A Fundraiser Jackpot?

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Does Pennsylvania's court ruling spell jackpot for campaign fundraisers?

By Dan Hirschhorn

When Pennsylvania was about to legalize slot parlors in 2004, lawmakers reconciling legislative differences for a final bill wanted to make sure casinos wouldn’t produce jackpots for politicians. So a last-minute provision was inserted that barred campaign contributions from anyone with an ownership stake in casinos in the state.

Five years later, the state Supreme Court struck down that provision as an unconstitutional limit on free speech rights. But even with expensive statewide races for governor and U.S. Senate looming, don’t expect wads of campaign cash to flow from those mavens of gambling just yet. Some politicians, including the Democratic governor who pushed for legalized gaming, are adamant that they still won’t accept money from casino interests. A Republican state lawmaker is preparing a new bill that would circumvent the court’s decision. And, after enjoying a legal excuse for keeping their wallets closed, casino executives aren’t exactly rushing to shell out campaign cash.

“As a matter of levity, I’ve heard from many people in the industry who say ‘now I’ve lost my cover,’” says Robert Krauss, a Philadelphia attorney and gaming law expert who helped the legislature draft parts of the original gaming law. Many casino interests, he speculated, will simply donate to lawmakers who already share their point of view on gaming law.

Besides, people always assumed that casinos were finding an indirect way to make their lobbying weight felt in Harrisburg, even if they couldn’t always prove it.

“The influence of gambling industry money is so pervasive,” says Curt Schroder, a Republican state representative who has been collecting cosponsors for a reformulated bill to reinstitute the ban. “It was largely the influence of that money that got the law passed in the first place, in my mind. Having that money flow through the system is a real problem.”

The drama in Pennsylvania is one that has played out in other states that are dabbling in legalized gambling as the recession cripples budgets and slot machines are increasingly looked to as a revenue source.

Nineteen states have legalized commercial casinos in one way or another, but only five have tried to restrict campaign contributions from the industry, according to court papers in the Pennsylvania case. The Keystone State’s ban was widely seen as one of the strictest, something the court noted in its 5-1 decision to overturn.

Good-government advocates defended the ban as protecting taxpayers from fraud and abuse, but the law had plenty of critics. Even some who despise legalized gambling on the whole didn’t think the ban on campaign contributions would fly.

“Restrictions on campaign contributions are the same as restrictions on political speech, and to single out an industry that is legal in Pennsylvania is a clear violation of our constitutional rights,” says Matt Brouillette, President and CEO of The Commonwealth Foundation, a conservative think thank in Harrisburg.

Peter DePaul, a Philadelphia-area developer who has an ownership stake in the Foxwoods casino planned for downtown Philadelphia, filed suit to challenge the ban after he was fined $100,000 for a series of contributions he made to area candidates in 2006. At the time, Foxwoods’ application for a slots license was still before regulators. DePaul admits to taking the fine personally. “I don’t think people are making donations to public officials because they want something from the gaming commission,” DePaul says.

“You donate to the people and parties you’ve always donated to, who you think would do the best job,” DePaul adds. “That’s where I’m coming from.”

The immediate effect on fundraising could prove muted, at least for now. People close to casino interests say that many ownership groups want clearer guidelines—either from the courts or lawmakers— about what is and isn’t allowed.

Sugarhouse, another slot parlor planned for Philadelphia, isn’t making any campaign contributions “at this time,” a spokeswoman for the casino says.

Schroder wants to keep the limited donations permanent. He hopes to introduce his bill soon, and with gambling in general still unpopular in pockets of the state, especially Philadelphia, he could prove successful. The Supreme Court did provide a framework for a legal statute, saying that regulation was fair game so long as it wasn’t overly broad. Schroder doesn’t buy the free-speech argument. “They have a tremendous amount of power and capital at their disposal,” he says of casino owners. “Being licensed in the state of Pennsylvania is a privilege, it’s not a right. I think people who make that argument are on weak ground.”

Krauss, a partner at the firm Ballard Spahr Andrews & Ingersoll, says efforts to reinstitute the ban could prove problematic.

“It was a very difficult law to enforce, and the penalties in it were outrageous,” says Krauss. “A director of a public company could give $100 to his brother who’s running for dog-catcher, and he’d be in violation of the law.

“Will the political operatives request cooperation from business leaders?” Krauss asks. “They do everywhere else, so of course they will. That’s part of our system.”


Dan Hirschhorn runs pa2010.com, a political news web site covering Pennsylvania’s 2010 elections.