Alberta’s Gamble with Gambling
The “crack cocaine” of gaming hooks a senior mandarin—and the provincial treasury
Before the trial, Raymond Reshke wore his shame like a bad suit. The tall, self-effacing, then-fifty-seven-year-old had, after all, lost “everything you could imagine in life.” The grandfather and churchgoer had financially destroyed friends, squandered at least $500,000, and lost his job as the assistant deputy minister of Alberta Infrastructure, the second most important civil office in the province. After Reshke pleaded guilty to defrauding the provincial government of over $100,000 in January 2004, the crown prosecutor didn’t think those collective losses were punishment enough and successfully argued for more. The judge sentenced Reshke to a nine-month jail term.
Prison didn’t erase Reshke’s sense of remorse, but it did prove a revelation. At “The Fort,” a crowded minimum security jail on the outskirts of Edmonton, the polite former civil servant met other middle-aged white males doing time for a different act of self-destruction: drinking and driving. But the majority of inmates were young aboriginals, many with gambling addictions, a dark problem that Reshke knew intimately. Between working on the cleaning crew, watching black-and-white TV, or just fighting boredom, Reshke listened to their stories and shared his own. “I played video lottery terminals,” he told them, but in Reshke’s case his addiction just happened to be aggressively promoted by his very own employer, the government of Alberta.
Alberta is the gambling mecca of Canada and a true pioneer in transforming a social vice into a respected government revenue stream. Eight out of ten Albertans gamble on legally sanctioned “games people play,” a coy government tag line. Albertans can buy lottery or scratch-and-win tickets at 2,292 outlets, gamble at one of seventeen splashy casinos, or visit 1,077 video gaming-entertainment centres, where they can try their luck with video lottery terminals (vlts). With fourteen different types of gambling readily available, Alberta boasts that its people have more “gaming” entertainment choices than any other province. With only 10 percent of Canada’s population, Alberta accounted for 19 percent of the nation’s $7-billion net gambling profits in 2003–2004.
To keep track of windfall profits, in 1999 the province established the Alberta Ministry of Gaming. Alberta Gaming, as it is known, last year proudly reported that the province’s adult population spent $20 billion on gambling. The new ministry now has the same import and respect as the education or health ministries.
Gary McCaskill calls that number mind-boggling. “That’s a lot of money that could be used for different things,” he says. McCaskill, who serves as the executive director of Edmonton’s Problem Gambling Resources Network, notes that the province’s gaming success story has a dark side. According to the Canadian Problem Gambling Index, Alberta has the second-highest rate of problem gamblers in Canada: at 5.2 percent it is edged out only by Saskatchewan’s 5.9 percent. Most are addicted to gambling on electronic machines. A 2004 review of the academic literature found that vlts and slot machines can establish addictions that destroy families and individuals faster than any other form of gambling. “While there is unanimity about the superior revenue generating capacity of electronic gambling machines for both the state and gambling venue proprietors, there is also concurrence on the distress these machines can visit on the public,” concluded the Alberta report. McCaskill adds that Reshke’s story is pretty common. “If you don’t stop, the machines will take you to the place where Reshke went: jail or suicide.”
Alberta wasn’t the only province to experiment with vlts as an efficient revenue generator in the early 1990s. New Brunswick, Quebec, Nova Scotia, and Newfoundland also signed on, and the machines now colonize eight of ten provinces, earning billions for cash-strapped governments. Canada’s bars and hotels now support nearly 90,000 electronic gaming machines, and for every $100 wagered an estimated $30 goes into provincial treasuries. No wonder then that Premier Ralph Klein is such a stalwart supporter of the gambling business. He plays vlts while cruising casino tables in Edmonton. Now a consistent source of hard cash, in 2004–2005 Alberta Gaming made more by mining citizens through vlts — $635 million — than Alberta Energy did from oil-sands royalties between 2001 and 2003.
Equipped with a randomly programmed microprocessor, a vlt is essentially a glitzy slot machine that entices players with intermittent rewards of up to $1,000. Watching adults play blackjack, keno, or poker on a vlt is a lot like watching stupefied children play a Nintendo GameCube. A European manufacturer boasts that vlts offer “a rich environment of capabilities and functionalities . . . . The player can bet, play and cashout the remaining credits at any time.” In the US, the games are known as poker machines. But Canadian politicians never liked that frank moniker. Fearing it smacked of vice, they choose the benign phrase “video lottery terminals.”
The more agreeable term, however, hides a malignant legacy. vlts have spawned bitter protests, public health condemnations, higher suicide rates, troubling crime statistics, and persistent questions about why provincial governments should regulate, promote, and profit from legally sanctioned addictions. Many researchers argue that government promotion of gambling not only violates its role as chief protector of citizens’ welfare, but also creates “a lot of collateral damage, and that’s what we are seeing,” says Garry Smith, University of Alberta professor emeritus and a gambling research specialist at the Alberta Gaming Research Institute. “They get blinded by the revenue.”
Reshke’s personal odyssey into the gambling underworld oddly parallels Alberta’s dependence on electronic gaming income. A product of rural Saskatchewan, Reshke graduated with an economics degree from the University of Saskatchewan in 1971. Friends described him as intelligent and blessed with a heart of gold, but he had no real job prospects. After months of fruitless searching, Reshke was offered a junior position in the treasury department of Alberta’s struggling Social Credit government, and he and his wife of four years moved west. The hard-working son of German Baptists earned a series of positive performance evaluations and rose through the ranks under Peter Lougheed’s charismatic Tory administration and then under Don Getty’s lacklustre one. By 1991, he had become Assistant Deputy Minister for Public Works Supply and Services.
That fall, Reshke arrived in Las Vegas with a team of Albertans to study the possibilities of machine gambling at an annual gaming conference. The diligent researchers included the province’s future deputy premier, Ken Kowalski. All stayed at the famous Mirage Hotel. The government’s interest in gambling and vlts was purely pragmatic: hobbled by debt due to low oil prices and bad investments, Alberta’s dispirited Tories required “alternative sources of revenue.”
Kowalski, a garrulous politician who served as Ralph Klein’s “minister of everything” in the early 1990s and who is now the Speaker of the House, insists that the introduction of vlts was to curb “grey machines,” the illegal gambling that had sprouted up across the province. Charter planes were heading off to Las Vegas every weekend on legal gambling junkets. Both factors prompted the government to become a gambling regulator and entrepreneur, Kowalski claims. To placate hotel owners hit by a recent 5 percent provincial tax, Kowalski offered them a consolation prize: 15 percent of the government’s share of vlt revenues, a sum that now averages $20,000 a machine per year.
While studying the mechanics of buying and installing vlts in Las Vegas, Reshke, who had never really gambled before, couldn’t help but play a slot machine. “I put in a few bucks and won $2,000 over three or four days.” The win gave Reshke what the machines were designed to produce: an ecstatic feeling that he ultimately spent the next decade chasing. Recent studies have shown that the same part of the brain stimulated by vlt gambling is also triggered by cocaine and morphine.
In the spring of 1992, Kowalski launched Alberta’s vlt invasion with little fanfare and no real public debate. The province located 435 machines in eighty-four bars and lounges, but Kowalski’s ultimate goal was to plant 8,600 terminals throughout Alberta. “It was virgin territory,” says Kowalski, who claims that he was unsure the province would make money from vlts or if people would play them. According to an Alberta Lotteries annual report, the machines generated $17.4 million in 1992 – 1993. By 1995 – 1996, gaming revenues had grown to $487.8 million, thanks largely to vlts. “Never once did we talk about the social impacts of vlts,” revealed one government official, speaking on condition of anonymity. “It was always how much and where. Those were the only considerations.” In fact, while academics, citizens’ organizations, and others produced numerous studies, the province itself has never done a community-impact assessment on electronic gaming.
Dr. Robert Hunter, a Las Vegas pioneer in the treatment of problem gamblers, dubbed vlts “the crack cocaine of gambling” at a 1990 conference in London, England. Not only did the machines induce a trancelike state, Hunter argued, they could also turn an occasional player into a full-blown addict within two and a half years. In contrast, racetrack gambling takes twenty years to make an addict and rarely leads to suicide. Hunter also asserted that vlts had the power to change the fabric of society, and by the mid-1990s several academic studies had identified problem gamblers as toxic to their families, social circles, and work peers. Unlike alcoholics, electronic gaming addicts often spend their family’s entire life savings.
Reshke’s habit began innocently enough. He started by playing video poker two or three times a week after work at Rosie’s Bar and Grill or the B-Street Bar in Edmonton. Jacks was one of his favourite games, and with a Coors Light in hand he quickly learned how to spend $20 a minute and play hundreds of games an hour. “You could double up your bet by pushing a button,” claims Reshke. Whenever he won, lights flashed, whistles blew, and people looked at him with envy. “Next thing you know you’re looking for your last dollar to pay the bar bill.” Within a year he was addicted.
By 1993, Reshke had eaten through his own savings and was borrowing heavily from friends or maxing out his credit cards. Divorced and without direct parental obligations, on many nights he’d play for six to ten hours and lose $500. Reshke routinely gambled with his girlfriend, who was similarly seduced by vlts. One Christmas they couldn’t wait for family guests to leave so they could rush out to play. “That’s how ridiculous it got.”
Albertans began noticing the highly addictive nature of vlts and their capacity to erode community values. One study showed that problem gamblers spent nine times more per month on the machines than did the nonaddicted. Critics accused the government of moving like a speeding train on vlts and using economic vampirism to pay down government deficits. In Rocky Mountain House, a community of about 6,500 people southwest of Edmonton, the machines brought in $2.5 million in 1996. Meanwhile, the three-year average for lottery-supported grants that the town had received was only $200,000. In northern frontier communities like High Level, with transient populations working in the oil-and-gas sector, vlts were a veritable gold mine, producing revenues in excess of $200,000 per machine per year. Southern agricultural communities such as Pincher Creek averaged a comparatively paltry, but still significant, $61,000 per machine annually.
In 1994, Reshke lost his house in Millwoods after he fed his mortgage payments into vlts. Banks and friends were reluctant to provide more credit, and shortly thereafter he split up with his girlfriend. He started to drink heavily as he gambled. “When you play vlts and drink, your inhibitions go out the window.”
Despite his galloping addiction, in 1995 Reshke landed a new job, Assistant Deputy Minister Finance and Administration with Alberta Transportation. His tasks included accounting, budgeting, information technology, and contract management services for the department. It was a clear promotion, but the added responsibility took its toll. By now Reshke was living to gamble. Lunch hours he spent at the bar getting lost in the twilight world of the machine. He would lose hundreds of dollars in twenty minutes, think a win was just around the corner, and then phone the office to say, “Something’s happened. Cancel my appointments.” He knew that in the randomly programmed world of vlts there are no corners, but the seduction was too strong, the addiction too deep.
Reshke fit the psychological profile of a problem gambler. “By and large the people who become addicted are unhappy with life’s circumstances,” notes Garry Smith. And Reshke had his share of unhappy losses. His mother died of cancer when he was four, and his father, a harsh disciplinarian, died when he was ten. In 1982, his marriage collapsed. Like most problem gamblers the civil servant probably had a predisposition to view the machines as a coping strategy, says Smith. A confluence of hurts and pains makes some people especially vulnerable, and vlts and slot machines are digital opportunists hunting for low self-esteem, depression, and other human weaknesses.
By 1996, Reshke was losing so much money that his gambling addiction required repeated cash advances on his monthly salary. The government had a special program to provide employees with two-week cash advances for emergencies, and Reshke tapped into it continuously. “No one in the government was alerted to the problem or became concerned,” recalls Reshke. With 1996 vlt revenues exceeding the take from health-care premiums, fuel, liquor, and tobacco taxes, and rivalling the tally from corporate income taxes, government attention was elsewhere.
Desperate, Reshke started using his government MasterCard. By the time he had eaten up $7,038.50, a subordinate reported the abuse to Reshke’s superior and friend, Ed McLellan, the deputy minister of Alberta Infrastructure. An embarrassed Reshke promised to pay back the money (which he did) and said he would get help. Reshke attended Alcoholics Anonymous and received counselling, but now admits that “nothing came of it. I was good for a six month period then fell off the wagon.” Reshke often went to bars with coworkers and clients, and drinking and gambling were part of doing business; vlts were everywhere. “You couldn’t avoid them,” he says.
Although public pressure had forced Klein’s government to cap the number of vlts at 6,000, the machines still made headlines throughout 1998. The government and hotel lobby argued that machines represented freedom of choice and that “no one was forced to play the machines.” Church groups and civic leaders called the machines a regressive tax on the vulnerable and accused the government of conflict of interest by being promoter, profiteer, and regulator of the gambling industry. Klein, a consummate gambler and drinker, wouldn’t allow a provincial referendum but reluctantly permitted local plebiscites. Seven of thirty-seven communities voted to remove the machines. Even though Klein promised the machines would be gone in a week, vlt retailers from the nay-saying communities tied the matter up in court until April 2003. In some cases the removal didn’t amount to much. While the government pulled ninety-seven vlts out of Fort McMurray in 2003, the number of slot machines at the casino shot up from twenty-five to two hundred.
Reshke held onto his job by juggling alcohol, debt, and vlts. On several occasions he got caught shoplifting, and was nailed for drinking and driving, but the thrill of the machine suspended all shame. “vlts ended up being a source of escapism for a least a few hours,” recalls Reshke. “And then I’d wake up in the morning and say, ‘My God, what did I do? ’ And then I’d go back to the bar and have a drink and gamble. It was a vicious circle.” He now owed friends and relatives more than $100,000.
One of Reshke’s good friends, David Lamash, got particularly antsy about his debts. Lamash owned a small company, ldj Project Management, which did consulting work for Alberta Infrastructure. He was also one of Reshke’s hockey and ice-fishing buddies. According to Lamash, the civil servant would borrow a sum, pay back a portion, and then make an excuse for not paying the rest. Reshke owed Lamash $10,000. “I tried to talk to him. I doubt if his bosses knew about this,” said Lamash later in a court statement.
Reshke had the authority to sign contracts up to $100,000 and to approve invoices from government suppliers. “Look,” he said to his long-time friend, “I can do some work for you and you can consider it a repayment for your loans.” Lamash agreed to a kickback scheme that involved taking money from Alberta Infrastructure and spending it on vlts, thus enriching the newly created gaming ministry and, of course, helping to fund services provided by Alberta Infrastructure.
Between 1998 and 2002, provincial vlt revenues increased from $460 million to $575 million even though the number of Albertans playing the machines remained roughly the same. People like Reshke were playing harder, longer, and for more dollars. Believing that he could eventually beat the machine and pay people back, Reshke had become a desperate chaser.
In 2000, Reshke’s friend and boss, Ed McLellan, retired and was eventually replaced by Eric McGhan. Reshke started to use an assistant’s government MasterCard for cash advances of $300 or $400. “That’s when things went downhill. I should have got out at that time.” Most days Reshke couldn’t wait to get out of the office to gamble, but miraculously he continued to be praised as one of the government’s best senior financial officers.
McGhan, however, had his suspicions and ordered an investigation into Reshke’s activities. Alberta Gaming investigators followed Reshke into bars, where he used the Alberta MasterCard to obtain cash advances from the ubiquitous abms — “the machine that always pays off,” as players call them. The investigation uncovered the kickback scheme with David Lamash, and after thirty-one years of service Reshke lost his job in February 2002. The government sued and demanded repayment of the fraudulent credit-card charges. Reshke declared bankruptcy.
While Reshke awaited trial, two of Canada’s foremost gambling researchers, Garry Smith and Harold J. Wynne, released a damning report on vlt gambling in Alberta. It concluded that the province had the highest percapita gambling losses ($781 in 2002) in Canada, and that Alberta vlts had the highest daily sales. In Fort McMurray alone, just ninety-one vlts produced a $20-million profit in 2003. The report noted that Alberta would have to raise taxes by $214 a person to replace gambling income and claimed that more than half of all vlt players in the province were probably addicted.
It was a wake-up call. Today, the rcmp routinely reports thefts, assaults, bankruptcies, suspected arson, child neglect, and suicides related to vlt addiction. Alberta banks have seen an escalation of internal theft to support vlt habits. Without substantial changes, the report predicted, Albertans will see “continuing high problem gambling rates among vlt players which will raise questions about government victimizing vulnerable citizens.”
This concern is being raised wherever provincial governments have exposed their citizens to vlts. In 2004, Manitoba’s chief medical examiner claimed that twelve suicides between 1999 and 2003 were linked to problem gambling with vlts and questioned a $75-million investment in the machines. In Nova Scotia, the province’s gaming corporation acknowledged that ten problem gamblers committed suicide in 2002. In New Brunswick, where vlts were recently removed from corner stores, Tim Smith of Saint John went on a hunger strike to protest the government’s involvement with vlts. In Quebec, a recent class-action suit demands that Loto-Quebec compensate 119,000 vlt addicts for counselling and legal fees. After a 2005 study on gambling in Newfoundland and Labrador found that nearly 18 percent of vlt users were problem gamblers, Health Minister John Ottenheimer soberly noted the government’s conflict of interest: “Let’s face it, we all know it . . . there is a monetary issue at stake here.”
At Reshke’s trial, his lawyer, Alex Pringle, said, “There is a difference between heroin addiction and vlt addiction and the difference is that the government doesn’t have anything to do with heroin addiction.” After his stint in prison, Reshke joined Gamblers Anonymous. Today, he spends much of his spare time lecturing about the perils of gambling at treatment centres and high schools. He tells his story and explains how slot machines have now overtaken vlts in popularity and revenue earnings. Like many problem gamblers he asks a simple question: “Why is government in the business of gaming?”
In Alberta’s profitable gaming circles the new buzzwords are “responsible gaming” and “harm minimization.” In addition to limiting the number of vlts in the province to 6,000, the province has equipped new vlt machines with “responsible gaming features,” including a permanent clock and problem-gambling information banners. Meanwhile, the prevalence of slot machines has grown by 74 percent over the past four years. Even though Albertan adults lose nearly 50 percent more on gambling ($886 in 2005) than the national average, no government community- impact assessment has been done, notes Garry Smith. Early in 2006, the government opened two Responsible Gaming Information Centres.
Unlike Alberta, Australia has taken a hard look at government-promoted gambling. In 2002, its Productivity Commission found that problem gamblers accounted for one-third of all gambling income, and 71 percent of problem gamblers choose electronic games as their preferred vice. The report found that regulatory practices were “incoherent, fragmented and inconsistent” and that the liberalization of gambling had been socially catastrophic. Smith contends that a national Canadian inquiry would find the same. “It is a truism in the administration of legal gambling in Canada,” he says, “that when revenue generation priorities and social responsibility clash, economic exigency wins.”
Kowalski, the man who introduced electronic gambling to Alberta, has few regrets and would do it all again. He says he can’t fathom the difference between vlts and other forms of gaming. He also believes that government knows best when it comes to gambling. “If you are going to have one Godfather, let it be the province,” he says, a somewhat ironic position for a minister from the live-free government of the Klein Conservatives. He offers his condolences to Reshke. “He was an outstanding civil servant, and I’m sad this happened to him.”
Prior to the introduction of vlts in 1991, just two chapters of Gamblers Anonymous operated in Alberta. Today, GA is doing a roaring business with sixty chapters. About 80 percent of the new members report being addicted to vlt or slot machines. Raymond Reshke is one of them.