COVINGTON, Ky. -- If you call certain phone numbers at Caesars Indiana--the largest riverboat casino in America--you get a recording that tells you to dial another extension "if you are calling to seek a contribution." In other words, there are so many calls for "contributions" that they need a full-time staff to deal with them.

No other state in America has perfected the fine art of squeezing money out of casinos like Indiana. It's hard to tell just how much gambling cash flows to the various state agencies, chambers of commerce, cities, counties, Lions Clubs, levee districts, Policeman's Balls and others each month, but a good guess would be about $52.6 million, with an additional $20 million going to salaries that stay inside the state. In the old days of organized crime, they had a name for this: "shakedown."

Look at this tax lineup:

First the state charges three bucks a head just to enter a gambling boat--and that three bucks is repeated at each sailing, every two hours, even if you don't get off the boat. (Nine of the ten casinos in Indiana pay this fee themselves instead of charging the customer, because paying before you've even seen the blackjack table tends to put a damper on your gambling spirit.) Next the casinos pay 20 per cent of their revenue off the top, and that money is distributed to the city, the county and the state. This is already enough to make Indiana the most heavily taxed gambling jurisdiction in the country--but there's more! Most casinos had to pay dearly to get their licenses in the first place. So all of them made "development agreements" with the city and county in which they're located, meaning they pay additional amounts based on their profitability or some other formula. This can be up to 12 per cent more of their revenue, and the result is that towns that were slumbering or dying--Lawrenceburg, Rising Sun, Florence, Elizabeth--have brand new streets, brand new street signs, brand new government buildings and downtown pedestrian malls, but, oddly enough, not that many new businesses. They all envision a world of bed-and-breakfasts, art galleries and curio shops transforming them into a tourist mecca, but so far there are just spotty patches of souvenir shops and the occasional museum or gallery.

But wait, we're not finished. Unexpected flood causes damage to the levee? Guess who gets the first call for help. Bridge over the Ohio needs a new structural support? Regional school district needs a new school bus? Little leaguers can't go to the state tournament unless they get new uniforms? Yes, all phone lines lead to the casino, which functions in these little Indiana rivertowns much like the big factory on the hill to which every resident is beholden for his livelihood.

It all works out to an effective tax rate of 35 per cent, which is so high that any serious gambler would fear those tables and slots as though they were poisoned. The only higher taxation rate comes from state lotteries--again, the government is always the perpetrator of the sucker bet--and those who used to say that horse-racing tracks were outrageous, at 18 per cent, now have to gasp in terror at these modern regional casinos.

What's interesting, though, is that no one seems to mind. On a recent tour of Ohio River casinos, I repeatedly asked what the organized gamblers associations thought of the exorbitant tax rate. Answer: apparently there is no lobby for gamblers in the state. Nobody thinks that way in Indiana. The purpose of casinos here is to soak up slot-machine revenue--preferably from out-of- state pockets--and then plough it into civic projects that would normally require a local tax.

"We needed water for our golf course," says Barry Morris, general manager of Caesars Indiana, "so the city of Elizabeth asked us to build them a new water treatment plant. We built the plant, and now the city sells us water from that plant. It's the gift that keeps on giving."

Morris is joking, of course--the casino corporations make all kinds of deals to protect their license--but after seven years of casino gambling in Indiana, many of the executives up and down the river are starting to secretly bridle at the constant appeals for more revenue.

It kind of makes you long for the golden days of Moe Dalitz.

There aren't too many people who remember Moe Dalitz when he ruled gambling in Covington, Kentucky. He died in 1989, in faraway Las Vegas, where he was known as the man who ran the Desert Inn and the Stardust in their glory days and became the most beloved and squeaky-clean gangster who ever lived. Moe was a criminal for eight decades, from the time he was a kid running with Italian gangs, busting up unions in Ann Arbor, Mich., to the years when he ran the Cleveland Syndicate and provided most of the illegal Canadian hooch for the Midwest, to the years when he linked up with Meyer Lansky and the two of them created the largest Jewish mob organization in history. To "old school" casino owners like Steve Wynn, Moe Dalitz was considered the most talented businessman Vegas ever had, and since he was never convicted of a single crime, he died old and comfortable, honored by the city for his vast humanitarian projects.

Covington, just across the Ohio River from Cincinnati, was Moe's playground in his Prohibition heyday. He had two casinos here, the Beverly Hills Club and Lookout House, that were legendary for their elegance and their almost complete freedom from law enforcement scrutiny. He owned two other casinos on the outskirts of Cincinnati--the Mound Club and the Pettibone Club-- which did have a few legal problems, but for the most part the four Cincinnati-area casinos were safe places to spend an evening and even sources of civic pride. Today collectors pay thousands of dollars for the rare chips used at the Mound, Pettibone, Beverly Hills, and especially the Lookout House.

How could Dalitz operate so smoothly for almost 30 years when gambling was illegal in Ohio and Kentucky?

Simple. He paid everyone. Not just the mayor. Not just the police chief. Not just the sheriff and the attorney general. Dalitz was like the Santa Claus of the Ohio River, doling out money to civic clubs, hospitals, schools, churches, synagogues, and virtually anyone who came to him with a genuine hard-luck story. Like many gangsters of his era, he could be both murderously brutal towards competitors and a teddy-bear with the public.

But eventually he found it easier to operate in the new legal nirvana of Las Vegas, so once he moved there in the fifties, he never returned to Covington. The clubs faded away. Casino gambling died. Covington's biggest employer became the Cincinnati International Airport. And then, in 1994, the state of Indiana decided to take a lesson from Moe and set up what is the most heavily taxed, heavily regulated string of casinos in America, just a little farther down the Ohio River, where the old decaying river towns were in sore need of an economic boost.

It worked. The people of Cincinnati hadn't forgotten how to gamble, and they flooded across the bridge connecting Covington, Ky., to Lawrenceburg, Ind., to pour millions into the Argosy Casino and, a little farther south, the Hyatt-owned Grand Victoria Resort in the little town of Rising Sun. Last October yet a third casino opened; the $230 million Belterra is the most elaborate of them all, but it's 67 miles downriver from Cincinnati and the jury is still out as to whether gamblers will drive past two other casinos just to gamble in a place that's a little more opulent.

The taxes in Indiana, both direct and indirect, are so high that a gambler could have gotten much better odds at Moe's illegal tables. Since the Indiana side of the river is mostly corn fields, and since casinos are illegal in the population center of Indianapolis, the vast majority of the customers at the five Southern Indiana casinos are from Ohio and Kentucky. Today every new road, bridge, levee, and street lamp in the once dying towns of Lawrenceburg, Rising Sun, Florence, and Elizabeth can be traced right back to the casino, so it's really an ingenious scheme by the state of Indiana to soak money out of the residents of Ohio and Kentucky. (The fifth Ohio River casino, the Aztar in the comparatively large city of Evansville, is a special case. It was expected to revitalize the old abandoned downtown business district, but so far that hasn't happened. The streets are better, the buildings are spruced up, but many of them are still empty.)

The strangest thing about the Indiana casinos is that they operate under a severe restriction imposed by the Legislature. They're required to cruise the river, but they can't cruise more often than every two hours. You have 30 minutes to board, and if you miss the cruise time, you're looking at 90 minutes before the boat comes back. (Hence the frantic 13-mile drive from the Argosy to the Grand Victoria, where cruise times are conveniently scheduled for 30 minutes later.) But the funny thing is that, during a full week of touring Indiana casinos, I was never on a boat that actually left the dock. The captains are allowed to remain immobile if they decide that it would be unsafe to cruise. Reasons for not cruising include "high wind," "too much barge traffic," "high water," "low water," "approaching thunderstorms," and a whole host of other nebulous log entries. If they do actually cast off, they have to hug the right bank of the river, for fear of passing into Kentucky waters, where gambling is illegal. (This is especially troublesome in Evansville, where the river's course has altered so much over the last 200 years that some dry land on the Indiana side is actually in Kentucky.) On a fine clear day with no river traffic, the 408-foot triple-deck Argosy VI actually cruises one-half mile, to the waters off downtown Lawrenceburg, and then back to its home-base complex of restaurants, hotel and bars. The Caesars Indiana boat sometimes cruises 1,000 feet downriver, then returns to dock.

But here's the goofiest thing of all. If the boat doesn't move, you still can't board after the assigned cruise time. The Indiana Gaming Commission has decided, in its wisdom, that, if the boat is held in the dock, it's still on a "virtual cruise." No new passengers can board until the next cruise time. (Passengers are allowed to get off the boat, however. I guess this would be called "virtual jumping overboard and swimming to shore.")

If this sort of thing had existed in Moe Dalitz' day, he simply would have offered the appropriate authority more money and the problem would have been solved. Modern Indiana casinos, by contrast, had to go begging to the Legislature when neighboring Illinois abolished its cruising requirement two years ago, causing a severe loss of customers, especially at the riverboats on Lake Michigan. You would think their 35 per cent taxation rate would buy them a little juice with the lawmakers. On the contrary, the Legislature voted them down, and they're still required to cruise.

One thing I do know is that Moe Dalitz would have loved the world of riverboat casinos. A friend of his once said, "I never met a man who knew more about boats or yachts than Moe Dalitz." (His illegal whisky came from Canada via the Great Lakes and the St. Lawrence River.)

When Dalitz died, by the way, there wre 300 mourners at his funeral, including former governors, sheriffs, casino executives, and FBI agents. In his will he left millions to 14 non-profit organizations, including the United Way, the Variety Club, hospitals, the Salvation Army, orphanages, handicapped organizations and the National Parkinson's Foundation.

Covington would probably be a richer city today if they had just legalized his casinos and let him ride.

"How was I to know those gambling joints were illegal?" he once told a Congresssional investigator. "There were so many judges and politicians at them, I figured they had to be all right."

© Copyright 2001 United Press International and Joe Bob Briggs

Return to the Column Archive