Debtors’ Prisons Prevail in Las Vegas, Thanks to Prosecutors and Casino Markers Law

by Derek Gilna

Anyone who has ever been threatened with jail or actually locked up for passing a bad check or failing to pay a debt knows that so-called “debtors’ prisons” are alive and well in the United States. [See: PLN, Nov. 2013, p.20]. But few states can match Nevada for pursuing criminal charges against people who owe money, especially to the state’s powerful casino industry.

In Nevada, failure to pay “gambling markers” – loans that casinos make to patrons to encourage gambling – is considered the same as writing a bad check under NRS 205.130(1)(e). Further, state law presumes that the debtor is guilty until proven innocent.

But a California businessman is challenging those presumptions.

The Nevada Supreme Court is currently considering the appeal of Harel Zahavi, 53, who was convicted in 2011 on four felony counts of passing bad checks and sentenced to 12 to 34 months in prison on each count. His prison term was suspended and he was placed on probation and ordered to pay fines.

Zahavi, who once ran a thriving ice cream business in southern California, had been indicted on charges that he failed to repay $384,000 in debts to four Las Vegas casinos that extended him gambling credit from October through December 2008.

According to testimony at his trial, Zahavi had a history of gambling – spending approximately $50 million at Nevada casinos over a ten-year period, including $8.3 million at one of the casinos involved in the bad debt charges.

Under Nevada law, casino markers have the same legal status as checks, giving casinos the right to withdraw the funds owed from the gambler’s bank account. If the account contains insufficient funds (NSF) to cover the amount of the markers, the law presumes that the gambler intended to defraud the casino by not paying the debt, even if the bank account held sufficient funds to pay the markers at the time they were granted.

Zahavi’s attorney, Matt Lay, argued before the state’s high court that the casinos issued gambling markers to his client even though they knew, or should have known, that he did not have sufficient funds in his bank account. They should never have issued Zahavi more credit, Lay maintained, and such credit is similar to short-term loans.

However, Clark County Chief District Attorney Bernard Zadrowski countered that casinos first check players’ bank accounts and determine their average balances in recent months before they extend credit. He told the Nevada Supreme Court that casinos have “no affirmative duty to alert” the gambler that his or her account lacks funds before cashing the markers.

Under state law, when gamblers agree to take a marker, they stipulate that they have sufficient funds to pay the debt, Zadrowski argued. Casinos can cash markers at any agreed upon time, typically 30 days or less – though the time period may be longer.

Lay noted that one of the four casinos determined that Zahavi had $27,000 in his bank account, but still extended him $100,000 in markers. He said the other three casinos had not checked Zahavi’s bank records for at least two months before granting him more credit.

As a result – and because the casinos failed to stop Zahavi from gambling – he could not be convicted of criminal fraud, Lay concluded.

Legal experts say the issues in the case run deeper than simply one gambler who was criminally prosecuted for running up unpaid gambling debts. The bigger picture, they claim, is that Las Vegas casinos use state law – and specifically the formidable power of the District Attorney’s office – as a means of debt collection. Also, the D.A. is allowed to collect a 5-10% fee from the defendant in addition to any monetary settlement.

Under Nevada law, individuals who fail to pay casino markers typically face criminal prosecution under five statutes:

• Making False Statements to Obtain Benefits (NRS 616D.300), meaning a person lied about his ability to pay back the marker because he knew he did not have enough cash, credit or collateral to cover it;

• Forgery (NRS 205.090), defined as using counterfeit records with the intent to defraud (charges of identity theft and misrepresentation of assets sometimes accompany a forgery charge);

• Obtaining Money by False Pretenses (NRS 205.380), or convincing someone to loan money based on trickery, such as forgery or making false statements;

• Crime of Bad Checks (NRS 205.130), which is defined as willfully passing a check with the knowledge that the account contains insufficient funds to cover the amount; and

• Theft (NRS 205.0832), which covers a broad range of actions that includes passing a check while knowing that funds are not sufficient to cover it.

All five offenses carry varying degrees of possible penalties upon conviction, including time in jail or state prison, fines and restitution.

“The D.A. is basically the casino’s debt collector,” stated Michael Becker, a Nevada criminal defense attorney. “Instead of hiring their own lawyers, casinos exploit public resources to recover private funds.”

“In our opinion, there’s an inherent conflict of interest in the whole system because the state has an added incentive to prosecute. The more you allegedly owe to a casino, the more the D.A. makes in collection fees,” he added.

“The bad check unit of Las Vegas’ Clark County District Attorney’s Office functions as a collection agency for the casinos,” agreed Adam Resnik, a former felon with a pathological gambling addiction and an expert on the subject.

Another issue is the “presumption of guilt” which critics say is built into state law. In order to secure a conviction, prosecutors need only prove that a gambler willfully took out a casino marker while having insufficient funds in his or her bank account to pay it. The law automatically presumes intent to defraud if there were insufficient funds in the bank when the casinos try to redeem the markers.

“Nevada casino marker law is very biased towards the casinos,” said Henderson, Nevada criminal defense attorney Neil Shouse. “If your bank account overdrafts, the law basically says you’re guilty until proven innocent.”

“We don’t put people in jail for failing to pay debts,” countered Chief D.A. Zadrowski. “We put people in jail for committing crimes, and that’s what this case [against Zahavi] was all about.”

Of course, those crimes are for failing to pay debts to casinos, making the D.A.’s counter-argument somewhat counterintuitive.

Sources: www.ibtime.com, http://profootballtalk.nbcsports.com, www.shouselaw.com, www.reviewjournal.com, www.cardplayer.com, www.gamingzion.com

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