Delaware: Back-room Business Booming for Bookies

By SEAN O'SULLIVAN and ADAM TAYLOR

The News Journal 

WILMINGTON -- Though federal judges ruled last month that Delaware's three racinos cannot take single-game wagers this weekend, you can still put cash down on the Eagles to beat the Panthers by 3 points.

You always could.

You also don't have to go to Atlantic City or wait until next year -- when the state expects to launch table games at the racinos -- to play poker for money.

Behind closed doors somewhere in the state -- in basements and in back rooms of barbershops and restaurants -- there is illegal wagering, table games and other gambling going on, just as it has taken place for generations.

And no federal injunction, or team of high-priced lawyers, is going to stop it.

One Wilmington bookmaker said business has been so good for so long that he hasn't had a real job since 1969.

And although law enforcement used to zealously investigate and bust this kind of activity with "bunco squads," that is no longer the case. Police and prosecutors this week could cite few cases of bookmaking or illegal gambling busts, let alone offer detailed statistics, in the past decade.

This is no doubt because violent crimes like rape, robbery and murder are a much higher priority for strained police forces, but the stigma associated with gambling has also been lifted -- despite the fact that problem gambling is still at the root of other criminal activity like fraud and embezzlement after the gambler falls thousands of dollars in debt.

Gambling is now "socially acceptable and legal," in Delaware and virtually every state in the union, said Arnie Wexler a compulsive-gambling expert and lecturer, thanks to the widespread institution of state lotteries in the 1970s.

As a result, a generation is being bred to accept and approve of gambling despite the cost in ruined lives.

And as Delaware launches its first full weekend of legal, parlay wagering on football games since the 1970s, bookmakers in Wilmington expect a windfall from Delaware's new embrace of gaming, predicting a surge in new bettors who will grow bored with the legal wagers and seek them out for single-game bets.

Wexler said children now regularly see their parents buy lottery tickets and jump up and down when they win a few bucks or a free ticket, "and they think, 'Wow, this is free money.' "

"The only difference between an illegal numbers racket and [the lottery] is the state takes a piece of the action," he said.

Because gambling has been made legal and socially acceptable, he said, it is now "a crime no one looks at anymore."

As evidence, he asked, when is the last time someone was arrested for illegal bookmaking? "Did it all of a sudden get better?"

Neither the Delaware State Police, Wilmington police, federal prosecutors nor the Delaware Attorney General's Office could immediately provide a recent example of a bookie getting busted. After some research, Wilmington police reported a 2007 arrest of a city man for drug trafficking and running a parlay sports betting operation on Lobdell Street.

Deputy Attorney General Richard Andrews, the state's chief prosecutor who was formerly a federal prosecutor, conceded cracking down on illegal gambling is no longer the priority it once was -- like when there were fears of an organized crime push into Delaware in the 1970s.

"I would say, based on the number of cases being brought to us [for prosecution by police] there is no evidence that illegal gambling is a significant problem in Delaware."

He agreed with Wexler that "the more gambling is generally legalized, the more that indicates a kind of societal norm and it is hard to prosecute against societal norms."

When it becomes tough to get a conviction against those norms, police generally follow suit and don't put their resources into that effort.

The last, high-profile gambling bust that anyone could remember was the February 2008 arrest of Middletown resident Shane Anderson for operating a high-stakes poker game in his home. But that case likely got as much attention for Anderson's upscale address and the salacious charge that the games also involved topless women serving drinks and dealing cards (something Anderson denies and that was never proved in court after Anderson entered a plea before trial).

Anderson ultimately admitted to two misdemeanors -- a tax charge and possessing a gaming "device" of poker chips -- served no prison time and paid no fine. His probation allowed him to continue to run a poker business where players win points instead of cash.

Middletown Police Chief Hank Tobin said it was not so much the gambling that was at issue, but the public nuisance that Anderson's large poker nights were creating in the community, with parked cars clogging streets and generating complaints.

More illegal betting forecast

Gambling opponents like Wexler and illegal bookmakers in Wilmington agree one likely outcome of Delaware's expansion of gambling will be more people gambling illegally.

Bookies don't see the state's entry into sports betting as competition but more like training wheels for first-time gamblers, known as donkeys , who will catch the betting bug at Delaware Park, Dover Downs or Harrington Raceway.

"I think they'll go there, learn how to place a bet, then come to us," said one Wilmington bookie who works on the west side of Wilmington and who, like all the bookies interviewed for this story, asked not to be identified.

On any given Sunday during football season, this bookie said, he handles a steady stream of customers in person while fielding 60 to 70 calls on four phone lines before the start of the National Football League's 1 p.m. and 4:15 p.m. games. The routine begins again before the 8:30 p.m. game's kickoff.

Another bookmaker with customers in northern Delaware and the Philadelphia suburbs believes he won't have to work as hard to attract new clients. He said the state and its racing casinos will spread a broad net to snare as many novice gamblers as possible, providing him with a much larger client base.

"Why do the pushing when the donkeys will do the pulling?" he said.

Gov. Jack Markell, however, believes the opposite will occur, said his spokesman, Joe Rogalsky.

Instead of running from casinos to bookies, the governor believes new gamblers -- and those accustomed to betting through bookies -- will prefer the legal option and bring in money to the state, Rogalsky said.

"The activity ... will be highly regulated, safe and generate revenue for important government services such as police and education," he said.

Countering that is Gerry Fulcher, a recovering compulsive gambler who has testified as an expert witness in Delaware court cases on the topic.

He believes there's no question illegal gambling will increase.

"Access always leads to excess," he said. "There will be a lot of collateral damage in the form of curiosity seekers who will develop gambling problems. Sadly, I predict they will be mostly young adults and older people."

Gambling a factor in crimes

While there may have been few arrests over the past decade or two for illegal bookmaking or other gambling operations, prosecutors and police can point to a large number of criminal issues related to problem gambling that have ended up in court, usually involving embezzlement, fraud and theft.

In just the past year, gambling issues have played a role in at least five high-profile criminal prosecutions.

In August, Jody Chubbs, who was sentenced to eight years in prison for stealing nearly $400,000 from her employer, blamed regular gambling at Delaware Park as one of the causes for her embezzlement.

In April, John Henry of Bear was sentenced to a halfway house and home confinement as a part of the prosecution of a wide-ranging marijuana sales and distribution network based in Delaware. Prosecutors said Henry became involved in the illegal operation, allowing his Newark home to be used as a stash house, because he owed a significant sports gambling and drug debt to the drug ring's operator. Henry also forfeited that Newark home to the government as part of his punishment.

In January, Elkton contractor Carlton Carroll blamed problems with gambling and alcohol for his convictions on home-improvement fraud, where he took money from 16 different people and either never finished work or, in some cases, never started. He was sentenced to 3 1/2 years behind bars.

In December, a long-serving regional manager for Comcast, George Setting -- who was in charge of making sure people did not steal cable television service -- was sentenced to 15 months in prison for stealing $63,200 from his employer. He blamed gambling on sports and horse racing as the source of his money troubles.

In many of these cases, prosecutors suggested greed more than gambling may have been at issue. But a year ago in federal court, then-U.S. Attorney Colm F. Connolly said sports gambling debts with bookies alone appeared to be responsible for a three-month, 10-bank robbery spree across four states by 23-year-old Johntel Clark.

Clark, of Philadelphia, had no previous criminal history, no problems with drugs, graduated from high school and was honorably discharged from the National Guard.

After his crime spree, which netted about $36,000, Clark abruptly turned himself in to police and offered an immediate confession to all 10 robberies, including ones police had no idea he had been involved in. He then admitted guilt in federal court without any kind of plea deal.

He was sentenced to four years in prison and Connolly said at the time it was "one of the most bewildering cases I've had as a prosecutor."

That is the essential difference between going to a bookie and going to a racino -- the state's option is legal and safe while betting through bookies is illegal and potentially dangerous.

And it's likely there are many more cases like Clark's that are not reported because illegal gamblers who fall prey to violence when they fail to pay up generally do not report it for fear of more violence, said Master Sgt. Steven Barnes of Wilmington police.

"When you have two people taking part in a criminal transaction like that, it's not the kind of thing that would typically get reported to police," he said. "If a guy's getting threatened, the prospect of calling police about it would probably make him fearful that he'd be making the situation worse for himself."

Betting at the state's racing casinos will remove that threat, said Ed Sutor, chief executive officer at Dover Downs.

"First and foremost, we do it legally, so there's no worrying whether you're going to get paid off, or, if you run up a big tab you can't pay, the other concerns that might come with that," Sutor said.

The atmosphere also will be better, he said.

Instead of skulking in corners or whispering on telephones to place bets, casino gamblers will enjoy the added amenity of an evening out with horse races, table games, restaurant meals and possibly a musical show, supporters say.

"It's a very communal atmosphere, high-fiving and laughing with all your friends while eating sports-bar finger foods in a first-class facility," Sutor said. "We see groups coming down in buses to our place, which will have a fun, festive and exciting atmosphere."

On the flip side, bookmakers offer convenience, anonymity and, maybe most importantly, credit. They also brag that winners don't have to pay taxes on their payoffs.

Under the state plan, anyone winning more than $600 will be mailed an IRS tax form. For those winning $5,000 or more, federal withholding taxes will be taken out before the winnings are paid, Rogalsky said.

"People aren't always going to want to go to the track and I'm always a phone call away if someone is home watching the game on TV and wants to make a bet," the Wilmington bookie said. "And discretion is a very, very important part of my business. Not everyone is going to be comfortable in line with a betting slip in their hand."

The Wilmington bookie, however, said it is a problem when a bettor gets in over his head and doesn't show up with the money.

"Now, if you don't pay, we'll come collecting," he said matter-of-factly.

Social costs outpace revenue

Even when it's state-sanctioned, betting will never be moral or a moneymaker for governments, Fulcher said.

That's because problem gamblers who steal from their workplaces take a bigger toll on the economy than whatever amount is raked in by the government, he said. "Theft, welfare, bankruptcies, all that will go up," Fulcher said.

He also doesn't buy the notion that legal sports betting is another sort of sin tax, which governments often tack onto cigarettes and alcohol products.

"Totally different," he said. "The state doesn't put up billboards or come up with big expensive promotional campaigns saying, 'Hey, have a drink today,' or 'Don't forget to puff away,' " he said. "But they'll be encouraging sports betting, that's for sure."

John Warren Kindt, a business and legal policy professor at the University of Illinois, said studies conducted by the University of Nevada at Las Vegas around tribal casinos in Wisconsin -- and replicated in other reviews -- have shown that people who live near a casino spend 10 percent less on food, 30 percent less on clothing and crime in the area goes up by about 10 percent.

"People lose money and resort to property crime to get more funds. And the taxpayer is paying $3 or more in societal costs for every $1 in new tax benefits," he said.

Keith Whyte, the executive director of the National Council on Problem Gambling, said Delaware should make a commitment to gauge the impact of increased legalized wagering on gambling-related problems.

"We urge the state of Delaware to significantly expand resources for research into problem gamblers and services for them," he said. "If you do research before it starts and track what happens afterward, you could really accurately target services and make the most efficient and effective use of funds. I think there is a real opportunity, if not a responsibility, for the state to do the best job it can to minimize the negative impacts."

Even one of the bookies admitted that gambling is all about chasing an adrenaline high, for bettors and bookmakers.