Deadbeat Gamblers Stiff Casinos

March 22, 2011 -- Gambler Jerome Powers is attempting what sounds like an ethnic impossibility: welshing on an Indian debt.

One night about two years ago, Powers lost $1.2 million playing blackjack at Mohegan Sun, a Connecticut casino owned by the Pequot Indians. The money he lost was in the form of a marker — a credit extended by the casino, according to court papers.

Though Powers wrote a series of checks that same night to cover the amount, none were honored by his bank. He later stopped payment on them, the documents state.

The Mohegans, understandably, were peeved. Though they have used Connecticut's courts to try to get their money back, Powers has resisted their efforts, advancing a variety of arguments in legal papers as to why he shouldn't have to repay.

First, he said he'd welshed on principle, claiming in court papers that the marker given him amounted to an illegal contract, since the State of Connecticut forbids both the extension of credit for gambling and gambling itself. He further argued that the State of Connecticut had no legal authority in the case, since the Pequots' reservation, like other Indian reservations, enjoys the status of a sovereign nation.

A judge in New London rejected these views and in January ruled that the Pequots could attach Powers' assets to the tune of $1.2 million. Powers has appealed the ruling.

At no time has he asserted that he can't pay. In fact, he seems, by every outward appearance, to be swimming in dough.

He is chief executive officer and co-chairman of Plum TV, a media company launched in 2002 that, according to its website, "is the first and only 24-hour lifestyle network" exclusively to cover rich people and their doings, in such locales as Aspen, the Hamptons, Martha's Vineyard, Miami and Sun Valley.

According to a November story in the Miami Herald, Powers in late 2007 sold a magazine he had founded. Purchase price: $33 million. Earlier that same year he told the New York Post he had entered into a multi-year $20 million magazine deal with Donald Trump.

Whatever the reason for Powers' refusal to pay the Pequots, he is only one of a growing number of gamblers resorting to inventive legal means to repudiate their debts.

Gamblers' Debts

A California man -- a problem gambler -- has been slugging it out in court with a Las Vegas casino that has been trying to collect on his unpaid $500,000 marker. This gambler's luck had been so bad--and his losses so great--that his attorney had intervened on his behalf, telling the casino in writing to cancel all lines of credit previously established and not to issue any new ones. Nonetheless, when the gambler returned to Vegas, the casino provided him with a new $500,000 marker, which he went on to lose.

His lawyer's defense against the casino is that they knew they were abetting a problem gambler. The credit agreement they had him sign said in part that the casino supported responsible gambling and would on request cancel or reduce a problem gambler's line of credit. This they failed to do, his lawyer contends.

A gambler at an Indiana casino owing $125,000 asserted that though the casino knew she had a gambling problem, it seduced her back to the tables by offering her free food, free lodging and free limo rides. When the casino sued to collect, she counter-sued. The case has yet to be resolved.

No one knows for sure how big a problem welshing has become for the gaming industry nationwide.

The American Gaming Association doesn't keep statistics on it. Nor does the biggest state gaming control board in the country, Nevada's. "I don't think there's been a material change," says Frank Streshley, chief of the board's tax license division. "The casinos obviously have very strict credit policies. They've tightened up their standards as the economy has weakened."

That's not the view shared by Professor I. Nelson Rose, a leading expert on gambling law, author, consultant and frequent expert witness and for governments and industry. Look at Atlantic City's casinos, says Rose. These, unlike their Nevada cousins, publicly report revenue and bad debt per casino (take a look HERE). While almost all reported a decrease in revenue for 2009 and 2010, bad debts at many were up.