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Ready for net gains - Law firms see business bump amid push toward online gaming

25 Apr 2012

by Chris Sieroty and Howard Stutz

LAS VEGAS, Nevada -- Ask any gaming attorney in Las Vegas if they think Congress will pass a bill legalizing online poker anytime soon, and the answer you'll get is no.

Despite the federal gridlock, law firms in Southern Nevada have seen a modest increase in Net gambling-related business. But it's business that's been generated from other states, countries and online companies looking to legalize gambling and needing regulatory advice.

Most of the discussion recently has focused on Nevada's new rules that allow companies in the state to apply for licenses to operate poker websites. The move poises Nevada to capitalize as more states approve Internet gaming or Congress reverses its ban.

The Nevada regulations allow companies to operate Internet poker sites in the state, with some sites expected to be operating by the end of the year.

Frank Schreck, who has been practicing gaming law for 40 years and oversees the practice for Brownstein Hyatt Farber Schreck, said Nevada was ahead of other states in adopting regulations and technical standards for approving online gaming, both intrastate and interstate.

Current Nevada licensees and foreign online gaming companies are rushing to file online gaming applications. Beneficial Holdings Inc. and slot machine manufacturer WMS Industries are just two of the 27 companies who have applied for an interactive gaming license in Nevada.

"We currently represent a number of the largest European online gaming companies, which has forced us to develop an expertise in a new area of gaming law," Schreck said. "My firm has (been) and (continues to be) involved in the negotiation, drafting and consummation of complicated joint venture agreements between major Nevada gaming companies and foreign online gaming companies whereby the foreign online gaming company provides its online gaming technology services to the Nevada licensee."

The growth of gaming in America comes as states and cities are looking for new revenue streams to help offset multimillion-dollar budget deficits. Nevada, which has an 8 percent tax rate, generated $10.7 billion in gaming revenues in 2011, while Pennsylvania, which has a 55 percent gaming tax rate, generated $3.3 billion last year.

Revenue from the U.S. online poker market is estimated at $5 billion.

"Internet gaming is a cash cow in Europe," said Jeffrey Silver, a shareholder in the Gordon Silver law firm. "They are looking at possibly benefiting from the demand for online poker domestically."

As other jurisdictions legalize gambling they look to Nevada, which has been seen as the "gold standard" for gaming regulation, he said.

"Nevada casinos operate in a transparent environment," Silver said. "There has been a tendency to look to Nevada (for legal) counsel" when other jurisdictions are considering legalizing gambling.

Bob Faiss of Lionel Sawyer & Collins said Internet gaming technology has been accelerating rapidly.

Gaming regulation, which had to evolve and keep pace as new jurisdictions opened and casinos expanded worldwide, needs to now stay current with technological advances.

"This is an area of law that has changed so much over the years," Faiss said.

Before gaming expanded nationwide, Nevada had laws that considered foreign gaming to be anywhere but Nevada. Today, foreign gaming has a different meaning with companies such as Las Vegas Sands Corp. and Wynn Resorts Ltd. deriving a large percentage of their revenues from Asia.

"Nevada gaming licensees operating in other markets are still subject to Nevada gaming regulations," Faiss said.

Today, 40 states have legalized gambling. Nevada, the largest jurisdiction, reported revenues exceeding $10.7 billion last year. New Jersey reported $3.3 billion in gaming revenues and Pennsylvania surpassed the $3 billion mark for the first time.

But the revenue growth hasn't been confined to the United States. Macau's gambling revenues were $33.5 billion, while Singapore reported $5.1 billion in 2011.

Michael Bonner, co-managing shareholder with Greenberg Traurig, said gaming is still an industry driven by Wall Street, with private equity firms playing a larger role. He cited Caesars Entertainment Corp., which is owned by a private equity firm that recently took the company public again.

Bonner said he's had discussions with a couple of private equity firms about opportunities in Nevada. He declined to identify the firms.

"Everybody has gotten interested in what Nevada has done with our online gaming," Bonner said. "A lot of these companies that have done well in Europe and elsewhere ... are now recognizing that at least they need to understand what is going on in Nevada."

Over the last few years, the legal industry, has endured similar struggles to the gaming industry, as the recession forced firms both large and small to reduce staffs, cut operating budgets and restructure their fees, even implementing flexible billing plans.

"We've been hit by the recession like everyone else has," said A.J. "Bud" Hicks of McDonald, Carano, Wilson LLP.

Hicks said when the economy slumped, gaming companies cut back on outside counsel.

During the recession, Bonner said, bankruptcy attorneys thrived for law firms, as real estate development and construction work was "dramatically impacted." He said that many of those firms were highly leveraged. And, when the bottom fell out, they sought bankruptcy protection or folded.

There was a similar trend in the gaming industry as highly leveraged companies found themselves reorganizing in bankruptcy court. They also found themselves with new investors, including Goldman Sachs, Deutsche Bank and J.P. Morgan Chase.

"It's still a pretty vibrant industry," Hicks said. "But the nature of my practice has changed as more and more banks and private equity firms have needed to be licensed because of their investments in Las Vegas."

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893. Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.


MICHAEL BONNER

Co-managing partner, Greenberg Traurig

Judging by his list of professional organizations and the clients he's represented over the years, Michael Bonner is a man who clearly enjoys what he's doing.

But his path to becoming a well-known gaming attorney was different than most.

"Many people start out as a deputy attorney general assigned to the gaming control boards," said Bonner, a co-managing partner at Greenberg Traurig LLP in Las Vegas. "My path was purely the law firm path."

Bonner describes himself as a corporate securities and finance lawyer.

"At my first law firm, we had as clients some of the large publicly traded gaming clients of that era," he said. "We did all their corporate and Securities and Exchange Commission work. My practice really started out as a purely corporate securities lawyer."

Among his original clients were Showboat Inc., Harrah's Entertainment and the Marnell family.

Bonner said he practices in Las Vegas because most of the corporate securities work is tied to the gaming industry.

"Many of the financing deals that we did, whether it was raising capital, or an IPO, debt or mergers, had to be approved by gaming regulators," he said. "It's evolved into 60 percent of my practice is traditional corporate finance and about 40 percent is gaming."

Bonner said clients call him for gaming advice and may not know of his background in corporate securities law. He said the traditional route of working for the attorney general's office was still the "dominant route" attorneys take to becoming gaming lawyers.

He said with the International Gaming Institute at the University of Nevada, Las Vegas and Boyd School of Law at UNLV, there is "a respect that exists today in academia for gaming." Bonner said with more jurisdictions embracing gaming, "I seen people migrate out of law school who see gaming as a potential discipline."

-- Chris Sieroty

TODD BICE

Co-founder, Pisanelli Bice

Todd Bice doesn't describe himself as a gaming attorney. Instead, he's spent years in Las Vegas focused primarily on commercial litigation.

But as the economy soured and casino companies found themselves facing or filing lawsuits, Bice found himself with a new and more high-profile client list.

"I've never considered myself a nuts and bolts gaming attorney," Bice said. "But as a result of the economy, I've found myself representing companies on gaming matters and regulatory matters that are related to gaming."

Among his more high-profile cases, Bice recently settled a case involving the Roadhouse Casino in Henderson. His client Station Casinos LLC dropped their lawsuit last month against Henderson after the city attorney's office reversed course and agreed with Station's position that city officials had unlawfully approved plans for the Roadhouse to operate without having to build a 200-room hotel.

Bice also represented MGM Resorts International in a shareholder lawsuit, and Wynn Resorts Ltd. He represents the gaming industry's political and lobbying arm, the Nevada Resort Association, on legislative, constitutional and other matters, and serves as outside counsel to the Las Vegas Convention and Visitors Authority.

"I started out as a young attorney working for Frank Schreck," Bice said. "He did high-end gaming and regulatory work. I got a very good understanding of gaming regulations from (him)."

Bice is a co-founder of Pisanelli Bice PLLC, a Las Vegas law firm focused primarily on commercial litigation. Bice said he realized early on that focusing on commercial litigation would lead to representing casino firms, with gaming being the largest industry in Nevada.

"In Southern Nevada, nine out of every 10 companies is a gaming company," Bice said.

Before forming his own firm, Bice was a shareholder in law firm Brownstein Hyatt Farber Schreck's national litigation group.

-- Chris Sieroty

BOB FAISS

Shareholder, Lionel Sawyer & Collins

Bob Faiss helped usher into place the system of how gaming is regulated in Nevada.

And Faiss, 77, is still helping keep Nevada's regulatory structure modern and intact.

As a shareholder in Lionel Sawyer & Collins, Faiss has practiced gaming law for some four decades and is head of the firm's gaming law division. He has represented some of gaming's largest companies.

A few years ago, the government of Singapore asked Faiss to lecture government officials who were tasked with creating Singapore's gaming regulatory structure on gaming law.

"They looked to Nevada for guidance in that area," Faiss said. "Even today, Nevada, as Gov. Brian Sandoval said, is still considered 'the gold standard' and leader in gaming regulation."

Faiss' background reads like a documentary of the gaming industry.

After a brief journalism career, Faiss became the assistant executive secretary of the Nevada Gaming Commission, serving from 1961 to 1963.

He became the executive assistant to Gov. Grant Sawyer from 1963 to 1967 and was instrumental as the Sawyer administration made numerous changes to how gaming was regulated in Nevada. Many of Sawyer's programs remain in effect.

After Sawyer's second term ended, Faiss spent a year as a White House staff assistant to President Lyndon Johnson. At the encouragement of Sawyer, he earned a law degree from American University in Washington, D.C., and returned to Nevada in 1973. At the time, Sawyer was pretty much the state's only gaming lawyer.

In 2009, his oral history book, "Gaming Regulation and Gaming Law in Nevada," was part of the 50th anniversary celebration of the Nevada Gaming Commission.

Faiss is largely considered responsible for the development of gaming law as a specialty. He is also involved with training the next wave of gaming attorneys.

-- Howard Stutz

FRANK SCHRECK

Partner, Brownstein Hyatt Farber and Schreck

Frank Schreck was a 27-year-old attorney when Gov. Mike O'Callaghan, his former high school teacher and mentor, appointed him to the Nevada Gaming Commission.

After four-and-a-half years on the part-time regulatory panel, Schreck decided to form a law practice with another one of his mentors, the late Shannon Bybee.

Some 40 years later, Schreck's role in shaping casino licensing has been well documented.

His client roster reads like a state history book. Schreck, 67, represented individuals such as Steve Wynn, Carl Icahn and Sumner Redstone; and companies such as Caesars Entertainment Corp., Wynn Resorts Ltd., MGM Resorts International, Penn National Gaming and Station Casinos.

He helped the late Station Casinos patriarch Frank Fertitta Jr. get his first gaming license in the late 1970s.

Schreck oversaw the licensing process in 18 different states when private equity groups Apollo Management and TPG acquired Harrah's (now Caesars) Entertainment for $17.1 billion.

Schreck helped push through changes in Nevada gaming law in 2009 that increased the maximum stake that a passive institutional investor could own in a publicly traded gaming company without going through licensing. The figure went from 15 percent to 25 percent.

Today, he is at the forefront of Nevada's entry into interactive gaming.

Schreck's firm is representing bwin.party Digitial Entertainment, a European online gaming company that operates PartyPoker and the World Poker Tour.

"This rush by online gaming companies to be licensed in Nevada has generated a tremendous amount of business for me and my firm," Schreck said. "Nevada is perceived as one the 'anointed' states for securing a gaming license which would provide a company wanting to be involved in interstate online gaming in the United States a competitive advantage."

-- Howard Stutz

MARK CLAYTON

Shareholder, Lionel Sawyer & Collins

Mark Clayton is no stranger to Nevada gaming regulators.

Before Clayton represented clients appearing before the Gaming Control Board and Nevada Gaming Commission, he spent three years as a member of the control board and had spent another three years as chief of the board's corporate securities division.

He also served as vice president and/or general counsel for Caesars Entertainment, Aladdin Gaming LLC and the Showboat Inc.

The gaming attorney now spends most of his time consulting or representing foreign countries, casinos operators and Internet companies, some of which are looking to be licensed in Nevada.

"My practice is becoming more international," Clayton said.

He said while Nevada was suffering from the recession, gambling took off in Asia and in Europe as Internet gaming has taken a foothold. Clayton said a number of foreign companies have a desire to be investigated and licensed in Nevada.

He said they want to go through the 12- to 18-month licensing process to position themselves for easier licensing should online poker be legalized state by state or federally in the United States.

He said companies feel that a Nevada gaming license takes "regulatory risk off the table."

Clayton joined Lionel Sawyer & Collins in 2009 as shareholder and member of its gaming and regulatory law department. He's also a member of the executive committee of the Gaming Law Section of the State Bar of Nevada and an adjunct professor for gaming law at the William S. Boyd School of Law at UNLV.

Clayton said the Boyd School of Law has done well teaching gaming law, but most attorneys working in the niche field today came to it through practicing corporate law or working for the state. He said the recession had forced gaming companies to develop their in-house legal departments.

-- Chris Sieroty

MICHAEL ALONSO

Partner, Lewis & Roca

Even though he grew up in Reno, Michael Alonso never really considered specializing in gaming law.

Alonso was headed toward a career in transactional law when a senior partner where he was working sent him to sit in on a Gaming Control Board hearing.

Alonso was asked after the meeting whether he enjoyed the subject material. When he responded affirmatively, the senior partner told him gaming was where he was now assigned.

"It was trial by fire. I learned along the way," Alonso said. "It's not something I would recommend."

Alonso built a respectable gaming practice for 20 years with the politically connected Jones Vargas law firm, which grew out of the 1998 merger between Vargas & Bartlett and Jones, Jones, Close & Brown.

In March Alonso joined the Reno office of Lewis and Roca, one of the first out-of-state law firms to enter the Nevada market more than a decade ago.

Alonso earned both his undergraduate and law degrees from the University of Southern California.

He brought to Lewis & Roca's gaming team experience in gaming and liquor licensing issues; land use; legislation and lobbying; and real estate transactions.

Alonso has also worked as a lobbyist in the Nevada Legislature and local governing bodies.

"His experience, integrity and reputation before the Nevada gaming regulators help fulfill our commitment to offer the highest quality legal services to gaming clients," attorney Anthony Cabot, who heads Lewis and Roca's gaming practice, said in a statement.

-- Howard Stutz

A.J. "BUD" HICKS

Partner, McDonald, Carano, Wilson

A.J. "Bud" Hicks wasn't looking for another job. But when Republican Gov. Brian Sandoval asked him to serve on the governor's planning committee for the 150th anniversary of Nevada's statehood, the amateur historian couldn't turn down the opportunity.

"I know the governor, like me, takes Nevada history very seriously," Hicks said.

Hicks is well known for his knowledge of Nevada's history, particularly in its primary industry, gaming. He also has a reputation as one of the state's premier gaming attorneys, having grown up in and worked in the industry for a number of years.

Before joining the McDonald, Carano, Wilson law firm in 1978, Hicks served as chief deputy in the Nevada attorney general's office and the Nevada Gaming Commission handling gaming-related cases.

"I was also a prosecutor in Washoe County in the gaming crime division, prosecuting several slot cheats in the early 1970s," he said.

Hicks joined the state attorney general's office in 1974 and was involved in a case against Frank "Lefty" Rosenthal, who was found in 1976 to be running four casinos, including the Stardust, without a Nevada gaming license.

Rosenthal was denied a license because of his reputation as an organized crime associate, particularly because of his childhood friendship with mobster Anthony Spilotro. Hicks said his experience working in the attorney general's office and with regulators was the best way to learn about the gaming business.

Today, he's based in Reno as a partner with the McDonald, Carano, Wilson law firm. Hicks splits is time between Reno and Las Vegas.

Hicks said he works with large financial institutions and private equity firms that are looking to restructure their investments in Las Vegas.

-- Chris Sieroty

ANTHONY CABOT

Partner, Lewis & Roca

Anthony Cabot was becoming proficient in Internet gaming law long before online gaming became a worldwide phenomena.

He must have been onto something.

Cabot said Internet gaming will have a changing impact on the casino industry, similar to what Nevada experienced when he was first licensed in 1981.

At the time, casino gaming was confined to Nevada while Atlantic City was in its infancy.

"Gaming law was a local practice when I first started out 30 years ago," Cabot said. "It changed dramatically and quickly as other states and other countries, in Europe, Asia and South America, began legalizing gaming."

Cabot is a partner in the Lewis & Roca law firm, which has offices in Nevada, Arizona, California and New Mexico. He is the practice group leader for the firm's gaming law section, which has 13 full-time attorneys.

Cabot originally worked for Lionel Sawyer & Collins but became one of Lewis & Roca's first Nevada attorneys when the firm expanded into Las Vegas.

Cabot's clients have included casino owners, game developers, Internet gambling sites, and companies that run contests and sweepstakes. Cabot has provided legal advice related to all types of games, encompassing online games, casual games and complex skill-based games.

He's authored or co-authored 10 books on gaming law and gaming regulation. Cabot authored the first editions of "The Internet Gambling Report," which is now in its 12th edition.

The growth of gaming has led Cabot into many emerging gaming markets, where he has offered legal advice on what to consider during the "predevelopment phase," before a casino is actually built and licensed.

"Many of these emerging jurisdictions don't have a lot of experience in gaming regulation," Cabot said. "There is a huge learning curve."

-- Howard Stutz

JEFFREY SILVER

Shareholder, Gordon Silver

Jeffrey Silver was a couple of years into a career as a certified public accountant when he realized that balancing other people's books or doing tax work wasn't for him.

So, one afternoon he decided to enroll in law school at the University of San Diego.

"I was a CPA with a box full of receipts ... adding up debts and credits making sure they came out to be the same number," Silver said. "I couldn't do it for another 30 years, so I said I think I want to go to law school."

Silver said getting his law degree allowed him to "exercise a little more discretion" over his career, which has included stints as the chief deputy district attorney of Clark County, and as a member of the Nevada Gaming Control Board.

He also spent several years working in the gaming industry as general counsel for the Landmark Hotel before moving on to be chief executive of the Riviera and a senior executive at Caesars Palace.

"When I got into the industry it was Nevada and maybe Atlantic City a distant second," Silver said. "Today, gaming is widespread ... everyone is looking at the business to balance their budgets."

Silver is a shareholder in the Gordon Silver law firm that has offices in Nevada, Arizona and Washington, D.C. He is the chairman of the firm's administrative, gaming and government affairs department.

He's authored "Gaming Law" for the American Bar Association's 1997 edition of "The Compleat Lawyer" and has served as a member or chairman of the Greater Las Vegas Chamber of Commerce, and the Las Vegas Convention and Visitors Authority.

The rapid expansion of Internet and brick-and-mortar gambling has led companies and foreign governments to seek out Silver's advice on various issues. He said some countries considering legalizing gambling come to Las Vegas because they know that "Nevada is the gold standard in terms of regulations."

-- Chris Sieroty

ELLEN WHITTEMORE

Of counsel, Lionel Sawyer & Collins

Ellen Whittemore initially thought her legal career would be in public interest law.

After graduating from the University of San Diego of Law in 1981, the Sparks native came back to Nevada and joined the state attorney general's office, handling matters for the Department of Prisons and the Board of Medical Examiners.

A year later, new Attorney General Brian McKay moved Whittemore into the gaming division.

She never left the field.

"I've been lucky to have learned from some of the best," Whittemore said in a 2009 interview. "And I have had some fabulous clients who have trusted their matters to me."

Whittemore spent seven years in the gaming division before going into private practice with Lionel Sawyer & Collins in 1989, where she is listed as of counsel to the firm.

During her tenure as a deputy attorney general, Nevada's casino industry began to change, as corporate giants began supplanting individual casino owners.

Her initial assignment was helping to write the state's pleadings for argument in the 9th U.S. Circuit Court of Appeals that involved the revocation of the Stardust's license in the 1980s.

She authored gaming regulations that cover corporate accounting matters and how gaming equipment manufacturers bring new games and technology into the market that are still used today. She handled several high-profile issues, including the "near miss" slot machine defect in 1989. Games manufactured by Universal Distributing contained a feature that gave gamblers an impression the machine just missed a jackpot.

"I've been blessed to have Bob Faiss as my mentor," Whittemore said in the 2009 profile. "I've been lucky to have worked and learned from the best. You couldn't find a better gaming lawyer to work for than Bob Faiss and there was no better senior partner than Grant Sawyer."

-- Howard Stutz

 
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