Aug. 5, 2004 – Most people picking up their morning paper in the nation's capital on Friday probably won't be aware of it, but the latest development in a raging controversy over plans to install 3,500 video lottery terminals in a depressed section of downtown Washington, D.C., has Virgin Islanders as key figures on both sides.
On Thursday evening, the District of Columbia Board of Elections and Ethics ruled that the group proposing the move had failed to collect enough legitimate signatures to get a proposal to legalize VLTs on the Nov. 2 ballot as a local referendum.
The group's attorney said they will seek an expedited hearing before the D.C. Court of Appeals in the hope of overturning the ruling in time to get the issue on the ballot after all.
Spearheading the drive to introduce the machines is Rob Newell, a St. Croix resident; his company, North Atlantic Investments LLC; and its financial backer, Bridge Capital, of which he is chief executive officer, according to published reports. The two firms share office space in a Strand Street building in Frederiksted.
The D.C. Board of Elections is chaired by Wilma A. Lewis, a prominent Washington lawyer, former U.S. attorney for the district, former inspector general for the U.S. Department of the Interior and native St. Thomian.
Currently the federal district has no VLTs and no governmental system for regulating them. The proponents, promising jobs and an economic boost to the city, collected more than 56,000 signatures on a petition seeking to put to voters their proposal for legalizing the machines.
The election board said on Thursday night that just 21,664 of the signatures were of registered D.C. voters, however; and of those, it threw out 6,977 due to what it said was evidence of forgery, fraud and other election law violations. That left far fewer than the 17,599 votes required to get the referendum onto the ballot.
A July 19 article in CasinoMagazine online refers to the petition being for the Video Lottery Terminal Initiative of 2004. It describes the machines to be installed as "slotlike devices" and refers to the undertaking as a "$500 million project" that "is expected to generate $765 million annually."
Citing contribution and expenditure reports filed on July 19 with the D.C. Office of Campaign Finance as a source of its information, the magazine article states that North Atlantic Investments LLC "incorporated in Delaware on April 21, the day before the District's gambling initiative was introduced."
CasinoMagazine described Pedro Alfonso, a D.C. businessman, as "the only local investor" in the project and reported that he named Newell as the key investor. However, "Mr. Newell says he is a 'coordinator' of a group of investors, but declined to identify them," the magazine article stated.
The group headed or coordinated by Newell wants to develop a 14-acre gambling complex that would house the machines and to see a relaxed set of regulations in place to govern it, as well as a guaranteed 10-year monopoly on legal gambling in the city.
Critics have said the VLTs would draw most of their business from the people in the district least able to afford gambling. The proponents have argued that because VLTs are not legal in Virginia and Maryland, the states adjoining the federal district, their operation would attract many non-Washington residents, thereby benefitting D.C. because 25 percent of the revenues would go to the local government
Board's First Ruling with Lewis as Chair
The election board ruling was the first since Lewis became its chair in May. According to a story in Friday's Washington Post, "Lewis was plodding and deliberate throughout a nine-day public inquiry into the petition drive. She delivered her final verdict with equal reserve."
The Post stated that the rejected signatures "included hundreds submitted by local residents who falsely claimed on petition affidavits to have gathered signatures that were actually collected by professional election workers flown in from California, Michigan and other states."
According to the election board, it is illegal for non-residents to direct the signature-gathering process for a local referendum. Many non-residents broke the law, the Post quoted Lewis as saying, because they "actively performed the circulatory responsibilities."
Most of the invalidated signatures had been collected under the direction of a Florida firm, Stars & Stripes USA Inc., the Post reported, and the election board concluded that this company "trained people to illegally misrepresent the initiative as being 'about schools and health care,' rather than about gambling."
The Washington Post had earlier reported extensively on the plans of Newell and his associates in front-page articles by staff writer Lori Montgomery published on June 21 and last Sunday.
Montgomery's Sunday article, headlined "Financing Behind D.C. Slots Murky," begins: "On the sunbaked streets of Frederiksted, a desolate harbor town on St. Croix's impoverished west coast, everybody seem to know Rob Newell."
The article laid out four elements of the controversy:
– Opposition by many people to slot machine gambling on moral or political grounds in that it tends to get much of its revenues from low-income people.
– Allegations of widespread fraud in the collection of signatures on the petition circulated to put the question on the ballot.
– The proposed regulatory scheme, written into the initiative. According to the Post, gambling experts said it "would give the District the most lenient rules in the nation."
– The question of who will benefit from the slots.
The lengthy Sunday article provided background on Newell, Bridge Capital, and what it described as the firm's two owners, Shawn Scott and John K. Baldwin.
Bridge, according to the Post, is a "private lending firm Baldwin founded in 1995. The company moved last year to Frederiksted where it has qualified for an economic development program that gives the firm and its owners a 90 percent exemption from federal income taxes for 15 years."
Bridge Capital Hasn't Activated EDC Benefits
However, Frank Schulterbrandt, chief executive officer of the Economic Development Authority, said on Thursday that while Bridge Capital's application for benefits has been approved by the Economic Development Commission, the firm has "not been granted a final certificate." The company has yet "to notify the EDC when they want to activate their benefits," he said, adding that "they have five years in which to do that."
(As of last March, some 50 companies were in the same situation, Schulterbrandt told a Senate committee then. He said the reason in some instances was a recent court case involving a partner in an EDC beneficiary company who pleaded guilty to federal charges of attempted tax evasion.)
The Post described Scott and Baldwin as "Las Vegas entrepreneurs who have tried for years to qualify for a license to operate a big-time gambling venture. They have had little luck, public records show. Scott, whose properties have secured financial support from Baldwin, has been denied or failed to obtain gambling licenses in five states where regulators found evidence of mismanagement, irregular accounting practices and hidden partnerships."
The June article stated that Scott also lives in the Virgin Islands. It also quoted Newell as saying that Scott pulled out of the D.C. project because it "got too big for him" and reported that Newell "said through a spokesman that Scott has no connection to North Atlantic."
The Post said that Bridge Capital purchased the building in Frederiksted and that the firm lends money to North Atlantic Investments and employs Newell as its "chief operating officer and director of capital markets."
According to the Post, Newell has
been involved in a number of "business deals arranged by others. Some ended badly: A California hotel he managed went bankrupt. A Las Vegas casino he owned failed to obtain a gambling license and later was torn down. A Spokane, Wash., investment firm of which he was an officer dissolved after state regulators accused it of swindling elderly, sick people out of their life savings."
Efforts by the Source to contact Newell for comment were unsuccessful. He, North Atlantic Investments, Bridge Capital and Scott are not listed in the telephone directory, and EDA personnel were unable to provide a telephone number for Bridge Capital. No Web site could be found for either company.
According to Washington's alternative weekly, City Paper, no major political figure in the District except the proponents' lawyer, former City Council member John Ray, is on record in favor of the VLTs proposal.
Congress has oversight for the District of Columbia government and in fact frequently votes to overrule D.C. government policies. Several members of the House of Representatives, including senior Republican Frank Wolf, whose district includes many of D.C.'s Virginia suburbs, have vowed to kill the effort through House action if the gambling referendum should get on the ballot and Washington voters should approve it.
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