Inside the Casinos : What Goes on Behind the Scenes Is as Interesting as the Action at the Tables, Says Author Paul Erdman

In the grand manner of some character in his best-selling financial-thriller novels, author Paul Erdman took a puff on his expensive Dominican cigar, a sip of champagne and sat back to reflect on the casino industry.

“You know, it’s their employees, not the customers, that they worry about. Their security is perfect. An outsider cannot steal from a casino, believe me. The only way--and I was told this time and again by the guys in charge--is that it’s got to be an inside job.

“And,” Erdman went on, “it has to involve two people--say a crooked dealer and a partner.”

Or, as in his newest work of fiction, “The Palace,” (Doubleday), the two managers of a Las Vegas casino. Mostly, though, the transgressors are lower on the ladder.

Anyone who has ever been inside a casino is aware that beyond those mirrored ceilings are catwalks patrolled by security people who look down on it all.

“But they aren’t watching you,” Erdman said. “They are always focusing on their own guys. Something may make them suspicious. Usually it’s instances where the numbers aren’t coming out right. A certain table isn’t statistically up to par.

“They’ll flick on a camera to videotape an entire shift. When the offender starts doing something fishy, it will be in the form of a signal to his partner--by hand, by blinking an eyelid, something. The workers, of course, know there are cameras up there, so it’s got to be very surreptitious. But the casino management knows all the tricks. Then, when they’ve got a pattern on, say, the dealer, they’ll put a camera on the man or woman he’s working with.”

Court proceedings rarely follow. Wrongful discharge suits aren’t filed. The former worker realizes he or she is finished for life in any casino, anywhere.

This education is just part of what Erdman has been receiving, on and off, for the past five years. The result is a rare look at what really goes on inside a casino--not just the card counters and the hookers and the system players--but the real thing.

And it is clearly a departure from the author’s popular treatment of international financial intrigue and the uncanny prescience of his previous work, “The Panic of ‘89,” which predicted the stock market’s biggest tumble and the troubles at Bank of America. “I got to spend an entire night in a Vegas counting room,” boasted Erdman, who lives in Northern California. “You try to even get inside one. There is only one door, did you know that?”

Everything inside this inner sanctum is recorded on audio and video. As the folding stuff arrives after having been unsuccessfully wagered, it is piled onto the center of a large table and rapidly ruffled by workers who count aloud.

After meeting with a Hollywood director, producer and a casino owner, Erdman says he was given the keys to the kingdoms (“The owners are all a brethren”), carte blanche to prowl the casinos of the world, to ask questions and to see what the public hardly ever gets to see.

His observations:

- The reason you’ve never seen a slot machine emptied of its coins is that you are probably asleep at the time. “About 4 a.m. is the low ebb of activity, and that is when they do it,” Erdman said. “It would be bad PR to do it at high noon and have all the customers watching their money being wheeled away. Boxes chained to a metal cart are used. The workers--there are always three of them--go from slot to slot, then wheel the total take to the counting room, where it is dumped onto a table and run through machines such as the banks have.”

- “The casino business is unique in that originally it was a mob business. . . . The business has evolved to the point where the Wall Street gang has taken over. . . .”

At one of Erdman’s stops at an Atlantic City casino, a board meeting was in progress. “They had flown in eight Wall Street analysts. The stock is publicly traded, so it was just like (Chrysler Chairman) Lee Iacocca bringing analysts to Detroit and showing them the new models, hoping they would go back and write up things real nice, and keep the stock price up.”

- “I was disappointed in Atlantic City. Originally, the title of my book was to include that place. Once I got to know Atlantic City, that was the last thing I wanted in my title. It’s such a schlocky joint.”

Will, as the people there hope, it ever become the Vegas of the East? “No, it’s ruined already,” the author replied. “You drive through miles of pine trees and end up at a boardwalk surrounded by a slum. And then you walk into a casino, and all you see are a couple acres of slot machines being operated by blue-collar workers who probably got there in a bus. The casino operators in Vegas aren’t at all worried about Atlantic City. The bus crowd is too much of the action there, and it won’t change.”

- Gamblers seem to enjoy life more than most people. This is a statement by Danny Lehman, the book’s central character, a coin dealer with money-laundering connections to a Cayman Islands bank who winds up owning casinos on both U.S. coasts. And Erdman (himself not much of a gambler) agrees with the statement, using the comparison of a race car driver:

“Both exist on a fast track, living risks all the time. High rollers, especially, have the same mentality as those drivers. If either one cracks up, he is probably dead. Death for a big gambler to whom the casinos have given unlimited credit comes if he ever hits a bad streak of luck--misses a curve, in effect--and can’t pay up. He will be blackballed everywhere, permanently.”

- The much-predicted prospect of a recession doesn’t bother the casino barons. “Paradoxically,” Erdman said he was told, “that is when the gambling industry does particularly well, as do movies and book sales. People retrench on other expenses, and use these things as an escape.”

Many of those who shared their feelings with Erdman said the ‘60s were the most exciting years. “When you went into one of the casinos, you felt you were being a rather bad boy about it all,” Erdman said. “Now evil has become too widespread. If you want to see a naked girl, you go to the corner video shop. If you want to gamble legally, even the state of California now tries to get you interested.”

Looking back on his years of research (followed by a million-dollar advance from his publisher), the 55-year-old author philosophized: “Vegas, after a while, is like having a daddy who owns a candy store. You can stand only so much. You OD on lollipops.”

Given Erdman’s background (he’s the former owner of a Basel bank, which eventually failed, landing him in a Swiss jail), his doctorate in economics from the University of Basel, and his book, “The Panic of ‘89,” one cannot help wondering about his thoughts three months after Black Monday.

Indeed, the same occurred to his publisher, which has had him complete a nonfiction book, “What’s Next?,” due out in March and dealing with what Erdman thinks will happen to the American economy and the stock market over the next three years.

You can’t ignore someone who says he actually made money on Meltdown Monday, Oct. 19, 1987. On the previous Friday, if you had gotten a put option on a futures contract on the Standard and Poor’s 500 index, and had invested $3,000, by noon Tuesday it would have been worth about $75,000. That is, Erdman said, about what he did.

If you anticipate a decrease in, say, the value of a stock or an index, a put option is a contract which gives you the right to sell at a fixed price for a fixed period of time. If the price goes down, you may exercise your option to sell at the higher price.

OK, so what’s ahead?

- “I think January-February-March of 1989 is when the recession starts,” Erdman replied. “And the effect will be much worse than last October. That was contained totally to Wall Street. Next time around, Main Street will be affected.”

- “I think for sure unemployment will go up to 8%.

- “My thesis is that this downturn won’t be sweet, but will be short--10 months. I think we’ve already set ourselves up for a recovery. This devaluation of the dollar had to happen, and it has put us back in the ballgame.”

- “I would keep salting money away for now. All mine is in certificates of deposit and money-market accounts. My theory is that if you’ve got stocks, and the Dow goes over 2000, dump them. Otherwise, you’ll be nickled and dimed until the Dow is down to 1200.”

- “At that point, you buy stocks, let me tell you. That is what I am going to do.”