Some say gaming law is as much an art as it is a science. If so, the Nevada law firm of Lionel, Sawyer & Collins is the Louvre, and Ellen Whittemore, the Mona Lisa. Her effective representation of clients runs the gamut of the huge gaming corporations, from MGM Mirage to the Onex Group of companies that has taken over the Tropicana, which is now led by former MGM president Alex Yemenidjian.

Prior to joining the firm, she was the supervising deputy attorney general for the Gaming Division. Whittemore is the primary author of Nevada Gaming Commission Regulations 6 (Accounting Regulations), 14 (Manufacturers, Distributors, Gaming Devices, New Games and Associated Equipment) and 26A (Off-Track Parimutuel Wagering). She successfully prosecuted individuals who were then included in the “Black Book” (the list of persons excluded from casinos) and was lead counsel in the case that established that gaming devices could not display “near misses” to customers (leading them to believe that they were close to a win). Whittemore spoke with Casino Connection Publisher Roger Gros at her Las Vegas offices in June.

Casino Connection: Through the years, Lionel, Sawyer & Collins has become the “go-to” law firm in Nevada. Does that put a little extra pressure on you when you appear before a commission or gaming or even in court for that matter?

Whittemore: I think it does. I think that we have very high standards at this law firm, and they were established by our founding partner, Sam Lionel, who, now in his 90s, is still probably one of the best litigators in this state. Of course, Grant Sawyer was the governor who really established the current system of gaming control. Those are big footsteps to follow. And of course you have Bob Fess, who was just acknowledged dean of gaming law. So we tend to be selective in the matters that we appear on. We understand that our obligation is not just to our clients, but also to the state of Nevada, so it does put a little pressure on you.

As gaming counsel, we have a responsibility to effectively advocate for our clients, but I also think we have a responsibility to dissuade those who might be not be suitable for licensing from even filing that application in the first place.

Right out of law school, you got into the public sector and eventually became deputy attorney general. Do you think that helped you, being on that side of the fence, now that you’re working for clients with the state?

I think it’s absolutely invaluable. I was a supervising deputy attorney general in the attorney general’s office representing the Gaming Control Board and the Nevada Gaming Commission, and the experience that you got at that time is an experience that you don’t get coming to a law firm. A lot of gaming law is instinct. A lot of it is understanding that although the statute might on its face say something, that historically there’s been a different interpretation.

The Nevada gaming industry is enduring some difficult times right now. What kind of challenges does that present to a gaming attorney? Are there all different kinds of issues that you have to deal with these days?

There are any number of our clients that have been putting their financial houses in order. So you’re involved in their discussions with their lenders for restructuring some of the debt that they have to help them face the challenges of these economic times. We also have been approached and represent a number of lenders who never thought they’d be in a position where they might consider going through the licensing process themselves. So there are challenges as a result of the economy, but there are also a number of opportunities for many people.

Do you have to bring in some people with some financial expertise? Traditionally in gaming, that financial expertise was important, but it wasn’t as important as it is these days.

Clearly, my clients have. From my perspective, we make sure that whatever restructuring or whatever investments people make, that they are those kinds of restructuring and investments that are going to satisfy the regulatory objectives, but clearly you see a number of the companies on the Strip retaining exceptional financial advisers.

There’s a proposal out there that will raise the threshold of investment in a public casino company from 15 percent to 25 percent before you’re forced to get a license. Do you think this is going to go through, and if it does, will it change the face of Las Vegas to a certain extent?

This proposal would increase the amount that an institutional investor may own without having to go through licensing. There’s also discussion to open up the categories of types of entities that would qualify as an institutional investor. I think that that may open up some additional sources of capital, but one of the primary goals of the gaming regulatory authorities is to ensure that individuals that haven’t been licensed do not exercise excessive control over a Nevada licensee. So although there may be an increase in the percentage that these types of entities can own, they’re still limited in how much they can do without being licensed.

Is that a difficult task, when a Nevada company wants to go into a foreign jurisdiction to be licensed, say in Macau?

I think it can become problematic. One of the things that the gaming authorities in Nevada clearly look at is the robustness of the regulatory apparatus in the foreign jurisdiction. I think that although it would be naïve to say that the Macau regulatory system is anything other than in its infancy, there have been a number of very, very positive steps by the Macau regulatory system to model itself after some of the best practices of Nevada and other jurisdictions. I think initially when Nevada licensees go outside the United States that they have to, on their own, be incredibly proactive in protecting themselves and their reputations.

Bankruptcy has always been apart of the gaming industry. Plenty of casinos have gone into bankruptcy and emerged from them. But there seems to be more now. Is there something different between the bankruptcies we’re seeing now and the bankruptcies we’ve seen in the past?

I think that what we’re seeing is companies that were very, very successful finding themselves faced with bankruptcy. I think that’s a little bit different. These aren’t companies who historically had struggled; these are companies that have been wildly, wildly successful, and as a result of that success, have perhaps overextended themselves as far as financing, and then when the economy has taken the nosedive that it has recently, they find that they don’t have the capacity to repay those obligations. In the past, when you saw a company go bankrupt, it was because they didn’t operate very well. This is totally different.

What is gaming’s role in the state of Nevada right now? We’ve had some clamoring in some quarters for increased taxes on the gaming industry, but has that subsided now in this economic downturn?

I think so. I think people realize that you can’t kill the goose that laid the golden egg. It is at a point where any talk of massive tax increases will put some of these lower-performing casinos into a serious position. I have always questioned the wisdom of not having a broad-based business tax. We do have a number of industries who enjoy the benefits of being based in Nevada and do not have to pay what I think are appropriate taxes.

So in terms of gaming’s role in the state, is its influence equivalent to its size?

Gaming is still very, very, very influential. I think that it is actually a function of there not being a number of controversial issues that have come to the forefront in the last several legislative sessions. The gaming authorities haven’t proposed new statutes that have been particularly controversial, nor has the gaming industry proposed any statutes that have been controversial. When you take a look at the legislative sessions, I think they’re more focused on ensuring that while they all are willing to pay their share of the taxes, that that obligation be spread to other industries in the state as well.

Is there something that the regulatory bodies can do to help reverse this economic trend we see here, or are they kind of helpless in that respect?

I think that they have to be helpful in situations in which licensees are faced with financial restructuring. Recently, the Gaming Control Board established a special team of individuals from each of the divisions within the Gaming Control Board to evaluate any of the applications that would be required as a result of refinancing or restructuring when a company does a bond offering, and there are certain approvals that are required as a result of that bond offering. The Gaming Control Board is expediting those approvals so that the lenders are protected, and that will then send the signal to other lenders who are potentially going to come in and help some of our Nevada licensees, to let them know that their rights as creditors will be protected. That therefore encourages them to come in and invest in Nevada. So there are things like that that they can do, but as far as going out and being a cheerleader for the industry, I think their ability to do that is somewhat limited.

There’s always that danger. Historically, the Gaming Control Board has attempted not to do anything that would give one side or the other any type of advantage in litigation. They attempt to remain quite neutral in bankruptcies of gaming licensees. Remember, when a gaming licensee goes bankrupt, that usually means that the Nevada Gaming Commission is a creditor, because they owe taxes. But they attempt to stay neutral. Certainly those of us who are gaming attorneys attempt to posture applications and situations so that our clients are benefited by the gaming regulatory process.

By Roger Gros

Roger Gros is publisher of Casino Connection and editor and publisher of Global Gaming Business magazine, the industry’s leading gaming trade publication. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its third edition. Gros was named “Businessman of the Year” for 1998 by the Greater Atlantic City Chamber of Commerce.