But I think it sets the stage for the regulation of the full casino gambling that everybody assumes is coming to California at some point. Nobody knows exactly when, nobody knows exactly where, nobody knows exactly who's going to control it. But that's really what all this is about. If it were just about cardrooms, this thing would have been settled a long time ago.

What this is really about is who's going to control gambling in the most populous state in the nation in the 21st century when everybody realizes it's going to be an immense thing at some point.

And I think what's been happening, and privately a lot of people involved in it will tell you that what's been happening is basically everybody's been milking it. There's no immediate crisis. So there's nothing that forces the legislature to act right this instant.

So what they've been basically doing is milking the thing. All those who are most immediately involved in the process, lobbyists and legislators, all have a built-in reason not to resolve the issue, because as long as they keep it running along the lobbying fees keep rolling in, the campaign contributions keep rolling in... Every year it seems they're about to make it, and suddenly and usually in the last few minutes in the legislative session something happens on some ostensible reason for some ostensible reason that kills the bill.

It had basically been passed by the Senate in a form that had, in the Senate, Bill Lockyer's house had picked up a lot of baggage. Stuff that was put in the bill supposedly to get support for it from some interest group, but it also turned off other interest groups. The thing had become kind of a Christmas tree bill with a lot of ornaments on it.

In the Assembly, at the very last minute, Phil Eisenberg, who's a former assemblyman who was carrying the bill for, for Dan Lungren, a Democrat carrying for Lungren, a Republican, basically stripped the bill back down to its original essence, which everybody supposedly kind of agreed on to begin with. The bill was past the Assembly in that form on the last night, went over to the Senate, needed one more floor vote in the Senate to go to the governor. And Bill Lockyer basically adjourned the Senate in a few minutes before that bill actually physically reached the floor and left no doubt about it. It doesn't leave any doubt about that he did it to kill that bill.

And then he had a confrontation with Phil Eisenberg in one of the back hallways of the capitol. Literally as the place was clearing out, he and Eisenberg ran into each other and, and Eisenberg said in effect, "Why did you do this to me? Why did you kill it? Why did you kill it?" And they got into a big row over the thing and Lockyer, who has a very short temper, yelled at Eisenberg, "F--- you, Mr. Termed Out!" Meaning it was the last legislative session for Eisenberg, who was being forced out of legislature by term limits. "F--- you, Mr. Termed Out."

And that kind of, that's now entered the legend, as it were, of this legislation, also Bill Lockyer's legend. But it indicates kind of how seriously everybody took it. The entire legislature ground to a halt, was literally quit for the year, or was stopped for the year just to prevent this bill from passing.

This is not the first time this has happened. I have seen many other issues milked in this exact same way over the years. Eventually what happens is that the people with the stakeholders, if you will, people are trying to get the, get it, make it happen eventually get tired of being milked, they really, they realize they are being milked finally, and they say, "Okay, we're out of here."

I saw it happen on a thing called unitary taxation. A very complex thing involving how you tax multinational corporations. The multinational corporations put up tons of money to get this system changed year after year after year. Longer than the gambling thing, it went on for eight or nine years. Finally the multinationals realized they were being milked. And they finally, then they just told everybody involved, "This is the last year. Either you do it this year or we're pulling out and we're never going to try it again." They said, "Okay, if that's the way you feel about it, we'll do it." And they did it. So this is not the first time this has happened.

You're talking about a tremendous amount of money. Once again, California does nothing small. And this is one of those things. Look, campaigns, legislated campaigns, just every two years a hundred seats in the state legislature come up. Eighty seats in the Assembly, twenty seats in the Senate. They spend an average of about a hundred, about a million dollars on each one of those races and campaign funds. It costs more to run for a legislative seat in California than it does a typical seat in Congress. So you're talking once again about a scale. A hundred million dollars has to be ponied up every two years here by somebody. [I]t's big business, it's very big business. And gambling is just one of the sources. It's not even the most important of those sources by any means, but it has emerged in recent years as a new source of money.

Every once in awhile something pops up that creates a new source of political money. This is like a new vein of gold up in the foothills or a new placer deposit in one of the streams. And all the miners are rushing in there to get it until it plays out. So they're all grabbing everything they can get a hold of, and it plays out. Now in this particular case, the outside stakes, literally billions of dollars, are so immense that it will probably keep on rolling.

Because in back of all this is an assumption that one way or the other casino gambling is coming to California, big time casino gambling. And if it comes the potential of it is unimaginable. If you can create what they've created in Las Vegas out in the middle of the desert, can you imagine what they could create on southern California beaches, or in the mountains of the skiing, or...California is a tremendous tourist draw as it is without full-scale gambling. Catalina Island, can you imagine gambling on Catalina Island? It could be the new Monaco, it could be the new Monte Carlo.

It's coming, everybody knows it's coming. It's coming little bits at a time. The Indian casinos, the big new cardrooms that are really casinos waiting to happen. The big new resort hotels that are casinos waiting to happen. Everybody knows it's coming. Nobody knows exactly when or where or who's going to control it, and this is what it's all about. So this cow is going to give a lot of milk. It can be milked and milked and milked and milked and milked for a long time, 'cause it's not something that's going to go away all by itself.

Now that's all done purely locally, and the attorney general's reasoning and the law enforcement reasoning is that cities are at conflict of interest. They are in the business of regulating some industry that is a major source of revenue for the city coffers. And so there's a lot of built-in reason to look the other way. To go easy, to not really put on tough regulation.

Lungren says what you really need is state licensing patterned after what they do in Nevada and New Jersey. The state commission, and background checks, and the whole nine yards of professional licensing. And by and large, the cities are not opposing that. As long as the, uh, the ground is equal, the playing ground, they're not opposing that. And a lot of the gambling interests want it as well, but some of them don't, some of them do. But yeah, but it's only the precursors I said before, it's only the precursors. Everybody assumes that full casino gambling is coming to California in some form sometime, and this sets the regulatory mechanism for what will be a huge gambling industry in this state sooner or later.

But....I think it will happen this way. The Indians will finally get their legal status clarified and they will start erecting bigger and bigger casinos on Indian land. Not only current Indian land, but lands that they acquire. They're already doing that in places like Palm Springs and so forth. And these will become so big, they'll be like Foxwoods in Connecticut. They'll be big resort destinations that the rest of the gambling industry in California, particularly the horse tracks and the cardrooms that exist now--and there's at least one horse track that has a cardroom attached to it--will say, "Hey, we're getting, we're getting rooked by these people." They're going to go to the legislature, they're going to go to the governor and they're going to say, "Look, casino gambling is here. It's a fact of life, the Indian's got it, we need it, too."

And that's why they're building these huge cardrooms now. It's not to play cards in, it's to get set to become the next round, the next level of casinos. Plus the fact that they're kind of edging up on these cardrooms. These cardrooms are getting a little more creative in designing games that they think will pass muster legally. And it's kind of a grey area legally as to what's a legal game and what's not a legal game. So they're kind of edging up.

I have to say, though, that what the real action is about, there's one thing that drives this whole thing. That's slot machines. The cardrooms, the this, the that, the thing, what this is all about is video slot machines. Those are the big moneymakers. Those are the ones that are issued on the Indian reservations as to what the Indians can do in terms of slot machines and what they can't do, and that's what the cardroom people want next. All this other stuff, baccarat, blackjack, all this other stuff is okay, but the real action, the real money, the real turnover, the guaranteed profit in gambling has to do with slot machines.

And what constitutes a legal slot machine and what constitutes an illegal slot machine, as you might, as you probably know, the state itself was operating what amounts to slot machines in its keno games. Its instant games that was running in bars and other places, in restaurants around the state. Uh, that encouraged the Indians to put in their slot machines, says, "The state is doing it, then we can do it, too." It has to do with very complex nomenclature of what is a bank game, a non-bank game and so forth. Very legalistic, very technical. But the state basically had to give up its own games and....I mean, it's who controls those slots is what's really going to determine the whole thing.

But it also provides a ready excuse for the politicians to continue delayed action, because nobody's going to be happy with whatever they do, therefore they can use it. "Well, we have to make this group happy, we have to make that group, have to take care of this concern, have to take care of that concern." And it, and it, it's because it's so complicated, it provides a rationale for, for, for procrastination.

So the gambling is increasing in the absence of regulation. And I think there's implicit acknowledgement by Lungren, who really opposes gambling in all forms. That "Hey it's going to happen, uh, and look it is happening, we need to get a handle on it. We need to control it. We need to regulate it."

Many of these communities in which gambling is located, particularly in southern California, are poor communities. They're predominantly African-American or Latino communities that have city problems, a lot of municipal needs. And it's very lucrative, or very, very tempting for these city officials, even honest city officials do kind of be soft on who's coming in and operating this gambling and kind of telling maybe the police chief, "Hey, you know, don't go too hard on these guys, you know? They're bringing a lot of money. They're paying the salaries of your cops, so you better be, you know you better treat them nicely."

But I don't know if there are any neutral parties in the legislature on this, they all have a stake in it to some degree or another. Every party leader in the legislature, Democrat and Republican, has gotten some kind of gambling money out of all this. They all have a vested interest in it to a certain extent. Willie just happens to be a little more personal because it's involved his personal law firm and his legal business and so forth.

I mean, the ads that the lottery runs--I just listened to one on the radio coming in here today. You can't, you can't avoid 'em, 'cause they're all over the place. Said basically, "get rich quick. You too can be a lottery million." The one ad I heard this morning was, "There have already been twelve hundred millionaires created by the California Lottery! You can be one, too! Just go play the lottery." So that the, the state itself, the state of California, and an agency of the state of California, promotes gambling as a personal and economic enterprise. And says it's a good thing to do. Go do some more of it!

So for the state to say, "Oh, well, but we don't we want casino gambling." Or, "We don't..." What's the difference? What's the difference? Gambling is gambling is gambling.

And the state, I might add, is also a virtual partner in the horse racing tracks. And that's gambling. They get a lot of money from the horse racing tracks. And, and the, there's a kind of a symbiotic relationship between the state and the horse racing tracks already. And then there's a symbiotic relationship between local governments and the card groups. We're already there! And it's gonna get bigger. The question is, who's gonna control it? And who's gonna get it? Who's gonna be--and who's going to get it? Or who's going to be frozen out, who's gonna get their foot in the door, who's gonna be frozen out, who's gonna control it? That's really the issue at this point.

And so that that's another factor that, that fuels the whole thing. Everything, everything about the lottery, the rise of the Asian population, everything that's happening in California now pushes up the gambling industry. And it's just kind of trembling on this verge of exploding into the huge, big time. It's not quite there yet, but everybody assumes it's gonna happen.

And I visit the big hotels, the new resort hotels in the Los--in the Palm Springs area. And you walk in, you say, "Why do they have all this open space in this hotel?" And you talk to a couple of waitresses and, or bellboys, say, "What's going on?" "It's casino." They're waitin' for the casino to happen.

But the, the hotel employees themselves think that's what's happening. That that's the grapevine within the hotels. That the wiring is already there for the slot machines, that the plans exist in some safe somewhere so that literally, or almost, overnight, you can roll in the machines, roll in the tables, and instant casino.

There is one hotel in, in Palm Springs in which they have an artificial lake, and a boat actually comes up into the lobby. I mean, this is, you look at this place as, this is Las Vegas! You know, this is like the Luxor or something like this. This is not the traditional little laid-back Palm Springs kind of place. This is, there's somethin' else goin' on here. You know? It has that Las Vegas feel about it.

There's--you just talk to people around, who are kind of on the fringe of this. The lobbyists and the people involved. It's just, "Yeah, it's comin'. It's comin'." It's all gonna happen some day, either through the Indian avenue or through a statewide ballot issue. There've been several ballot issues proposed to legalize gambling. Through a ballot initiative, through the Indians, through just evolutionary--evolution of the cardrooms. In some way, casino gambling's coming to California.

And so basically Nevada, I think with Howard Hughes, as I understand the history was Nevada, with Howard Hughes' encouragement, in the 1960s cleaned up their act. And they put in very stringent, uh, gambling. And now you have publicly-traded corporations and it's all kinda on the up-and-up.

California isn't there yet. Maybe we have to have a problem like Nevada did before we, we see it. Uh, before the politicians are willing to act. Right now, the politicians look at this thing and says, "What's the problem?" In fact, Bill Lockyer said that one time. He produced an elaborate state report that...said, "We don't need this! There is no--gambling's a very small business in California. We don't need any kind of regulation." In response to that, Lungren put in a kind of a two-stage bill that said, okay, well, it's a very low-level thing. And then it kicks up if it gets bigger, and so on and so forth. Well, that didn't fly either.

...[B]ut we're kinda at the stage, the politicians are at the stage of most of 'em are, "Ehhh, well, what's the problem? We can milk this thing for a little bit longer. You know, get the money, keep rollin' in." There's no real, there's no public clamor for this. See, the media haven't clamored for it, the public hasn't clamored for it. There haven't been any big scandals. Yeah, you got the Bicycle Club, you got a couple of little things. But nothing, nothing that just kind of forces the legislature into acting. So they feel that they can continue to, uh, procrastinate on this thing, milk it, without paying any political penalty. Now, at some point, they will pay a political penalty. But they're not quite there yet.

Now, if you had a, you know, some sort of huge scandal, then would probably, "Oh, yeah. Oh, we gotta do this sort of thing." But as long as there's nothing, nothing, there's no meaty clamor for it, other than Dan Lungren and a few newspaper editorials and things like that, then they don't feel like they have to do it.

And it has to do with banks and non-bank games. Bank game being something which is controlled by the house. Non-bank gaming something where players are technically playing against each other, like a poker game. Okay? In which the house merely takes an administrative fee, as it were. There's technology kicking around right now that creates what they call "non-bank slot machines." Where it's a parimutuel pool, like a horse race or a poker game, in which the players are playing against each other rather than against the house. If they can create--if, if the compact allows--to a player it makes no difference. He's playing the slot machine. He doesn't care whether he's playing against the house or against, against a pool.

But, if the compact that eventually emerges from the negotiations that are going on now includes some form of slot machine, non-bank, presumably, slot machine, then I think that the cardrooms will clamor and successfully, I might add, to have the same thing. 'Cause they will say, "Look, we're playing non-bank poker games right now. The Indians are gonna have non-bank slot machines. Why should we have non-bank slot machines? And the state was operating slot machines itself in its Keno game. Why shouldn't we have non-bank game ourselves?"

And that, that I think will be successful. I think the legislature...will slide around the issue of the voters' decision not to have full casino gambling, which they passed as part of the lottery initiative at the behest of a lottery company because they didn't want the competition. The legislature will slide around and say, "This isn't Nevada-style gambling, because Nevada-style gambling is banked. You're playing against the house. This is non-bank. This is, this is on the up-and-up. This is like poker game. This is like horse racing. We've already got--this is like the lottery. We've already got non-bank games. Therefore, we will give these cardrooms the right to have non-bank slot machines."

Once you have that, the door's open. Then you've got it all. Then you can go to the casino and play slot machines. You can go to the casino and play the horses. You can go to the casino and play poker. You can go to the casino and play a form of non-bank's blackjack, which they're already dealing in the Indian casinos, called "Jackpot 21." And you've got it all. You have, then, full casino gambling. You can do anything in California that you can do, essentially, in Las Vegas. There'll be some technical differences between, but to the players there'll be no differences.

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