Richard Lugar

Mr. LUGAR

Mr. LUGAR. Mr. President, I further ask unanimous consent that when the Senate resumes executive session to consider the resolution of ratification, there be 6 hours for debate, to be equally divided in the usual form, with unlimited additional time under the control of Senator Thurmond; and following the conclusion or yielding back of time, the Senate proceed to vote on adoption of the resolution of ratification, without further action or debate.

Mr. LUGAR. A point of parliamentary clarification. Am I correct to assume that the report of the Foreign Relations Committee resolution ratification is before the body?

Mr. LUGAR. I thank the Chair.

Mr. LUGAR. I am happy to yield to the Senator.

Mr. LUGAR. I respond to the distinguished Senator that a summary was not included with the text.

Mr. LUGAR. Is it relevant to START II?

Mr. LUGAR. Mr. President, for the moment I suggest the absence of a quorum.

Mr. LUGAR. I join the distinguished Senator in thanking the minority staff. Of course I thank Kenny Myers and Lindon Brooks, who has been an able backup negotiator of this treaty. In particular, my colleague from Alaska, Senator Stevens, who, in his cochairmanship of the Arms Control Observer Group, did a remarkable job in pulling this together for four sessions, with many Senators from both sides of the aisle, to think through the implications of this treaty, to refine the language of the managers' amendment that has been submitted and adopted today. Does Senator Stevens have further comment?

Mr. LUGAR. The unanimous-consent request stated I would submit, as a manager, amendments. I have submitted those to the desk.

Mr. LUGAR. I thank the Chair. I ask my distinguished colleague if he has further comment?

Mr. LUGAR. Followed by disposition of the treaty.

Mr. LUGAR

Mr. LUGAR. Mr. President, I ask unanimous consent that the following staff members be accorded the privilege of the floor during consideration by the Senate of the START II treaty: Kenneth A. Myers III, Linton Brooks, a CNA fellow in my office and K. A. Myers, Jr., a professional staff member of the Select Committee on Intelligence, and Ronald Marks, legislative fellow on the majority leader's staff.

Mr. LUGAR. Mr. President, will the Chair please state the pending business?

Mr. LUGAR. Mr. President, I am pleased to answer the distinguished Senator from Virginia that after the opening statements by the managers and others, then the resolution of ratification that came from the Foreign Relations Committee will be the pending business, and amendments will be in order at that point.

Mr. LUGAR

Mr. LUGAR. The Senator's understanding is absolutely correct.

Mr. LUGAR. The Senator is correct.

Mr. LUGAR. Mr. President, I rise in support of H.R. 2029, the Farm Credit System Reform Act of 1996. The bill makes changes to the authorizing legislation for the Federal Agricultural Mortgage Corporation [Farmer Mac] to afford it a final opportunity to establish a successful secondary market for agricultural loans. Its future is seriously threatened and without this corrective legislation, the benefits it offers farmers, ranchers, and rural homeowners may be lost. Farmer Mac was established to encourage a stable and highly competitive lending environment for rural America, an environment that must be preserved. The bill also provides changes to the underlying statute for the cooperative Farm Credit System [FCS] to provide relief from outdated and unnecessary regulations. These changes will give FCS more flexibility in its operations and allow it to provide competitive loan rates and improved service. The bill also extends the U.S. Department of Agriculture's interest rate reduction production on guaranteed farm loans. This program is an important tool used to transfer direct loan borrowers to guaranteed loans, eventually leading to borrower graduation from Federal support. Finally, the bill will authorize a new foundation to facilitate creative solutions to soil and water conservation problems. This foundation will be funded primarily through private donations. Farmer Mac is responsible for providing farmers, ranchers, and rural homeowners with access to a stable and competitive supply of credit for mortgage loans. It is a privately owned and operated corporation created by Congress in 1988. Farmer Mac is known as a Government sponsored enterprise, similar to Sallie Mae and Fannie Mae, which employ private capital to establish business operations charged with specific responsibilities to carry out public policy. Farmer Mac, which began operations after the enactment of the Agricultural Credit Act of 1987, raised $21 million in private capital from banks, insurance companies, and Farm Credit institutions to fund the development and operation of a secondary market. No Federal funds were invested in the original capitalization of Farmer Mac and no Federal funds have ever been appropriated to support any facet of its operation. In fact, Farmer Mac pays the Farm Credit Administration annual assessments to cover the cost to the Government of regulating the secondary market. Farmer Mac must make a profit to support its operations or its capital base will eventually be exhausted. Should the capital base erode--it is currently down to about $11 million--the original investors would lose their investments and the secondary market would terminate. Termination of Farmer Mac would deny rural Americans access to competitive long-term fixed rate mortgages at a time when budget reductions and changes in Government housing and agricultural policy will place increased pressure on farmers, ranchers, and rural homeowners to reduce expenses to remain competitive. The successful Fannie Mae and Freddie Mac residential mortgage secondary markets were used as the structural design for Farmer Mac. However, certain distinctions were made that have become obstacles to Farmer Mac's success: First, the requirement that Farmer Mac operate its program through poolers, and Second, the requirement that every Farmer Mac loan be backed by a minimum 10-percent subordinated participation interest. The bill repeals both of these obstacles. Nine poolers have been certified since 1990. However, the poolers have only submitted six pools of qualified loans, totaling $790 million, for guarantee under the program. The limited participation has prevented the program from generating enough income to support its cost of operation. Under H.R. 2029, Farmer Mac will now be permitted to purchase and pool loans itself, and the 10-percent cash reserve requirement is eliminated. The removal of these impediments will make Farmer Mac's structure essentially identical to other successful GSE's. In addition, the legislation: extends the time period before the Farm Credit Administration may promulgate risk-based capital regulations to 3 years after the date of enactment; provides a time triggered transition period to increased minimum and critical capital requirements; requires Farmer Mac to increase its core capital to at least $25 million within 2 years or curtail its operation; and provides procedures for the Farm Credit Administration to liquidate Farmer Mac's operation in the event it fails to establish a successful secondary market. It has become apparent that after almost 6 years of operation, Farmer Mac's statutory structure will not work. This important piece of legislation gives Farmer Mac everything it needs to succeed for the sake of rural Americans. The bill also removes undue regulatory burden placed on the Farm Credit System and provides the System greater flexibility in its operations to offer its borrowers competitive loan rates and improved service. This portion of the legislation provides that FCS borrower stock and borrower rights requirements do not apply for 180 days to loans designated for sale to the secondary market; allows FCS associations to form administrative entities; provides for rebating to System banks excess amounts in the Farm Credit System Insurance Fund after 8 years of interest earnings accumulate on top of the System's secure capital base; provides procedures for allocating to System banks and to other institutions holding Financial Assistance Corporation [FAC] stock excess amounts in the Farm Credit System Insurance Fund until $56 million is repaid; provides authority to prohibit or limit golden parachute payments to System executives; and repeals the requirement for establishing a new board of directors for the Farm Credit System Insurance Corporation and retains the current board structure. The FAC stock provisions lay to rest a long standing controversy in the Farm Credit System. Beginning in 1984, the System came upon hard times due to the credit crisis in farming and System associations were required to purchase FAC stock for the amount of unallocated retained earnings exceeding 13 percent of their total assets to assist in rescuing the floundering system. The associations which had a high level of capital in relation to their loan volume were affected most. Many associations believe that they and their borrowers were required by the Agricultural Credit Act of 1987 to carry a disproportionate share of the System's self-help burden. The substantial depletion of capital resulting from the assessment caused associations to increase interest rates to their customers. The assessment was challenged by 21 production credit associations shortly after the enactment of the 1987 legislation. However, the U.S. Court of Appeals affirmed the authority of Congress to impose the assessment in June 1992. Legislation in 1988 and 1989 permitted the return of $121 million to the FAC stockholders of the more than $177 million collected from System institutions. Many in Congress believe that the assessments and mandatory purchase of FAC stock represented a commitment to the future of the Farm Credit System. It was the inherent responsibility of System institutions to join the Federal Government to bail out the System in exchange for continued agency status for their debt securities. The compromise included in this bill permits the repayment of $56 million to the remaining FAC stockholders and terminates the Financial Assistance Corporation trust upon full repayment of that sum. I support this compromise and I am pleased that this controversy has been amicably resolved. Preserving and making more efficient a system that provides rural America access to stable and competitive credit is of the utmost importance. Farmer Mac can make an important contribution to this goal. This legislation is a final congressional effort to make Farmer Mac viable. Legislative restrictions may have hobbled the institution until now. If the new authorities do not prove sufficient, it will be time to declare Farmer Mac a failed experiment. The bill before us provides for orderly procedures in this event. I urge my colleagues to support this important piece of legislation.

Mr. LUGAR. Yes, it is my intention next year to work with the gentleman from Vermont and other interested Members to conduct a comprehensive review by the Committee on Agriculture, Nutrition, and Forestry of the authorities of the institutions regulated under the Farm Credit Act of 1971, other than Farmer Mac, consistent with the jurisdiction of the committee. The stated goal of this review will be to develop legislation to provide for the modernization, expansion, and improvement of their Federal charter and other authorities of the institutions of the Farm Credit System. Such legislation, if warranted by our review, could provide for enhanced agricultural, business, and rural development financing across the United States.

Mr. LUGAR. I would be pleased to engage the Senator in a colloquy.

Mr. LUGAR. The Senator is correct.

Mr. LUGAR

Mr. LUGAR. Mr. President, I submit a sense-of-the-Senate resolution urging Trinidad and Tobago's accession to the North American Free Trade Agreement [NAFTA]. Trinidad and Tobago's admission to the NAFTA between the United States, Mexico and Canada is essential to ensuring continued growth and prosperity. Participation in the NAFTA and the contemplated Free Trade Agreement of the Americas will promote sustained economic development and increased commercial activity between Trinidad and Tobago and its hemisphere neighbors. Indeed, free trade in the western hemisphere would be in the common economic interest because it would be wealth-maximizing for all members. Trinidad and Tobago is well prepared to undertake the obligations of NAFTA. As one of the most advanced economies in the Caribbean, the island nation has successfully implemented economic reforms that have deregulated industry, lowered tariff barriers, and promoted investment. Its achievements are in keeping with criteria for NAFTA eligibility that the Administration has laid out in negotiations with Chile. Trinidad and Tobago has enjoyed good relations with the United States through the years. The two countries share a fundamental commitment to civil liberties and human rights. In recent years cooperation has included working to curtail illegal drug shipments and money laundering in the hemisphere and sharing information relating to customs modernization and reorganization. Trinidad and Tobago and the United States have long enjoyed cordial diplomatic relations as well as strong economic ties arising from the investment of United States companies in the energy sector of Trinidad and Tobago. Both countries have dedicated significant resources to the full restoration of democracy and free market development in nearby Haiti and Cuba. The end of the cold war has altered the nature of the U.S. interest in the Caribbean. Apart from geographic proximity, the flow of people, commodities, culture, and a shared interest in combatting drug trafficking, protection of economic interests and fragile ecosystems have bound the hemispheric together as never before. As with United States-Mexico relations, United States-Caribbean relations dramatically demonstrate the inseparability of foreign and domestic issues. The opportunities for growth and investment for U.S. companies are increasing. The Trinidad and Tobago oil and gas industry is growing steadily, spurring growth in an increasingly diversified economy. This presents excellent opportunities for United States companies interested in conducting operations in the Caribbean as a nexus for trade with South America and the Pacific Rim through the Panama canal. Sustainable growth can be most readily achieved in Trinidad and Tobago by its integration into the regional trade framework. Trade between Caribbean countries accounts for a mere 4 percent of their exports, and investment between the countries of the region is negligible. Trinidad and Tobago is an economic leader within CARICOM, provides most of the current investment and is major creditor in the region. The economies are small; domestic markets and intra-Caribbean markets cannot absorb production and therefore cannot foster meaningful trade expansion. Future economic prosperity for Trinidad and Tobago lies in its rapid integration into the North American market. Economic Reform. Over the past several years, Trinidad and Tobago has created a solid macroeconomic climate through a strong governmental commitment to private-sector-led expansion and export growth. Trinidad and Tobago has had an aggressive program of divestment of public holdings in commercial companies. Fifteen companies have been divested over the past 3 years, including the generation division of the national electric company, the national airline and the iron and steel company. Divestment procedures are in progress for another 13 companies. Trinidad and Tobago's aggressive economic reform policy decisions, rigorously implemented, have yielded positive results and created allies out of many skeptics in the business community. Despite the support for high labor standards and protection of workers' rights and despite actual reductions in unemployment--currently about 18 percent-- the macro-economic reforms cannot by themselves reduce unemployment to acceptable levels. Trinidad and Tobago's Government accounts are now tractable. The fiscal deficit, which averaged 7.2 percent in 1986-88, has been reduced to 1.7 percent over the last 5 years. In 1994, the government closed the year with a small fiscal surplus and expects a similar result again in 1995. The balance of payments in Trinidad and Tobago has also begun to demonstrate a new robustness. Following 11 years of continuous deficit, for the past 2 years the external accounts were in surplus. A supportive monetary policy is in place, aimed at restraining exchange reserves. As a result, inflation is moderate and falling. The inflation rate from September 1993 to September 1994 was only 6.4 percent. The government floated the Trinidad dollar in 1993 and has now fully absorbed the devaluation occasioned by that flotation. The exchange rate has held remarkably firm. Consequently, the inflation rate is expected to fall under 5 percent this year. The external debt service payments have been onerous--well over a half a billion U.S. dollars last year. Nevertheless, the government has reduced the debt significantly and it now represents barely 30 percent of GDP--this down from 42 percent in 1992. Trinidad and Tobago has instituted a major structural adjustment away from import substitution and is vigorously pursuing a policy of export led growth. Almost overnight, the old tariff structure has been dismantled. In 1991, 40 percent of the items were removed from the import negative list. In 1995, the temporary surcharge imposed subsequent to the removal of items from the negative list, was reduced to zero. In 1994, the majority of agricultural items were removed from the negative list. Nevertheless, total output in this sector increased by almost 12 percent. Consistent with the obligations within CARICOM, the existing maximum tariff of 30 percent will be phased down to 20 percent by 1998. It is important to note, however, that a more accurate reflection of the openness of the trade regime is that average tariff rates are now less than 6 percent for imports from the United States. Favorable Investment Climate. The best proof of the success in creating a favorable investment climate is evidenced by the surge of direct investment. In 1995, the Government of Trinidad and Tobago reduced the corporate tax rate for foreign investors from 45 to 38 percent. In 1994, investment flows from the U.S. reached almost $700 million and for 1995, the country has commitments for $1.2 billion. Trinidad and Tobago will easily surpass all other countries in the hemisphere in attracting foreign investment. Trinidad and Tobago will, as a member of the NAFTA, maintain United States environmental, health and safety workplace standards. Trinidad and Tobago's Government procurement provisions guarantee United States firms the ability to compete for government contracts. Tariffs on most U.S. exports have been eliminated in the computer, oil refining equipment, special industrial machinery, pharmaceutical, telecommunications and photographic equipment and sectors. In addition, Trinidad and Tobago has signed both a Bilateral Investment Treaty [BIT] and Agreement on Intellectual Property Rights with the United States. Hemispheric Energy Security. Trinidad and Tobago is a major oil- producing country. Trinidad's 10.6 trillion cubic feet of natural gas reserves represents a 45-year reserves life index. The economy is based largely on its plentiful reserves of petroleum and natural gas. As a result, Trinidad and Tobago has developed good relationships with United States oil companies involved in oil and gas development and extraction. The strategic geographic location of the islands has favored the establishment of large oil refineries and other facilities designed to promote energy research and to produce natural gas and petroleum by-products such as methanol and ammonia fertilizer. Trinidad and Tobago is the world's second largest exporter of nitrogenous ammonia fertilizer, a natural gas by-product. One-third of the United States 3 million tons of ammonia imports come from Trinidad and Tobago annually, valued at $240 million in 1994, according to U.S. Commerce Department figures. This is equal to about 5 percent of U.S. ammonia fertilizer usage annually. The United States currently imports 80 MBD of crude oil and petroleum products from Trinidad and Tobago valued at over $500 million a year in 1994, or 1 percent of the Nation's oil imports. Cooperation on Drug Trafficking. Trinidad and Tobago has modernized its customs operations. It has introduced the automated system for the collection of customs data, which is now operational in most of the country. Officials expect that this critical element in the administrative reform of the Customs department will be extended to Tobago and to the industrial estate at Point Lisas during 1995. Trinidad and Tobago is not a major producer, consumer or trafficker of illegal drugs, precursor chemicals, or money laundering. The Government and the people of Trinidad and Tobago recognize that illegal drugs are disruptive to public health, safety, and the social fabric. Business people contend that money laundering undermines legitimate economic activities. The effects of illegal drug related activity are likely to increase, particularly if economies suffer and drug related work is seen as one of the few income producing opportunities available. Passage of the Dangerous Drugs Amendment in November 1994 brought the laws of Trinidad and Tobago into conformity with the requirements of the 1988 United Nations Convention. The new law prohibits activities regarding the manufacture of precursor chemicals, money laundering activities, assets forfeiture, and removal of impediments to effective prosecution. Since 1992, local Trinidad and Tobago banks have voluntarily reported large deposits to the police department's Office of Strategic Services [OSS], a special unit built to diminish the availability of banking services to traffickers. OSS collects intelligence on financial transactions and in 1994 published a money laundering information pamphlet for local financial institutions. Conclusion. Mr. President, the Republic of Trinidad and Tobago deserves consideration as the next country to accede to NAFTA, following Chile. It has successfully undertaken economic reforms that have attracted foreign investment, reduced debt, and expanded the private sector. In order to further expand its economy, Trinidad and Tobago needs greater access to the larger markets of the hemisphere. The reality is that Caribbean economies are small. Domestic markets and intra-Caribbean markets alone, cannot absorb production and therefore cannot foster meaningful trade expansion. Future economic prosperity for Trinidad and Tobago--as well as for other eligible countries--lies in its rapid integration into the North American market. In submitting this resolution, I hope Trinidad and Tobago can soon be considered for membership in the NAFTA.

Mr. LUGAR

Mr. LUGAR. Mr. President, I would like to take this opportunity to inform my Senate colleagues on the progress of important legislation moving through Congress that addresses the issue of legalized gambling in America. Legalized gambling today is proliferating at breathtaking speed, touching the lives of millions of Americans. Communities across the country are considering casinos, riverboat gambling, pari-mutuel racing, off-track betting, and other forms of wagering. Whereas only 2 States offered casino gambling in 1988, today 23 States have authorized casinos to operate. Overall, 48 States now permit some form of legalized gambling. A steady stream of news accounts have chronicled the recent growth and expansion of gambling activities in America. Many of these stories describe the enormous profits generated almost overnight by gambling enterprises. Questions are being asked about decisions by State and local leaders to legalize gambling. People are concerned not only about the economic costs of these decisions, but of the human costs as well. The Wall Street Journal, recently reported that some New Orleans public officials, retailers, and citizens are having second thoughts about the economic impacts of bringing riverboats, casinos, and video poker machines to Louisiana. The New York Times related the personal experiences of local residents in cities and towns across America who visit a casino instead of a restaurant or ballpark, who spend their grocery money on a nearby instant-play video lottery game, or who exhaust their personal or family savings at the casino tables. In the face of this explosive growth, I joined Senator Simon last April in support of legislation to establish a national commission to conduct an 18-month study on the effects of gambling. This measure, S. 704, would provide State and local governments with an objective, authoritative resource to use as a basis for making informed choices about gambling. S. 704 does not propose to further regulate gambling activities or to increase taxation of gambling revenues. The bill has been endorsed by the President and enjoys bipartisan support in the Senate with a total of 11 cosponsors, including Senators Gorton, Kyl, Lieberman, Grassley, Warner, Feinstein, Hatfield, Kassebaum, Hatch, and Coats. The Governmental Affairs Committee on November 2 conducted a hearing on S. 704. Senator Simon and I testified before the committee along with several other Members of Congress and outside experts concerned about this important issue. I am hopeful the committee will approve this important legislation before the conclusion of this session. Companion legislation was introduced in the House of Representatives by Congressman Wolf of Virginia. The House Judiciary Committee held hearings on Representative Wolf's bill, H.R. 497, and approved the measure by voice vote on November 8. Prospects are good for passage by the full House during the 104th Congress. The Washington Post, in a September 22, 1995, endorsement of the gambling study commission proposal, stated that, Those pushing casinos into communities make large claims about their economic benefits, but the jobs and investment casinos create are rarely stacked up against the jobs [[Page S 17930]] lost and the investment and spending forgone in other parts of a local economy. The commission's study could be of great use to communities pondering whether to wager their futures on roulette, slot machines and blackjack. As evidence of the desirability for a comprehensive study of the gambling issue, I ask that the following Chicago Tribune article from November 29, 1995, be printed in the Record. The article follows: [From the Chicago Tribune, Nov. 29, 1995] Risky Business: Can Gaming Win in Cities?--Chicago May Get Tip From New Orleans (By Ken Armstrong) The way casinos have flopped in New Orleans may drive other cities to flip in their views toward gaming, but Chicago still looks like a viable gambling market, according to financial analysts. As the country's first major city to introduce large-scale gaming, New Orleans was to be a model demonstration of casinos creating tax dollars and jobs. What transpired instead were budget shortfalls, unrealized promises and the threat of municipal layoffs. ``I think there were many municipalities watching this project as an experiment in urban gaming,'' said Jason Ader, a gaming analyst with Bear Stearns & Co. in New York. ``And the fact that it has effectively failed casts a dark cloud over other urban markets considering gaming as an economic engine.'' Harrah's Jazz Co. shut its temporary casino in New Orleans last week and declared bankruptcy. Harrah's Jazz also suspended construction on its permanent casino, which was slated to open in New Orleans next summer. No longer able to count on lease and tax payments from the casino, New Orleans faces a budget shortfall and has postponed the sale of $15.8 million in general obligation bonds. Mayor Marc Morial said he may have to lay off as many as 1,000 city employees. Gaming opponents have latched on to the debacle, using it to argue that other cities pursuing casinos would be wise to give up the chase. Tom Grey, a Galena, Ill., minister spearheading the anti- gambling movement nationwide, said there's reason to believe that what happened in New Orleans would be replayed in Chicago, where Mayor Richard Daley has pushed hard for casinos. But several financial analysts who specialize in gaming say it isn't necessarily so. ``Everybody in the industry knows Chicago and New York would be layups if they had casinos there,'' said Steve Schneider, an analyst with Stifel Nicolaus & Co. in St. Louis. He estimated that casinos in Chicago could generate $800 million to $1 billion in gross profits without cutting heavily into the revenues of nearby riverboat casinos. Daley spokesman Jim Williams said the mayor still views casinos as a good way to attract convention-goers and increase tax revenue for the city and state. But he added: ``The mayor has never seen gaming as a panacea. He's been steadfast in his belief that it should never be seen as a primary source of income.'' What happened in New Orleans would more likely give pause to marginal markets for gaming such as Milwaukee or Cleveland, Schneider said. The poor performance of the New Orleans casinos also will make it more difficult for gaming companies to secure project financing for future developments, he said. Brian Ford, director of gaming industry services at Ernst & Young in Philadelphia, said New Orleans hardly proves that casinos can't flourish. With video-poker machines in truckstops, casinos on riverboats and what would have been one of the world's largest land-based casinos, Louisiana tried to do too much with too small a population base, Ford said. The shutdown of Harrah's Jazz was New Orleans' second losing hand. Another project with two riverboat casinos--the $223 million River City complex--closed in June after opening just nine weeks before. Analysts blamed its failure, like that of Harrah's temporary casino, largely on its location. The riverboat complex was built in an industrial area where its neighbor is Glazer Steel & Aluminum--hardly a tourist draw. A thousand feet of head-high weeds, tractor trailers, piles of gravel and an abandoned Chevette with smashed-in windows separate the complex from the edge of the city's downtown area. David Anders, a gaming analyst with Raymond James & Associates in St. Petersburg, Fla., said New Orleans shows that while state and municipal governments should rightfully profit from a casino, they shouldn't make the casino's financial burden so great it can't survive. Harrah's Jazz paid $125 million up front as a franchise fee for the state's only land-based casino and promised payments of at least $100 million a year to the state, regardless of financial performance. The company's principal partner is Memphis-based Harrah's Entertainment Inc., which grew from a bingo parlor in Reno during the Depression to an industry giant with casinos in all of the country's major gaming markets. Ralph Berry, a Harrah's Entertainment spokesman, said Harrah's Jazz still wants to open the permanent casino and will try to renegotiate the casino agreement with the state, city and lenders. Critics have accused Harrah's Jazz of using the bankruptcy filing as leverage for more attractive terms.

Mr. LUGAR

Mr. LUGAR. The gentleman is correct, the reforms in section 1107 will result in more competitive sugar prices, enhanced Government revenues, and the potential for increased sugar imports.

Mr. LUGAR. I would be pleased to engage the Senator from Idaho in a colloquy.

Mr. LUGAR

Mr. LUGAR. Mr. President, I ask that the following article be printed in the Record. [From USA Today, Nov. 17, 1995] Despite Legal Issues, Virtual Dice Are Rolling (By Linda Kanamine) Forget Las Vegas. Skip Atlantic City. In an instant, on-line card games, slots, roulette, keno, craps and sports betting could be available to everyone with a computer and a phone. Everyone is ready--the games, the virtual casinos, even a new way to pay. Billions of dollars are riding on just one more thing, the government's OK. But so far, law officials are saying ``No dice.'' The technology may be fine, but there's no protection for bettors. ``People are literally being asked to send money to somebody 4,000 miles away, who is not regulated and not controlled,'' says Minnesota Deputy Attorney General Tom Pursell. ``Just give him your credit card number and trust him to tell you when you've won. Now, what's wrong with this picture?'' Even as law enforcement balks at virtual casinos, the vast, unregulated Internet computer network has about 200 gambling- related sites. While most are how-to-play tutorials or ads for future games, a handful are defiantly taking wagers. ``The vice watchers are really taking a look at this,'' says Jeff Frentzen, who follows Internet trends for PC Week magazine. ``The Internet is insecure. It's become a major hot-button issue and there will be many attempts to put controls on it.'' But how to control it? Upstart operators already are in business in the Caribbean and Liechtenstein as they capitalize on the appeal of gaming. Players, propelled by a new electronic cash system that replaces credit cards, already can click their computer mice on a handful of on-line sites and place their bets. Most of those still look like a kid's video game. Blackjack? Your cards come up under the dealers' hand, you choose ``hit'' or ``stay,'' the computer adds up your cards for you. Roulette? The wheel turns on screen as you click your ``red'' or ``black,'' ``even'' or ``odd'' numbers. Some are clearly adults-only. Sex World, for instance, features topless female dealers. Still, it's hardly the $10 billion bonanza that gambling afficionados predicted would explode across the Internet six months ago. Gambling enthusiasts remain worried about ripoffs. The first court challenge comes in December when Minnesota Attorney General Hubert ``Skip'' Humphrey Jr. tries to stop Las Vegas-based Granite Gate Resorts Inc. from offering on- line gambling. Humphrey says simply advertising a future service is consumer fraud because federal and state laws bar betting over communications wires or with credit cards. ``We're trying to raise the issue before the cat's out of the bag with this,'' says Pursell, his deputy. ``This sets a precedent on dealing with the Internet in general.'' Policing computer users could ultimately affect cyberspace, from chat rooms and shopping to pornography and, of course, gambling. But blocking computer gambling may be tougher than hitting a royal flush. A recent study found nearly 37 million people in the USA and Canada now have access to the Internet. And polls have found at least 65% of adults have gambled, from lotteries and office pools to illegal sports bets. Wagering on legal games (casinos, lotteries and racetracks) has skyrocketed from $17 billion in 1976 to $480 billion last year and more than $500 billion this year. Last month, St. Louis' Mark Twain Bank opened the first electronic-cash accounts. The bank turns account dollars into e-cash credits, which the customer spends on-line. The customer sends an encrypted code to the bank, which approves the payment. ``I absolutely believe there will be billion-dollar companies 10 years from now doing interactive gambling,'' says Colleen Anderson, president of IWN Inc. in Carlsbad, Calif., which develops interactive gambling programs. ``The potential is phenomenal. But we've got big hurdles to get over, like the regulations to say it's legal,'' she adds. Meanwhile, entrepreneurs have headed offshore to take advantage of lax regulations abroad and the distance from U.S. law enforcement officials. Many, like 34-year-old Toronto businessman Warren Eugene, are betting that U.S. agents will be too busy to bother with at-home gamblers. His Internet Casinos is run from the Caribbean islands of Turks and Caicos. Click onto the site's home page and an eye- patched pirate runs a hand through coins and jewels overflowing a treasure chest at this ``Caribbean Casino.'' Registered players with passwords choose from 18 games, including Asian favorites, and casino themes ranging from the cowboys-in-leather West World to the topless Sex World. In five months, he claims 25,000 have registered to play; 2,800 from Canada, Europe and especially Asia bet regularly. Casino jackpots have paid up to $1,400 and a football bet ``well over $100,000.'' With 22% of the gross going to the company--far higher than Las Vegas casinos, which hold about 8%--and no sizeable overhead costs, Eugene predicts ``huge, huge, huge profits, almost obscene profits.'' He says he doesn't accept U.S. gamblers unless they have an offshore bank account and even warns Americans on the home page to stay away. There's no such warning on one of the newest gambling sites, a weekly Lotto run by the government of tiny Liechtenstein. Launched Oct. 7, it promises a minimum weekly jackpot of $1 million. Justice Department officials concede gambling isn't a top priority. ``The Internet, we have no set policy,'' says spokesman John Russell. ``It's a very exciting time to be in law enforcement looking at these issues. The scope is so obviously huge.'' Yet most law enforcement agents insist that gambling is so stigmatized by links with organized crime, scandals and fraud that it must be regulated. Critics say virtual casinos will increased debt and social angst. ``People will get involved over their heads,'' says Ed Looney of the Council on Compulsive Gambling in New Jersey. ``On-line hits a bunch of people who are the shut-ins, who will now have access to a casino,'' he says. And many will be underage wagering behind the anonymity of a modem and their parents' credit cards. So where is all this going? ``There isn't a lot of activity yet. I think there's a wait-and-see attitude while the martyrs go out and . . . make the mistakes,'' says PC Week's Frentzen. ``The Internet is a free system. It was never intended to be used for commercial purposes. The biggest hurdle will be consumer confidence, is this safe?''