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Blumenthal: Foxwoods slot promotion shortchanges the state

HARTFORD, Conn. – A dispute between the state’s attorney general and the Mashantucket Pequot Tribal Nation over a slot machine promotion at Foxwoods Casino Resort may end up in court for a resolution.

Connecticut Attorney General Richard Blumenthal said a promotion at Foxwoods that allows customers to play slot machines for free deprives the state of some of its cut of gaming revenues.

“Foxwoods must play by the rules – or face the consequences,” Blumenthal said.

Foxwoods President John O’Brien said the free slots promotion is a legitimate marketing effort, but the tribe will prepare for the possibility of a court dispute.

“We have agreed to escrow any of the disputed monies so that if any future court decision went against us, the taxpayers of the state of Connecticut would be protected. In the meantime, we are continuing with this promotion,” O’Brien said.

In a press released issued Sept. 29, Blumenthal and Paul Young, executive director of the state’s Division of Special Revenues, said Foxwoods’ Free Slots Play promotion violates the tribal/state gaming compact that pours more than $200 million – 25 percent of gross slot revenues – into the state’s coffers each year. The state receives a total of around $425 million a year in combined slot revenues from Foxwoods and the Mohegan Sun, the state’s other casino.

The marketing promotion began Sept. 8.

“What’s happening is [that] for promotion purposes, the tribe is giving out coupons to patrons in $25 and $50 denominations, and maybe others; and when those are used at the casino the tribe is not counting those amounts toward the winnings. We believe a strict interpretation of the language of the memorandum of agreement is that they can’t conduct the program and administer it without counting the amount of money they make available to their patrons.

“We’re saying that money just adds to the win. They’re saying the money is just for promotion purposes. Our position is it doesn’t make any difference where that money is coming from; it’s being utilized by the customer. So there’s a difference between the state and the tribe about how the free slots game is being administered,” Young said.

O’Brien said it was unfortunate that “Connecticut’s attorney general” decided “to turn a legitimate disagreement into a media event. Our Free Slot Play promotion is a marketing program that provides a benefit for our customers and ultimately helps the state, which would share in any increased slot revenue that results. We are disappointed, but remain committed to this legitimate marketing effort.”

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The Foxwoods president cited a Sept. 15 letter from Connecticut Comptroller Nancy Wyman that “clearly stated that in her view these types of promotions did not constitute a wager that would be calculated into casino revenue. In so doing, she used the IRS’s definition of a wager.”

In detailing his claim, Blumenthal said when a player loses, Foxwoods fails to calculate the amount of the free coupon as income. But when the player wins, Foxwoods deducts the amount from its “gross operating revenues.” The result is that when Foxwoods calculates the 25 percent of gross operating slot revenues that it owes to the state, it undercounts its actual revenues, Blumenthal said.

“It’s the position of Special Revenue that the money given out should be included as revenue, and then the payouts deducted from revenue – as has been the system since the inception of the slots. Casinos have in the past had promotions where they have given rolls of quarters to be used in the slot machines, and that money has always been included in the revenue even though it came from the house as a promotion,” Blumenthal said.

The attorney general said that Foxwoods reported giving out $50,000 a day in coupons during the first week of play.

“It is unknown what the payout on that amount is. And that’s just in the beginning – before the coupons are in wide use. The potential use and therefore loss to the state will only grow,” Blumenthal said.

Foxwoods did not respond to an e-mail seeking clarification of how the casino was calculating the amount of money to place in escrow.

In order to comply with the memorandum of understanding between the state and the Mashantucket Pequots, Foxwoods must include the value of all Free Slot Play coupons in the calculation of the tribe’s payments to the state, Blumenthal said.

“It cannot change the rules to play its own game both ways – count only a part of the wagers, but subtract all of the winnings. State taxpayers should not be forced to pay for Foxwoods’ promotional pitches,” Blumenthal said.

Young said the state is waiting for an official response from the tribe to letters asking the tribe to include the free slot coupons in its calculations for September’s revenues.

“I understand we’re going to be receiving an official response this week. We’ve always enjoyed a very good working relationship with the tribe and I expect we’ll continue to, but this is a debate about how this particular program is being administered,” Young said.

“I’d say it’s a possibility that the issue will be litigated, but I’m not going to speak for the attorney general or my boss. We’ll await an official response by the tribe and then decide as to how we’ll proceed,” Young said.