News Articles

FIRST-PERSON: Enron & a state lottery have striking similarities

EDITORS’ NOTE: Rodney K. Smith holds the Herff Chair of Excellence in Law in the Cecil C. Humphreys School of Law at The University of Memphis. The views in this commentary are his own and not necessarily those of The University of Memphis.

MEMPHIS, Tenn. (BP)–In law, the strongest witness is one who testifies against his own interest. As one who teaches in and is wholeheartedly committed to public higher education, I am an apparent beneficiary of revenues generated from a proposed state lottery. It might be assumed, therefore, that I should write in favor of the lottery. I cannot do so.

The proposed lottery is immoral and imprudent. It is imprudent because its limited benefits come only at an unacceptable, and at times devastating, societal cost. It is immoral because it deceptively hides behind a noble cause — public education — while preying upon human weakness, with particular effect on our most vulnerable citizens.

Initially, I resolved to avoid declaring the lottery “immoral,” knowing that a proponent of the lottery will surely cry, “Don’t legislate my morality.” I am persuaded, however, that Dallin H. Oaks, who served as president of my alma mater when I was a law student and also served as a member of the law faculty at the University of Chicago, was right when he said, “I suppose persons who mouth the familiar slogan [‘Don’t legislate morality’] think they are saying something profound. In fact, if that is an argument at all, it is so superficial that an educated person should be ashamed to use it. As should be evident to every thinking person, a high proportion of all legislation has a moral base. That is true of all of the criminal law, most of the laws regulating family relations, businesses, and commercial transactions, many of the laws governing property, and a host of others.”

I trust that nearly everyone will grant that what happened with Enron and other recent corporate fraud — insiders knowingly taking advantage of outsiders and bilking them of their hard-earned money — is immoral. The lottery is analogous to Enron in a number of unsettling ways.

The proponents of the lottery would have us believe that education in Tennessee will receive something for nothing. That is a pernicious teaching. George Will notes that, “Gambling is debased speculation, a lust for sudden wealth that is not connected with the process of making society more productive of goods and services. Government support of gambling gives a legitimatizing imprimatur to the pursuit of wealth without work.” Similarly, offending officials at Enron took steps designed to satisfy their personal lust for wealth without doing anything to build the economy. I do not want to teach my children or my students that it is right to get something for nothing.

Some proponents of the lottery, in moments of candor, reluctantly concede that gambling is often not a good thing. They acknowledge that the lottery will take money from the poorest in Tennessee and give it to education, but they contend that the end of education justifies the questionable means, the lottery. Statistics demonstrate that the heaviest lottery players are those with annual household incomes of less than $10,000. With the lottery, the poorest of the poor are enticed by government-sponsored advertising to purchase a ticket on the fraudulent ground that it can deliver them from the ravages of their poverty. By analogy, in cooking their books, the officials at Enron knew that they could do just what the proponents of the lottery intend to do — get the unwitting to invest in wild and unwarranted speculation, while quietly benefiting corporate officialdom in the process.

Studies confirm that the long-term costs to society, in terms of increased crime, bankruptcy and harm to children and families, exceed any short-term benefits from a lottery or gambling of any sort. Officials at Enron also believed that short-term benefits to themselves and stock prices warranted accepting certain long-term risks, especially if those risks could be shifted to others. While serving as dean of the William H. Bowen School of Law at the University of Arkansas at Little Rock, I sat in a joint ethics meeting in Little Rock between leaders of the Arkansas Bar and the Louisiana Bar. Describing the harms done after seven years of experience with legalized gambling in their state, including attorneys stealing from clients to feed their gambling addiction, the leaders from Louisiana implored that we do all that was within our power to oppose government-recognized gambling in Arkansas.

The lottery differs from corporate fraud in a notable way: Even with its corporate scandal, Enron shares were generally a better investment than lottery tickets. Until the moment of Enron’s bankruptcy filing, analysts rated Enron a better buy — more likely to turn a profit — than a lottery ticket. At least Enron retained some valuable assets, now the subject of bankruptcy litigation. The lottery has no valuable asset, only a less-than-Enron chance at winning a return. The state proposes to advertise and sell to its citizens a poorer investment than Enron stock.

I can see the wry smile of the lottery proponent as he condescendingly replies, “Professor, you exaggerate. The lottery is small and innocent, hardly gambling at all and it offers such alluring benefits.” C.S. Lewis anticipated just such an argument in his book, “The Screwtape Letters,” where he has Wormwood, the devil, say to his supporters: “You will say that these are very small sins; and doubtless, like all young tempters, you are anxious to be able to report spectacular wickedness. But do remember, the only thing that matters is the extent to which you separate man and the Enemy. It does not matter how small the sins are, provided that their cumulative effect is to edge the man away from the Light and out into the Nothing. Murder is no better than cards if cards can do the trick. Indeed the safest road to Hell is the gradual one — the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts.”

If a lottery is adopted, students (many of whom come from wealthier families) may receive scholarships, I may enjoy a salary increase, and we may obtain the latest in computer technology, but I will be harmed greatly in my effort to teach my students. Each benefit funded with tainted lottery dollars will diminish my capacity to teach my students. They will know that each benefit has come at significant moral cost, and they will wonder what the real story is — is it the ethics of our words in the classroom or the ethic of our works in bettering ourselves materially through funds generated from a morally bankrupt lottery? I trust the citizens everywhere will be wise enough not to raise that question.

    About the Author

  • Rodney K. Smith