A Kansas City law firm run by some of the state’s most well-connected Republicans has been paid $395,000 by the cash-strapped Missouri Gaming Commission to study how the casino regulator investigates license applicants.
Graves Garrett partner Nathan Garrett, in a three-page engagement letter, described the work as “serving as Independent Counsel in investigating Missouri gaming license background investigations, processing and awards.”
He agreed to reduce his normal hourly rate from $595 to $495, with others at the firm billing from $195 to $405 an hour. The agreement does not set a cap on total costs or a deadline for completing the work.
The five-member commission approved the agreement in a closed meeting on April 17, 2020, when the state’s 13 casinos had been shut for a month in response to the COVID pandemic.
In an April 6 meeting, members discussed how casino closures put the commission at risk of running out of money before the end of fiscal year. The commission, which is funded by a fee on casino admissions, needed an infusion of $1.5 million in general revenue to support its operations in the spring to offset lost fee income.
The contract, and the investigation by the law firm, caps a contentious year at the gaming commission, which saw its executive director resign last spring amid allegations that the governor’s office was attempting to hamstring his efforts to cut costs.
Indeed, the timing of the decision to hire Graves Garrett raised some eyebrows, as it coincided with the sudden resignation of then-Executive Director David Grothaus.
Grothaus, in his April 1 resignation letter, wrote he had attempted to cut costs for licensing investigation and security duties assigned by contract to the Missouri State Highway Patrol but faced stiff resistance.
“As processes were implemented to ensure accountability the highway patrol refused to participate and engaged in ‘guerrilla warfare’ in an attempt to influence the commission decisions,” Grothaus wrote. “It now seems there is more interest in protecting the assignments of highway patrol officers than in ensuring a sound, proactive, technically competent, top-notch regulatory (Missouri Gaming Commission) effort.”
But the investigation being done by Graves Garrett, interviews with commissioners and former gaming commission employees show, is not to determine whether the commission could save money by changing its operations. Instead, the law firm is reviewing whether civilian commission staff edited work done by highway patrol investigators in ways that had an impact on licensing decisions.
“The complaint by the troopers to the chairman is that (Missouri Gaming Commission) employees were changing their reports and that by changing the reports, the commissioners were not getting the data they needed to properly assess the licensing worthiness,” Grothaus said in an interview.
Making the issue how reports are presented, rather than the cost of using the patrol, is a distraction from making the commission more efficient, Grothaus said.
“It is total hogwash,” he said. “It is a complete smokescreen.”
Grothaus and others also questioned the selection of Graves Garrett as the firm to do the work. There was no formal bidding process, in part because the Gaming Commission is exempt from state purchasing rules and in part because a 1980 opinion from the Attorney General’s Office states that no state agency has to seek proposals before hiring private attorneys.
The Graves in Graves Garrett is Todd Graves, former U.S. Attorney for the Western District of Missouri, former Missouri Republican Party chairman and brother of U.S. Rep. Sam Graves, R-Tarkio.
Nathan Garrett, a former patrol trooper, worked as a division chief for Graves in the U.S. Attorney’s office and was named by then-Gov. Eric Greitens in 2017 to the Kansas City Board of Police Commissioners. The firm includes former acting U.S. Attorney General Matt Whitaker and Lucinda Luetkemeyer, former general counsel to Greitens and wife of state Sen. Tony Luetkemeyer, R-Parkville.
Garrett did not respond to messages seeking comment. The patrol had not responded to questions submitted to a spokesman by publication time.
Parson’s office also did not respond to questions about the contract and other issues at the commission.
Ed Grewach, staff counsel, declined to give any more information about the work being done.
The next meeting of the commission is scheduled for 9:30 a.m. Wednesday. Any discussion of the Graves Garrett work, which involves closed material from licensing investigations, would take part in closed session.
Commissioner Daniel Finney, the longest-serving current member, declined to discuss any details of the firm’s work. He did, however, express confidence in the work being done.
“There is nothing that I have seen in the work product that would make me call into question the good faith of the firm,” Finney said.
Grothaus, however, said the investigation is unnecessary.
“It is a complete waste of money, time and effort as far as I am concerned,” he said.
Commission Chairman Mike Leara, a former state lawmaker, did not respond to a message seeking comment.
The Missouri Gaming Commission regulates the state’s 13 casinos and bingo games operated by not-for-profit groups. Created in the 1990s after voters approved casino gambling, a major part of its operations is licensing the casinos themselves, vendors supplying games like slot machines and anyone who wants to work on casino premises.
Under state law, it can contract with state and federal law enforcement agencies to provide security at casinos and conduct some or all of the licensing investigative work. Since the first casinos opened, that contract work has been done by the highway patrol’s gaming division, with an authorized strength of 134 troopers paid from gaming commission funds.
A tax on the money lost by gamblers goes to education programs. The commission is funded by the state’s half of a $2-per-person boarding fee. The other half goes to the local government with jurisdiction over the casino property.
If boarding fees generate more than is needed for commission operations, state law allocates the first $12.5 million of the surplus to four programs. College scholarships get $5 million, the Missouri National Guard gets $4 million, the Veterans Commission Capital Improvements fund gets $3 million and grants for homeless and gang prevention programs get $500,000.
All the remaining surplus goes to the veterans commission fund.
Over the five years ending June 30, 2019 – before disruptions due to COVID-19 – casino admissions fell almost 16 percent. Transfers to the Veterans Commission fund fell almost 30 percent, from $26.7 million in fiscal 2014 to $19 million in fiscal 2019.
With no foot traffic in casinos from March 17 to May 31, the transfer to veterans programs for fiscal 2020 was only $8.8 million.
Those declining transfers were the issue that raised alarms for Grothaus soon after he took his post in March 2019.
He questioned whether the on-site security work could be done by local law enforcement or casino guards and whether career investigators would be a more effective tool for licensing than patrol personnel.
The commission pays about $550,000 a year for patrol vehicles, $725,000 a year for fuel, supports more than five full-time instructors at the patrol academy and provides $800,000 for equipment for the academy and patrol technical operations, state budget documents show.
The state budget even allocates about $35,000 to support the administrative payroll of the patrol.
All of that is in addition to a direct patrol payroll of more than $9 million – 50 percent more than the commission’s civilian payroll – as well as patrol fringe benefits that exceed those of regular state employees.
“Since (Missouri Gaming Commission) has no law enforcement mission and is only authorized to perform regulatory enforcement, there is no provision to pay those expenses not related to the regulatory mission,” Grothaus wrote in a management review dated April 1, the day he tendered his resignation. “This would also include vehicles and related expenses as (Missouri Gaming Commission) has no need for highway patrol officers in the casinos to have a car since their only duties are in the casino.”
COVID-19 has only exacerbated the problems already cutting into transfers. Foot traffic in Missouri casinos was down almost one-third for the period July 1 through Dec. 31 compared to the same period in 2019.
Grothaus’ push to cut costs, and re-examine the agreement between the commission and the patrol, was initially well-received by commissioners, said Maggie White, who left her post as assistant director in charge of the commission’s enforcement division in 2020.
That changed, Grothaus said, after Gov. Mike Parson appointed three new commissioners – Leara, a Republican former state representative from St. Louis County, former state Rep. Pat Conway, a St. Joseph Democrat, and David Hane, former police chief of Brookfield.
Leara became chairman.
Conway declined to discuss specifics of the contract with Graves Garrett, but said he was satisfied by the reports he had received since his appointment in 2019.
“I personally believe we have received all the information that is required for us to make a fair decision,” Conway said. “And that comes from all sources, not only the patrol but the gaming commission.”
Hane could not be reached for comment.
“Frankly I think he was appointed to do one thing,” Grothaus said of Leara. “To make sure the highway patrol wasn’t picked on.”
The tension over Grothaus’ push for change came to a head just as the COVID-19 pandemic reached the state in the spring of 2020.
Over the 25 years of the Missouri Gaming Commission’s existence, it has become a popular employer for retired troopers. Two of the last three executive directors were top officers at the patrol, including one former superintendent, and deputy director Tim McGrail is a former major in the patrol.
Grothaus also had experience as a trooper, but did not spend his career in the patrol.
The push to replace troopers with civilian employees was seen as a threat to that pipeline, White said.
“The patrol did not like that because they felt they were losing some control,” she said.
Grothaus said he decided to retire because Leara was not only uninterested in his plans for cutting costs, but seemed to be working to actively undermine him.
Leara would visit casinos and meet with troopers assigned to those sites but not meet commission civilian employees, Grothaus said. The commission held closed sessions without him, he said.
“He was doing things and not communicating with me, not working with me at all,” he said.
Within two weeks of Grothaus submitting his resignation letter, commissioner Finney called for a state audit.
A state audit is underway, according to the online report of audits in process, but it is directed toward revenues from gaming taxes dedicated to education, not the functions of the commission itself.
“After reviewing the provided information, our office closed the complaint,” Steph Deidrick, spokeswoman for State Auditor Nicole Galloway, wrote in an email to The Independent when asked about Finney’s request for an audit.
In the open portion of the April 17 meeting where the agreement with Garrett Graves was approved, Finney leveled accusations at Leara that mirrored some of Grothaus’ complaints.
During a closed session April 1, Finney said in the later meeting, Leara made “material misrepresentations” about his demand that Deputy Director Tim McGrail resign, tried to fire a mid-level employee and blocked release of the closed-meeting vote in violation of the Sunshine Law.
“In sum, this chairman has withheld the source of allegations that I did not have all of the facts necessary for a vote before I cast it,” Finney said. “This chairman has withheld and misrepresented material facts to me, potentially caused me to incur personal liability.”
Finney also commented in the open session about allegations that the patrol’s findings were not fully presented to the commission.
“I have never cast a vote as a commissioner on the Missouri Gaming Commission without being in possession and knowledge of all of the material facts necessary for my deliberation and determination of that vote,” he said.
Facing steep revenue declines after casinos closed, the commission cut staff with a combined 80 years of state service and has not hired a new executive director.
White, Grothaus and other former employees interviewed for this report said they fear that the Garrett Graves investigation is intended to somehow show that civilian staff improperly changed licensing reports prepared by troopers.
The charge is that the edits made, or original documents omitted from a final report, made a material change that led the commission to a decision it should not have made, Grothaus said.
Discussions on licensing can be as big as whether to allow a casino merger that consolidates market control or as small as yanking a casino license for an employee who missed deadlines for reporting a misdemeanor arrest.
In both instances, substantial paperwork must be gathered and interviews conducted to determine the facts. Not all of that reaches the commission, Grothaus said.
“That is what they took to the commission and they have blown it way out of proportion,” Grothaus said. “The commissioners counted on us to condense this information down and answer, ‘so what?’”