Of Fathers, Friends and Licensing Standards
By Anthony Cabot

Licensing of applicants in the gaming industry is an important and difficult task. Through this process, regulators try to screen persons who can harm the government’s interest in the industry. Direct harm can be done by those who skim funds without paying taxes, cheat patrons, or are so incompetent that the state will lose tax revenues because of employee or patron theft, or poor management. If one operator cheats, patrons may believe the entire industry is dishonest. Here, the regulators’ job is to assess the prior behavior of the applicant in an attempt to predict whether he poses a threat to the gaming industry.

Other persons can indirectly harm the state’s interest because their mere presence taints the industry and may convince legislators to make gaming illegal, or dissuade patrons from visiting the casinos. The regulators’ task here is easier than predicting future behavior. They can decide whether the applicant’s current reputation or associations justify denying his license application. The gaming industry can suffer credibility problems if the media exposes a casino owner or operator as having criminal ties regardless of whether the owner or operator otherwise complies with all regulations and acts ethically.

Regulators have broad discretion to deny a license to anyone who may pose a threat to the gaming industry based on lack of integrity, truthfulness and honesty. These are related, but have different meanings. Truthfulness means to tell the truth. It is only one component of honesty. One can be truthful, but dishonest. Using true facts but not disclosing other facts to create a false impression is dishonest. For example, a person who was arrested by state police can truthfully state that he was never arrested by city police. So, being truthful is not enough. As a licensing criteria, honesty is preferable to truthfulness. Regulators want applicant and licensee not only tell the truth, but to convey accurate impressions by full disclosure.

How useful is honesty as a criteria? In "Hamlet," Shakespeare wrote, "Ay sir, to be honest, as this world goes, is to be one man picked out of ten thousand." The sentiment is that no matter how committed to honesty a person may be, few (if any) can claim to be completely honest in all their dealings.

When applying the honesty criteria, regulators may apply a materiality standard. An applicant is unlikely to be denied a license if he told his son that he could not take him fishing because he had to work, when he was in fact going with his buddies to a football game. The honesty criteria generally is reviewed in a business relationship, as opposed to a personal relationship. This is justified, because the purpose of licensing is to predict the behavior of the applicant as a gaming licensee. Thus, his behavior in other business relationships is more germane to the inquiry than his personal relationships.

Honesty in business conduct becomes more relevant with the importance of the transaction. For example, it may be of minor materiality that an applicant, to cut short a telephone conversation, lied to a salesman when he told him that he bought the product being offered. The materiality increases dramatically if the applicant misrepresents the value of inventory to convince a lender to loan money to his business.

Honesty is only one component of integrity, which means soundness of moral character, as shown by dealings with others. A person can be honest, but lack integrity if, for example, he knowingly takes advantage of people in his business dealings. While conceptually, integrity appears preferable to honesty, it is difficult to assess and apply.

Integrity is a complex concept that involves coherent commitment to a personal order of moral principles. Commitments can include honesty, family, friendship, religion, honor, country or fairness. Persons order these commitments such that it is acceptable to violate some commitments to honor others. For many people, a lie is acceptable to protect another from harm or injustice. For example, integrity is not compromised if a person shelters a victim of spousal abuse and lies to the spouse when questioned as to the victim’s whereabouts.

Integrity means to uphold these commitments in the face of temptation or challenge for the right reasons. Attempting to test a person’s integrity consistently tests the skills of the regulators. They must understand the person’s personal order of commitment, then decide whether the person consistently is true to these commitments.

Take two different scenarios. In the first, the applicant is a long-time casino manager. His record in the industry and his reputation are excellent. He befriended a person in the fifth grade. His friend has been involved in many crimes and linked to a local member of a crime family. The applicant has no involvement with the criminal matters, but remains loyal to his childhood friend, even to the point of posting bail money. In the second scenario, the applicant is the same except that instead of having a notorious friend, suppose his father is the local member of a crime family. While he maintains a normal father-son relationship, he is not involved in any criminal activities and does not associate with any of his father’s friends.

Integrity might be inconsistent with regulatory policy based on the ordering of the applicant’s commitments. Take the first scenario. Here, the applicant values personal friendship highly. Unfortunately, he guessed poorly in his childhood. The regulators demand licensees not associate with such persons, but the applicant’s personal integrity places his personal commitment to friendship above the dictates of regulation. If the applicant were a person of little integrity, he might lie to the regulators and tell them he will not socialize with his friend in the future. If the applicant was a person of integrity, his personal order of commitment might dictate that he maintain his friendship and to tell the regulators as much. Here, the regulators must assess whether the relationship and the applicant’s refusal to severe it pose such a threat to the industry as to justify denying the license. Here, an applicant may be denied a license, not because he lacks integrity, but because his high commitment to friendship is inconsistent with good regulation.

The second scenario is even more difficult because most people consider commitments to one’s family more important than to friends. As the saying goes, "You can pick your friends, but you cannot pick your family." Here, the regulators must decide whether to license the person despite his relationship with his father, require the applicant to dissociate from his father, or deny the application because the mere involvement of the son taints the industry.

Every month, regulators across the continent must tackle similar issues by applying the best attributes of an interrogator, psychologist and philosopher to reach decisions on gaming applications. Not only are the issues worthy of debate at the Lyceum, but the stakes are often high. A denial of a license is a permanent mark on the person’s reputation and results in his banishment from the gaming industry. Everyone associated with the gaming industry should understand the enormity of the regulators’ task and be appreciative of their efforts.