What's Your Communications Compliance Policy?

Article originally appeared in Gaming Management on 11/15/08

Compliance plans and advertising seem like strange bedfellows. After all, what advertisements can possibly cause gaming regulatory compliance issues? One Las Vegas casino found out when it attracted the unwanted attention of gaming regulators when it launched a risqué series of billboards. One showed cards, poker chips and a couple in a suggestive pose with the tagline “There’s always a temptation to cheat.” Another declared that the casino supported “your Monday night rights,” which included “large quantities of prescription stimulants” and “having wives in two states” with a message stating, “Tell your wives you are going; if they are hot, bring them along.”

Nevada’s gaming regulators decided that illicit sex, illegal drugs and casino cheating were over the top even by Vegas standards and brought a complaint alleging a violation of Nevada Gaming Regulation 5.011(4) and sanctioned the casino for a “failure to conduct advertising and public relations activities in accordance with decency, dignity, good taste, honesty and inoffensiveness…”The casino ultimately agreed to pay a fine of $300,000 and implement new compliance procedures to review future advertisements.

While the Nevada Gaming Commission ultimately decided to reject two of the three counts in the final decision because of First Amendment questions, such conflicts can strain relationships with the regulators and the community.

Other advertising issues do not invoke Constitutional considerations. Even the ardent civil rights lawyer will acknowledge that the Constitution offers no protection against false or misleading advertisements. Both gaming regulatory laws and general consumer protection laws provide sanctions, both criminal and civil, for such advertisements. The same Nevada regulation cited above prohibits “advertising that is false or materially misleading.” Meanwhile, California has a statute that criminalizes advertising that concerns“any circumstance or matter of fact connected with the proposed performance or disposition thereof, which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading.” Frequent occurrences that raise the interest of regulators are quantifiable claims that are simply untrue. For example, a casino cannot advertise that it has the loosest slot machines in town unless they can show by some reasonable standard their slot machines have the highest average return. A casino also can get into trouble not by what it says in advertisements but by what it does not say. Some states, like New Jersey, require all casino advertisements to provide information regarding compulsive gambling programs including providing an 800 number. Finally, a casino can violate gaming regulations and other laws by sending casino advertisements to prohibited groups. Well-known Michigan gaming attorney Robert Stocker issued this warning to the Michigan gaming industry: “On August 10, 2006, the Michigan Attorney General filed criminal and civil charges against two senders of unsolicited messages to minors whose e-mail addresses were registered under the Michigan Child  Protection Registry Act. The Michigan Act declares that it is the Legislature’s intent to “provide safeguards to prevent certain messages regarding ... gambling ...from reaching minor children of this state. ”In reality, the Michigan Act exposes the gaming industry to criminal and civil prosecution for a wide variety of lawful commercial business activities. Minors are not the only group protected from casino advertisements. In New Jersey, for example, problem gamblers can request to be placed on the list of self-excluded persons. Once on these lists, casinos should not send these individuals any form of casino-related advertising or offer the many casino-related benefits. Advertising is not the only form of communications that can lead to regulatory problems. Casino companies have faced stiff fines for public relations that have gone astray. In one recent case, the Nevada Gaming Commission fined a manufacturer for issuing a press release that claimed it entered into a contract with another party when it had only entered into a letter of intent (that was never consummated). False or misleading financial press releases pose an additional risk of civil lawsuits and sizable money damages. For example, in 2006TimeWarner settled a case with the Pennsylvania Public School Employees’ Retirement System and others for $23million for false and misleading statements concerning the business, financial results and operating condition of Time Warner. Compliance committees are not well equipped to review every press release or advertisement for proper content or to scrutinize the mailing lists for such advertisements. A compliance plan, however, can recognize the potential problems that can occur with both advertisements and public relations. The plan should inform company employees of their obligations regarding appropriate advertising, describing and warning personnel of the dangers of false or misleading advertisements or press releases. The plan should provide systematic policies for review of all advertisements and press releases by the respective company personnel and outside advisers. A company may require the chief financial officer and corporate counsel to review all press releases before they are issued. The compliance officer also may review advertisements before publication. Policies can be implemented to require that email lists be regularly compared to the rolls of states with Child Protection Registry laws to ensure that advertisements do not inadvertently reach listed minors. Likewise, all advertisement lists can be checked against any state lists of excluded persons and purged appropriately to avoid regulatory violations.

Click here to view a PDF of the original article