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Political Horsepower

A would-be slots operator says state fixers rode roughshod over him

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Everything seemed to be coming up cherries for Charles J. Betters in June 2003. The self-made development magnate from Beaver County had the land, the plan and the team that seemed a good bet to capture one of a handful of lucrative licenses to operate slot machines in Pennsylvania.

The land was a 634-acre parcel high above East Carson Street in the wooded northern half of Pittsburgh's Hays neighborhood. The plan was to strip-mine underlying coal, flatten much of the landscape and build a thoroughbred horse-racing track, slots casino, hotel, shopping center and 1,000 homes. The $500 million Pittsburgh Palisades Park proposal had the support of Mayor Tom Murphy, whose development gurus estimated it would generate $19 million a year in local taxes.

Betters' team included people with close ties to the mayor, Allegheny County leadership, the governor and top General Assembly Republicans and Democrats. They seemed well positioned to come out of the gate, round the political track and end up in the winner's circle of slots magnates.

Seventeen months later, however, Betters has nothing to show for his efforts. The Gaming Act, signed into law July 5, includes provisions slipped in by an unknown hand that effectively cut him out of the slot-machine business. Meanwhile two of Betters' former collaborators, William Lieberman and Charles Zappala, have become competitors for a piece of the slots action -- even as they've supported the legislators Betters says scratched him from the race.

Betters isn't taking it lying down. He's suing the state, Gov. Ed Rendell, House Speaker John Perzel and Senate President Pro Tempore Robert Jubelirer. He has fired legal warning shots at Lieberman and Zappala. And he's not ruling out suing other legislators or private individuals. "We've got a lot of litigation not only filed, we're filing additional litigation, too," Betters says.

Betters' legal salvos might not overturn the state's slots law. But they could provide a rare look into Pennsylvania's culture of backroom deal-making, and make the process of divvying up the slots winnings a dicey one indeed.



At the woodsy far end of Agnew Street, where Baldwin Borough meets Hays, critters skitter through the underbrush and fallen leaves. An eight-point buck peers out of the autumn-brown weeds and trees. Environmentalists protesting Betters' proposals have noted that this expanse serves as a refuge and a pathway for both animals and hikers. The trash -- old booze bottles, the battered remains of a mattress -- speaks of the kind of recreational opportunities even glitzy, new developments can't provide.

Unfortunately, teen-age tippling, summer love and nature hikes don't generate revenue. Slot machines do. The state estimates that each slot machine will net an average of $230 a day. A facility with the maximum 5,000 machines, operating every day, would rake in nearly $420 million a year. Of that, 34 percent would go to the state and 4 percent to the municipality, leaving 62 percent for the owner to cover overhead and make a hefty profit.

For more than a decade, owners of struggling racetracks, developers, out-of-town gambling interests and public officials hungry for revenue have pushed for gambling expansion. In 2002, they found their champion in Rendell, whose campaign touted slot machines at racetracks as a relatively painless way to fund schools and lower property taxes. Many local and national gambling interests gave Rendell five-figure campaign contributions.

By the time Rendell took office on Jan. 21, 2003, business interests were already angling for pieces of the action. Just nine days after the inauguration, and months before a slots law was even drafted, Betters filed with the state Horse Racing Commission for a thoroughbred-racing license. Seven other contestants quickly lined up, including four that wanted to build tracks in southwestern Pennsylvania.

If oddsmakers had handicapped the race, Betters would have likely been among the early favorites. In 34 years in business, he'd turned his family's small plumbing company into a national development firm, one that renovated public housing projects nationwide and built suburban commercial and residential developments in Cranberry and elsewhere. In 1993 he purchased hundreds of acres in Aliquippa that he hoped would host a riverboat casino. Riverboat gambling never materialized, and much of that land is still undeveloped. That didn't deter Betters from trying again when Rendell came to power.

This time, Betters came at it with some added horsepower. According to a June 27, 2003, filing with the Horse Racing Commission, Betters' politically potent partners included David W. Sweet, a lawyer who ran Gov. Ed Rendell's 2002 campaign. Another was William R. Newlin, now a top executive at Dick's Sporting Goods and a confidant to Mayor Tom Murphy. (A third, Allegheny County Councilor Dave Fawcett, later pulled out to avoid any appearance of a conflict of interest should gambling-related issues come before council.) And next to Betters, the two biggest shareholders were Lieberman and Zappala, according to the filing. Lieberman, a Pittsburgh insurance broker, is a self-described "long-time contributor" to the campaigns of House Speaker John Perzel, probably Harrisburg's most powerful Republican. Zappala, a financier, is the uncle of District Attorney Stephen A. Zappala Jr. He's also a contributor to County Executive Dan Onorato and state Sen. Vince Fumo, a powerful Philadelphia Democrat.

Despite all that clout, Betters still had a race on his hands. At the time, the state had just two available racing licenses. One was for thoroughbred racing, in which jockeys ride in saddles. That license is under the control of the three-member Horse Racing Commission. The other would permit harness racing, in which drivers sit in buggies, called sulkies. That license is under the purview of the separate Harness Racing Commission.

In the weeks that followed, Betters sought to hedge his bets. On July 17, 2003, he challenged an inactive thoroughbred license previously granted to Presque Isle Downs Inc., a potential rival headed by gambling kingpin Edson "Ted" Arneault that wants to build a track and casino near Erie. A week later, an apparently confident Betters paid $1 million for 28 acres near his original, 634-acre parcel.

The day after Betters challenged Arneault, the House voted to legalize not just slot machines at racetracks, but non-track "slots parlors." Almost simultaneously, Lieberman and Zappala dropped out of Betters' team.

Betters will say nothing about Lieberman and Zappala or their decision to part ways. Lieberman will say only that he and Zappala "had originally talked about going into business with [Betters], and we had talks, but it didn't work out, so we decided to go our own ways." He acknowledges that in filings with the Horse Racing Commission, Betters listed him as a shareholder, but says that "was probably premature, because we had never come to an agreement." They never exchanged any money, he says.

Lieberman's and Zappala's political stock has since soared. In January, Allegheny County Executive Dan Onorato appointed Zappala to the Southwestern Pennsylvania Commission and the Regional Asset District board. SPC sets transportation policy for the region, while the RAD board distributes funding from the 1-percent sales tax on goods bought in Allegheny County.

In February, meanwhile, Perzel named Lieberman to the Intergovernmental Cooperation Authority, which oversees Pittsburgh's financial recovery effort. Lieberman later became chairman of the ICA, and has been a key figure in pounding out a mix of spending cuts and tax hikes designed to keep the city out of bankruptcy. (See "Gaming the Numbers," pg. ???)

As discussions on the eventual shape of gambling legislation continued in Harrisburg, Lieberman and Zappala continued to cultivate key relationships. On March 29, a week after a new gambling bill first passed the House, Lieberman made a $10,000 contribution to Perzel's campaign. The same day, according to a state database of political giving, Zappala contributed $10,000 to Fumo's coffers. "I didn't know [Zappala] made a contribution," Lieberman says. "If it was the same day, I didn't know that. If so, it was a coincidence." Lieberman says his contribution wasn't related to his pursuit of a slots license. "I've been a long-time friend of Speaker Perzel; I've been a long-time contributor to Speaker Perzel," he says.

Zappala did not return calls for comment.

Lieberman says that he and Zappala are still hoping to invest in a slots parlor. "Yes, I'm still continuing to pursue it," Lieberman says, "but no, I don't have a deal."

Neither does Betters, thanks to some very clever wordsmithing by a Harrisburg author whose identity he can only guess at.



On March 22, 2004, the House passed a new gambling bill and sent it to the Senate. As senators pored over it and started suggesting amendments, the din of lobbying rose to a crescendo. The Associated Press has reported that in April, May and June, at least 34 businesses and individuals interested in gambling spent $575,000 seeking to influence the state's 50 senators.

Betters registered himself as a lobbyist, and enlisted seven other lobbyists, including gubernatorial confidant Sweet and Katherine Pippy, wife of Sen. John Pippy of Moon. His team, though, was badly outnumbered. MEC Racing, which owns The Meadows, in Washington County, registered 10 lobbyists. Arneault's company, MTR Gaming, and his potential partners, the Pittsburgh Penguins, registered 17 lobbyists. Forest City Development and Harrah's Entertainment, which are working together on a possible Station Square slots-parlor bid, fielded a combined 30 lobbyists.

"You couldn't walk into the hallway without 25 lobbyists approaching you on this issue," says Sen. Jim Ferlo, a Highland Park Democrat.

"They all had people up there trying to get people included -- or excluded" from the competition for slots licenses, says Sen. Jay Costa (D-Forest Hills).

In the final days of June, all attention focused on two senators: Fumo, who emerged as the Democratic leader on the issue, and Robert Tomlinson, who led a small cadre of pro-slots Senate Republicans. "They held the pen," says Drew Crompton, spokesman for Senate President Pro Tempore Jubelirer.

Apparently, one of them scratched Betters out.

The bill that passed the Senate on July 1 allows for seven racetracks with slots, four stand-alone slots parlors (including one in Pittsburgh), and two small slots lounges at resorts. Under General Assembly rules, the House wasn't allowed to amend the bill. With Perzel's blessing, it passed on July 3 and Rendell signed the Gaming Act into law on July 5. The final measure created a far bigger gambling expansion than Rendell promised in 2002. But Betters alleges the Gaming Act locks the starting gate on Pittsburgh Palisades Park not once, but three ways.

First, those who win future thoroughbred licenses, as Betters hopes to do, are locked out of the running for slots: The Act contains no provision for putting slots at an as-yet-unlicensed thoroughbred track. Already-existing harness and thoroughbred tracks, meanwhile, are virtually guaranteed slot machines. So is whoever gets the state's remaining harness-racing license, which is likely to go to competing teams intent on building tracks in Beaver or Lawrence counties.

Second, the new law pulls Betters' site out from under him. It bars tracks with slots from being within 20 miles of each other -- and the proposed Pittsburgh Palisades Park site is 17 miles from The Meadows, which is almost guaranteed to get machines of its own.

Third, the law strikes from the slots race anybody who has challenged a decision by the Horse Racing Commission, Harness Racing Commission or newly created Gaming Control Board, which will pick the operators of slots parlors. Fumo spokesman Gary Tuma says that provision is meant to keep parties from using a lawsuit or challenge to pressure those boards. But for now, Betters' appeal of Arneault's Presque Isle Downs license is apparently the only such challenge on the books.

"That's convenient as hell, isn't it?" Betters says.

"When you've got three [provisions] that are directly fired at us, I don't think it's any coincidence," says attorney Tom King, who is representing Betters. "There's no secret that this was directed at us."

Betters sued in federal court on Aug. 20, seeking to overturn provisions that his lawyers wrote "are directed specifically at harming the Plaintiffs; and ... improperly preclude Plaintiffs from obtaining a gaming license." Legislation written to benefit or harm a specific individual violates the U.S. Constitution, King says.

It's easy to see why rivals would have wanted Betters out of the running. Pittsburgh is guaranteed one slots venue, and Betters' parcel is the largest undeveloped space in the city. His property may be the only one big enough for a racetrack, which is "a strong application compared to a [non-track] slots parlor," Betters says, citing the size of the construction project and the potential to bring in tourism. "I believe certain legislators, and I'm not gonna name names now, worked diligently against the project," Betters says. "They worked for the benefit of other parties."

"Did [the Gaming Act] eliminate [Betters]? Yes, it certainly did," says Rep. Harry Readshaw of Carrick, whose district includes Hays and who supports Pittsburgh Palisades Park. "Did it stink? Yes. ... Was it done intentionally? I would hope not."

Betters' suit could conceivably force changes in the slots laws, or gum up the process of picking slots operators, which is expected to run through 2006. "I don't believe [the Gaming Act] is going to be altered by this lawsuit," says Readshaw. But Betters, he adds, "may well have a case."



Asked which legislators may have worked against Pittsburgh Palisades Park, King names one name. "Sen. Fumo is one of the sponsors of that bill, as were other Democrats and Republicans," he says.

Technically, Fumo was not a bill sponsor, but he was a key player, at one point single-handedly holding back gambling expansion for months while he argued for the inclusion of Indian-run casinos. He later dropped that demand. Fumo is known as a master of the levers of power: He has directed so much public and private money to organizations controlled by his staff and supporters that federal investigators are looking into it, according to the Philadelphia Inquirer.

"We don't believe it's true that there are provisions in the bill that prevent [Betters] from obtaining a slots license," says Tuma, Fumo's spokesman. Betters could, he notes, drop his challenge to Arneault's license, buy a piece of land farther from The Meadows, and pursue both a thoroughbred-racing license and a separate slots-parlor license. "The fact that you have a piece of land on which you want to build a racetrack does not guarantee you a slots license," Tuma adds. And Fumo can't be blamed for any specific provision in the bill, he says: "It was a negotiated deal. You get input from a lot of different people and you craft a compromise bill."

Through a spokesperson, state Sen. Tomlinson says he hasn't seen the lawsuit and can't comment on Betters' accusations. Neither Tomlinson nor Fumo is currently named in Betters' litigation.

On the same day Betters launched his widely reported federal suit Downtown, his lawyers quietly opened a second front. In the Beaver County Court of Common Pleas, they filed writs of summons naming Lieberman and Zappala. Such writs don't list the litigant's grievances, but are "one of the ways that a lawsuit is commenced," says King. He notes that the filing of a writ could allow him to start demanding documents, answers to questions and deposition testimony even before the filing of a complaint. Neither King nor Betters will say why they've filed writs naming Lieberman and Zappala, nor whether they blame the two for the triple-whammy put on their racetrack proposal.

"I don't know anything about it," says Lieberman, adding that he didn't even know a writ was filed against him until he was advised of it by City Paper. In any case, he says, he had nothing to do with the provisions allegedly cutting Betters out of the slots business. "I have a deal with the legislature and the governor," Lieberman says. "They don't sell insurance, and I don't make legislation."

Betters, meanwhile, is building an access road into his Hays wilderness. He's pursuing environmental permits that would allow him to strip-mine the site. "We still intend to do the site," he says. If he can't build a track with slot machines, he'll build stores and homes, he says. With or without the track, he says, "I think the project, period, is a benefit to the city."

That said, he'd prefer to do it with a racetrack. And unless the slots law changes and lets him back in the running, he'll demand sworn testimony from key lawmakers to determine exactly who wrote him out of the slots game. "That," he promises, "will come out."







Gaming the Numbers


The city's top overseer says there's nothing wrong with calling the budgetary shots and owning a piece of the slots.

On Oct. 18, another of Mayor Tom Murphy's budgets got the shaft. The Intergovernmental Cooperation Authority, appointed by the state to oversee the city's fiscal recovery, said it wanted Murphy to make more spending cuts and add one new chunk of revenue: the $17.6 million a year it is eventually expected to get from a slots parlor. The city was guaranteed a slots parlor, and Murphy conditionally supports gambling in the city.

The vote to send the budget back was unanimous, including an "aye" from ICA Chairman William Lieberman.

Eighteen days later, the ICA unanimously approved a revised budget -- one which included $57 million in revenue from slot-machine taxes through 2009. The new budget sealed the deal, virtually ensuring that the city will be financially dependent on gambling by the end of the decade.

The ICA's actions raised an interesting question: Might one of the men who forced gambling money into the city budget both eventually oversee the tax revenue and own a piece of the slots action?

Even as Lieberman has worked long hours trying to hammer out a solution to Pittsburgh's perennial budget crisis, he's openly sought to invest in a slot-machine venue. He and Charles Zappala are looking for a slots investment opportunity, "likely in the Pittsburgh region, but possibly somewhere else," Lieberman says. They've talked with potential slots-parlor owners, including local parking-lot owner Merrill Stabile, who wants to build a slots parlor near the two North Shore stadiums, but haven't yet reached any deals.

City Council President Gene Ricciardi has alleged that Lieberman's ICA role and gambling aspirations could constitute a conflict of interest. Such a dual role could put Lieberman in a position to demand special city services, like extra police presence, for a slots parlor he'd partly own, Ricciardi says. Lieberman has responded that if he became a partner in a slots parlor, he would ask the state Ethics Commission to decide whether he needed to step down from the ICA.

In August, House Majority Leader Sam Smith asked the Ethics Commission to rule pre-emptively on Lieberman's potential dual role. On Sept. 21, the commission punted, saying that it couldn't decide, because it has no power to interpret the new Gaming Act.

The Gaming Act says that a "public official" can't hold anything more than an inconsequential stake in a gambling enterprise. State appointees are included in that ban, unless they're just members of "advisory boards" that can't spend significant tax dollars and lack real powers. The Intergovernmental Cooperation Authority spends hundreds of thousands of dollars on consultants, and has the power to veto city budgets and intercept tax dollars. "If you are on the [ICA] board, you wouldn't be eligible for [a slots license]," says Sen. Pippy, a Republican.

The governor's general counsel, Leslie Miller, has rendered a verbal opinion on the issue, says Rendell spokesman Chuck Ardo. "The general counsel's opinion states clearly that Mr. Lieberman should consult with the ICA's solicitor to assess his own ethical responsibilities under Pennsylvania law," says Ardo. "The general counsel also suggests that he might seek private counsel as well."

Upon being read that quote, Lieberman interprets it as an OK to serve both as the city's chief overseer and, potentially, one of its slots owners. He says he's checked with the ICA's solicitor -- whom he helped choose -- and a private lawyer. "ICA counsel and private counsel," he says, "have said the same thing the governor's office has: that they have no problem with it."

-- Rich Lord





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