Concord Casino kept higher share of proceeds meant for charity than any other facility, with state Lottery’s permission
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Earlier this month, state lottery regulators moved to strip Concord Casino of its license to operate after investigators found the casino’s owner, former state Sen. Andy Sanborn, allegedly used $844,000 in COVID-related bailout loans to fund a lavish lifestyle including sports cars purchased for himself and his wife.
For years before the New Hampshire Lottery Commission took action, publicly available records show Sanborn had been collecting fees from charities he partnered with far above the percentage charged by other charitable gaming facilities, and in apparent violation of state law.
The fees Sanborn collected from charities are not part of the state’s investigation into his casino. In fact, the unusual arrangement was done with the Lottery Commission’s apparent approval, and resulted in Sanborn retaining for himself half of the proceeds intended for charities, according to publicly available reports. That’s a higher percentage of charitable gaming proceeds retained than any other casino in the state.
The practice illustrates what many call the outdated and at times contradictory regulations that apply to an industry that's expanded dramatically in New Hampshire over the past 20 years.
The fees charged by casinos to charities, called “rents,” “were a carryover from an earlier era of how gaming worked,” said former state Rep. Pat Abrami of Stratham, who is serving on a commission tasked with reviewing the state’s charitable gaming laws. “We’ve got real casinos here.”
“It needs looking at,” he added.
The collection of rents from the very nonprofits who are supposed to benefit from legalized gaming is a vestige of a simpler era of gambling in New Hampshire. Charities in the past would rent out a local hall and hire a gaming operator to run table games — roulette or black jack — with the nonprofit carrying the burden of funding the event, and keeping any proceeds.
In 2006, New Hampshire overhauled its rules for charitable gaming, allowing for-profit facilities to run table games year round – essentially acting as mini casinos — with 35% of gambling proceeds flowing to a rotating list of local charities. The gaming operators, however, were permitted to continue charging rents to the charities, as a way to cover their overhead at a time when bets were capped at just $2.
Today, the state’s 14 charitable gaming facilities have morphed into more professional operations: $50 maximum bets, rooms full of slot machines, almost round-the-clock hours, and neon “CASINO” signs in the window. The facilities, however, continue to charge rents, though the amount varies by facility and have no clear tie to the actual cost of renting out the space.
State law requires that casino rents be fixed and not “based on a percentage” of proceeds, but records from the Lottery Commission show that the Concord Casino was doing just that: adjusting the rent it charged charities, essentially night by night, based on the amount of money it collected.
While its initial contracted rental price with any given charity was fixed at $750 per night, according to the Lottery Commission, Concord Casino would then recalculate the rent based on its actual gambling proceeds, which tended to be lower than other facilities due to its smaller size.
Records show that Sanborn’s casino regularly retained half of the proceeds designated for charities as his rental fee. In practice, that meant rather than the charity receiving 35% of the gambling profits from table games on any given night — a percent in statute and by the Lottery Commission — nonprofits that partnered with Concord Casino often only received 17.5% of proceeds. That’s far lower than what every nearly other casino in the state would pay out to charities.
In a statement, the Lottery Commission said that it was aware of the arrangement with Sanborn’s casino and “raised the issue in recent audits.” However, regulators permitted Sanborn to continue adjusting rents based on gaming revenues because of a quirk in state law that allows casinos to set their rental rate at the “fair rental value of the property for any use.” And Sanborn’s initial contracted rent of $750 per night is considered fair market, according to the Lottery.
The Concord Casino’s relatively small number of table games meant that during any given 10-day window, gambling profits only barely cleared rental fees, and sometimes fell short. By recalculating the rents, Sanborn was awarding more money to the charity than they would have received with his initial fixed rental price. But it also meant that he was pocketing a larger percentage of gambling proceeds than he would have if he’d set a lower initial rent for the charities.
“We have not imposed a sanction on Concord Casino for this practice as the remediation would likely result in less revenue for the charities,” a Lottery spokesperson said.
Casinos charging charities rent
Under New Hampshire’s unique gambling structure, every gaming operator must partner with a designated charity for every day they are in operation. Charities often sign seven- or 10-day contracts, with the expectation they will receive 35% of profits from table games, minus any rental charges. Beyond that, the state collects 10% of table game profits, while the gaming operators retain any proceeds from the remaining 55%, after paying their expenses. (Proceeds from slot machines, also known as historic horse racing games, have a different payout breakdown. Concord Casino does not have slot machines.)
For example, when Manchester Choral Society was Concord Casino’s designated charity for a 10-day window earlier this year, the casino generated $7,538 in proceeds from table games, according to Lottery data. The contracted rent of $7,500 for the 10 days would have meant the Choral Society would have received less than $40 in proceeds. Instead, Sanborn recalculated the rent at half of the charity’s stake — $3,750 — and awarded the remaining half to the singing group.
The Lottery said it permits charities to “negotiate” a lower rental rate, despite state law prohibiting floating rates, because it “allows the rooms to be more generous to the charities.”
In practice, however, charities don’t negotiate a lower rent. A group who has received donations in the past from its partnership with Concord Casino told NHPR it had to simply accept whatever proceeds are distributed, even if well below their statutory 35% share.
No other facility in the state regularly recalculated its rents based on proceeds, according to the most recent year of data, though the Lottery said it has permitted gaming operators to adjust rental fees in the past.
Rents charged by charitable gaming facilities around the state vary, often following no clear pattern. In Dover, for example, the Dover Poker Room charged its charities between $375 and $750 per night. In Seabrook, The Brook collected $375 per night from each charity, while the Filotimo Casino, in Manchester, generally collected $750.
Casino operators around the state gave different explanations for how rents are set, and why they should or shouldn't persist.
“The organizations pay the casinos a certain amount of rent per day to offset the casinos’ operating costs, including staffing, space leasing, supplies and utilities,” Glen White, a spokesperson for Nashua’s Gate City Casino, formally called Boston Billiard Club, told NHPR.
At its facility in Nashua, charities pay $250 per day in rent, “which is a very small percentage of what they receive from the gaming revenue.”
Rent setting, as well as how charities are selected to benefit from gambling proceeds, are two issues on the agenda for the newly formed legislative commission that will study the effect of recent changes in the industry. Its members include representatives from the charitable gaming industry, as well as lawmakers and regulators.
“We’re going to take a look at that,” said Abrami, who will serve on the group, noting how much the industry has changed in the past two decades.
Republican state Rep. Laurie Sanborn, Andy Sanborn’s wife, was tapped to chair the gambling commission, but was from the post earlier this month after the Lottery announced its findings about the Sanborns’ casino.
In late August, the New Hampshire Attorney General’s Office and the Lottery Commission Sanborn of his license, writing he is not “suitable to be associated with charitable gaming.” Authorities alleged the couple fraudulently obtained $844,000 in COVID-19 relief money and used it on luxury personal expenses, including the purchase of three race cars for himself and his wife. Prosecutors further allege Andy Sanborn paid himself $183,500 that he claimed were rent payments, by funneling the money into a business he owned.
Sanborn has denied the allegations and said his actions were in “complete accordance” with the law. He has appealed the state’s effort to strip him of his operating license. He didn’t respond to a request for comment about his rent collections.
