In this space last Friday, UNLV’s Anthony Cabot and Becky Harris wrote that “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.”  This call to action, which has been made before, is misguided.  The public policy reasons for the long-standing decision of the Nevada Legislature exempting the Nevada Gaming Commission from an ex parte rule remain as valid today as when enacted in 1977.

An ex parte rule prohibits one side in a dispute from having private conversations with a judge or other government decision-maker in the absence of the opponent.  The existence of an ex parte rule does not mandate open government and public participation as Cabot and Harris presuppose.  This rule simply requires that both parties to a dispute must be given the opportunity to be present and participate in a private conversation with the decision-maker.  This is exactly what happens every day behind closed doors in Nevada and elsewhere before judges and decision-makers of other state regulatory bodies.

Were this rule imposed as Cabot and Harris advocate, the restriction must be equitably enforced uniformly to all parties.  Equitable enforcement of an ex parte rule means the stream of information, communications, and reports that flows from the Nevada Gaming Control Board to commissioners must end or be made only in a public proceeding contrary to current Nevada law.  The Commission, who by law must rely on the Board for staff support would be crippled.  To prepare for a public hearing, commissioners could not converse in private with a Board auditor about how the gross revenue tax is applied, discuss the evidence upon which a Board investigator concluded an applicant is unsuitable, or receive guidance from the Board’s technical experts on how some electronic component in a slot machine operates.  Conversely, the existence of an ex parte rule would require the Board to disclose in public now confidential information such as investigative interviews and reports.

Cabot and Harris cloak their plea for an ex parte rule in the guise of transparent and good government, suggesting that Nevada is out-of-step with “regulatory best practices.”  To the contrary, Nevada’s legislature has made very conscious policy decisions that depart from those made in other states and foreign countries and are different than those that apply in Nevada to other state regulatory agencies.  Nevada law confers on the Board and Commission a comprehensive set of exemptions that excuse state gaming regulators from complying with many aspects of our public records and open meeting laws, including giving the Board and Commission the power to conduct hearings and meetings in secret, use confidential informants and prevent disclosure of reports and other information.  Likewise, the Board and Commission are excused from complying with the myriad of due process requirements under the state’s administrative procedures laws applied to other state boards and commission.  Nevada policymakers have for decades viewed these exemptions as critical to the unique vocation of the Board and Commission “[t]o ensure that gaming is conducted honestly, competitively and free of criminal and corruptive elements.”

Nevada’s gaming laws already prohibit ex parte communications in contested cases to discipline licensees and between a player and a casino over payment of winnings from a game.  This is identical to federal and Nevada law governing all other administrative agencies where regulators act as judges.  In this context, an ex parte rule must exist to ensure that the parties receive constitutionally protected due process where a property interest is at stake. Here, Cabot and Harris acknowledge they advocate for what already has existed in regulation for over a generation.

Cabot and Harris opine that there is no justification for ex parte rules not to extend to tax redeterminations and refunds. On this point, they are correct.  In tax disputes, like disciplinary cases, the Board and the taxpayer licensee are true adversaries.  The Commission is tasked with reading briefs, receiving evidence, hearing oral argument, and then rendering a decision that adjudicates the respective pecuniary interests of the State of Nevada and a taxpayer, with only the taxpayer having the right of judicial review if aggrieved by the result ordered by the Commission.  Although, to be clear, this will have virtually no practical impact because most tax disputes are resolved in a privately negotiated agreement between the taxpayer and Board approved by the Commission in a fairly perfunctory public hearing.

No administrative body in Nevada state government is subject to an ex parte restriction when the agency is conducting rule-making.  Cabot and Harris present no compelling justification for singling out the Commission for a different standard.  When regulators, like gaming commissioners, adopt rules they make law under a delegation of legislative power from the legislature.  Federal law is the same as relates to federal administrative agencies.  Commissioners must not be deprived of information from any source in private or public, just as is the case for legislators making law.  This flow of information is critical when evaluating the policy implications, the practical impacts, and the motivations of both proponents and opponents, of a proposed law.

Finally, Cabot and Harris advocate that an ex parte rule must exist in licensing and other application matters, including employee work registrations.  Such a rule is inconsistent with the legislatively designed role of the Commission to provide a citizen-controlled committee selected from the community to temper the institutional role of the Board as both gaming cop and prosecutor.

The Commission makes decisions on granting licenses and registrations, which are privileges and not rights, based on the investigative diligence performed by the Board and communicated in confidential reports sent to the Commission.  These decisions are beyond court scrutiny except in the most unusual circumstances.  This is a very different situation than that facing other state government regulatory decision-makers where licensing subject to similar notice and hearing protections are treated as a contested case under the administrative procedures act.  In those contested cases, licensing decisions are made only on “evidence” shared in advance among all the parties, available as public records, and disclosed in a process like a public trial. The Nevada Legislature purposefully exempted the Commission from this trial-like procedure, and related ex parte rule, because it impedes the effort to gather and debate sensitive information about gaming applicants’ suitability and probity, as well as provides that the courts may through judicial review control the discretion of the Commission.  Nevada policy makers explicitly placed gaming licensing and registration decisions beyond examination of the courts except in an instance where the regulators deprive persons a license based on a “suspect” reason like race, religion or gender.

Were an ex parte rule applied in application matters, the Commission would be even more captive to the Board’s control of information. The policy Cabot and Harris propose likewise transforms the Board into the role of an adversary of the applicant instead of an agency committed to the quest of impartially gathering, evaluating and reporting facts to the Commission which is the arbiter of fitness to participate in the gaming industry.

Perhaps the most insidious characteristic of imposing an ex parte rule in application matters is that only applicants would be foreclosed from having private dialog to inform commissioners, while the Board retains its prerogative of confidential communications with the Commission.  This would become a one-sided gag rule eliminating the only protection afforded applicants against potentially over-zealous career regulators.  Thus, the minor process tweak advanced by Cabot and Harris in the name of public transparency, is instead a rule that will inoculate the Board further from Commission oversight unless Nevada policymakers are prepared to embrace the consequences of eliminating the confidentiality now shrouding the investigative mission of the Board.

By exempting the Commission from a panoply of process-related and open government requirements applied to other state regulatory bodies, including an ex parte communication rule, the legislature struck a careful balance by allowing applicants to privately converse with commissioners on one hand, and on the other hand preserving the power vested in the Board and Commission to control a confidential investigation process that is a cornerstone of Nevada’s gaming regulatory system.  Upsetting this balance or tinkering at the margins of this comprehensive regulatory system is bad public policy for Nevada.

Dan Reaser is a gaming lawyer at Fennemore Craig, P.C., and served as chief counsel to Nevada’s Gaming Commission and Gaming Control Board from 1986 to 1990.