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Be Aware of Political Contribution Restrictions

25 May 2005

With the construction of three new permanent casinos in the works, at the same time as an upcoming Detroit mayoral election, it is vitally important for any supplier involved in the industry to be aware of the Michigan political contribution restrictions. All of the Detroit casino operators and suppliers, as well as certain employees of these companies, are strictly prohibited from making state or local political contributions. A violation of this prohibition is grounds for the Michigan Gaming Control Board to revoke a casino suppliers license which will terminate the privilege of a casino supplier (gaming and non-gaming) to provide goods or services to a casino. Worse yet is the fact that a violation of this prohibition is a felony, punishable by imprisonment for 10 years and/or a fine of $100,000.

For those who have not done business with the casinos before, this provision usually comes as a surprise. Many suppliers have run into problems, and the Michigan Gaming Control Board has struggled with the issue over time. In cases where suppliers have been honest about the contributions made by their key employees, the Board has fairly recently established a precedent allowing withdrawal of a license application followed by reapplication. Thus, if you find yourself in a situation where one of your employees has inadvertently made a political contribution, it is important to be honest about it and to seek counsel on how to rectify the situation to assure licensing and to assure that the criminal penalties will not apply.

The best approach, however, is prevention. Thus, it is key for any business that hopes to do business in the casino industry to learn the rules and to educate its employees about the basics. Several questions and answers on the political contribution restrictions as they apply to Detroit casino operators, suppliers and certain employees follow.

Question: Who is prohibited from making a contribution?

Answer: The Michigan Gaming Control and Revenue Act, as amended, prohibits the following persons from making contributions to a state or local elective office holder, candidate, candidate committee, political party committee, independent committee (as defined by the Michigan Campaign Finance Act), or committee organized by a state legislative caucus:

1) a person who holds a casino license issued by the Michigan Gaming Control Board;

2) a person who holds a supplier license issued by the Michigan Gaming Control Board;

3) a person who holds 1% interest in either a supplier or operators license;

4) a person who holds a 1% interest in the buildings, facilities or rooms connected to a casino, or a 1% interest in any other facility in the city that is under the control of a casino licensee or affiliated company ("casino enterprise");

5) an officer or managerial employee of a licensee or casino enterprise;

6) an officer of any entity that holds a 1% interest in a licensee or casino enterprise; or

7) an independent committee of a licensee or casino enterprise.

A person subject to this prohibition is also prohibited from making contributions through a legal entity established, directed, or controlled by that person.

Question: How long does the contribution prohibition continue?

Answer: Casino Licensees: Political contributions may not be made for a date one year prior to applying to the Michigan Gaming Control Board for a casino license, and continuing until three years after the license expires. The prohibited period includes all time between these dates, including the period when the Board is still considering a license application.

Supplier Licensees - Political contributions may not be made from the date an application is submitted to the Michigan Gaming Control Board for a supplier license, and continuing until three years after the license expires.

Question: What is the punishment for violating the political contribution prohibition?

Answer: A person who makes a prohibited contribution is guilty of a felony, punishable by imprisonment for 10 years and/or a fine of not more than $100,000.

Question: Where can a political committee or candidate gain a list of entities prohibited from making a political contribution?

Answer: Casino Licensees - The Casino Interest Registration Act requires that a person holding a casino interest must file a registration form with the Department of State within five days after obtaining a casino interest. Twice a year, the Department of State must publish a list of the names of persons who hold casino interests. This list must be given wide public dissemination.

Suppliers Licensees - The Department of State is not required to publish a comprehensive list of suppliers prohibited from giving political contributions. However, for licensing reasons the Michigan Gaming Control Board publishes a list of all companies registered as vendors or suppliers to the Detroit casinos. Note, however, that the Board's list does not constitute a comprehensive list of companies and persons prohibited from giving political contributions.

Question: Who is prohibited from accepting a political contribution from a casino licensee or supplier licensee?

Answer: The Michigan Campaign Finance Act, as amended, prohibits a committee from knowingly maintaining the receipt of a contribution that is prohibited under the Michigan Gaming Control and Revenue Act, as amended. A committee knowingly maintains the receipt of a contribution only if it fails to return the contribution within 30 business days after receiving notice from the Department of State that the committee has received a prohibited contribution.

Question: To whom can a Detroit Casino Licensee and Supplier Licensee legally give a political contribution?

Answer: A Casino Licensee and Supplier Licensee can contribute to a federal committee or federal candidate, as well as a State of Michigan Ballot Committee. However, it is important to check with any federal candidate or federal committee to verify that absolutely no part of your contribution will be used or donated to a State of Michigan candidate or committee (other than a State of Michigan Ballot Committee) prohibited from receiving a contribution from you.

Question: Can a Casino Licensee or Supplier Licensee volunteer his/her time working for a candidate or committee to which the Michigan Gaming Control and Revenue Act prohibits political contributions?

Answer: The Michigan Gaming Control and Revenue Act does not prohibit a Casino Licensee or Supplier Licensee from volunteering time to work on any committee for any local, state or federal office.

More information on this topic can be found at the Michigan Gaming Control Board's website, michigan.gov/mgcb, and at michigangaming.com.

When it comes to doing business in the gaming industry, education and knowledge about the unique regulatory requirements are essential to survival.

David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com
David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com