Jurisdictions across the world rightfully look to Nevada’s gaming regulatory system as possessing many of the best regulatory practices. Nevada policymakers, however, should critically examine its system for improvements. One area, which has failed to keep up with regulatory best practices, is allowing members of the Nevada Gaming Commission to engage in ex parte communications, which occur when one party to a matter speaks to commission members outside the presence of other parties or outside of a public forum.
Information received through ex parte communications is not subject to adversarial comment, additional perspectives, or public review. This type of communication is one-sided and contributes to the perception that an agency is making the inequitable decision. Information obtained through ex parte communications also is not available for consideration upon judicial review should one party desire judicial redress for an agency’s decision.
An ex parte communication is the antithesis of open government and public participation through open meetings, which are the cornerstones of government in the United States. Open meetings allow the public to observe their government officials, elected and appointed, and provide an avenue for various stakeholder groups, including the public, to present facts, provide context for their positions and offer options to the decision-maker. An open meeting requires decision-makers to gather, hear, review, and consider facts, evidence, and perspectives while publicly deliberating and arriving at a decision. Public policy should result from open meetings rather than backroom negotiations or other influences.
Through the public hearing process, gaming regulators decide five types of matters: patron disputes, licensing/suitability/work permits, disciplinary actions, tax disputes, and adoption of regulations. In the first four situations, the Commission acts in an adjudicatory capacity and is the final decision-maker. In these actions, ex parte communications are improper because, as decision-makers, the Commission is deciding the conflicting rights of different parties. All parties have the right to know and refute the evidence on which the Commission will make the decision. Each of these situations, however, has different considerations.
Patron disputes have a unique process for resolution in that a hearing officer employed by the Board typically hears the matter and renders a decision. In Nevada, the Gaming Control Board has responsibility for enforcement of the gaming laws and regulations. The Board decision is then subject to limited judicial review, whether it favors the patron or the casino. The Commission regulations properly prohibit ex parte communication with any Board member or the hearing examiner regarding patron dispute hearings.
Disciplinary actions and tax disputes are adversarial in that the Board represents the state against the casino. In tax disputes, the Board is seeking additional taxes or refusing a refund, and the Commission is sitting as a neutral arbitrator to decide the obligations of the casino. Similarly, in disciplinary hearings, the Board is seeking a fine, condition and/or license revocation against the casino and the Commission is the neutral arbitrator. Nevada gaming laws prohibit ex parte communications with the Commission members in disciplinary actions, but no justification exists for not prohibiting them in tax disputes.
Licensing decisions are unlike disciplinary matters and tax disputes because only one party, the applicant for the license, is appearing before the regulators. In the licensing process, the Board serves as both investigator and decision-maker because it makes a recommendation to the Commission regarding the applicant’s suitability.
The Board agents necessarily must have ex parte communications with the applicants to conduct the investigation, but sound reasons exist for prohibiting ex parte communications with the Commission in licensing decisions. First, prohibition avoids the perception that “deals” are made in the back room. Such perception erodes the public’s confidence in the regulatory system. Second, political accountability requires that the public has the salient information on which the agency makes its decisions. Without such, the community cannot assess whether the decisions made by the agency enhance or erode the public trust.
The Commission has significant discretionary power in rulemaking, specifically the adoption of gaming regulations. The Commission’s usual practice is to delegate the drafting of gaming regulations to the Board, which has the staff necessary to conduct background and policy research, receive the public and legislative comment, hold regulatory workshops on regulations that are open to the public, and have public hearings on proposed regulations.
Whether administrative agencies should receive and consider ex parte communications in rulemaking is debatable. One reason supporting this type of communication is that regulators need an avenue for informal input of proposed changes from both legislators and stakeholders. An informal, frank discussion is more likely to occur off the record. Another reason that favors ex parte communication is that political compromise might need to occur to facilitate an agency’s resolution to a particular challenge. In the context of adopting gaming regulations in Nevada, significant opportunities for both political and public input already exist at the Board level.
Though the Commission has final authority on regulations, it rarely accepts public testimony involving suggested changes. Instead, the Commission serves more as a check on the process undertaken by the Board. Because the Commission acts in an oversight capacity, there is no need for it to engage in ex parte communications, particularly because the public is limited from giving evidence and testimony to the Commission regarding regulations.
Other states commonly have prohibitions on ex parte communications on most matters before gaming regulators. For example, Michigan law provides that “a licensee or applicant or any affiliate or representative of an applicant or licensee shall not engage in ex parte communications with a member of the board.” Nevada gaming law treatment of ex parte communications is not reflective of best regulatory practices and is contrary to the law in many other jurisdictions.
Nevada should prohibit all ex parte communications with the members of the Commission on any pending matters in which the legislature requires a public hearing before them. The Nevada law has a single prohibition against ex parte communications, which prohibits the Board or a party to a disciplinary matter from communicating with the Commission members regarding the substance of the matter. This exception, however, should become the rule.
Anthony Cabot is the Distinguished Fellow of Gaming Law at the Boyd School of Law, where he teaches gaming law.
Becky Harris is a Distinguished Fellow in Gaming and Leadership with the International Gaming Institute at UNLV.
