Gambling and Good Government
Prepared remarks for the 30th Anniversary of the Warren M. Anderson Series
by Bennett Liebman *
October 20, 2022
Click here to download the accompanying presentation slides.
Thank you for letting me speak to you this afternoon. It’s an amazing honor. I’m extremely grateful to Judge Stein, Patrick Woods, our whole staff at the Government Law Center, and our advisory board, led by B.J. Costello, for arranging for me to speak on the 30th anniversary of the Warren M. Anderson Series. Thank you to both Judge Stein and Pat Connors for investing my presentation with a sense of gravitas, which it does not merit. I think I’ve held every position in the Government Law Center over the past two decades. I’ve been the coordinator for racing and wagering law, the acting director, the executive director and on two occasions the interim director. I’ve worked for wonderful brilliant bosses in Ray Brescia and Ava Ayers. But all my work over two decades at the school has been just a minute fraction of the work that Patty Salkin did here in any given month. Patty originated the Anderson program, and it’s her legacy that (notwithstanding my appearance here) has made it what I think it is today—the premier public policy forum in the Capital District.
Almost from the start, two of the major topics handled at the Anderson series have been ethics and gambling. It’s not surprising. They have been overarching topics that have gone hand-in-hand ever since colonial New York. They are also issues that I have been involved in for a long, long time.
I’ve tried in these remarks to divide the topic into three parts. The first is a history of New York gambling, followed by a history of New York gambling corruption, and, finally, a comparison of New York gambling corruption to overall New York corruption.
I started working with the state in 1975 at the height of the post-Watergate era, where young attorneys—perhaps having seen too many idealistic tv legal shows of that era—came into government thinking that they would make government pure. On top of that, I found myself working in Manhattan at the office of the first Board of Public Disclosure established by Governor Hugh Carey.
To show you how long I’ve been involved in this issue, that board very early on established what we jokingly called the “Seymour Katz rule.” The board authorized Seymour Katz, who was a high-ranking official in the former Department of Social Services, to teach a course at SUNY Albany. It became the “Seymour Katz rule,” and all requests for limited outside adjunct teaching—largely to this day—have followed the rule. Years later I moved to Albany, and my wife’s family lived across the street from Seymour Katz. I became friends with Seymour and his family. I’ve been to his family’s weddings and bat mitzvahs. I even went to Seymour’s funeral. Seymour’s legacy continues as his granddaughter, Freddi Goldstein, ended up being Bill de Blasio’s press secretary.
I also found myself working for Secretary of State Mario Cuomo. It’s hard to imagine, but Mario Cuomo was both a little naïve and even more idealistic. We were to treat everyone equally. No one was to get a break. It wasn’t as wild or self-righteous as the even more moralistic Charles Evans Hughes in 1906. Hughes, after he was elected Governor, was asked by his friend Job Hedges for a position on the Public Service Commission. Hedges had made Hughes’s nominating speech. Hedges later became the Republican candidate for governor in 1912. Hughes turned him down saying, “I can’t very well appoint you. You’re my friend.”
Mario enforced his morality through making sure that we did little wrong. No one was to do political work on state time. We had to file a report every time we spoke to a lobbyist. Nobody could give a speech without prior permission. And if he ever thought you did anything wrong, he would ream you out, like nothing you have ever heard. If he thought we might be doing something questionable, he simply stopped talking to us. In 1976, he got suspicious that we might be assigning inspection visits on out-of-state land subdivision sales as an excuse for vacations. He stopped talking to most of us for a month.
He was fascinated by the world of horse racing and gambling, but he thought it was silly. He grew up in Jamaica, Queens. His junior high school was less than two miles from both Aqueduct and Jamaica. His law partner and close friend Peter Dwyer was a diehard racing fan. Dwyer and his pal Freddy Flynn would even drive to Harrington Racetrack, a harness track in southern Delaware, because before OTB, Harrington was the only track in the east that was open between Christmas and New Year’s. Dwyer would come into our office and say, “My ex-partner is the Secretary of State, and I’m the only lawyer in Brooklyn who doesn’t have a pass to the track.” Mario was fascinated by gambling, but he just didn’t get why anyone would waste money on it.
For my part, I’ve always been interested in horse racing. My parents lived three blocks from Aqueduct before I was born. You could see the old Roosevelt Raceway from my high school, and I landed up in a dorm room with guys who even took out student loans so they could bet at Saratoga Harness. I hated law school so much I would regularly take a subway and a bus to go to Yonkers Raceway. My friends and I even tried to publish a harness racing tip sheet.
So when there was a vacancy on the State Racing and Wagering board in the late 1980s, I asked Governor Mario Cuomo to be appointed. He gave in but only after telling me that “I was wasting my time and my law degree.”
At the Racing Board, I discovered that a side commissioner was not expected to do much of anything but show up regularly, so I tried to learn about racing and gambling. I’m still learning.
A History of New York Gambling
From my learning, I can divide New York gambling history into three distinct eras. We lived through the age of the lottery until 1850, then 100 years plus of horse-racing dominance, and now we’re back in the lottery universe.
The Age of the Lottery (c. 1750–1850)
Underscoring this history is that, according to gambling maven William Thompson, “historically and in contemporary times, New York has also led the nation in illegal gambling activity.” We had illegal casinos thriving in Saratoga Springs from 1850 to 1950. There were hundreds—if not thousands—of illegal gambling establishments in New York City in the 1800s, including an estimated 6,000 gambling establishments in 1850.
In colonial New York, the lottery was a regular feature of life. Private lotteries, which were lotteries run by individuals without the imprimatur of the government, abounded. The colonial legislature regularly passed laws to discourage the spread of private lotteries. In a 1747 law, the legislature stated that private lotteries brought "pernicious consequences to the public, by encouraging numbers of laboring people to assemble together at taverns where such lotteries are usually set on foot and drawn." Taverns were the eighteenth-century version of Buffalo Wild Wings. Eventually, private lotteries were banned.
But there were numerous times when the colonial legislature authorized public lotteries. Starting in 1746, numerous public lotteries were authorized. Even in 1821, when all lotteries were banned, the ones that had been authorized before 1821, continued for nearly two decades. The first public lottery authorized fortifications for the City of New York. Without listing all the colonial lotteries, this fortification lottery was followed by lotteries for City Hall in New York City, a New York City jail, assistance for the City of Albany, the Sandy Hook Lighthouse in New Jersey, and even a lottery to encourage the growing of hemp.
After independence, the public lotteries continued. There was a lottery to settle New York City’s debt, to rebuild the Ulster County courthouse, to improve navigation on the Hudson, to improve the port of Sag Harbor, to promote literature, to build a statehouse in Albany, and a number of lotteries to help out colleges. Getting a lottery became the nineteenth-century equivalent of a member item.
The chief beneficiary of these college lotteries was Union College under its president Eliphalet Nott, in Schenectady. That’s the Nott of Nott Memorial, Nott Terrace, and Nott Street. He was the president of Union for sixty-two years and served simultaneously as the first president of Rensselaer Polytechnic Institute. For eleven years between 1820 and 1849, Union graduated more students than any other college. Nott started at Union in 1804 and by 1805, he secured an $80,000 lottery for Union College. This was just the start of Nott’s relationship with the legislature. Francis Wayland, the longtime president of Brown University, wrote, “No man ever exerted so great an influence on the legislation of New York.” You had Giorgio DeRosa, Jim Featherstonhaugh and Pat Brown all wrapped up in one college president. You wouldn’t need a Council on Independent Colleges if you had Eliphalet Nott.
Nott struck again in 1814. He needed land for a new campus. He returned to the legislature with far more grandiose plans. He wanted $200,000 for Union College, in the middle of the War of 1812 where a significant part of the war was fought in upstate New York. Obviously, this was not an easy lift.
Nott did his thing. He logrolled his bill through the legislature. He brought on newly formed Hamilton College which would receive $40,000 from a lottery. $30,000 in allocated lottery funds would go to the endowment of the College of Physicians and Surgeons. The Asbury African Church was to receive $4,000. There was a lottery for the New York Historical Society.
That only left Columbia, New York’s first college. Something had to be done to placate Columbia, so Nott arranged for some minor lands in Manhattan to be transferred from the State to Columbia. The lands constituted the Hosack Botanical Garden, a twenty-acre property, far away from the center of the city. Columbia wasn’t happy, but it couldn’t stop Nott. 171 years later, Columbia president Michael Sovern said the land had been fobbed off on us in 1814.
Nott’s accomplishments were so extraordinary that the official session laws for the 1814 session read, “No bill before the legislature excited greater interest and attention than this act. Much credit is due to the unwearied exertions of the able and eloquent president of Union College in procuring its passage.”
In 1821, the New York constitution banned lotteries, but the controversies involving the Union College lottery continued for decades. Since the State no longer wanted to deal with lotteries, Nott personally became the manager of the lottery. He also bought out the potential shares of lottery revenues from Hamilton College, the College of Physicians and Surgeons, the Asbury African Church, and the New York Historical Society. The lottery was to simply benefit Union College. The headquarters of the New York Lottery was—as it is today—in Schenectady.
The kicker in the story is that while Union benefited significantly from the lottery, the real winner in the lottery saga was Columbia, for the worthless plot it had been given in 1814 turned out to be Rockefeller Center. For a century, proceeds from the property helped to strengthen Columbia’s endowment and maintained its finances during the depression. Columbia eventually sold the property for $500 million in 1985. The joke was on Union.
Horse Racing (1863–1970)
With the end of lotteries, New York moved on to horse racing. And it truly dominated gambling for more than a century. Why did New York become known as the “Big Apple?” Because it was the #1 destination for the top horses in America. Starting with Saratoga in 1863, and Jerome Park in the Bronx in 1866, New York dominated American racing. For decades, the biggest race in America was the Futurity— or two-year-olds’ run—at Sheepshead Bay in Brooklyn. It was all New York.
Sure, there were hiccups along the way. In 1894, the State Constitutional Convention ended all gambling, thereby seeming to end the possibility of horse racing. The State legislature connived a way around the Constitution, and the courts somehow upheld the legislature’s actions. Racing continued and prospered. Governor Charles Evans Hughes persuaded the legislature to ban horse racing based on his belief that its gambling component violated the State Constitution, but after a two and a half-year moratorium, courts allowed racing back, finding somehow that oral betting (betting without a written record) did not constitute bookmaking.
Racing survived in New York under oral betting. It started to prosper during the Great Depression, and when pari-mutuels were legalized in 1940, the sport in New York went through the roof. Nighttime harness racing with a mobile starting gate became a huge hit. By the early 1950s, thoroughbred racing had the highest attendance of any sport in the nation, and harness racing was the nation’s major growth sport. The New York Racing Association took over the thoroughbred tracks and rebuilt Aqueduct and Belmont and improved Saratoga. In 1964, Aqueduct averaged 30,000 fans a day, and there were 25,000 fans on average at both downstate harness tracks, Yonkers and Roosevelt. The state pari-mutuel tax in 1964—when you factor in inflation—brought in far more money than all the state’s [video lottery terminals (VLTs)] currently produce, and also far more than what mobile sports wagering will produce this year. By the late 1960s, harness racing even surpassed thoroughbred racing in New York in handle.
The Lottery (1980s–present)
It was great while it lasted. This begins to change in the 1970s with [off-track betting (OTB)] coming in, harness racing scandals, increased suburbanization, and more gambling opportunities through the lottery and Atlantic City.
And since the 1980s, the lottery has taken over New York gambling with jackpot games, numbers, scratch-offs, and the video lottery. The reality is that the lottery embodies New York gambling.
In 2018, my estimate was that gambling revenue in New York was $7.168 billion. Of that number, 73.5% of the revenue was from the lottery. That was 44.6% from traditional lottery—that’s numbers, jackpot lotto games, quick draw and scratch offs and 28.8% from video lottery terminals. The lottery accounted for $5.3 billion in revenue. The casinos accounted for 21.5% of the revenue with about two-thirds of this revenue coming from the tribal casinos.
You might be wondering about the diminution of racing. Has it really reached such a low stage where it only accounts for 4% of gambling revenue? The answer is, unfortunately, yes. When you compare 1969 to 2019, and adjust for the cost of living, horse racing handle is 15.2% of what it was in 1969, and that’s including the handle from out-of-state account wagering hubs. In 1969, there were no OTBs, no exotic bets, no bets on out-of-state races, no televised racing, no account wagering. We went from betting nine races a day at the track to betting on an unlimited number of races from everywhere which you can bet on at any time from any device. And we’re at 15% of where we were in 1969.
Also, you’ll see a miniscule number for fantasy sports revenue. That’s just the way it is. Fantasy sports are a gateway drug for real sports wagering.
I know these figures are from 2018 and don’t account for mobile sports wagering. I would estimate that gross gaming revenue from sports wagering will be about 1.4 billion. That means that about 15% of the gross gambling win in New York will come from sports wagering. It’s still a fraction of lottery revenue. We don’t talk about it a lot, but the lottery really is the face of New York gambling.
It’s nice to give you a history of New York gambling, but the problem is that New York gambling comes with a super-sized side of corruption. It’s what Starbucks might call the venti size of venality.
It starts with the old lottery. Every manner of chicanery took place. They were run by private managers who took their cut of the fees. The tickets were sold in private establishments, and they took their share of the money. Swindles were everywhere. People would sell tickets and then not have a drawing. Counterfeit tickets would be sold. Tickets would be sold for non-existent lotteries. Lottery proprietors would skip town before paying up. There was often fractional ownership of lottery tickets, and two centuries before The Producers, the sellers would sell more than 100% of a ticket. An Assembly Committee in 1819 noted that nothing could divest the lottery “of all the evils of which it has hitherto proved so baneful a cause.”
Much of this was exemplified by the career of our old friend Eliphalet Nott. Having made himself the manager of the Union College lottery, Nott arranged to receive 2.25% of sales to be placed in his “president’s fund.” His percentage later increased to 6.31% of sales. Years of litigation and legislative inquiries followed the Union College lottery and Nott’s personal use of the lottery funds. An Assembly report in 1850 found that President Nott “did use the funds of said college as his own, interchangeably as occasions did arise.” An initial 1852 Senate report found that Nott had taken $885,000 of the college’s fund for himself. This was followed by another Senate inquiry which was designed to resolve the issue. This 1854 report found Nott innocent, but largely because in the interim between 1852 and 1854, Nott gave back $600,000 to the college plus the lands he had bought with his proceeds which was most of what is currently Long Island City in Queens. This apparently convinced the Senate that Nott had somehow always intended to give all the lottery proceeds to Union College.
Subsequent histories of the college indicate otherwise. Nott’s own lawyer told him “Sir, you have not a shadow of right to that property. Your title to it is not worth a straw.” Nott was what the early lotteries were all about: almost total greed.
I wish the horse-racing era was as pure as the early lottery, but I’m not sure that’s the case. Here’s a look at some of the public corruption issues that have arisen in horse racing. And this is simply public officials and public funds. It doesn’t get into corruption by racetrack operators.
It’s a long list. Some of the listings speak for themselves, others need explanation. In the first examples, the forces trying to keep Governor Hughes from ending racing in 1908 did their best to persuade, with money, legislators from voting with Hughes, including once trying to forcibly kidnap an anti-racing legislator from getting to the Capitol to vote on racing bills.
Herbert Bayard Swope was almost a great man. He won the first Pulitzer Prize as a reporter. He was the editor of the New York World when it was America’s most significant paper. He inaugurated the “op-ed.” He likely coined the term “cold war.” He was also the chair of the State Racing Commission, and used that position to do whatever he liked, which included being the chairman of a major racetrack in a different state. He was a great man. Petty conflicts applied to others.
The next series of corruption deals with the belief that obtaining a racing license was the equivalent of printing money. After legalizing pari-mutuels in 1940, the legislature went on a display of bipartisanship at its worst. You might envision an episode of Oprah set in the State Capitol with her saying, “You get a harness track, and you get a harness track.” The legislators and the political leaders got the licenses. Democratic Senate Minority leader Jimmy Dunnigan—the father of pari-mutuels—opened up Buffalo Raceway. Irwin Steingut, the Democratic Assembly Minority Leader, had the majority share in Batavia Downs. Holding much of the minority interest in Batavia was former Republican Assemblyman and Assistant Secretary to the Senate Pat Provenzano, and the Provenzano heirs ran the racetrack until 1994. Vernon Downs was incorporated by a number of major republican leaders including the current and former Republican party chairs and State Senate Majority Leader Arthur Wicks. They sold much of their stock to lower-level Republicans. George Fearon, a former Republic State Senate leader became the chairman of Vernon. Saratoga Harness was run by Republican Party activists, who were originally from Albany County. The two downstate tracks, Roosevelt and Yonkers, were an overall amalgamated mess, featuring an assortment of Republican county leaders, Tammany Hall, mob-related officials, Norman Penny, the Republican Assembly sponsor of the pari-mutuel bill and a number of labor racketeers.
The cleanup of this overall mess led to the passage of the state’s first major ethics legislation, including the main provisions in current sections 73 and 74 of the Public Officers Law—so you state employees can thank harness racing for the state code of ethics. Also, the guy brought in to clean up harness racing, George Monaghan, lost his job after taking numerous free meals from Yonkers Raceway.
Then, we had a series of problems emanating largely from former Congressman Eugene Keough, who had become a member of the State Racing and Wagering Board. The Keogh Plan is named for him. He had a financial arrangement with Yonkers, and he ordered the board staff to license George Steinbrenner. After he was forced off the board in 1976, the new board leadership fired the staff people who complained about Keough.
People still believed that a racing license was the way to millions. So you see Brooklyn Democratic party boss Meade Esposito trying to get an ownership interests in quarter horse tracks. He failed, and Attorney General Abrams had him removed from his party chairmanship. One never-built track was in Albany County—the built one was in Suffolk County. That Suffolk County track was an absolute financial flop.
Since then, we’ve seen individual acts of corruption at the OTBs. Some of the leaders of Western OTB were forced to resign. Davis Etkin, the long-time head of Capital OTB, pled guilty to felonies. Hazel Dukes and Bill Carnevale at NYC OTB were found guilty of crimes. Walter Conlon at Suffolk OTB was forced to resign for contracting violations. Just recently, the Gaming Inspector General found that Catskill OTB’s finances and offices were total messes.
This is just the public corruption side. Between 1995 and 2005, Vernon Downs was run by a series of corrupt individuals, which forced the Racing Board to twice place independent monitors in charge of the track. Jamaica Race Track in Queens was a Tammany Hall outpost. Saratoga in the 19th century was owned by a series of major gamblers. There were serious allegations that Roosevelt Raceway was financially drained by its parent corporation Gulf and Western. NYRA staff were regularly accused of demanding kickbacks for stall space. NYRA, under Kenny Noe in the 1990s. was found by the Comptroller and the Attorney General to have improperly bid major contracts, several employees at NYRA were found guilty of tax fraud, and NYRA itself was indicted by the federal government for tax fraud in 2003. It’s a daunting list.
But here’s a somewhat brighter side to it. In the age of the lottery, we’ve seen fewer corruption issues. On the operations side, I don’t recall improper lottery payments—whether it’s been on jackpots, daily numbers, scratch-offs, or video lotteries. Even the non-operational side has been quiet. In 1975, the Lottery held drawings for which no winning tickets had been drawn and did not properly inform the public about it. In 1979, the Lottery gave the contract to run Lotto to a Rupert Murdoch-controlled company not long after the New York Post had endorsed Hugh Carey for reelection. This proved to be a short-lasting story. The one major lottery issue was the crookedness of the Aqueduct Entertainment Group, which somehow nearly won the contract to operate VLTs at Aqueduct in 2009. The application and the group were beset with leaks of confidential bidding information to a favored company, potential bid-rigging, and "pay-to-play" campaign donations.
Illegal Casinos (1850–1950)
Again, I’ve mentioned before that we’ve had an undercurrent of illegal casino gambling. And this casino gambling has always been accompanied by public corruption. In New York City in the 1890s, the police basically demanded protection money to let the gamblers stay in business. It was undoubtedly worse in Saratoga Springs from 1920 to 1950, when gangsters ran the large number of fancy casinos. The law enforcement officials in the City of Saratoga Springs and the County of Saratoga were regularly bribed. The Albany leadership of the State largely looked the other way. Occasionally, a governor might remove a public official or demand investigations. But after these removals, Saratoga Springs went back to business as usual. Governors left Saratoga Springs alone.
No aspect of gambling has been without a corruption aspect. Bingo was legalized in the mid-1950s, and was such a big moneymaker that, in many areas of the state, the mob took control of the bingo business. Governor Rockefeller named a Moreland Act Commission to stop the bingo corruption, and the State Investigations Commission similarly did its own report on the ties between bingo and public corruption.
Where there’s gambling and the lure of both big money and easy money are involved, you’ll find corruption. Maybe that’s why we see less of this in horse racing and the lottery today. They’re not where the money is. We can expect more issues where big and easy money are possibilities: the areas of sports gambling, casino gambling and internet gambling.
New York's Major Corruption Scandals
I wanted to see how gambling corruption compared with overall corruption scandals. Here’s my chronological and subjective list of New York’s top corruption scandals.
I think it’s helpful to view these scandals by looking at who’s the source of the venality. Who’s corrupting whom? Who started it? Is it coming from outside the government or from inside the government?
The traditional way is that the people outside the government bribe the decisionmakers in the government. That’s what happened in the original nineteenth-century banking scandal. You needed the legislature to give you a banking franchise. Everyone that wanted a bank bribed the legislature. It got so bad that, in 1812, Governor Daniel Tompkins sent the legislature home in the face of notorious bribery efforts. It didn’t matter. The legislature returned a month later and chartered the bribing bank.
Maybe the most notorious efforts at outside instigation was the railroad wars in the 1860s. The Erie Railroad, represented by Jay Gould and Jim Fisk and the New York Central Railroad, owned by Cornelius Vanderbilt, took turns buying the legislature.
The gas company and life insurance company scandals in 1905 followed the same pattern. The companies were in the habit of paying off the legislature. One life insurance company even had a house about a half a mile from here at 616 Madison Avenue, which functioned to entertain members of the legislature. The newspapers called it “the house of mirth.”
The other outside-in scandals included the [State Liquor Authority (SLA)] bribery cases, the street car bribery activities in the 1880s, and the nursing home outrages in the 1970s.
The other method of corruption is where the insiders—the legislature or the executive—start the corruption process. If there is a prototype of this brand of corruption, it’s probably the administration of Syracuse Mayor Lee Alexander in the 1970s and 1980s. Alexander simply put Syracuse city government up for sale. If you wanted anything from the city of Syracuse, you paid Alexander. He took kickbacks on most every deal involving the City of Syracuse. There was at least $1.2 million in bribes and kickbacks.
The 1850s “Forty thieves” scandal involved the New York City Common Council. They truly earned their nickname by selling off major parts of city property, awarding ferry leases and railroad franchises in return for kickbacks.
The Tweed Ring—which held sway in New York City and State in the late 1860s—did the Forty thieves proud by expanding on their legacy. Besides the crimes of the Forty Thieves, they awarded contracts to themselves. They bought up land cheaply, and then built roads, sewers, water pipes, and public works projects, which greatly increased the value of the land. The New York County Courthouse—known as the Tweed Courthouse—was supposed to cost $1 million. It cost more than $11 million, which much of the extra cost due to payments to the Tweed Ring. Tweed himself even bought a marble quarry to supply marble to the project. No fraudulent stone was left unturned.
The canal issues and the Jimmy Walker scandals also followed the same blueprint. So did the New York City parking violations scandal, where public officials and party leaders solicited bribes from various private companies engaged in the parking-ticket business. What kind of kickbacks can we get from selling off our assets and our franchises?
Another type of insider scandal comes from police agencies demanding protection. That’s what happened with the Lexow Committee report on New York Police in the 1890s and the Knapp Commission report in the 1970s.
We also have the insiders use their positions to try to get better positions for themselves. That was the case of the harness racing troubles of the 1950s.
Finally, the Black Horse Cavalry was another twist on the insider-created corruption issues. Individual legislators introduced or threatened to introduce bills that would harm corporations. Maybe it would be a bill to increase taxes on a specific taxpayer. Maybe it would be a bill to revoke or limit a corporation’s franchise. In any event, the purpose of the legislation was not to better government but to force the corporation to pay a bribe to prevent the harmful legislation from moving forward. Theodore Roosevelt, who was in the assembly in the 1880s, estimated that “there were a great many thoroughly corrupt men in the legislature, perhaps a third of the whole number.” Gradually, this practice moved to the leadership of the two parties, and Tammany Hall and Republican boss Thomas Platt employed this Black Horse Cavalry technique.
You can argue that this technique was used in the most recent series of legislative scandals. If you wanted your continued state benefits, you had to include the Speaker or the Senate Majority Leaders. But actually, the recent prosecutions of legislators have to be evaluated on an individual basis. Some were bribed, like Carl Kruger. Pedro Espada was more like the harness racing situation. He founded a nonprofit health network and used it like a piggy bank. Then, you have former Assemblyman William Boyland who combined it all. He solicited bribes, falsely claimed state travel expenses and used a grant he had steered to a non-profit for his political campaign.
So when you look at the list of these major scandals and compare it to our gambling corruption issues, you find that most of the major scandals have not involved gambling. Gambling was a significant part of the Lexow investigation where police demanded protection money from gamblers. Nearly 80 years later, the gambling protection racket was part of the Knapp Commission hearings on New York City police misconduct. Gambling was the centerpiece of the harness-racing scandal and also the United States Senate Kefauver hearings in 1950, which found a total failure of law enforcement to combat casino gambling in Saratoga Springs as well as ties between gamblers and political officials. The Kefauver revelations ended casinos in Saratoga Springs and ended the political career of New York City Mayor Bill O’Dwyer, who resigned to become U.S. ambassador to Mexico.
But while corruption might have followed gambling, most of the major corruption scandals in New York did not have a gambling element. Gambling may be associated with corruption, but corruption in New York has not needed gambling to proceed. Gambling is a sufficient but not a necessary part of New York corruption.
The question becomes—as Boss Tweed supposedly said—“What are you going to do about it?”
I’m not the same moralist that I was 1975. Since I retired eight years ago, I’ve found out how political and extra-legal forces saved many of us in the World War II era because of special influence. Political intervention allowed my cousins to escape from Nazi Germany in the spring of 1939. On the other side of my family, my aunt and my cousin got out of Russia in 1938 after another political intervention. My aunt’s husband, who had been imprisoned in Stalinist Russia, escaped to China, where he was reunited with his Korean family. They survived through extra-legal assistance. I’m very aware of Jesus’ admonition “Judge not, lest ye be judged.”
But the facts are overwhelming. I know that major reform action is necessary. Sometimes, you have to judge.
Let’s start with what hasn’t worked.
My initial premise is that the history of reforming New York government has not worked. We get a reform wave to stop a Jimmy Walker or a Boss Tweed, and a few years later that zeal for reform has passed. We slip past to our old ways. Until we can have an electorate that remains focused on reform, our efforts are not sufficient.
First, we have, in theory, a system where the state’s sixty-two district attorneys could prosecute official corruption. They have the jurisdiction, but it hasn’t worked. They have defaulted. Over the twenty-first century, the prosecution of legislators has largely fallen to the U.S. attorneys. We’ve federalized official corruption in New York. We’ve largely let Preet [Bharara] do it. The current state system hasn’t worked.
Second, the twenty-first-century ethics commissions haven’t worked. You obviously need an independent commission, qualified members, a fair voting system, better coverage of the legislature, and clear rules on what is or isn’t confidential. But ethics commissions in New York and in other states really aren’t prosecutorial agencies. They exist primarily for advice, for training, and for providing public information. You’d have to hire a ton of investigators, prosecutors, and hearing officers, and change the entire nature of ethics commissions. Until you change the ethics commission into a prosecutorial system—basically an Inspector General with quasi-judicial powers—you’re not going to make a major impact on corruption.
Finally, audits by state comptrollers—and it’s not just on the current Comptroller, it’s been there since I entered state government—have not been particularly helpful. They’re okay. But the subject of the audit questions the audit, and it becomes yesterday’s news. It’s Groundhog Day. In the racing field, we get “he said, she said” audits where the Comptroller says that NYRA violated competitive bidding requirements, and NYRA claims it complies. Very little gets accomplished, and it’s become a soporific enterprise. Meanwhile, much of the racing media has been complaining about New York’s drug testing regimen and you can hardly find an audit dealing with the SUNY Morrisville drug program.
What might work in gambling?
- To the extent that it’s constitutional, we ought to ban political contributions from gambling companies and their representatives. It works in New Jersey. It lessens pressures on regulator. It even lessens the pressure on the gaming industry to enter “pay to play” arrangements. You don’t want the downstate casino bidders to be providing funds to the legislature and the executive. It’s not a panacea. In the casino competition, you’ll see the hotel workers’ union deeply involved in the political game, but the fact is that gambling is not a proper area for political contributions.
- The Gaming Inspector General has now been folded into the broader Inspector General’s office. We need this position to be fully funded, and it needs a broader focus not just internally on public employees, but on all aspects of the private gaming industries in New York.
- The existing OTB system should end. Only Capital OTB has any interest in conducting wagering on horse racing. Suffolk OTB is totally dependent on its VLT facility. Western OTB is dependent on its racino at Batavia Downs. Nassau OTB gets a significant share of revenue from Genting’s Aqueduct racino. Catskill OTB handled $15 million in 2020. That’s not even a good day at Saratoga. You either end the system totally and let NYRA and the out-of-state wagering systems handle it or consolidate OTB into one system.
- We need to figure out what part of NYRA’s operations are subject to public availability. We went from a system where most everything was available to one where little is available. Why not have accurate numbers on actual turnstile attendance at Saratoga? Why are the major reports on NYRA from its outside monitors from a decade ago not available?
On the general corruption side, I have a few ideas as well:
- The State Inspector General must be independent of gubernatorial control.
- We need a state-level office to prosecute official corruption. There is no place to put it other than in the Attorney General’s office. If the individual district attorneys aren’t doing it, someone else should. Those of us who started state service in the 1970s tend to worry about the “Maurice Nadjari’s factor,” the special prosecutor for New York City, who largely terrorized the court system and ran amok in that era. By placing this power in an individual in the AG’s office, we can put some political constraints on it.
- We need to revise section 107 of the Civil Service Law. This is the so-called state "Little Hatch Act," which tries to prevent political interference in government. It’s an anachronism, much of it dating from the 1880s. It is unfit for an electronic age.
- We’re not going to have a full-time legislature, but the leaders of the legislature ought to be full-time and be prevented from having outside paying positions.
- The executive and the legislature need to be more proactive in ending corruption. The Governor has extensive removal powers which haven’t been utilized since the 1930s. The legislature, through investigative committees, ended the police scandals in New York City in the 1890s, the gas and life insurance scandals, and the Tammany-Jimmy Walker hijinks of the 1920s. But these legislative investigating committees have faded from sight.
- We should not ever have member items. The quid pro quo possibilities are just overwhelming.
- Hopefully, it doesn’t come down to this, but 2021 showed us that our laws governing impeachment are totally antiquated.
But all these institutionalized reforms are not enough. Our overall problem has been our massive indifference to corruption. If it doesn’t affect our daily lives, we look the other way. We have to be proactive. If you see something, say something. But our history has been, that we actively avoid seeing evil.
Look at the history I’ve presented. In 1870, the Tweed Ring presented its municipal charter for vote in New York City. The federal government, knowing Tweed’s tactics, prevented new immigrants from voting and even sent troops and warships to New York City to stop Tweed. Nonetheless, the Tweed charter easily passed. In 1871, during the height of the scandal revelations, Tweed won reelection as a state senator.
For 60 years, people in Albany kept electing the O’Connell-Corning organization even though it was inherently corrupt. In 1938, when running for governor, Tom Dewey maintained that that there were more voters in Albany than there were adult residents in the city. But so long as O’Connell kept his own Hedrick’s beer on tap and kept property taxes low on Democrats, they kept voting for him.
When Howard Samuels became the first president of New York City OTB, his staff was clearly and intentionally assembled not to run a gambling operation but to run his 1974 campaign for governor. Nobody batted an eye.
For nearly thirty years, Davis Etkin treated Capital OTB as his personal fiefdom. But he was disarming and the energizer bunny of horse racing. He brought world-class tennis to Schenectady, and people may have thought he was the second coming of Eliphalet Nott. For decades, his corporation performed worse than the other OTBs. But almost nobody close to his corporation opposed his reign.
In 1997, Donald Trump stopped Governor George Pataki’s constitutional casino resolution through employing a million dollars’ worth of lobbyists and donating $100,000 to the Senate Democrats who proceeded to vote 23-3 against casinos. It was a one-day story.
But the worst situation was in Saratoga Springs. Let’s start with the adoration of John Morrissey, who started the track and its main casino in the 1860s. Basically a thief and probably a murderer. Then, from 1920 to 1950, the worst elements of the mob ran the Saratoga casinos. There was Lucky Luciano, Arnold Rothstein, Meyer Lansky, and Frank Costello.
Yet, the people of Saratoga Springs elected the Democratic bagman Doc Leonard as their public safety commissioner on 13 separate occasions. When the heat got too hot, he would resign, which he did three times.
And the supposed great governors of New York—Al Smith, Franklin Delano Roosevelt, Herbert Lehman, and Tom Dewey—basically did nothing. They put their heads into the sand, or maybe Saratoga Lake. They kept Saratoga open for the mob.
Al Smith, after he was governor, even dined at the Brook Club with Doc Leonard. The Brook had been Arnold Rothstein’s casino. Smith was in the process of running for president. What was he thinking?
You can’t look at the record of these governors and not feel ashamed. They abetted some of the worst mobsters in this nation’s history. It’s like a reboot of the film Chinatown where the last line now is “Forget it Franklin. It’s Saratoga.”
If we are serious about corruption, we must stop our indifference. Our indifference provides fertile soil for public corruption. Government is not a game. Maybe Eliphalet Nott would have disagreed. But I’m fairly confident that Seymour Katz would have agreed. And hopefully I’ve convinced you to agree as well. You can’t be silent. Our indifference only feeds corruption. Thank you.
* Bennett Liebman is a Government Lawyer in Residence with the Government Law Center at Albany Law School and an adjunct professor of law. He worked for Mario Cuomo while Cuomo was Secretary of State and served as his Counsel when he was Lieutenant Governor. When Cuomo was elected Governor in 1982, Bennett became his Special Deputy Counsel handling ethics matters, Freedom of Information Law questions, and many other issues. Bennett served as a member of the New York State Racing and Wagering Board for more than a decade beginning in 1988, including a term as its Acting Co-Chair. He concluded his government service in 2014 after three years as Deputy Secretary to the Governor for Gaming and Racing.