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Lawsuit Puts State Gaming Study on Hold

Gambling: Challenge claims consultant had conflict that he failed to fully disclose. He says he disclosed facts in his bid but law requiring more shouldn't apply to a temporary advisor.


SACRAMENTO — The watchdog Little Hoover Commission has put on hold a California gambling study pending legal advice on how to respond to a lawsuit contending that a consultant on gambling whom the agency hired had a conflict of interest.

The commission's action was described Thursday by its chairman, Richard R. Terzian.

Former state Sen. Barry Keene and a San Diego taxpayer advocate, Bruce Henderson, sued the commission last month in Sacramento Superior Court, saying the consultant, I. Nelson Rose, should not have been retained to conduct a gambling study because of extensive ties to the gaming industry. Rose is also named as a defendant.

The lawsuit also contended that Rose had failed to follow prescribed procedures for filing a Statement of Economic Interests.

"We have suspended all [gambling study] activities until we get a report from our counsel," Terzian said. In the meantime, he said, "we have told Mr. Rose not to do anything further pending further action on our part."

Rose has produced documents showing that at the time he bid for the consulting position, he had volunteered to the commission a listing of numerous clients representing a wide range of the gambling industry including Nevada and California interests, as well as law enforcement and government agencies.

In addition, he responded with a letter to the Fair Political Practices Commissions as soon as he was made aware of the requirements for filing the economic interests statement. He did so, documents show, by requesting an exemption from submission of a lengthy form. The full form should not be required of temporary consultants, he argued. Rose's request for an exemption is pending with the political practices commission.

The Little Hoover Commission apologized to Rose for not informing him, within the prescribed 30-day period from the start in January of his six-month contract, of the legal requirement for filing the economic statement.

Rose, a professor at Whittier Law School, said he expects the lawsuit to be thrown out as "frivolous," adding that the matter properly belongs before the political practices commission.

In the meantime, Lowell Finley of San Francisco, a lawyer representing Keene, raised the possibility Thursday that the suit could be settled out of court, but only on condition that Rose no longer be associated with the study.

When informed of that, Rose said it comes late in the proceedings. The gaming study, he said, "has been virtually completed and, in any case, our contract ends on June 30."

The lawsuit asks legal costs plus restitution of $85,000--the amount of Rose's contract with the Little Hoover Commission. The contract covers both Rose's fee and expense payments to other consultants he retained.

But Finley, as well as co-plaintiff Henderson, have said money was not the principal reason for bringing the suit.

"Essentially," Finley said, it was filed to "stop the contract and have [the study] conducted by someone who does not have a conflict of interest."

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