, well thought out, broad-based economic plan.

Just bringng in a casino or another form of gaming isn't going to solve all kinds of economic problems. It's got to be part of a very carefully developed economic plan that covers the community. No different from any other industry coming into a community--you got to bear in mind all the other ramifications and adjust for it.

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