1 1 2 3 4 5 * * * * * * * * * * * * * * * * * 6 7 TEXAS LOTTERY COMMISSION 8 MEETING 9 10 FEBRUARY 15, 2001 11 12 * * * * * * * * * * * * * * * * * 13 14 15 16 17 18 19 BE IT REMEMBERED that the TEXAS LOTTERY 20 COMMISSION meeting was held on the 15TH of FEBRUARY, 21 2001, from 8:30 a.m. to 4:05 p.m., before Brenda J. 22 Wright, RPR, CSR in and for the State of Texas, 23 reported by machine shorthand, at the Offices of the 24 Texas Lottery Commission, West Sixth Street, Austin, 25 Texas, whereupon the following proceedings were had: WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 2 1 APPEARANCES 2 3 Chairman: Mr. C. Tom Clowe, Jr. 4 Commissioners: 5 Ms. Elizabeth D. Whitaker Mr. Anthony J. Sadberry 6 General Counsel: 7 Ms. Kimberly L. Kiplin 8 Executive Director: Ms. Linda Cloud 9 Charitable Bingo Operations Director: 10 Mr. Billy Atkins 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 3 1 INDEX 2 3 Appearances...................................... 2 4 AGENDA ITEMS 5 Item Number 1.................................... 4 6 Item Number 2.................................... 4 Item Number 3.................................... 7 7 Item Number 4.................................... 9 Item Number 5.................................... 10 8 Item Number 6.................................... 122 Item Number 7.................................... 11 9 Item Number 8.................................... 12 Item Number 9.................................... 21 10 Item Number 10................................... 136 Item Number 11................................... 137 11 Item Number 12................................... 142 Executive Session................................ 147 12 Item Number 16................................... 148 Item Number 17................................... 149 13 Item Number 18................................... 157 Item Number 19................................... 157 14 15 Reporter's Certificate........................... 159 16 17 18 19 20 21 22 23 24 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 4 1 CHAIRMAN CLOWE: Good morning. It is 08:48 2 8:50 a.m., February 15th, 2001. I would like to call 08:48 3 to order the meeting of the Texas Lottery Commission. 08:48 4 We have a quorum. Commissioner Sadberry is here. I 08:48 5 am Tom Clowe. We will begin without Commissioner 08:48 6 Whitaker. We anticipate her arrival at some point in 08:48 7 time, and I'll announce that when she appears. 08:48 8 We're ready to go to the agenda, item 08:48 9 number two, report, possible discussion and/or action 08:48 10 on lottery sales and trends. Toni, are you going to 08:48 11 help us with that this morning? 08:48 12 MS. SMITH: Yes, sir. Good morning, 08:48 13 Commissioners. For the record, I'm Toni Smith, 08:48 14 marketing director of the Texas Lottery Commission. 08:48 15 First, to take a look at sales. Fiscal year to date 08:48 16 for fiscal year 2001 are $1,297,255,224. This is 08:48 17 11.37 percent from last fiscal year's total sales of 08:49 18 $1,164,865,476. To look at the same numbers on a 08:49 19 weekly average basis for fiscal year '01, we are at 08:49 20 $54,052,301, which again, reflects an 11 percent 08:49 21 increase over the weekly average of last year's sales 08:49 22 of $48,536,061. 08:49 23 To look at year to date by just a 08:49 24 couple of products. The Instant product fiscal year 08:49 25 to date is $797,271,319, as opposed to $708,545,367. 08:49 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 5 1 The Instant product in fiscal year '01 represented 08:49 2 61.46 percent of sales, and last year it was 60.83 08:49 3 percent of sales. So we're seeing a 12.52 percent 08:50 4 increase over last year. And for Lotto Texas, fiscal 08:50 5 year to date we're at $320,613,469, versus 08:50 6 $268,922,799. It's currently 24.71 percent of sales, 08:50 7 and we've seen an increase of 19.22 percent on that 08:50 8 product. And then just to compare this week to last 08:50 9 week, total sales for this week were $54,942,635, 08:50 10 which was an increase of seven percent over last week 08:50 11 of $51,326,869. And I have also included a handout 08:50 12 that Robert Tirloni, our on-line product manager, 08:50 13 prepared at your request, Chair Clowe, to take a look 08:50 14 at where we are with our Lotto Texas matrix change. 08:50 15 So we looked at the game -- the change has been in 08:50 16 effect for 30 weeks, so we looked at the 30 weeks 08:51 17 prior to the change and 30 weeks after the change. 08:51 18 And the Lotto Texas was hit 20 times prior to the 08:51 19 matrix change, and we've only been hit nine times in 08:51 20 the 30 weeks since it started. So we're less than 08:51 21 half of the number of times we're being hit, so I 08:51 22 think the matrix change is working for us. 08:51 23 CHAIRMAN CLOWE: Toni, I would like to 08:51 24 comment at this point in time that I agree with that 08:51 25 last summary statement that you made. I think that we 08:51 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 6 1 have achieved to this point in time what the change in 08:51 2 the matrix was designed to do. The jackpots are 08:51 3 larger and they have been won or hit less than half as 08:51 4 many times since the matrix has been changed. In this 08:51 5 report that you've just finished quoting to us, the 08:51 6 sales are up substantially, Texas Lotto or Lotto 08:51 7 Texas, and the instant ticket sales are up 08:51 8 substantially, which -- 08:52 9 MS. SMITH: Yes, sir. 08:52 10 CHAIRMAN CLOWE: -- seems to go in some 08:52 11 relationship. 08:52 12 MS. SMITH: Yes, sir. 13 CHAIRMAN CLOWE: So I would say at this 08:52 14 point in time, we are being successful with the goal 08:52 15 we established of increasing interest in Lotto Texas, 08:52 16 and that has had a positive effect on the instant 08:52 17 tickets, so we're headed in the right direction. 08:52 18 MS. SMITH: Yes, sir. 08:52 19 CHAIRMAN CLOWE: And I also want to 08:52 20 refer back to the change the Legislature made in the 08:52 21 prior session of increasing the prize payout. I think 08:52 22 that has had a positive impact on the interest in the 08:52 23 games as well. 08:52 24 MS. SMITH: Yes, sir, I agree. 08:52 25 CHAIRMAN CLOWE: So the lottery in 08:52 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 7 1 Texas, insofar as what the goals have been, to 08:52 2 recreate some interest in a correct and positive way, 08:52 3 is being achieved. 08:52 4 MS. SMITH: Yes, sir. 08:52 5 CHAIRMAN CLOWE: Good. Anything 08:52 6 further on that? 08:53 7 MS. SMITH: No, sir. 08:53 8 CHAIRMAN CLOWE: Linda, anything to 08:53 9 add? 10 MS. CLOUD: No, sir. 08:53 11 CHAIRMAN CLOWE: We'll go to item 12 number three, then. Report, possible discussion 08:53 13 and/or action on lottery advertising and promotions, 08:53 14 including print media criteria. 08:53 15 MS. SMITH: Fogarty, Klein & Lowe, our 08:53 16 general market services ad agency, presented new 08:53 17 radio -- will present a new radio concepts for three 08:53 18 Lotto spots that will begin on January 29th. And they 08:53 19 were also worked -- we worked on some three animated 08:53 20 scratch coin spots, and one called hoedown will begin 08:53 21 to air on February 19th. 08:53 22 In our minority market, The King Group 08:53 23 has just completed a secret -- and that's the title of 08:53 24 the campaign, that will continue to run in the 08:53 25 minority markets radio started on November 20th and TV 08:53 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 8 1 began in the beginning of February. So we're getting 08:53 2 everything covered out there. 08:53 3 CHAIRMAN CLOWE: Explain that secret 08:53 4 campaign, if you would. 08:53 5 MS. SMITH: It's sort of a fun way to 08:53 6 look at the different ways that people either scratch 08:53 7 their tickets or pick their numbers. So each spot 08:54 8 shows a different way. Maybe someone carries a lucky 08:54 9 charm, or they may pick their numbers based on their 08:54 10 clothing sizes or football scores, or just sort of a 08:54 11 fun way to look at how you decide how to pick your 08:54 12 numbers or where and how you scratch your tickets. 08:54 13 CHAIRMAN CLOWE: Kind of like a lucky 08:54 14 shirt? 08:54 15 MS. SMITH: Yeah. Exactly. 08:54 16 CHAIRMAN CLOWE: Okay. 08:54 17 MS. SMITH: And that's all I have. 08:54 18 MS. CLOUD: Toni, has the Commissioners 08:54 19 been given copies of those commercials? 08:54 20 MS. SMITH: I just signed off on the 08:54 21 tapes to go upstairs this morning, so they might can 08:54 22 get them today. 23 CHAIRMAN CLOWE: We haven't seen them. 08:54 24 Very good. Anything further, Toni? 08:54 25 MS. SMITH: No, sir. 08:54 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 9 1 CHAIRMAN CLOWE: Then we'll go to item 08:54 2 number four. Status report, possible discussion 08:54 3 and/or action on the lottery operator procurement 08:54 4 and/or lottery operator consultant. Linda? 08:54 5 MS. CLOUD: Mr. Bennett? 08:54 6 MR. BENNETT: Good morning, 7 Commissioners. For the record, my name is Ridgely 08:54 8 Bennett. I'm the deputy general counsel. We are 08:54 9 still in the drafting phase of the lottery operator 08:54 10 procurement, and once that has been issued, you will 08:54 11 be so notified. I'll be happy to answer any questions 08:55 12 if you have any. 08:55 13 CHAIRMAN CLOWE: Is that moving on 08:55 14 schedule, Ridgely? 08:55 15 MR. BENNETT: It's moving right along, 08:55 16 Commissioner, yes. On schedule -- 08:55 17 MS. CLOUD: It is on schedule. 08:55 18 MR. BENNETT: I think -- it appears to 08:55 19 be on schedule. I hate to say we're on schedule 08:55 20 because out the door -- 08:55 21 CHAIRMAN CLOWE: You've been whipped 08:55 22 before. 08:55 23 MR. BENNETT: Many times. 08:55 24 COMMISSIONER SADBERRY: Responsiveness 08:55 25 to the question. 08:55 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 10 1 CHAIRMAN CLOWE: Well, I guess the 2 question -- let me rephrase the question. 08:55 3 MR. BENNETT: Certainly. 08:55 4 CHAIRMAN CLOWE: Are we comfortable 08:55 5 with the progress that's being made towards the 08:55 6 deadlines which are established? 08:55 7 MR. BENNETT: Yes, we are. 08:55 8 MS. CLOUD: The slowdown has been the 08:55 9 executive director. 08:55 10 CHAIRMAN CLOWE: Somehow that doesn't 08:55 11 surprise me. 08:55 12 Well, that's very important and we want 08:55 13 to make certain that we do all those things timely and 08:55 14 don't get in a crunch. 08:55 15 MR. BENNETT: Certainly. 08:55 16 CHAIRMAN CLOWE: Anything further? 08:55 17 MR. BENNETT: I have nothing further. 08:55 18 CHAIRMAN CLOWE: Thank you, Ridgely. 19 Debra, I think we're now to item number 08:55 20 five, consideration of and possible discussion and/or 08:55 21 action on state audit reports relating to the Texas 08:55 22 Lottery Commission. 08:56 23 MS. McLEOD: Good morning, 08:56 24 Commissioners. For this agenda item, I have nothing 08:56 25 to report. We have complied virtually with the 08:56 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 11 1 requirements by the state auditors in past reports. I 08:56 2 know we're still working on some of the print media 08:56 3 things from our standpoint, but there is nothing new 08:56 4 to report on anything. 08:56 5 CHAIRMAN CLOWE: All right. Fine. 08:56 6 Thank you. We're going to hear from you on the next 08:56 7 item, which is number six, report, possible discussion 08:56 8 and/or action on the agency's internal audits, 08:56 9 including the audit of the instant game plans. 08:56 10 MS. CLOUD: Can we pass this until 08:56 11 Commissioner Whitaker is in the room? 08:56 12 CHAIRMAN CLOWE: That's a good idea. 08:56 13 MS. CLOUD: She has a lot of questions 08:56 14 so -- 08:56 15 COMMISSIONER SADBERRY: I thought I -- 08:56 16 I may be wrong. I thought I saw her pass the window. 08:56 17 I thought she was walking in. Maybe not. 08:56 18 CHAIRMAN CLOWE: Let's hesitate just a 08:56 19 minute here and see if she arrives. 08:56 20 We'll pass item number six and go to 08:57 21 number seven. Report, possible discussion and/or 08:57 22 action on the production studio procurement. 08:57 23 MR. BENNETT: Thank you, Commissioners. 08:57 24 Once again, I am Ridgely Bennett. We do have 08:57 25 proposals in and those are currently being evaluated 08:57 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 12 1 by the evaluation committee, and we hope to have a 08:57 2 recommendation to the executive director within the 08:57 3 next couple of days. 08:57 4 CHAIRMAN CLOWE: Great. Anything 08:57 5 further on that, Linda? 08:57 6 MS. CLOUD: No, sir. 08:57 7 CHAIRMAN CLOWE: Thank you. Then we'll 08:57 8 go to item number eight. Report, possible discussion 08:57 9 and/or action on the 77th Legislature, including the 08:57 10 agency's legislative proposals. 08:57 11 Nelda, are you ready. 08:57 12 MS. TREVINO: Good morning. For the 08:57 13 record, I'm Nelda Trevino, the director of the 08:57 14 governmental affairs department. Commissioners, just 08:57 15 a brief update this morning. We've passed out some 08:57 16 updated tracking reports that you should have in front 08:58 17 of you. As of this morning, there have been over 2600 08:58 18 bills and resolutions that have been filed. We are 08:58 19 tracking 90 of them. And I want to briefly update you 08:58 20 on the status on several bills -- excuse me. 08:58 21 In regards to House Bill 1, the general 08:58 22 appropriations bill, as both Chairman Clowe and 08:58 23 Commissioner Sadberry know, we were before the general 08:58 24 government subcommittee on January the 31st, and we 08:58 25 did a follow-up with them on February the 13th, for 08:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 13 1 mark-up before that subcommittee. We anticipate, 08:58 2 based on the preliminary schedule that has been 08:58 3 provided by the committee, to go before the full 08:58 4 committee sometime either February 28th or a few days 08:58 5 thereafter. They have, again, put out a preliminary 08:58 6 schedule. They anticipate taking all the general 08:59 7 government agencies, again, beginning February 28th. 08:59 8 They have allotted four days to take up those 08:59 9 agencies. There are 40 agencies that are in the 08:59 10 general government category, so I don't have a 08:59 11 specific date to provide today, but at least wanted to 08:59 12 inform you that, again, they anticipate beginning on 08:59 13 the 28th, and I think it would be important to have 08:59 14 representation from our Commission attend that 08:59 15 appropriations committee hearing. 08:59 16 COMMISSIONER SADBERRY: Nelda, in that 08:59 17 regard, if I may, Mr. Chairman. Do you believe this 08:59 18 time we'll be able to get enough advance notice so 08:59 19 that we can attend and participate? I know we had 08:59 20 that problem last time, or is that just something you 08:59 21 don't know until you get there? 08:59 22 MS. TREVINO: I think we just -- as far 08:59 23 as getting a specific date, I know the committee is 08:59 24 working very diligently in trying to give as much 08:59 25 advance notice to agencies. But just based on their 09:00 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 14 1 schedule, sometimes it becomes very difficult. The 09:00 2 other thing that I will say that I was going to report 09:00 3 here shortly pertains to Senate Bill 170, and that's 09:00 4 the bill by Senator Wentworth addressing the quorum 09:00 5 issue before a legislative body. And that bill is 09:00 6 moving rather quickly and it has been scheduled for a 09:00 7 House committee hearing on Monday next week, so 09:00 8 depending on how fast that bill moves, that might 09:00 9 address our quorum issue before a legislative 09:00 10 committee. 09:00 11 MS. KIPLIN: If it does not before 09:00 12 February 28th, I would need the notice no later than 09:00 13 February 28th, and then for every day thereafter, it 09:00 14 is the same. 09:00 15 COMMISSIONER SADBERRY: Tell them we 09:00 16 don't mind being summoned if that's what it takes to 09:00 17 get us there, if that's the confusion or concern about 09:00 18 it. 09:00 19 MS. KIPLIN: And then that would allow 09:00 20 for us to notice up an emergency meeting. 09:00 21 MS. TREVINO: Again, as soon as we get 09:01 22 any further notification from the committee, we'll be 09:01 23 sure and inform each of the Commissioners of that 09:01 24 date. Again -- 09:01 25 CHAIRMAN CLOWE: Nelda, I just might 09:01 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 15 1 note that all three Commissioners were in attendance 09:01 2 before the Senate Finance Committee meeting, and 09:01 3 Commissioner Sadberry and I were present for the House 09:01 4 subcommittee on business. 09:01 5 MS. TREVINO: That's correct. 09:01 6 CHAIRMAN CLOWE: Chairman Heflin's 09:01 7 committee. And the Commissioners have had a high 09:01 8 level of interest, and wherever legally possible, they 09:01 9 have been in attendance. And I think there is a high 09:01 10 level of intent to continue that representation. 09:01 11 MS. KIPLIN: I would say just for the 09:01 12 record that the attendance by the Commissioners Clowe 09:01 13 and Sadberry at the last meeting where they were both 09:01 14 there was on one item, just one item. 09:01 15 CHAIRMAN CLOWE: That's correct. 09:01 16 MS. TREVINO: Okay. Again, just a 09:01 17 couple of bills that I wanted to bring you an update 09:01 18 on. And that -- if you look on your tracking report 09:02 19 on page seven, House Bill 891 by Representative Robert 09:02 20 Puente, that would authorize the Lottery Commission to 09:02 21 participate in a multi-state lottery game. That bill 09:02 22 was heard in the House licensing committee yesterday, 09:02 23 and Linda Cloud was there as a resource witness. I 09:02 24 will tell you that there was no questions from the 09:02 25 committee, but I did want to -- the Commission to know 09:02 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 16 1 that Representative Tony Goolsby made some very 09:02 2 flattering comments about the agency, about the staff, 09:02 3 and particularly about Linda, and so I wanted to be 09:02 4 sure and let you all know about that. Those kind of 09:02 5 comments don't happen very often, and so we were very 09:02 6 appreciative of his comments. 09:02 7 On page ten of the tracking report, 09:02 8 House Bill 1521, that's relating to the employee 09:02 9 retirement benefits for law enforcement officers here 09:03 10 at the Lottery Commission, and as you may recall, that 09:03 11 is part of the agency's legislative package, and so I 09:03 12 wanted to be sure and let you know that Representative 09:03 13 Ron Wilson had filed that bill. It's been referred to 09:03 14 the House Pensions and Investment Committee, and the 09:03 15 bill has not been scheduled for hearing, but we will 09:03 16 keep you posted as progress happens on that bill. 09:03 17 I've already mentioned Senate Bill 170 09:03 18 to you and, again, we'll keep you apprised as to any 09:03 19 progress in regards to that bill. 09:03 20 On page 13 of your tracking report, 09:03 21 Senate Bill 257 by Senator Carona, that would impose a 09:03 22 fine for a minor to purchase a lottery ticket. That 09:03 23 bill was heard in the Senate State Affairs Committee, 09:03 24 both on February the 15th and February the 12th. 09:03 25 There was a committee substitute that was reported 09:03 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 17 1 favorably out of the committee. The substitute 09:03 2 removed the enactment of a second offense by a 09:03 3 retailer and established the penalty to the minor to 09:04 4 be just a 250 dollar fine. And our director of 09:04 5 security, Mike Pitcock, was there as a resource 09:04 6 witness for both of those committee hearing dates. 09:04 7 In regards to our legislative package, 09:04 8 the one bill pertaining to -- to the agency as a whole 09:04 9 has to do with getting an exemption on a surveillance 09:04 10 van of having the name of the agency on the 09:04 11 surveillance van. And we do have commitments from 09:04 12 both a House member and a Senate member to have that 09:04 13 bill filed and we anticipate that happening very 09:04 14 shortly. 09:04 15 In regards to our bingo legislative 09:04 16 proposal, I know Mr. Neinast is here to provide an 09:04 17 update based on the advisory committee's meeting 09:04 18 yesterday. But I just very briefly wanted to update 09:04 19 you. There are basically five draft bills that the 09:04 20 agency has been working on, based on the proposals 09:05 21 that were either recommended by the advisory committee 09:05 22 or approved by the Commission. And one is the -- what 09:05 23 we're referring to as an omnibus bill that includes 09:05 24 several of the proposals. Primarily, the two -- what 09:05 25 I consider to be the two major sections of the bill 09:05 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 18 1 pertain to the removal of the 40 percent limit on the 09:05 2 electronic card minding devices and eliminating the 09:05 3 prize fee for prizes less than five dollars. Billy 09:05 4 and I have had some meetings with Representative Art 09:05 5 Reyna and he has agreed to file that bill. So we 09:05 6 anticipate seeing some progress on that. 09:05 7 In regards to the authorization of a 09:05 8 progressive bingo game, we have talked to 09:05 9 Representative Pat Haggerty and Senator Lucio and they 09:05 10 have informed us that they will be filing legislation 09:05 11 in regards to that proposal. 09:06 12 We continue to work with -- with our 09:06 13 legal staff and with some folks in the industry in 09:06 14 regards to the draft legislation pertaining to 09:06 15 summarily suspending a license. We have been in 09:06 16 discussions with Representative Tony Goolsby in 09:06 17 regards to that piece of legislation and hope to again 09:06 18 provide you a progress report on that proposal. 09:06 19 In regards to the authority to issue 09:06 20 and enforce subpoenas, we have talked to 09:06 21 Representative Pat Haggerty about that proposal, and 09:06 22 he has agreed to file legislation regarding that item. 09:06 23 And we continue to work on drafting 09:06 24 some language in regards to the extending the time and 09:06 25 location where pull tabs can be sold. I don't know if 09:06 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 19 1 Billy has any further updates in regards to those 09:06 2 legislative proposals and, again, I know Mr. Neinast 09:06 3 will be providing a report in regards to the advisory 09:07 4 committee's meeting. 09:07 5 CHAIRMAN CLOWE: I think we're going to 09:07 6 hear more about that shortly. 09:07 7 MS. TREVINO: That's basically my 09:07 8 report, and I'm happy to answer any questions. 09:07 9 CHAIRMAN CLOWE: Nelda, I think I can 09:07 10 say on behalf of Commissioner Sadberry and myself, 09:07 11 this is my first legislative session as chair of this 09:07 12 Commission. I am most appreciative and really 09:07 13 admiring the work that you and Colin have done to 09:07 14 prepare the staff, Linda, and myself, for testimony 09:07 15 before these committees, and the job that you all are 09:07 16 doing about these issues concerning legislation with 09:07 17 the various offices of the leadership. I have seen 09:07 18 other agencies that do not have the thoroughness and 09:07 19 the completeness that you all have. And our issues 09:07 20 are sometimes difficult to understand, and I just 09:07 21 think, you know, this agency is different from any 09:07 22 other state agency and the work that you two do helps 09:08 23 tremendously to help those who are going to be 09:08 24 deciding issues about our appropriations and our 09:08 25 funding and legislation that applies to this agency 09:08 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 20 1 and its great service, which makes it easier to do for 09:08 2 us and for them. So I wanted to say, at this point in 09:08 3 the session, where there is no victory or defeat, you 09:08 4 know, I'm appreciative of the good work that you all 09:08 5 are doing. 09:08 6 MS. TREVINO: Well, thank you very 09:08 7 much, Chairman Clowe, and I would just add that it 09:08 8 really takes a cooperative effort and we've got people 09:08 9 like Kim and Patsy and Linda and Billy, and I don't 09:08 10 want to leave anybody out. Bart Sanchez and his 09:08 11 group, and again, all the directors and their staff, 09:08 12 it really takes a cooperative effort because we do get 09:08 13 a lot of requests that impact different divisions 09:08 14 within the agency, and so Colin and I rely on each of 09:08 15 the directors and their staff to respond rather 09:09 16 quickly sometimes to a request that we might get. So 09:09 17 I appreciate your kind words but, again, I want to be 09:09 18 sure and emphasize that it really is a cooperative 09:09 19 effort. And I want to thank everybody within the 09:09 20 agency for -- 09:09 21 CHAIRMAN CLOWE: It's teamwork, isn't 09:09 22 it? 09:09 23 MS. TREVINO: It's teamwork. 09:09 24 CHAIRMAN CLOWE: Thank you. 09:09 25 MS. TREVINO: Okay. 09:09 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 21 1 CHAIRMAN CLOWE: Then we'll go to item 09:09 2 number nine, report by the bingo advisory committee 09:09 3 chair on the committee's activities, possible 09:09 4 discussion and/or action on such report. 09:09 5 Good morning, Bill. 09:09 6 MR. NEINAST: Good morning, Mr. 09:09 7 Chairman. For the record, I'm Bill Neinast, chairman 09:09 8 of the bingo advisory committee of the Texas Lottery 09:09 9 Commission. 09:09 10 Chairman Clowe and Commissioner 09:09 11 Sadberry, I think one of the functions of the bingo 09:09 12 advisory committee is to act as your eyes and ears 09:09 13 into the bingo industry in its broadest sense. And 09:09 14 recently we've had the opportunity, I think, to get a 09:10 15 good picture of that industry in certain respects. 09:10 16 And the only thing I can report to you is that the 09:10 17 troops or the Indians, or whatever you want to call 09:10 18 them, are unhappy. As a matter of fact, they are 09:10 19 pretty damn riled up. Their major concern at this 09:10 20 time is over some proposed legislation, and the 09:10 21 particular focus is on the proposal to grant summary 09:10 22 suspension authority to the Bingo Division. There 09:10 23 were just any number of witnesses here yesterday in 09:10 24 our meeting. I have received several e-mails on this. 09:10 25 And the perception is that it's not good. 09:10 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 22 1 To review the history just a little 09:10 2 bit, because I think it's important. There was a 09:10 3 subcommittee that the committee appointed and met in 09:10 4 October to review various proposals. One of those -- 09:11 5 and most of these came from the staff. One of those 09:11 6 was to grant the bingo division summary suspension 09:11 7 power, and that was the recommendation of the 09:11 8 subcommittee to the committee. You might say, 09:11 9 unlimited summary suspension power. At the committee 09:11 10 hearing, because of input from a number of concerned 09:11 11 individuals, the vote of the committee was to 09:11 12 recommend to you that that summary suspension power be 09:11 13 limited to financial matters, specifically, delinquent 09:11 14 fees and taxes. And that was the recommendation to 09:11 15 the Commission. The Commission, in voting on it -- I 09:11 16 don't remember the exact words, Billy can probably 09:11 17 help us, was to give it back to the division and say, 09:11 18 go with the legislation as you see fit. I don't know 09:11 19 whether that's a correct description of the final 09:12 20 action or the motion of the -- is that -- 09:12 21 MR. ATKINS: That's somewhat accurate. 09:12 22 MR. NEINAST: And that was the task 09:12 23 given to the division. The resulting legislation is 09:12 24 to -- or draft legislation is to give to the division, 09:12 25 summary suspension power, period. And there is a 09:12 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 23 1 tremendous amount of concern out in the bingo 09:12 2 community about this. And there is a perception that 09:12 3 you can't argue with that this is giving unnecessary, 09:12 4 unbridled power to the bingo director. I think there 09:12 5 would be a compromise that might be accepted. And 09:12 6 that would be to go back and give them summary 09:12 7 suspension power on those financial matters where 09:12 8 there are delinquent fees or taxes. 09:13 9 Gentlemen, I think we're jumping into 09:13 10 uncharted waters here, and I think a -- a better 09:13 11 approach might be to go at it a little slowly, step 09:13 12 into the water and test the water and give power -- 09:13 13 summary suspension power into those financial matters. 09:13 14 If it works, and if there is then developed to be a 09:13 15 useful technique for or need for it, look at it again 09:13 16 at the next legislative session. The industry has 09:13 17 operated for 19 years without this power. Another two 09:13 18 years wouldn't matter that much. I anticipate, if the 09:13 19 legislation goes in and is pushed by the Commission as 09:13 20 currently drafted, there is going to be a tremendous 09:13 21 lobbying effort within the legislature that may affect 09:13 22 other bills that might be more important. So I 09:14 23 think -- I would urge you to reconsider the action 09:14 24 that was taken at your November meeting and back off 09:14 25 and say, okay. Let's start first with summary 09:14 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 24 1 suspension power in those financial matters only, see 09:14 2 how it works, and then see if there is a need later. 09:14 3 I -- this is an opportunity, I think, for us to show 09:14 4 the bingo community that we are listening to them. 09:14 5 That we the committee are listening to them and that 09:14 6 you, the Commission, is listening to them. We in the 09:14 7 government, administrative, can't always be right. 09:14 8 Sometimes you can come up with -- each of you with 09:14 9 situations, I'm sure, where a government agency, 09:14 10 whether it's in Austin or Washington or down at the 09:14 11 county courthouse, said, hey, we know best, this is 09:14 12 what we're going to do, and the results have been 09:15 13 disastrous. I'm not saying they would be disastrous 09:15 14 in this case, but there is an opportunity for abuse 09:15 15 here that has the community scared. 09:15 16 I just thought of an example as I was 09:15 17 driving home last night of another action that we took 09:15 18 at the committee, and that had to do with a report 09:15 19 that the mandated training session for operators, 09:15 20 every operator has to have completed the mandated 09:15 21 training by September the 1st. 81 point-something 09:15 22 percent have already completed it, so it looks like we 09:15 23 may be at 100 percent. But the question was asked, 09:15 24 well, on September the 2nd, if there are several out 09:15 25 there who haven't completed it, what do you do? We 09:15 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 25 1 don't know. But that would be a case where this -- 09:15 2 they could throw it -- yeah, if the operator hadn't 09:15 3 completed the training for whatever reason, the -- 09:15 4 there is a summary suspension. 09:15 5 So again, we did not -- the committee 09:16 6 did not vote on this again. The vote at the November 09:16 7 meeting was unanimous for limiting the suspension 09:16 8 to -- 09:16 9 CHAIRMAN CLOWE: Pardon me, Bill. For 09:16 10 the record, Commissioner Whitaker has arrived and we 09:16 11 are very happy that she is here. 09:16 12 COMMISSIONER WHITAKER: There was a 09:16 13 wreck. 09:16 14 COMMISSIONER SADBERRY: We know all too 09:16 15 well about it. 09:16 16 CHAIRMAN CLOWE: Commissioner Whitaker, 09:16 17 if I may, Bill, I would like to bring her up to date. 09:16 18 We have convened the meeting and we 09:16 19 have progressed through and to item nine. The 09:16 20 chairman of the advisory committee is reporting at 09:16 21 this point in time. We passed item number six, 09:16 22 pending your arrival. 09:16 23 COMMISSIONER WHITAKER: Okay. 09:16 24 CHAIRMAN CLOWE: And if that catches 09:16 25 you up, we will ask Bill to continue his report. And 09:16 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 26 1 would you just briefly, for Commission Whitaker's 09:16 2 benefit, recap in encapsulated form what you've told 09:17 3 us? 09:17 4 MR. NEINAST: I'll try to encapsulate 5 it. Because Commissioner Whitaker was the one who 09:17 6 made the motion to go with the full power for summary 09:17 7 suspension. 09:17 8 Commissioner Whitaker, we're talking 09:17 9 about the proposed legislation to grant summary 09:17 10 suspension authority to the director the Bingo 09:17 11 Division. As a background, in October there was a 09:17 12 subcommittee meeting of the bingo advisory committee 09:17 13 that met, recommended to the full committee that 09:17 14 summary suspension authority in its broadest form be 09:17 15 sought from you and from the legislature. The 09:17 16 committee, in taking testimony on that issue, voted 09:17 17 instead to limit that summary suspension power to only 09:17 18 financial matters where there are delinquent fees or 09:17 19 taxes. One of the things I did not mention to the 09:17 20 other Commissioners before you arrived, it was brought 09:17 21 out repeatedly that when you suspend or revoke the 09:18 22 license of one operator, that has a ripple effect on 09:18 23 everyone else engaged not only in that hall, but in 09:18 24 other halls. Because if you take out one game that is 09:18 25 being played or one session that's being played, 09:18 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 27 1 people who came to play at all two or three sessions 09:18 2 that might be held that day, if there is a blank right 09:18 3 in the middle, they're going to leave, they're not 09:18 4 going to stay around, and they're going to go to other 09:18 5 halls and then habit forms, they lose customers. And 09:18 6 so that was one of the reasons why there was so much 09:18 7 concern about summary suspension. You could still 09:18 8 revoke licenses, and that would have the same effect. 09:18 9 But as I was telling the other commissioners, 09:18 10 yesterday there was just a tremendous outpouring of 09:18 11 concern. I had more requests to testify than any I 09:18 12 have had since I've been on the committee. Primarily, 09:18 13 on this issue. That they are concerned about granting 09:18 14 this unbridled power to summarily suspend. The 09:19 15 suggested compromise, which I was urging, was that the 09:19 16 Commission go back and recommend only legislation that 09:19 17 would authorize summary suspension in financial 09:19 18 matters, where there is a delinquency of fees or taxes 09:19 19 that are due, see how that works, and if there is 09:19 20 still deemed to be a need on the part of the bingo 09:19 21 advisory -- I mean the Bingo Division, that two years 09:19 22 from now, come in with -- and give some good 09:19 23 documented examples of, here is the situation where 09:19 24 summary suspension would really have worked and it 09:19 25 would have had this effect. We -- at least I'm not 09:19 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 28 1 aware of any -- if Billy has any examples like that, 09:19 2 he can give now. But if you want the respond -- the 09:19 3 perception in the bingo community, you would, I think, 09:20 4 reconsider the action and recommend that we go forward 09:20 5 with only the limited summary suspension authority. 09:20 6 COMMISSIONER SADBERRY: Bill, I think 09:20 7 when Commissioner Whitaker was walking in, you were 09:20 8 just saying that you as a committee did not vote on 09:20 9 it, and I believe that's where you stopped. I was 09:20 10 waiting to hear what you were going to say. 09:20 11 MR. NEINAST: Yes. We did not vote 09:20 12 again on this issue yesterday, but I feel confident in 09:20 13 saying I'm representing the unanimous feeling of the 09:20 14 committee members who were present yesterday, and the 09:20 15 vote originally was unanimous to have the limited 09:20 16 authority. 09:20 17 And Chairman Clowe, this isn't Roy D. 09:20 18 Mercer talking, this is -- this is giving you the word 09:20 19 from the bingo community. 09:21 20 CHAIRMAN CLOWE: I appreciate that 09:21 21 correctness. 09:21 22 Bill, I was there when Billy gave his 09:21 23 answer on the issue of the operators having to be 09:21 24 trained by the deadline, and I thought he gave a good 09:21 25 answer on that, in that the goal was to get the 09:21 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 29 1 operators trained and that they weren't going to -- 09:21 2 the division wasn't going to be -- on September the 09:21 3 2nd, I think, was the date that he used, trying to 09:21 4 jump on people and shut them down. The goal was to 09:21 5 get them trained. And you used that as an example, so 09:21 6 I wanted to refer to my recollection of his answer. I 09:21 7 thought he responded in a proper way for a regulator 09:21 8 at that point in time to that question. 09:21 9 I'm a little bit still in the dark 09:21 10 about what the concerns are of the folks that 09:21 11 testified to your committee yesterday, as to the 09:21 12 negative aspect of suspension. Can you be more 09:22 13 specific on that? What are they concerned about? I 09:22 14 understand the ripple effect that you mentioned. But 09:22 15 where do they perceive potential injustice or 09:22 16 incorrect action on the part of the division? Can you 09:22 17 be more specific for us there? 09:22 18 MR. NEINAST: I'm sorry, I can't, 09:22 19 because to the best of my knowledge, they have not 09:22 20 been more specific than that, other than being 09:22 21 concerned, a general concern of giving any agency, 09:22 22 regardless of what agency it is, this power over them 09:22 23 of having a summary power. That just scares people. 09:22 24 CHAIRMAN CLOWE: Okay. So it's just a 09:22 25 concern about the power itself being in place, not 09:22 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 30 1 anything -- no concern about the financial aspect. 09:22 2 Comfort there to some extent. 09:22 3 MR. NEINAST: Well, there -- I wouldn't 09:23 4 say they're overwhelmingly happy about that, but I 09:23 5 think they would accept it as probably a necessary 09:23 6 situation. Although we did not go into the details. 09:23 7 We did in some other cases where -- I think that was 09:23 8 probably at our November meeting where Billy pointed 09:23 9 out that some of these agencies -- not agencies, 09:23 10 operators, are delinquent and they go up to the very 09:23 11 last day when that final ax is going to fall before 09:23 12 they finally come in, and this goes over a period of 09:23 13 weeks and months in many cases. And so in those 09:23 14 cases, if that ax could fall a lot sooner, you would 09:23 15 get compliance a lot sooner. Now, there is just a 09:23 16 general concern. I recognize that. One of the -- 09:23 17 those testifying yesterday brought a case that you're 09:23 18 probably familiar with. You signed off the order, I 09:23 19 think, in October. The Victoria Community Theatre. 09:23 20 Again, it was brought as an example that we don't 09:24 21 think this would ever happen in our agency, but they 09:24 22 point out the ALJ, in that case, found that the 09:24 23 action -- or the reasons given for the action taken by 09:24 24 the division was not reasonable in the -- in the 09:24 25 names -- in the words of the ALJ. And although the -- 09:24 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 31 1 in that particular case, if you recall, the division 09:24 2 had recommended revocation of the license, and the 09:24 3 final result was to give a -- I think, a one-week 09:24 4 suspension. So there was some punitive action taken, 09:24 5 but not the Draconian measure in that case that the 09:24 6 division recommended. So that is the type of 09:24 7 perception, that's the type of fear that these 09:24 8 organizations are feeling. We had both individual 09:24 9 operators, people representing multitude of 09:24 10 organizations, and the lawyers who were representing a 09:25 11 number of agencies, and who are lobbies for those. 09:25 12 I think this is going to open up a 09:25 13 tremendous lobbying effort that could adversely affect 09:25 14 other legislation. 09:25 15 CHAIRMAN CLOWE: Bill, is this the 09:25 16 principal item in your report or are there other 09:25 17 issues that you want to tell us about? 09:25 18 MR. NEINAST: The other issue, it's 09:25 19 kind of related to it. The concern, also, about the 09:25 20 legislation to grant subpoena authority to the agency. 09:25 21 And there was -- is opposition to that generally on 09:25 22 the same basis of what I have just given, this 09:25 23 perceived fear of granting that type of authority. 09:25 24 There is not that much of a deep-seated opposition to 09:25 25 that provision as there is to the summary suspension 09:26 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 32 1 authority. 09:26 2 The other action that was taken that 09:26 3 relates to ongoing legislation, Nelda mentioned it, is 09:26 4 the final action -- I think it was the final action of 09:26 5 the committee was to recommend that the legislation 09:26 6 affecting when you collect prize fees, that no prize 09:26 7 fees be collected for prizes under 50 dollars. The 09:26 8 way it is now, it's under five dollars, which is not 09:26 9 going to have -- I say, not going to have too much of 09:26 10 an effect. Billy has some startling figures, I think, 09:26 11 on the effect of those actions, whether it's under 09:26 12 five dollars or under 50 dollars and what it'll have 09:26 13 on the income revenue of the State. The -- the 09:26 14 consensus of the committee, though, was that for a 09:26 15 number of reasons, we should go forward in this 09:26 16 session, recognizing not too much chance of success of 09:26 17 a proposal to exempt any bingo prize under 50 dollars 09:27 18 from the prize fee. And that was the recommendation 09:27 19 of the committee, which is a little different from 09:27 20 what Nelda is working on now. Not a little, a big 09:27 21 difference. 09:27 22 CHAIRMAN CLOWE: Those are the 09:27 23 principal issues? 09:27 24 MR. NEINAST: Yes. 09:27 25 CHAIRMAN CLOWE: Commissioners, with 09:27 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 33 1 your agreement, I think there may be some other 09:27 2 individuals who want to speak on this issue. I would 09:27 3 like to call on them now. And also, there are 09:27 4 individuals who are members of the bingo advisory 09:27 5 committee that may wish to add to the chairman's 09:27 6 comment. At this point, let me ask, are there any 09:27 7 individuals on that committee who are here this 09:27 8 morning who wish to elaborate on what the chairman has 09:27 9 reported to the Commission? I believe there are none 09:27 10 who wish to speak. 09:27 11 Mr. Fenoglio, I have an appearance form 09:27 12 for you and I may have passed over you. You indicate 09:28 13 item number eight. Is this the appropriate time for 09:28 14 you to come forward? 09:28 15 MR. FENOGLIO: Yes, it is, 09:28 16 Mr. Chairman. 09:28 17 CHAIRMAN CLOWE: If you would, please. 09:28 18 MR. FENOGLIO: And if I could bring 09:28 19 David Heinlein up, too. 09:28 20 CHAIRMAN CLOWE: Yes. And do we have 09:28 21 an appearance form for him? 09:28 22 MR. FENOGLIO: While Mr. Heinlein is 09:28 23 giving you his appearance form, for the record, my 09:28 24 name is Stephen Fenoglio. I'm an attorney in Texas 09:28 25 and represent at least 35 different charitable 09:28 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 34 1 organizations. On the two issues -- the appearance 09:28 2 slip said the Victoria Community Theatre charities. 09:28 3 In addition, the River City Bingo charities, and then 09:28 4 based upon conversations yesterday, Mr. Heinlein, who 09:28 5 represents 30 different charities in bookkeeping and 09:28 6 advising capacity, if you will, has authorized me to 09:28 7 speak on behalf of those charities. 09:28 8 CHAIRMAN CLOWE: And do you represent 9 also Mr. Fred M-i-c-c-i-o? 09:29 10 MR. FENOGLIO: No. Fred is here. 09:29 11 CHAIRMAN CLOWE: Did you want to speak 09:29 12 on this subject as well, sir? 09:29 13 MR. MICCIO: Yes, sir. 09:29 14 CHAIRMAN CLOWE: All right. I'll ask 09:29 15 you to speak next, if I may. I'm sorry. I thought 09:29 16 you were part of Mr. Fenoglio's group. 09:29 17 Go forward. 18 MR. FENOGLIO: I'm going to distribute 09:29 19 first a letter, Mr. Chairman and Commissioners, from 09:29 20 Don Truman, Truman's Transfer and Storage, Inc. The 09:29 21 original I'm giving to the Chairman, and then copies 09:29 22 that is directly relevant to the issue in front of the 09:29 23 Commission today. And we tried -- we prepared this 09:29 24 yesterday after his testimony so the Commissioners 09:29 25 could get the benefit. Unfortunately, business 09:29 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 35 1 required him to be in Victoria. He is a businessman 09:29 2 from Victoria active in all seven charities that 09:29 3 conduct bingo, coincidently, has been president of two 09:29 4 of the organizations and is currently president of one 09:29 5 of the charity organizations, the Victoria Community 09:30 6 Theatre, that the Commissioners will recall was the 09:30 7 subject of an enforcement measure that Mr. Neinast 09:30 8 described briefly. 09:30 9 Mr. Truman, I would suggest to you, is 09:30 10 not the typical charity representative you would see. 09:30 11 Very active in the community. Coincidently, was chair 09:30 12 of the Republican -- and is still chair of the 09:30 13 Victoria County Republican Committee and been so for 09:30 14 15 years when there wasn't much of a party in any 09:30 15 event. But having said that, to give you the bona 09:30 16 fides of him. He testified really on two issues, and 09:30 17 with -- as did I. But first, before we go into that. 09:30 18 Most of the legislative program, all the charities 09:30 19 support. And congratulations and kudos to the 09:30 20 Commissioners and to the staff for bringing those 09:30 21 legislative proposals to you. You always hear the 09:30 22 negative stuff, and before we talk about some of the 09:30 23 details, 80 percent, 90 percent of what y'all are 09:31 24 proposing, we hope is adopted. No question about it. 09:31 25 There are two issues, though, that 09:31 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 36 1 deserve special scrutiny. The first is the subpoena 09:31 2 power, and as Mr. Truman indicated on the second page. 09:31 3 The drafts that we have seen are lifted directly from 09:31 4 the Texas Racing Act that would give the Commission or 09:31 5 any designated representative subpoena power for any 09:31 6 reason or no reason, to come in and subpoena any 09:31 7 records the Commission desires or the staff that 09:31 8 prepares it. Two comments on that. Number one, in 09:31 9 discussions yesterday, what's the purpose? What has 09:31 10 been the problem that the agency has foreseen with 09:31 11 this? No example given whatsoever. One of the bingo 09:31 12 advisory committee members, a former regulator from, I 09:31 13 believe, Minnesota, said, well, he had to use it once 09:31 14 in Minnesota several years ago. Well, I would suggest 09:32 15 to you that if it ain't broke, don't fix it. And 09:32 16 there is no compelling reason for that extremely broad 09:32 17 authority. Presumably, they could obtain a subpoena 09:32 18 for my records. Under -- and under the draft, I don't 09:32 19 think anyone would question that they can obtain a 09:32 20 subpoena. I would be required to go file a motion to 09:32 21 quash. I think I can do that as an attorney. But 09:32 22 someone sitting in Baytown, Texas who gets the 09:32 23 subpoena and says, we're here for these records, give 09:32 24 them up right now. What does that person do? The 09:32 25 draft -- the drafts that we've seen do not make clear 09:32 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 37 1 what that person's rights would be. Does he have the 09:32 2 right to a counsel? Does he have the right to go ask 09:32 3 the person who actually has authority to review 09:32 4 those -- release those records? If he wants to quash 09:32 5 it, is a judge in Travis County the only authority or 09:32 6 can he get a district judge in Baytown to do it? The 09:32 7 draft is unclear, and I would suggest to you it's bad 09:33 8 policy and not needed. But if it is, it certainly 09:33 9 ought to be scrubbed more so that people who are only 09:33 10 going to deal with this issue maybe once in their 09:33 11 life -- if they call me, I think I can figure it out 09:33 12 in a hurry. And in one sense, that's good business 09:33 13 for me, but for the people out in Baytown, Texas or 09:33 14 south Texas or west Texas, how would they know quickly 09:33 15 where to go to get that. Clearly, it would require 09:33 16 legal talent to do so. 09:33 17 As to the temporary suspension 09:33 18 authority. Again, you have this concept, and I want 09:33 19 to make clear that my clients don't have a problem 09:33 20 with the temporary suspension authority that we have 09:33 21 heard discussed that there is an overwhelming need 09:33 22 for. And that is, derelict charities, and there are 09:33 23 only a few. There is a distinct minority of the 1700 09:33 24 charities that are licensed at any one time -- I 09:33 25 think, since I've been regularly coming to this 09:33 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 38 1 Commission, less than 50 cases in the last three years 09:34 2 of charities that have repeatedly, over a series of 09:34 3 quarters, have not paid either timely or at all. That 09:34 4 type of suspension authority, good. Go ahead. But 09:34 5 the drafts that we have seen go far broader than that. 09:34 6 And Mr. Truman goes into that, and it includes -- if 09:34 7 you're like me, you have a problem remembering exactly 09:34 8 what happened last week, much less November of 2000, 09:34 9 where the staff at the hearing said, we want a 09:34 10 one-year suspension, the death penalty. The ALJ said, 09:34 11 no. One week is fine. We would have accepted that. 09:34 12 But it came before the Commission. And can you -- 09:34 13 maybe you recall some of the testimony. Under the 09:34 14 drafts that we've seen, that charity could be shut 09:34 15 down or could be, could be shut down. And if the 09:34 16 director of the charitable division -- and Mr. Atkins 09:34 17 is a fine man. I don't -- this is isn't personal. 09:34 18 The next director, we don't know about. But that type 09:35 19 of broad authority, we submit, is too much. The 09:35 20 devil's in the details, and y'all know that. The -- 09:35 21 the notion of a -- if you're late or don't pay a 09:35 22 tax -- the Commission's auditors all the time do 09:35 23 audits, and they will discover many times 09:35 24 discrepancies, problems. I represent five charities 09:35 25 at the River City Bingo Hall. The auditors came in 09:35 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 39 1 and audited our books. One of the discrepancies that 09:35 2 they claimed was a disallow -- they challenged the 09:35 3 triple net rental payment. You know, and this is in a 09:35 4 strip center shopping center. We pay as a part of the 09:35 5 lease with the landlord, not only a base rent, 09:35 6 everyone does, but also our percentage portion of 09:35 7 triple net for property taxes, common area 09:35 8 maintenance, and common area insurance. The auditor 09:35 9 said, no, we're going to disallow that. Had we not -- 09:35 10 and we challenged it and provided documentation as to 09:36 11 why that is a reasonable expense. Every tenant at 09:36 12 Barton Creek Mall pays a triple net. It is a common 09:36 13 practice in the real estate industry. But the sum and 09:36 14 substance of the auditor's recommendation was, you owe 09:36 15 the tax. We're going to disallow that expense, so 09:36 16 therefore your -- your payment of taxes, your payment 09:36 17 on your calculation of charitable distributions, 09:36 18 your -- even your filing of those quarterly tax 09:36 19 payments is wrong. Well, under the draft legislation, 09:36 20 the entire five charities could have been shut down. 09:36 21 Would they be shut down? I would certainly hope not. 09:36 22 But that would be one of the powers that would have 09:36 23 been granted under a very broad analysis of some of 09:36 24 the draft legislation that we have seen. 09:36 25 The Commission already has in the 09:36 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 40 1 lottery side this type of suspension authority. There 09:36 2 is at least one case that I'm aware of that I happened 09:37 3 to handle where the Commission exercised their 09:37 4 temporary suspension authority. During that temporary 09:37 5 suspension authority, the staff has taken the position 09:37 6 that there is no discovery allowed, at all. We're not 09:37 7 entitled to see any of the documentation they have, 09:37 8 unless they choose to provide it. And, of course, 09:37 9 their argument is, well, it's either ten or 20 days, 09:37 10 you know, you'll have your opportunity for discovery 09:37 11 in this particular case. And I brought the docket 09:37 12 with me. The Lottery Commission made a mistake. They 09:37 13 got the wrong convenience store. And on February 9th 09:37 14 of 2000, the ALJ dismissed this enforcement case based 09:37 15 upon a temporary suspension because, in the words of 09:37 16 the notice of nonsuit that was filed by the assistant 09:37 17 general counsel of the Lottery Commission, the wrong 09:37 18 sales agent's license was suspended. We didn't find 09:37 19 that out until the day before the hearing when staff 09:38 20 did give us the investigative report, and in comparing 09:38 21 the investigative report with what my client said he 09:38 22 had or had not done, I noticed a different license 09:38 23 number and an identification of an employee that he 09:38 24 had never had. And in communicating with the staff -- 09:38 25 and to the staff's credit, within five hours of us 09:38 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 41 1 calling it to their attention, they canceled -- they 09:38 2 reinstituted our lottery retailer license. The point 09:38 3 is, mistakes can be made. That entity, One Stop 09:38 4 Convenience Store, in Dallas, Texas, was shut down 09:38 5 from lottery sales for three weeks. Conservatively 09:38 6 speaking, he lost 1500 to 2500 dollars in sales, 09:38 7 because people, as you know, come in to a lottery 09:38 8 retailer -- come in to a retailer to buy lottery 09:38 9 tickets and they'll also buy other items. So he lost 09:38 10 revenue. Under the doctrine of sovereign immunity, he 09:38 11 has no remedy, period, end of sentence. So if there 09:38 12 is a mistake that's made -- and mistakes will be made, 09:39 13 no question about it. No one on this earth that I'm 09:39 14 aware of is perfect. But if there is a mistake that 09:39 15 is made, where does a licensee go to be made whole? 09:39 16 And the answer is, nowhere. He pays for the legal 09:39 17 fees, he can't recover the legal fees from the State. 09:39 18 He pays for the lost revenue. He can't get that. In 09:39 19 the case of one charity in a seven-charity bingo hall, 09:39 20 the other charities have enough license time, they can 09:39 21 pick it up. But if you shut down a commercial lessor, 09:39 22 I mean, how long could an HEB stay in business if it's 09:39 23 shut down for two weeks? I would suggest to you that 09:39 24 it would not be in business very long if you were to 09:39 25 shut down, because there is a problem. Because 09:39 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 42 1 someone made a mistake, got the wrong license number. 09:39 2 The notion of payment of fees or taxes, those mistakes 09:39 3 are made. But the way the drafts that we have seen 09:39 4 would give the authority to unilaterally shut someone 09:39 5 down, and we think that's too broad. 09:40 6 I'll be happy to turn it to David 09:40 7 Heinlein. 09:40 8 MR. HEINLEIN: Thank you. I'm glad to 09:40 9 have the opportunity to speak to you on this matter. 09:40 10 First of all, I would, kind of like Steve, like to -- 09:40 11 this is a negative thing we're talking about, but 09:40 12 there are a lot of positive things. I appreciate 09:40 13 Billy Atkins and his staff and the way that they 09:40 14 professionally handle the bookkeeping, and that's what 09:40 15 I'm involved with, the accounting. And his audit 09:40 16 staff has just done an excellent job. I am impressed 09:40 17 with the quality of the individuals. We just 09:40 18 completed an audit down at Victoria in this hall where 09:40 19 this charity is that we've talked about, and it was a 09:40 20 good audit. The auditors gave us a very good report, 09:40 21 and yet when you read it, you know, there is -- there 09:40 22 is errors made. It's unavoidable that as careful as 09:40 23 you are in all the details that you do, there is a 09:40 24 mistake made. And when you make a mistake, then it's 09:40 25 written up in a way that it's scary to the charity, 09:41 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 43 1 because they look at it and it says, it's a violation 09:41 2 of code number -- you know. And while it's just a 09:41 3 reference that must be made to exactly why that is a 09:41 4 violation, it looks like to the charity, my gosh, what 09:41 5 did I do wrong, you know. And when they first get it 09:41 6 and it's a package this thick, you know, they're, man, 09:41 7 did we do all that wrong? Well, no, it's really not a 09:41 8 bad thing at all. I mean, you really didn't have any 09:41 9 real problems. But one of the mistakes made out of a 09:41 10 whole year's of bingo -- now, this is a hall that's 09:41 11 playing two sessions every day, at that time, seven 09:41 12 days a week. You have over 600 sessions in a year. 09:41 13 And all of that paperwork is brought in for audit. I 09:41 14 mean, boxes, you know. Your auditors had to carry out 09:41 15 with two-wheel dollies all the stuff to take back to 09:41 16 San Antonio to audit. In going through all that, we 09:41 17 found one daily cash report that had been wrongly 09:41 18 posted to the wrong charity. Its name on it, I posted 09:42 19 it on the sales journal to the name that was on the 09:42 20 daily cash report. Unfortunately, that was the wrong 09:42 21 charity. It was another charity's session that we 09:42 22 posted it to. And the money went to their bank. And 09:42 23 I caught it when I did the bank statement and said, 09:42 24 hey, y'all put that money in the wrong bank. You've 09:42 25 got to get it over here to this other one. I made 09:42 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 44 1 them transfer it. Wrong. The money belonged in that 09:42 2 account that it first went to. But we didn't discover 09:42 3 that until we went through the audit. Well, the net 09:42 4 result was that we had one charity that had overpaid 09:42 5 their winner's fees, another charity that had 09:42 6 underpaid their winner's fees. Therefore, we have one 09:42 7 charity in violation, who has failed to pay. Now, if 09:42 8 that charity, for failure to pay that, could be 09:42 9 summarily suspended, I think that would be a shame. I 09:42 10 don't think that would happen. You know, you can't 09:42 11 imagine that. But at least it's in place that they 09:42 12 could be suspended, and that's, you know, I don't 09:43 13 think a good thing. So I think we need to have it 09:43 14 written in such a way that in those kinds of cases 09:43 15 where there have been obvious clerical errors made 09:43 16 that have caused a violation. It is a violation. But 09:43 17 we didn't mean to make it, you know, and we corrected 09:43 18 it as soon as it was brought to our attention. And 09:43 19 when we went through exit conference, we brought a 09:43 20 check to the conference to pay the winner's fee for 09:43 21 the charity that was in default. So thank you. 09:43 22 MR. FENOGLIO: And just in summation, 09:43 23 two of the Commissioners are attorneys. I don't 09:43 24 think -- and Mr. Heinlein is a CPA. If you violate 09:43 25 the statute, would your license be taken away from you 09:43 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 45 1 for the short period of time. On an outrageous 09:43 2 example, perhaps it should. But day-to-day stuff, 09:43 3 where you don't file something on time, I would 09:43 4 suggest that's an extremely harsh result. Trucking, 09:43 5 Mr. Chairman is very familiar with, and the Railroad 09:44 6 Commission did regulate trucking at one time, and had 09:44 7 the Commission had the kind of authority that if 09:44 8 someone, for whatever reason, is hauling a product in 09:44 9 an area that they're not authorized to haul, that 09:44 10 happened every day of the year, 365 days a year. Most 09:44 11 of the time, it was unintentional. And I remember 09:44 12 looking at those circles and trying to figure out if 09:44 13 you were within 50 miles or a hundred miles, or 09:44 14 whatever. And that's how it was. Who the heck knew 09:44 15 if you were within 50 miles of San Antonio, Texas. 09:44 16 But the -- and the Commission, to my knowledge, never 09:44 17 sought this type of authority and I don't think the 09:44 18 legislature would have ever given it, for good reason. 09:44 19 Because we know there are going to be some violations, 09:44 20 but you don't want someone to be -- I mean, that 09:44 21 entire license to be grabbed and shut down for at 09:44 22 least ten days. And, of course, when you go to SOAH, 09:44 23 as I guess the two attorneys are aware, the SOAH judge 09:44 24 does not necessarily have to announce the decision on 09:45 25 that day. And in the fact of the Victoria Community 09:45 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 46 1 Theatre enforcement action, after the close of hearing 09:45 2 and after the briefs had been filed, I believe it was 09:45 3 almost 90 days before a decision had been made. 09:45 4 Under the temporary suspension 09:45 5 proposals we've seen, that suspension would remain in 09:45 6 effect during that entire period of time until someone 09:45 7 makes a decision to lift it. So we think it goes far 09:45 8 too far. Thank you for your time. 09:45 9 CHAIRMAN CLOWE: Any questions of these 09:45 10 two gentlemen? 09:45 11 COMMISSIONER WHITAKER: Well, I would 09:45 12 like to hear from the other gentlemen and Billy, and 09:45 13 then I might have a couple of questions. 09:45 14 CHAIRMAN CLOWE: I'm going to call 09:45 15 on -- Fred, help me with the correct pronunciation of 09:45 16 your last name. 09:45 17 MR. MICCIO: Good morning, Mr. 09:45 18 Chairman, ladies and gentlemen. My name is Fred 09:45 19 Miccio. Today I'm here -- 09:45 20 CHAIRMAN CLOWE: M-i-c-c-i-o. Fred, 09:45 21 I'm sorry. You and I met yesterday morning and I 09:45 22 didn't get the correct pronunciation of your name. 09:46 23 MR. MICCIO: It's Miccio, M-i-c-c-i-o. 09:46 24 Fred. 09:46 25 CHAIRMAN CLOWE: Very good. 09:46 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 47 1 MR. MICCIO: Today I'm here 2 representing the American Legion Department of Texas. 09:46 3 For the record, I'm also associated with several 09:46 4 charities and I also am a commercial lessor as far 09:46 5 down in Baytown, Texas, so I -- I'm completely 09:46 6 involved in this thing all the way. For the record, 09:46 7 I'm here today to talk about this suspension. And I 09:46 8 would like to go on the record, first, to say that if 09:46 9 I was sure Mr. Billy Atkins and his crew would be here 09:46 10 forever, I wouldn't have a problem with this. But as 09:46 11 we know, nothing is forever. And the reason I'm so 09:46 12 adamant about this. I'm going to relate a problem 09:46 13 that I had, a past experience that I had. 1986, I was 09:46 14 commander of Post 490, American Legion, by Lincoln 09:47 15 Field. I was sitting in the office about 10:00 09:47 16 o'clock in the morning, myself and several of my 09:47 17 officers, writing up checks, doing our business. The 09:47 18 knock on the door. Five State Police cars surrounding 09:47 19 the building. 09:47 20 What's the problem? 09:47 21 Came here to get your bingo license. 09:47 22 What do you mean, you came here to get 09:47 23 my bingo license? For what? 09:47 24 We came here to get your bingo license. 09:47 25 Give us your license or you're going to jail. 09:47 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 48 1 I said, you've got to be kidding. What 09:47 2 did I do wrong? It seems at the time, there was -- if 09:47 3 I remember correctly, there was some kind of change in 09:47 4 when the distributions were made, before or after such 09:47 5 and such a date. But anyhow, we had tried to get it 09:47 6 straightened out, and didn't. We goofed and we didn't 09:47 7 get it straightened out, but that's all the problem 09:47 8 was. Anyhow, to make a long story short, I finally 09:47 9 had to give up the license in order not to go to jail. 09:47 10 Now, you talk about an angry, frustrated GI that spent 09:48 11 five years during the War, fighting a police state, 09:48 12 having this happen to me right here in Texas. And 09:48 13 that -- that is why I am so adamant against giving 09:48 14 somebody this kind of power. Consequently, over the 09:48 15 years, we backed the legislation, we had the -- most 09:48 16 of them rules and regulations removed. And I don't 09:48 17 want to get back into that situation again. Like I 09:48 18 say, if I knew forever that Billy and his crew would 09:48 19 be there, I wouldn't have a problem with it. 09:48 20 Now, as far as this tax delinquency, 09:48 21 yes, we need to do something about it. It's unfair to 09:48 22 let these charities play and not pay their taxes and 09:48 23 compete with charities that are paying their taxes. 09:48 24 But there -- there has got to be another way to do it. 09:48 25 And if there is a suspension, especially if it's in a 09:48 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 49 1 commercial hall, if it's an individual by himself, 09:48 2 they're the only one getting hurt. But if it's in a 09:49 3 commercial hall, you've going to have four or five 09:49 4 charities involved and you're going to break up a 09:49 5 schedule. If you pull one out that's three days, that 09:49 6 schedule is going to be broke up and that's going to 09:49 7 kill the charity. The rest of the charities in that 09:49 8 hall are going to be penalized for that one charity 09:49 9 that didn't pay their taxes. So what I would suggest 09:49 10 is, if you must go that route and you do pull the 09:49 11 license, through legal procedures, then we need to 09:49 12 make some kind of rule, either give these -- this hall 09:49 13 additional temporary licenses to continue operating so 09:49 14 their schedule is not interrupted until such time as 09:49 15 they can replace the charity that is playing in the 09:49 16 hall there. That's my comments. 09:49 17 CHAIRMAN CLOWE: Thank you, sir. There 09:49 18 is another individual who has asked to appear and give 09:49 19 testimony, Mr. Philip Arnold. Would you come forward, 09:49 20 please, sir. 09:49 21 Good morning. 09:49 22 MR. ARNOLD: Good morning. I 09:50 23 appreciate the opportunity of being here today. My 09:50 24 name is Phil Arnold. I represent various charities 09:50 25 out of Houston, Texas, Reunion Ministries, Fine Arts 09:50 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 50 1 Foundation, and several others that are -- that are in 09:50 2 Houston. 09:50 3 I've been involved in bingo since 1986. 09:50 4 And I have seen many changes and many things happen 09:50 5 over the years, and I just wanted to speak very 09:50 6 briefly today to express my keen interest and 09:50 7 appreciation for some of the proposals that I see that 09:50 8 are going to go before the legislature. There are 09:50 9 some very good things, I believe, that are -- that 09:50 10 have a chance of passing. Things that would really 09:50 11 help bingo and the charities that are involved in 09:50 12 bingo. And I think the crucial thing in my thinking 09:50 13 these days about bingo is that the last year has been 09:50 14 very, very difficult. I don't think I'm telling you 09:51 15 anything new, but I just wanted you to hear it -- I 09:51 16 guess I just wanted to express that. It's been very, 09:51 17 very difficult on the charities, certainly in the 09:51 18 Houston area, and I think all over the state. For 09:51 19 example, our hall has excelled at selling pull tabs 09:51 20 over the last three or four years. We have had a 09:51 21 strong emphasis on that. And we have always been able 09:51 22 to sell a lot of pull tabs, and our instant bingo. 09:51 23 And not only have the crowds been somewhat down, but 09:51 24 it's just been very difficult to sell as many as we 09:51 25 used to. I think perhaps some of the novelty wore 09:51 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 51 1 off. And there is a -- I can see here that, according 09:51 2 to some of the proposed legislation, there is some 09:51 3 hope for some change in that area, where there will be 09:51 4 more variety and perhaps some different ways of 09:51 5 marketing the product. This would certainly help the 09:51 6 charities to be able to do that. 09:52 7 Also, I see there is talk of a 09:52 8 progressive game, and I want to underscore how 09:52 9 important that would be, to increase player interest 09:52 10 because the pots would somewhat higher, and it would 09:52 11 add another element to the whole bingo presentation. 09:52 12 And this would cause players to have more fun, have a 09:52 13 chance to winning a little bit more, add some 09:52 14 excitement to it, and the crowds will probably go up a 09:52 15 little and we would able to sell more product and 09:52 16 this, in turn, would help the charities greatly. So 09:52 17 I'm so much in favor of that -- of the progressive 09:52 18 game idea. 09:52 19 Also, the possibility of not paying 09:52 20 sales tax on -- nonprofits generally don't pay sales 09:52 21 tax, but here we are paying sales tax for the last 16 09:52 22 years on bingo equipment, paper and, recently, 09:52 23 electronics. And even saving 30 or 40 dollars a 09:52 24 session, two sessions per day for 300-something days 09:52 25 of a year, that 40 or 50 dollars adds up. So that 09:53 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 52 1 would be a big help to us, also. Those are some of my 09:53 2 thoughts about it. And I remember standing on the 09:53 3 floor of the legislature, I guess it was in '86 or 09:53 4 '87, and I think former President George Bush had just 09:53 5 recently said that charities represented a thousand 09:53 6 points of light. And I remember bringing that up at 09:53 7 that time when I said, if you see a bingo hall, that's 09:53 8 one of those thousand points of light. And I want to 09:53 9 particularly this year, in view of some of the recent 09:53 10 election results, that that idea of the nonprofit 09:53 11 sector assuming a very important role in helping 09:53 12 society and helping the community, once again, we see 09:53 13 the vision of a thousand points of light. And by 09:53 14 passing some of these new ideas and by helping to 09:53 15 encourage bingo in any way that we can, as individuals 09:54 16 and as committees and as organizations, as 09:54 17 Commissioners, and as the Lottery Commission itself, 09:54 18 this is keeping alive and helping those lights burn 09:54 19 more lightly. And that's what the whole purpose of it 09:54 20 all is about anyway. So some of these things are 09:54 21 very, very good and I just want to express those 09:54 22 thoughts and my appreciation. 09:54 23 CHAIRMAN CLOWE: Mr. Arnold, I think we 09:54 24 understand your message. Did you have any specific 09:54 25 comment about these two issues that the chairman of 09:54 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 53 1 the advisory committee reported to the Commission on? 09:54 2 I didn't hear you comment on those two items. 09:54 3 MR. ARNOLD: And would you specify the 09:54 4 two items so I'll know exactly what we're talking -- 09:54 5 CHAIRMAN CLOWE: The suspension power 09:54 6 and the elimination of tax on the 50 dollars or less 09:54 7 prizes. 09:54 8 MR. ARNOLD: The -- the issue of the 09:54 9 suspension power. Of course, you know, as someone who 09:54 10 has studied history quite a bit and that's my 09:55 11 specialty, I seem like I've always been on the side of 09:55 12 having less power in the hands of government. At the 09:55 13 same time, when there are infractions of rules that 09:55 14 make it unfair for those particular organizations that 09:55 15 are keeping the rules to be able to compete because 09:55 16 some people are avoiding following the rules, you do 09:55 17 need some kind of government power, I think, to be 09:55 18 able to handle those situations. So I would say, 09:55 19 particularly in the case of financial violations where 09:55 20 taxes or fees, winner fees are not being paid, then 09:55 21 that kind of power would be important to put in the 09:55 22 hands of government, of agents and authorities. 09:55 23 Otherwise, I would want to be very careful because we 09:55 24 don't know what the future brings as we go down the 09:55 25 road of history. 09:55 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 54 1 In reference to the tax or the winners 09:55 2 fees issue, I think that any relief in that area would 09:55 3 be very, very good, whether it's 50 dollars or below 09:55 4 or five dollars or below. The reason that's very 09:56 5 important to us, when it comes to selling a product 09:56 6 like pull tabs, think for a moment, go into one of 09:56 7 these thousand points of light, one of these bingo 09:56 8 halls where these charities are just trying to make a 09:56 9 little money. Think about it for just a moment. 09:56 10 You've got 200, 300 people in there and you're selling 09:56 11 pull tabs on the floor. You have four or five workers 09:56 12 at intermission, let's say, selling those pull tabs. 09:56 13 And you're trying to like -- by trying -- by 09:56 14 collecting the winners fees on the five -- on the 09:56 15 winners that are five dollars, sometimes you're 09:56 16 dealing with pennies and nickels, giving change, 09:56 17 interchange of the product, back and forth with the 09:56 18 player when time is moving very fast is very, very 09:56 19 difficult. You lose sales. So what you wind up doing 09:56 20 is losing maybe a hundred dollars worth of sales -- at 09:56 21 least a hundred dollars worth of sales, maybe 200, 09:56 22 when you have a big crowd and you have five or six 09:56 23 workers on the floor taking care of those people, 09:56 24 you're going to lose several hundred dollars over a 09:56 25 period of a few days. And that's also profit, which 09:57 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 55 1 also affects how much winners fees are collected, 09:57 2 because if you sell more product, you will actually 09:57 3 wind up paying more to the State in the way of winners 09:57 4 fees. The idea is to maximize the opportunity to 09:57 5 sell. So relief there would be of great help to us. 09:57 6 CHAIRMAN CLOWE: Very good. Thank you 09:57 7 very much. Again, Commissioners, any time you have a 09:57 8 question of any of these witnesses, I think we're 09:57 9 ready to hear from Billy now. And Billy, 09:57 10 particularly, I'm sure you will anyway, but I want to 09:57 11 point out two areas that I think we would like to hear 09:57 12 from you on. The chairman of the advisory committee 09:57 13 did not have specific concerns to list: It was a 09:57 14 generic or a -- a general concern about suspension 09:57 15 powers beyond those relating to financial activities. 09:57 16 Mr. Fenoglio and Mr. Heinlein, I believe it is, 09:57 17 mentioned specific concerns. Mr. Arnold has just 09:58 18 stated, I think it's fair to characterize, some 09:58 19 general concerns. If you can be specific about what 09:58 20 you're after in this rule in that regard, I think it 09:58 21 would be helpful to the Commission. And then I 09:58 22 particularly -- 09:58 23 MR. ATKINS: I'm sorry, Mr. Chairman. 09:58 24 You're talking specifically as it relates to summary 09:58 25 suspension? 09:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 56 1 CHAIRMAN CLOWE: Yes. And then 09:58 2 additionally, if you could be very specific about the 09:58 3 issue of suspension of -- what is the correct 09:58 4 termination? Of prize fees? 09:58 5 MR. ATKINS: Prize fees. 09:58 6 CHAIRMAN CLOWE: Prize fees, and 09:58 7 reduction of those or elimination of those. Is the -- 09:58 8 the issue below five dollars or below 50 dollars? 09:58 9 Clarify that for me. 09:58 10 MR. ATKINS: Okay. 09:58 11 CHAIRMAN CLOWE: Now, I heard five 09:58 12 dollars yesterday in -- 09:59 13 MR. ATKINS: All right. 09:59 14 CHAIRMAN CLOWE: -- the committee 15 meeting, and that -- this 50 dollar -- 09:59 16 MR. NEINAST: May I clarify that? 09:59 17 CHAIRMAN CLOWE: If you would. 09:59 18 MS. KIPLIN: Can you come -- we've got 09:59 19 audio. Sorry. 09:59 20 MR. NEINAST: After you were called 09:59 21 out, Chairman Clowe, the committee did take specific 09:59 22 action on that specific issue. The final vote was to 09:59 23 recommend that prize fees below 50 dollars not be 09:59 24 collected. 09:59 25 CHAIRMAN CLOWE: Okay. 09:59 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 57 1 MR. NEINAST: The way it is now, it's 09:59 2 five dollars. So there is a change from five to 50. 09:59 3 CHAIRMAN CLOWE: That's what I -- 09:59 4 MR. NEINAST: And while I have the 09:59 5 chair, if I may add one addenda before Billy addresses 09:59 6 subpoena power. A -- I mentioned the concerns of the 09:59 7 community on this subpoena power. One solution that 09:59 8 was -- not a solution, but a compromise that was 09:59 9 offered, and I throw that out only for your 09:59 10 consideration is, the concern is this unbridled power 09:59 11 on one administrative official. Some think it would 10:00 12 be more acceptable if there was a procedure, instead 10:00 13 of the director of the bingo division having that 10:00 14 authority, that he could use it only on getting the 10:00 15 permission of one of you Commissioners, putting it 10:00 16 directly into the political arena. That would not 10:00 17 be -- they didn't say, require a meeting of the 10:00 18 Commission, but Linda or Billy gets on the telephone 10:00 19 to Commissioner Sadberry and say, hey, this is the 10:00 20 problem, we need a subpoena, will you approve it. 10:00 21 Then the bee is on the -- the political appointee's 10:00 22 back. 10:00 23 COMMISSIONER WHITAKER: His back. 10:00 24 COMMISSIONER SADBERRY: Who was that 10:00 25 talking about things coming to an end? 10:00 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 58 1 CHAIRMAN CLOWE: That characterization, 10:00 2 Bill, was yours, not the Commission's. We do not 10:00 3 consider ourselves political people, I don't think. 10:00 4 Okay, Billy. If that helps you on how 10:00 5 to get started on this. Please come forward. 10:00 6 MR. ATKINS: It does. Thank you, 10:00 7 Mr. Chairman. I would like to start off by saying 10:01 8 that I appreciate the comments that everybody made 10:01 9 personally both about me and the staff. I don't know 10:01 10 that I am really actually as nice as they classify me. 10:01 11 I think it's a result of the talented people in the 10:01 12 division and the hard work that they do, and I've 10:01 13 mentioned that to you -- I know, to all of you before. 10:01 14 And I appreciate the members of the public reiterating 10:01 15 that today. However, I do have to tell you that I am 10:01 16 very troubled by Bill's characterization of the 10:01 17 representation at yesterday's meeting. You know, we 10:01 18 have over 2,000 licensees. And I actually misjudged 10:01 19 the number. There were only 20 people in attendance 10:01 20 at yesterday's meeting. There were no more than five 10:01 21 to six that gave testimony. And what concerns me the 10:01 22 most is that, again, these are the same people giving 10:01 23 the same testimony. There is -- you know, I take 10:02 24 exception with his characterization that there is this 10:02 25 ground swell of concern amongst the industry. I'll 10:02 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 59 1 address that a little more later. But we at the 10:02 2 Commission meeting back in December, discussed these 10:02 3 proposals, and it was discussed that the Commission 10:02 4 wanted as much input provided by members of the public 10:02 5 as possible. There was some discussion of a -- of a 10:02 6 bill-drafting session taking place, but there were 10:02 7 concerns among staff as to the time. So even after 10:02 8 holding six separate public hearings where testimony 10:02 9 could be provided by the public, we immediately set 10:02 10 about putting those recommendations on our website 10:02 11 with the means for the public to submit written 10:02 12 comments to us on those proposals. Besides being on 10:03 13 the website, we publicized that information at the 10:03 14 different conferences we've done, at the training 10:03 15 sessions, that we've given every opportunity that we 10:03 16 got. And just so you know, we received no comments. 10:03 17 I am -- you know, I'm -- I'm concerned 10:03 18 by some of, you know, the testimony that was given 10:03 19 yesterday and some that was given today that in my 10:03 20 mind is kind of -- contradicts, you know, one or the 10:03 21 other. There seems to be a general sense among the 10:03 22 members of the public that they want a clean, 10:03 23 respectable bingo industry, but they're concerned 10:03 24 about this unbridled power given to the agency in 10:03 25 order to enforce that industry and to make sure that 10:03 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 60 1 the laws and the rules are complied with. You know, 10:04 2 again, Bill stated that there were no specifics given 10:04 3 of, you know, instances where, you know, this agency 10:04 4 has, you know, got gone out and abused its authored or 10:04 5 its discretion or anything, taken any kind of 10:04 6 heavy-handed tactics, but there is always that 10:04 7 allusion. I think that, you know, it could occur. If 10:04 8 there is some sort of, you know, specific examples, I 10:04 9 would like to hear them. I don't know that I would 10:04 10 characterize them necessarily the same way. 10:04 11 Now, you know -- 10:04 12 COMMISSIONER WHITAKER: Bill, they did 10:04 13 mention the Victoria hall that they considered to be 10:04 14 an abuse. I'm not agreeing or disagreeing, I'm just 10:04 15 saying that's what they identified. And they also -- 10:04 16 Mr. Miccio talked about his circumstance, and then 10:04 17 there was one other that I am now forgetting. But 10:04 18 there were three different instances mentioned. 10:05 19 MR. ATKINS: Okay. Mr. Miccio's, I 10:05 20 think he said, took place in 1986. I'm talking about 10:05 21 by this agency. Now, as to the Victoria Community 10:05 22 Theatre, the -- you know, the heavy-handed tactics 10:05 23 that they were referring to then resulted in 66 10:05 24 unlicensed occasions being conducted by an 10:05 25 organization. This agency's or this division's 10:05 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 61 1 attempt to be a kinder, gentler division and not -- I 10:05 2 think as Commissioner Sadberry represented it first, 10:05 3 dropping the hammer at that time, but you know, we 10:05 4 said, okay. You did it, don't do it again. And they 10:05 5 did it again. They played additional unlicensed 10:05 6 sessions. So that's why we went to hearing and that's 10:05 7 why we ultimately got the suspension. And what's 10:05 8 frustration to the staff, Commission Whitaker, and 10:05 9 Mr. Fenoglio will remember this, because we discussed 10:05 10 this on a speaker phone with several of my staff 10:06 11 there. Less than 24 hours after this Commission 10:06 12 signed off on that suspension for Victoria Community 10:06 13 Theatre, we were getting frantic phone calls from the 10:06 14 hall the next day, at 10:00 o'clock. At 10:15, they 10:06 15 faxed in an amendment wanting to play at 10:00 10:06 16 o'clock. And, you know, we're like, what's up with 10:06 17 this? You come in front of the Commission, you say 10:06 18 you're going to manage your business and we're not 10:06 19 going to be doing this, and less than 24 hours, we're 10:06 20 up here jumping through hoops. We had to ask them 10:06 21 several times, are you playing bingo now? They were 10:06 22 like no, no, no. We just -- well, then, why do you 10:06 23 want it for 10:00 o'clock? Well, I don't know. How 10:06 24 about 11:00? So you know, Commissioner Whitaker, we 10:06 25 get some stuff that doesn't add up. And the -- I'm 10:06 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 62 1 going to defer to Ms. Kiplin some in regards to the 10:07 2 summary suspension and the subpoena authority. But, 10:07 3 specifically, what I want to say to the Commission is 10:07 4 the fact that it would be easier, I think, to identify 10:07 5 or to name off those agencies that don't have that 10:07 6 authority than to name the agencies that do. And 10:07 7 after everything that I have heard so far, I am 10:07 8 convinced we probably need it more now than ever. 10:07 9 As to the specifics of the summary 10:07 10 suspension drafts that have been worked on, Nelda 10:07 11 mentioned that we've been talking to certain members. 10:07 12 One of the members that we talked to was 10:07 13 Representative Tony Goolsby, and we talked to him 10:07 14 about the summary suspension bill. And his 10:08 15 recommendation was to go back and to come up with like 10:08 16 four or five of those key issues that would be the 10:08 17 most important to the division to have that authority 10:08 18 on. And the staff identified the failure to pay 10:08 19 delinquencies, whether it's prize fee or gross rental 10:08 20 tax, failure to file a report, leasing the location to 10:08 21 an unlicensed organization, selling -- selling product 10:08 22 to an unlicensed organization or selling unapproved 10:08 23 product. So we identified what we believed to be the 10:08 24 five most egregious violations that could occur that 10:08 25 we would want to use the summary suspension authority 10:08 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 63 1 on. And that's -- that's kind of where we are now is, 10:08 2 you know, in -- in the negotiations with, you know, 10:08 3 different agencies -- with different individuals, 10:08 4 representatives of different groups, on that type of 10:08 5 language. You know, Bill mentioned some people have 10:09 6 suggested that a commissioner sign off on the summary 10:09 7 suspension before it was issued. I think legal may 10:09 8 have some concerns with that. 10:09 9 CHAIRMAN CLOWE: Was that the 10:09 10 suspension or the subpoena? I thought it was the 10:09 11 subpoena. 10:09 12 MR. NEINAST: Subpoena. 10:09 13 MR. ATKINS: I'm sorry. The subpoena. 10:09 14 It has been mentioned that a -- that on the summary 10:09 15 suspension that a commissioner also sign off on one of 10:09 16 those. That's what I think legal has a problem with 10:09 17 as far as the Commissioners being the final 10:09 18 decision-makers. You know, there has been 10:09 19 recommendations made, again, from one individual 10:09 20 representing several organizations, that a long list 10:09 21 of notice be provided to the other organizations at 10:09 22 the hall. So we're looking at those recommendations. 10:09 23 The -- on the prize fee, the staff's 10:10 24 recommendation to eliminate the prize fee on prizes of 10:10 25 less than five dollars was one of those 10:10 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 64 1 recommendations that is actually a very selfish 10:10 2 recommendation on our part, but still would benefit 10:10 3 the organizations. The concern on the staff's part 10:10 4 being, some of these prize fees in some cases are two 10:10 5 cents, three cents, a nickel. And so our auditors, 10:10 6 being very thorough, which I appreciate they are, are 10:10 7 often struggling to find these nickels and pennies 10:10 8 when they're collecting these prize fees. Now, again, 10:10 9 that exemption is still going to have a fiscal 10:10 10 implication for the State, and we estimate just 10:10 11 eliminating the prize fees on prizes of five 10:10 12 dollars -- on prizes of less than five dollars to be 10:10 13 890,000 dollars over a year. The estimation that we 10:10 14 did on eliminating the prize fee on prizes of less 10:11 15 than 50 dollars is about 2.9 million. 10:11 16 COMMISSIONER WHITAKER: Out of what? 10:11 17 Out of what total? 10:11 18 MR. ATKINS: The total prize fee that 10:11 19 we collect is, I believe, around 20 million. 10:11 20 COMMISSIONER WHITAKER: It's like ten 10:11 21 percent? 10:11 22 MR. ATKINS: Yes, ma'am. So, you know, 10:11 23 from staff's point of view, I guess we don't have a 10:11 24 real strong feeling one way or another about 10:11 25 eliminating it on the higher prize fee. The only 10:11 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 65 1 thing that we would point out is that we see it being 10:11 2 kind of a hard sell to the legislature. We see that 10:11 3 the -- eliminating the prize fee of less than five 10:11 4 dollars as being a hard sell, the 890,000 dollars. 10:11 5 CHAIRMAN CLOWE: Billy, educate me on 10:12 6 the basis of the computation of the prize fee right 10:12 7 now. Is that a percentage of the winning? 10:12 8 MR. ATKINS: The prize fee is five 10:12 9 percent of all prizes awarded to players. 10:12 10 CHAIRMAN CLOWE: So you're talking 10:12 11 about a dollar win, change is made at that point in 10:12 12 time, and 95 cents is given to the winner and a nickel 10:12 13 is -- 10:12 14 MR. ATKINS: Retained as a prize fee, 10:12 15 exactly. 10:12 16 CHAIRMAN CLOWE: -- as a prize fee on 10:12 17 the point of sale or the point of redemption? 10:12 18 MR. ATKINS: That's correct. 10:12 19 CHAIRMAN CLOWE: And then I had another 10:12 20 question on comments that you've been making. When 10:12 21 you identified the five areas in response to 10:12 22 Representative Goolsby, did you comment on that in the 10:12 23 meeting yesterday to the committee and was there 10:12 24 discussion about that? 10:12 25 MR. ATKINS: There was not a lot of 10:12 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 66 1 discussion. I believe I did -- I know during 10:12 2 Mr. Truman's testimony, I did tell him that there were 10:13 3 ongoing negotiations at the -- at the request of 10:13 4 Representative Goolsby to specify the specific areas 10:13 5 that would be subject to summary suspension. I can't 10:13 6 recall, Mr. Chairman, if I actually enumerated those. 10:13 7 CHAIRMAN CLOWE: I think it would have 10:13 8 been helpful if that could have been brought up in 10:13 9 that meeting, because I heard from the Chairman that 10:13 10 there were financial areas that they were comfortable 10:13 11 with, and then when you named those five specific 10:13 12 areas, I'm not sure, three or some-odd number were 10:13 13 very financially oriented, and then failing to file a 10:13 14 report, that may be financial, it may not, but I wish 10:13 15 we had gotten some reaction to those five areas. And 10:13 16 that's where you said you were responding to 10:13 17 Representative Goolsby and you were satisfied with 10:13 18 that level of asking for the suspension power, if I 10:14 19 got your meaning clearly. 10:14 20 MR. ATKINS: Those are, as we've 10:14 21 identified by staff, probably the most egregious areas 10:14 22 and the ones where the staff believes it would be the 10:14 23 most important to take immediate action. 10:14 24 COMMISSIONER WHITAKER: Why would it 10:14 25 be -- it be immediately necessary to respond to a 10:14 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 67 1 failure to file a report? What is the -- the issue is 10:14 2 not whether those should be allowed or disallowed at 10:14 3 any point, but whether you need an emergency power to 10:14 4 enforce it. 10:14 5 MR. ATKINS: Because without the 10:14 6 report, we don't have the means to -- well, first of 10:14 7 all, assuming that they've made a payment without 10:14 8 filing the report, we don't have the means to 10:14 9 substantiate the payment. 10:14 10 COMMISSIONER WHITAKER: If you don't 10:14 11 have summary power, then what's your option? It's to 10:14 12 go through -- 10:14 13 MR. ATKINS: Go through the 10:14 14 administrative process. 10:15 15 COMMISSIONER WHITAKER: And that takes 10:15 16 how long? 10:15 17 MR. ATKINS: 12 to 18 months. 10:15 18 COMMISSIONER WHITAKER: And is there a 10:15 19 way of speeding that up, as a practical matter, in 10:15 20 certain circumstances? 10:15 21 MR. ATKINS: I would defer to the 10:15 22 agency's general counsel. 10:15 23 CHAIRMAN CLOWE: Okay. If you're going 10:15 24 to talk, and I think you are, let's ask you to talk 10:15 25 about that, and then in addition, talk to us about the 10:15 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 68 1 existing process. 10:15 2 MS. KIPLIN: Okay. 10:15 3 CHAIRMAN CLOWE: For suspension, for 10:15 4 subpoena, and your comments on the prize fee, if you 10:15 5 have a legal opinion on that, please, ma'am. 10:15 6 COMMISSIONER WHITAKER: And let me just 10:15 7 add this, Kim. What I'm interested in this is a 10:15 8 series of checks and balances, of how this power is 10:15 9 weighed with due process. Because any emergency power 10:15 10 thing needs to be balanced with a check, so what are 10:15 11 those, in your opinion, and are they sufficient. 10:15 12 MS. KIPLIN: First question, can you 10:15 13 speed up the administrative process. It depends on 10:15 14 whether people want to do discovery, whether people 10:15 15 are wanting to continue. You know, different issues 10:16 16 that come into an administrative hearing. I think 12 10:16 17 to 18 months might be a bit much. You know, there are 10:16 18 requisite time requirements for filing a notice of 10:16 19 hearing and then providing that notice and so forth. 10:16 20 Second -- 10:16 21 COMMISSIONER WHITAKER: Is there any 10:16 22 equivalent, though, to TRO or temporary injunction? 10:16 23 Is there an equivalent to that? 10:16 24 MS. KIPLIN: No. The -- the straight 10:16 25 answer is, no. There is an opportunity for temporary 10:16 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 69 1 suspension, but it's not a summary suspension and in 10:16 2 my view, is not an effective process. The existing 10:16 3 process for suspension, I just answered that. 10:16 4 The subpoena. There is no authority 10:16 5 for the agency to subpoena a non-licensee's records or 10:16 6 request them present themselves for questioning, 10:16 7 outside of an -- an administrative contested case 10:16 8 proceeding, where at that point, you would be issuing 10:16 9 commissions to take depositions along with subpoena 10:16 10 authority. 10:17 11 Your interest in the check -- I'm 10:17 12 hitting general questions, and then I'll go to more 10:17 13 specific. The checks and balance on the due process. 10:17 14 The summary suspension power that I'm aware of or 10:17 15 another vehicle, I guess, for an emergency power would 10:17 16 be a cease and desist order, emergency cease and 10:17 17 desist order. There is an opportunity for hearing at 10:17 18 some point in the future, and it's -- usually it's a 10:17 19 really quick time trigger. Under the statutes that I 10:17 20 researched, and I want to go to the issue when you 10:17 21 asked him about the taxes. The Comptroller has 10:17 22 exhaustive authority to summarily suspend a sales 10:17 23 permit or a license that's issued under their agency's 10:17 24 power for failure to do just that, for failure to file 10:17 25 a return or report, or failure to pay taxes. 10:17 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 70 1 Alcoholic Beverage Commission also has that kind of 10:17 2 similar power. 10:17 3 For the cease and desist, it is for, 10:18 4 from what I can tell, financial institutions. The 10:18 5 Lottery Act does provide broad authority in terms of 10:18 6 being able to summarily suspend a license. The 10:18 7 example that you heard regarding the lottery license, 10:18 8 and I think there was a time period where the licensee 10:18 9 was not selling for, I think Mr. Fenoglio said, three 10:18 10 weeks. Under the Lottery Act and under the proposed 10:18 11 summary suspension language in the -- that we're 10:18 12 talking about in the Bingo Act, there would be a show 10:18 13 cause hearing within ten days of notice, so it doesn't 10:18 14 go on forever. It's a very quick time trigger, ten 10:18 15 days, unless the parties agree to a -- a longer time. 10:18 16 And if I'm not mistaken, in that -- he may correct me, 10:18 17 but as I recall, there was an agreement to extend the 10:18 18 time period in that particular case that he 10:18 19 referenced. 10:18 20 COMMISSIONER SADBERRY: I don't know if 10:18 21 you're familiar with the current proposed legislation, 10:18 22 which sounds like it's evolving, but do you know if 10:19 23 that type of provision would be in that legislation? 10:19 24 MS. KIPLIN: Yeah. I drafted it at 10:19 25 Mr. Atkins' request, so, yes, it is. And it's not 10:19 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 71 1 unbridled authority that are findings that are 10:19 2 required to be made. And it's that the action is 10:19 3 necessary to maintain the integrity, security, 10:19 4 honesty, or fairness of the operation of bingo, or to 10:19 5 prevent financial loss to the State, and there are 10:19 6 five enumerated acts or findings that must occur. One 10:19 7 is what he said, conducting a bingo game outside its 10:19 8 licensed time; failing to file a report or return, or 10:19 9 make a fee or tax payment; leasing bingo -- a bingo 10:19 10 premises to somebody who is not licensed under the 10:19 11 act; selling, leasing, or distributing bingo equipment 10:19 12 that is not authorized for use in the State of Texas. 10:19 13 And as I understand it, that's to try to stop, 10:19 14 obviously, unapproved bingo paper or bingo products as 10:19 15 well as other bingo equipment. 10:19 16 COMMISSIONER SADBERRY: Let me go back 10:20 17 to the hearing. What's the venue of the show cause 10:20 18 hearing? 10:20 19 MS. KIPLIN: It's SOAH, 10:20 20 administrative -- yes. It's the State Office of 10:20 21 Administrative Hearings, and my sense is that it would 10:20 22 be similar to the process on the lottery side where 10:20 23 the letters are issued, and within the letter, there 10:20 24 is the time, the place, and the date of the show cause 10:20 25 hearing. They are sent certified mail. They're 10:20 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 72 1 effective on the mailing. And we're -- on the lottery 10:20 2 side, we do this -- this kind of process every 10:20 3 Thursday, so it's not as though it would be unusual or 10:20 4 we would not be familiar with the process. I think 10:20 5 I've laid that out, unless any of you have any further 10:20 6 questions -- 10:20 7 COMMISSIONER WHITAKER: I'm having a 10:20 8 hard time understanding why, if you get a hearing in 10:20 9 ten days, why you can't wait ten days. I'm not 10:20 10 understanding -- 10:20 11 MS. KIPLIN: Because it's egregious -- 10:20 12 it's in the view of the -- the whole basis for an 10:21 13 emergency -- first of all, the Commission has to make 10:21 14 a decision. Is there -- is there any sort of offense 10:21 15 when -- I guess it would be the legislature, but in 10:21 16 terms of moving forward with this. The first decision 10:21 17 would have to be, is there any type of offense under 10:21 18 the Bingo Enabling Act that would fall under an action 10:21 19 that would be necessary to maintain the integrity, 10:21 20 security, honesty, or fairness. So it's an emergency 10:21 21 matter. You have to see whether you think that the 10:21 22 conduct is the type of conduct that requires an 10:21 23 emergency remedy. Okay? That would be the first 10:21 24 threshold. 10:21 25 If that's the case, then it's -- then 10:21 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 73 1 you would have the summary suspension authority in 10:21 2 place. And the checks and balance that, Commissioner 10:21 3 Whitaker, you mentioned, would be a show cause hearing 10:21 4 within ten days, so there is the due process. 10:21 5 COMMISSIONER WHITAKER: Would you 10:21 6 require -- would you require an issuance of notice 10:21 7 before the suspension kicks in? 10:22 8 MS. KIPLIN: This is -- 10:22 9 COMMISSIONER WHITAKER: So, for 10 example, five days before -- a letter saying, in five 10:22 11 days we're going to invoke this? 10:22 12 MS. KIPLIN: It's not drafted that way. 10:22 13 COMMISSIONER WHITAKER: Is that an 10:22 14 issue? Is that a problem if that happened? 10:22 15 MS. KIPLIN: I mean, it's not drafted 10:22 16 that way. It's -- you know, this is legislation. I 10:22 17 guess it can be drafted the way the Commission would 10:22 18 prefer. I will say that in my -- just in my quick -- 10:22 19 I'm going through quickly in my mind. On the tax and 10:22 20 fee, I don't see that on the Comptroller's side, if 10:22 21 you want to use that as a model, or on the lottery 10:22 22 side, if you want to use that as a model. 10:22 23 Now, I will also say just for, you 10:22 24 know, as much disclosure. On some of the statutes 10:22 25 that I did review, the summary suspension for the 10:22 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 74 1 financial aspects, the ones that I think people have 10:22 2 been referencing, when the report is filed, and 10:22 3 assuming that all the -- the fees and taxes have been 10:22 4 paid and the suspension is no longer effective. In 10:22 5 other words, there is another non-extraordinary remedy 10:23 6 available and in board on revocation. So that would 10:23 7 be another -- you know, another aspect that the 10:23 8 Commission could take a look at in light of what you 10:23 9 have heard today with regard to the financial aspects. 10:23 10 So that the summary suspension would be set up to 10:23 11 where it's effective immediately upon the notice 10:23 12 properly addressed to -- you know, the license 10:23 13 information is maintained. And I'm only talking in 10:23 14 the context of a failure to file a report or a return, 10:23 15 or failure to pay a tax or a fee, but once the agency 10:23 16 receives that, then the suspension would not be 10:23 17 effective and then there would be an opportunity to 10:23 18 forward -- if you're following the Comptroller type -- 10:23 19 COMMISSIONER WHITAKER: Say that one 10:23 20 more time. 10:23 21 MS. KIPLIN: Sure. Under the 10:23 22 exhaustive -- I mean, exhaustive authority that I 10:23 23 could tell the Comptroller has, as to the failure to 10:23 24 file a report or a return, or the failure to pay a fee 10:23 25 or a tax, the summary suspension is effective, you 10:23 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 75 1 know, upon the mailing of the suspension. But it 10:24 2 becomes not effective, if you will, once the report or 10:24 3 the return have been filed, and/or the tax or the fee. 10:24 4 In other words, you've got to be square -- the 10:24 5 permittee has to be square with all of the financial 10:24 6 matters. 10:24 7 COMMISSIONER WHITAKER: So on day one, 10:24 8 they could get notice of suspension, and day two, they 10:24 9 could run in with the check and they would immediately 10:24 10 get their power back? 10:24 11 MS. KIPLIN: Uh-huh. Well, once -- 10:24 12 obviously, once it's received, and then the agency 10:24 13 could go forward with the non-extraordinary vehicle. 10:24 14 Now, that doesn't cover the other issues, clearly, 10:24 15 that Mr. Atkins has a concern about. But if you're 10:24 16 looking at just the financial, that -- you get that 10:24 17 part paid, there may be a concern that I'm not aware 10:24 18 of that Mr. Atkins has regarding that. But, you know, 10:24 19 for people that are playing outside the license, or 10:24 20 still continuing to lease to somebody who is not 10:24 21 licensed, or making available equipment that's not 10:24 22 been approved, it wouldn't cover those kinds of 10:25 23 issues. There is that opportunity for a hurry-up 10:25 24 quick hearing within ten days. Unless, of course, the 10:25 25 parties agree, and the Commission would -- you know, 10:25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 76 1 I'm losing the lottery side as the basis for these 10:25 2 comments because that's what we've done for the last 10:25 3 seven years. And I will say that the example that 10:25 4 Mr. Fenoglio raised is the only time that that has 10:25 5 occurred on the lottery side in -- well, I guess we've 10:25 6 been running now since 1992, so I guess it would be 10:25 7 eight years. '93? Oh, yeah. You guys have been 10:25 8 running, sorry, '93, so we'll go on that information, 10:25 9 not start-up. 10 So the -- I guess the first threshold 10:25 11 question is, does the Commission believe that there 10:25 12 are issues that are -- that are of such a nature that 10:25 13 would require an extraordinary remedy or extraordinary 10:25 14 method or process. And if that's the case, the checks 10:26 15 and balance, Commissioner Whitaker, are the fact that 10:26 16 you do have a hearing, you have a show cause hearing. 10:26 17 Now, I guess if the Commission wanted to try to have a 10:26 18 quicker time frame, then we could build that into the 10:26 19 statute. You know, you could do it on three days, 10:26 20 five days. Ten days seemed to be, in looking at the 10:26 21 different provisions, seemed to be, from what I could 10:26 22 tell, the norm. And that may just be because of 10:26 23 process issues, you know, trying to get notice out and 10:26 24 so forth. 10:26 25 Do you have any further questions on 10:26 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 77 1 the summary suspension, and I'll move to the other. 10:26 2 MR. ATKINS: Could I comment real 10:26 3 quickly, Commissioner Whitaker? That is one of the 10:26 4 proposals that's been put forward to us, that in the 10:26 5 event of the -- of a -- a suspension being issued for 10:26 6 a tax or fee, that the organization have the 10:26 7 opportunity to pay that amount and the suspension be 10:26 8 lifted. We could -- you know, we could see something 10:26 9 like that being viable. Our question becomes, what 10:26 10 happens when the organization comes in with the check 10:27 11 that -- to clear that up, that comes back to us 10:27 12 insufficient funds? 10:27 13 COMMISSIONER WHITAKER: You do, I 10:27 14 guess, a certified check or something like that. 10:27 15 MS. KIPLIN: Or summarily suspend again 10:27 16 for failure to -- 10:27 17 COMMISSIONER WHITAKER: Yeah. 10:27 18 CHAIRMAN CLOWE: Okay. 10:27 19 MS. KIPLIN: Moving to the -- the 10:27 20 subpoena authority. You know, from my review, and 10:27 21 what I did was I just went into a word search and put 10:27 22 in the word subpoena to see what popped up on 10:27 23 administrative agencies. And I would say that it is 10:27 24 my sense just from a review of the agencies that 10:27 25 popped up that it appears to be a pretty standard 10:27 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 78 1 investigative tool, not a unique or unusual to 10:27 2 agencies. And it goes all the way from the 10:27 3 Cosmetology Board to the Veterinarians Board, to the 10:27 4 Texas Natural Resources Conservation Commission, to 10:28 5 the Railroad Commission, and so forth. I will also 10:28 6 say that I have -- in the review, I have seen language 10:28 7 where it is a duly appointed representative of the 10:28 8 Commission, and I'm assuming for purposes of this 10:28 9 discussion, the Bingo Division, and one commissioner. 10:28 10 So that language does exist with regard to subpoena 10:28 11 authority granted to other agencies. 10:28 12 In terms of the fact that it needs to 10:28 13 be scrubbed up or scrubbed down, or whatever the 10:28 14 phrase was that I heard characterized, it's actually 10:28 15 more specific than other statutes that I researched, 10:28 16 but it's also not as specific as some -- as a few 10:28 17 statutes. It seems to be the norm language. And 10:28 18 that's one of the reasons that I went for that 10:28 19 language, because it seems to be something that was 10:28 20 acceptable to the legislature when they granted 10:28 21 subpoena authority to other administrative agencies in 10:29 22 the context of an investigative tool. 10:29 23 COMMISSIONER SADBERRY: So that I'm 10:29 24 clear, what I understood your comments to be in 10:29 25 general about this proposed legislation, and what I 10:29 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 79 1 understand you to now say you have compared with other 10:29 2 agencies, you're talking about, "A", an investigative 10:29 3 tool, where the authority would reach to nonlicensed 10:29 4 individuals, where there is not a pending 10:29 5 administrative proceeding with respect to a licensure 10:29 6 issue. So you're talking about the ability to look 10:29 7 see, just for purposes of investigating for the 10:29 8 possibility of administrative action. 10:29 9 MS. KIPLIN: Correct. But I wouldn't 10:29 10 limit it to nonlicensed, because the subpoena 10:29 11 authority as it's drafted is not -- you know, I heard 10:29 12 anecdotally that there was a speaker who mentioned 10:29 13 that there were, you know, several different ways 10:29 14 under the existing Bingo Enabling Act that provided -- 10:29 15 and I heard initially subpoena authority. There is no 10:30 16 subpoena authority that I can find in the Bingo 10:30 17 Enabling Act as it stands. There is the -- kind of 10:30 18 the standard authority with regard to licensees that 10:30 19 they've got to allow you to examine their books and 10:30 20 records. And the question is enforcement. The 10:30 21 enforcement, of course, would be an administrative 10:30 22 process to yank their license for somebody in the -- 10:30 23 within the organization not providing that kind of 10:30 24 access. And there are times where a subpoena 10:30 25 instanter would be appropriate. You know, if you're 10:30 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 80 1 trying to chase down a theft of an organization, when 10:30 2 you went to the bank, you probably would want to get 10:30 3 those records, or so forth, and in the -- the subpoena 10:30 4 authority power, of course, is enforceable in Travis 10:30 5 County, so there is that review. And if we went 10:30 6 forward and the Travis County judge said, you know, I 10:30 7 just -- I don't see it your way. I'm not going to 10:30 8 enforce the subpoena by contempt or otherwise. So 10:30 9 there is -- there is obviously review. If somebody 10:30 10 decides that they don't want to comply with the 10:31 11 subpoena, and I don't necessarily agree with 10:31 12 Mr. Fenoglio that he wouldn't otherwise have a remedy 10:31 13 anyway in terms of going forward and trying to get a 10:31 14 motion to quash filed in some proceeding. 10:31 15 In terms of the question that you have, 10:31 16 Commissioner Sadberry, about administrative process. 10:31 17 This is prior to any sort of -- of notice of hearing 10:31 18 being issued in a contested case, because once there 10:31 19 is an administrative proceeding, a contesting case 10:31 20 proceeding, then the Administrative Procedure Act 10:31 21 provides for appropriate discovery, and also 10:31 22 compelling persons, under the provisions of the 10:31 23 Administrative Procedure Act, their attendance at a 10:31 24 hearing. 10:31 25 COMMISSIONER SADBERRY: Right. Well, 10:31 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 81 1 let's go back, then, to the checks and balances. In 10:31 2 the subpoena -- I mean, similar to what you have 10:31 3 discussed at the summary suspension arena. 10:31 4 Mr. Fenoglio's concern is that somebody in Baytown who 10:31 5 may not have immediate access to legal representation 10:32 6 has the dilemma of compliance versus risking contempt 10:32 7 or other adverse consequences. You say, I think 10:32 8 correctly, that where Mr. Fenoglio received it in his 10:32 9 office in Austin, he can go file a motion to quash and 10:32 10 seek other remedies, where the checks and balances in 10:32 11 the proposed legislation for someone in an otherwise 10:32 12 disadvantaged -- potentially disadvantaged situation. 10:32 13 MS. KIPLIN: I think the subpoena 10:32 14 authority that was drafted, there are a couple of 10:32 15 different approaches, and this one was more general, 10:32 16 doesn't really address that issue in terms of somebody 10:32 17 who says, I'm not going to comply and wanting to go to 10:32 18 court. I do think that there is a remedy that's 10:32 19 available to them to do so. And, you know, my -- when 10:32 20 a constable comes out to serve a subpoena, they're not 10:32 21 going to have the statute with them anyway. There is 10:33 22 going to be a subpoena and they're going to, I would 10:33 23 imagine, contact an attorney about how to comply with 10:33 24 it if they feel as though they don't want to comply. 10:33 25 It's the same as any other subpoena that's served 10:33 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 82 1 anywhere else in the state of Texas. 2 COMMISSIONER SADBERRY: And instanter 10:33 3 versus appear by a certain date, you know they have 10:33 4 different implications and consequences. 10:33 5 MS. KIPLIN: That's right. I agree 10:33 6 with that. 10:33 7 COMMISSIONER SADBERRY: And understand, 10:33 8 we're not drafting legislation. We're cooperating, I 10:33 9 suppose, with the legislature to the extent we are 10:33 10 asked. 10:33 11 MS. KIPLIN: As requested. 10:33 12 COMMISSIONER SADBERRY: As requested. 10:33 13 But this has been brought to us and we, to some 10:33 14 extent, I suppose, could have a legitimate basis for 10:33 15 input in the event the legislature wants to know what 10:33 16 the Commissioners think about it. 10:33 17 MS. KIPLIN: I would say that in going 10:33 18 back to one of my earlier comments, you know, I 10:33 19 patterned the -- when I was requested to draft this, 10:33 20 I -- like I said, I went through, just to refresh, 10:33 21 went through and took a look at a bunch of other 10:33 22 agencies and their authority and patterned this 10:33 23 authority after already existing language for other 10:33 24 agencies. So in terms of the checks and balances, you 10:34 25 know, what happens, I guess, in those situations, I 10:34 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 83 1 have just said, the legislature saw fit to adopt what 10:34 2 they saw fit for those agencies. And my view was, if 10:34 3 it was reasonable for that, then I figured it would be 10:34 4 good language to stick with. 10:34 5 COMMISSIONER SADBERRY: And I wanted to 10:34 6 ask whoever -- Billy, I guess. Is Representative 10:34 7 Goolsby, is he the member of the legislature who is 10:34 8 carrying this proposed legislation or is he just a 10:34 9 resource person with whom you are consulting in this 10:34 10 regard, or what exactly is the situation there? 10:34 11 MR. ATKINS: We -- Mr. Goolsby hasn't 10:34 12 filed anything yet. He has asked to see it. Again, 10:34 13 there was a meeting with Representative Goolsby, 10:34 14 Nelda, myself, and Steve Bresman, in his office, and 10:34 15 Mr. Goolsby's direction to us, again, was to, you 10:35 16 know, address those specific areas and any concerns 10:35 17 and, you know, where we could, come to a -- an 10:35 18 agreement. 10:35 19 COMMISSIONER SADBERRY: I want to 10:35 20 follow up on what -- a question the Chair asked and a 10:35 21 point, I believe, he made. And I'm not asking that 10:35 22 you speculate, which would almost essentially be the 10:35 23 required response. But my question to you is, if you 10:35 24 feel you have -- and the chair of the advisory 10:35 25 committee may also want to weigh in on this. If you 10:35 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 84 1 have specifically gone into those five areas of 10:35 2 concern that there seems to be some discussion on the 10:35 3 legislative level about right now, with the meeting of 10:35 4 the committee yesterday, where there could possibly be 10:35 5 an understanding that this is something that has come 10:36 6 to the attention of the legislature, at least one 10:36 7 member, perhaps more, and you are working with that 10:36 8 member and perhaps others in that regard, so you're 10:36 9 not oblivious to the concern or the basis for the 10:36 10 concern, do you think that perhaps there may have been 10:36 11 a different reaction from the advisory committee in 10:36 12 that regard? I guess my basic question is, do you 10:36 13 think you were clear enough in whatever comments you 10:36 14 did make yesterday in that regard to give them a 10:36 15 chance to react to where you are right now and the 10:36 16 direction you seem to be going? 10:36 17 MR. ATKINS: Well, let me say up front 10:36 18 that as best as I can recall, no, I probably was not 10:36 19 as articulate as I should have been yesterday in 10:36 20 outlining those specific areas that had been 10:36 21 discussed. I say that because I simply can't recall 10:36 22 saying them. I do remember, you know, saying there 10:37 23 were specific points being discussed. Again, I don't 10:37 24 remember enumerating them. My reaction would be based 10:37 25 on previous testimony from the committee is that 10:37 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 85 1 anything outside of a summary suspension for anything 10:37 2 financially related, no, they would not -- they would 10:37 3 not endorse. 10:37 4 COMMISSIONER SADBERRY: And one final 10:37 5 follow-up question for the time being. Mr. Neinast 10:37 6 indicated that we made -- took some action or gave 10:37 7 some direction in the November 2000 meeting. 10:37 8 Listening to all of this, I've tried to recall back 10:37 9 exactly to what was before us and what we did suggest 10:37 10 or do. I remember there being questions raised about, 10:37 11 Billy, whether you were in agreement with the 10:37 12 committee's recommendation and why you had not 10:37 13 requested a broader scope, and I do now recall there 10:38 14 being some suggestion of you having a -- more input 10:38 15 and cooperation with the members of the committee in 10:38 16 going forward. You have probably pulled out, in 10:38 17 anticipation of where I'm going with this, can anybody 10:38 18 put before us what action or what we did do as a 10:38 19 Commission so that we might have that as a basis to 10:38 20 reflect upon in the event we're asked or called upon 10:38 21 to do something consistent with or inconsistent with 10:38 22 that? 10:38 23 COMMISSIONER WHITAKER: You're talking 10:38 24 about late last year? 10:38 25 COMMISSIONER SADBERRY: November of 10:38 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 86 1 2000. 10:38 2 COMMISSIONER WHITAKER: My recollection 10:38 3 was that, Billy, you wanted a broader power than the 10:38 4 advisory committee was, at that point, willing to sign 10:38 5 off on, and that I know I specifically said, I would 10:38 6 like to have as much input from them as possible, and 10:38 7 specifically to address due process and checks and 10:38 8 balances. So it was very much in the context of, I'm 10:38 9 open to entertain the idea, but only if I'm satisfied 10:38 10 that. 10:39 11 COMMISSIONER SADBERRY: Well, that's 10:39 12 what I wanted to get at -- 10:39 13 COMMISSIONER WHITAKER: I thought that 14 was, in fact, a reflection of your view as well. 10:39 15 COMMISSIONER SADBERRY: I thought so. 10:39 16 And that's why I was wondering -- we don't draft 10:39 17 legislation, we can only perhaps address our 10:39 18 perception of policy. And I think those were policy 10:39 19 points that I recall we addressed, giving you, Billy, 10:39 20 what you think you need, but obviously, working with 10:39 21 the industry that you regulate or are you interface 10:39 22 with, and addressing it with the legislature in that 10:39 23 vein. I just wanted it clear what we had done or 10:39 24 suggested in that regard. 10:39 25 MR. ATKINS: And Commissioner 10:39 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 87 1 Whitaker's recollection is practically verbatim. The 10:39 2 question -- 10:39 3 COMMISSIONER WHITAKER: I'm not as old 10:39 4 as I thought I was. 10:39 5 MR. ATKINS: The question to me was, 10:39 6 what do you want? And my response was, you know, I 10:39 7 will happy be with, as a starting point, addressing 10:39 8 the financial matters. And, you know -- and 10:39 9 Commissioner Whitaker is correct. She said, 10:40 10 additional specific matters that the director of the 10:40 11 Bingo Division believes necessary should be 10:40 12 considered, but she wants the question of due process 10:40 13 addressed. 10:40 14 COMMISSIONER WHITAKER: Could I ask -- 10:40 15 COMMISSIONER SADBERRY: Sure. That's 10:40 16 where I was kind of headed. Go ahead, please. 10:40 17 COMMISSIONER WHITAKER: On the fee 10:40 18 issue, which you're saying is kind of the core 10:40 19 concern, payment of fees. Right? 10:40 20 MR. ATKINS: Yes, ma'am. 10:40 21 COMMISSIONER WHITAKER: Would you agree 10:40 22 that's your core concern? 10:40 23 MR. ATKINS: Yes, ma'am. 10:40 24 COMMISSIONER WHITAKER: You today have 10:40 25 the right to ask for the books and records to be 10:40 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 88 1 opened upon request? 10:40 2 MR. ATKINS: Of a licensee. 10:40 3 COMMISSIONER WHITAKER: Okay. So where 10:40 4 you're going, then, is the need for outside of the 10:40 5 licensee context. 10:40 6 MR. ATKINS: Third party, yes, ma'am. 10:40 7 COMMISSIONER WHITAKER: And do you 10:40 8 think you need that subpoena power on an instanter 10:40 9 basis? 10:40 10 MR. ATKINS: I have no idea. 10:40 11 COMMISSIONER WHITAKER: I mean, do you 10:40 12 need it immediately? In other words, there is some 10:40 13 subpoenas that say, produce this in 30 days, there is 10:40 14 others that say, do it right now. Do you need that 10:40 15 right now power, in your opinion? 10:40 16 MR. ATKINS: Yes, ma'am, and I tell you 10:40 17 why. Investigators and auditors have expressed to me 10:40 18 a concern that without that authority, there is the 10:41 19 potential that some documents or records could be 10:41 20 manufactured. 10:41 21 COMMISSIONER WHITAKER: Give me an 10:41 22 example of the nonlicensee where that might be true. 10:41 23 MR. ATKINS: Where the records could be 10:41 24 manufactured? 10:41 25 COMMISSIONER WHITAKER: Yes. 10:41 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 89 1 MR. ATKINS: Or where we would need 10:41 2 them? 10:41 3 COMMISSIONER WHITAKER: Where you would 10:41 4 need them, where they would be manufactured, where you 10:41 5 would have jurisdiction. 10:41 6 MR. ATKINS: Where we would need them 10:41 7 would be in the event of -- if we wanted to reach to 10:41 8 an individual's bank account, if there was a 10:41 9 suspension that funds had been -- bingo funds had been 10:41 10 diverted there instead of to the bingo bank account. 10:41 11 COMMISSIONER SADBERRY: You're going to 10:41 12 have a lot of provisions in the Civil Practices 10:41 13 Remedies Code, as Kim will tell, on that, that's going 10:41 14 to slow you down and give you a process. If that's 10:41 15 the example, I'm telling you, that's out there. 10:41 16 MS. KIPLIN: But without the authority 10:41 17 to begin with. You have to have some -- you have to 10:41 18 lay a foundation in your own organic law. 10:41 19 MR. ATKINS: Another example that I 10:42 20 can't go into a lot of specifics about, could deal 10:42 21 with an organization that was represented to the 10:42 22 agency as performing -- as being a business that was 10:42 23 performing a service to -- to a licensee in 10:42 24 conjunction with their bingo, and our inability to 10:42 25 substantiate that that business in effect existed. 10:42 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 90 1 There is the potential that documents could be created 10:42 2 to make it appear that, in fact, there is a business. 10:42 3 COMMISSIONER WHITAKER: But currently, 10:42 4 if you didn't have this power, you would have the 10:42 5 right to file some kind of action, and within that 10:42 6 context, get documentation. Right, Ms. Kiplin? 10:42 7 MS. KIPLIN: I'm sorry. 10:42 8 COMMISSIONER WHITAKER: Under today's 10:42 9 situation, without this power, if you believed that 10:42 10 and had good faith basis for it, you could still bring 10:42 11 a proceeding, and within that proceeding, seek 10:43 12 discovery? 10:43 13 MS. KIPLIN: But I can't bring a 10:43 14 proceeding unless I, in good faith, think that there 10:43 15 has been a violation that would move towards that kind 10:43 16 of proceeding. I mean, this is -- the -- were we 10:43 17 talking about the subpoena or the -- 10:43 18 COMMISSIONER WHITAKER: Yes. 19 MS. KIPLIN: The subpoena is purely an 10:43 20 investigative tool. This particular legislation is 10:43 21 purely designed for an investigative tool, because if 10:43 22 you're in the proceeding, there is authority already 10:43 23 under the Administrative Procedure Act for that kind 10:43 24 of discovery. 10:43 25 CHAIRMAN CLOWE: Does that answer your 10:43 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 91 1 question? 10:43 2 COMMISSIONER WHITAKER: That answers 10:43 3 the question. It doesn't solve my concerns. 10:43 4 CHAIRMAN CLOWE: You can't go to an 10:43 5 unlicensed individual today? 10:43 6 MS. KIPLIN: Correct. 10:43 7 CHAIRMAN CLOWE: You have no authority. 10:43 8 MS. KIPLIN: Correct. 10:43 9 COMMISSIONER SADBERRY: And you're 10:43 10 saying those statutes give that authority to other 10:43 11 agencies? That's what I was really getting at a 10:43 12 minute ago. It does? 10:43 13 MS. KIPLIN: The way I read it, yeah. 10:43 14 COMMISSIONER SADBERRY: For 10:43 15 investigative purposes? 10:43 16 MS. KIPLIN: Yeah. 10:43 17 COMMISSIONER SADBERRY: And I think the 10:43 18 instanter issue is one that -- I believe, is one that 10:43 19 looms now. And is it instanter or do you know for 10:43 20 these other statutes? 10:43 21 MS. KIPLIN: I can't recall, but I will 10:44 22 say in -- my frame of reference for that is at another 10:44 23 agency where worked, and we would issue subpoenas 10:44 24 depending on the -- you know, the situation, and we 10:44 25 would gauge that, whether it was something that 10:44 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 92 1 required instanter or not instanter. 10:44 2 CHAIRMAN CLOWE: I know Mr. Fenoglio 10:44 3 wants to add a word. 10:44 4 COMMISSIONER WHITAKER: Does he really? 10:44 5 MR. FENOGLIO: I'll pay two minutes and 10:44 6 that'll be it. 10:44 7 MS. KIPLIN: Could I -- before 10:44 8 Mr. Fenoglio jumps in. And I want to put us back on 10:44 9 the summary suspension authority. There is -- and I 10:44 10 may have misspoken. The Comptroller is set up to 10:44 11 where it is ten days and it's pretty much -- it pretty 10:44 12 much tracks the language that we've got. On the TABC 10:44 13 side, Commissioner Whitaker, you had a specific 10:44 14 question about, can you delay the effectiveness of the 10:44 15 suspension? On the TABC side, the suspension takes 10:45 16 effect on the third day after the suspension, the 10:45 17 notice of the suspension is given, so there is already 10:45 18 that kind of foundation. And that's -- on the TABC 10:45 19 side, that's where the suspension is terminated, when 10:45 20 all the returns and tax payments are made. And in 10:45 21 just quickly looking at the difference between the 10:45 22 Comptroller -- and I think I got them jumbled up. The 10:45 23 Comptroller just goes through the -- exactly the same 10:45 24 kind of way. There is a suspension, you get a show 10:45 25 cause hearing or preliminary hearing, ten days, the 10:45 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 93 1 burden is on the permit holder to show why it 10:45 2 shouldn't remain suspended. APA doesn't apply, and 10:45 3 then it goes into the notice part. So just to give 10:45 4 you the difference in the approaches that are -- that 10:45 5 are already in law. That I can tell. 10:45 6 MR. FENOGLIO: The subpoena, if I my, 10:45 7 Commissioners. My name is Steve Fenoglio. The 10:45 8 subpoena drafts that we've seen is instanter. It 10:45 9 applies to anyone, anywhere, and the concern that I 10:45 10 have, and I've never had this problem with this 10:46 11 agency, but I have at a former agency that used to 10:46 12 regulate bingo immediately before this agency. They 10:46 13 would come in with a subpoena, with a gun and a badge. 10:46 14 Here is the list, give them to us now. If you want to 10:46 15 impede the investigation, you're arrested. I mean, 10:46 16 you don't fight that. So, you know, you just throw 10:46 17 out notions of, in my view, fair play and due process. 10:46 18 If there is a concern about bank records, I think, 10:46 19 Commissioner Whitaker, you're absolutely correct. 10:46 20 They're not going to manufacture or fabricate or 10:46 21 destroy documents. Banks don't do that. You know, 10:46 22 again, when we talked yesterday, what's the problem 10:46 23 here. And, you know, bank records are going to be 10:46 24 there for at least five years pursuant to federal law, 10:46 25 probably, most likely, much longer than that. 10:46 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 94 1 MR. ATKINS: Well, and that wasn't the 10:46 2 example that was given. Bank records were the example 10:46 3 of what would be subpoenaed. What would be 10:46 4 manufactured would be records relating to a fictitious 10:46 5 business. 10:47 6 MS. KIPLIN: If I could just respond to 10:47 7 Mr. Fenoglio. In terms of the subpoena, it's silent 10:47 8 to whether it's instanter or not. So it could be 10:47 9 other. It could be either one. 10:47 10 MR. FENOGLIO: It's going to be 10:47 11 whatever the agency wants it to be, the way it's 10:47 12 drafted. 10:47 13 MS. KIPLIN: Yeah. I want to follow up 10:47 14 on that. It is up to the judgment of the person who 10:47 15 is issuing the subpoena. If the concern is the 10:47 16 judgment issue, I think what you heard is a compromise 10:47 17 from Mr. Neinast, and I think others might have 10:47 18 articulated it. I'm not proposing this, I'm just 10:47 19 reminding you of this, is the notion of having the 10:47 20 duly authorized representative and the one 10:47 21 commissioner issuing the subpoena, because then you 10:47 22 have the -- you have that oversight and that judgment. 10:47 23 And like I said, that's not -- that's not really 10:47 24 unusual in the -- the framework, the statutory 10:47 25 framework already in existence for some other 10:47 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 95 1 agencies. 10:47 2 CHAIRMAN CLOWE: Kim, one last thing. 10:47 3 I asked you if you had a legal opinion on the 10:47 4 reduction of the prize fees. 10:48 5 MS. KIPLIN: Oh, I'm sorry. I missed 10:48 6 that. Currently, there is no exemption whatsoever. 10:48 7 So what you're being asked is to create an exemption 10:48 8 and the question is, the amount. It's pure out flat 10:48 9 what is the amount that is in issue, the five versus 10:48 10 the 50 or, frankly, any prize. And I don't really 10:48 11 have any legal opinion as to the amount. The legal -- 10:48 12 my legal opinion is just that without some proposed 10:48 13 legislation, then the agency will continue to be 10:48 14 obligated to collect on any prize. 10:48 15 CHAIRMAN CLOWE: Okay. I want to make 10:48 16 sure that I am clear on where we are in this process. 10:48 17 And it might not be a bad idea to state it so that 10:48 18 there is an understanding on everybody's part. The 10:48 19 Commission approved legislative proposals, which you 10:48 20 put forward, Billy, and Nelda as well, with some 10:48 21 indications on the record, which have been discussed. 10:48 22 And you've had now discussions with elected 10:48 23 representatives relative to the filing of bills that 10:49 24 would achieve these actions. You have now heard from 10:49 25 the bingo advisory committee, and our chairman has 10:49 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 96 1 reported to us on that, and individuals here today 10:49 2 have testified in addition to that, and those 10:49 3 individuals are expressing their concern about their 10:49 4 commercial activities and what this proposed 10:49 5 legislation might be as a negative impact. 10:49 6 Where are we on the timing of these 10:49 7 activities? If you will put that in focus for us, as 10:49 8 to what decisions the Commission should make today 10:49 9 relative to these discussions, and how that's going to 10:49 10 be impactable on the process in the legislature. As 10:49 11 Commissioner Sadberry has said, we don't write the 10:49 12 legislation, we are trying to assist and support the 10:50 13 legislature in what we're asking for that would be 10:50 14 beneficial to this agency. Put that in focus for us, 10:50 15 if you will. And Nelda, you may need to help him. 10:50 16 MR. ATKINS: I was going to ask Nelda 10:50 17 the filing deadline. 10:50 18 MS. TREVINO: Mr. Chairman, the filing 10:50 19 deadline is March the 9th, so we are running up 10:50 20 against a clock. 10:50 21 MR. ATKINS: Which means that we have 10:50 22 to have a bill filed by then. And generally, before 10:50 23 members file legislation, they like to have it -- they 10:50 24 actually like to have a draft prepared by legislative 10:50 25 counsel, reviewed by their attorneys and drafted by 10:50 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 97 1 their attorneys, so any draft that we have given them, 10:50 2 they have since forwarded to legislative counsel. So 10:50 3 that's where we are. 10:50 4 CHAIRMAN CLOWE: Good. 10:50 5 MR. ATKINS: We -- I guess if -- if we 10:50 6 are asking for -- I don't know that staff is asking 10:50 7 for anything. It may be what the advisory committee 10:51 8 is asking for is direction from the Commission to 10:51 9 staff either not to pursue either of these proposals 10:51 10 or to, you know, place some very specific constraints 10:51 11 in the proposals. I think it's probably one of those 10:51 12 two things that they're asking. 10:51 13 CHAIRMAN CLOWE: Yeah. That's -- let 10:51 14 me tell you what I think they're asking. I think 10:51 15 they're asking for not having suspension power with 10:51 16 the exception of financial issues, not having subpoena 10:51 17 power, and they're asking for prize fee reductions on 10:51 18 prizes under 50 dollars. 10:51 19 MR. ATKINS: Uh-huh. 10:51 20 CHAIRMAN CLOWE: Did I hear you right? 10:51 21 MR. NEINAST: Are you talking to me? 10:51 22 CHAIRMAN CLOWE: Yes, sir. 10:51 23 MR. NEINAST: On the subpoena power, 10:51 24 no, we do not oppose that. 10:51 25 CHAIRMAN CLOWE: Okay. There was a 10:51 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 98 1 witness who said that, but you're not part of the 10:51 2 advisory committee. Thank you for clarifying that. 10:51 3 MR. NEINAST: No. The only 10:52 4 suggestion -- 10:52 5 CHAIRMAN CLOWE: No position on that. 10:52 6 MR. NEINAST: We're not opposed to it. 10:52 7 The only suggestion is the one that I made that Kim 10:52 8 picked up on is possibly building in a safeguard of 10:52 9 having it go through one of the Commissioners. 10:52 10 CHAIRMAN CLOWE: Okay. Thank you. 10:52 11 That clarified that. 10:52 12 Is that on the record, did you get 10:52 13 that? 10:52 14 THE REPORTER: Yes, sir. 15 CHAIRMAN CLOWE: We had one witness who 10:52 16 testified against the issue of subpoena power. 10:52 17 COMMISSIONER SADBERRY: And Mr. 10:52 18 Chairman, on that, I think it was cleared up, and I 10:52 19 knew it, but I think it would be helpful if the record 10:52 20 is clear, that the example used by that witness was 10:52 21 not one where an incident occurred under the auspices 10:52 22 of this particular agency after it, by statute, 10:52 23 assumed the regulation of bingo in Texas. 10:52 24 CHAIRMAN CLOWE: Very good. Is there 10:52 25 any other comment? 10:52 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 99 1 MR. FENOGLIO: The only other one that 10:53 2 we didn't talk about, going back to Ms. Whitaker's 10:53 3 comments about the due process on the summary 10:53 4 suspension. You do already have authority to engage 10:53 5 in suspension authority. The Commission has never 10:53 6 adopted or even proposed rules under that, under 10:53 7 2001.355 and 35 -- I'm sorry. Yes, 355 and 356. It's 10:53 8 arguably arcane because of some specific language 10:53 9 about the health, safety and welfare. But the notion 10:53 10 is a good one, and it goes to your concern, 10:53 11 Ms. Whitaker, if you're going to have it, what's wrong 10:53 12 with the notice first, a real, real short period of 10:53 13 time to have the hearing, and at the hearing, the 10:53 14 burden of proof is on the licensee to prove they 10:53 15 didn't. And that's what the legislature did earlier. 10:53 16 I think they kind of muddled it because of this 10:53 17 health, safety and morals, whatever that means. The 10:53 18 Commission has never tried to identify what that means 10:53 19 and that would be a lengthy rule-making proceeding. 10:53 20 But there is already a framework, but the framework 10:54 21 is, you know, you give someone some notice and you've 10:54 22 got a short period of time, ten days. The notion of a 10:54 23 three-day hearing that Ms. Kiplin proposed to you or 10:54 24 discussed with you, the problem with that is, you send 10:54 25 a certified mail letter from Austin, Texas to Midland, 10:54 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 100 1 Texas, it's going to be the third day, most likely, 10:54 2 that it'll get there, and that's not any sort of a 10:54 3 notice. I mean, if you're going to do it, expand it 10:54 4 more than what I think there is unanimity of agreement 10:54 5 for. Make it the other way so that before that 10:54 6 license is destroyed, that they have an opportunity to 10:54 7 have their say and not, your -- your license is taken, 10:54 8 the business could be destroyed, and then you've got 10:54 9 this hearing within ten days. 10:54 10 COMMISSIONER WHITAKER: What are you 10:54 11 thinking, Kim? 10:54 12 MS. KIPLIN: Yeah, I agree with 10:54 13 Mr. Fenoglio's arcane legislation. It's not summary 10:54 14 suspension authority. It's characterized as temporary 10:54 15 suspension, it doesn't -- it does not summarily 10:54 16 suspend a license until there is a hearing, and then 10:55 17 at some point after that, there is an order issued. 10:55 18 So it does not achieve the -- the goals and the 10:55 19 concerns, and it does not address the concerns that 10:55 20 you heard today. 10:55 21 COMMISSIONER WHITAKER: Okay. So let 10:55 22 me suggest and have your reaction. What if there were 10:55 23 a requirement for ten days notice before the summary 10:55 24 suspension kicked in, number one; and number two, that 10:55 25 the concept of "necessary" include both the concepts 10:55 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 101 1 of importance and urgency, which I think it does 10:55 2 anyway. How about that? 10:55 3 MS. KIPLIN: Well, to take the latter, 10:55 4 because I agree, I think it does anyway. I think the 10:55 5 necessary findings to even trigger a summary 10:55 6 suspension will incorporate that. I think the ten 10:55 7 days cuts against the fact that it's an emergency. 10:55 8 It's too long. I haven't seen that in the existing 10:55 9 language. I have, like I said, seen the three days, 10:55 10 where it's effective three days after it's been served 10:55 11 on somebody. And I don't think that's too long, but 10:55 12 if it's the kind of -- if it's the kind of conduct 10:56 13 that's so egregious that it would require an 10:56 14 extraordinary approach anyway, I think ten days is too 10:56 15 long. 10:56 16 MR. FENOGLIO: Thank you, 10:56 17 Commissioners. 10:56 18 COMMISSIONER SADBERRY: Billy, am I 10:56 19 right that financial addressed by the chair of the 10:56 20 advisory committee is one of the five things you have 10:56 21 discussed with Representative Goolsby? 10:56 22 MR. ATKINS: Yes, sir. 10:56 23 COMMISSIONER SADBERRY: And would the 10:56 24 other four fall even arguably within a reasonable 10:56 25 definition of financial or are they just something 10:56 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 102 1 else altogether? 10:56 2 MR. ATKINS: I think they're something 10:56 3 else altogether. 10:56 4 COMMISSIONER WHITAKER: They're listed 10:56 5 in the second page of this letter. 10:56 6 CHAIRMAN CLOWE: The failure to pay is 10:56 7 the only real financial item. 10:56 8 MS. KIPLIN: Well, and the -- 10:56 9 MR. ATKINS: The failure to pay and the 10:56 10 failure to file. Because, again, the return is what's 10:56 11 used to substantiate the payment. 10:56 12 CHAIRMAN CLOWE: There are actually two 10:56 13 out of the five. 10:57 14 MR. ATKINS: Yes, sir. 10:57 15 COMMISSIONER WHITAKER: Well, my 10:57 16 sense -- are we giving our comments at this point? 10:57 17 CHAIRMAN CLOWE: I wanted to give 10:57 18 everybody time to gather their thoughts, and I think 10:57 19 you correctly pointed our attention to the next to 10:57 20 last paragraph on the second page of the letter that 10:57 21 Mr. Fenoglio gave us. That's a good list. And at any 10:57 22 time anyone is ready to reach a conclusion or make a 10:57 23 motion, it would be time. 10:57 24 COMMISSIONER WHITAKER: Do we want to 10:57 25 make a motion or do we want to give our comments so 10:57 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 103 1 that they can be folded in? Because it's the specific 10:57 2 language -- you know, we can't give you specific 10:57 3 language without actually sitting down and studying. 10:57 4 MS. KIPLIN: My sense is that the staff 10:57 5 needs a motion and an action and direction on at least 10:58 6 what your concepts are. I think the language will 10:58 7 follow what your concepts are. And if there is any -- 10:58 8 if there is any confusion, then I wouldn't hesitate to 10:58 9 try to talk with each one of you individually, of 10:58 10 course, to see if it satisfied what your individual 10:58 11 concerns were. 10:58 12 CHAIRMAN CLOWE: And I also would like 10:58 13 a motion, because I want the Commission to come down 10:58 14 on this issue so that the public can know where we 10:58 15 stand. I don't want to be evasive on this. I think 10:58 16 the public has come to us and they have spoken. Not a 10:58 17 great number of the licensed operators, but they have, 10:58 18 and I think the Commission ought to take a position, 10:58 19 if we can, at this time. 10:58 20 MS. KIPLIN: I will say, neither 10:58 21 Mr. Atkins nor I have a copy of what has been provided 10:58 22 you, so I didn't know if there was any language in 10:58 23 there or... 10:58 24 COMMISSIONER SADBERRY: Well, I'll have 10:58 25 to say, then, and I appreciate Commissioner Whitaker 10:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 104 1 pointing that out, I did read this letter, but I guess 10:58 2 I didn't appreciate that these were the same five 10:59 3 things. Are they, Billy, the same five things -- 10:59 4 MR. ATKINS: I don't know, Commissioner 5 Sadberry -- 10:59 6 MS. KIPLIN: We don't have a copy of 10:59 7 the letter. 8 MR. ATKINS: We haven't been provided 10:59 9 that letter. 10:59 10 COMMISSIONER SADBERRY: It says, in a 11 footnote, draft legislation from staff, provided 10:59 12 February 13th, 2001, which is to suggest that maybe 10:59 13 there was a fuller disclosure yesterday than perhaps I 10:59 14 appreciated from the staff's perspective on what it's 10:59 15 considering working with on this -- so something must 10:59 16 have been provided to Mr. Truman yesterday from which 10:59 17 he could draft this letter. 10:59 18 MS. KIPLIN: As far as I can tell, it 10:59 19 is the same language. Mr. Fenoglio just provided us a 10:59 20 copy of his -- 10:59 21 MR. FENOGLIO: It is identical to the 10:59 22 draft that was provided Tuesday. 10:59 23 CHAIRMAN CLOWE: Billy, have you seen a 10:59 24 copy of it yet? 10:59 25 Could we take the time for you to look 10:59 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 105 1 at it, and could you verify that when you're ready? 10:59 2 COMMISSIONER SADBERRY: While he's 3 doing that, Mr. Chairman, it seems to me, so that -- 11:00 4 my comments about Mr. Truman's letter are clear. I'm 11:00 5 not saying Mr. Truman is in agreement with that. In 11:00 6 fact, in reading the language in context of this 11:00 7 paragraph, it seems like he is in disagreement with 11:00 8 it. But at least it identifies that he is aware of 11:00 9 what staff is considering. 11:00 10 MR. ATKINS: The items enumerated do 11:00 11 appear to be correct, Commissioners. But I take 11:00 12 exception that all of this occurs without notice or 11:00 13 hearing. I do think the draft legislation -- the 11:00 14 draft legislation does provide for both notice to the 11:00 15 organization as well as a -- a hearing to be -- 11:00 16 COMMISSIONER WHITAKER: And what notice 11:01 17 does it require? The serving of the order? 11:01 18 MR. ATKINS: Yes. 11:01 19 COMMISSIONER WHITAKER: Okay. 11:01 20 COMMISSIONER SADBERRY: I think he's 11:01 21 talking about prior notice. 11:01 22 COMMISSIONER WHITAKER: Let me give you 11:01 23 my thoughts and then we can see if you agree, and if 11:01 24 you don't, we can -- on the temporary suspension, it 11:01 25 is an emergency proceeding and therefore "necessary" 11:01 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 106 1 does include the concept of importance and urgency. 11:01 2 But I do like the notice of prior -- the idea of prior 11:01 3 notice, if it can be given without -- you know, if it 11:01 4 can be reasonably given. In other words, there will 11:01 5 always be probably extraordinary circumstances where 11:01 6 it just can't be given. But I like the notice, prior 11:01 7 notice if possible. I also like the idea of fixing it 11:01 8 like that three days after you get suspended, if you 11:01 9 come up with the money, or whatever that is that the 11:01 10 Comptroller has. I like that notion of immediately 11:01 11 being able to repair it and have your license back, if 11:01 12 possible. That would work, it seems, for the 11:01 13 financial part. I don't know how it would work for 11:01 14 the other parts of this. So that's my thought on 11:02 15 temporary suspension. 11:02 16 On subpoena, I am concerned that it 11:02 17 would be -- it sounds very broad. Instanter bothers 11:02 18 me, unless it were very clearly understood that that's 11:02 19 an extraordinary remedy to be exercised only when 11:02 20 notice cannot otherwise be given and under 11:02 21 circumstances that are urgent and important. I would 11:02 22 also feel much more comfortable with subpoena power 11:02 23 if -- if notice were given, and even then, it was only 11:02 24 exercised under circumstances of -- of at least -- 11:02 25 probably urgency and importance, because there are 11:02 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 107 1 processes out there where you can get documents 11:02 2 quickly. And what we're talking about is something 11:02 3 that doesn't go through that process, that is outside 11:02 4 of that process, that is required because of 11:02 5 extraordinary needs of the Commission. And if that's 11:02 6 true, then I would like that articulated. 11:02 7 COMMISSIONER SADBERRY: And 11:02 8 Commissioner Whitaker, I understand, and we haven't 11:02 9 even agreed about how to pronounce it as -- not the 11:03 10 least to say, how it should apply. Let me give you my 11:03 11 take on it. I believe and what I sense is that bingo 11:03 12 has come a long way, through a history that it as an 11:03 13 industry is quite familiar with and has lived with, 11:03 14 that I believe bingo is saying generally, they feel is 11:03 15 behind them. And that the Lottery Commission has 11:03 16 presented them through trial and error, if you will, 11:03 17 through experience, the opportunity to have a feeling 11:03 18 of good faith that perhaps didn't exist in their 11:03 19 history of being regulated by various agencies, and 11:03 20 just the fact of being moved around quite a bit. And 11:03 21 even after coming to the Lottery Commission, there 11:03 22 have been observations, studies, legislation, and 11:03 23 other things regarding moving bingo from the Lottery 11:03 24 Commission. And I believe, in spite of all that, and 11:04 25 now, in fact, I think because of all that, bingo is 11:04 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 108 1 comfortable that there is a good regulatory 11:04 2 relationship that is fairly and even-handedly applied. 11:04 3 But when you have history, which is not 11:04 4 too distant in your life, you have a hard time 11:04 5 forgetting it, and the concern is to go carefully and 11:04 6 slowly as we bring bingo in parity with perhaps 11:04 7 lottery in terms of administrative authority and the 11:04 8 enforcement of that authority. And would I agree with 11:04 9 whoever said it, and I think several people said it, 11:04 10 we can't, in any of our actions, take specific staff 11:04 11 configuration as the standard. It has to be something 11:04 12 that stands alone, that is, whoever is in the chair of 11:04 13 the bingo division, a director, would be bound to 11:05 14 apply. Which means whatever occurs, I think the 11:05 15 satisfaction to the bingo industry would be that there 11:05 16 are specific checks and balances written into whatever 11:05 17 comes out of the process that gives the assurance of 11:05 18 the even-handed application, and not recurrence of 11:05 19 perhaps earlier experiences of the lack of that, at 11:05 20 least from the perception of the industry. But at the 11:05 21 same time, this is where I come down perhaps, Billy, 11:05 22 from where you are, gives the division the realistic 11:05 23 authority to have emergency procedures available in 11:05 24 the -- to be used in the right circumstances, with 11:05 25 checks and balances, whether that includes 11:05 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 109 1 commissioner oversight or not, to assure responsible 11:05 2 handling of those procedures. That they will not be 11:06 3 used arbitrarily or unfairly to hurt the public. And 11:06 4 that has to be our concern as Commissioners, I 11:06 5 believe, in reaching our sense of what is reasonable 11:06 6 and balanced. Is it broken? It doesn't sound like 11:06 7 it, but should it be fixed? If it is an appropriate 11:06 8 power and authority to have, then I guess the argument 11:06 9 is, why not have it. Is there reason to not have it, 11:06 10 and are we remiss if we don't recommend it being 11:06 11 provided, if it is consistent with what other agencies 11:06 12 have in terms of regulatory authority. Now, that's 11:06 13 where I see it coming down. And I agree with the 11:06 14 Chairman. I am prepared to come down where we as 11:06 15 Commissioners should on this issue whenever that's an 11:06 16 appropriate time. I'm not sure we're there yet, but I 11:06 17 think that's -- 11:06 18 CHAIRMAN CLOWE: Let me try to help us 11:06 19 on that. I'll put myself up as the straw man. 11:07 20 I want to thank the chairman of the 11:07 21 bingo advisory committee for conducting his meeting 11:07 22 yesterday and giving us a report today and the 11:07 23 individuals who have appeared here today. This is the 11:07 24 information that I think the Commission asked for and 11:07 25 needs, and we're going to attempt to do the right 11:07 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 110 1 thing as we have listened to you all and to the staff, 11:07 2 and to the general counsel. And my sense -- I want to 11:07 3 keep this in the context of a discussion and not a 11:07 4 motion at this time. My sense is that I would be in 11:07 5 favor of asking the legislature to favorably consider 11:07 6 suspension powers for the director as it relates to 11:07 7 the issue of a licensee failing to file a report and 11:07 8 return or make -- or return or make a fee and tax 11:07 9 payment required by this chapter. That may not be 11:07 10 exactly the correct wording, but it is financially 11:07 11 related. 11:08 12 I would also be in favor in my mind, at 11:08 13 this point in time, in asking the legislature to give 11:08 14 the Bingo Division subpoena power with the proper 11:08 15 wording to make an emergency in a sense. I would not 11:08 16 be favor of asking the legislature to have any 11:08 17 reduction in the prize fees as they are now 11:08 18 constituted. That's where I am on my mind. 11:08 19 COMMISSIONER WHITAKER: Let me ask you 11:08 20 this, Mr. Chairman. On the notion of, if somebody's 11:08 21 license is suspended, but they come in with the 11:08 22 payment or the report, would you be in favor of them 11:08 23 having their license back? 11:08 24 CHAIRMAN CLOWE: Immediately. 11:08 25 COMMISSIONER WHITAKER: Okay. And then WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 111 1 the second thing is, on the reduction of the prize 11:08 2 fee, the five dollars and under, do you think that's 11:08 3 important from an administrative point of view? In 11:08 4 other words, is it workable to have a collection 11:08 5 effort of under five dollars? Is that, as a practical 11:08 6 matter, a workable thing? 11:08 7 MR. ATKINS: We do it now. It's time 11:08 8 consuming for the auditors and it's -- it's difficult 11:09 9 for the organizations to comply with, and it's not 11:09 10 marketable. So we're doing it now. We just think it 11:09 11 would be easier for everybody all the way around if we 11:09 12 didn't have to. 11:09 13 CHAIRMAN CLOWE: Does it cost more than 11:09 14 800,000 a year to do it? 11:09 15 MR. ATKINS: Actually, Mr. Chairman, 11:09 16 and I apologize for not bringing this up earlier, but 11:09 17 there was some really good conversation yesterday in 11:09 18 the bingo advisory committee that there is a feeling 11:09 19 in the industry, which I concur with, that by 11:09 20 reducing -- by eliminating that prize fee, there is 11:09 21 the potential to actually generate some additional 11:09 22 sales. 11:09 23 CHAIRMAN CLOWE: I heard that. 11:09 24 MR. ATKINS: And so I'm not saying that 11:09 25 it could cover that reduction completely, but it may 11:09 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 112 1 not be as much as the -- as the flat amount that we 11:09 2 can identify. 11:09 3 COMMISSIONER WHITAKER: At the five or 11:09 4 the 50 dollar level? 11:10 5 MR. ATKINS: At the five. 11:10 6 CHAIRMAN CLOWE: Can you justify that 11:10 7 to a legislator? I understand what you're saying. I 11:10 8 understand what the industry is saying. But I'm also 11:10 9 thinking about the revenue to the State, and how do 11:10 10 you justify that to a legislative body and say to 11:10 11 them, give up this 800,000 dollars, because the 11:10 12 industry would like it and we would like it. What is 11:10 13 your -- what is your answer? And if you don't have 11:10 14 one, Bill -- 11:10 15 MR. ATKINS: Well, our answer so far 11:10 16 would be two-fold. One, we believe it is -- it is 11:10 17 easier for the organizations and for us, we think that 11:10 18 it's more equitable. We think that by eliminating 11:10 19 that, we could realize increased sales, which could 11:10 20 result in a reduction of that lost revenue. And we 11:10 21 also believe that we will realize to some degree, 11:10 22 we're not able to quantify how much unfortunately, but 11:10 23 a savings in the terms of time spent on audits, 11:11 24 because the auditors won't be having to spend all that 11:11 25 time searching for those funds, so the audits will be 11:11 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 113 1 conducted in a more timely fashion. Being able to 11:11 2 conduct in a more timely fashion could lead to 11:11 3 additional audits being able to be performed. Those 11:11 4 additional audits could result in the identification 11:11 5 of additional revenue. 11:11 6 CHAIRMAN CLOWE: And you -- you think 11:11 7 it's reasonable to put forth the idea that sales would 11:11 8 be increased because people wouldn't have to fool with 11:11 9 that nickel out of every dollar? You really think 11:11 10 that's viable? 11:11 11 MR. ATKINS: Sure, yeah, I really do. 11:11 12 Because, I mean, if you stop and think about it, if 11:11 13 you win a one-dollar pull tab, what you want to do is 11:11 14 you want to exchange that for another pull tab. So, 11:11 15 in essence, what you have to do is you have to 11:11 16 exchange that pull tab and a nickel. 11:11 17 CHAIRMAN CLOWE: Okay. You see, Nelda, 11:11 18 the issue is whether -- I think that's got to be sold. 11:11 19 If you're asking the State to give up 800,000 dollars 11:11 20 of revenue, you have to make those two points 11:11 21 forcefully and say they offset the loss of revenue. 11:12 22 And the revenue comes back to the State if there are 11:12 23 more sales, and the audit staff is more productive, 11:12 24 and the expense is not necessarily reduced, but it's 11:12 25 more result driven. Are you -- are you liking what 11:12 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 114 1 you're hearing? 11:12 2 COMMISSIONER SADBERRY: Her face 11:12 3 doesn't suggest it, Mr. Chairman. 11:12 4 CHAIRMAN CLOWE: I don't want to get 11:12 5 off a dead horse. 11:12 6 MS. TREVINO: I think, realistically, 11:12 7 anything with a negative fiscal impact is always a 11:12 8 hard sell. And as Billy stated, you know, earlier, it 11:12 9 would be a hard sell because of the negative fiscal 11:12 10 impact that it would have. I think there are some -- 11:12 11 some compelling arguments that we could certainly 11:12 12 articulate. I'm not going to sit here and say it's a 11:12 13 guarantee that it would fly with members of the 11:12 14 legislature, but in talking to Representative Art 11:13 15 Reyna, who is the member that we spoke to about 11:13 16 carrying this piece of legislation, and he has -- he 11:13 17 personally has been involved in bingo operations, he 11:13 18 certainly understood the -- the need to eliminate that 11:13 19 prize fee, particularly for those smaller prizes. So 11:13 20 it might be helpful also that the bill sponsor 11:13 21 understands it from -- from an operational end. 11:13 22 COMMISSIONER SADBERRY: I don't want to 11:13 23 put you on the spot, Nelda, but I was trying to 11:13 24 recall -- do you recall, or Kim, anyone else, whether 11:13 25 the interim Senate Finance study committee had any 11:13 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 115 1 recommendations on the prize fee? 11:13 2 MR. ATKINS: I don't recall that they 11:13 3 did. 11:13 4 MS. TREVINO: Commissioner Sadberry, I 11:13 5 don't recall whether they did or not. And we can 11:13 6 certainly take a look. 11:13 7 MR. ATKINS: I know it was discussed. 11:13 8 COMMISSIONER SADBERRY: I know it was 11:13 9 discussed. 11:13 10 MR. ATKINS: I can't remember if there 11:13 11 was ultimately a recommendation. 11:14 12 COMMISSIONER SADBERRY: I thought there 11:14 13 may have been something at some drafting stage, but 11:14 14 did not get in the final report. 11:14 15 MR. ATKINS: I remember at one time 11:14 16 there was a discussion of eliminating the prize fee on 11:14 17 an amount of 250 dollars or less, and that fiscal note 11:14 18 came back -- I think that's when the discussion 11:14 19 stopped. 11:14 20 COMMISSIONER SADBERRY: I believe that 11:14 21 you're correct. I tend to, in the discussion format, 11:14 22 go back where the Chairman was originally placed on 11:14 23 this prize fee issue. I even think -- it may not have 11:14 24 been Bill, but somebody said in their presentation 11:14 25 this morning that there seemed to be a slim chance, I 11:14 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 116 1 believe words to that effect, of it getting favorable 11:14 2 attention from the legislature. I tend to believe 11:14 3 Nelda is on point to say, any negative fiscal note is 11:14 4 a large amount and decline to explain it, and justify 11:14 5 it, and hope you keep the attention span of those 11:14 6 listening long enough to do so. If you have other 11:14 7 priorities that seem to have a compelling nature to 11:14 8 them, and this one seems to be least compelling, at 11:15 9 this time to the legislature, given the fiscal 11:15 10 situation in the State of Texas now, budgetary issues, 11:15 11 to lead with that would, to me, seem to mire yourself 11:15 12 down from the start, make it somewhat difficult to go 11:15 13 forward with your legislative package. Now, that's 11:15 14 just -- whether it's a good idea or not, that just 11:15 15 seems to me to be being practical and realistic about 11:15 16 the process at this time. 11:15 17 COMMISSIONER WHITAKER: How strongly 11:15 18 are the feelings about this? Let me ask you that, 11:15 19 Mr. Neinast. 11:15 20 MR. NEINAST: Really not that strong, 11:15 21 and we certainly agree with Nelda and with 11:15 22 Commissioner Sadberry, the chances of it getting 11:15 23 through this year are nil or zero. The thought was, 11:15 24 get it in there, get what the feeling is, and possibly 11:15 25 lay the groundwork for upcoming sessions or future 11:15 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 117 1 sessions. One thing that has not been mentioned, and 11:16 2 I think it is an argument that could be made in favor 11:16 3 of it, is fairness. Billy mentioned the one-dollar 11:16 4 pull tab and you have to get five cents back. If you 11:16 5 go into a -- a lottery sales and buy a one-dollar 11:16 6 scratch off, and I don't want to raise this with you, 11:16 7 whether it's a one-dollar ticket, whether you won or 11:16 8 lose or not, but you don't pay -- 11:16 9 COMMISSIONER WHITAKER: We settled 11:16 10 that. 11:16 11 MR. NEINAST: But you don't pay -- but 11:16 12 nonetheless, you do not pay a tax on that dollar 11:16 13 return. And so there is a -- a little element of 11:16 14 fairness involved. Lottery, you don't pay the sales 11:16 15 tax, you do pay income tax if it gets higher, on 11:16 16 scratch off, you do. 11:16 17 COMMISSIONER WHITAKER: Nelda, if we 11:16 18 were to approach the legislature more from a -- this 11:16 19 is an idea we would like to start thinking about, 11:16 20 float around for discussion, what impact does that 11:16 21 have, in your opinion? 11:16 22 MS. TREVINO: I think -- I would think 11:17 23 that probably the only way for the legislature to take 11:17 24 it up for discussion would be that it's included in 11:17 25 the bill. So that if it is granted a committee 11:17 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 118 1 hearing, that there is an allowance for some testimony 11:17 2 there. You know, if it's not a provision in the bill, 11:17 3 the likelihood is that it would not be discussed. We 11:17 4 would certainly have informal discussions with 11:17 5 members, but for there to be some public discussion 11:17 6 about it, it would have to be language in a bill. 11:17 7 Well, and I say that. I mean, if it's -- if it's not 11:17 8 in the bill, it could be that somebody in public 11:17 9 testimony could potentially raise it. 11:17 10 MR. ATKINS: And just to follow up, you 11:17 11 know, Commissioners, we'll make those arguments as 11:17 12 eloquently as we can. You know, we think the best 11:17 13 testimony would come from the organizations themselves 11:17 14 that are affected by this. And we would hope that if 11:18 15 this -- this proposal does move forward that they'll 11:18 16 articulate from their personal experience the effect 11:18 17 of this. 11:18 18 COMMISSIONER WHITAKER: Well, that's my 11:18 19 sense is that if somebody else were to sponsor it and 11:18 20 then we could give, you know, our views on it, which 11:18 21 are not hostile to it subject to, you know, obviously 11:18 22 the fiscal part of it, but it seems to me there are 11:18 23 two sides to the coin, there is a lot of things to 11:18 24 balance, and there could be some fruitful discussion 11:18 25 about that. 11:18 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 119 1 MS. TREVINO: Another point maybe to 11:18 2 make is, while there is a negative fiscal impact on 11:18 3 the reduction of the -- or the elimination of the 11:18 4 prize fee on these prizes of five dollars and less, 11:18 5 there is a positive fiscal impact on the piece of 11:18 6 legislation regarding progressive games. So that 11:18 7 might be another way of offsetting some of those 11:18 8 dollars. 11:18 9 CHAIRMAN CLOWE: Okay. Thank you, 11:19 10 Nelda. Thank you, Bill. Billy. 11:19 11 MS. KIPLIN: Could I get a little more 11:19 12 clarification on the subpoena power? I heard, 11:19 13 Commissioner Clowe, you articulate an emergency, and 11:19 14 I'm trying to get a little bit more specific direction 11:19 15 on that. 11:19 16 CHAIRMAN CLOWE: I would like to ask 11:19 17 Commissioner Whitaker to help on that. I think she 11:19 18 has the best sense of that, much better than I have. 11:19 19 Would you -- 11:19 20 COMMISSIONER WHITAKER: On the record? 11:19 21 Okay. I see it as two levels. One is, I don't -- the 11:19 22 instanter subpoena, I think that the -- we have to put 11:19 23 in checks and balances language that stress the 11:19 24 urgency, that it be an extraordinary circumstance 11:19 25 where the urgency and importance of the matter 11:19 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 120 1 requires that extraordinary measure. 11:19 2 Secondly, as to other subpoenas that 11:19 3 require or give notice and time to comply, I would 11:19 4 also include, however, the notion that it is in fact 11:19 5 an extraordinary remedy and needs to be narrowly 11:19 6 drawn. 11:19 7 COMMISSIONER SADBERRY: Mr. Chairman, 11:19 8 I'm not sure how Commissioner Whitaker might react to 11:20 9 this. I tend to favor the notion, particularly on the 11:20 10 instanter subpoena, of at least one commissioner, and 11:20 11 I think it should be, if that is in the bill, any 11:20 12 commissioner, not a specific, like the bingo 11:20 13 representative commissioner. At least one 11:20 14 commissioner, whatever the right phraseology is, 11:20 15 advice and consent accompany that. I think I'm in 11:20 16 concurrence with the potential seriousness of an 11:20 17 instanter subpoena. We have them in the civil 11:20 18 litigation context. Usually that doesn't come as a 11:20 19 great surprise to the person or entity being addressed 11:20 20 because it's been discussed in the litigation to some 11:20 21 extent. They kind of anticipate it coming. A third 11:20 22 person or entity totally unrelated to the particular 11:20 23 licensee, or maybe not unrelated, but not the 11:20 24 licensee, receiving a document that says, you must 11:20 25 immediately comply and produce certain records, not 11:21 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 121 1 necessarily knowing options that might be available, I 11:21 2 can see instances where that would be appropriate. 11:21 3 But I think whoever -- whatever the word was, whatever 11:21 4 we are, we are here, I think, to be responsible to the 11:21 5 state leadership from the Governor's office down, and 11:21 6 I think that's a -- a function that we should take on 11:21 7 in this instance, that if you're going to do that, you 11:21 8 know, if we're going to authorize staff to do that, 11:21 9 that one of us weighs in on the process. To me, that 11:21 10 adds some -- hopefully, some degree of checks and 11:21 11 balances beyond just the raw, if you will, power, even 11:21 12 with all the language, it still has to be reviewed by 11:21 13 some officer someday to see if those circumstances, 11:21 14 those exigent circumstances actually existed. And I 11:21 15 think if a commissioner has been brought in, that's 11:21 16 going to require a deliberative process and ensure 11:21 17 some degree of fairness and justification for the 11:22 18 emergency nature of it. 11:22 19 COMMISSIONER WHITAKER: I would also 11:22 20 add, having responded to many document requests in my 11:22 21 day, that they're always too broad for my tastes. 11:22 22 So -- unless I'm sending them out. No. 11:22 23 COMMISSIONER SADBERRY: Of course. 11:22 24 Make that distinction. 11:22 25 COMMISSIONER WHITAKER: I don't know if 11:22 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 122 1 we need this in the statute, but I do want it to be 11:22 2 narrowly drawn. That's part of what it means by 11:22 3 extraordinary. 11:22 4 COMMISSIONER SADBERRY: I agree with 11:22 5 that. 11:22 6 CHAIRMAN CLOWE: So moved. Is there a 11:22 7 second? 11:22 8 COMMISSIONER SADBERRY: I second. 11:22 9 CHAIRMAN CLOWE: The motion has been 11:22 10 made and seconded. All in a favor say aye. Opposed 11:22 11 no. 11:22 12 The vote is three-zero in favor. 11:22 13 Have you noticed how we were whipping 11:22 14 along there until Commissioner Whitaker came? 11:22 15 COMMISSIONER SADBERRY: We were out of 16 here the last committee at 9:30 or 10:00 o'clock at 17 the latest. 18 COMMISSIONER WHITAKER: Traffic slows 11:22 19 down. 11:22 20 CHAIRMAN CLOWE: No, it's when you got 11:22 21 here -- I'm just kidding. Thank you. 11:22 22 We're now going to return to item six, 11:23 23 the report, possible discussion and/or action on the 11:23 24 agency's internal audits, including the audit of the 11:23 25 instant game plans. 11:23 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 123 1 Debra, are you ready to go forward now? 11:23 2 MS. McLEOD: Yes, sir. Good morning, 11:23 3 Commissioners. Thank you very much for passing on 11:23 4 this until Commissioner Whitaker arrived. We have had 11:23 5 several discussions through the week about the 11:23 6 different game levels, and I know it's of interest to 11:23 7 her to hear this feedback. I want to start by sort of 11:23 8 going back over prior testimonies to capsulize where 11:23 9 we are in the audit, some of the things we've found to 11:23 10 date, and then go forward with what we've found on the 11:23 11 most recent issues. 11:23 12 This audit was part of our regularly 11:23 13 scheduled audits. When we came across some instances 11:23 14 in the sell-in sheet where we noted that the 11:24 15 approximate number of winners was based on marketing 11:24 16 work papers, we brought this immediately to the 11:24 17 attention of the executive director, with the 11:24 18 understanding, what could we do to better improve the 11:24 19 process. I think that's what transpired in the last 11:24 20 few meetings, with the emergency meeting, then the 11:24 21 meeting before the House Appropriations Committee to 11:24 22 bring them up to date as to what our processes were 11:24 23 with that. Linda, any time you want to jump in and 11:24 24 say what we're going to do to change the process. 11:24 25 My understanding right now is we have, 11:24 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 124 1 on that sell-in sheet, also put those numbers out on 11:24 2 our website, and as a result, we've disabled that 11:24 3 website until we can make correct the numbers that are 11:24 4 out there and to improve the language so that the 11:24 5 players have a better understanding that this is based 11:24 6 on an approximate number of tickets that we're 11:24 7 receiving. There were three issues that came out of 11:25 8 this audit. One was the player. The second one was 11:25 9 the State issue, the amount of money that went back to 11:25 10 the State. I'm prepared to give a very detailed 11:25 11 explanation, but the high-level part of that is that 11:25 12 only a small percentage of the money on three specific 11:25 13 games had the effect of going back to the State faster 11:25 14 than if we had accounted for the formula slightly 11:25 15 different on the three games. 11:25 16 The final aspect of this is the vendor, 11:25 17 and looking at what the ticket vendor had presented 11:25 18 with us in the ticket run. Before I jump into that 11:25 19 issue with an explanation, I would like to recapsulate 11:25 20 how we understand that the prize payout and the audits 11:26 21 did change, even though the quantity of tickets that 11:26 22 we had ordered versus the quantity of tickets we 11:26 23 received may have changed. So on the flip chart up 11:26 24 there, I've got an example "A". And in that example, 11:26 25 we're using a one-dollar ticket value, what a player 11:26 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 125 1 would purchase a ticket at, for both examples. 11:26 2 3 PRIZE PAYOUT 4 5 EX. A: 60/100 = 60% PPO 6 100/60 = 1:1.66 ODDS. 7 MS. McLEOD: Here we have 60 winners, 11:26 8 there is a possible 100 tickets that we received. So 11:26 9 the prize payout percent is 60 percent. In 11:26 10 calculating the odds, have you 100 dollars, if you 11:26 11 will, because each ticket is worth one dollar. 11:26 12 Divided by the 60, for value, and that gives you the 11:26 13 one out of 1.66 in odds. So in a very simplistic, 11:26 14 very defined example, that's how your prize payout 11:26 15 would work in your odds. 11:26 16 17 PRIZE PAYOUT 18 EX. B: 48/80 = 60% PPO 19 80/48 = 1:1.66 ODDS 20 21 MS. McLEOD: In example B, for example, 11:27 22 we only received 48 winners, and there was only a 11:27 23 possible 80 tickets that we received. So if the 11:27 24 shipment changed from 100 to 80, we still would have 11:27 25 the same prize payout percentage, because they would 11:27 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 126 1 adjust the number of winners within that ticket -- 11:27 2 within that ticket shipment. Thus, you would have the 11:27 3 same prize payout percent. Likewise, when you take 80 11:27 4 dollars divided by 48, you would still have the same 11:27 5 odds. So even though the quantity of tickets may have 11:27 6 changed and the number of winners, we're still 11:27 7 receiving the same odds and the same prize payout 11:27 8 percentage. 11:27 9 10 .01 11 .0008 QTY 12 .0028 $ 13 14 MS. McLEOD: From the audit, we looked 11:27 15 at 65 open games. The true net effect -- okay. The 11:27 16 true net effect of all of the 65 games is, if this is 11:28 17 one percent, this is the total quantity of shipment in 11:28 18 difference over all 65 games. We received this 11:28 19 amount, 8/1,000ths more, in quantity of tickets. We 11:28 20 received 28/10,000ths -- or should I say, 8/10,000ths 11:28 21 in -- this is quantity of tickets, 28/10,000ths in 11:29 22 prize dollars. So that's the net effect of the 65 11:29 23 games, with the shipments being different from what we 11:29 24 had ordered from what we received. 11:29 25 COMMISSIONER SADBERRY: 28 percent. 11:29 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 127 1 MS. McLEOD: 28/10,000ths -- 11:29 2 COMMISSIONER SADBERRY: 10,000 more -- 11:29 3 MS. McLEOD: If you're looking at .01 11:29 4 as being one percent -- 11:29 5 COMMISSIONER SADBERRY: Right. I'm 11:29 6 just getting -- it's an overage. Right? 11:29 7 MS. McLEOD: Correct. 11:29 8 COMMISSIONER SADBERRY: All right. 11:29 9 MS. McLEOD: I think the question that 11:29 10 we've grappled with the most is, how can you possibly 11:29 11 have the same prize payout, the same odds, and through 11:29 12 prompting by a commissioner, we've been asked to do 11:30 13 some sort of a graphical presentation. I think I will 11:30 14 resort more to a show and tell format so that I can 11:30 15 better explanation how this works. 11:30 16 We look at this bowl as being the 11:30 17 shipment that we receive, and every pool of tickets 11:30 18 that the vendor comes up with and prints. And I'm not 11:30 19 pushing Hershey chocolates today, but if we assume -- 11:30 20 CHAIRMAN CLOWE: Left over from 11:30 21 yesterday? 11:30 22 MS. McLEOD: Actually, these are for 11:30 23 Easter. 11:30 24 MR. ATKINS: Do we get to eat the 11:30 25 example? 11:30 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 128 1 MS. McLEOD: As long as you don't 11:30 2 change my prize payout, yes. 11:30 3 Roughly, within each shipment we get 11:30 4 six pools of tickets. The vendor has gone to great 11:30 5 lengths to assure, like in each bag, that you have the 11:30 6 same quantity of high-tier, mid-tier, and low-tier 11:31 7 tickets. And to ensure quality assurance from home, 11:31 8 I've left them sealed. 11:31 9 (Emptying bag of chocolates into bowl.) 10 MS. McLEOD: When you look at each 11:31 11 shipment, the vendor is saying, within this pool of 11:31 12 tickets, I can guarantee so many prizes. He does the 11:31 13 same thing with each shipment, each pool. 11:31 14 MS. CLOUD: Each pool. 11:31 15 (Emptying bag of chocolates into bowl.) 11:31 16 MS. McLEOD: So that when we make the 11:31 17 total quantity available to the players, we have kept 11:31 18 the same prize payout at each pool. Therefore, if we 11:31 19 receive only this amount in tickets, we have made it 11:31 20 possible for a player to come in and say, okay. If I 11:31 21 were to pull from this jar at this point, this is the 11:31 22 quantity of prizes I have available to me. By the 11:31 23 vendor giving us more tickets, they have also given us 11:31 24 more prizes. So that is how the -- how the 11:32 25 correlation between each prize level is allowed to 11:32 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 129 1 remain exact. They have this printing done through a 11:32 2 computer system, they have an algorithm in there to 11:32 3 assure those prize levels. What we have found through 11:32 4 a more detailed analysis is that there is judgments 11:32 5 being made by the instant ticket printer at certain 11:32 6 levels, that we have raised this to the director, and 11:32 7 I think it would be prudent for us, now that we've 11:32 8 done the analysis, to sit down with the vendor and go 11:32 9 through and analyze, is this a decision we want to 11:32 10 make at this level, or do we want to make other 11:32 11 decisions in order to keep the prize payout correct. 11:32 12 We have 26 percent of the games that I 11:32 13 think the executive director and the print vendor 11:32 14 should sit down with and discuss some of the decisions 11:32 15 that were made, but in no way does that mean that the 11:33 16 prize payout changed or the audits changed. 11:33 17 MS. CLOUD: Or the return to the State. 11:33 18 Commissioners, we have requested the 11:33 19 lottery operator to pick up the sell-in sheets that 11:33 20 are out on the street so that we may adjust the 11:33 21 numbers that are on those sell-in sheets. We have 11:33 22 also, as Debra said, disabled our website so that 11:33 23 there is no information on the website that may be 11:33 24 perceived as being incorrect, and we're making the 11:33 25 changes to the web. 11:33 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 130 1 MS. McLEOD: Let me make it very clear. 11:33 2 What we received from the instant ticket manufacturer 11:33 3 is exactly what we have loaded on our computer system. 11:33 4 We have prepared some reports for internal monitoring, 11:33 5 bot on our side and the lottery operator, and we went 11:33 6 through and looked at some detail. There were some 11:34 7 transposition errors and Mr. Cain from Gtech was very 11:34 8 quick to respond to that so that we are now reporting 11:34 9 with all games. I think we had just a couple of games 11:34 10 where we had our percent of closing, due to the 11:34 11 quantity of tickets, they had an Excel spreadsheet was 11:34 12 in error, and they've gone back and made those 11:34 13 corrections. 11:34 14 CHAIRMAN CLOWE: I want to, for 11:34 15 Commissioner Whitaker's benefit, restate some of the 11:34 16 history of this issue, and for the record. When this 11:34 17 perceived issue, possibly a problem, was brought to 11:34 18 the attention of the Commissioners, we were early into 11:34 19 the audit and we had not achieved definitive results, 11:34 20 as you are achieving now. I felt at that time that we 11:34 21 needed to have an emergency meeting, so that we could 11:35 22 have this issue brought to the attention of all who 11:35 23 might be interested, and we had that emergency 11:35 24 meeting. You stated you were in the process of your 11:35 25 audit at that time, Debra. 11:35 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 131 1 MS. McLEOD: Yes. 11:35 2 CHAIRMAN CLOWE: And Linda gave her 11:35 3 comments, and that's all on the record. That was in 11:35 4 the opening. Then Commissioner Sadberry and I 11:35 5 appeared before the House Finance Subcommittee, 11:35 6 Chairman Heflin's committee, and through noticing 11:35 7 that, we were able to appear together and to give 11:35 8 testimony and answer questions with a quorum of the 11:35 9 Commission present, and staff was present as well. 11:35 10 Representative Luna from Corpus Christi indicated that 11:35 11 she was having trouble understanding what you were 11:35 12 about in the audit and where you were coming down, and 11:36 13 you attempted to give her a more complete and fuller 11:36 14 explanation, and Linda joined into that effort. I 11:36 15 think it's important that -- because we are more 11:36 16 familiar with the subject that you have just covered, 11:36 17 that we not become complacent about an explanation to 11:36 18 the public, to the leadership, to the elected 11:36 19 representatives of the people when they have a 11:36 20 question about it. And Representative Pickett, I 11:36 21 think his comment in the committee hearing was, I'm 11:36 22 with you on Friday, and that's when we had said we 11:36 23 would probably have results. We didn't have results 11:36 24 that Friday, but we have continued, as I understand 11:36 25 it, to communicate with the members of the committee 11:36 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 132 1 and to keep the leadership up to date on this. This 11:36 2 was perceived initially as potentially a very serious 11:36 3 problem. It turns out, if I am understanding what you 11:36 4 have told us correctly, and I want to state what I'm 11:37 5 understanding, that there is no harm to the players, 11:37 6 there is no harm to the State, that in fact, we have 11:37 7 been using the worksheets as a basis for our 11:37 8 advertising, and that refers to the sell-in sheets, 11:37 9 Linda, that you've commented Gtech has taken back in. 11:37 10 We have posted that on our website, those odds at the 11:37 11 different prize levels, and Debra has told us this 11:37 12 morning that that's been disabled and that's being 11:37 13 redone. Although there was a disclaimer printed on 11:37 14 those sell-in sheets, which covered this, we wanted to 11:37 15 go a step beyond and make sure that the public 11:37 16 understood just exactly what our concern was. 11:37 17 Now, Debra, you have reported to us at 11:37 18 this stage in the audit, I think, positive results, 11:37 19 and the winners are all in that jar. 11:38 20 MS. McLEOD: Correct. 11:38 21 CHAIRMAN CLOWE: And that's the message 11:38 22 I think that we want to get back to the leadership, to 11:38 23 the representatives that have had a question about 11:38 24 what this problem was we were trying to identify. And 11:38 25 I think it's important that we clarify -- I won't say 11:38 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 133 1 correct, but we clarify our advertising so that even 11:38 2 though we had the disclaimer there with the asterisk, 11:38 3 as the number of tickets was reduced, the number of 11:38 4 prizes was reduced, but it was in proportion, or the 11:38 5 correct ratio. 11:38 6 MS. McLEOD: Correct. 11:38 7 CHAIRMAN CLOWE: As I say, that may be 11:38 8 easier for us to understand than it was Representative 11:38 9 Luna or a public player. It's important that we take 11:38 10 that extra step to get that explanation out to the 11:38 11 people of Texas. And I think that is what I have 11:38 12 heard you say. Am I correct in that? 11:39 13 MS. McLEOD: Yes, sir, that's exactly 11:39 14 correct. 11:39 15 CHAIRMAN CLOWE: Okay. And I just 11:39 16 wanted to go over the history of it because you were 11:39 17 out of the country and were unable to attend these 11:39 18 meetings. And Commissioner Sadberry, if I misstated 11:39 19 anything or you have anything to add, I would 11:39 20 appreciate it. 11:39 21 COMMISSIONER SADBERRY: Mr. Chairman, 11:39 22 thank you. I did want to say something, and that is 11:39 23 that I appreciate and support strongly your call, the 11:39 24 decision made for conducting this matter in the form 11:39 25 of an emergency meeting. That is a judgment call. I 11:39 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 134 1 think by now almost everyone appreciates the 11:39 2 restrictions we as Commissioners have on the ability 11:39 3 to talk outside of the context of an open meeting, 11:39 4 including whether to call a meeting, and that 11:39 5 sometimes presents a difficult situation. I would err 11:39 6 in almost every instance on the side of disclosure. I 11:39 7 think we can live with disclosure. I think to not 11:40 8 disclose and then have inquiry, even where it turns 11:40 9 out, as now, not to necessarily be the degree of 11:40 10 concern that perhaps we had initially. I think 11:40 11 Chairman Heflin echoed those sentiments, which I 11:40 12 thought was -- was good that he did so. And I think, 11:40 13 because of that, and the way in which this audit has 11:40 14 been conducted, and certainly the results, it's hard 11:40 15 to prove a negative, as our legal colleagues 11:40 16 understand. But it certainly could have turned out 11:40 17 differently, and it could have been a negative, 11:40 18 including just the fact of not disclosing it. So I 11:40 19 appreciate the fact that you did that, Mr. Chairman, 11:40 20 and the fact, from the staff's standpoint, that you 11:40 21 can now confirm these results is certainly helpful. 11:40 22 It speaks to our integrity, and that's our hallmark, 11:40 23 and this is another good example of how you handle it 11:41 24 is at the point -- including, as the Chair points out, 11:41 25 how you respond to questions and concerns, where we 11:41 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 135 1 might be more conversant than perhaps the public. 11:41 2 They have a right to know. They have a duty to ask, 11:41 3 and it's up to our office to respond and be 11:41 4 responsible. And I think that it's good that we can 11:41 5 say now, I believe we have got our arms around this 11:41 6 and that's a good thing, I believe. 11:41 7 COMMISSIONER WHITAKER: Let me add one 11:41 8 thing. I did not have the opportunity to be at those 11:41 9 meetings, but I did, after that, study the issue very 11:41 10 closely. And I want to say that I do appreciate your 11:41 11 hard work on this, Debra, and yours, also, Linda. 11:41 12 There was a great deal of attention paid to that, and 11:41 13 I think it shows in the finality that you're bringing 11:41 14 to it today, so thank you. 11:41 15 MS. McLEOD: I just want to say that 11:41 16 while this portion of the audit is concluded, we still 11:41 17 have other audit steps to perform. And part of that 11:41 18 would be to survey some of the other state lotteries 11:42 19 and see how they handle this issue in their 11:42 20 advertising and how they monitor their vendor on down 11:42 21 to the prize level and what type of contractual 11:42 22 language they use. And that will be some of the 11:42 23 additional steps we still have yet to perform on this. 11:42 24 MS. CLOUD: Commissioners, this is a 11:42 25 process that we've taken recently, and looking at the 11:42 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 136 1 processes that -- the way we're doing things, and 11:42 2 we're trying to make sure that each division is doing 11:42 3 things -- staying up with the times, keeping up with 11:42 4 the way things need to be done currently. We have, as 11:42 5 you know, MAS is here from the State Auditor's Office 11:42 6 working with -- has just completed the operations 11:42 7 division, fixing to go into the financial division, 11:42 8 next would be the marketing division, and then at the 11:43 9 same time, the internal auditors are looking at 11:43 10 processes on what -- the functions that are taking 11:43 11 place that would interact with each division's, so 11:43 12 that we don't have any -- any holes in the process, 11:43 13 because it changes over from one division to another 11:43 14 in the responsibility or the procedure. So this is 11:43 15 what I want to do in preparation of getting ready for 11:43 16 sunset, to make sure that we are doing what we're 11:43 17 supposed to be doing, in -- and not overlooking the 11:43 18 fact that a lot of things have changed since we first 11:43 19 started the Lottery Commission. 11:43 20 CHAIRMAN CLOWE: Very good. Thank you 11:43 21 all. We're now take ready to take up item ten, 11:43 22 consideration of and possible discussion and/or 11:43 23 action, including adoption, on new rule 16 TAC number 11:44 24 401.312 relating to new on-line game, Texas Two Step. 11:44 25 MS. KIPLIN: Commissioners if you'll 11:44 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 137 1 recall, you voted to propose the Texas Two Step 11:44 2 on-line game rule for publication and for public 11:44 3 comment at an earlier Commission meeting. That was 11:44 4 published in the January 5th, 2001 issue of the Texas 11:44 5 Register. The required minimal 30-day public comment 11:44 6 period has elapsed. The rule is ripe for your 11:44 7 adoption. The Commission received no comments. We 11:44 8 are recommending that you adopt this -- the proposed 11:44 9 text, you adopt it without changes as it was published 11:44 10 in the January 5th, 2001 issue. I'll be glad to 11:44 11 answer any questions you have. I do have an order for 11:44 12 your signature should you vote to adopt. 11:44 13 COMMISSIONER WHITAKER: So moved. 11:44 14 COMMISSIONER SADBERRY: Second. 15 CHAIRMAN CLOWE: All in favor say aye. 11:44 16 Opposed, no. The vote is three-zero in favor. 11:44 17 We are now ready to go to item 11, 11:44 18 consideration of and possible discussion and/or 11:45 19 action, including repeal, on 16 TAC 401.311 relating 11:45 20 to "Texas Million" on-line game. 11:45 21 MS. KIPLIN: Commissioners, this was a 11:45 22 companion proposal that was presented to you for your 11:45 23 consideration to vote to publish for the minimal 11:45 24 30-day public comment period. This is the repeal of 11:45 25 the "Texas Million" on-line game rule. The proposal 11:45 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 138 1 to repeal was published in the January 5th, 2001 issue 11:45 2 of the Texas Register. The Commission received no 11:45 3 comments regarding this rule proposal. It is ripe for 11:45 4 your consideration for adoption today. It is my 11:45 5 understanding that based on the staff's work with 11:45 6 regard to eliminating the "Texas Million" game and 11:45 7 replacing it with the Texas Two Step, that the last 11:45 8 drawing on this game is set to be May 11th, 2001. 11:45 9 This goes to the issue of what the effective date of 11:46 10 the repeal should be. With that, the staff recommends 11:46 11 that you vote to adopt the repeal of this rule, but 11:46 12 make it effective, the repeal effective November 8th, 11:46 13 2001. The thinking behind that is that it'll be 180 11:46 14 days from the date after the last drawing. That is 11:46 15 the time period within which a "Texas Million" player 11:46 16 can present a ticket for claim, and we will need the 11:46 17 rule to be in effect until that very last day should 11:46 18 there be any issues regarding the claim as presented. 11:46 19 With that, I'll be glad to answer any questions. 11:46 20 COMMISSIONER WHITAKER: So moved. 11:46 21 COMMISSIONER SADBERRY: Second. 11:46 22 CHAIRMAN CLOWE: All in favor, say aye. 11:46 23 Opposed, no. The vote is three-zero in favor. 11:46 24 MS. CLOUD: Commissioners, Robert 11:46 25 Tirloni is our on-line product manager and he is just 11:46 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 139 1 here to briefly address the time line for the Texas 11:46 2 Two Step game with you. You have a copy of the time 11:46 3 line. 11:46 4 MR. TIRLONI: Good morning, 11:46 5 Commissioners. For the record, my name is Robert 11:46 6 Tirloni. I am the on-line product manager in the 11:47 7 lottery's marketing division. I handed out a Texas 11:47 8 Two Step game launch plan. You should all have a copy 11:47 9 of it. And I'll briefly walk you through the plan 11:47 10 that we have put in place to successfully count down 11:47 11 the "Texas Million" game, and then launch the Texas 11:47 12 Two Step game. Now that the rule has been adopted by 11:47 13 the Commission, the "Texas Million" multi-draw 11:47 14 countdown point of sale pieces will begin distribution 11:47 15 on Monday, February 19th. I've given you a sample of 11:47 16 that point of sale piece. It's a terminal topper that 11:47 17 sits on top of the on-line terminal. This piece is 11:47 18 very similar to a piece that we used when we were 11:47 19 counting down the Lotto Texas six of 50 matrix right 11:47 20 before we made the matrix change to the six of 54 11:47 21 matrix. On the front side, it notifies our players 11:47 22 that the last "Texas Million" drawing is scheduled for 11:48 23 Friday, May 11th, 2001, and it notifies players that 11:48 24 there is -- due to the fact there is a multi-draw 11:48 25 feature on this game, they need to be aware of how 11:48 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 140 1 many draws are left after each draw takes place. On 11:48 2 the back side of that, it helps the clerk by actually 11:48 3 counting down how many draws are remaining after each 11:48 4 draw. And then it notifies the clerk that on Sunday, 11:48 5 May 13th, the sales for the new game will take place. 11:48 6 The "Texas Million" countdown is 11:48 7 scheduled to begin on March 9th, 2001. That would be 11:48 8 the first of the last ten draws. In late March, our 11:48 9 Gtech sales reps will begin introducing the game at 11:48 10 the retail level, to clerks, store managers, et 11:48 11 cetera. In mid April, the new on-line ticket roll 11:48 12 stock distribution will begin to all retail locations. 11:49 13 In late April, sales reps will also begin delivering 11:49 14 new on-line terminal keypads, so that once the game 11:49 15 starts on Sunday the 13th, Texas Two Step wagers will 11:49 16 be able to be placed. The last "Texas Million" draw 11:49 17 will take place on May 11th, 2001. Sales for that 11:49 18 game will cease at 9:45 p.m. when the draw break 11:49 19 occurs. After that draw, the game will no longer be 11:49 20 available for sale. 11:49 21 Sales for Texas Two Step will begin at 11:49 22 6:00 a.m., on Sunday, May 13th. We will sell through 11:49 23 that first entire week, with the first Texas Two Step 11:49 24 draw being Friday, May 18th, 2001. Beginning that 11:49 25 next Tuesday, May 22nd, we begin our regular Tuesday, 11:49 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 141 1 Friday draw schedule, and then as Kim mentioned, the 11:49 2 180-day validation period for the "Texas Million" -- 11:49 3 any "Texas Million" ticket that was purchased for that 11:50 4 last draw on May 11th, that validation period ends on 11:50 5 November 7th, 2001. This is just the highlight, 11:50 6 Commissioners, to paint the broad picture of what we 11:50 7 have in place. If you have any other questions, I 11:50 8 would be happy to answer them for you. There are a 11:50 9 lot of other details that aren't included on here. 11:50 10 But again, this is just to give you the big picture of 11:50 11 what we have planned. 11:50 12 CHAIRMAN CLOWE: This is -- the new 11:50 13 game, Texas Two Step, is a two-draw game. And it's 11:50 14 going to be exciting to watch it on television, isn't 11:50 15 it? 11:50 16 MS. CLOUD: Yes. 11:50 17 CHAIRMAN CLOWE: See the balls fall out 11:50 18 of two machines. I certainly wouldn't want to miss 11:50 19 that -- 11:50 20 MS. CLOUD: No. I wouldn't want to 11:50 21 miss that. We need to watch those draws. 11:50 22 CHAIRMAN CLOWE: We need to watch those 11:50 23 draws. That's right. Robert, that's an inside joke. 11:50 24 Thank you. 11:50 25 COMMISSIONER WHITAKER: He's not going 11:50 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 142 1 to share it with us. 11:50 2 MS. CLOUD: It's the fight for the 11:50 3 studio. 11:51 4 CHAIRMAN CLOWE: You didn't hear that. 11:51 5 We were working hard for that. Thank you, Robert. 11:51 6 MR. TIRLONI: Thank you, Commissioners. 11:51 7 CHAIRMAN CLOWE: Counselor, can I 11:51 8 announce -- may I announce item 12 without reading all 11:51 9 of the rules? 11:51 10 MS. KIPLIN: Yes, you may. And if you 11:51 11 want to, you can just say, we're to item -- what is it 11:51 12 on -- 11:51 13 CHAIRMAN CLOWE: Item 12, the 14 consideration and possible discussion and/or action, 11:51 15 including proposal, on amendments, repeal and/or new 11:51 16 rules within subchapter E, and then the rule and the 11:51 17 amendments are specifically documented within that 11:51 18 item. 11:51 19 MS. KIPLIN: Commissioners, I -- 11:51 20 Commissioner Whitaker, I'm not sure you were here for 11:51 21 the rule review, but just by way of background. Each 11:51 22 agency is required to undertake a rule review of each 11:51 23 of its rules. And this agency did that. And the rule 11:51 24 review is complete, both on the bingo side and on the 11:51 25 lottery side, and then the general administration. At 11:51 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 143 1 the time that the Commission voted to re-adopt the 11:52 2 rules, there were some rules that were not re-adopted 11:52 3 because the Commission, in its view, determined that 11:52 4 there was no reason for those rules to exist any 11:52 5 further, and there was a -- an understanding that 11:52 6 there were rules that would be re-adopted, but would 11:52 7 require revision. What you have before you is the 11:52 8 first package of those rules based on the Commission's 11:52 9 rule review. And this is subchapter E, the retailer 11:52 10 rules. Within this package, there are rules that 11:52 11 are -- the staff recommends that you vote to propose 11:52 12 amendments to, you vote to propose the repeal of, 11:52 13 because we actually have -- we are required under the 11:52 14 Administrative Procedure Act to and Texas Register 11:52 15 Act, and also the Rules of the Secretary of State, 11:52 16 administering the Texas Register, to actually repeal 11:52 17 those rules. Otherwise, they stay on the books, and 11:52 18 we are also adding a new rule. Just by way of 11:52 19 information, the new rule that we're adding is really 11:52 20 a currents rule, but it's undergoing such significant 11:53 21 revision that, in staff's view, it would be -- it's 11:53 22 just better to people who where trying to follow along 11:53 23 with regard to the rule making process to repeal the 11:53 24 old 401.353 and then -- and go ahead and propose a new 11:53 25 rule. 11:53 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 144 1 The proposed amendments are making the 11:53 2 rules consistent with existing law and they're 11:53 3 clarifying the current agency practices and 11:53 4 procedures. And I -- and the preamble sets out the 11:53 5 specific reasons for -- or specific issues on making 11:53 6 the practice and procedure more consistent. And, of 11:53 7 course, the proposed repeals are to eliminate language 11:53 8 that is redundant to language in the State Lottery 11:53 9 Act. We found that quite a bit of the language in 11:53 10 the -- in certain aspects of the Chapter 401 of the 11:53 11 Administrative Code just was a repeat of state law, 11:53 12 and there is no reason to be redundant in a rule. And 11:53 13 also, repealing rules that are inconsistent with 11:53 14 current agency practice, and the new rule is as I've 11:53 15 mentioned. So with that, staff would recommend that 11:54 16 you vote to propose the amendments to the rules as 11:54 17 they are stated in the Open Meetings notice, and the 11:54 18 repeal of the rules as they're stated in the Open 11:54 19 Meetings notice, and of course, they're set out in 11:54 20 this preamble, and also propose the new rule. They 11:54 21 will be published, should you vote to propose these, 11:54 22 for the minimal 30-day public comment period. And at 11:54 23 the appropriate time, we will come back with the 11:54 24 appropriate request for action in light of whatever 11:54 25 comments we might receive. With that, I'll be glad to 11:54 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 145 1 answer any questions there are. This was a product of 11:54 2 a working group, and that consisted of marketing, 11:54 3 lottery operations, and security, and I see at least 11:54 4 two of the directors that are in the audience should 11:54 5 you have any questions of them. You will be getting 11:54 6 more packages like this in the future to bring our 11:54 7 rules into line with practice. I'll be glad to answer 11:54 8 any questions. 11:54 9 COMMISSIONER WHITAKER: So moved. 11:54 10 COMMISSIONER SADBERRY: Second. 11 CHAIRMAN CLOWE: All in favor, say aye. 11:54 12 Opposed, no. The vote is three-zero in favor. 11:54 13 We are now ready to go to item 13 on 11:55 14 the agenda, consideration of and possible discussion 11:55 15 and/or action, including re-adoption, on 16 TAC 11:55 16 401.355 relating to restricted sales as part of the 11:55 17 agency's rule review. 11:55 18 MS. KIPLIN: Commissioners, I'll just 11:55 19 incorporate my comments on the preceding agenda item 11:55 20 in connection with the rule review for the purposes of 11:55 21 this discussion, and would say that this is one rule 11:55 22 that the Commission at the time did not re-adopt under 11:55 23 its rule review. And the reason was, at the time the 11:55 24 staff didn't believe that there was a need for this 11:55 25 rule to continue. Having gone through the working 11:55 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 146 1 group and looking at the other rules, the staff now 11:55 2 believes that there is a reason, that the reasons at 11:55 3 the time that the rule was originally adopted do 11:55 4 continue to exist, and do recommend that you do 11:55 5 re-adopt this rule. And I've got an order prepared 11:55 6 for that purpose should you vote to go forward in that 11:55 7 light. 11:55 8 COMMISSIONER WHITAKER: So moved. 11:55 9 COMMISSIONER SADBERRY: Second. 11:56 10 CHAIRMAN CLOWE: All in favor, say aye. 11:56 11 Opposed, no. The vote is three-zero in favor. 11:56 12 At this time, I move the Texas Lottery 11:56 13 Commission go into executive session, to deliberate 11:56 14 the duties and evaluation of the Executive Director, 11:56 15 Internal Auditor, and Charitable Bingo Operations 11:56 16 Director, pursuant to Section 551.074 of the Texas 11:56 17 Government Code; to deliberate the duties of the 11:56 18 General Counsel and Security Director, pursuant to 11:56 19 Section 551.074 of the Texas Government Code; to 11:56 20 receive legal advice regarding pending or contemplated 11:56 21 litigation and/or to receive legal advice pursuant to 11:56 22 Section 551.071 (1) (A) or (B) of the Texas Government 11:56 23 Code and/or to receive legal advice pursuant to 11:56 24 Section 551.071 (2) of the Texas Government Code, 11:56 25 including but not limited to: Scientific Games, 11:56 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 147 1 Incorporated versus Texas Lottery Commission, Linda 11:57 2 Cloud, and M. Patricia Henry Matter involving the 11:57 3 Department of Justice pursuit of a complaint regarding 11:57 4 the Americans with Disabilities Act; Matter involving 11:57 5 Request for Open Records Decision in Attorney 11:57 6 General's Open Records file number 119718-98 relating 11:57 7 to request for information in connection with the 11:57 8 lottery operator audit; employment law, personnel law, 11:57 9 procurement and contract law, and general government 11:57 10 law. 11:57 11 Is there a second? 11:57 12 COMMISSIONER WHITAKER: Second. 11:57 13 CHAIRMAN CLOWE: All in favor say aye. 11:57 14 Opposed, no. The vote is three-zero in favor. The 11:57 15 Texas Lottery Commission will go into executive 11:57 16 session. The time is 11:59 a.m. Today is February 11:57 17 the 14th, 2001. 11:57 18 MS. KIPLIN: February 15th. 11:57 19 CHAIRMAN CLOWE: Sorry. What did I 11:57 20 say? Still got Valentine's day on my mind. 11:57 21 Correction. February 15th. Thank you, sir. 11:58 22 (EXECUTIVE SESSION) 15:50 23 CHAIRMAN CLOWE: The Texas Lottery 15:51 24 Commission is out of executive session. The time is 15:51 25 3:58 p.m. Is there any action to be taken as a result 15:51 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 148 1 of executive session? If not, let's move on to item 15:51 2 16, consideration of the status and possible entry of 15:51 3 orders in numerous cases, A through G. 15:51 4 MS. KIPLIN: Commissioners, you have in 15:51 5 your notebooks seven cases. Six are attached to one 15:51 6 matter, and then the other one is an agreed order. At 15:51 7 the last Commission meeting, you signed orders that 15:51 8 unfortunately contained a clerical error, and the 15:52 9 report, in fact, for those three orders, and they were 15:52 10 agreed orders, was the inaccurate date. The date was 15:52 11 the year 2000 and not the year 2001, and we seem to do 15:52 12 this about every other year. So we have filed for 15:52 13 your consideration a motion for nunc pro tunc to 15:52 14 correct the clerical order. We have sent a notice of 15:52 15 this motion to the parties that were involved, and 15:52 16 we're simply asking for you to approve a nunc pro tunc 15:52 17 order and correct the clerical mistake to reflect the 15:52 18 correct year of 2001. 19 COMMISSIONER WHITAKER: So moved. 15:52 20 COMMISSIONER SADBERRY: Second. 15:52 21 CHAIRMAN CLOWE: All in favor say aye. 15:52 22 Opposed, no. The vote is approved three-zero. 15:52 23 MS. KIPLIN: Commissioners, the last 15:52 24 case that you have in your notebook is the Kyle 15:52 25 Enterprise d/b/a TexMart case. This is a memorandum 15:52 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 149 1 and agreement and consent order between the parties, 15:52 2 and if you do -- well, let me just tell you what the 15:52 3 allegation is and, I guess, the agreed finding of fact 15:53 4 was that the employee of the retailer sold a ticket 15:53 5 and accepted as payment a coupon that was not issued 15:53 6 by the Commission for purposes of purchasing a lottery 15:53 7 ticket. And it was not by interlawful method. The 15:53 8 recommended disposition of this case is a 14-day 15:53 9 suspension of the retailer's lottery license, and this 15:53 10 act does -- as you can see by the signatures, does 15:53 11 agree with that. And at this time, we ask your 15:53 12 approval of that order. 15:53 13 COMMISSIONER WHITAKER: So moved. 15:53 14 COMMISSIONER SADBERRY: Second. 15:53 15 CHAIRMAN CLOWE: All in favor say aye. 15:53 16 Opposed, no. The vote is approved three-zero. Thank 15:53 17 you, Kim. 15:53 18 I think we're ready now to move to item 15:53 19 17, report of the executive director. Linda, what do 15:53 20 you have for us. 15:53 21 MS. CLOUD: Commissioners, we 15:53 22 transferred to the Foundation School Fund on January 15:53 23 12th, $68,712,804, giving us a total transfers to the 15:53 24 State since start-up of $8,446,743. I'm going to call 15:54 25 Robert Hall up to give you his minority report. 15:54 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 150 1 CHAIRMAN CLOWE: Good afternoon, 15:54 2 Robert. 15:54 3 MR. HALL: Good afternoon, 15:54 4 Commissioners, Chairman Clowe. For the record, my 15:54 5 name is Robert Hall. I'm the director for minority 15:54 6 development services here to give you an update on 15:54 7 minority participation, contract, and activity. 15:54 8 Commissioners, we have had an increase 15:54 9 in utilization since the month of December. And our 15:54 10 overall participation, total utilization to date is 15:54 11 roughly around 13.51 percent. And that includes our 15:54 12 direct contract activity as we are tracking currently 15:54 13 under current methodology, as well as any 15:54 14 subcontracting that we have to date. I think I 15:55 15 informed you back in November, we were going to try to 15:55 16 work with our IT division to develop a database, in 15:55 17 which we would be able to track every expenditure that 15:55 18 was directly paid to HUB vendors, and also all of the 15:55 19 subcontracting activity. We are still working on the 15:55 20 information on the database that will entail direct 15:55 21 expenditures paid directly to HUB and minority 15:55 22 vendors. And so right now the information before you 15:55 23 does not include those expenditures. And we hope to 15:55 24 provide further information for you on that. 15:55 25 In addition to that, hopefully, next 15:55 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 151 1 month or in the next or following month, we would like 15:55 2 to give you an update as to where we are in the 15:55 3 implementation of our HUB rules to make sure you are 15:55 4 currently aware and then also updated on a regular 15:55 5 basis what's going on with that. And I'll be happy to 15:55 6 answer any questions you may have about the report or 15:55 7 anything else that involves minority development 15:56 8 services. 15:56 9 CHAIRMAN CLOWE: Any questions for 15:56 10 Robert? 15:56 11 COMMISSIONER WHITAKER: We just 15:56 12 appreciate your enthusiasm. This is good. I mean, we 15:56 13 get a very good sense that we're doing great. 15:56 14 MR. HALL: Thank you. 15:56 15 CHAIRMAN CLOWE: Robert, we're eagerly 15:56 16 anticipating, as I know you are, the answer from our 15:56 17 query about Past (phonetic) situation and hope we will 15:56 18 ultimately know what the State's position is on that 15:56 19 and deal with it. 15:56 20 MR. HALL: Yes, sir. We're all waiting 15:56 21 for it. 15:56 22 CHAIRMAN CLOWE: Good. Thank you very 15:56 23 much. 15:56 24 MS. CLOUD: Robert, did you mention 15:56 25 your meeting today? 15:56 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 152 1 MR. HALL: No, ma'am, I did not. I'm 15:56 2 sorry. 15:56 3 Commissioners, Chairman Clowe, we are 15:56 4 having a round table discussion for all of our vendors 15:56 5 this afternoon. I think we sent by way of informing 15:56 6 you a letter that -- in regards to the round table 15:56 7 discussion. It's been very positive. We have got 15:56 8 23-plus vendors, including our primary vendors as well 15:56 9 as some of our subcontractors, coming in, that we can 15:56 10 share information with them regarding the history of 15:57 11 the underutilized business requirements. And we also 15:57 12 are going to be discussing the new business 15:57 13 subcontracting plan as it -- as it relates to 15:57 14 contracts over 100,000 dollars. And our effort is to 15:57 15 ensure they're informed as well as knowledgeable of 15:57 16 what requirements it takes to adhere to the new 15:57 17 requirements, and also for them to comply. Hopefully, 15:57 18 easily, as we -- we are experiencing now, we're going 15:57 19 to hopefully make sure they're aware, or inform them 15:57 20 of what they need to be aware of to make sure they can 15:57 21 comply very easily. And we invite you -- we invite 15:57 22 your participation this afternoon if you're here, and 15:57 23 as well as we are going -- we are inviting all of our 15:57 24 directors here at the agency to participate as well. 15:57 25 CHAIRMAN CLOWE: What is that, from 15:57 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 153 1 5:00 to 7:00? 15:57 2 MR. HALL: Yes, sir. 15:57 3 MS. CLOUD: We have vendors from Canada 15:57 4 even that have come in to this meeting. So I think 15:57 5 that's pretty good. 15:57 6 CHAIRMAN CLOWE: What is the number you 15:57 7 anticipate? 15:57 8 MR. HALL: 23 at this time. If the 15:58 9 weather holds, we're anticipating that number this 15:58 10 afternoon, so... 15:58 11 CHAIRMAN CLOWE: Wonderful. Let us 15:58 12 know about the results of that at our next meeting, 15:58 13 would you, please? 15:58 14 MR. HALL: Yes, sir. I'll be happy to 15:58 15 give you an update on the meeting as well as any other 15:58 16 information you need. 15:58 17 CHAIRMAN CLOWE: Great. Thank you 15:58 18 again, Robert. 15:58 19 MR. HALL: You're welcome. 15:58 20 CHAIRMAN CLOWE: Linda, do you have an 21 additional item? 22 MS. CLOUD: Yes, sir. The FTE report, 15:58 23 we have 307 active FTEs. We have 25 vacant positions 15:58 24 at this time. Eight are in the selection, acceptance 15:58 25 pending, and 14 are in recruiting, screening and 15:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 154 1 interviewing. And we have three vacant positions 15:58 2 where HR has no activity for those as yet. We have a 15:58 3 town hall meeting scheduled -- 15:58 4 CHAIRMAN CLOWE: Just in regard to the 15:58 5 positions, what is the status of Robert Bell's 15:58 6 position? 15:58 7 MS. CLOUD: I'm going to ask Patsy to 15:58 8 respond to that. She has been overseeing that. 15:58 9 MS. HENRY: At -- the status of it thus 15:59 10 far, my name is Patsy Henry, deputy executive 15:59 11 director, is that Mr. Richardson and his staff have 15:59 12 screened the applications that have been received thus 15:59 13 far and we've got, oh, I guess about 30 -- 33 15:59 14 applications that I'm in the process of reviewing to 15:59 15 select some interview candidates. And I'm also 15:59 16 considering who else to put on the interview team. 15:59 17 CHAIRMAN CLOWE: Good. 15:59 18 MS. HENRY: So we're moving along. 15:59 19 It's going slowly, but, again, we have a very 15:59 20 competent acting director in there with Chuck Wilson. 15:59 21 CHAIRMAN CLOWE: Great. Thank you, 15:59 22 Patsy. 15:59 23 MS. CLOUD: We have a town hall meeting 15:59 24 scheduled for Plainview, Texas on March the 20th. So 15:59 25 we'll be in Plainview. The first time we have visited 15:59 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 155 1 Plainview. And I have a schedule, as you know, I'm on 15:59 2 the executive committee for -- 15:59 3 CHAIRMAN CLOWE: How are you going to 16:00 4 get to Plainview? 16:00 5 MS. CLOUD: Well, you know, I think 16:00 6 we're flying in to Lubbock and we're driving an hour 16:00 7 and a half. Or Mary Beth was trying to see what the 16:00 8 State plane, how it -- how it would work expense-wise 16:00 9 for us compared to maybe having to spend the night 16:00 10 or -- 16:00 11 CHAIRMAN CLOWE: You get to see some 16:00 12 country if you fly in to Lubbock and drive up there. 16:00 13 MS. CLOUD: This one is a little 16:00 14 different. I am on the executive staff for the 16:00 15 National -- national association, and they are having 16:00 16 an executive staff meeting, the 6th through the 9th in 16:00 17 Chicago. And they pay my expenses. However, it's a 16:00 18 good possibility we're going to have our full House 16:00 19 Appropriations Committee hearing early that week in 16:00 20 March, and if we don't have it before I was scheduled 16:00 21 to leave then, of course, I won't be going. But that 16:00 22 is the only conference information I have. 16:01 23 CHAIRMAN CLOWE: And that's the only 16:01 24 committee meeting that we're anticipating an 16:01 25 appearance? 16:01 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 156 1 MS. CLOUD: Well, we will most probably 16:01 2 have to go before them again tomorrow on the 16:01 3 finalizing of the capital budget, on the subcommittee. 16:01 4 CHAIRMAN CLOWE: Is that the business 16:01 5 subcommittee? 16:01 6 MS. CLOUD: Yeah. 16:01 7 CHAIRMAN CLOWE: Chairman Heflin's 16:01 8 committee? 16:01 9 MS. CLOUD: Yes. 10 CHAIRMAN CLOWE: That's tomorrow. 16:01 11 MS. CLOUD: I think. Nelda -- I'm not 16:01 12 sure she has got an exact last word. 16:01 13 CHAIRMAN CLOWE: Is that just to answer 16:01 14 questions and be responsive to inquiries? 16:01 15 MS. CLOUD: Yes. 16:01 16 CHAIRMAN CLOWE: Since we've already 16:01 17 testified. Is there an appearance before committee 16:01 18 when mark-up occurs? 16:01 19 MS. CLOUD: That's what we did earlier 16:01 20 this week. 16:01 21 CHAIRMAN CLOWE: You've handled that? 16:01 22 MS. CLOUD: Yes. 23 CHAIRMAN CLOWE: Okay. And then the 16:01 24 full committee, when did you say in March? 16:01 25 MS. CLOUD: The full committee is 16:01 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 157 1 scheduled for, when is it Billy? 16:01 2 February 28th. 16:01 3 MR. ATKINS: Until the 1st of March. 4 MS. CLOUD: Or four days, like that -- 16:01 5 MR. ATKINS: Over a four-day period, 6 they'll take up all of Article Seven, which we're a 16:02 7 part of. So it would be over that four-day period. 16:02 8 CHAIRMAN CLOWE: Great. Well, if 16:02 9 possible, I think the Commissioners would like an 16:02 10 opportunity to be with you at that meeting. 16:02 11 MS. CLOUD: I would very much 16:02 12 appreciate the Commissioners being with me in the full 16:02 13 House Appropriations Committee hearing. 16:02 14 CHAIRMAN CLOWE: Great. Anything 16:02 15 further, Linda? 16:02 16 MS. CLOUD: That's all of my report. 16:02 17 CHAIRMAN CLOWE: I believe, then, we're 16:02 18 ready to go to the next item, and Billy, I think 16:02 19 that's your report. Do you have -- 16:02 20 MR. ATKINS: Commissioners, I don't 16:02 21 have anything to add other than what is in the 16:02 22 notebook. 16:02 23 CHAIRMAN CLOWE: Very good. Thank you, 16:02 24 sir. We have come to item 19, which is public 16:02 25 comment. Is there anyone here who wishes to make a 16:02 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 LOTTERY - February 15, 2001 158 1 comment? Seeing no one being responsive, the 16:02 2 Commission is adjourned at 4:04 p.m. Thank you all 16:02 3 very much. 16:02 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 159 1 REPORTER'S CERTIFICATION 2 3 STATE OF TEXAS ) 4 COUNTY OF TRAVIS ) 5 6 I, BRENDA J. WRIGHT, Certified Shorthand 7 Reporter for the State of Texas, do hereby certify 8 that the above-captioned matter came on for hearing 9 before the TEXAS LOTTERY COMMISSION as hereinafter set 10 out, that I did, in shorthand, report said 11 proceedings, and that the above and foregoing 12 typewritten pages contain a full, true, and correct 13 computer-aided transcription of my shorthand notes 14 taken on said occasion. 15 16 Witness my hand on this the 19TH day of 17 FEBRUARY, 2001. 18 19 20 21 BRENDA J. WRIGHT, RPR, 22 Texas CSR No. 1780 Expiration Date: 12-31-02 23 1609 Shoal Creek Boulevard, Suite 202 Austin, Texas 78701 24 (512) 474-4363 25 JOB NO. 010215BJW WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363