Could a Connecticut gaming regulator own stock in a supplier of casino slot machines?

Plain-English summary

In July 1998, Connecticut’s AG concluded that a Division of Special Revenue employee’s stock in International Game Technology (IGT) violated the gaming conflict-of-interest provision in § 12-561. That law barred division employees from having any interest as shareholders in dealing in a betting enterprise or in property used for one. IGT did not itself run a betting business on the facts supplied, but it furnished slot machines and progressive-game services used by tribal casinos. The AG read the property branch of the statute to cover a shareholder’s interest in that supplier.

The particular employee was a casino liaison who monitored operations, internal controls and license status. The AG saw a conflict in a regulator having a financial stake in machines and services used at the facilities the regulator inspected. The opinion did not state what disciplinary action must follow or resolve whether the shares were bought before or after employment. Instead, it advised referral to the division’s personnel officer to review the facts and take appropriate action, and suggested possible notice to the Ethics Commission.

Gaming employees at the time

Public trading of the shares did not remove the statutory conflict. The employee’s oversight role made the concern especially concrete.

Personnel officials at the time

The AG gave a legal conclusion about prohibited ownership and left the response to a review of the employee’s actual circumstances.

Currency note

This opinion was issued in 1998. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Was IGT itself a betting operator?
A: The AG said the supplied facts did not show that; the company’s equipment and services for betting enterprises brought the shares within the statute.

Q: Did it matter that the stock traded publicly?
A: The opinion still found a prohibited shareholder interest under § 12-561.

Q: Did the AG order a specific penalty?
A: No. He advised personnel review and possible attention from the Ethics Commission.

Background and statutory framework

The division asked about stock ownership by an employee assigned to casino oversight. The AG read the broad conflict language in § 12-561 in light of the supplier’s products and the employee’s regulatory duties.

Citations and references

Statute: Conn. Gen. Stat. § 12-561.

Source

• Landing page: https://portal.ct.gov/AG/Opinions
• Opinion page: https://portal.ct.gov/ag/opinions/1998-formal-opinions/george-wandrak-division-of-special-revenue-1998010-formal-opinion-attorney-general-of-connecticut

Original opinion text

George Wandrak, Division of Special Revenue, 1998-010 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General Richard Blumenthal

July 13, 1998

George Wandrak

Acting Executive Director

Division of Special Revenue

555 Russell Road

Newington, CT 06111

Dear Mr. Wandrak:

This is in response to your request for an opinion on whether an employee of the Division of Special Revenue (DOSR) may own stock in International Game Technology, Inc. (IGT) in light of the conflict of interest rules contained in Conn. Gen. Stat. § 12-561. For the following reasons, we believe that the statute prohibits employee ownership of the stock.

The statute involved provides, in pertinent part, as follows:

Conflict of interest. No executive director or unit head or employee of the division or member or employee of the Gaming Policy Board shall directly or indirectly, individually or as a member of a partnership or as a shareholder of a corporation, have any interest whatsoever in dealing in any lottery, racing, fronton or betting enterprise or in the ownership or leasing of any property or premises used by or for any lottery, racing, fronton or betting enterprise.

Conn. Gen. Stat. § 12-561.

Stock in the company is publicly traded on the NASDAQ exchange. You advise us that IGT is the world's largest distributor of slot machines and gaming equipment and it sold 84.6% of the slot machines at the Mohegan Sun Casino and 63.8% of the slot machines at Foxwoods Casino. Pursuant to the Gaming Compact with the Mohegan Tribe, Sec. 6, and the Gaming Procedures applicable to the Mashantucket Pequot Tribe, Sec. 6, IGT holds a Gaming Service Enterprise registration with the State. Provisions reproduced in Attachment A. IGT also performs jackpot verification and payment of jackpot prizes, under service contract for a progressive slot machine game connecting at least seven tribal casinos throughout the nation including the Mohegan Sun and Foxwoods. IGT's registration is revokable for cause. See Attachment A, Sec. 6(g).

You further inform us that the employee who owns the stock is a Special Revenue Gambling Facilities Liaison Officer. His duties at the casinos include monitoring gaming operations, identifying deficiencies in internal controls and monitoring the status of DOSR licenses. See Job Description, Attachment B. It is not known whether the employee acquired the stock before or after his employment with the DOSR. In determining the applicability of the statute to these facts we utilize the classic rules of statutory construction. Words are construed according to the commonly approved usage of the language. Conn. Gen. Stat. § 1-1(a); Caldor, Inc. v. Heffernan, 183 Conn. 566, 570, 440 A.2d 767 (1981). Also, in interpreting statutes, we consider the history of the statute, its language considered in all of its parts, the mischief the law was designed to remedy, and the policy underlying it. Waterbury Savings Bank v. Danaher, 128 Conn. 78, 81, 20 A.2d 455 (1941).

The present question distills to the issue of whether the employee, as a shareholder in IGT, has "any interest whatsoever" in "dealing in any betting enterprise" or in the "ownership . . . of any property used by or for any . . . betting enterprise." The term "betting enterprise" is not defined by the statute. Turning to the ordinary meaning of these words, "betting" commonly means the putting of a certain sum of money or valuable thing at stake on the happening or not happening of some uncertain event." 38 C.J.S. Gaming § 4 citing Shaw v. Clark, 49 Mich. 384, 13 N.W. 786, 787, 43 Am. Rep. 474 (1882); Carpenter v. Beal-McDonnell & Co., 222 F. 453, 460 (D. Ark. 1915). The term "enterprise" means "2. A business organization" Webster's II New Riverside University Dictionary (1988). You have supplied us with no facts demonstrating that IGT is itself a betting enterprise as it does not operate a betting business. Rather, it is a manufacturer or service provider to businesses where bets are taken. It supplies property, i.e. machines and games, to such betting enterprises. This falls within the purview of the final phrase of the cited statute. IGT does deal in the ownership of property used for a betting enterprise, i.e. slot machines and progressive game services at the Mohegan Sun and Foxwoods casinos.

This conclusion also follows from an analysis of the history and underlying policy of the statute and the mischief which it was designed to prevent. The DOSR conflict of interest statute was part of the original enabling act creating the Commission on Special Revenue, predecessor to the Division of Special Revenue, which regulates legalized gambling in Connecticut. See 1971 Conn. Pub. Acts. No. 71-865, Sec. 5 The statutory language, in pertinent part, has remained unchanged since that time. Legislative remarks on the provision in question focused on the need to protect the public from fraud and dishonesty. As Senator Strada stated:

Section 5, of this bill, prohibits all the commissioners and all employees of the commission from either directly or indirectly, individually or as a member of any partnership or a shareholder of a corporation, from having any interest whatsoever, in any of the legalized gambling activities. This provision, Mr. President, is very broad. And amply protects the protect [sic]. It covers all the situations referred to in the proposed amendment. Section 6 of this bill, gives the commission the power to make and enforce all regulations, necessary to carry out the intent and purpose of the act, and to prevent fraud and dishonesty.

14 Sen. Proc. 1971 Sess. Pt. 7 at p.3377.

The potential for mischief is not illusory where state employees, responsible for exercising judgment in monitoring revenues from casino slot machines, also have a stake in the sale of those machines. There is a lingering suspicion that defects would be ignored to protect the interests of IGT, which the employee shares as a stockholder. It has been held that "[N]o person should be a judge in his own cause." Patterson v. Council on Probate Judicial Conduct, 215 Conn. 553, 566, 577 A.2d 701 (1990) quoting Dacey v. Connecticut Bar Ass'n., 184 Conn. 21, 24-25, 441 A.2d 49 (1981). Similarly, a state employee should not put himself or herself in the position of inspecting his or her company's products in operation. The situation presents a conflict of interest. Accordingly, we advise that the matter should be brought to the attention of your personnel officer for review of the factual situation and for the taking of whatever action would be appropriate under the circumstances. In addition, you may wish to bring this matter to the attention of the Ethics Commission.

Very truly yours,

RICHARD BLUMENTHAL

ATTORNEY GENERAL

Robert F. Vacchelli

Assistant Attorney General

RB/RFV/bjo