Casino Lawyer, Fall 2010

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Gaming Regulator of the Year – Americas: Jack Ketterer
By John Wilson

It is once again time for the announcement of IMGL’s Gaming Regulators of the Year. The selection of process for each Gaming Regulator of the Year is extremely difficult as there are many hard-working, dedicated individuals who are worthy of this distinction. The recipients must have made great contributions to the gaming industry with noteworthy achievements. They must provide a stable regulatory environment within the jurisdiction. They need high integrity and to have demonstrated service in the community as well as in their overall body of work in their career. It’s a tough decision, but after all of the deliberation, IMGL selected as the 2010 Gaming Regulator of the Year – Americas, Jack P. Ketterer, administrator of the Iowa Racing & Gaming Commission.

Early Years
Ketterer was born and raised in Nebraska and attended Creighton University in Omaha, later attending the Arizona State University College of Law. Following graduation, Ketterer established a private practice and subsequently worked for the Nebraska Racing Commission as director of security and investigations from 1974 to 1983.

The pari-mutuel industry in Iowa started after the Pari-Mutuel Act was passed in the spring of 1983. Ketterer was hired as the first director of racing in December. “We amended the legislation and adopted rules for racing horses and greyhounds in the state and developed a process for reviewing almost a dozen applicants for racetracks,” says Ketterer, who was proving his talent as a pioneer in these new industries with the ability to not only operate and manage the commission staff, but to build it from the ground up with integrity.

Following his tenure in Iowa, he worked in the private sector with the Phoenix Greyhound Park from 1989 until mid-1993. But it was once again time to return to Iowa to face new challenges and develop a new industry in the state. The Excursion Gambling Boat Act had been passed, which allowed limited-loss wagering on riverboats. About a year later, further legislation was enacted that removed the wager and loss limits and allowed racetracks to have slot machines. “It was a very comprehensive bill, and it had to pass county referenda for approval,” Ketterer recalls. “I was involved in implementing the legislation for the commission. We went through several application processes because there was renewed interest in riverboat gambling in Iowa when wager and loss limits were removed.”

The expansion to casino gaming within the state provided unique challenges and opportunities. An extensive background in racing proved valuable, and Ketterer was the right individual to bring the racing and gaming sides together. Three out of four racetracks passed a county referendum and became operating casinos. “It seems like when we just about have it right, then there is legislation or new applications and we get to start again,” Ketterer says. “But I think that right now our industry is pretty mature, and we’ve had about 15 years of unrestricted casino gambling and pari-mutuel wagering with casino gambling at the tracks.”

In 2004, the excursion requirement was removed, opening up the central portion of Iowa to gaming. There will soon be 18 licensed casinos within the state, three of which have racetracks—one horse and two greyhound.

“When I returned to Iowa, things had changed through legislation over a period of time,” Ketterer says. “We had the removal of wager and loss limits, removal of excursion requirements and the expansion of the number of facilities from three to 15 over the course of the last 15 years. Assembling a staff provided many challenges. Through all phases of the process, the background checks and post licensing, regulation focused on fairness and consistency, leading to stability in the industry. The policies and process of the commission reduced the influence of politics through the stable environment that was created. This process has worked through three different governors.”

Iowa was about the only state—definitely the largest one—that had both pari-mutuel racing and casino gaming. In most states where both exist today, there is a separate commission for each. Iowa racing includes three breeds: thoroughbred, quarter horse and standard bred or harness horses, as well as greyhound racing. Each industry is heavily regulated, with regulators working hard to protect the bettor so that the races are conducted in an honest fashion. There are stewards to officiate the racing and veterinarians to ensure that the welfare of the animals comes first. The animal welfare oversight includes a drug-testing program through the Iowa State University veterinary diagnostics lab, which is reportedly one of the leaders in the racing chemistry industry. Iowa regulates quite diverse industries and has never failed to rise to the occasion.

“Along the way, the challenges included having the application processes for commission members who meet up to 10 times a year and to get all of the information for them to assist them in making informed decisions on granting these licenses,” Ketterer says. In addition to the licensing issue, the regulation side needs appropriate staff and resources. The Iowa Racing and Gaming Commission has a staff of roughly 70 people, comprising of a dozen in the main office in Des Moines with the rest in the field. Depending upon the size of the location, there may be as few as two commission personnel to as many as 12 at a racetrack casino where both sides of the industry are regulated.

“We do our due diligence when someone applies for a license, and we get thorough background investigations done through our state’s Division of Criminal Investigation,” Ketterer explains. “If our commission is convinced that the applicant is worthy of a license, then we want to make sure that the licensee is aware of the laws and rules and what is expected.”

Hands-On/Hands-Off Approach
The commission takes a hands-on/hands-off approach to its licensees. The philosophy is such that prevention and a proactive approach to the operations are encouraged. The licensees are aware of their obligations and responsibilities, based upon open communications and a full-time presence. But enforcement, though a necessary and requisite part of the industry, is not the primary objective.

Under the direction of Ketterer, preventing the problems before they occur is the first order of business. “Throughout the industry I sometimes see fines that are somewhat punitive, given to set an example. I don’t necessarily agree with that approach. I believe that licensees should be sanctioned when there are violations of internal controls and similar issues, and if a problem persists, then the fines can escalate. Licensees are not excited about first of all paying anything or secondly being cited publicly at a commission meeting for shortcomings or for something they did. Licensees need to put controls in place to show that such a violation is not likely to happen again, and that’s the goal. We are looking for a deterrent.”

The Community Best
Throughout the entire process, the people of Iowa have been under constant consideration. “We feel that the people of Iowa really don’t want a free enterprise model like Nevada,” Ketterer explains. “We want to provide the most economic benefit that we can. The commission has limited the licenses that it grants to ensure the most benefit for the communities and people. We require that license applicants bring something to the table beyond a casino: a hotel, restaurant, a conference center, and other things that will employ more people in Iowa. We want to create jobs for Iowans and create economic development within the communities. I think if we had several licenses issued in some of the smaller locations then we wouldn’t see that kind of investment in those facilities. When we have more than one application for a city or for a general region or area of the state, we have often not selected all of them even if they did pass the necessary backgrounds. We take the one that we think will benefit the state most in terms of the investment, number of jobs and the economic development that will be created.”

Once an applicant is granted a license, the work has just begun. The commission works with the licensees so that they understand exactly what is expected of them in terms of laws and regulations. But then they are given the freedom to run their daily operations. Should a violation occur, Ketterer’s goal is to treat them fairly and consistently so that the industry and the licensees understand why there is a gaming commission in place and what they are required to do. Fair and consistent treatment makes sanctions easier to accept and enables licensees to continue operating in the state and the environment.

“To be fair and consistent all the way through the licensing process creates stability in the gaming environment in the state, and gaming becomes less of a political issue,” Ketterer says. “Regulators work in a political environment, but if we work diligently, fairly and consistently, these efforts create a stable environment where there are fewer reasons for politics to get in the way. “

Theory of Regulation
The commission in Iowa deals with two industries and has always felt like a partner to each industry’s licensees. Each has its own unique requirements, such as animal welfare, and each presents its own challenges. Although both industries are heavily regulated, there is a human side to each. “I have always felt that we are a partner with the licensees and that the most important task for a regulator is to listen. In this industry, whether it’s in pari-mutuel or gaming, there are a lot of opinions. Almost everyone has one and not many are alike. Sometimes people just want an opportunity to be heard so it is good to listen to them and to explain why their opinion is shared by some and by some it isn’t.” Ultimately the commission and the legislature are responsible for final decisions. “We’re pretty much champions of open records and open meetings laws. Just about every piece of information except the background investigations from the Division of Criminal Investigation and certain exceptions for personnel records is open to the public and open to freedom of information requests. We endeavor to give persons who are requesting information good customer service. We also remind licensees that information is public.”

On the staff level, the commission members deal with the participants and employees at each facility. At times there may be employee violations, and these are generally dealt with at the staff-level. If an employee does not follow procedures with keys, for example, then he may be subject to a fine or other actions. The five commission members would only get involved in more serious issues. The staff at each facility constantly assures that the regulations are being followed and that there is total compliance. Employees want the facilities to do well and be popular with their customers. Gaming regulation is a difficult job of balancing a hands-off approach to the business with a regulatory overseeing that requires hands-on participation.

The Iowa Racing and Gaming Commission has yet to suspend a license, and there have only been a few cases where large fines were issued. It is through strict monitoring and enforcement of the regulations that these problems can be avoided in the first place, ensuring that the credibility and public opinion of the racing and gaming industries are preserved.

Ketterer has executed due diligence, hard work and dedication to regulating not just the gaming industry, but also the racing industry. He has a long and respected career and has contributed to several panels and conferences in the gaming industry, including G2E. He has been a speaker and moderator for the pari-mutuel racing industry each December at the University of Tucson in Arizona. The Arizona program is noted for producing racing officials and industry leaders over its existence since the mid-‘70s, the same time Ketterer began his career.

Iowa has been a model for both gaming and racing, and Ketterer has pioneered both industries in the state. Many other jurisdictions have visited Iowa when they began to incorporate casino-style gaming within their racetracks to get advice. “We were always happy to benefit the industry and to give information on how to incorporate casino gambling, and on what types of rules, regulations and compliance issues arose during our past. This only helps our industry and hurts the bad guys,” he says.

The Iowa Racing and Gaming Commission embodies Ketterer’s philosophy, his values and his beliefs. He has always worked beyond the status quo in areas of regulation and legislation, and at all times keeping the bigger picture in view. His concerns for each community, the citizens of Iowa in general and even beyond the industries of racing and gaming, have been apparent. From creating jobs to ensuring the welfare of animals, Jack Ketterer is certainly worthy of the distinction of being 2010’s Gaming Regulator of the Year – Americas.

Congratulations, Jack, you have earned it.

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