Monthly Archives: December 2010

Comment on Vancouver’s Oak Street Shooting: gangs and money-laundering

The shooting of 10 gang-related people on Vancouver’s westside over the weekend is an astonishing punctuation mark in our history. We all know this horrific escalation of violence is out of any control by police and civil authorities, and no end is in sight.

Most of us associate gangs with violence and street warfare, but these incidents are only ancillary to the massive industry behind them. Money is the lifeblood that feeds it. Controlling the gangs is as simple, and as overwhelmingly difficult, as this: STOP THE MONEY.

It’s impossible to stop the drug business, the prostitution, human trafficking, gun and weapons trade, loan sharking and other commerce that preys on human misery and weakness.

Yet consider this: almost ALL gang-related transactions are cash, and that cash, hundreds and hundreds of millions of it, must be laundered into “legal” currency through conventional business outlets.

FINTRAC (Financial Transactions and Report Analysis Centre of Canada) is the federal government agency tasked with discovering, scrutinizing, disrupting, and shutting down money-laundering activities. It has identified casinos as a high priority focus for money laundering by organized crime and terrorists–which BC has had more than its fair share of: see  FINTRAC – Money Laundering Typologies and Trends in Canadian Casinos – Financial Transactions and Reports Analysis Centre of Canada.

FINTRAC tracking indicates that money laundering in casino venues has increased significantly from 2007-08.

For all their talk about integrity and law and order, the BC Lottery Corporation and the BC government have almost completely abandoned the nexus between legal gambling operations and money-laundering by organized crime.

In late 2008 the Integrated Illegal Gaming Enforcement Team issued a damning report, which said “Canadian casinos are extremely vulnerable to money laundering because they deal in cash and handle tens of millions of dollars every day… members of organized crime also used casinos for criminal purposes and… some of these criminal elements have successfully infiltrated the industry. “ See RCMP on money-laundering.

The report goes on to say that in recent years FINTRAC has alerted the RCMP to suspicious transactions involving casinos, with amounts across Canada totalling over $40 million, but that, “because of other priorities and lack of resources, at this time, nothing is being done to investigate these situations.”

Most of us, faced with such an incendiary report, would immediately beef up policing of casinos, yes?

Obviously we don’t understand how protecting the public interest actually works in the greatest place on earth.

Because the real answer was to call an urgent in-camera meeting of the IIGET Consultative Board with representatives of the Gaming Branch, to review the report. This happened on January 26, 2009, and concluded with a discussion of the “uncertainty of future funding for IIGET.”

Within three weeks, internal emails reveal, the die was cast. IIGET would be disbanded. See the emails concerning the closure of the integrated illegal gaming enforcement team. To this day BC has no dedicated specialized policing of casinos and the money-laundering and loan-sharking that go on inside their premises on a daily basis: The announcement was made April 1, 2009, which probably tickled the funny-bones over at BC Gaming.

And what has been the result?

The BC Lottery Corporation seems to have turned a blind eye to the whole business. In July of this year, FINTRAC, in an unprecedented move, fined the BC Lottery Corporation $670,000 for inadequate reporting of suspicious transactions–the first fine of a gaming regulatory body in Canada. BC Lottery Corporation president Michael Graydon brushed off the offenses as clerical errors.

Mr. Graydon, Solicitor General Rich Coleman: We are seeing the results of your negligence on our city streets. Our children are waking in their beds to the sound of gunfire outside their windows.

Faced with the opportunity to help stop this hellish business, you are doing nothing. Worse than nothing.

Give us real policing in our casinos, and stop pretending that everything that goes on inside them is just fun and games.

By Unanimous Decision, Paragon Loses Casino Bid in Missouri

Missouri State Gaming Commission chairman James Mathewson of Sedalia reacts to the process of selecting Cape Girardeau and the Isle of Capri Casino as the presumptive recipient of the state's 13th and last riverboat gaming license.

On December 2, 2010, the Missouri Gaming Commission voted 5-0 to grant its final vacant casino license to locally run Isle of Capri Casinos, in preference to Las Vegas run Paragon Gaming’s Sugar Creek bid and one other competitor. No dice for Sugar Creek casino – Independence, MO – The Examiner.

(Paragon are the current owners of Vancouver’s much smaller Edgewater Casino. BC Lottery Corp has given them the contract to to open a giant new expanded Edgewater next to BC Place Stadium – IF Vancouver City Council approves it.)

Missouri’s open, public, competitive bidding process contrasts with sharply with the BC Lottery Corporation’s approach. Missouri set a 6 week deadline for interested bidders to submit detailed economic assessments, then another 6 weeks to submit a formal application, following which there would be another 2 months for public hearings, polls, independent economic impact reports, with no formal end time for the consideration process. SE Missouri Gaming Commission sets timetable for casino licensing process (05/27/10)

Here’s the chair of the Missouri Gaming Commission on the selection process – see YouTube.

Paragon Gaming’s $407 million proposal was not able to garner a single vote of support from the Commission, having been assessed as generating the least amount of revenue and generating the fewest jobs of the three shortlisted bidders.

(Note: Paragon has been making a lot of noise about the jobs it will create in Vancouver, but they don’t address the way such casinos suck money and jobs out of the surrounding businesses and economy. Its jobs algorithm is faulty – and furthermore, it is not talking about high-level or green jobs.)

Expanded Gambling is Bad for Local Businesses

The following article was written by US Senator Jamie Eldridge. The article cites some reputable studies from reputable economist professor Earl Grinols.  We have no evidence as yet that gambling improves the economic climate for neighbouring businesses.

“People will spend a tremendous amount of money in casinos, money that they would normally spend on buying a refrigerator or a new car. Local businesses will suffer because they lose customer dollars to the casinos.”

– Donald Trump, casino owner[1]

Casinos will hurt local restaurants, hotels and entertainment businesses. Money that would otherwise be spent at locally-owned small businesses will instead be dumped down predatory slot machines owned by out-of-state corporations. Massachusetts dollars are shipped far away to wealthy owners and investors, and little of that money is being reinvested in the local community.

Casinos and slots won’t help locally-owned tourism businesses. Casinos will divert tourists and residents away from local historic, cultural, and natural attractions from Cape Cod to the Berkshires, hurting businesses that rely on those visitors. To the extent that people do travel to Massachusetts for a resort-style casino, they’ll stay at a casino hotel, eat at casino restaurants, and go to casino-sponsored entertainment events. Casinos drain money from the local economy.

When discretionary income is spent on gambling, local businesses suffer. Consumers have less money to spend on clothing, electronics, furniture, automobiles, or any other locally-sold product. A study on the costs and benefits of casinos found that for every $1000 in increased casino revenue, businesses up to 30 miles away lost $243. [2]

Job growth in the casino industry will lead to job cuts elsewhere. As the Boston Business Journal notes, the claim that casinos will create 20,000 new jobs “is bogus because the diversion of billions of dollars into one sector is destined to cause job losses in other sectors”.[3]

Expanded gambling hurts worker productivity. Local businesses can anticipate increased personnel costs due to increased job absenteeism and declining productivity of workers.[4]

Expanding gambling is not an effective economic development strategy. It drains money from local economies, hurting local businesses. As the Wall Street Journal notes, “a growing body of research and experience suggests the odds are not stacked in the state’s favor”[5] when it comes to economic development. There are better strategies for creating jobs and promoting economic growth in the Commonwealth that don’t come with the significant downsides that casinos bring.

[1] “The Jackpot State.” The Miami-Herald. March 27, 1994

[2] Grinols, Earl L. Gambling in America Costs & Benefits. Cambridge University Press, 2004. Pg. 77.

[3] “It’s all about the money.” Boston Business Journal. December 21, 2007

[4] Grinols, Earl L. and David B. Mustard. “Business Profitability versus Social Profitability: Evaluating Industries with Externalities, the Case of Casinos.” Managerial and Decision Economics. 2001. Pg. 151.

[5] Whitehouse, Mark. “Bad Odds.” Wall Street Journal. June 11, 2007.

BC Business on the proposed expanded Edgewater mega-casino

This article was first published on October 7, 2010 in BC Business Magazine. To read the original on the BC Business site instead, please click here. We wanted to reproduce the article here because it is an informative, thorough investigation into the salient details of the casino deal. Article is by Nick Rockel; image by Peter Holst. For related materials, please see Vancouver Observer series and Edgewater cannot compete with Singapore for China gamblers. Please note that what Paragon states may differ from actual casino plans, particularly on this question of the ‘destination casino.’ Please stay tuned for future article, and  review the Vancouver Observer series (link above) to keep yourselves informed.

The new casino slotted for downtown Vancouver will triple the gambling capacity of the old Edgewater and help pay for a new roof for neighbouring BC Place. Whether the global gambling elite will come to play, as both the developer and province hope, is another matter .

In his black jacket and open- necked shirt, Scott Menke looks ready to play a little roulette, or maybe some Texas hold’em. One morning in late June, the president and co-founder of Las Vegas-based casino developer Paragon Gaming is sitting in the boardroom of his company’s downtown Vancouver office at Plaza of Nations. Menke has just flown in from Edmonton, where his company runs one of its three Canadian casinos. With the confidence of a croupier, he explains how Paragon plans to transform Vancouver into a global gambling destination.

Paragon owns the Edgewater Casino, an underwhelming 30,000-square-foot establishment at the far end of the plaza. But it recently won the right to build a Vegas-style hotel, casino and entertainment complex across the street from here, on a small plot of land next to provincially owned BC Place Stadium. The Edgewater – or rather, its precious gaming licence – will move to the new 780,000-square-foot development, which Paragon aims to finish by 2013.

With 150 tables and up to 1,500 slot machines, the casino portion of the still-unnamed, $450-million project will be more than three times bigger than the Edgewater. But Menke points out that it occupies just 14 per cent of the proposed complex, a branded property that will include two hotels with a combined 650 rooms, plus restaurants, shops, meeting spaces and spa and gym facilities. “Everybody says it’s a casino, but the casino is only 100,000 square feet out of 800,000,” notes the tall Arizona native.

Focus on destination tourism

Menke says the Paragon development is an opportunity to bring more visitors to Vancouver. Where 23 per cent of the Edgewater’s customers are from outside the Lower Mainland, Paragon projects that number will at least double at the new property, thanks to a mix of Canadian and international guests.

In other words, the joint won’t rely on Metro Vancouver residents to keep its baccarat tables and hotel rooms full. “We’ll continue to build our local base, but our focus is really on the destination tourism,” Menke says. “We absolutely believe that we’re going to be additive to the market, not competing with other hotels around here.”

Paragon’s Vancouver play is one more step in the expansion of the B.C. gambling industry, which may soon pour more money into provincial coffers than all corporate income taxes combined. Gambling – or gaming, to use the industry euphemism – is a lucrative business. But skeptics say the provincial government is hooked on the revenues it brings while overlooking the economic and social costs of problem gambling. To others, the idea that high rollers from Chicago and Shanghai will flock to a Vancouver casino is far-fetched. And if the province does view gambling as more than a money grab, it isn’t sharing its plan with the public.

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