Gaming the Gaming Commission’s “Enhanced Code of Ethics”?

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The Boston Globe published stories on November 21st and December 8th revealing that Steve Crosby, Chairman of the Gaming Commission, had a previous seven-year business partnership with Paul Lohnes, part-owner of a land parcel in Everett that is the proposed site of a casino in competition to win the sole casino license in Eastern Massachusetts. According to the Globe stories, Chairman Crosby and Mr. Lohnes have had a forty-year relationship and Mr. Lohnes had provided crucial investment money to Crosby’s company when it was struggling. According to the Globe stories, a partnership including Crosby’s former business partner purchased the Everett site in 2009 at a price of $8 million. Subsequently, according to the Globe stories, the property was put under a land option agreement at a price of $70 million, contingent on the awarding a casino license for the site.

Chairman Crosby responded to the Globe by posting on the Gaming Commission’s website two “Disclosure[s] of Appearance of Conflict of Interest Disclosure in accordance with G.L c. 286(A), & 23(b)(3)” that he had filed on August 22, 1013 with the Governor’s office and on October 25, 2013 with the State Ethics Commission. Chairman Crosby also issued a written statement announcing his intention to recuse himself from the Commission’s decision-making process involving the Everett land option but stating that he will continue to participate in the licensing process for Eastern and Western Massachusetts.

Chairman Crosby’s response doesn’t do justice to the “Enhanced Code of Ethics” that the Gaming Commission adopted on February 13, 2013 that governs his conduct as a Commissioner. Given Chairman Crosby’s and Mr. Lohnes relationship, the “Enhanced Code of Ethics” prohibits Chairman Crosby from participating in the licensing process for Eastern Massachusetts.

The 2011 state law authorizing casino gambling in Massachusetts specifically mandates that the Gaming Commission adopt a code of ethics for its commissioners and employees more restrictive than the one applicable to other state employees. The legislature did this to address the heightened vulnerability of gaming commissioners to conflicts-of-interest in the awarding of casino licenses worth hundreds of millions of dollars, and to protect public confidence in the awarding process.

The casino legislation prohibits any commissioner from participating in a matter affecting the financial interest of a person with whom the commissioner has a significant relationship. The outright prohibition is tougher than the conflict-of-interest standard that applies to other state employees, who are not prohibited by state ethics laws from participating in matters involving private relationships so long as the employees disclose their relationships to their appointing authority, ignore any considerations arising from their private relationships, and perform their official duties objectively and fairly.

The Gaming Commission complied with the statutory requirement by adopting an “Enhanced Code of Ethics” on February 13, 2013, stating: “No Commissioner, employee, or consultant may participate in a particular matter, as defined by G.L. c.268A, §1, pending before the Commission that may affect the financial interest of . . . a person with whom they have a “significant relationship.”” The “Enhanced Code of Ethics” adopted by the commission defines “a significant relationship” as “anyone with whom a person shared an influential or intimate relationship that could reasonably be characterized as important.” Thus, the Gaming Commission fulfilled its statutory requirement by establishing an outright ban on a commissioner’s participating in matters that may affect the financial interest of persons with whom the commissioner shares a present or prior influential relationship. This outright prohibition provision is much stricter than the conflict-of-interest established by G.L c. 286(A), & 23(b)(3) pertaining to other state employees.

Given the facts reported by the Globe and by Crosby’s own disclosures, it is evident that Chairman Crosby and Mr. Lohnes “shared an influential . . . relationship that could reasonable be characterized as important.” Had the legislature not required the Gaming Commission to adopt stricter ethics standards, including the outright prohibition provision, Chairman Crosby would have fallen under the regular ethics laws applicable to other state employees that would have allowed him to participate in the Eastern Massachusetts licensing process by simply making a disclosure to his appointing authority and agreeing to perform his official duties objectively and fairly. In fact, this is exactly what Chairman Crosby has chosen to do, acting as if his conduct is subject to G.L c. 286(A), & 23(b)(3) instead of to the “Enhanced Code of Ethics” including the outright prohibition provision.

Chairman Crosby is attempting to game the Gaming Commissions’ tough, new Enhanced Code of Ethics. The legislatively mandated Enhanced Code of Ethics prohibits Chairman Crosby from participating in a matter affecting the financial interest of people like Mr. Lohnes, with whom Chairman Crosby had a significant relationship as defined by the new ethics code. Mr. Lohnes has a financial interest in the licensing process for Eastern Massachusetts, since the value of his land interest is dependent on a land option triggered by casino license approval.

Chairman Crosby’s decision to recuse himself from deliberations about the Everett land but not from deliberations about the casino license for the land makes a mockery of the new ethics rules. The value of the land to Mr. Lohnes’ company is dependent on whether the Gaming Commission selects Everett as the approved casino site for Eastern Massachusetts. If the Gaming Commission selects Everett for the casino license, Mr. Lohnes and his partners in FBT Everett Realty stand to make a windfall profit; if not, they don’t. Chairman Crosby has already acknowledged that his prior relationship with Mr. Lohnes requires him to recuse himself from the land deliberations; it should be obvious to any objective observer that the casino licensing decision, and not the land deliberations, represents the trigger to windfall profits for his former business partner.

To protect the public trust and safeguard the ethical integrity of the Gaming Commission, Chairman Crosby should recuse himself from further deliberations about the Eastern Massachusetts casino license as the new, enhanced ethics rules require.