Legislative auditors fault NM gambling regulators

SANTA FE, N.M. (AP) -- New Mexico needs to strengthen its regulatory oversight of a billion-dollar gambling industry that includes horse racing tracks and casinos operated by Indian tribes, legislative auditors recommended Wednesday.

A report by staff of the Legislative Finance Committee said the New Mexico Racing Commission and the state Gaming Control Board are understaffed and hampered by limited regulatory powers.

The Racing Commission regulates the five race tracks in the state, all of which operate casinos. The Gaming Control Board oversees the state's gambling compacts with 14 tribes as well as non-tribal gambling at race tracks and by non-profit groups and fraternal organizations.

Gambling generated revenue of about $1 billion last year, with the state receiving $133 million in taxes and a share of tribal casino profits.

Sen. John Arthur Smith, a Deming Democrat and LFC vice chairman, said the state needed better regulation to ensure the integrity of gambling at tracks, casinos and by charitable organizations.

"We have a mess on our hands," said Smith

The audit said the Racing Commission, despite a law enacted this year, needs more money to increase the frequency of testing of horses to detect illegal drug use. Lawmakers approved a measure earlier this year to earmark about $700,000 for drug testing of horses starting in 2015.

The report said racing regulators need to improve their auditing of pari-mutuel wagering, a betting pool style of wagering used at horse races, to ensure that tracks are paying the proper amount of taxes. The LFC auditors also said the commission "struggles to address" unlicensed horse racing that illegally occurs in the state.

Racing Commission Executive Director Vince Mares said in in a written response to the audit that the regulator is working with state police to try to stop illegal racing but that state law needs to be changed, such as giving commission investigators law enforcement powers statewide rather than just at licensed tracks.

Mares said the commission has taken steps to try to stop performance-enhancing drugs from being administered to horses. The commission has implemented a necropsy program to determine whether drugs played a role in the death of horses at tracks.

At a committee hearing on the audit, Sheryl Edgar, an Albuquerque certified public accountant who worked as a race track controller, said there were "gaping holes in the audit process" by regulators of casino revenue that supplements winnings paid at horse races.

"We need real internal controls and real audits for the maintenance of integrity and safeguarding of all of this money," Edgar told lawmakers.

Auditors recommended that Indian gambling compacts be amended to give the Legislature access to financial information about casinos to allow lawmakers to better oversee gambling and the state's regulation of it.

Gaming Control Board Chairman Jeffrey Landers said in a written response to the audit that tribes and pueblos are unlikely to agree to expand access to confidential gambling information.

"Simply put, the recommendation is to ask a sovereign nation to open up an existing compact to obtain that sovereign nation's consent to subject its gaming operations to oversight by the legislative body of another sovereign government," Landers said.

Landers also took issue with an audit recommendation that the state gaming representative, who monitors tribal gambling and is the state's liaison with tribal governments, be made an independent office rather than being part of the Gaming Control Board.

Landers said the position historically has been filled by governors as a political appointee but that Gov. Susana Martinez's administration had the board make the appointment. He also said there always have been interim gaming representatives, even when the position was vacant.

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