April 19, 2001 – The fate of Internet gambling in the territory was nowhere near to being resolved after more than eight hours of testimony Wednesday before the Senate Economic Development, Agriculture and Consumer Protection Committee on a bill before the 24th Legislature.
The measure would grant an exclusive master franchise to develop online gaming in the territory to a company formed by St. Thomas businessmen Nick Pourzal, Michael Bornn and Tom Colameco.
Pourzal told the senators that the territory "could be the first U.S. jurisdiction to take center stage as the world's foremost gaming site."
Internet gaming, with its high-tech spinoffs, has the potential to bring untold riches to the territory, analysts say. However, witnesses expressing concern about the bill said Wednesday, introducing it without proper regulation could create an international black eye for the Virgin Islands. The key, they said, is stringent regulatory control.
Committee chair Adelbert Bryan said he is skeptical of the proposal before his panel because of "a lot of contradictions in its present form." The bill's sponsors, Sens. Almando "Rocky" Liburd and Vargrave Richards, say the measure could bring much additional revenue to the territory and have it all earmarked for a program to provide free Internet access to all V.I. public schools.
At present, there is no Internet gambling under the U.S. flag and that, as territorial Casino Control Commission chair Eileen Peterson put it, has "all eyes on what the V.I. will do."
The proponents are urging quick action on the measure. According to the sponsors, "jurisdictions like Nevada and New Jersey are rushing, even as we speak, to take the lead in the nation by establishing regulatory structures so that they will be poised to be the first U.S. jurisdiction to provide Internet gambling."
Congress has yet to pass legislation regulating Internet gambling, leaving the V.I. the option of creating its own law to take advantage of the highly lucrative industry. Last year, at a seminar on Internet gaming hosted by the Casino Control Commission, experts said online gambling had reached about $2.2 billion annually. By 2005, it is projected to reach $10 billion.
More than 55 nations, including Antigua, Belize, the Dominican Republic and Jamaica in the Caribbean region, now allowing Internet gaming. Controls in some of the jurisdictions have been widely criticized for their laxity.
Pros and cons of a master franchise
The 59-page bill before the 24th Legislature would give the entire gaming franchise for the territory to one master franchiser, V.I. Technological Initiative LLP, whose officers are Pourzal, Bornn and Colameco.
Pourzal and Colameco were longtime associates at the territory's largest hotel, Frenchman's Reef Beach Resort, where Pourzal was general manager and Colameco served as food and beverage director. The two were also partners in the onetime upscale Club Z nightclub in Contant. Bornn, an independent financial consultant, was Gov. Charles W. Turnbull's second nominee to serve as Tourism commissioner and held the post in an acting capacity until he and the governor clashed publicly and Turnbull withdrew Bornn's pending nomination from Senate consideration.
Former senator Leroy Arnold told the committee Wednesday that the bill creates a monopoly. He said he and other Crucians have formed the St. Croix Internet Gaming Group LLP, which wants to obtain a franchise. Giving one group a master franchise is "not fair and it is not right," he said.
Under questioning by senators, Pourzal said that a master franchise is necessary to market and develop the industry. "Another franchiser" would work to the detriment of the V.I., he said, because it would create a bidding war between them.
Casino commission concerns
Petersen and Solicitor General Fred Handleman expressed reservations about the bill's regulatory and legal aspects. Peterson said the casino commission does not support or oppose the bill but has myriad concerns:
– The bill might not withstand legislative scrutiny by the federal government because it gives regulatory duties to an independent body and provides for sharing the commission's regulatory duties with the master franchiser. This, Petersen said, is contrary to sound regulatory practices.
– It does not require investigation of the major officer of the master franchiser or provide any source of funding for such investigation, and it does not make licensing of the master franchiser mandatory.
– It does not provide for competitive bidding for the master franchise, thus raising the specter of special-interest legislation.
– It does not mandate licensing of Internet gaming suppliers.
– It exempts the parties from payment of all taxes other than those for gambling receipts.
– It does not require a surety bond to ensure performance of the master franchiser's statutory commitment to education.
Peterson also cited five federal statutes considered to be applicable in forbidding or restricting Internet gaming. "In light of these federal statutes, it is questionable whether the V.I. government can enact this legislation," she said. "Of course," she added, "the Legislature can become a pioneer by 'leaping where others under the American flag feared to trod.' The commission salutes you for your courage."
She had questions about the bill's provision for free Internet access for the schools. Would the school system be tied into the gaming network, she wondered, or would it be independent? Does the proposal include necessary hardware?
Where Peterson left off, Handleman took up. He testified that the territory has worked very hard over the past five years to develop itself as a reputable and respectable gambling jurisdiction. "Any imprudent legislation and lack of adequate regulation and enforcement over Internet gaming in the V.I. would affect the reputation of the territory throughout the international gambling community," he said.
Bernie Buckholder, president and CEO of Treasure Bay Gaming & Resorts Inc., which operates the Divi Casino in St. Croix, told the Senate committee he is all in favor of Internet gambling. However, he said, "This bill needs much more work." The casino commission has a "sterling reputation," he said, and he would not like to see that change.
Hope Gibson, a St. Croix telecommunications expert, urged the lawmakers to act quickly to take advantage of the high-tech spinoff business that she said could result after Internet gambling is in place. Gibson said the V.I. has the necessary band width, and the high-speed data-transfer ability the gambling industry would provide would attract online, "or dot-com," companies to the territory, where they could operate under the U.S. flag.
Around 3:30 p.m., when it was apparent that the bill needed reworking, co-sponsor Richards opted to table it until a May 7 hearing. Calling the measure a "work in progress," Liburd said all of the numerous concerns raised about it would be looked into. "Our goal is to have a bill that is workable," he said.
As witnesses and senators raised questions and objections to the bill, Bryan asked that they submit their comments or proposed amendments in writing for the committee to review them.
After the bill was tabled, the committee continued to hear testimony until 10 p.m. A video lottery, part of the Internet gaming bill, and a bill of Bryan's to regulate all V.I. charitable and commercial bingo games also were on Wednesday's agenda. The measures never made it to the floor and are to be considered at the May 7 hearing.
Senators attending the hearing in addition to Bryan and Liburd were committee members Richards, Donald "Ducks" Cole, Celestino A. White Sr., Emmett Hansen II, Norman Jn. Baptiste and Roosevelt David, plus non-members Lorraine Berry, Carlton Dowe, David Jones and
Norma Pickard Samuel.
