The story of Bob Lytle, the most infamous figure in California gaming you’ve never heard of

Blackjack, image by 18percentgrey

In the annals of California gaming history, there is perhaps no more infamous and consequential figure than Bob Lytle.

A law enforcement veteran, Lytle directly shaped California’s current gambling landscape right before he retired from the Attorney General’s office to go work for a cardroom – a cardroom where he was later investigated and ultimately lost his gaming license.

“For what Lytle did for the cardrooms, they should build a statue of him in front of every cardroom in the state,” said Richard Schuetz, the renowned casino executive and gaming regulator and former member of the California Gambling Control Commission.

Lytle began his law enforcement career as a California Highway Patrol officer, then joined the Attorney General’s Bureau of Narcotics Enforcement as a special agent, rising, eventually, to the rank of assistant chief. In October 2002, he was named deputy director of the Division of Gambling Control – the old name of the AG’s gambling operations – where he oversaw a variety of administrative programs.

“For what Lytle did for the cardrooms, they should build a statue of him in front of every cardroom in the state.”

When Harlan Goodson retired as director of the Division of Gambling Control in July 2003, Lytle became acting director. Then Attorney General Bill Lockyer made his appointment as head of the division permanent in September 2003.

As the director, Lytle didn’t do much of note. His most lasting contribution to the California gaming community came in his final month on the job, in December 2007.

On December 20, Lytle sent a letter to two lobbyists for the cardroom industry. In that letter, Lytle laid out his interpretation of California law, relaxing previous restrictions enforced on “banked” games offered in cardrooms.

This letter was hugely influential, laying the groundwork for the convoluted and controversial system cardrooms use today in order to offer Blackjack and Baccarat at their facilities.

It started with, Proposition 1A, approved by the voters in 1999, which established that Native American tribes have the exclusive right to operate card games using house money in California. That meant that cardrooms would be prohibited from offering “banked” games like Blackjack.

But Lytle’s new interpretation changed that. Essentially, his letter said that if cardrooms offered every player at a Blackjack table the opportunity to serve as the house or bank for a hand or two, and as long as the cardroom itself never acted as the bank, it was OK for them offer games like Blackjack and Baccarat, no matter what Prop. 1A said.

This letter led to the creation of the current (and very confusing) third-party proposition player system cardrooms use today to offer banked games. Third-party proposition players, or TPPPs, are special licensed businesses that work within California cardrooms but are supposed to be financially independent from them.

TPPP employees volunteer to act as the house or bank at Blackjack tables and, unlike most other players at the table, they have the financial means to cover the action.

Essentially, before a cardroom dealer deals a hand of Blackjack, the dealer is supposed to offer all of the players at the table the opportunity to serve for a hand or two as the house or bank. Most cardroom players decline the offer – but TPPP employees pick it up. And Lytle’s letter essentially said that the bank doesn’t have to actually rotate beyond the TPPP employee as long as the position is offered to everyone at the table.

California’s gaming tribes say this awkward workaround blatantly violates the intent of the voters, but they’ve never been able to get the issue heard in court, because judges have ruled sovereign tribes lack the legal standing to challenge the cardrooms.

So, since late 2007, cardrooms have relied on the TPPP system, based on Lytle’s December 20, 2007 letter, as a loophole to offer Blackjack and Baccarat, some of their most profitable games.

In fact, it has been estimated that Lytle’s letter is directly responsible for creating millions of dollars in profits for California cardrooms

Lytle, meanwhile, resigned from the AG’s office 10 days later, on December 30. The very next day, he formed Lytle Consulting Services and went to work for the Garden City Casino cardroom, which later became the parent company of Casino M8trix in San Jose.

As an interesting sidenote, before he quit the AG’s office, he allegedly directed state regulators “to cut back ongoing investigatory activities regarding Garden City,” which was the subject of “outstanding notices of violation.”

And this is where things start to get weird.

In Lytle’s new role as a bigwig in the cardroom industry, he maintained close relationships with state gaming regulators, particularly Richard Lopes, the then-chairman of the California Gambling Control Commission, and James Parker, a special agent in the AG’s gambling operation, which was renamed the Bureau of Gambling Control. (California has two separate agencies responsible for overseeing gambling within the state.)

Lytle eventually agreed to give up his gaming licenses and to pay at least $75,000 in fines or 15 percent liquidation of his ownership in two Sacramento cardrooms, whichever was higher.

Parker, the gambling control agent, was at one time living with Tina Littleton, the executive director of the California Gambling Control Commission.

From December 2012 to December 2013, Lytle allegedly “solicited and received confidential information” about Garden City and Casino M8trix from Parker during “no less than 180” telephone calls.

This all came to light when the AG’s Bureau of Gaming Control accused Lytle of violating numerous state gaming regulations in December 2014. Lytle eventually agreed to give up his gaming licenses and to pay at least $75,000 in fines or 15 percent liquidation of his ownership in two Sacramento cardrooms, whichever was higher.

Lytle was accused by then-Attorney General Kamala Harris of potentially compromising a skimming investigation at Casino M8trix, where $119 million in profits were suspected of being diverted to shell companies to avoid taxes. That investigation resulted in the resignation of part owner Eric Swallow, who was forced to sell his interest in Casino M8trix.

Also as fallout from this whole scandal, Lopes recused himself from any involvement in Lytle’s case and eventually retired, while Littleton took a lesser role within the agency and Parker retired from the AG’s office.

As part of his settlement with the state, Lytle agreed to lifetime ban from California gambling activities. Since then, he’s fallen off of the radar of the California gaming community. Capitol Weekly tried tracking him down using the people finder service BeenVerified. It contacted 16 phones numbers and 13 email addresses associated with Robert E. Lytles with ties to California. None of them worked.

Whatever the case, Lytle’s story epitomizes why California’s gaming tribes have such a contentious relationship with both the cardrooms and California’s gaming regulators.

The tribes believe Lytle is responsible for creating a loophole that allows cardrooms to horn in on their exclusive right to offer banked games, an intrusion they estimate costs tribes about $100 million a year. At the same time, Lytle’s unsavory entanglements with state gaming regulators have made the tribes skeptical of their legitimacy and fearful that their corruption tarnishes the integrity of the games played in California.

Requests for comment on the record from tribal gaming entities on Lytle’s impact went unanswered. But Schuetz is clear in his feelings about the role Lytle played.

“Bob Lytle and his lack of integrity is largely responsible for the tribal nations in the state of California having no faith in the regulatory model there,” said Schuetz, the former gaming commissioner.

Want to see more stories like this? Sign up for The Roundup, the free daily newsletter about California politics from the editors of Capitol Weekly. Stay up to date on the news you need to know.

Sign up below, then look for a confirmation email in your inbox.


Support for Capitol Weekly is Provided by: