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4 GLR 1 (2000)

handle is hein.journals/gmglwr4 and id is 1 raw text is: GAMING LAW REVIEW Volume 4, Number 1, 2000 Mary Ann Liebert, Inc. Bankruptcy Trends in the Gaming Field GERALD M. GORDON AND SCOTT D. FLEMING OVERVIEW OF REGULATORY ISSUES G AMING REGULATION HAS ITS GENESIS in vari- ous declarations of public policy which are concerned with, among other things: (1) the pre- vention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (2) the establishment and maintenance of responsible accounting practices and procedures; (3) the maintenance of effective controls over the fi- nancial practices of a licensee, including the es- tablishment of minimum procedures for inter- nal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keep- ing and requiring the filing of periodic reports with Gaming Authorities; (4) the prevention of cheating and fraudulent practices; and (5) the creation of a source of state and local revenues through taxation and licensing fees. These state- ments of public policy are embodied in statutes, regulations and supervisory procedures imple- mented at the state and local level by a variety of overlapping regulatory bodies (the Gaming Authorities). Regulation and licensing affects gaming properties (hereinafter, Casinos)1 and their owners and operators on several levels, many of which have a profound impact in the course of a Casino bankruptcy.2 Licensing and Regulation of the Casino Only corporations organized under the laws of the forum state may hold a gaming license.3 Gerald M. Gordon is a shareholder in Gordon & Silver, Ltd., Las Vegas, Nevada. He is a member of the Clark County Bar Association, the American Bar Association, the State Bar of Nevada, and the American Bankruptcy Institute. Scott D. Fleming received his J.D. degree from Loyola Law School in 1995 and is a member of the American Bar Association, the State Bar Association of Nevada, and the Clark County Bar Association. Accordingly, gaming enterprises are operated by domestic corporations, that in turn are of- ten wholly-owned by out-of-state (and often publicly-traded) corporations. Because parent corporations routinely guarantee the debts of subsidiaries, Casino bankruptcies frequently involve two or more corporate entities.4 Regu- lation of a Casino affects both the operating cor- 1 There are, of course, other types of gaming properties beside the traditional Las vegas style casino. Riverboat gaming has become popular throughout much of the Mid- west and along the Southeast coast and occasionally pre- sents conflicts (or at least an interesting convergence) of state gaming and federal bankruptcy and admiralty law. Some of these issues are addressed below. Other types of gaming of include horse and greyhound racing, jai alai, and bingo. (As state-sponsored programs, lotteries are un- like other forms of gaming.) Each type of gaming will nat- urally present unique issues in bankruptcy. Many of the regulatory issues that are likely to be encountered in a bankruptcy involving a horse or dog racetrack, a jai alai facility or bingo hall, however, are likely to parallel those encountered in a traditional casino. Moreover, cases in- volving traditional casinos are more common than cases involving other forms of gaming. For these reasons, this article will focus on the traditional casino. Regulatory schemes obviously vary by locality. The State of Nevada, however, has the longest history of legalized gaming and has established the most comprehensive reg- ulations respecting gaming activities. Because Nevada law frequently serves as a basis for gaming regulation in other states, general discussions of gaming law are based upon Nevada law. 3 Though gaming licensed Casinos may be owned and op- erated by individuals, limited liability companies, part- nerships and trusts, for ease of this overview, the discus- sion is limited to corporations. I This common structure, dictated at least in part by gam- ing concerns, may have a significant impact upon both case administration and claims litigation. For instance, in In re Elsinore Corp., 228 B.R. 731 (9t Cir. B.A.P. 1998), the appellate panel upheld a determination by the bank- ruptcy court that workers at the Atlantis Hotel & Casino in New Jersey were not entitled to priority treatment un- der Section 507(a)(3) for wages earned within 90 days of the cessation of business at the Atlantis. The wage claimants were employed at the parent/holding company level, and the parent corporation had not ceased doing business as a holding company. 1

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