Proceedings of the Standing Senate Committee on
Legal and Constitutional Affairs
Issue 7 - Evidence for February 24, 2005
OTTAWA, Thursday, February 24, 2005
The Standing Senate Committee on Legal and Constitutional Affairs, to which was referred Bill S-11, to amend the Criminal Code (lottery schemes), met this day at 10:50 a.m. to give consideration to the bill.
Senator Lise Bacon (Chairman) in the chair.
[English]
The Chairman: Senators, we have before us Bill S-11, an act to amend the Criminal Code. Our witness this morning is Mr. W.P. Rutsey, the President of Multigames International Incorporated.
Welcome to our committee. We are looking forward to hearing from you on this important bill.
Mr. W. P. (Bill) Rutsey, President, Multigames International Inc.: Good morning. Thank you for inviting me to appear before your committee.
Multigames International is the Canadian company in the international gaming business. I have been in the gaming industry for over 16 years, both as a senior adviser to governments and to the private sector, and as the CEO of operating gaming businesses, including here in Ontario as the Coopers & Lybrand gaming consulting practice leader to the Government of Ontario, Casino Windsor and Casino Rama, and as the CEO of a multi-property business in the most competitive gaming market in the world, Las Vegas. This may be of particular interest to you in that it was a chain of sports bars and smaller casinos offering video poker, that is, VLT-style gaming.
It is my understanding that I was invited to provide information to you because of this multi-faceted hands-on experience.
I have reviewed the transcripts of the previous presentations to the committee posted on your website and have prepared some brief remarks based upon well-documented published industry data and research reports, as well as my own personal experience. I have avoided anecdotal observations such as you have heard, such as that some people wear diapers, urinate on the floor, vomit on the machines, et cetera. I can assure you from my experience that those are highly unusual behaviours of an extremely limited number of severely afflicted individuals, and clearly not representative of the vast majority of gaming patrons.
I, like Senator Lapointe and all of you, sincerely believe that problem gambling or gambling addiction is a very serious issue for those afflicted and their families. My fundamental premise, in which I seem to be in agreement with the sentiments expressed by your Deputy Chair Senator Eyton, is that while gambling addiction is a serious condition, these people are consistently estimated as being 1 per cent or less of the adult population, and those with moderate problems less than 4 per cent, and that regulating and proscribing availability of highly popular entertainment products based upon the pathology of 1 per cent or fewer of the population seems extremely draconian and repressive. It is like severely limiting access to alcoholic beverages for the general population based on the fear that an alcoholic might get some too.
I will start by reviewing some of the anecdotal observations and commonly held myths previously presented.
Senator Lapointe testified that 78 per cent of the people with problems have played video lottery terminals. He is probably right, but this is like saying that most alcoholics have had a few beers. Statistically this is in line with the overall player preference or game of choice for all casino patrons. Slots and video poker are the first choice of 74 per cent of them. Gaming is consistently attacked for offering its customers products that they like.
You have heard testimony that young people are disproportionately at risk from VLTs. Actually, VLTs and slots are less popular with younger gamblers — 69 per cent for those 21 to 35 years old versus 77 per cent for those over 50.
Senator Lapointe testified that there are more VLTs in poorer Montreal neighbourhoods than in wealthier ones. No doubt he is right again, but I suspect that this has been caused by zoning and approval related issues. In my experience, this would not be good marketing or good business. As I told you, I was the CEO of a company that owned a chain of 21 neighbourhood bars in Las Vegas, all with video poker machines. Our worst performing bars were in the less affluent neighbourhoods. We always and only sought out new locations in the wealthier neighbourhoods, which lead me to the oft-quoted bromide that gaming is a tax on the poor, or its variation, that people spend a greater proportion of their income on gaming than wealthier people do. They also spend a greater proportion of their income on food and shelter and they save less than wealthier people. This is because they have less money, not because they cannot help themselves. In fact, the average casino patron is slightly older, wealthier, better educated and more likely to have a white-collar job than the general population.
You have heard testimony that teenagers have ready access to VLTs because of lax or no enforcement of age-of- majority laws. What can you say to that? This is strictly a law enforcement issue. In Nevada, business owners, police and gaming regulators take this issue very seriously. It just does not happen if you do not want it to happen, from a regulatory perspective.
It simply is not smart or good business practice to put a business and many livelihoods at risk for the sake of a few dollars from underage customers. In fact, it is really stupid.
Senator Lapointe's research assistant referred to VLTs as the crack cocaine of gambling: You play them once and you are almost instantly hooked. I will start with crack cocaine. The term was actually coined by Donald Trump in an attempt to limit competition to his casinos. Instead, he succeeded in providing a great shorthand term for all opponents of gambling. The instant addiction assertion is simply ludicrous. Millions of people play these games responsibly every day all around the world.
For example, there are approximately 250,000 VLTs in Spain, which has a population of 40 million people, versus the 38,000 VLTs we have here in Canada. I would invite any and all of you to play VLT or to try a hand of video poker. You may or may not like it, but I doubt any of you would become immediately hooked, or hooked even if you played dozens of times.
I would like to share with you the results of some research that was conducted by Harvard Medical School directly on this point and presented by Howard Shaffer, the Director of the Division of Addictions at Harvard Medical School. He states that there is a myth regarding addictive behaviour around gambling that the game causes the disorder. In fact, the game does not cause the disorder because, if it did, everyone who played the game would end up with the problem. Gambling problems derive from every form of gaming. It is the relationship of a person with vulnerabilities to the games that they play, what this means to them and how it fits into their life that essentially determines whether or not they will have a problem.
I would now like to move on to the research data, including the recent widely publicized reports on the sources of Ontario gaming revenue. I will cite facts from research previously presented to you by the Canada West Foundation summarized from their research report number 16, ``Gambling in Canada.''
First, approximately 75 per cent of Canadians participate in legalized forms of gambling. Second, few Canadians have problems controlling their levels of gambling. For those who do, the consequences of addictive behaviour are often substantial. Third, gambling has emerged as an important revenue source for governments, charities and businesses. Fourth, a number of entities — First Nations, charities, hospitals, universities, et cetera — view gambling as providing potential opportunities for financial recovery and economic development.
As for the recent widely-quoted report on the demographics of sources of Ontario gaming revenue, the shocking findings are that people who like to gamble, or gamble more frequently, which does include the 1 per cent with gambling problems, disproportionately contribute to the gaming revenues of casinos, et cetera. This is like saying that season ticket holders to the Montreal Canadiens contribute more to the box office than those who go to one or two games a year, or that people who like to drink wine with their meals contribute more to alcohol sales than teetotallers, or that smokers pay more tobacco taxes than non-smokers. It is a self-evident truth.
Unlike those shocked and appalled by the reported conclusion that 35 per cent of gaming revenues are contributed by less than 5 per cent of the adult population with moderate and severe problems — which findings, incidentally, are well in excess of any previous studies, including those of the University of Chicago that determined that less than 4 per cent of gross daily casino revenues are attributable to pathological gamblers. — I actually read the whole report, gave the authors the benefit of the doubt that it was entirely correct and crunched their numbers. One can certainly argue with the methodology and leaps of faith and logic employed by the authors. Even they placed great limits on their findings.
To quote from the report:
...the findings concerning gambling expenditures are tentative.... The proportion of revenue from severe problem gamblers is very tentative...reported expenditures did not match up to actual revenues...
The report conclusions are based upon the premise that if all types of gamblers minimize and exaggerate to the same extent, then the proportion of revenues derived from problem gamblers would be the same regardless, that is, that the lies and reported errors in the data will equal and balance out in the end. I would say that rigour seems to be somewhat lacking.
That the incidence of problem gaming estimated by the authors is anywhere from 26 to 140 per cent higher than other recent studies is also highly suspect.
The report concluded that the average contribution from this segment of the population was $3,118 per person annually versus $427 for the general population. Assuming that these seemingly inflated numbers, when compared to any other study, are true, simple math tells us this is an average of $8.50 a day, about the cost of two Starbucks lattes, one glass of wine in a restaurant and less than the price of one movie ticket.
By way of comparison, a single ticket to a Toronto Maple Leafs game last year ranged from $37 to more than $400. The Raptors are offering mini-packs of 10 games for $360 to $1,800 a seat, and a single Blue Jays ticket goes form $9 for a nosebleed seat to $205. This translates into a full season single seat costing up to $16,000 or more. Are these people addicted? Do they need treatment or protective legislation?
You might be more comfortable with the comparison with alcohol consumption. In Ontario, the LCBO reports that the Ontario alcohol beverage market is $8 billion, almost twice the size of the gaming market. The Centre for Addiction and Mental Health reports that 82 per cent of Ontario's adults consume alcohol, 10 per cent self-identify as heavy drinkers, which is more than twice the number of gamblers with mild to severe problems, and 5 per cent are physically dependent on alcohol, which is five times more than those with severe gambling problems. No doubt these heavy and physically dependent drinkers also contribute a staggeringly disproportionate share of government revenue from alcohol.
My point is that most of us drink responsibly. Gaming is a harmless entertainment for between 95 and 99 per cent of the population. Problem gaming is a serious issue for those afflicted and their families, as is the excess consumption of alcohol, but I do not see a hue and cry or a proposed bill from the Senate for a moratorium on liquor, wine and beer sales or the closing of licensed hospitality establishments. I have to ask: Why the double standard?
If history has taught us anything, it is that prohibition or severely limiting access does not work. It just drives activity underground and criminalizes the normal, responsible, social behaviour of the vast majority of people.
As the bill under consideration is meant to limit VLTs to racetracks and casinos and remove them from commercially zoned small businesses, I would like to share my experience in the sports bar business in Las Vegas. Our pubs were typically between 4,000 and 5,000 square feet, sports themed with multiple televisions, some large screen TVs, pool tables, shuffle boards, darts and other group games, and 15 video poker machines, usually built right into the bar. Our goal was to create a clean, comfortable, convivial home away from home, a place where our customers could have fun with friends and neighbours and make new friends. Our primary products were cold beer, good food and gaming. Our business plan was based upon a little bit of money from a lot of people, and by that we meant local people. Our continuing business was dependent on return customers who had an entertainment budget and would stick to it, rather than vacuuming every dollar out of their pockets once.
Our patrons preferred smaller, friendlier local spots rather than a larger, impersonal, stranger-filled racino or casino, which there are many in Las Vegas, as you all know. This type of small, intimate facility, properly managed and regulated, is much better suited to monitor customer conduct and spot excessive behaviour than a large, anonymous racetrack, slot floor or casino. We did not have customers wearing diapers, and we sure would not let them urinate on the floor or serve them to the point of being physically ill. The testimony you have heard previously about that simply reflects shoddy management and a fundamental lack of proper oversight and regulation.
The bill under consideration reminds me of campaigns by larger casino operators in Nevada to oppose smaller local facilities in an attempt to crush small business and grab more market share.
In closing, I would like you to consider the following three questions.
One: If VLTs are the horrible scourge portrayed, why are you not banning them entirely rather than diverting revenue from small businesses and transferring it to racetrack owners and casinos?
Two: Do you think it is a good idea to transfer significant small business income and wealth to racetrack owners and casinos? For example, according to the Lotto Québec annual report, there was $1.129 billion of spending and $277 million paid to VLT location operators in 2004. By any measure of economic impact, this would represent a significant contribution to the various regional economies and the salaries of ordinary Quebecers, enough to pay the salaries for between 5,000 and 9,000 full- and part-time jobs, depending on the method of measurement. Do you really think it is better to shift such significant hospitality and entertainment spending from local venues in smaller communities to larger venues, racetrack owners and government-owned casinos in bigger communities? In Quebec alone, it would completely eliminate $277 million of annual small business income from the provincial GDP. This would be a $1- billion-plus transfer of wealth to the big guys.
Three: Do you really think that compulsive gambling behaviour can be better monitored in large, anonymous facilities than in smaller venues where it is much more likely that the service personnel would have a personal knowledge of the clientele and be able to spot compulsive behaviour?
I would be pleased to try to answer any questions you may have.
The Chairman: I think you participated in the creation of gaming policy and casino development in Ontario.
Mr. Rutsey: Yes.
The Chairman: It was reported in an article published on May 20, 2000 in the Ottawa Citizen that more than 20,000 illegal video lottery terminals are in circulation in the province of Ontario, according to police authorities. One of the legitimate concerns with this bill is that by banning VLTs we could open the door to some illegal activities. I would like to have your opinion on that.
Mr. Rutsey: That is very true. If you speak to anyone in law enforcement, as I have done, they will tell you that the number of grey market or illegal VLTs went down substantially with the introduction of legalized gaming in Ontario. Again, people like to gamble, and if you give them a choice between a safe, legal environment versus an illegal, dodgy environment, they will always choose the safe legal one. The reason they still exist is that many communities do not have ready access to legal forms of gaming, and that is probably where you will find the majority of the still-existing illegal or grey market machines.
The Chairman: Do you think the gaming industry has a responsibility to address a major social problem like pathological gaming?
Mr. Rutsey: I think they do, but I think they do more than any other industry.
I think they do more than for any other industry. I do not have the numbers in front of me, but the Ontario Lottery and Gaming Corporation dedicates a significant amount of money directly to combat compulsive gaming behaviour, as opposed to say the LCBO, which contributes not one dollar but takes credit on their Web site for letting Mothers Against Drunk Driving put little tin boxes in their stores. I think that people hold the gaming industry to a higher standard than they do other industries, and I think the gaming industry has responded. They do have codes of conduct and self-exclusion programs in place. Nothing is perfect, but they certainly go a lot further than any other similar industry, such as alcohol.
Senator Andreychuk: Thank you for bringing a different perspective so that we can weigh all of them.
I take it from your presentation that you think the fault lies in the way that either municipal or provincial authorities are doing the zoning and other related regulation of VLTs. Do you think that if the authorities exercised their responsibilities better, it might clean up some of the excesses of VLTs in neighbourhoods?
Mr. Rutsey: Yes, I do. With regard to kids sneaking into bars to play the games, we all probably snuck into bars to try to get a drink when we were younger. You used to have to be 21 to get into a bar, and I was in a couple of bars in Toronto before I was 21. It is an ongoing issue, but it is a policing issue and a management issue.
It may seem strange, because people have a different view of Las Vegas and Nevada, but there they treat gaming as what they call a privileged industry. You do not have a right to operate; it is a privilege. When you get a licence, you take on tremendous responsibilities. You might get away with allowing underage people into your facility to gamble once or twice, but then they will pull your licence and put you out of business, so people take it very seriously. The police check the neighbourhood bars. There are aggressive carding systems in place in all the bars. There is probably a huge trade in counterfeit identification, but it is taken very seriously.
I do not mean to put words in Senator Lapointe's mouth, but it sounds like he is talking about some locations that are more concerned about making a couple of dollars quickly today than they are about running a business in a responsible manner, and that is an issue for the local police and municipal licensing officials.
Senator Andreychuk: I am interested in the Harvard Medical School study. Do you know of any similar study in Canada?
I grew up in Saskatoon, which was founded on the Temperance Society. The debate on the good or evil of alcohol has been with us for centuries. Is part of the problem that gambling was hidden and done by very few but now it has become prevalent and we do not yet fully understand it? Is it a matter of education and reorienting business and governments to deal with it responsibly and put the proper controls on it?
Mr. Rutsey: I am not aware of similar studies in Canada.
I agree with your analogy to alcohol. To refer back to when I was a kid again, in Ontario we had taverns where we could drink that had a men's room and a ladies' and escorts' room. The men's room was the filthiest place you could imagine. The floors were dirty and the tables and chairs looked as though they had been taken from the garbage. It was as though the government said that we could drink but we had better not enjoy ourselves.
We have moved on from there, but we are now going through a similar societal attitude toward gambling. People have been doing it since time began. For between 95 and 99 per cent of us, it is not an issue; it is just another entertainment choice.
If we took the same approach to alcohol, there would be three places in Toronto where you could drink, and they would be huge stadiums. You would not be able to buy alcohol to take home. You would not be able to have wine at home with your dinner. I am not suggesting that we do that, but we are using that kind of approach to gaming. We are saying that it is bad and we do not like it, but if someone wants to do it, we will look the other way.
Gambling is harmless entertainment for the vast majority of people, so I do not understand why we create a general policy based on a very small portion of the population's pathology, although that is not to say that we should not have treatment programs in place for them.
Senator Andreychuk: Our approach to alcohol has been one of trial and error. We have gone through phases where we have restricted it entirely and phases of more liberal approaches to it, along with which have come with a lot of education and a lot of support systems. With gambling, there does not seem to be the education or the support systems, nor are we entirely sure how to handle it.
There is real controversy with the casinos that have sprung up around the country. It is a recent phenomenon and we do not know what the fallout will be. We are seeing the negative side of it, which is why we are here. How do we attack this?
Mr. Rutsey: I do not think that legalizing gambling or gaming has created the pathology. It has brought it above ground where people can see it, and now people have a ready target to blame.
I can speak from my own experience in my family. My dad liked to bet on the races too often and there were a couple of occasions when there were some serious consequences for our family as a result, so I do not take this lightly. However, I think that a better approach is to legalize an activity that many people like to do and to provide for fair games that people can trust in environments where people can be seen so that they are acting in a less clandestine way.
Aberrant behaviour thrives in clandestine locales.
Senator Rivest: Do you believe that the increase in the number of video machines would, as a direct consequence, increase the number of pathological players?
Mr. Rutsey: The short answer is probably not. One per cent of the population is consistently tracked as having a severe pathology, and they are going to gamble one way or another. Slot machines and VLTs are the games that 77 to 78 per cent of all gamblers like to play. If you are a pathological gambler and you have access to various forms of gaming, you will choose the form that you most enjoy. It is just like alcohol. If you like to drink beer, you will drink beer; if you like to drink over-proof wine, that is what you will drink. It is your poison of choice.
I do not think it has necessarily raised the pathology levels. All it has done is made it much more visible because these people are now in public places feeding their addiction as opposed to doing it privately or in back rooms or alleys.
Senator Rivest: If there is an open bar at a college, can we expect that more students will have alcohol problems?
Mr. Rutsey: In any university town, whether there is a bar on campus or bars surrounding the campus, the kids who want to drink will drink and the kids who do not want to drink will not drink. It is self-evident that easier access makes it easier to do anything.
Senator Rivest: Do you see absolutely no link between the number of video poker machines and the number of persons who have problems?
Mr. Rutsey: I would say that the link is tenuous at best. It might be incremental, but I think it is a very small increment. The numbers of pathological gamblers do not leap with the introduction of different forms of gaming. It just becomes more visible.
We have been tracking this for a number of years in Canada, and it has always been around 1 per cent. As I said, in Canada we have 38,000 VLTs and in Spain there are 450,000. I do not think there are 10 or 12 times more pathological gamblers in Spain than in Canada. The short answer is that it probably does not have a great impact.
Senator Rivest: Do you believe that people will agree with the government significantly increasing the number of video poker games or casinos? People will fear that it will cause social problems. I think there is a clear link between the number of places where gambling is allowed and the level of gambling problems.
Mr. Rutsey: I think you are right, but there was a fear in the 1920s and 1930s that availability of alcohol would increase alcoholism, and I think that alcoholism rates rose during prohibition. What people think or fear may not necessarily be reflective of the truth of a situation.
Senator Sibbeston: I see from the information that you gave us about yourself that you are involved with big casinos, so I do not know whether you are the right person to provide us with information we are looking for. Senator Lapointe's concerns are mainly about poor working people who have gambling problems. We are not dealing with rich people who go to Las Vegas. Those people generally have money and are sufficiently disciplined that they would not harm themselves.
This reminds me of the problem of alcohol among native people in the Northwest Territories, where I am from. The government brought liquor into the North not realizing the harm that would be done to people. Europeans have had thousands of years of experience with alcohol, but Aboriginal people have not. They have just come from the igloos and tepees, as it were, into society, and they do not know alcohol. It has been medically shown that Aboriginal peoples' bodies do not know how to handle the carbohydrates, so alcohol has a bigger effect on them.
It was devastating to bring alcohol to the native people; but the government thought that since that is the way it was in the South, they would make alcohol available to Aboriginal people. The consequences are devastating; people die from excessive drinking.
There are similarities between that and the situation of VLTs. I believe that Senator Lapointe is concerned about the consequences in neighbourhoods, communities and local pubs where VLTs are operating, where ordinary working people do not have the discipline to handle gambling addictions and invariably hurt themselves.
You operate at a very high level. You do not see the consequences for people in the neighbourhoods and communities. This is a cry for hope; a cry for help for people who have problems and whose lives are devastated. It is an attempt to, in a small way, ensure that people do not suffer from this.
I do not know whether you can be very helpful to us in this, because you make your livelihood from dealing with establishments involved in gambling. You are probably far removed from the neighbourhood situation. Nevertheless, if you can understand what the concern is, can you help us in that regard?
Mr. Rutsey: As I told you, I have greatly varied experience. I have acted as a consultant and adviser to governments on large gaming-related issues and in the private sector I was the CEO of a company that owned 21 neighbourhood bars in Las Vegas. I was right there. These establishments were in all kinds of neighbourhoods, ranging from poor to wealthy. The bars in the wealthier neighbourhoods actually made more money than the bars in the poor communities, because wealthier people have a larger budget and more discretionary income.
I understand your heartfelt response to the problem with alcohol consumption in the North. However, I do not think that is a good analogy. Gambling has been in society since time began. There is not a genetic defect in Canadians generally that makes them addicted to gaming the minute someone deals them a hand of cards.
The people who go to Las Vegas are a cross-section of Middle America or middle Canada. The average person who gambles and does not have a problem is a little older than the general population, has a few more dollars and is a little better educated. The profile of the pathological or problem gambler is someone younger, less well educated and non- Caucasian. Those are the facts. You need to do is design programs that reach out and find those people.
Another issue is the treatment of people with addictions, be they alcoholics, gambling addicts or excessive smoker. We do not take them into custody, and you cannot force treatment on people. People have to seek out treatment for whatever their problems are, or their problems will never be solved. The gaming industry has many programs to help people. They make much more available than does the alcohol industry with respect to treating problem drinking.
The gaming industry could do a better job, but if you take a legitimate business away from small businesses and hand it to wealthy racetrack owners or casino operators, the same people will go there. You will only be shifting economic activity from small business to big business. You will not change the way people gamble or behave.
Senator Sibbeston: Further to my example from the North, after many public meetings we did institute in controls. We admitted that native people cannot handle alcohol and decided that as a government and a society we were not going to make it readily available.
I believe that Senator Lapointe wants the government to send a message to people. If we allow gambling at every corner, it is like society and government acknowledging that it is a good lifestyle and encouraging it. If we took it away, it would be recognition by the government that it is not such a good thing, that our society is not coping with it very well, that there are dire consequences and that the government is going to do all it can to at least ensure that it is not readily available in the neighbourhoods. There is not much you can do about gambling at racetracks and in bigger centres; that it is part of our society.
I believe it would help if the government took that stand. It would send a message to society that it is not such a good idea to have it so readily available.
Mr. Rutsey: I take your point, but I believe that those people will find other ways to gamble. Their pathology will not go away and the impact on their family will be the same.
I hope you do not think I am suggesting that we need a bar with 15 to 30 VLTs on every corner in every neighbourhood. It is an issue of supply and demand just as licensed establishments in general are. How many licensed and regulated entertainment activities are appropriate in any area, be they taverns, restaurants or movie theatres? That is a more realistic approach.
[Translation]
Senator Lapointe: I congratulate for what you have brought to the committee. I found the Multigames International publicity very interesting. It brings out all the glamour of these establishments, brings that special environment to life, we see these young women walking about with drinks, et cetera.
However, this publicity is about places that are well monitored. I went to Las Vegas last January; I was the guest of René Angelil, Céline Dion's husband. I stayed in a suite and was treated like a king. I arrived with $1,800 U.S. and left with $1,900. I bought a lot of clothes.
Senator Joyal: Did you declare everything at customs when you came back here?
Senator Lapointe: No, because they ask if you have $10,000 or more.
Mr. Rutsey, I am a gambler and I know what I am talking about. When I used to go to France I was often invited to go and play at the Monte Carlo Casino. I think I can say that I have some experience with gambling.
I want it to be clearly specified that I am not against casinos. My suggestion that video lottery terminals be removed from bars rests on the fact that there is a proliferation of gaming establishments in close proximity to modest-income neighbourhoods.
I know what I am talking about when I say that video lottery terminals have been installed in poorer neighborhoods. I toured them, I did my own investigation. It is important to recognize that all the venues which Multigames International has interests in are venues that are under strict surveillance, whereas in the bars from Saint- Henri to Montreal, there is no surveillance.
The example you gave of people wearing diapers did not come from me. It was cited by the president of the restaurant and bar employees' association; he stated that nine out of ten employees voted against video lottery terminals, not only because they had an adverse effect on their income, but because they could plainly see what they did to people.
In your presentation you did not talk about suicides among compulsive gamblers. Understand me. I am not against casinos because these facilities are controlled and strictly monitored. I went to the Rideau-Carleton casino, where everything was very well kept, and I think that such places make a contribution.
When you say that racetrack owners are very rich, I beg to differ; that is not the case everywhere. Just in case you are not aware of this, there are not very many racetracks in North America that make millions; that is why video lottery terminals were installed in them, because they bring in more than the racehorses.
As I said, your publicity is very well done and I think you are sincere, but perhaps you should change suits. You should go and walk around in these places as I did, in order to see all of the ravages cause by video lottery terminals.
The suicide rate linked to VLTs is alarming. You know as well as I do that someone who wants to commit suicide does not always take the time to write a letter. What you have presented to us is very well structured, but you do not address the human suffering that all of this causes, nor do you refer to the social costs involved.
An outside study has proven that the social costs — absenteeism, suicide, depression, family breakdown, children going hungry, are three to five times greater than the income the government derives from this. I am talking about Quebec since these are figures that come from Quebec for the most part. In your operation, things are completely different. You are there, you are in business to make money, but I don't believe you when you say that only 1 per cent of players have a gambling problem.
The percentage may not be as high as for video lottery terminals in the province of Quebec where I did my research. I am told that the situation is the same in Alberta and that the problem may be even more serious in Alberta. I did not go there, so I can not comment first-hand.
In brief, I thank you for your presentation, and I respect your data, but I have to tell you that I do not share your opinion on this in any way. This is very nice publicity, but you have not carried out research with serious journalists concerning the flip side of the coin.
[English]
Mr. Rutsey: Thank you for your kind words. I would like you to know that Multigames International conducts no business in Canada. All of our business is international, so I am not here trying to drum up business or gain market share or advantage for myself. Further, I do not mean to diminish the legitimate suffering of people who have problems. As I said, it has touched my family. I do not doubt for a moment your research with respect to where bars with VLTs are located in Montreal. As I said in my remarks, you are probably right, but I think that is because they have gone where the zoning officials will let them go. I would agree with you that there may well be too many in specific neighbourhoods.
However, my overall premise is that taking VLTs out of well-run neighbourhood facilities will not stop people who have gambling problems from gambling. You will not have a VLT to point at to illustrate their problem, but they will do it in another manner that will be less visible to you. The pathology numbers do not change based on the number of facilities available in which to gamble.
I cannot argue or ignore human suffering. However, I do not think there is a direct link between the operation of VLT style gaming in well-managed and well-operated businesses and increased levels of pathological gambling. I do not think there are any studies that prove that.
It sounds to me that the kind of places to which you went were dirty, rundown joints that were badly managed where they were taking advantage of people by letting them play while intoxicated and where they were turning a blind eye to underage kids sneaking in. I would simply pull their business licence. However, it is excessive to take away an activity with which 99 per cent of people do not have a problem just because a couple of people run bad businesses.
Senator Mercer: Your comments about enforcement are well taken and perhaps we could make recommendations on that in our report on this bill. However, this is a bill to remove VLTs from corner stores and neighbourhood bars and move them into racetracks and casinos, centralized operations that are built for gambling and not places where you can buy a quart of milk or go to have a beer on a Friday night with your friends. These places are built for gaming.
If I was an alcoholic and I never had a drink, I would not know I was an alcoholic. If I was addicted to gambling and I was never exposed to gambling, I would not know I was addicted to gambling. I suggest that your theory of having VLTs in corner stores and local bars, be they well run or not, be they dirty or clean, exposes people who may not otherwise have been exposed to gambling because they do not frequent racetracks or casinos, but they do buy a quart of milk and they do have a beer and wings with their friends on Friday nights. We can say they have the choice of not using them but, just as you had a drink in Toronto when you were underage, everyone experiments a little.
You say that people can gamble elsewhere, even at home if they want, but that is not something that society and parliamentarians can control. We cannot regulate a poker game in your living room. However, we can control commercial outlets that attract people, so I challenge your statements on that.
In your submission you say that you have heard it said that young people are disproportionately at risk from VLTs, but that in fact VLTs and slots are less popular with young gamblers, that only 69 per cent of those aged 21 to 35 prefer them versus 77 per cent of those over 50. If I were in a retail business and you told me that 69 per cent of people aged 21 to 35 liked or preferred VLTs, I would be a happy camper because 69 per cent of that market is interested in my product. Any marketer would tell you that that is a good chunk of the marketplace, so I challenge that.
I also am pleased to hear the other side of this argument, and it is important that we do. However, I maintain that if I go to the corner store and there is no VLT there, I am not going to use a VLT.
Mr. Rutsey: I cannot disagree with much of what you said. I do not think that VLTs should be in corner stores either, where kids buy candy bars and people buy milk. I do not see an issue with selling lottery tickets in a Mac's Milk because that is a much more passive or softer form of gaming. That seems to have become very socially acceptable. I agree with you in that I would not want to see anyone standing in a corner store playing a VLT. It does not make sense. In Las Vegas, they have VLTs in grocery stores. That is the culture there. I would not want to see that in Canada. That, to my mind, does not reflect the kind of place where we want to live.
However, I do not see it as a serious issue in properly run, licensed establishments that are age controlled by virtue of the fact that they serve alcoholic beverages, especially with the Canadian model where there are not a large number of the machines in any one bar. I have to disagree with you with respect to neighbourhood bars. It is more of an operational and law enforcement issue, as you have said.
Senator Pearson: It was helpful to hear what you had to say. It is helpful for those of us who have been more affected by Dostoevsky's The Gambler than by generally observing the world. It puts a perspective on what we have been talking about.
Although you do not have to answer this question, I cannot resist asking it. Much of your argumentation about things that people like to do is quite persuasive. How do you feel about the decriminalization of marijuana?
Mr. Rutsey: Apparently, the government of the day wants to do that. I think it will save a lot of young kids an unnecessary criminal record and is, therefore, probably a good thing. The use of marijuana is too widespread, and to put that many young people at risk of a criminal record is probably not in the best interests of a society.
Senator Eyton: As you may know, senators, Mr. Rutsey is here today at my suggestion. I was happy that he, at the end of his remarks, made it clear that he has no financial interest in any gaming business in Canada and is appearing here as a Canadian citizen and a volunteer trying to do things right. He does that with a considerable background, including, you will note from his résumé, being the leader of the gaming tourism sector of what is now Price Waterhouse Coopers, a prominent international firm. He was the resident expert there in what he was speaking to. His presentation reflected statistical responses to a lot of anecdotal evidence that we have heard, which is why I suggested his name.
The three questions with which he ended his presentation are vital to this committee's deliberations and report. First, very simply, if VLTs are that bad, should they not be banned entirely? Second, should we transfer that kind of wealth from small business to big business? The value of that business nationally is between $2 billion and $3 billion, a significant transfer of wealth from little operators to big guys. Third, do you really think that bad behaviour is better monitored in larger enterprises such as racetracks and casinos?
I want to share with Senator Lapointe that I am not as good as he is. If he is that successful at gaming, he should promote all forms of it everywhere, and he can get richer every day. I was in Nassau last week and did some gambling there. I made $2,000 into $200.
My question for Mr. Rutsey is two-fold. His comments do not reflect Internet gaming, which is a modern phenomenon and which, by all reports, is increasing. It is accessible to one and all, with few limits, and is increasing in popularity. This is not directly on point, but it does represent an important factor in all considerations of gaming and how best to regulate it.
Although you probably have not thought about this thoroughly, can you comment on the implications of Internet gaming and its increasing popularity in relation to our subject matter?
Mr. Rutsey: That is a good question because the advent of Internet gaming has put a VLT into the home of anyone with $300 to buy a computer. People can play to their heart's content with no monitoring at all. I am not suggesting that the people who operate Internet casinos are anything but honest, upright individuals, but it is amazing that every time you get 20, the dealer happens to get 21. I personally would not want to play.
There is a tremendous opportunity for a first-world jurisdiction to create a regulatory framework for Internet gaming, which will not go away. It would be a great source of revenue and repatriation of funds for whatever jurisdiction chooses to create rules and standards for legitimate, honest Internet gaming operation, as well as an importation of funds from all the players around the world who will be playing the games approved and regulated by that regulator.
I know you have lots to do, but that might be something that you might want to get jurisdiction to consider.
Senator Ringuette: How much have the businesses that you help to run been affected in the last few years by on-line gambling?
Mr. Rutsey: Studies have been done on the various impacts. Bigger impacts have been issues like SARS and 9/11, which have affected tourism. Those things caused a huge decrease. People are not frequenting our establishments as often because people who have the opportunity just play at home, just as when the smoking rules with respect to gaming establishments were changed there was a drop in activity.
No one can measure what is happening on the Internet because there are no reporting mechanisms. The money just disappears. It is hard to measure.
That was a long way of saying that I do not have a good answer for you.
Senator Ringuette: I am surprised by the comment that on-line gambling is accessible to all and that you can buy a computer for $300, never mind the monthly Internet fee. That is like comparing apples and oranges with regard to this bill.
This bill deals in the main with a portion of our society that cannot afford decent groceries, never mind affording a computer and the monthly cost of Internet access. We have to weigh all of that in our considerations. I understand the target customers of your line of business. Some of them may be lured to on-line gambling, but probably not that many. We should not compare apples and oranges.
Mr. Rutsey: I did not mean to. I think you are right in that most people who do not have a problem gambling like the social aspect of it. They have a budget and they stick to it. You might like to go out for dinner and have a nice bottle of wine; they might like to play blackjack. Most people who gamble do not expect to win — it is a surprise and a real bonus if they do — but they do not want to lose too quickly. They are buying a block of entertainment. It is an ephemeral experience. They are expecting to be there and play the game for a given number of hours.
It is like going to a baseball game. When you are finished, what do you have? You have a sore stomach from the hot dog and the ephemeral experience of watching your team either win or lose. It is the same kind of thing for those people.
Senator Ringuette: I can understand your perspective and the target groups that you work with. However, I reiterate that it is like comparing apples and oranges with regard to the group of people that Senator Lapointe is trying to target with this bill.
Mr. Rutsey: I do not mean to sound disrespectful, but it sounds kind of paternalistic to pass a law that would affect only poor people.
Senator Ringuette: It is no different than drunk-driving legislation. You set a limit. It is not patronizing if you set parameters in which it is socially and economically acceptable. It is not being paternalistic.
We used to have absolutely no law with regard to drinking and driving. After many decades, we saw the result of that on our society, our economy and our families. I beg to differ with you.
Mr. Rutsey: Drunk driving crosses all classes. You started your remarks by saying that you wanted to help people who could not buy groceries, and that is what I was picking up on. I apologize if I offended you.
Senator Joyal: Thank you for your presentation. Would you say that the Canadian gambling industry is generally more regulated than the American industry?
Mr. Rutsey: Are you talking about the level of regulation or the strictness of it?
Senator Joyal: I am asking about the level of regulation.
Mr. Rutsey: There are different jurisdictions. In some states, you can only buy lottery tickets; in other states, like Nevada and Mississippi, there is a lot of gambling.
The standards are pretty high. The major difference between Canada and the United States is that in Canada the prevailing opinion today is that, if gambling is going to occur, the government will own and operate the industry rather than the private sector making a lot of money. I come from the other side, so perhaps I am a little biased, but I think there is an essential contradiction there because the government is also the regulator. How do you regulate or sanction yourself?
It is better to tax it and regulate it and let business operate it. That way, if business gets out of line, you can whack them. It is very hard for a government to punish itself. There is an essential contradiction there.
However, most of the regulatory frameworks in Canada are based upon American precedents. There are two basic models of regulation; the New Jersey model and the Nevada model. New Jersey is very bureaucratic. For example, you used to need four or five different levels of permission to move a slot machine just across a casino floor. In Nevada it is really self-regulation. They take the position that they do not have enough manpower to check on everyone all the time, so they do spot audits; but if you ever step out of line, you are out of the business.
In Canada, we seem to have struck a balance between the two.
Senator Sibbeston: With respect, you said that gambling is not a problem for 98 per cent of people. I have to take issue with that. To me, this is analogous to bars. If you watch people at the Chateau Laurier during the course of an evening, you will see that the clientele is generally high-class, disciplined people. They will have a few drinks and go back to their rooms.
There is a bar in Yellowknife called the Gold Range. It is one of the busiest bars in Canada in terms of per capita sales of alcohol. A variety of people frequent that bar. Some come from the mines with thousands of dollars that they have made in the bush that they want to spend and have a good time with. Some are government people and some are people on welfare. At any given time, there is a fight going on in that bar, there are people drunk and there are people cheating on their partners. That is the setting I am talking about. These are not people like Senator Eyton who can go to a casino with a limit on the amount of money they will spend and can afford to lose $1,800.
Could it be that the evidence you gave us today is from the perspective of your world and your experience, which is not necessarily valid in terms of the issue before us, that being problem gamblers who kill themselves and cause all sorts of societal and family disruptions?
Mr. Rutsey: First, I think we are both talking about the same total population. In any given country, approximately 1 per cent of the population either is or is at risk of becoming pathological gamblers and between 2 per cent and 4 per cent more of the general population will have some kind of problem handling gambling. They will not be compulsive, but they may gamble to excess. They may be able to stop themselves, but they may not necessarily be as disciplined as anyone at this table would be.
I once had a summer job peeling moss off rocks so that the diamond drillers could go in drill. I met those guys and know exactly what you are talking about. I witnessed that kind of behaviour, and it is crazy. There may be a whole lot of them in one place, but overall they form a very small part of society. Do you really want to write a law to govern the behaviour of 1 per cent of the population? Is that a good way to govern?
The Chairman: Mr. Rutsey, hearing what you had to say today will help us further study Bill S-11. I am pleased that you could come and meet with us. Thank you very much for your help.
Mr. Rutsey: It was my pleasure. I would like to thank you all for being so kind to me. I was warned that you could be tough, but you were very nice.
The committee adjourned.