Aug. 10, 2005
Copyright © Las Vegas Review-Journal
Troubles rise for school, Rawson
Court orders college to halt financial deals
By ROD SMITH
GAMING WIRE
The assets and accounts of a holding company for the year-old Hawaii College of Pharmacy have been frozen, spurring new concerns among gaming industry observers about Nevada Gaming Commissioner Ray Rawson's role in helping start up a sister dental school.
The former Nevada senator is the founding dean of the Hawaii College of Dental Medicine, which is to open in 2006 as a sister school for Pacific Educational Services' pharmacy college in Kapolei on Oahu.
A Hawaii court last week issued a temporary restraining order prohibiting Pacific Educational from engaging in any financial transactions in response to a lawsuit filed by the state's Department of Commerce and Consumer Affairs, which is investigating a series of complaints accusing the yet-to-be-accredited pharmacy school of unfair and deceptive business practices.
The order also applies to the incipient dental college, blocking its further development at least until the issues involved in the state's lawsuit have been resolved, Hawaii sources said.
The dental school that Rawson is helping launch is not involved in the state's lawsuit over unfair business practices, but his role as the founding dean of a professional college is raising concerns among many industry experts about how Nevada selects its regulators and how effective Rawson can be on the commission.
Jim Medick, chief executive officer of the MRC Group, Nevada's largest market research firm, said Rawson's involvement in the brewing issue undermines the public confidence he is charged to uphold in the regulatory process.
"The question that then begs to be answered is how will he judge anyone accused of deceptive business practices as a Nevada Gaming Commission member. The answer is he can't," Medick said. "This is another case of what I have labeled catch-me-if-you-can" politics.
"If the 60 percent of us Nevadans cared enough to say our piece and maybe even vote, we would tell Mr. Rawson that the color gray doesn't work in the Nevada Gaming Commission. It's black or white or you are out," he said.
Hal Rothman, a professor at the University of Nevada Las Vegas, questioned how effective Rawson will be with the dual jobs.
"Nevada has too much at stake to permit regulators who do not have full commitment to the state as well as an unassailable reputation," he said. "The integrity of the gaming industry demands commissioners who are actively engaged in observing and evaluating the industry and its participants."
Nevada is one of only a handful of states in which dual-office holding is not a major conflict of interest, said University of Nevada, Las Vegas professor Bill Thompson, who specializes in gaming studies.
"Our state makes it very difficult to deal with (such) ethical situations," he said. "It's just not in our best interest to have a gaming regulator whose feet are also firmly entrenched in (public) activities in another state, in this case thousands of miles away."
Rawson, who could not be reached for comment, has said that he has made arrangements so he will be able to manage both of his jobs effectively. He has not commented on where he will reside most of the time.
In addition to his home in the Summerlin community, Rawson purchased a $950,000 home in an upscale Honolulu residential development on May 10, about a month after his appointment to the Gaming Commission, according to conveyance documents at the Honolulu Real Property Assessment and Treasury Division. The house is about five minutes from the dental school campus.
Rothman said any conflict-of-interest concerns are compounded by the residency question, in this situation because of the demands that forming a new professional school will put on Rawson.
"The job of a founding dean would be a full-time job and then some. It requires a tremendous amount of community involvement, building personal and professional ties in the community, profession, and state, and would require a great deal more than 40 hours a week," he said. "In my estimation, the role of gaming commissioner can only effectively be performed by a full-time Nevada resident."
Observers also agree that the Rawson issue raises some serious issues for Nevada's gaming industry and underscores the need for a confirmation process that holds regulators to the same high standards as those set for gaming licensees.
"We should go to a full vetting of individuals selected, a process similar to that of New Jersey's and maybe even more stringent," Rothman said. "Potential commissioners should expect to be held accountable to the highest standards. They should expect their financial and personal relationships with the industry to be made public and scrutinized, and they should be held accountable to even a higher standard than elected officials.
"In many ways, the state economy depends on their judgment," he said.
Keith Schwer, director of the University of Nevada, Las Vegas' Center for Business and Economic Research who specializes in public finance, concurs.
He said the issue along the lines of the one that Rawson is involved in could compromise the gaming industry's sound standing with Wall Street, which wants thorough and honest regulatory process to encourage investor confidence.
Thompson suggests that kind of transparency requires that all members of the Gaming Control Board and Gaming Commission be subject to the same type of background review that is done for major licensees.
Further, he said, "the state Senate should have to give advise and consent" for all appointments.
Hawaii is suing the pharmacy school and trying to force its founders and Rawson's partners, two former employees at UNLV's College of Pharmacy in Henderson, to return the $28,000 in tuition paid by 240 students who enrolled in courses last year. The total exceeds $6.7 million.
Hawaii claims the pharmacy school, which had five teachers, violated state statutes for unaccredited colleges and engaged in deceptive trade practices by misleading students about the school's accreditation and its services.
Rawson's partners last year falsely assured the Office of Consumer Protection it had enrolled no students and would not until it was accredited, court records show.
The state also found the partners had failed to even apply for pre-candidacy accreditation status despite written promises to do so and still started accepting student applications last spring.
Rawson has said he has no plans to sever ties with the dental college, barring "evidence or convictions."
The state's gaming commissioners, who are paid $40,000 a year, have other employment. Rawson's term runs through April 2008.