State: Casinos called Keno a ‘lottery’

Officials from Connecticut’s two casinos said Tuesday that the Rell administration’s proposal to launch a Keno game would violate their exclusive rights to operate “casino games” in the state and jeopardize a revenue-sharing compact that means millions of dollars to the state each year.

But state officials say Foxwoods and and the Mohegan Sun thought differently of Keno when they filed applications to operate the game at their casinos more than a decade ago: At the time, both referred to it as a “lottery game.”

The distinction is critical to Gov. M. Jodi Rell‘s proposal to use Keno to help close the state’s budget gap. Under the revenue-sharing compact, the state gave Foxwoods and the Mohegan Sun exclusive rights to operate “casino games” in exchange for a share of slot machine revenues now worth almost $400 million a year. But both the state and the casinos are allowed to operate “lottery games.”

“The compact is clear and Keno is not listed in the compact at all. They are allowed to have lottery games but that is not unique to them,” Paul A. Young, executive director of the Connecticut Division of Special Revenue, said in an interview Tuesday. Under the compact, casinos games are identified as blackjack, poker, dice, money-wheels — no Keno mentioned.

Keno is an electronic bingo-like gambling game popular in restaurants and bars in Connecticut’s surrounding states. Rell’s proposal would launch the game at 600 to 1,000 bars and restaurants, Connecticut Lottery Corporation President Anne M. Noble told the Public Safety and Security Committee Tuesday during a public hearing.

Robert Genuario, Rell’s budget director, said Keno would generate $60 million a year, but $400 million would be available immediately to fill a state budget hole by borrowing against its future revenues.

But officials from the Mohegan and Mashantucket Pequot tribes say a state-run Keno game could give them reason to stop paying nearly $400 million a year to the state from their revenue-sharing agreement.

“The moment that exists – that is, a game as the state describes Keno starts – the obligation to make the payments stop,” Jackson King, counsel for Foxwoods, said during an interview. “Under the contract, the tribe doesn’t go to court at all. The payments just stop.”

Both King and John Meskill, director of operations for the Mohegan Tribal Gaming Commission, said they have exclusive rights to the game.

“It is a casino game,” Meskill told the committee. “… The reason we play it at the casino is because it’s a compliment to the casino games.”

But records show the Mashantucket Pequot and the Mohegan Tribal gaming commissions both applied to have Keno to the DSR as a lottery.

“The Compact permits the Tribe to conduct ‘any lottery game,'” reads Foxwood’s July 1992 application, followed by a definition of lottery, and then: “Keno is a form of lottery within this definition.” Mohegan Sun filed a similar application four years later.

To sort out the legal jargon, discussions between Rell’s budget office and casino representative began last week, Genuario and casino officials acknowledged Tuesday. But for now, the casinos sound set against having the state run a Keno game.

“I can tell you that I think the [tribal] council would be deeply concerned about 600 to 1,000 gaming parlors opening up around the state of Connecticut,” said Chuck Bunnell, chief of staff for the Moheghans.

If Keno is launched and casinos do decide to withhold payment to the state, Deputy Attorney General Carolyn K. Querijaro said the state would file suit to recuperate money owed, but the case could be held up in court for years.

“There’s no way we can say with any degree of certainty how a court would rule,” she said. “I am not a gambler but this seems to be a big gamble.”

There are no court cases to point to on how a court would rule warned Attorney General Richard Blumenthal last year when Rell first introduced Keno. He noted that courts across the country have ruled both ways on the issue of whether Keno is a lottery game but any conclusion by him on how Connecticut courts would rule “would be more a guess than a legal analysis.”

If legislators chose to reject the Keno proposal, the gap must be made up my borrowing against some other future revenue, as $1.3 billion of the states $18.9 billion budget for the coming year is dependent on borrowing.

Rell spokesman Adam Liegeot said, “If the Legislature prefers another way to help balance the state budget, Gov. Rell would be open to considering it.”

The Rell administration believes that Keno is one of the best options for borrowing because it is a new revenue source, it is a voluntary game and the bond market will look favorably towards borrowing from a new revenue source versus a revenue source that is already spoken for.

“You add to your problems,” if the state borrows from already existing revenue, warned Genuario.

Rep. Stephen D. Dargan, D-West Haven, co-chairman of the Public Safety Committee, said now that the legislature for the first time knows where the casinos stand the ball is in lawmaker’s court to move on Keno or “we will have to come up with some other revenue stream.”