With gambling legislation on pause in Indiana, some push for reform

The leaders of the Statehouse’s dual Republican supermajorities have been clear: After recent gambling industry scandals involving former lawmakers, next year’s legislative session will include no expansion.

That’s prompted a divided response over what to do instead.

It’s a chance for reform, some government transparency and ethics advocates say. But others — industry leaders, experts and regulators — have warned against knee-jerk reactions.

The gambling industry and advocates have for several years wanted to legalize i-gaming, but that timeline may now be years longer than previously expected.

Former Rep. Sean Eberhart, a Republican from Shelbyville, pleaded guilty on Tuesday to a federal felony charge: conspiracy to commit honest services fraud.

Federal prosecutors have accused him of pushing Spectacle Entertainment’s desire to relocate two casinos through a 2019 bill, in exchange for a job paying upwards of $350,000 and an equity stake. Eberhart retired in 2022 after 16 years in office, to fanfare.

And last year, a federal judge sentenced former Sen. Brent Waltz and former Rep. John Keeler — a casino executive — to prison for election finance schemes involving Spectacle predecessor New Centaur. Waltz has since filed to overturn his sentence, reports Fox59.

There are additional records of other dubious industry-lawmaker interactions, according to a list from the Indianapolis Star.

GOP Senate President Pro Tem Rodric Bray said Eberhart’s case “taints the Statehouse” and harms public confidence in lawmakers’ integrity at a legislative preview this month. He said there’d be no expansion during the upcoming session, and indicated the case could limit action for several more sessions.

Is it time for damage control?

Reforms needed, transparency and ethics advocates say

The recent scandals show Indiana’s lobbying and campaign finance regulatory processes are a “complete failure,” said Julia Vaughn, leader of government watchdog Common Cause Indiana.

“No state agency even recognized what was going on. … Thank goodness that the (Federal Bureau of Investigation) was paying attention,” Vaughn said — although she said Indiana Election Division and Indiana Lobby Registration Commission (ILRC) staff were “doing the best they can under the very bad structure” in place.

She called those two regulators “giant filing cabinets” because they’re under-resourced. IED has nine employees and ILRC has just three, according to the state’s online directory.

The Indiana Gaming Commission, which directly regulates the industry, has more than 200 employees. But its duties extend beyond the 13 casinos.

Vaughn also noted that the agencies are led by political appointees rather than independently.

She and former U.S. Rep. Jill Long Thompson, a Democrat from Indiana, observed gaps in the laws that govern lawmakers and lobbyists.

Thompson, who left office in 2015 and has since written a book on ethics in government, recalled how U.S. House members and senior staff must inform the chamber’s ethics committee about new jobs within three business days of starting negotiations or accepting an offer.

There’s no such public notice required when Hoosier lawmakers change employment, such as former Sen. Jon Ford’s — who often carried gambling legislation — sudden departure to coal advocate group Reliable Energy, headed by a prominent casino leader.

Thompson also remembered strict federal limits on lobbyist gifts — something Vaughn also suggested.

In contrast, Indiana puts forth no value limit and permits lobbyists to pay for meals, entertainment and other gifts. Lobbyists must report their activities just twice annually; the second period encompasses the legislative session but is due May 31, well after its conclusion.

Gift and purchase reports are due within 15 business days, according to the ILRC, but filings often don’t attribute spending to specific lawmakers or purposes. Lobbyists spent $1 million on lawmakers over the sixth-month period that includes 2023’s legislative session, according to a State Affairs analysis, but three-quarters of it will “remain secret.”

Additionally, lawmakers’ own statements of economic interest may be incomplete or inaccurate, Vaughn said. The forms ask for information on employers, stocks and more.

In an analysis of all 150 disclosures, the Capital Chronicle found that it’s largely an honor system, with little review except by journalists and watchdog groups. And although some lawmakers choose to list clients, they’re not required to do so unless a client is a significant income source.

“We need some sort of (review) process. I hate to be the person who says, ‘I hope this scandal blows up into the biggest thing ever,’ but that’s what spurs reform,” Vaughn said.

Hold your horses, warn industry experts

The current system works, said Casino Association President and CEO Matt Bell: Eberhart and others were caught.

“The regulatory and statutory edifice that’s in place today met the challenges that it was faced with,” said Bell, who also heads Reliable Energy.

Bell said he respected Republican leaders’ decision, but called it “disappointing for the industry” nevertheless.

He noted that the scandals all involved one company — Spectacle — or its predecessor, and that no current casino operators have faced accusations of illegal or unethical activities. He called the scandals “an aberration” and “not reflective of the industry at large.”

While the association isn’t seeking out new ethics legislation, he said it’d “keep an open mind.”

Ed Feigenbaum, a longtime journalist and industry expert for Hannah News Service, cautioned against a hasty response for a different reason.

“Typically, when you see legislation enacted in response to some kind of ethics problem, it’s very specific, very narrowly tailored and it’s not comprehensive in the way that it probably ought to be,” Feigenbaum said. “You want to look at campaign finance laws. You want to look at ethics laws, you want to look at lobbying laws, and potentially even (public records access) laws as well.”

Ideally, legislators would take that comprehensive look in the absence of a scandal, he added. The system should ensure that lawmakers’ financial interests are publicly available, give prosecutors suitable legal tools and offer penalties steep enough to make would-be lawbreakers think twice, he said.

But Hoosiers will always rely on lawmakers to behave morally, Feigenbaum said.

“Just because you have strong laws does not mean that people will not violate those laws. And even if you don’t have any kinds of laws, (some lawmakers could) adhere to principles that would go even beyond what legislation would be on the books,” he said. “You’re ultimately dependent upon the people that you elect to represent you rather than the laws. The laws are generally just a moral minimum.”

The Indiana Gaming Commission, meanwhile, isn’t requesting any legislation and has “no insight” into other possible gambling bills, according to Deputy Director Jenny Reske.

In written responses, Reske said the agency regularly reviews its rules but isn’t planning any changes for the near future. The agency in 2021 strengthened integrity rules for shareholders, prompting legal action from multiple Spectacle investors that a judge later dismissed, reports the Times of Northwest Indiana.

But, according to Reske, the agency “will continue to examine emerging issues and make rule updates as necessary.”

And it’ll keep its focus on “ensuring the public’s confidence is maintained through the strict regulation of gaming,” she said, including taking “appropriate and decisive action when faced with actors who do not meet the high standards of integrity established in statute.”

What’s next

For former Rep. Charlie Brown, a Democrat from Gary, the recent scandals are a fumble for an industry that’s brought sorely needed revenue to struggling local governments and to the state.

“It’s regrettable that it makes it appear as though those that were pushing, and eager to get gaming in here, had some morality issues. And I don’t think that was widespread,” he said. “But I assure you that our intent in Gary, Indiana, was that we needed revenue sources. That was the driver for us pushing so hard.”

Brown, who served from 1982 to 2018, was among the biggest advocates of bringing gambling to Indiana. Hoosier voters ditched the constitutional ban on a lottery in 1988, opening the door to further expansions.

But getting there was difficult, according to Brown.

“I hate the fact that you’ve now got a black eye on this whole issue of gaming in Indiana,” he said. “Indiana is notorious for being a very conservative state. So it took a lot of arm-twisting to get (key lawmakers) to finally say, ‘Let’s take a look.’”

Current lawmakers have kept quiet.

Manning, who chairs the House committee that typically handles gambling legislation, didn’t return multiple requests for comment. Neither did his predecessor, Auburn Republican Ben Smaltz.

Bell, the casino association leader, said the industry has work to do, particularly as competition from neighboring states grows.

“If now’s not the time to move forward, we will work to ensure that that we can do so as soon as possible,” he said, “by ensuring that we rebuild any trust that needs to be rebuilt with the Legislature and that we present ourselves as the great world-class businesses that we are.”

The industry plans to highlight its tax, employment and development contributions to Hoosier communities, plus its commitment to “upholding the highest standards of ethics and integrity,” according to Bell.

“This is not a situation that anyone in the gaming industry ever hoped to encounter,” he said. “… We’re going to do our best to get through it.”

The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.