Stretched to their taxing limits and cut off from federal support, cities and states around the country are toying with the idea of legalized gambling.

From riverboat gaming along the Mississppi River to full-scale casino resort proposals in Chicago and New Orleans, gambling is gaining respectability among officials hoping to cash in on the billions Americans now wager through illegal bookies.

Marvin B. Roffman, president of Roffman Miller Assoicates in Philadelphia, gained national attention in 1989 when his negative assessment of Donald Trump's Taj Mahal casino bonds appeared in The Wall Street Journal. Mr. Trump demanded that Janney Montgomery Scott, the casino analyst's former employer, fire him or publish a retraction of his comments.

Mr. Roffman refused to write a retraction and was fired, an action that some market watchers believe has put in question the reliability and indepedence of Wall Street research.

The analysts eventually won a $750,000 settlement from Janney Montgomery, and last year he settled a federal court case against Mr. Trump for an undisclosed amount.

In an interview with staff reporter Steven Dickson, Mr. Roffman discuss the impact gambling would have on city and state revenues around the country, as well as what his experience with Mr. Trump has taught him about the value of Wall Street research.

Q: Over the past two years there has been an explosion of proposals for using legalized gambling as a source of new revenues for cities and states. Why now?

A: If you look around the country you see enormous budget deficits, so there's that desire to raise revenues. About two years ago, you started to see the push for gambling on riverboats in Iowa and Illinois, and low-stakes gambling in Colorado and South Dakota.

Now you have an outbreak of casino gaming...on Indian reservations. In February, a major casino opened in Ledyard, Conn., on an Indian reservation. It has just been a tremendous success. The indications are that this property could win $150 million in its first year, which is certainly beyond anyone's initial expectations. And many tax-payers say, "Why should the state not open up and permit gaming in Bridgeport if people in Bridgeport are going to Ledyard to gamble?"

About $1 billion of the gaming revenues in Atlantic City come from Philadelphia-area patrons, yet this city has a $200 million-plus budget deficit. Mayor [Edward] Rendell, as soon as he assumed office in January, became a very strong proponent of riverboat gambling. It was defeated by the Pennsylvania Legislature this time, but I can tell you it is simply a question of time.

Q: If the goal is higher revenues, will legalized gambling work? One study in Chicago estimated a casino there would cut the state's lottery take by 12%.

A: That was probably one of the reasons why it was soundly defeated in the state Legislature here in Pennsylvania, where lottery sales are in excess of $1 billion.

But there's no question that legalized gambling generates tremendous revenues. It's just taking the business away from the bookies. It generated $21.5 billion in revenues last year. That's a tremendous amount of money, and that's why I say it's inevitable.

Q: What can cities like Chicago and New Orleans, now considering large-scale casinos, learn from Atlantic City's experience?

A: It depends on whose side of the table you're sitting on.

If you're a politician, you have to wear your rose-colored glasses and say casino gambling has been a tremendous success. It's generated hundreds of millions of dollars in revenues and taxes and 50,000 jobs.

But from the standpoint of the voter, he was promised -- and the purpose of bringing casino gambling to Atlantic City in the first place -- was to revitalize the city. Here we are just about going into the 14th anniversary, and that city has still not been revitalized. In fact, the place just is an eyesore, except for these spanking new [casino] properties. ...And that's one of the reasons why Atlantic City casinos could be in for some stormy seas ahead. Not right now, but several years down the road.

Q: Is the main threat to Atlantic City from the major resort casinos being proposed, or should city officials also be worried about riverboat gambling and casinos on Indian reservations?

A: It's not that this one casino standing in Ledyard, Conn., is going to take away business, although there's no question that there are a number of high-rollers in the New York area who might find it more convenient to go to Ledyard. But the point is that the development of those projects will trigger the proliferation of gambling to the states.

Q: What has been the public's response to the idea?

A: Most people say, "I love casino gaming. Just don't bring it to my backyard." All you have to do is talk to some people who lived in Atlantic City for many years. The advent of casino gaming has ruined a lot of people's lives.

You can ask, has casino gaming been a panacea for New Jersey? And the answer is, no, it hasn't. Yes, it's been great at generating a lot of revenues for the elderly in assistance programs. But then again, look what it's done to elderly people who may be going down and putting their Social Security checks into these [slot] machines.

Q: In 1989 Donald Trump pushed Janney Montgomery Scott to fire you for your analysis of his Taj Mahal bonds. How prevalent is that kind of pressure on Wall Street?

A: The way Wall Street is set up, there are tremendous conflicts that are present. Analysts are always reminded that they are not a profit center. If you take a look at Wall Street today, the big profit centers are the corporate finance departments and syndicates. They don't like waves, and they don't like negatives, and they don't like potential lawsuits. It's just the way things are. So almost everything you see coming out of research are "buy" recommendations. When I worked at Janney Montgomery Scott, they didn't use the "s" word -- "sell." They used to use "switch." After I was fired, they reverted back to "sell."

Also after I was fired, Institutional Investor did a poll of their all-star analyst team. An alarmingly high 61% said at least once in their career they were asked to temper or modify an opinion.

Q: What's the solution?

A: Fortunately, in this country we have a self-correcting mechanism. Many analysts have set up their own shops, like myself. Independent research now is the fastest-growing segment of research in this country.

During the decade of the '80s, the leading stock indexes almost tripled. Yet most investors did not fare well. Why? Because Wall Street was trying to reinvent the wheel. A lot of things came up, like partnerships and shelters, that have really turned out to be very poor investments. So during the '80s, many small investors left the market and went into mutual funds. If individuals are not doing well with their brokers, they will go to professional money management. Either through mutual funds or to money managers like ourselves.

Q: How do you asses the rating agencies in terms of independence and research quality?

A: I don't look at the rating agencies. If you look at the decade of the '80s when a lot of these bonds became just terrible investments, it was after the bad news came out that they started to lower the ratings.

I think what that means is this: When an analyst has to follow more than 15 companies, he starts to lose control. When you have an analyst following 50 companies, you can't effectively do that. I don't know whether the rating agencies have the firepower.

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