1 1 2 3 * * * * * * * * * * * * * * * * * 4 5 TEXAS LOTTERY COMMISSION 6 MEETING 7 8 April 25, 2002 9 10 * * * * * * * * * * * * * * * * * 11 12 13 14 15 16 17 18 BE IT REMEMBERED that the TEXAS LOTTERY 19 COMMISSION meeting was held on the 25th of April, 20 2002, from 8:30 a.m. to 3:30 p.m., before Leigh Anne 21 Williams, CSR in and for the State of Texas, reported 22 by machine shorthand, at 333 Guadalupe, Room 100, 23 Austin, Texas, whereupon the following proceedings 24 were had: 25 2 1 APPEARANCES 2 Chairman: Mr. Tom Clowe 3 4 Commissioner: Ms. Elizabeth Whitaker 5 6 Executive Director: Ms. Linda Cloud 7 8 Charitable Bingo Operations Director: Mr. Billy Atkins 9 10 General Counsel: Ms. Kimberly Kiplin 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 INDEX 2 Appearances...................................... 2 3 AGENDA ITEMS 4 Item Number 12................................... 4 5 Item Number 13.................................... 51 Item Number 4.................................... 58 6 Item Number 5.................................... 160 Item Number 10................................... 162 7 Item Number 11................................... 164 Item Number 2.................................... 166 8 Item Number 3.................................... 170 Item Number 6.................................... 170 9 Item Number 7.................................... 174 Item Number 14................................... 182 10 Item Number 17................................... 184 Item Number 18................................... 185 11 Item Number 19................................... 187 12 13 Reporter's Certificate........................... 254 14 15 16 17 18 19 20 21 22 23 24 25 4 1 April 25, 2002 2 Texas Lottery Commission Meeting 3 CHAIRMAN CLOWE: It's April 25th, 4 8:30 a.m. My name is Tom Clowe. 5 Commissioner Whitaker is here. We have a quorum. 6 It's my understanding that 7 Commissioner Criner has resigned, and, therefore, 8 we'll be operating with two commissioners until a 9 third commissioner is appointed. 10 I appreciate all of you being here this 11 morning. This is a change for us from our normal 12 location, and I know it's been difficult for some of 13 you to find the building and to achieve parking 14 spaces. 15 We have a number of members of the 16 public here which I think indicates a high level of 17 interest in a number of items on our agenda, and what 18 we're going to attempt to do today is to move through 19 those items first where we anticipate public comment. 20 So, if you will bear with us, we'll be skipping back 21 and forth through the agenda with the hope of 22 accommodating members of the public who wish to 23 address the Commission. 24 In that spirit, we're going 25 immediately, then, to Item 12 which is consideration 5 1 of and possible discussion and/or action, including 2 proposal of amendments, new rule, and/or repeal, on 3 TA -- 16 TAC 402.554 relating to instant bingo. And 4 I'm going to ask Billy Atkins, the director of the 5 Charitable Bingo Division, to speak on this rule 6 first. He has a presentation he'd like to make. Then 7 we're asking members of the public who wish to 8 comment -- and, Chairman Neinast, if this includes 9 part of your report, if you'll speak on this rule at 10 the proper time as well, and then we'll come back to 11 your full report from the Bingo Advisory Committee on 12 a later agenda item. 13 Thank you, Billy. 14 MR. ATKINS: Thank you, Mr. Chairman, 15 Commissioner Whitaker. 16 Pull tabs represent a very important 17 part of the games that are conducted in charitable 18 bingo. They provide probably the greatest profit or 19 margin of profit for organizations. Back in -- I 20 think it was 1999, after visiting some halls, an 21 operator from Houston first made the suggestion to the 22 Division regarding different types of pull tabs. 23 The one referenced specifically was a 24 merchandise pull tab, whereby part of the prize 25 structure contained, instead of a cash award, a 6 1 merchandise prize, and the staff thought that this was 2 an interesting concept, went back, contacted the 3 manufacturers of pull tabs in order to get some 4 additional information in a hope of moving forward, 5 but didn't receive a lot of interest, and recently, 6 because of the decline in bingo revenue, this issue's 7 come up within the industry and has generated quite a 8 bit of interest within the industry as a way to help 9 the charitable organizations in their conduct of bingo 10 and make those operations more profitable. 11 There have been several Bingo Advisory 12 Committee meetings that have addressed this topic 13 where the different types of pull tab games have been 14 discussed, and they made a recommendation that the 15 Commission move forward with changes to Charitable 16 Bingo Administrative Rule 402.554. That rule 17 addresses instant bingo or what we normally refer to 18 as pull tabs. 19 The staff had prepared a draft. We 20 have subsequently met with different members of the 21 industry to go over those various drafts. Ms. Kiplin 22 and I have worked on incorporating as many comments as 23 we've received into this draft, and those changes to 24 the rule are so significant that we believe it would 25 facilitate the process to have current Charitable 7 1 Bingo Administrative Rule 402.554 repealed while, 2 contemporaneously, this new rule 402.554 is proposed, 3 and what I would like to do, Commissioners, is take 4 you very briefly through the rule, and then there are 5 representatives of the bingo industry here that 6 actually have one or two examples of the type of 7 tickets that we're talking about that we'd like to 8 show you, and then we'd be able to answer any 9 questions you may have. And, again, I know there's 10 some members of the public that want to comment on it. 11 CHAIRMAN CLOWE: Very good. 12 MR. ATKINS: Starting with the rule in 13 Section A, we have added definitions that deal -- they 14 define words that we have commonly been using in the 15 Division as they relate to pull tab bingo, but have 16 never been defined in the Act or Rule, as well as 17 defining some of the elements that are involved with 18 the new style of play that we are considering for 19 the -- to be introduced. 20 We further define and clarify the 21 approval of bingo cards and the procedures that staff 22 follows. We identify the manufacturing 23 requirements -- 24 COMMISSIONER WHITAKER: As you go 25 through this list, if you could also comment on how it 8 1 changes its existing practice, if you're in a position 2 to do that. 3 MR. ATKINS: Okay. On the approval of 4 cards, I don't know that it changes our current 5 practice that much. It just clarifies in rule format 6 what that practice is. 7 The same on the manufacturing 8 requirements, Section C. There is one change that -- 9 or two changes that I want to -- I'm sorry, 10 Commissioners, I don't think I'm looking at the right 11 draft. 12 I wasn't. It was the old draft. I'm 13 sorry. 14 "A," definitions, it defines terms that 15 have been commonly used by the Division or identified 16 with the new types of play that are being proposed. 17 Approval of the bingo tickets, it again sets forth the 18 requirements. I think one difference in the approval 19 process, Commissioners, is that we clearly specified 20 that manufacturers may submit their products 21 electronically via the Internet, and that's something 22 that we believe facilitates the approval process for 23 us because it saves us from having to make copies, 24 etcetera, etcetera. 25 One thing that we have tried to do in 9 1 the section dealing with the approval process, I would 2 refer you to -- I believe it is B3G. 3 CHAIRMAN CLOWE: What page is that, 4 please? 5 MR. ATKINS: Page 6. Whereby we have 6 attempted to identify the type of art work that we do 7 not believe should be approved, specifically images 8 that depict alcoholic beverages, weapons, profane 9 language, provocative, explicit or derogatory images 10 or text. 11 In the past, the rule simply stated 12 that no art work would be approved that didn't ensure 13 the integrity of the games, and we felt that that was 14 too broad. So, we're trying to be more specific for 15 the benefit of the manufacturers. 16 CHAIRMAN CLOWE: That's Letter G. 17 Correct? 18 MR. ATKINS: Yes, sir. 19 The disapproval of pull tab tickets, 20 just flipping through it, I don't know if there's a 21 lot of difference from the current rule or the 22 manufacturing requirement of pull tabs. 23 If you move over to Page 10, Section E 24 on sales and redemption, we have -- The old rule used 25 to state that pull tabs could only be sold during an 10 1 organization's occasion. We have changed that 2 language on Page 10 in Section E2A by deleting the 3 requirement that they be sold during the occasion, but 4 allow the organization to sell it during their entire 5 licensed time. 6 Many organizations will have a licensed 7 time of up to four hours, but they'll only conduct 8 bingo for an hour, but we would like to afford them 9 the opportunity to sell the pull tabs during that 10 entire licensed time period. 11 Also, if you move to Page 11, No. 6, 12 we've added language. A number of organizations have 13 told us that a very effective way for them to sell 14 pull tabs is to bundle together in small groups of, 15 say, five or ten 1-dollar tickets, tickets from 16 different deals, and, so, they'll sell that bundle for 17 $10, and the player will have up to ten different 18 tickets to play. So, we've specifically authorized 19 that in No. 6. 20 We don't see that being an issue as far 21 as the sale of pull tabs go. The audit staff still 22 prefers that, as the deals are stored, they be stored 23 together, same ticket with same ticket, but as far as 24 the sale, that's not an issue for the staff. 25 The record-keeping requirements, I 11 1 believe that there are some changes. I'm not sure 2 exactly what those are. I do know that the 3 manufacturers have indicated to me that they would 4 like to see additional record-keeping requirements for 5 themselves included in the rule, and it's my 6 understanding that they intend to submit those during 7 a comment period. 8 And finally, Commissioners, if you go 9 over to Page 13, starting with smaller "h," that is 10 where we start to identify the different types of pull 11 tab tickets that are -- or will be authorized for sale 12 by this rule. And what I'd like to do real quickly is 13 just show you some different examples. 14 What I've given you is essentially what 15 would fall under the definition of an instant ticket. 16 That is a pull tab. You pop the tabs on the back of 17 the ticket, and you know instantly if you've achieved 18 a pattern that wins a prize. 19 The vast majority of the new games that 20 we're proposing would fall under the definition -- the 21 broad definition of an event ticket, and an event 22 ticket is one where you still have a tab similar to 23 what you have in your hand. You can open that tab, 24 and you may or may not have an instant winner, but you 25 may have a symbol that designates your opportunity to 12 1 participate in a future-time drawing. 2 Now, what I've just handed you would be 3 referred to as an event ticket, again a regular pull 4 tab like you're used to seeing, but you have with it 5 that flare, and what you do is -- you'll notice that 6 there are indications that on one of these tickets is 7 essentially a bingo ball that's going to look like -- 8 that's how the graphic will appear, and the indicators 9 1 through 75 are within this deal, but the way that 10 that winner is determined is by drawing a bingo ball 11 out of the blower, much like is done at a regular 12 bingo game. 13 This type of concept brings a lot of 14 excitement to the games because it creates the 15 atmosphere where the individual is waiting for another 16 event to determine the winner. It also helps 17 encourage that a deal be sold out so that someone will 18 know they have the opportunity to achieve all these 19 different types of designators, the 1 through 75. 20 Another concept would be what's called 21 a paddle wheel, and it's the same as drawing a bingo 22 ball except you have a ticket with a designator on it, 23 and the winner is determined by spinning one of those 24 big wheels like you see at a carnival and matching 25 either a number or a symbol. 13 1 So, we think that another example -- 2 Let me show you real quick a coin board. And a coin 3 board is a type of ticket whereby, again, you play 4 your pull tab ticket -- and I'm going to ask Nolles to 5 stay up here and make sure that I explain this 6 correctly, but, again, you play your regular pull tab, 7 and one of the designators under the tab will give you 8 the opportunity to go up to this board and remove one 9 of these seals, and underneath the seal will identify 10 what prize you've won, and these prizes usually -- 11 they can consist of actual U.S. currency or special 12 medallions, etcetera, etcetera. But it's just an 13 attempt to bring a different element of excitement to 14 pull tabs. 15 These games are very common in other 16 jurisdictions. I just returned from the North 17 American Gaming Regulators conference in Charleston. 18 There was a lot of discussion from regulators about 19 the fact that these different types of games do help 20 generate excitement in the halls and help the sales of 21 pull tabs. 22 The staff would recommend that you vote 23 to propose this rule for publication in the Texas 24 Register for a public comment period. The staff would 25 also recommend that a public hearing be scheduled. I 14 1 think we've identified May 31st as the date for that 2 public hearing. 3 We've put a lot of work in this rule, 4 and we have had a lot of good input from members of 5 the industry. It's been referred to -- and I think 6 it's an accurate description -- that this is still a 7 work in progress. As I mentioned, I know that the 8 manufacturers have comments that they want to submit 9 on it. The staff would also hope that -- would seek 10 out comments relating to what could be referred to as 11 minimum standards of play for these different types of 12 pull tabs. 13 COMMISSIONER WHITAKER: What do you 14 mean by that? 15 MR. ATKINS: For example, we would want 16 to discuss whether or not a -- on an event ticket, the 17 entire deal had to be sold out before the event were 18 held, you know, exactly when during the play the event 19 would occur. I think that from our standpoint, 20 particularly as it relates to the event ticket, there 21 are still going to be some comments that we need to 22 receive on record-keeping requirements. 23 And that very briefly is my 24 presentation, unless you have any questions. 25 COMMISSIONER WHITAKER: You talked 15 1 about what you consider to be the upside of doing 2 this. What would you say are the downsides of doing 3 these changes? 4 MR. ATKINS: The downside that I would 5 see right now, Commissioner Whitaker, would be the 6 fact that -- would be on our end, in that as these new 7 rules -- as these new tickets are wanting to be 8 submitted, we're going to have to test them, and I've 9 told members of the industry, if this rule's adopted 10 and it goes into, you know, effect, if every 11 manufacturer all of a sudden submits 60 tickets for 12 testing, that's going to put a burden on us. 13 So, we would probably want to do 14 something similar to what we did when pull tabs 15 utilizing symbols were authorized and have 16 manufacturers submit, say, no more than five tickets 17 to begin with, which would be reviewed and authorized 18 at the same time so that no manufacturer would get a 19 heads up on another, and it would kind of give us a 20 chance to get accustomed to the process and get it 21 into place. 22 As far as other downsides, you know, I 23 have to point out, while these games aren't new, 24 they're new for us, and they're new for Texas, and I 25 would just refer back to the fact that I think there's 16 1 still going to need to be some work done in both the 2 areas of record keeping as it relates to these new 3 tabs, as well as the minimum standards of play so that 4 we can assure that the games are being conducted in 5 accordance with either the manufacturer requirements, 6 in that the organizations -- or that the players can 7 be assured of the integrity of the games. 8 COMMISSIONER WHITAKER: Isn't the 9 record keeping going to be quite a substantial burden 10 to the operator? 11 MR. ATKINS: I don't think so. I don't 12 think the record keeping will be that much different 13 than what's required for our traditional pull tabs 14 already. You know, what I've been told so far by the 15 auditors is that, at a minimum, what we would like to 16 see in the case of an event ticket is they would like 17 to see the flare and the wing tickets retained by the 18 organization for verification that that occurred. 19 So, I don't see it right now. I don't 20 know if I can answer that question, you know, fully 21 without us getting in there and flushing it out. 22 CHAIRMAN CLOWE: Billy, I know that you 23 and members of your staff, as well as the office of 24 the general counsel, have worked hard on being able to 25 present this proposed rule to the Commission at this 17 1 meeting, and I think a lot of that effort was a result 2 of enthusiastic comments that were made at the last 3 Bingo Advisory Committee meeting by members of the 4 industry regarding the need for this, and I suppose 5 we'll hear from members of the public about that here 6 this morning. 7 I have a couple of questions regarding 8 these proposed rules, and I appreciate you saying this 9 is a work in progress. This is not a finished rule 10 that the staff feels is really ready to be considered 11 in its present form, but is being requested as a 12 proposed rule so that additional and further work can 13 be done on it, and you do plan a public hearing which 14 I think will be very beneficial in regard to having 15 input from all involved, and I noticed in the proposed 16 draft, you've retained the seal on the ticket. Would 17 you comment on that. 18 MR. ATKINS: I would, 19 Commissioner Clowe. The seal on the ticket, to the 20 best of our knowledge, has been required as long as 21 pull tabs have been authorized in this state, and we 22 find it to be a very effective regulatory tool for the 23 auditors and investigators when they're out in bingo 24 halls because they can, you know, look at the ticket, 25 look for the seal, and have a certain degree of 18 1 confidence that that's a ticket that's been authorized 2 by the Commission for sale in the state of Texas. 3 Now, the use of the seal, I know, has 4 been an issue for manufacturers. Originally, the rule 5 required that the seal be printed on the front of the 6 ticket, and that did require that they create 7 essentially two different presses for their games, one 8 without the seal that they could sell in other 9 jurisdictions and then a separate one just for the 10 state of Texas. 11 Amendments were made to the 12 administrative rule several years ago that still 13 required the seal, but didn't specify the front or -- 14 the face or the reverse of the ticket. So, what the 15 manufacturers do is they put the seal on the reverse 16 of the ticket so that all they had to print was a 17 separate back stock for their tickets and not the 18 separate face stock for all their other jurisdictions. 19 They have requested in the past -- 20 although at my last meeting on, I think, either 21 Tuesday or Wednesday with the manufacturers, they did 22 not bring up the seal. I have reinforced to them that 23 we believe it is an effective regulatory tool, and, 24 you know, as far as they're concerned, that it causes 25 them to have a separate stock that's sold nowhere else 19 1 but tickets (sic). You know, it's really hard for me 2 to verify that because, again, I'm told by other 3 jurisdictions that they see those tabs in their state 4 with the Texas seal on it. 5 So, if we were at a point where we were 6 able to verify tickets using a serial number or form 7 number electronically through some sort of wireless 8 system, I think that we could forego the seal on the 9 back of the ticket, but at this time, I just don't 10 think that we're able to. 11 CHAIRMAN CLOWE: Very good. 12 And, Billy, I want to point out to you 13 what I think is a typographical error on Page 2 at the 14 end of the second paragraph, last line, derived 15 from -- I think that should be bingo, unless you're 16 inventing a new game. 17 MS. KIPLIN: I'm sorry, Commissioner, 18 where was that again? 19 CHAIRMAN CLOWE: Second page, bottom of 20 the second paragraph, last line. Should be bingo, I 21 think, instead of bongo. 22 MS. KIPLIN: We'll fix that. And while 23 we are on the subject, on Page 2, there are three 24 paragraphs that refer to amendments. Each of those 25 really should be new rules, proposed new rule on the 20 1 three paragraphs on Page 2. 2 And then, Commissioners, I wanted to 3 follow up on the issue with regard to the work in 4 progress on the rule. I want to make sure that you 5 all and everybody are aware that we are anxious to 6 receive comments. I anticipate we will receive 7 comments, Billy and I do, and depending on the nature 8 of the comments and depending on the nature of the 9 changes to the proposed text, if any, it may require 10 that the proposed new rule be republished for an 11 additional public comment period. So, I want to make 12 sure that we're -- we've put that out there so that 13 everybody understands that. 14 CHAIRMAN CLOWE: I appreciate you 15 mentioning that, and I'd like to make that abundantly 16 clear to everyone, that if the Commission were to 17 adopt this for publishing for proposal, that it is 18 possible, as you stated, that substantive changes will 19 result in possibly the need for republishing. 20 MS. KIPLIN: Yes, it will -- In my 21 view, it will depend on the nature of the comments and 22 the nature of the changes, if any, and we'll have to 23 do an analysis. There's only really one case in Texas 24 law that even addresses the question of when an agency 25 has to republish a rule, and we'll look to that one 21 1 case yet again for guidance. 2 CHAIRMAN CLOWE: And while you're 3 speaking, will you address the proposed rule in regard 4 to it being within the scope of the Bingo Enabling 5 Act? 6 MS. KIPLIN: Yes, I will. I -- Billy 7 and I spoke about this in connection with some of the 8 other draft language that we had seen, and I had an 9 opportunity to visit with Billy over the last couple 10 of days regarding the types of pull tab tickets that 11 are being proposed for sale and the type of games, and 12 I've had an opportunity to take a look at the Act, and 13 I will say that there's -- there are -- there's a 14 couple of definitions in the Bingo Enabling Act. One 15 is bingo, and that is a very broad definition. The 16 other one is pull tab that incorporates the word 17 bingo, and then the only real reference that I'm aware 18 of is 2001.408 that does indicate that subject to the 19 Commission rules, bingo may be played using the pull 20 tab bingo ticket. 21 Based on my conversations with 22 Mr. Atkins regarding the text of the proposed rule 23 that's in front of you for consideration today for 24 public comment, I do believe that it is within the 25 statutory authorities, specifically the Bingo Enabling 22 1 Act and the organic language in there, to propose for 2 public comment. 3 There was other language that I was 4 concerned about and did not have an opportunity to do 5 a -- in my view, an adequate legal analysis because I 6 wanted more facts, and that's not part of this 7 particular proposed rule making. Each one of these 8 games does use a pull tab ticket, and the use of that 9 pull tab ticket, I think, does conform to the 10 definition of bingo and also pull tab. 11 CHAIRMAN CLOWE: Very good. 12 We have two members of the public who 13 wish to comment on this item, Mr. Fenoglio and -- is 14 it Mr. Cornwell? 15 MR. CORNWELL: Yes. 16 CHAIRMAN CLOWE: Gentlemen, would you 17 come forward. 18 MR. FENOGLIO: Mr. Chairman, for the 19 record, my name is Stephen Fenoglio. I represent 20 900-and-some-odd organizations. You've got my notice 21 list. Mr. Cornwell is in from out of town and agreed 22 to stay over to demonstrate briefly some new product 23 that this rule, if adopted, would allow, and I'm going 24 to allow -- if it -- with your permission, allow him 25 to go first. 23 1 CHAIRMAN CLOWE: Can you get that 2 microphone a little bit closer to you so you don't 3 have to lean over into it? 4 That's it. That's great. I want you 5 to be comfortable. 6 MR. CORNWELL: Thank you, sir. My 7 name's Nolles Cornwell, and I am principal in 8 KBD Sales out of Dallas, Texas. I've brought for your 9 review real quick what I think is the economic impact. 10 If you'll give me a moment, I'll pass this out. 11 The first page contains assumptions. 12 These are conservative assumptions. Second page is 13 what I'd like to, for the time, flip to. You'll see 14 in the first column where we had the actual numbers of 15 pull tab sales, cost of sales, prize payouts, so forth 16 for the actual numbers for the year 2001. 17 Through our assumptions, through what 18 has been proposed in the rule, the use of these new 19 tabs, we're projecting an increase of one and a half 20 times of what we're existingly selling in the bingo 21 operations today. 22 If you'll follow me down, we recognize 23 that additional tab sales is going to take additional 24 paid labor. We recognize there's going to be an 25 increase in the cost of the number of tabs provided by 24 1 distributors to the organizations, but we do recognize 2 a 31-million-dollar -- almost 32-million-dollar 3 increase in moneys available to charities after 4 additional labor. 5 These tabs should create somewhere 6 approximately 135 jobs at an annual salary base of 7 approximately $30,000 a year. You will see an 8 additional sales tax revenue to the State of 9 approximately $153,000. We should see the Lottery 10 Commission receive about $4,400,000 in additional 11 prize fees in Texas. 12 So -- and that is -- and it will 13 create, like I said, 135 jobs, $30,000 a year, or an 14 additional $4 million in payroll, and I'd like to just 15 bring that -- that this is a positive step. It's a 16 positive step in the right direction. 17 Commissioners, I can point to other 18 jurisdictions in which we operate in and some of those 19 jurisdictions generate 80 percent of their gross 20 revenue from -- out of bingo out of pull tabs, and 21 this right here, after the projected increase, only 22 represents approximately 25 percent of the gross bingo 23 receipts. 24 So, we got a long ways to go if we want 25 to catch it, but there's a lot of benefits to where 25 1 we're headed. I really appreciate your help, and the 2 staff's been just absolutely great in working with us 3 to draft these new rules, and I hope it's a big step 4 and we don't quick step it. Thank you. 5 CHAIRMAN CLOWE: Thank you, 6 Mr. Cornwell. 7 Mr. Fenoglio, are you ready? I'm going 8 to ask you to do something that's different, if I may. 9 There are six individuals who wish to give testimony 10 to the Commission on this subject, and I think all of 11 them are speaking in favor of this. So, I'm going to 12 ask all of you to be as brief as possible. 13 MR. FENOGLIO: You bet. I'll be happy 14 to. 15 And I had understood that Mr. Cornwell 16 was going to demonstrate some new product, but I 17 gather -- Is that -- Mr. Atkins, did you cover that 18 sufficiently? I'm sorry. 19 MR. ATKINS: That's what we were 20 talking about. 21 MR. FENOGLIO: Well, let me go with my 22 comment. 23 We appreciate Ms. Kiplin's involvement 24 and Mr. Atkins. It's a -- from what we've seen in the 25 last 20 days, a very favorable environment for new 26 1 product in Texas. This is still a work in progress. 2 We still will have some issues to resolve. We've 3 resolved many in the process that began when 4 Mr. Atkins agreed to meet with several representatives 5 of the industry and myself last week, and some of the 6 issues that -- we had an understanding on and we've 7 got agreement on, and others we're working through and 8 we'll continue to work through. 9 We're glad the staff proactively 10 suggested for the Commission's consideration a public 11 hearing, because as, you know, Mr. Chairman, that's an 12 important part of the governmental process, and we 13 will participate in that. We also appreciate -- Billy 14 and I, as you know, has been out of town. He and I 15 last night started exchanging phone calls from the 16 airport for Billy and me, and we actually caught up 17 about 10:15 last night and went through about 30 18 minutes of consideration. 19 And I'm not going to belabor the point 20 other than we want you to vote to publish it for 21 public comment. I don't want you to think that, by 22 these comments, we agree with everything that's 23 drafted. We don't. But as we've said, Mr. Chairman, 24 in the meetings that you have sat through -- and God 25 bless you for doing that. It was a lengthy process of 27 1 several hours, but we will work through that with 2 Mr. Atkins. He's offered to meet with us and my 3 clients on a mutually convenient schedule. 4 As you know, we were making this an 5 ex parte. It's not a -- (inaudible) -- case 6 proceedings. So, we can sit down with staff, and we 7 look at -- look forward to being able to do that. 8 I'll be happy to answer any questions, 9 but in the spirit of what you suggested, Mr. Chairman, 10 I'm keeping my remarks short. 11 CHAIRMAN CLOWE: We're most 12 appreciative. Thank you, sir. 13 I'm going to call on the individuals as 14 their appearance forms have been handed to me. Next 15 is Mr. Bresnan. 16 MR. BRESNAN: Thank you. My name's 17 Steve Bresnan. I represent the bingo interest group, 18 as well as a number of charities around the state, and 19 I appreciate the opportunity to be here today. 20 I feel really good about being here to 21 speak on this subject. Mr. Chairman, thanks. 22 Appreciate it a lot, appreciate your attendance at the 23 hearings, and appreciate y'all listening to people in 24 the bingo community. I think this is going to go a 25 long way towards helping them. 28 1 Really looking forward to the public 2 hearing. So, I'm going to save most of my comments on 3 this rule for that time period, but I do want to give 4 you a little flavor about what I think you'll hear. 5 Commissioner Whitaker, I think your 6 question about the record-keeping burden is well taken 7 and ought to be seriously thought through during that 8 process to minimize the burden so we're not increasing 9 the revenues on the one hand and the expenses on the 10 other. 11 The Texas seal, the Lottery Commission 12 seal issue, I'm not sold that it's a security 13 enhancing item, but I think the manufacturers ought to 14 come down here and explain to people in bingo how 15 they're going to save money if that seal comes off, 16 and I would issue that challenge to the manufacturers 17 to come and talk to the people, their customers, about 18 how they can save money if the seal comes off there, 19 and I'll be issuing that challenge to them privately 20 and personally after this meeting. If we can't defend 21 it -- If they can't defend it and show how we're going 22 to save money for the charity out there, increase 23 their bottom line, then you probably won't hear me 24 talking about the Texas seal again. 25 Finally, I do want to say -- I think 29 1 there's one area that's jumped out at me, and I've got 2 different copies. So, I want to try to take you 3 directly to it or I'll end up flipping through the 4 material here, but I do think there's one provision in 5 here. It's actually two pieces. They're in separate 6 places, that we can combine to eliminate the best 7 selling pull tab in Texas today, and it -- this -- 8 the -- this particular pull tab was submitted and has 9 been approved by both the TABC and this Commission in 10 the past. 11 At one time, this Commission wanted to 12 review that and basically told the company that they 13 were not going to approve that again. We went to 14 court in San Antonio, and we demonstrated that the 15 Lottery Commission has a number of products that 16 operate on exactly the same principle as that 17 particular pull tab. The judge spent a fair amount of 18 time looking -- comparing the Lottery tickets that we 19 took down there to the pull tab. Ultimately, we 20 prevailed in that and were able to reach a settlement 21 ultimately. 22 So, I'd like to be sure, as we go 23 through this over the next 30 to 45 days, that we're 24 looking for unintended consequences like that and we 25 don't take something off the table while we're trying 30 1 to put things on the table. I appreciate it once 2 again. Thanks. Billy, thank you. I appreciate it. 3 MR. ATKINS: Mr. Chairman, if I can 4 comment on one thing. Steve's correct on that 5 language -- and I don't remember exactly where it 6 is -- that relates to a specific prize being awarded 7 for a specific pattern. I'm just trying to go by 8 memory. That's something that Mr. Fenoglio and I 9 discussed last night, and I had no recollection of it. 10 My best guess is that that's one of 11 those things -- At one time, we had so many drafts 12 going back and forth, that just found it's way back to 13 him, but I do appreciate Mr. Bresnan bringing it up. 14 COMMISSIONER WHITAKER: Are you sensing 15 that perhaps the rule needs to be revised or 16 republished next time around, I mean, this proposed 17 rule? I mean, I'm getting the sense that it's very 18 much a work in progress. 19 MR. ATKINS: I, right now, don't know, 20 Commissioner Whitaker. I, again, would like to go 21 forward and see if we can, you know, have a rule that 22 we can bring forward for adoption. 23 COMMISSIONER WHITAKER: Do you think 24 it's at the point where it can be fruitfully 25 published? 31 1 MR. BRESNAN: Yes, ma'am, I do, and I 2 think we should. And, you know, we'll come and share 3 all of our concerns about it. When they're fixed, if 4 the rule is substantially different and, in Kim's 5 judgment, it needs to be republished, then we'd 6 support republishing, but we've come along way. This 7 is a long way. We've been working on this for a year 8 and a half, two years. So, I wouldn't want to see 9 anything happen that would derail that process at this 10 point in time. 11 I would like to say one other thing. A 12 number of people who have been attending these 13 meetings regularly have come from across the state. 14 They're not all going to speak today, but I've met 15 with them, talked to them, and I think they're all of 16 a single mind, that they really appreciate the 17 leadership that you guys are showing, and we'd like to 18 go forward and get this on the Register so we can get 19 the rest of bingo involved in this discussion. Thank 20 you. 21 MS. KIPLIN: Commissioners, just so you 22 know, if you do vote to publish for public comment, 23 because of the Register scheduling dates, we would 24 need to get it filed by Monday at noon for it to come 25 out in the next issue, and that begins the public 32 1 comment period when it's actually published, and that 2 issue would be May 10th. 3 So, there is -- Even now, there is a 4 bit of a delay, and I think that's why there is a 5 desire on both the staff's part and the industry's 6 part to go ahead and get it published, recognizing 7 that there may be a need for republication, but, yet, 8 at the same time, the comments that may be obtained 9 during the comment period would be very helpful even 10 if the rule is needing to be republish. 11 CHAIRMAN CLOWE: And following that 12 comment, if it were to begin on May the 10th -- 13 MS. KIPLIN: Yes, sir. 14 CHAIRMAN CLOWE: -- the next Commission 15 meeting, assuming it would occur in the month of May, 16 would be prior to the close of the comment period and 17 more than likely before the date you selected for the 18 public hearing? 19 MS. KIPLIN: That is correct. 20 CHAIRMAN CLOWE: So, the Commission, 21 therefore, if the rule did not have to be published 22 again or republished, could not act on this if it 23 chose to until the June meeting of the Commission? 24 MS. KIPLIN: I think that, in any time 25 during a rule making process, the Commission retains 33 1 the right to withdraw and republish, but given the 2 timing and the fact that the -- we're looking at a 3 May 31 hearing date, I'm not sure that you would have 4 meaningful information earlier than the hearing date 5 to make a decision. 6 CHAIRMAN CLOWE: That was the sense of 7 my question to you for confirmation. I want to say 8 that so that the members of the public would not 9 anticipate that the Commission, under the schedule 10 we're looking at now, if the Commission votes to 11 publish this rule this morning, would be in a position 12 to act, at the earliest, until the June meeting? 13 MS. KIPLIN: That's correct. You would 14 not be in a position to act if your action would be to 15 adopt. You retain the power to withdraw and republish 16 at any time during a rule making. However, my sense 17 is that you would not have substantive comment before 18 you at a May Commission meeting -- 19 CHAIRMAN CLOWE: Correct. 20 MS. KIPLIN: -- for you to consider the 21 withdrawal and republication. 22 CHAIRMAN CLOWE: And I want that stated 23 so everyone here can understand it out of an abundance 24 of desire to have everybody see what the track is -- 25 MR. BRESNAN: Sure. 34 1 CHAIRMAN CLOWE: -- if the Commission 2 votes to publish today. 3 MR. BRESNAN: Right. You bet. We'll 4 have to spread the word on that as well, but, you 5 know, I think one of the reasons we wanted to bring a 6 group of people down here today was to see the finish 7 line and know that they were approaching it, and, so, 8 we'll help to make sure that they know exactly where 9 the finish line is out there. 10 We're also going to work diligently to 11 get a whole lot more people in bingo involved, and I 12 think if this -- Actually, this hanging out there for 13 a little while and this time frame will enable us to 14 do that. I think it's obviously very positive for the 15 Commission and very positive for us to get that done. 16 So, we'll keep after it. Okay? Thank y'all. 17 Appreciate it. 18 CHAIRMAN CLOWE: Thank you, 19 Mr. Bresnan. 20 Mr. Garrison. 21 MR. GARRISON: Mr. Chairman, Gene 22 Garrison from Midland, Texas. 23 I didn't see the new proposed rules 24 until this morning, but I'm glad to hear that you're 25 not going to act on those until at least we've had an 35 1 opportunity to discuss it and review it. I got the 2 feeling in the quick look at it that I had that we 3 really have not accomplished the objective of 4 increasing the revenue from pull tabs, and that's my 5 thought on the matter, and I do appreciate the fact 6 that we're going to have another hearing on the 7 matter. Thank you. 8 CHAIRMAN CLOWE: Thank you, 9 Mr. Garrison. 10 Ms. Taylor. 11 MS. TAYLOR: I've brought a handout for 12 you. 13 My name's Suzanne Taylor. I serve on 14 the BAC. I'm here today to express my own opinions, 15 and I have a much narrower view than Nolles did when 16 he showed you what the economic impact on the state 17 could be. I'm showing you what the economic impact on 18 my bingo hall would be. 19 The Page 1 shows you our attendance, 20 our total attendance, and the easiest way to see how 21 we've done is to look by the year. Our total 22 attendance for the year in 2000 was 115,063 people, 23 and we netted $84,347 on tabs alone. 24 When you go to 2001, our tabs have 25 dropped to 104,798 people, and our profit on tabs has 36 1 dropped to 65,809. So, I think you can see not only 2 has the attendance gone down, you can see the effect 3 that this has had on our tab sales. 4 Just recently -- in fact, last week -- 5 if you'll go to Page 2 -- I traveled over to 6 Baton Rouge with a couple other bingo folks that are 7 very interested in this issue and went to two 8 different bingo halls. The second hall I was at was a 9 very small hall, looked like a VFW type of hall. Both 10 halls were selling the tabs that we currently sell, 11 the kinds that we currently sell, event tickets and 12 sealed tickets. They didn't have any of the other 13 paddle wheels or pinwheels or anything else, but just 14 those two types of tabs at the hall. 15 At the second hall that I was at, the 16 84 person -- there were 84 people in attendance at the 17 bingo session. The prize for the evening was $2,800, 18 which is $300 more than we give out, and imagine that. 19 They're doing that with 84 people. Are they making 20 the money on bingo? No, they weren't. They were 21 making the money on the pull tabs. 22 By the end of the evening, the Bombers, 23 which was the charity playing -- they sponsor many 24 baseball teams and were using volunteers to sell these 25 tabs. So, you know, our paid employees that are there 37 1 night after night, they're doing an awesome job doing 2 this. At the end of the evening, they sold $7,800 in 3 pull tabs. Obviously that's where the money is coming 4 from in this hall. That's tab sales average of $92.86 5 a person. They had an average payout of about 75 6 percent. 7 So, I took the same numbers that we had 8 on Page 2 and dropped them down at the bottom of 9 Page 2 and said, with the same attendance we had in 10 2001, if we could do what the Bombers did, we would 11 have $2,432,885.57 profit on tabs alone, but I don't 12 want to think that, you know, the Bombers can do it 13 better than we can do it. 14 So, on Page 3, I said here's what we 15 can do. If we can do one-sixth of what the Bombers 16 did, that would net us $405,568. If we could do 17 one-twelfth what the Bombers are doing, we would end 18 up with $208,784, one-twelfth, compared to -- well, to 19 65,000. That shows you the impact on my hall that 20 this one issue could have. 21 So, I ask you please, please publish 22 those rules as quickly as possible. They're not 23 perfect. Nothing's perfect in a perfect world. I 24 really -- My hope is that the items that need to be 25 corrected are small enough that they don't need to be 38 1 republished because, for the hope of my hall and a lot 2 of other halls in this state, we need the rules as 3 quickly as we can. 4 I personally saw what this can do for 5 my hall, and that's very selfish, but it's not going 6 to only help my hall, it's going to help the halls 7 across Texas. So, in a much smaller area, I thought 8 you could see what this -- the impact this could have 9 on one hall, and, of course, you can also see I put 10 the prize fees in there, the difference of prize fees 11 that would bring in on this also. 12 So, I know it would help the Lottery, 13 but it would help us, and I think that I'm just one of 14 many little fish out here that's asking for your help 15 in asking you please, please publish these rules and 16 give us this opportunity. 17 Thank you. Did you have any questions? 18 CHAIRMAN CLOWE: No, ma'am. Thank you. 19 MR. ATKINS: Mr. Chairman. 20 CHAIRMAN CLOWE: Yes. 21 MR. ATKINS: Can I make one quick 22 clarifying comment? I think both Suzanne and Nolles 23 have referred to the prize fees that they anticipate 24 these type of tickets would generate and what those 25 prize fees would bring to the Lottery Commission. 39 1 Those prize fees don't go to the Lottery Commission. 2 They go to the general revenue fund. So, this isn't 3 revenue that's received by the Lottery Commission. 4 CHAIRMAN CLOWE: Right. Thank you, 5 Billy. 6 Mr. Hutchings. 7 Good morning. 8 MR. HUTCHINGS: Good morning. My name 9 is Charles Hutchings. I represent Amvets Post 52. I 10 too would like to thank everyone here today, the 11 Commission, the commissioners. You know, I just can't 12 believe how much cooperation is going on here, and I 13 hope it continues in the future in other venues other 14 than the pull tabs. 15 There is an item or two in here that I 16 disagree with or have a strong opinion on. One of 17 them is G on 4 where they want to put the profit from 18 the game on the flare, or that's the way I take it as 19 what it says. I don't think that putting the actual 20 profit from a deal of tabs is realistic for -- That 21 would -- I'm sure they'd be considering every tab 22 sold, and that's not exactly how it works out. You 23 have tabs left that you can't sell after the winners 24 have all been sold out, five or whatever the deal is. 25 At the end of sessions, boxes are 40 1 pulled. So, it would be over or under. It wouldn't 2 be true -- It's not truth. It's not really truth. 3 It's truth if you consider it as just that, in one 4 area only. 5 And then over on inspections, it says 6 something about the Commission representatives or 7 designees. I don't know what kind of designees could 8 be coming out to inspect tabs or under what 9 conditions, but, you know, it's just minor stuff, and 10 I think it's been stated we'll try to bring all that 11 up at the public hearings, and we do appreciate it 12 very much. Thank y'all. Have a great day. 13 CHAIRMAN CLOWE: Thank you, 14 Mr. Hutchings. 15 Mr. Arnold. 16 MR. ARNOLD: Thank you very much. I 17 want to thank everyone that's participated in the 18 production of this draft. It's amazing to see such 19 great cooperation. This has come at a very crucial 20 and critical time for charity bingo. I have been 21 involved as a charity leader in Houston, and we have 22 been involved in bingo since 1986, and I come today 23 representing Reunion Ministries and several other 24 charities throughout the Houston area, and we have 25 been involved there with meetings of many charities 41 1 over the past two years, discussing the decline of 2 charitable bingo in Texas, and it has gotten to a 3 point now that many charities are suffering death rows 4 because the crowd has gone down. The economy, with 5 the floods in Houston, with all the things that have 6 happened the past few years, it's become very, very 7 difficult, but I think most of you know that already. 8 The good news is there's something that 9 can be done about it, and the charities have put 10 together their thoughts and have worked hard at coming 11 up with some kind of solution, and that's why we 12 charity people have gotten behind the concept and have 13 written letters to the bingo division, have called on 14 the phone, have called representatives, have contacted 15 people in the industry, and have, I think, helped 16 galvanize now a chance to increase the different types 17 of pull tab products that we'll be able to offer to 18 our players. 19 They're very excited about the 20 possibilities. I mentioned this to them, that 21 Austin's thinking about giving us the liberty to offer 22 more products, and they're so happy because now for 23 many -- so many years, they've been playing the 24 similar kinds of games. So, we've studied with our 25 accountants and with our people -- our boards have 42 1 met. We see this as an opportunity now to make a real 2 difference. 3 We really do need this, and we're so 4 pleased with the draft. I've studied and read it. It 5 has so many good products in it that will really make 6 a huge difference. 7 We are on the ropes. It's a fight 8 right now. One bad day of weather, we could lose 9 $1,000 because we don't have good days like we used to 10 early in the month where we'd have a super good day 11 that could absorb a hit later in the month. We're in 12 a position now, because we have an average day early 13 in the month, when we get ahead later in the month, it 14 takes away the profit for the entire month, and I 15 speak now for many, many charities. 16 So, we see this as a very good thing. 17 It's one of these things that -- I mean, we could 18 debate how many -- as we theologian types like to do, 19 how many angels can dance on the tip of a pull tab, 20 but we're not going to do that. What we want to do is 21 simply let you know that this is a beautiful draft 22 with so many good things in it. Just get that 23 lifeline out to us as soon as you can. We appreciate 24 it very, very much. 25 CHAIRMAN CLOWE: Thank you, sir. 43 1 MR. ATKINS: Mr. Chairman. 2 CHAIRMAN CLOWE: Sir. 3 MR. ATKINS: If I could just point out 4 it was actually Mr. Arnold who first brought the 5 concept of merchandise pull tabs forward to the 6 Division. So, in a way, he, three years ago, kind of 7 got this ball rolling. 8 CHAIRMAN CLOWE: Very good. 9 Mr. Highland. 10 MR. HIGHLAND: My name is Jerry 11 Highland. I'm in general management. I do the 12 accounting for about 40 different charities, which, of 13 course, as I told you in our last meeting, have been 14 declining. Eight of those have gone on administrative 15 hold in the last couple of months. 16 I just want to underline what's already 17 been said, inasmuch as I cannot tell you how excited I 18 am about this meeting today because I think for the 19 first time in several months, I feel like that I can 20 tell my charities there's some hope coming very 21 quickly if you could just hold on. Last week I did 22 meet with one of our bingo halls and recommended to 23 them that they shut the hall down completely or I 24 said, at the very least, let's shut the hall down for 25 three days a week, hoping that we're going to get some 44 1 very quick relief here with some new products, which 2 in my sense in looking at what we have here, I would 3 not be opposed of just approving this like it is and 4 let's go with it, let's get it done, so that next week 5 we can start selling some pull tabs that we can start 6 seeing some additional revenue, because we are, as 7 Mr. Arnold said, on the ropes. 8 We really have a number of our 9 charities who now, for the second quarter in a row, 10 will have a zero distribution -- charitable 11 distributions, and that's what I focus on the most is 12 to be sure that there's some money coming to the 13 charity. I have a fire department that is under audit 14 now since last week, and I'm glad that it is because 15 I'm saying I hope that the auditors can see that we're 16 not telling any lies here. We're in trouble. You 17 know, we've got a zero requirement of donation last 18 quarter, and once again this quarter, it's another 19 zero. That charity has to consider what am I in bingo 20 for; if I'm not going to get any funds out of it, 21 let's quit. 22 And, so, I just said to them last week, 23 we're going to a meeting this week and I hope that I'm 24 going to have some good news to bring back to you that 25 there is a lifeline coming out, and within a month or 45 1 two months, we may be able to start selling a product 2 that is going to bring new revenue. I have looked at 3 our numbers for the last -- just the last three weeks, 4 I've seen a 25 percent decline in our deposit 5 averages, which is another number that I look at. I 6 look at gross receipts, I look at all the other costs, 7 I got to look at how much money actually goes into 8 their bingo bank account on a daily basis. 9 First thing I do every morning is turn 10 the computer on, look at all of my e-mails and check 11 all of the deposits and look and see what my charities 12 are depositing in the bank, and those bank deposits 13 have declined about 25 percent in just the last three 14 weeks, and I'm anticipating further decline in the 15 month of May. 16 So, we're in a really big crisis right 17 now. So, I'm very hopeful that on this -- that this 18 could get published immediately and then by the June 19 Commission meeting, you'd have everything clarified so 20 that you actually could approve without republication. 21 If it has to be republished, then fine, let's do that. 22 Let's not stop the ball and get it going. 23 Thank you, Billy, for -- I'm just 24 amazed that y'all did so much so quickly and for 25 Ms. Kiplin to look it over and give her opinion. I 46 1 mean, everybody's certainly had to do a lot of 2 midnight oil here to do this, and we thank you very 3 much because we very badly need it. Thank you. 4 CHAIRMAN CLOWE: Thank you, sir. 5 Chairman Neinast, could I ask you to 6 carve out that portion of your Bingo Advisory 7 Committee report and comment on this issue, please? 8 CHAIRMAN NEINAST: Thank you, 9 Mr. Chairman. I'm Bill Neinast, the lame duck chair 10 of the Bingo Advisory Committee. What I say is being 11 taken a little out of context. I was going to cover a 12 number of these issues in my report, and I'll probably 13 repeat some of them. 14 First of all, I just want to echo what 15 everybody says, this is something that is badly 16 needed, and we recommend that action be taken, but to 17 put it in context, there has been a lot of kudos 18 thrown out for the staff, but as Paul Harvey says, 19 there's the rest of the story, and I think it's 20 important that you realize and that the bingo industry 21 realizes that this issue has been pending before the 22 Bingo Advisory Committee for about two years. I don't 23 know the exact date. 24 When it first came up at the Bingo 25 Advisory Committee, I asked Billy if they could draft 47 1 a change in the rule, and I was told the staff is too 2 busy to do that; no, we can't do it. So, I turned to 3 one of the Committee members, Fabian Hoffner, who was 4 the representative of this industry, asked him if he 5 would draft it, and he said he would. 6 A long story, that rocked along for a 7 number of months or years, and Fabian resigned. His 8 replacement was Mary Magnuson. We would ask at our 9 Bingo Advisory Committee meetings the status of this 10 from the Division. We were told it was pending. I 11 went to Mary Magnuson and asked her to prepare a 12 draft, which she did and which you have before you. 13 That was presented to and brought up before the Bingo 14 Advisory Committee. 15 Then all of a sudden, the staff's 16 version appears at that meeting that was some -- I 17 don't have the exact number of pages, but it was 18 considerably longer than it is now because we did not 19 have time to review it, have said it's too long, it's 20 too much detail. It goes with the problem of 21 overregulating. So, they quickly reduced it in size. 22 I don't know the exact number. 23 So, this is something that's been 24 pending, and I will plead guilty for not pushing it 25 myself, but the cooperation that you're hearing today 48 1 has come about only in the very recent future -- I 2 mean, very recent past. It's something that should 3 have been done long ago. 4 And, Chairman Whitaker, I want to 5 comment also on your question. I hope that's a 6 question that is asked repeatedly on all of these 7 rules, is what is it going to cost the industry. 8 Chairman Clowe, you asked a very good 9 question, and I think that is -- reflects something 10 endemic to the staff, the answer of having the seal; 11 well, we've had it all along; so, it must be good. As 12 I recall at the hearing when this came up, the 13 industry representative said that there -- Texas is 14 only one or -- I'm not sure of the number, two or 15 three states that require this. All the other states 16 that have bingo can regulate it, get along without 17 that seal. They think -- they being the producers -- 18 that it can be produced at a savings to the industry. 19 That's just one point. I won't 20 comment -- I haven't had a chance to look at the 21 draft, but it is something that needs to get out 22 there, and all of these issues can be worked out in 23 the hearing process, but it is something that I think 24 needs to be put on the front burner. It's been on the 25 back burner too long, and let some of these issues be 49 1 worked out at the hearing process. 2 And I'll comment on some of this in my 3 report later. Thank you, Mr. Chairman. 4 CHAIRMAN CLOWE: Thank you, sir, and 5 I'll call on you later for the rest of your report. 6 Billy, any further comments? 7 MR. ATKINS: I think the last thing, 8 just to address very briefly the seal issue, is, 9 Commissioners, if you look to this ticket that was 10 distributed to you, if you turn it over, you'll see 11 language specific to California, and to my 12 recollection, that was omitted in the reference to the 13 states that require some sort of identifier. So, 14 my -- In regards to the seal, it's not because it's 15 always been there. It's because we find it to be an 16 effective regulatory tool. That's all I have at this 17 time. 18 Again, staff would recommend that you 19 vote to publish the rule for public comment. 20 COMMISSIONER WHITAKER: So moved. 21 CHAIRMAN CLOWE: Second. 22 All in favor say aye. 23 Aye. 24 COMMISSIONER WHITAKER: Aye. 25 CHAIRMAN CLOWE: Opposed, no. 50 1 The vote is two zero in favor. 2 I would like to thank all of you who 3 have come to this meeting this morning and urge you to 4 not only attend the public hearing on this rule, which 5 I believe general counsel has announced May 31st, time 6 and place yet to be announced, and additionally urge 7 you to continue to attend the Bingo Advisory Committee 8 meetings because I see that as an effective conduit of 9 industry thinking to the Commission -- 10 MS. KIPLIN: Commissioner Clowe, I'm 11 really sorry to interrupt you. Our audio recording is 12 our official record and -- 13 CHAIRMAN CLOWE: Let the record reflect 14 the commissioners did not talk through that tape. 15 MS. KIPLIN: Thank you. He says we're 16 good to go. 17 CHAIRMAN CLOWE: Okay. We really 18 appreciate the input as a Commission through the Bingo 19 Advisory Committee of the individuals who have 20 attended those meetings, and I hope we can keep that 21 level of participation very high. 22 We're now ready to go to Mr. Hall's 23 item, if his group is here. 24 MS. KIPLIN: Commissioner, I have one 25 housekeeping matter. 51 1 You voted to propose a rule -- a new 2 rule for public comment, and you did not vote to 3 propose the repeal of the old rule, and I need to have 4 that because I can't have a new rule out when there's 5 an old rule. 6 COMMISSIONER WHITAKER: So moved. 7 CHAIRMAN CLOWE: Second. 8 All in favor say aye. 9 Aye. 10 COMMISSIONER WHITAKER: Aye. 11 CHAIRMAN CLOWE: Opposed, no. 12 The vote is approved two zero. 13 Mr. Hall, is your group here now? 14 Let me get the agenda item that's your 15 subject. 16 MR. HALL: 13. 17 CHAIRMAN CLOWE: 13? Consideration of 18 and possible discussion and/or action on the 19 Commission's Mentor Protege program. Mr. Robert Hall. 20 MR. HALL: Thank you, Mr. Chairman. 21 Good morning, Commissioners. For the record, my name 22 is Robert Hall, director of Minority Development 23 Services. 24 Commissioners, the Minority Development 25 Services Commission is coming to you today with 52 1 question and consideration of and possible discussion 2 and/or action on the Commission's Mentor Protege 3 program. In accordance with the Texas Government 4 Code, Chapter 2161.005, all state agencies with a 5 biannual budget over $10 million are required to have 6 a mentor protege program. 7 In accordance with the Commission's 8 adopted rules, the purpose of the mentor protege 9 program is to foster long-term relationships between 10 prime contractors and historically unutilized 11 businesses or hubs. The ultimate goal of the program 12 is to provide developmental assistance to hubs that 13 will provisionally increase their ability to contract 14 directly with the State and/or obtain subcontracting 15 opportunities on a State contract. 16 Through Minority Development Services, 17 the Commission is hosting a mentor protege orientation 18 meeting on February 5th with its approved mentors and 19 potential proteges. 20 The purpose of our orientation meeting 21 was to provide both the mentors and the proteges with 22 an overview of the policies and the procedures 23 relating to the mentor protege program. During the 24 meeting, each mentor had an opportunity to give an 25 overview of the professional areas in which they could 53 1 provide assistance to the eligible proteges. The 2 approved mentors were the King Group, GTech, 3 Scientific Games -- (inaudible). 4 Mentors and proteges were also given an 5 opportunity to network with each other to discuss 6 potential relationships. At the conclusion of our 7 meetings, all mentors and proteges were informed that 8 applications would be accepted for two weeks during 9 the initial implementation phase. During this time, 10 MDS received 20 applications, all of which were 11 approved according to our procedures. MDS screened 12 the approved protege applications to determine which 13 proteges could be matched with the mentors that were 14 approved that they were able to provide the needed 15 assistance. The appropriate applications were then 16 sent to each mentor for consideration. The mentors 17 were instructed to contact all proteges and hold 18 meaningful discussions to develop the relationships. 19 On April 12th, we received notification of potential 20 mentor protege relationships that would be developed 21 by each mentor. 22 Afterwards, agreements were drafted and 23 reviewed by MDS to ensure the necessary requirements 24 for each agreement were highlighted. Each agreement 25 includes both the mentors and the protege's 54 1 commitments, duties, goals and performance measures. 2 Today, I am very pleased and very proud to announce on 3 behalf of the Commission that seven relationships have 4 been established and that the Commission has agreed to 5 sponsor each relationship. At this time, I would like 6 to defer to our executive director, Linda Cloud, to 7 identify and sign each mentor protege relationship. 8 And, Commissioners, I've asked the 9 mentors and proteges to stand up when I call their 10 name. 11 MS. CLOUD: Fogerty Klein Monroe is the 12 mentor. The protege is n8 Solutions. 13 CHAIRMAN CLOWE: May we have the 14 individuals who are here representing those companies 15 identified as well, please. 16 MR. HALL: I've been informed by 17 Fogerty Klein Monroe that all three of their proteges 18 this morning could not make it because of a meeting 19 conflict. 20 MS. CLOUD: You have Charlie here 21 with -- 22 CHAIRMAN CLOWE: And who is it with 23 Fogerty Klein? 24 MS. CLOUD: Charlie -- (inaudible) -- 25 from Fogerty Klein. 55 1 CHAIRMAN CLOWE: Thank you. 2 And you're signing the agreement as you 3 announce these individuals. Is that correct? 4 MS. CLOUD: As our sponsorship of these 5 vendors and their proteges. 6 CHAIRMAN CLOWE: Right. 7 MS. CLOUD: Fogerty Klein Monroe, the 8 mentor, and Maximum Exposure Marketing is the protege. 9 Fogerty Klein Monroe, the mentor, and 10 Packaging, Printing & Promotions, the protege. 11 Scientific Games, the mentor, and 12 4D Productions -- and I think Ron Williams is here to 13 represent Sci Games. 14 All right. Do you have your protege 15 with you? 16 CHAIRMAN CLOWE: May we have his name, 17 please? 18 THE PROTEGE: Daniel Lugo. 19 CHAIRMAN CLOWE: Thank you for being 20 here. 21 MS. CLOUD: Scientific Games, the 22 mentor, and Liberty, Inc., the protege. 23 And your name, sir? 24 THE PROTEGE: Lauren Johnson. 25 MS. CLOUD: Thank you. 56 1 CHAIRMAN CLOWE: Thank you both. 2 MS. KIPLIN: Ms. Cloud, can you, for 3 the record, just put his name on the tape? 4 MS. CLOUD: Lauren Johnson. 5 GTech Corporation, the mentor, and Just 6 Off the Square, the protege, Ramon Rivera and -- 7 THE PROTEGE: Kelly Chapman. 8 MS. CLOUD: -- Kelly Chapman. 9 GTech Corporation, the mentor, and 10 DS3 Computing Solutions, Incorporated, the protege. 11 THE PROTEGE: Davis Sylvester. 12 MS. CLOUD: David Sylvester? 13 THE PROTEGE: Davis Sylvester. 14 MS. CLOUD: Davis Sylvester. 15 Commissioners, I just want to say one 16 thing, then I'm going to turn it back over to Robert. 17 This is just another step in our minority development 18 program, and Robert's been very instrumental in 19 complying with all of this -- the regulations and the 20 stipulations on our minority program, and I'm very 21 happy that -- To my knowledge, we're one of the few 22 agencies that have more than one protege program, 23 mentors. 24 MR. HALL: Thank you, Linda, and that 25 is correct. We're one of the leading agencies to have 57 1 more than one mentor protege relationship, and we're 2 very proud of that. 3 In closing, I'd like to tell you that 4 all mentors and proteges have agreed that their 5 relationships are all volunteer, and also their 6 participation in mentor protege program is neither a 7 guarantee for a contract, nor a promise for business, 8 but an intent to foster long-term positive business 9 relationships. MDS sincerely appreciates the 10 participation and assistance you have provided us, 11 Commissioners, our executive director and staff, in 12 the implementation of the program. 13 At this time, I'll be happy to answer 14 any questions that you may have. 15 CHAIRMAN CLOWE: Robert, on behalf of 16 the commissioners, I want to thank you for the effort 17 that's going into this. I know it's been substantial. 18 To those of you who are mentors and proteges, we thank 19 you for your participation in this program. We want 20 you to know this Commission is sincerely and totally 21 dedicated to the development of these kinds of 22 relationships. 23 Linda has supported Robert strenuously 24 in his efforts, and it's a great team effort. I want 25 you to know that in the visits that Linda and Billy 58 1 and I make on legislators from time to time and 2 especially preparatory to the Sunset hearings, we are 3 constantly asked what is the status of this agency in 4 regard to hub and minority development, and as Robert 5 said, we are able to give an extremely positive 6 response to that question which is something that the 7 commissioners are very proud of. 8 So, again, we thank all of you for 9 participating in this program, and, Robert, we would 10 like to be updated at a reasonable interval on how 11 these relationships are developing and kept up to date 12 on the success of this program. 13 MR. HALL: Yes, sir. May I add to that 14 we will be monitoring these relationships on a quality 15 basis and providing you feedback as we see fit. 16 CHAIRMAN CLOWE: Very good. Thank you. 17 Now we'd like to go to Item No. 4, 18 report by the Bingo Advisory Committee Chairman, 19 possible discussion and/or action regarding the Bingo 20 Advisory Committee's activities, including the 21 March 20th, 2002, and April 10th, 2002, Committee 22 meetings. Chairman Neinast. 23 CHAIRMAN NEINAST: Thank you, 24 Chairman Clowe. For the record, I'm Bill Neinast, 25 chairman of the Bingo Advisory Committee. 59 1 I have furnished you previously a 2 summary of the two meetings mentioned by 3 Chairman Clowe that has three enclosures to it. That 4 is a very, very brief summary of two very long, very 5 productive meetings. The only way you can get the 6 true flavor of those meetings, I think, is to read the 7 accounts of the meetings. We do have verbatim records 8 prepared -- or being prepared, and this is just my 9 attempt to summarize that. Chairman Clowe attended a 10 meeting -- perhaps both of these meetings, and I think 11 he recognizes what I'm saying, that this is just a 12 very brief summary of what was accomplished. 13 Also, attached to that summary was a 14 position paper submitted by Stephen Fenoglio, and I 15 want to say I agree with everything he put in there. 16 It elaborates a little bit more than my summary, but I 17 commend his memo to you, if you've not already read 18 it, and the summary that I have prepared. 19 I would like to deviate now a little 20 from a direct report from just reporting what the 21 Committee did or said, and with your indulgence, 22 Chairman Clowe, I'd like to share with you, as this is 23 my swan song, my reflections on five years on the 24 Committee and four years of which as chair, and I 25 think there's some things that really need to be 60 1 addressed, and a lot of these were brought up at these 2 Committee hearings, and it was really gratifying to 3 see the industry turn out the way they did. I think 4 there were almost 40 -- or maybe 40 members of the 5 industry at that first meeting and almost that many at 6 the second meeting, and I hope that they continue that 7 way, and I think as the Committee gets the authority 8 to move out and hold hearings in other parts of the 9 state rather than Austin, I think -- I hope and I 10 think that we may see more participation, which I 11 think is very good for the industry. 12 So, what I have to say now is just Bill 13 Neinast's view and does not reflect, so far as I know, 14 the thinking of the Committee. First of all, I think 15 this supervision of the bingo industry is grossly 16 inefficient even for a government activity, having you 17 three commissioners making the final decision and 18 having the Bingo Advisory Committee as a filter. You 19 can say, well, they do that in legislative bodies. 20 The Congress has its subcommittees that get the 21 information and go to the floor. Corporations, the 22 board of directors have their subcommittees that bring 23 in information. 24 A big difference between those two and 25 the Bingo Advisory Committee and the Texas Lottery 61 1 Commission. Both the legislative committees and board 2 of directors subcommittees, every one of those acting 3 at those hearings have a vote on what's going to be 4 done eventually, and the people reporting to them 5 recognize that, that they have some authority and some 6 responsibility. That's not true with this situation. 7 The Bingo Advisory Division, in my opinion -- and 8 Chairman Clowe, I've discussed with you and Billy in 9 the past -- view or look at the Bingo Advisory 10 Committee as an unnecessary thorn in the side. They 11 come, and they participate. 12 I just gave you a good example of when 13 we asked for a draft of the rule that you just voted 14 on, I was told that they did not have time to do it. 15 I don't think that answer would have been given to 16 you, the Commission, if you had asked for a draft. 17 We'll get to that again as we come to one of the 18 recommended actions by the Bingo Advisory Committee. 19 On the appointment of the new 20 Committee, Chairman Clowe, you asked that the 21 Committee take that over in the past. Those 22 nominations went just through the Advisory Division 23 and then to the Committee. We appointed a 24 subcommittee. Members of that subcommittee divided up 25 the names of the nominees and called -- each one of 62 1 those were contacted, if they could, to review their 2 interest and their knowledge of this thing they were 3 to do. That subcommittee came back in with a report 4 recommending certain individuals be appointed. Phil 5 Sanderson, the department director was sitting at that 6 meeting and did not raise one issue on any of the 7 appointments. 8 One thing that came up that was 9 mentioned when it was over, that three of the 10 individuals considered by the Bingo Advisory Committee 11 subcommittee for appointment had not submitted a 12 formal application and that, in the view of the 13 Division, they should not be considered. 14 There is nothing in the Bingo Enabling 15 Act or in the rules that required it to be a formal 16 nomination. I was caught on this myself two or three 17 years ago. I did not know that if you're on a 18 Committee, you have to have another nomination so 19 that -- and several current members of the committee 20 did not know that. 21 At least in my case two or three years 22 ago, Rolanda Neal gave me the courtesy of giving me a 23 call and saying are you interested in serving again 24 and, if you are, you need to get a nomination. So, at 25 that first meeting, I announced to the public that 63 1 several members of the Committee did not have 2 nomination forms in and wanted to be considered. They 3 would be considered, and we would consider anyone else 4 at that meeting who wanted to be considered. 5 Two of them said they would be -- like 6 to be considered. Both have been former members of 7 the Advisory Committee. Their names were added to the 8 list that the subcommittee considered, and one of 9 those, the vice chair, Virginia Brackett, was 10 nominated. I'm told -- was informed yesterday at 11 2:46, according to my answering machine, that the 12 Advisory Division -- I mean, the bingo division 13 disagrees with and is going to recommend that a number 14 of other individuals be considered, one being 15 recommending Virginia Brackett because she didn't have 16 this form. 17 Again, that's endemic of something else 18 I'm going to discuss, of the Division putting form 19 ahead of substance. Like I say, there's no written 20 requirement in public documents of either the Act or 21 the rules that say you have to have a formal 22 nomination, but since they didn't comply with this 23 little internal memo or internal operating principle 24 of the Division, it's not to be considered. 25 One of the others who has been very 64 1 active in participating with the Committee by 2 attending most Committee meetings understands that 3 he's objected to because there is some action of some 4 kind pending against him or his organization within 5 the Division. That should have been known by Phil 6 Sanderson as he was sitting there listening to his 7 name being recommended by the Committee. It's come up 8 and brought to my attention less than 24 hours before 9 this Commission meets. 10 Personally, I do not see how a fact 11 that a Committee member has something pending before 12 the Division, that some type of action should 13 disqualify that person. If it does affect a 14 particular item that the Committee is considering, he 15 can certainly recuse himself as judges do in a lot of 16 cases, but that individual, Scott Ingram, would have 17 been very helpful to the Committee. I think he would 18 make an excellent member -- addition to the Committee. 19 I do not know what action is pending against him. As 20 I said, I do not see, personally, why that would 21 disqualify him. 22 The other individual, there is a good 23 reason for his or her -- I don't remember whether it's 24 male or female being considered, because it was the 25 representative of the general public, and it turns out 65 1 that that individual is a bingo operator, which I 2 agree that there is another area in which he could be 3 appointed if he or she so wanted to. I think the 4 representative of the general public should be just 5 that, someone not officially connected with bingo in 6 any capacity, but that, again, is -- this is something 7 that the Division has done in the past, something 8 that's been taken away from them, and they're saying, 9 oh, you should have done it this way, and we want you 10 to do it that way. 11 It goes to -- right to something that 12 was said repeatedly at these hearings, is that the -- 13 both the Advisory Committee and Lottery Commission are 14 rubber stamps of the Division. They -- You do what 15 the Division wants rather than what the community or 16 what the industry wants, and I think there is -- you 17 know, this is a perception of these people out there, 18 and I certainly think that -- I mean, we need to be 19 aware of that and be conscious of it and consider 20 that. 21 And an example of that was given. 22 Chairman Whitaker, you were not here I know. I don't 23 know about you, Chairman Clowe, but something came up 24 through the Committee on summary suspension power for 25 the director of the bingo division. The vote of the 66 1 Committee was to not grant that -- the summary 2 suspension power. I dissented. I disagreed with it, 3 but I brought that recommendation to the Commission, 4 and Billy talked against it, and, so, the Commission 5 went along with Billy of giving him the summary 6 suspension power. Again, maybe that was the right 7 decision. I think it is because I was the minority 8 vote on the -- but that is the type of perception that 9 the industry has of both the Advisory Committee and 10 the Lottery Commission. 11 I've already talked about the Bingo 12 Advisory Committee. To a certain extent, it is kind 13 of unnecessary. We go through all the hearings. We 14 try to summarize those for you. You have to then try 15 to sift through that and make a decision. 16 It's reflected something else I'm going 17 to be talking about in one of the recommendations made 18 by the Committee that's in my report, is that if you 19 looked at the -- your agenda today, which is typical 20 of those where you have bingo matters, it's one of -- 21 just one of many, many items. Most of the items on 22 your agenda deal with the Lottery business or Lottery 23 industry, and very little time is allotted on the 24 agenda -- I'm probably taking up more than my time 25 today for bingo, and that's a perception, that the 67 1 industry does not have a real voice and is not being 2 listened to. 3 I think there are three things, three 4 possibilities how this would be corrected. Each one 5 of them would require legislative action, but I think 6 they ultimately addressed, and that is just abolish 7 the Bingo Advisory Committee and let all of this be 8 brought directly to the Commission. I think if you do 9 that -- Chairman Clowe, you know, you've been -- Thank 10 you for doing that and the industry does, too. You 11 have been attending just about every one of the 12 Committee meetings, but you can see how that would 13 greatly increase the workload of the Commission. So, 14 that's one possibility. 15 A second possibility -- and that is one 16 that is recommended and was recommended to you by the 17 last meeting of the Committee -- is to establish bingo 18 as a separate operating agency with its own board of 19 directors. Again, as a matter of perception -- and, 20 Chairman Clowe, I'm certainly not trying to tell you 21 how to run the Commission, but the Committee 22 recommended six specific actions, one of those being 23 this of establishing the bingo division as a separate 24 agency. Of those six, only three are on the agenda 25 today. 68 1 Perception-wise, it may have been 2 better to include all of those, listen to a little 3 testimony on those, and if you think there was not 4 enough to put it to table, action till a further 5 meeting, but that goes to the perception of the 6 industry, that we, the Committee and the Commission, 7 is not being responsive to the needs of the bingo 8 industry, and I think there is a basis for that 9 perception. 10 The third possibility for creating 11 this -- or correcting this inefficiency would be to 12 establish some type of hybrid organization that 13 probably doesn't exist in any state or the Federal 14 Government, and that would be to retain the bingo 15 division under the Lottery Commission, but establish 16 another type of Committee that has some direct 17 supervisory authority and responsibility over the 18 Division, with the Lottery Commission just retaining a 19 lot of oversight or broad policy guidance. 20 I can't give you an example where 21 that's done. I don't know that it's done anywhere, 22 but it is one possibility that I thought of. But I 23 think that something has to be done to make this 24 situation work where the Commission or the 25 Committee -- Commission and the Committee can be more 69 1 responsive to the needs and desires of the bingo 2 industry. 3 And I've already mentioned that there 4 is the perception out there that both the Advisory 5 Committee and the Commission are just rubber stamps of 6 the Division. I probably added to that perception by 7 continuing a practice that was there when I came on of 8 having Billy, the director, sitting at the table, as 9 really looks like he's part of the Committee sitting 10 at the right hand of the Chair. I think 11 perception-wise that might be something that the new 12 Committee wants to look at of having the 13 representative, whoever it is, of the Division sitting 14 out as a resource person rather than sitting at the 15 table, but it goes, again, to the perception that is 16 being picked up, and that's just a minor matter. 17 Another thing that really concerns me 18 is that if you look at the history of bingo in Texas, 19 it's as old as Texas probably. It was illegal until 20 the Constitution was amended some 20 years ago to 21 authorize it. The purpose of that constitutional 22 amendment was to authorize or legalize, quote, 23 charitable bingo, to let these churches, VFWs, other 24 charities that had been playing bingo illegally, but 25 doing it for what was recognized as a good purpose, to 70 1 continue to raise money for charity. 2 That purpose, in my opinion, has been 3 completely forgotten or overlooked or hijacked -- I 4 don't know what word to use -- by two other objects. 5 The whole industry is driven through the legislature 6 and through the Bingo Advisory Division by two things, 7 is we don't want organized crime to take over. Again, 8 that goes back to this issue of the seal. This is a 9 way to make sure that there's not some illegal 10 activity going on and making sure that every penny of 11 money that's raised for charity, every penny is spent 12 for charities, and that's reflected in the regulations 13 over and over and over, which is another point. 14 In my opinion, the industry is grossly, 15 grossly overregulated. I think the best example that 16 I can give of that, if you want to challenge it, is 17 that every operator out there, whether it be the 18 Catholic church or any other church or VFW, any number 19 of members of those organizations know how to conduct 20 bingo games and how to play bingo, but we have to 21 establish an eight-hour instruction course for these 22 people to come in just to tell them how to comply with 23 the regulations. Now, something is wrong with that 24 picture, and I think you can see what it is. It's a 25 case of overregulation. 71 1 The overregulation's there because of 2 this fear of organized crime taking over or fear that 3 one penny of the net that these companies -- that 4 these charities have may not go for a charitable 5 purpose. I think it's time to have -- and I hate -- 6 advisory or subcommittees or whatever you want to call 7 them established, but I think it's time to have a 8 Commission or a Committee composed of the people who 9 are being regulated go through those regulations with 10 a fine-toothed comb and see which ones really are 11 necessary for ensuring that bingo is played by 12 charities and that the money goes to charitable 13 purposes, and I think if that's done with the idea of 14 wanting to accomplish that purpose, I think there can 15 probably be a lot of changes made that would result 16 ultimately in the increase in money left over at the 17 charities or use for charitable purposes. 18 And another two examples of this 19 overregulations is, as it started out -- and I've used 20 the term, much to Billy's chagrin, of bingo as being a 21 stepchild of the Federal Government -- I mean, of the 22 State Government because we started out with -- being 23 under the Comptroller, then it went to the Texas 24 Alcoholic Beverage Control Commission and now the 25 Lottery Commission, and I must say that -- I want to 72 1 say that you commissioners have been most attuned and 2 most helpful to the bingo industry, but since day one 3 of the Bingo Enabling Act, once a year, I've had to 4 come in with an application for the Lion's Club to 5 conduct one bingo game that nets about $400. 6 In both the Comptroller and Texas 7 Alcohol Beverage Control -- very simple procedure. 8 Under the Texas Alcoholic Beverage Control, I go 9 over -- either over to Bryan, which is near my home 10 town, or sometimes I could come to Brenham, take in my 11 application, and they would issue the license right 12 there. No more, not under the Lottery Commission. 13 You've got to come in, even with that application, at 14 least 30 days before you can play the game. 15 This is, in my opinion, an example of 16 overregulation. At least we worked out that now, 17 currently, renewal licenses cannot be more than two 18 pages long. They used to be -- I don't know how many 19 pages, but one time I had to come to Austin after my 20 application was submitted because I had failed to sign 21 two pages of the supplement where the supplement was 22 you could put on three names of officers -- I think it 23 was three names, just a limited number of officers or 24 players. I had failed to sign two pages. Everything 25 else was in order, but they couldn't process the 73 1 application until those two pages were signed, even 2 though I'd signed an affidavit on the application 3 itself, but that's an example of overregulation, an 4 example of, in my opinion, putting substance ahead 5 of -- I mean, putting procedure ahead of substance. 6 Those are my general observations. I 7 think there is some need for real change. I do think 8 that the Advisory Committee needs some more help, 9 Chairman Clowe, on making sure that the bingo division 10 is responsive to the Committee as it is to the 11 Commission. I think that would help our procedure a 12 lot. I think there has to be real consideration given 13 to establishing the bingo as a separate agency. 14 I think Mr. Fenoglio's attendant to my 15 report gives some very good and very cogent reasons 16 for doing that, and I agree with everything he says in 17 there. You can't escape the fact that the Lottery is 18 set up to bring in money for the State of Texas, the 19 bingo is set up to bring in money for charities, and 20 although that results in some taxes and fees that go 21 to the general fund, there is certainly enough 22 generated for -- to fund its own separate entity, and 23 I would leave -- or finish my report with the four -- 24 six recommendations, motions that were made by the 25 Committee for action by you, and if I could just go 74 1 through those quickly. 2 These were motions that were passed at 3 one or the other of the last two meetings of the Bingo 4 Advisory Committee. One was the appointment of the 5 Bingo Advisory Committee with the names. There's one 6 question, I think, that should be addressed, and that 7 is the nominee for general public. Turns out that 8 he's an operator, and I think that there should be 9 someone who's not. 10 The other two or three objections that 11 the Division has, I think, are -- first of all, they 12 are not timely. I don't know when they were first 13 known, but it was not called to my attention until 14 2:56 yesterday afternoon and particularly in relation 15 to Virginia Brackett. She's the vice chair. I think 16 she would make an excellent chair for the future 17 Committee. The objection to her is that she did not 18 have a formal nomination form. 19 One or two of the others, because there 20 is some pending action against those individuals in 21 the -- within the Division, I think those could be 22 handled very easily by -- since the Advisory Committee 23 has absolutely no supervisory function over the 24 Division, the fact that one of those people is on the 25 Committee should have no effect or influence on the 75 1 action to be taken or -- and if anything comes up 2 before the Committee that affects directly those 3 pending actions, that person could and should recuse 4 himself or herself. So, I think that the objections 5 of the Bingo Advisory Division to those other than for 6 the nominee to the general public are not well taken. 7 I've already mentioned -- recommended 8 that the Charitable Bingo Operations Division be 9 established as an independent state agency. I think 10 that's something that should be put on the next agenda 11 for the next meeting of this Commission and addressed 12 in some form. One that I have not discussed in 13 detail, but it's discussed in both the first 14 attachment to my summary and I discussed it briefly in 15 my summary, is that the Charitable Bingo Operations 16 Division be reorganized to include its own general 17 counsel and security division. I think that's 18 something that you could address that I don't think -- 19 I might be wrong. I don't think it would require 20 either a rule change or a statutory change. It would 21 require some, of course, budgetary changes. 22 The Rule 402.567 to change the matter 23 of appointing the Bingo Advisory Committee and 24 recommended a change to the -- That rule is attached 25 as Tab B to my report. The -- To get it into the 76 1 rule, there would probably have to be some changes 2 made and published and changes made to meet the 3 requirements of getting it as a rule change, but it's 4 something that should move forward. Basically what it 5 does is instead of appointing the entire Committee 6 every year, this would set up a Committee on a 7 staggered basis with three positions being up for 8 appointment every year so that you would have a 9 continuity of -- once the person's on and after you 10 get through the initial three years, everyone would be 11 on for at least three years to give some continuity. 12 I recommend that for your consideration, and that is a 13 member -- I mean, an item on your agenda. 14 Another is that the Gaming Laboratory 15 International be used for approval of card binding 16 devices. That is something that I think can be done 17 by your action, and then the other -- The last is the 18 one we've already discussed, the amendment of the rule 19 dealing with instant bingo, and we've gone through 20 that in detail. 21 And one other thing that was discussed 22 that's something that's action you can take and that 23 is the real concern expressed repeatedly by the 24 members of the last two meetings were members of the 25 security division where they attend a bingo occasion, 77 1 coming in wearing and exhibiting their weapons. This 2 is something that can be handled administratively. 3 I want to say that I have the greatest 4 admiration for Mike Pitcock. He's been one staff 5 member who's most helpful to me individually and to 6 the Committee. I think he's doing a great job, but 7 this is something that needs to be addressed, and it 8 was addressed to a certain degree at our last meeting 9 with Mike. I'm not sure that he appreciated fully the 10 concern that was being expressed by the members of the 11 industry who were there, that if it's not necessary -- 12 or that they not come into the meetings exhibiting a 13 pistol. 14 Certainly if there is reasonable cause 15 to believe that an arrest is going to be made or that 16 there might be some disturbance, it's different, but 17 just a general visit when there's no reason to believe 18 that there might be a need for a weapon, it might be 19 advisable to -- on bingo occasions, at least, they not 20 wear a weapon. 21 This personally doesn't bother me to 22 see a police officer wearing a weapon regardless of 23 where he is, but if you read the testimony that was 24 given at the last meetings, this is of great concern 25 to a lot of the bingo operators and those who attend 78 1 the bingo. 2 So, I appreciate your letting me take 3 an inordinate length of time for my normal report, but 4 I thought these were some items that were of 5 importance to you and to the industry, and I'd be glad 6 to answer any questions that you may have or comments. 7 And I would like to urge, 8 Commissioner Whitaker and Commissioner Clowe, each of 9 these rules as they come up, ask that question that 10 you did, what is this going to cost. That was one of 11 the things reflecting in my report is that each rule 12 ought to now have a determination made and made as 13 part of the rule exactly what it's going to cost the 14 operator to comply with it. 15 COMMISSIONER WHITAKER: Let me ask you 16 a couple questions about the appointments to the BAC. 17 In your opinion, is the problem with Ms. Brackett that 18 you weren't told immediately about the notice issue or 19 the filing an application issue or is it -- Do you 20 propose that people not be required to, in fact, file 21 an official form? Which is the objection proposed? 22 CHAIRMAN NEINAST: The -- As we were 23 leaving the meeting where I appointed the 24 subcommittee -- and that was the first meeting of 25 March the -- whatever it was, Ms. Brackett and another 79 1 member -- and I've forgotten who -- said, we didn't 2 know we were supposed to put in our nominations, and 3 as I mentioned, I didn't know that several years ago 4 myself until Rolanda called me, and, so, I said I 5 don't know of a requirement, but you will be 6 considered. 7 I announced it at the meeting in the 8 open meeting. I said we're going to consider 9 Ms. Brackett, and we will consider anyone else who has 10 not submitted a formal nomination, and two others said 11 they would like to be considered, and I instructed the 12 subcommittee to consider those two as well, and they 13 were considered. 14 COMMISSIONER WHITAKER: Was there any 15 complaint made by any other persons outside of that 16 meeting that they would have submitted their name had 17 they known about it? 18 CHAIRMAN NEINAST: Not to me. 19 COMMISSIONER WHITAKER: Do you know of 20 any? 21 MR. ATKINS: No, ma'am. 22 COMMISSIONER WHITAKER: Okay. And you 23 think considering her would be consistent with sound 24 policy? 25 CHAIRMAN NEINAST: I think so, because 80 1 it was announced at the meeting, and that was the 2 intent of the meeting, that she was going to be 3 considered, as were the other two who asked that they 4 be considered. 5 COMMISSIONER WHITAKER: Billy, do you 6 have any comments on that? 7 MR. ATKINS: My comment is, you know, 8 Commissioner, my recollection is my direction to 9 Mr. Neinast is, again, that the Committee was free to 10 do whatever they wanted to, to consider any 11 individuals that they wanted to. You know, I offered 12 no authorization or anything like that, and the 13 concern that the staff wants to bring forward is that 14 Bill's representation is correct. You know, he did 15 say that they were going to consider the other members 16 who hadn't submitted forms. There were two 17 individuals that came up and asked that they be 18 considered. He said they would be. The only issue 19 that we wanted to bring forward to the Commission for 20 consideration is that there are about 1,800 21 individuals that didn't have that opportunity because 22 they weren't in attendance. 23 COMMISSIONER WHITAKER: Have any of 24 them indicated at any time that they would have liked 25 to have been considered? 81 1 MR. ATKINS: No, ma'am. But at the 2 same time, I don't think they'd been notified that 3 they could. 4 COMMISSIONER WHITAKER: Aren't your 5 comments posted or wasn't there any posting at all? 6 MR. ATKINS: The minutes are posted. 7 COMMISSIONER WHITAKER: Isn't there a 8 posting somewhere of the fact that the Committee will 9 be -- that appointments will be considered for the 10 Committee? 11 MR. ATKINS: That was a posted agenda 12 item, yes, ma'am. 13 CHAIRMAN CLOWE: Bill, I want to say 14 one thing before I call for a short recess, and there 15 are two other individuals that we -- should speak on 16 this item on the agenda, and I think there are other 17 members of staff, and there will be some questions. 18 So, we'll come back to this after a short recess, but 19 before we do that, I want to thank you very sincerely 20 for your term of service on the Bingo Advisory 21 Committee and as the chairman. 22 As you know, since I've been on the 23 Commission and been designated as the bingo 24 commissioner, I've attended a number of meetings, and 25 I think that your leadership and your guidance has 82 1 resulted in an improvement of substantial measure in 2 the communication that has been affected in the Bingo 3 Advisory Committee, and I know that you get paid just 4 what the commissioners get paid, and you do this as a 5 true public service, and, so, this being your last 6 meeting -- You've announced at -- You've conducted 7 your last meeting, and this is your last report to us. 8 Before we get into any other detail after the recess, 9 I want to thank you on behalf of the Commission for 10 this great public service on your part. 11 CHAIRMAN NEINAST: Thank you, sir, and 12 for the benefit of the public -- they may not know how 13 we are overcompensated. For the members of the 14 public, we get paid our expenses to come to Austin. 15 That's it. 16 Thank you, Chairman Clowe. 17 COMMISSIONER WHITAKER: Bill, I want to 18 say the same thing. I mean, there's a lot here to 19 chew on in your comments, and I know you -- it was 20 obvious from your comments and how you presented today 21 that you're very sincere in what you're saying. You 22 have a lot of concerns, and I hope there is some way 23 that we can continue to keep you involved. Is that 24 part of the deal? 25 CHAIRMAN NEINAST: Possibly. 83 1 COMMISSIONER WHITAKER: Thank you. 2 CHAIRMAN CLOWE: Having said that, 3 then, we'll return to this agenda item after our short 4 recess. It is now 10:17. Let's take about a 5 ten-minute recess and reconvene then. 6 (Recess.) 7 CHAIRMAN CLOWE: We are going to 8 reconvene now. The time is 10:31, and we are 9 continuing on Item No. 4, the report by the Bingo 10 Advisory Committee chairman. I know that there are 11 individuals on the staff who will want to make some 12 comments, perhaps the commissioners will have 13 additional questions, but we have two individuals who 14 have asked to make appearances and give comments on 15 this subject, Mr. Fenoglio and Ms. Taylor, and I'd 16 like to ask Ms. Taylor, if she's here at this time, to 17 come forward. 18 Thank you for remaining here. We're 19 happy to hear from you today. 20 MS. TAYLOR: Thank you. My name is 21 Suzanne Taylor. I was one of the subcommittee that 22 made the recommendations to the entire Committee. I 23 wanted to say one thing that we did on the 24 subcommittee. What we looked at when we were looking 25 through the applications were the reasons why the 84 1 individual wanted to serve on the BAC, and we were 2 looking for those individuals that were interested in 3 trying to make bingo an exciting place, working within 4 the rules, and trying to improve the industry. The 5 other thing we looked at was the length of time they 6 had been involved in bingo, and in all honesty, we 7 were looking for people that had been involved in 8 bingo longer than -- I mean, we looked at length of 9 service, if we might call it that, because we were 10 thinking that if we had a Committee of bingo people 11 that knew the industry and had been involved, that 12 instead of spending all our time educating the new BAC 13 members, that we could get in there and continue to do 14 the job, and I do think the BAC has become more 15 effective recently, and our goal was to see that we 16 continue to be effective, and with a group of 17 experienced individuals, we thought that the BAC could 18 continue this trend and help with the bingo industry. 19 So, if you have any questions, I'll be 20 glad to answer them, but those were the things we 21 looked at when we were considering and going through 22 the applications. 23 And I have to also tell you one last 24 note. We called some individuals that had no idea 25 what the BAC was or what the Bingo Advisory Committee 85 1 was and hadn't a clue of why we were calling them and 2 talking to them about it. So, where some of the 3 nominations come from, I don't know, but some of them 4 are definitely clueless on why we were making a phone 5 call. 6 So, if I could answer any questions on 7 how we came up with this list of names, I'd be glad 8 to. 9 CHAIRMAN CLOWE: I don't think we have 10 any questions right now, but I want to thank you as 11 well for your service on the Bingo Advisory Committee 12 and say how much the commissioners appreciate the time 13 and effort. 14 You're, I believe, from Corpus Christi? 15 MS. TAYLOR: Yes. 16 CHAIRMAN CLOWE: And you've come up to 17 Austin for those meetings, taken your time and 18 traveled and been there fairly consistently, if I 19 remember. You've always been there when I was there. 20 MS. TAYLOR: I've never missed a 21 meeting. 22 CHAIRMAN CLOWE: Good for you, and we 23 thank you for that. 24 MS. TAYLOR: Thank you. 25 CHAIRMAN CLOWE: Mr. Fenoglio. 86 1 MR. FENOGLIO: Yes, Mr. Chairman, and 2 I'll be brief. It just shows you what Suzanne's -- 3 how much of a glutton for punishment she is if she's 4 never missed a meeting. 5 We support -- My clients support the 6 nominees that have been laid out for -- by the BAC 7 with one exception. There is an issue, I understand, 8 about whether Mr. Holden is appropriately a member of 9 the general public. He's a VFW post quarter master, 10 and I represent the state VFW and was able to contact 11 him just now, and he did confirm he is the conductor 12 and the primary operator of that organization, and 13 what the member -- what the meaning of general public 14 is undefined in the statute or rule. It's not 15 mentioned other than a member of the public, but I 16 think it -- for him to be as a primary operator, a 17 member of the general public would be against the 18 intent of the -- 19 CHAIRMAN CLOWE: Could you just speak 20 up a little bit for us? 21 MR. FENOGLIO: Yes. I think it goes 22 against the intent for him to be considered as a 23 member of the general public, and I'm sorry to say 24 that because they're a client of mine as the state VFW 25 organization. I visited with him about that, and he 87 1 said he understood that. So, other than that, I have 2 nothing more to say, and thank you for your time. 3 CHAIRMAN CLOWE: Thank you, sir. 4 Billy, I think next, we'd like to hear 5 from you, if you're in agreement, 6 Commissioner Whitaker, on your thoughts concerning 7 Chairman Neinast's comments, including the 8 recommendations that he reported to us from the action 9 of the Bingo Advisory Committee in these last two 10 meetings in March and April. 11 MR. ATKINS: To include the nominations 12 to the Advisory Committee? 13 CHAIRMAN CLOWE: Certainly. 14 MR. ATKINS: Thank you. Thank you, 15 Mr. Chairman. 16 One thing that I want to do for 17 clarification of the record, Mr. Neinast has referred 18 to an attachment to his report. It's one that's 19 labeled bingo interest group, position statement on 20 regulation of bingo -- regulation of charitable bingo. 21 Bill has referred to that as that being a document 22 produced by Steve Fenoglio. It's actually produced by 23 Steve Bresnan. I certainly understand, given the two 24 Steves, that he could get that confused, but for 25 purposes of clarification. 88 1 One other thing I'd like to say before 2 I start is, also, Bill is correct that he was not 3 informed of my intentions regarding the nominations to 4 the Bingo Advisory Committee until yesterday. That's 5 my fault, and that's my fault alone. It's an 6 oversight on my behalf. It was not an attempt to 7 circumvent anything. I should have, and I didn't. 8 You know, I can say it's because I was in a rush to 9 get out of town and get to a conference where I was 10 serving as a Committee chair, but the fact of the 11 matter is, is I didn't do it, and I apologize for it. 12 I regret that Bill's -- I think he 13 referred to it as a swan song, reflected his 14 unhappiness with the Bingo Advisory Committee, the 15 Lottery Commission, the bingo division and his service 16 on it. I've enjoyed working with Bill, and I 17 appreciate the effort that he's done with the Bingo 18 Advisory Committee. I concur with Suzanne's comments. 19 I do believe that the operation of the Bingo Advisory 20 Committee has improved, especially from where we came 21 from. I think we've gone a long way. 22 One of the things that Bill always 23 tried to emphasize and always stressed to both the 24 staff and the members of the Advisory Committee was to 25 submit information for consideration or deliberation 89 1 prior to the meeting so that we could collate it and 2 get it out to the members so that everyone, the 3 Advisory Committee, the staff, where appropriate 4 copies for members of the public, would have the same 5 document and could be working off the same page. The 6 times when that did occur, I think it was very 7 efficient. The times when it didn't occur, I think 8 we've kind of found ourselves in the situations like 9 we are now. 10 Just some of his comments before I go 11 into his report, I do not recall commenting to Bill at 12 any time that I thought the Advisory Committee was 13 either unnecessary or a thorn in the side of the bingo 14 division. I do remember commenting to him that people 15 had expressed frustrations to us about the Bingo 16 Advisory Committee, and I'm sure that I expressed to 17 him frustrations that we had in -- sometimes in 18 working with the Committee, but again, I think all of 19 that improved under his tenureship. 20 Regarding the -- One of the things he 21 referenced in his comment was the limited amount of 22 time that bingo was given on Commission agendas and 23 the limited number of things that were brought 24 forward. I guess the only response I have is, what 25 else did does he want to see on there? I mean, we 90 1 bring the actions forward to the Commission that we 2 believe require your attention or your action. 3 I'm concerned, you know, about his 4 comments about the Commission being a rubber stamp for 5 what the Division wants. I'm sure that we can go back 6 and come up with plenty of instances where the 7 Commission, you know, went against the Division, and 8 we can find instances where they went, you know, with 9 the Advisory Committee or the general public. 10 The -- You know, in his discussion 11 regarding the operator training program and the 12 overregulation of bingo, the operator training program 13 was a proposal that was brought from the industry. 14 It's something that they wanted, and the intent, you 15 know, to my knowledge wasn't to keep organized crime 16 out or to be overly burdensome. It was to provide a 17 mechanism whereby organizations could ensure that they 18 were aware of the requirements and the Act and the 19 rules so they could remain in compliance with it. 20 We've gotten excellent response from 21 the licensees, and we've seen what I consider to be 22 dramatic reductions in the number of violations that 23 we're noting. So, I think it's been a very positive 24 program for us. 25 And, you know, finally, I have to tell 91 1 you I'm really shocked. Bill is the first person who 2 I have ever heard say that a licensing process was 3 easier at another agency. So, that was a real 4 eye-opener for me. I've never heard that from any 5 licensee prior to that. 6 Going into his report, I guess, and the 7 comments regarding the frustration that the industry 8 experienced and the declining revenue and what he has 9 in his report is the perceived lack of concern and 10 support from the Advisory Committee and the Lottery 11 Commission, and I assume that that would also include 12 the Charitable Bingo Division. I don't know why that 13 perception exists. 14 If you go later on to his report where, 15 you know, they're recommending certain opportunities 16 to enhance bingo revenues such as the changes in pull 17 tabs that you took action on today, the progressive 18 bingo game, the elimination of the prize fee on small 19 prizes, these were items that the agency all 20 identified early on, and the agency has made 21 recommendations not just to the Advisory Committee, 22 but to the legislature as well on all of those items. 23 So, again, I don't understand why this perception is 24 that there is a, you know, lack of concern on behalf 25 of the Division or the agency. 92 1 COMMISSIONER WHITAKER: Billy, let me 2 ask you while you're at that point, what do you think 3 accounts for the fact that it's taken several years to 4 bring some of this to the point where we can publish a 5 rule about it? 6 MR. ATKINS: You know, it's been our 7 perception that there -- at the time when we first 8 brought it up, that there wasn't an interest in doing 9 it. 10 COMMISSIONER WHITAKER: Interest by? 11 MR. ATKINS: By the industry in doing 12 it. You know, again, we first contacted the 13 manufacturers and said we understand that these types 14 of games are out there. We want to know about -- more 15 about them, you know, plus other type of games there 16 are, and we got no response. 17 COMMISSIONER WHITAKER: Did you talk to 18 the charities and to the operators and the conductors? 19 MR. ATKINS: My recollection is that it 20 did come up before the Advisory Committee. Again, I 21 don't recall telling Bill that, you know, we were too 22 busy, we didn't want to have anything to do with it. 23 I do recall that -- he is correct, in that it was my 24 understanding that a lot of that was going to be 25 driven by Fabian Hoffner who has been active or had 93 1 that experience with. I know that he caused -- Fabian 2 caused a presentation to be made to the Advisory 3 Committee on different types of pull tabs, but I don't 4 recall right now what the final action was on those by 5 the Advisory Committee. 6 COMMISSIONER WHITAKER: But your 7 recollection is is that that didn't move forward 8 because of the feedback you had gotten that there was 9 no interest in the industry for that? 10 MR. ATKINS: Yes, ma'am. Or there 11 definitely wasn't the interest that we're seeing 12 today. I mean, you know, we definitely didn't have 13 the opportunity to get the input that we're getting 14 now. 15 I guess I'd like to, you know, discuss 16 the -- get to some of the issues raised regarding 17 either creating bingo as its own state agency or 18 reorganizing the Division to include security and 19 legal staff under the bingo division. Unless the 20 Commission is in a position to provide the bingo 21 division with, you know, more legal staff or, I guess, 22 security investigators that we have now, I don't see 23 it, you know, providing any benefit. 24 The problem that I'm faced with is I 25 think that there are anywhere from 75 to 100 cases 94 1 that the bingo division has pending in the legal 2 division, and there are 4 or 5 attorneys. They can't 3 do anything, and I have to make decisions every day on 4 which cases that they're going to work on. 5 So, you know, the concept that bingo 6 cases are bumped or overshadowed by Lottery cases I 7 don't think is correct. Bingo cases get bumped and 8 overshadowed by other bingo cases. Some are very 9 difficult and take a lot of time for the attorneys to 10 work up and work through. Others are relatively 11 simple, but I have to work with the attorneys in 12 making the decision, getting the limited number of 13 resources we have, doing the unlimited amount of work 14 that we have, and it's the same with the 15 investigators. 16 You know, as far as working with it, 17 you know, Ms. Kiplin is the general counsel. Mike 18 Pitcock is the commander of the security division, 19 granted me unlimited access. I can go to them with 20 any problem, with any question. They assist in any 21 way they can. We meet regularly, and we do that in 22 order to facilitate the work we do and to try and do 23 the work that we have in the most efficient manner, 24 but I'm not saying that because Kim and Mike and I are 25 great people. I think that whoever was in this 95 1 position, that's what this Commission would expect, 2 that we would work together and we would do our jobs 3 to the best of our ability given the resources that we 4 have, but the -- you know, just the concept itself of 5 transferring legal or security to the bingo division, 6 I don't see it having any kind of tremendous impact on 7 bingo revenue. 8 I don't see, you know, the average 9 person out in the street saying, oh, boy, now that 10 legal's under bingo, I'm going to go play, and I don't 11 think that it's addressing the really central issue 12 that we have, and that is, you know, how do we help 13 bolster these declining bingo revenues, which I don't 14 know if I've said before, but having just returned 15 from this conference, are not unique to Texas. 16 Charitable gaming across North America 17 is declining, and it's declining because of the growth 18 in other gaming opportunities that are out there, and 19 bingo doesn't have the opportunity that the Lottery 20 has in order to introduce or modify its games. A lot 21 of ours has to go before the legislature, and we have 22 attempted to do that. We -- Sometimes we've been 23 successful. Sometimes we haven't, but I think that 24 the staff has been proactive in trying to bring some 25 of these issues forward. 96 1 You know, the problem is is if you get 2 the staff and, say, ten different bingo people in a 3 room, the chances are you'll have 15 different 4 opinions, and, so, it's very difficult to come to a 5 consensus on any of these issues. I think we've done 6 a great job on the pull tab rule, and Mr. Fenoglio has 7 worked with us, Suzanne has worked with us, other 8 people in this room have worked with us in getting 9 this product, and I think it shows that when we do 10 work together, we can come up with something. 11 Everybody doesn't get everything that they want, but 12 we all get something that we can at least live with. 13 On -- 14 COMMISSIONER WHITAKER: Billy, what's 15 your reaction to this exhibit that I -- about all 16 states? 17 MR. ATKINS: I think they're very, very 18 optimistic, and I -- 19 COMMISSIONER WHITAKER: What, in your 20 opinion, explains what happened in Louisiana? 21 MR. ATKINS: You know, 22 Commissioner Whitaker, I've never even been in the 23 state of Louisiana. I wouldn't know. I don't know 24 how the games are -- how they're rated or anything 25 like that. 97 1 You know, I do know from talking with 2 other jurisdictions that, you know, in some 3 jurisdictions, players have a certain preference. You 4 know, some jurisdictions are pull tab playing 5 jurisdictions, and that's their most popular game. 6 We didn't, in our fiscal note on the 7 rule, state what we anticipated the total increase 8 would be because we just can't quantify that. The 9 reason we can't quantify that is because we have to 10 take in factors such as regular bingo sales, and 11 that's been declining, and we have no reason to 12 believe that with the introduction of these additional 13 pull tab games, that it's going to result in any kind 14 of increase in regular bingo. So, any increase in 15 these pull tab games are going to have to be balanced 16 against the regular bingo and those losses. 17 I do think it will increase sales. I 18 do think it will generate interest and an excitement 19 among bingo players. Commissioner Whitaker, I can't 20 quantify to you how much. You know, I would certainly 21 hope that Suzanne's estimation is not pie in the sky. 22 I would defer to her. She's in the bingo hall every 23 day. She's had the opportunity to go to Louisiana and 24 see how they operated. You know, I don't know. 25 Again, we're hoping that it's going to increase sales 98 1 and increase the revenue. By how much, I just can't 2 tell you. 3 And then finally, I guess, 4 Mr. Chairman, regarding the recommendation of the 5 establishing bingo as its own agency, the thing that 6 concerns me most is thinking back to when it 7 transferred from TABC to the Lottery Commission is the 8 amount of disruption that it caused, not just for the 9 agency that it was moving from, TABC, or the agency 10 that it was moving to or the staff in either agency, 11 but finally in the industry itself. There was a lot 12 of confusion among licensees, where do I send this, 13 where do I send this, and it took awhile for a lot of 14 that to get flushed out, and, you know, I just don't 15 see that an independent agency could do what we do any 16 cheaper or any better, and I don't see how an 17 independent agency would be of assistance to the bingo 18 industry any way that we are now -- or any more 19 assistance than we are now. 20 We have, I think, very specific 21 requirements under state law, and that is to regulate 22 bingo, and if there are changes that need to be made 23 to that law where there's more of an emphasis on 24 promoting bingo, I can't think of another agency that 25 would be better suited to that than the Lottery. I 99 1 mean, they definitely know about promoting games, and 2 that would be a very valuable resource that I would 3 think that we would want to draw off of. 4 Then, I'm sorry, finally getting to the 5 BAC nominations, again, it's my fault for not bringing 6 this matter up earlier. You know, as far as Phil 7 being in attendance at the Commission meeting when 8 these were brought up, again, I think it would have 9 been nice if we had been given the list prior to the 10 meeting. We might have been able to look into some of 11 this and avoid it. That didn't happen. 12 In going through it, as it's been 13 discussed earlier, William Holden who was nominated 14 for the general public is listed as an operator for a 15 VFW organization. As a matter of fact, a number of 16 individuals that were listed in the general public 17 category it turns out were actually listed as 18 operators of organizations. 19 The person that we have on our 20 recommendation, Ricky Turman from Bayco, is not listed 21 on there. I've contacted him, and like I said, the 22 last time I talked to him, he was about 95 percent 23 sure that he would be willing to serve if asked. 24 Originally, we had replaced, as Bill 25 said, Scott Ingram with an individual Mario Manio from 100 1 Garland as a commercial lessor. I found out this 2 morning that Mr. Manio is apparently in kind of the 3 same situation that Mr. Ingram is, and, so, given 4 that, I think the only other individual listed as a 5 commercial lessor is a gentleman named Wesley Newton 6 from Odessa. I have not contacted him. 7 There was another recommendation by the 8 Bingo Advisory Committee for a conductor/lessor 9 category of a Marilyn Matthews who, you know, 10 originally we were also going to recommend, but then 11 that would give us two individuals from Odessa. 12 There's a conductor/lessor that -- Eva 13 Mae Watts from San Antonio. Again, we haven't had the 14 opportunity to contact her yet because this just 15 happened this morning. 16 And in Virginia Brackett's case, like I 17 said earlier, they did consider individuals who had 18 not submitted a nomination form timely. I don't know 19 if it was Bill or Mr. Fenoglio, but whoever it was, 20 they're correct. There is nothing in the rule or 21 statute that requires that a nomination form has to be 22 in by a certain time, but I think it's been the 23 practice in the past of the Commission to only 24 nominate those individuals who have timely submitted a 25 nomination form. 101 1 And, again, my other concern was that I 2 don't know that the other body of licensees had the 3 same opportunity that either the members of the 4 Advisory Committee that were there or the members of 5 the public who were there had to request to be 6 considered for nomination. 7 COMMISSIONER WHITAKER: Were the 8 members of the public that weren't in attendance told 9 by public posting that only those who timely got their 10 nomination form in would be considered? 11 MR. ATKINS: I believe the nomination 12 form itself states that, and, you know, again, we sent 13 out, I believe, some 14,000 nomination forms. 14 COMMISSIONER WHITAKER: Do you have 15 that -- 16 MR. ATKINS: I do. 17 It does not say that. It reads, "If 18 you or someone you know qualifies to serve on this 19 committee and is interested, please fill out the 20 nomination form and return it by February 28th, 2002. 21 Nominations and all supplemental information should be 22 returned to the address listed on this form." It does 23 not include language that nominations received after 24 that will not be considered. 25 COMMISSIONER WHITAKER: When 102 1 Mr. Sanderson was present when the Committee was 2 making nominations, why would he not have been in a 3 position to have brought out timeliness or lack of 4 timeliness of nomination forms right then? 5 MR. ATKINS: I can't respond to that, 6 Commissioner Whitaker, why Phil wouldn't have done 7 that. I can guess. 8 COMMISSIONER WHITAKER: I don't want 9 you to guess. 10 MR. ATKINS: Yeah. I don't know. 11 COMMISSIONER WHITAKER: Okay. 12 CHAIRMAN CLOWE: I'd like to ask the 13 general counsel and the commander of the security 14 division now to give us their comments on the 15 recommendations from the BAC relative to their areas 16 of activity. Kim. 17 MS. KIPLIN: I'll be glad to. I've 18 heard the presentation by Mr. Neinast today, and I've 19 had an opportunity to read the transcripts, and I also 20 met with some other folks, and I'm familiar with the 21 position paper prepared by Steve Bresnan on behalf of 22 his clients. And, so, I'm pretty familiar, I think, 23 with the claims that they're articulating, and just to 24 kind of capsulate those, they include the claim that 25 legal services aren't provided timely to the bingo 103 1 division, that legal makes the business decisions for 2 bingo, and that there's a conflict of interest that 3 exists between doing Lottery work and bingo work, and 4 actually, I don't know if I want to characterize it as 5 Lottery. I'd probably want to more characterize it as 6 agency work, work for the entire agency. 7 So, I appreciate the opportunity to 8 address those claims. I think Billy's point was 9 correct. There's a significant amount of legal work 10 for the agency. Since September of '93, Legal's 11 opened over 15,000 cases for the agency. Currently, 12 we've got about 500, a little over 500 cases that are 13 open in legal. For the 4.75 FTDs, I've got a lawyer 14 who's a frequent time lawyer to work on them. 15 I think to get down to how reality 16 really works, at least from my point of view, the 17 first thing is that the client division establishes 18 the priority for the lawyers so that their legal work 19 for that division can be met. The attorneys in legal 20 don't put work relating to the Lottery or the agency 21 in front of or before the work that relates to bingo. 22 It's the client divisions that drive 23 the priorities of the legal work, and because the 24 legal services are centralized, it's my view that the 25 high priority legal work does get accomplished, and it 104 1 gets accomplished timely for the entire agency, 2 including the bingo division. 3 Billy touched on that, on the fact that 4 we do meet, we being the commander of the security 5 division, Mike Pitcock, myself and Mr. Atkins. We 6 meet weekly, and a large part of the purpose of those 7 meetings is to coordinate our activities and to allow 8 the bingo director to prioritize the work of bingo 9 that's in legal. 10 The bingo director is also the one who 11 directs how he wants that legal work done. For 12 example, in enforcement cases, it's the bingo division 13 director who makes the decision on how he wishes to 14 proceed, and he does that on all of the work that is 15 in legal for the bingo division. So, I would say, 16 contrary to the perception regarding who's making the 17 decisions, it's the bingo director that makes the 18 decisions that relate to bingo. 19 The fact is that there is an 20 attorney-client relationship that exists when an 21 attorney provides legal services to a client division, 22 and what that means is that the lawyer -- the function 23 of the lawyer is to do his or her best in terms of 24 providing the best legal advice and the best legal 25 opinion that the lawyer can so that the client makes 105 1 an informed decision, and that's really the goal of 2 the lawyer is to make sure that the client is making 3 an informed decision, and the most important about 4 that is it's the client that makes the decision, not 5 the lawyer. 6 Best approach in this relationship is 7 no different from the bingo division than it is any 8 other division in the agency. 9 So, contrary to the claim that legal is 10 running bingo, bingo is running bingo, and contrary to 11 the suggestion that the lawyer's not accountable to 12 the bingo division by virtue of the attorney-client 13 relationship, we're wholly accountable to the bingo 14 division director, not only because of the 15 attorney-client relationship, but also because of the 16 direction of the Commission. The three-member 17 Commission is the body that sets the policy for the 18 agency and sets the direction for the agency. 19 There is no conflict of interest 20 that -- for the lawyer that exists with regard to 21 doing bingo work or agency work or Lottery work. I've 22 been here eight years, and I've never had an occasion 23 to where I thought I had a conflict of interest that I 24 needed to disclose to the respective divisions, and 25 the fact of the matter is that the Commission oversees 106 1 both Lottery and bingo. So, ultimately the client for 2 an agency attorney is the organization and how best 3 that we carry that out. 4 Bingo, like every division, requires a 5 myriad of legal services, and I think there's some 6 suggestion that -- and I think folks that are 7 regulated, what they see is the regulatory aspects, 8 but they don't see the rest of the legal services. We 9 provide transactional and litigation legal 10 representation. Specifically, we provide legal 11 services that include labor law, general government 12 law, intellectual property law -- yes, bingo has had 13 intellectual property issues, believe it or not -- 14 administrative law in connection with both enforcement 15 and proceedings and rule making, procurement and 16 contract law. We've got a very significant contract 17 matter on behalf of bingo that is in the legal 18 division, and we're working on that. Bankruptcy law, 19 that transcends -- or all the agency, frankly, ethics, 20 both the records -- (inaudible) -- and that's just a 21 flavor. It's not meant to be comprehensive. 22 The fact is that no one or two 23 attorneys could provide any Commission division, 24 including bingo, with the panoply of legal services 25 that I just mentioned because it would require too 107 1 many legal expertises for one attorney to develop. To 2 assign an attorney to a division really doesn't serve 3 that division's legal needs because the variety of the 4 legal services that the division will need is just too 5 great, and, so, the perception that moving legal into 6 bingo allows for a specialization to develop, that 7 being a bingo specialization, really is unfounded 8 because, setting aside the organic law of the Bingo 9 Enabling Act, there are so many other legal needs that 10 come up from time to time for the bingo division. 11 To do that, really, I think would limit 12 all the legal specializations that would need to be 13 available for a particular client division to try to 14 assign one attorney. I've been asked recently why not 15 just assign an attorney to bingo, and that's my point. 16 My point is to do that. They're not going to have 17 access to all the different types of legal expertise 18 that have been developed over the time. 19 I assign an attorney to a particular 20 case based on the nature of that case and the legal 21 issues that are involved in that case. So, for 22 example, if it's a labor law case, I'm going to assign 23 a labor lawyer. If it's a contract case, I'm going to 24 assign a contract case (sic). If it's a rule making 25 matter, there will be a lawyer who's got a familiarity 108 1 with how to promulgate rules. 2 I think in all of those examples I've 3 just mentioned, bingo -- In other divisions, 4 frankly -- I don't want to carve out bingo, but I know 5 the focus today is on bingo and them having their own 6 lawyer -- they've benefited from having all those 7 particular legal skill sets available. 8 I think the issue, it seems to me, is 9 really whether the agency should have centralized 10 legal services or decentralized legal services. The 11 centralized approach, which is what is at the agency 12 and it has been since inception, allows the 13 cross-training of attorneys so that all the legal 14 needs of the organization can be met effectively and 15 efficiently. It allows for the backup and the 16 flexibility regarding case assignments. It allows for 17 the consistency with regard to legal opinions and 18 legal advice. 19 For example, in the event of absence by 20 an attorney or a particularly complex legal case that 21 would require a full attention of an attorney, there 22 are other attorneys that are there to back up and to 23 support the legal needs of a particular division 24 because they're cross-trained. As best we can, we 25 cross-train, and frankly, the centralized approach 109 1 allows for the consultation and collegiality among the 2 lawyers so that we deliver the best product we can, 3 and I think it's better than a product that can be 4 delivered by one attorney working alone. It's like 5 any profession. It's good to be able to consult with 6 members of the profession who have that background. 7 I think the criticism of the 8 centralized approach is that the client division 9 doesn't feel like the client division controls the 10 work of the attorney, but I think it's -- that claim's 11 only perception is not based in reality because of the 12 reasons I've just mentioned. 13 The suggestion is that a decentralized 14 approach allows for one attorney to understand a 15 particular division's needs and issues and work on 16 that division's issues exclusively. However, as 17 Mr. Atkins pointed out, when resources are limited, a 18 decentralized approach just doesn't -- it doesn't 19 work. It doesn't provide comprehensive legal 20 services. 21 In my experience as an agency attorney 22 and the practice of my areas of law for the last 18 23 years, I have been involved in both models, the 24 centralized and decentralized, and I think it is 25 important to note that experienced legal services for 110 1 a government agency -- it's a valuable commodity, and 2 it has to be used efficiently and effectively, and in 3 my view, the centralized model does deliver the best 4 legal services to the agency and to the divisions, 5 and, so, I think we do the best in terms of providing 6 legal services to bingo from that centralized 7 approach. 8 At any given time, there will be 9 multiple attorneys working on different bingo matters 10 depending on the nature of the case, and I think it's 11 fair to say that any one of our -- any one of the 12 attorneys in legal has bingo matters as part of their 13 open case list, whether it's an open records request 14 that's come through that the open records attorney is 15 working with the bingo division in terms of how best 16 to proceed and whether to request an exception from 17 the -- a decision from the open records division, 18 whether there's litigation that's occurring and what 19 the nature of the litigation is, whether regretfully 20 that there would be an employment law issue in bingo, 21 it's going to be -- have a labor lawyer that's 22 assigned to it. And, so, I think -- I think that's 23 where the centralized approach works. It also allows 24 for the backup. 25 We did have, a long time ago, I guess, 111 1 very, very long ago, an attorney who was assigned to 2 do enforcement matters, enforcement matters, and that 3 was both for the Lottery side of the house and the 4 bingo side, and what we found when that person left 5 was that there was a huge hole because there wasn't 6 the cross-training, there wasn't the collaboration, 7 and there wasn't the ability to understand the 8 process, and, so, we really worked hard to make sure 9 that that doesn't occur now so that no one division's 10 needs are being left behind. 11 I guess just an aside that I'd like to 12 point out is that it's interesting to me that the 13 focus has been on two support services being brought 14 into bingo, that being security and that being legal. 15 In reality, there are a lot of support services within 16 the agency that are provided to the bingo division. 17 There's the human resources, you know, the hiring of 18 people, the timekeeping, all the functions that occur, 19 the benefits. There's the facilities management, just 20 the space that bingo occupies and keeping up with that 21 space. There's the financial administration, the -- I 22 think they're involved in the allocations. They're 23 also involved in payroll and the other reporting of 24 performance measures and things like that on behalf of 25 bingo. Governmental affairs, information technology, 112 1 they support the entire agency. They're a support 2 service like legal and security, and frankly, on the 3 information technology case list, at any given time, 4 we'll have open cases that are to benefit bingo, but 5 it's coming through information technology. 6 Marketing, for example, supplies graphics work, and, 7 so, it's -- I could go on. 8 So, I guess in summary, I think the 9 two -- the three divisions work very well with each 10 other on a weekly basis. We do coordinate the 11 activities. I look to the bingo division director to 12 be the client, and our best goal is to make sure that 13 we're giving him the best legal advice and opinion -- 14 and the staff, for the matter, so they can make an 15 informed decision and move it forward to advocate the 16 positions that he sets out, and we'll continue to do 17 that to the best of your abilities. 18 CHAIRMAN CLOWE: Thank you. 19 Commander Pitcock, would you come up 20 and speak to us about your feelings in regard to the 21 suggestion or recommendation that the security 22 division assign specific personnel to the Charitable 23 Bingo Division? 24 MR. PITCOCK: Yes, sir, I will be glad 25 to. My name is Mike Pitcock, commander of security. 113 1 Back in 1994 when we actually started -- I have to go 2 back in time to give a historical background. I think 3 we measure enforcement or security based on your 4 effectiveness and your functionability to carry out 5 what you need to do. 6 We were assigned this task in '94, and 7 Billy knows that, you know, we tried to go into this 8 process of hiring 22 investigators and 2 supervisors 9 to take over and run bingo without a lot of knowledge 10 of what we were, you know, getting into. So, we were 11 starting from scratch. 12 The end result, to make a long story 13 short, we had no historical knowledge in our group. 14 We were unable to hire any investigators, anyone that 15 had bingo working knowledge or historical knowledge of 16 bingo. So, our staff was fairly just brand-new. What 17 we did hire was a staff of very veteran law 18 enforcement officers. Today our staff averages over 19 20 years of law enforcement and 10 years investigative 20 experience. 21 In my training and experience, you try 22 to get the quality based on the ability of those 23 people that know how to investigate, and whatever 24 issue they investigate, whether you give them a 25 homicide, bingo, Lottery, whatever, their abilities 114 1 are based on that final result, the end result that 2 they produce to an entity to make a decision, gather 3 information and produce it. 4 My investigators, again, were all 5 veteran law enforcement officers, and we were assigned 6 at that time to be investigators without the ability 7 to arrest or carry firearms. We went out to locations 8 based on complaints -- and we still do that today. 9 Most of our investigations are reactive to complaints 10 from the public, bingo public in this case. 11 And a couple times when we first 12 started, my investigators would come back to Dallas, 13 for example -- they would come back with a story and 14 say, you know, Mike, you know, there were shots fired 15 at the parking lot and you're asking me to go out 16 there -- and this is a veteran, 20-years-plus law 17 enforcement officer -- to investigate this and you're 18 asking me to go at two o'clock in the morning and do 19 this. 20 I said, yes, I am. 21 They may be putting me in -- You're 22 putting me in harm's way. 23 I said, yes, I am. 24 And we did that repetitively. This was 25 not one time. In Houston, Dallas, if you played 115 1 bingo -- and you know bingo, it's played 24 hours a 2 day, 7 days a week. In some of the areas of town that 3 bingo is played, it's not where you would say is a low 4 crime rate. We get intelligence from our fellow law 5 enforcement officers that tell us that you should not 6 go to that area of town without, you know, a weapon or 7 backup or some kind of help if you're going to go 8 there and do enforcement. 9 In that case, I talked about first our 10 men, because I had to feel good to myself -- I've 11 worked in law enforcement. I know narcotics. I've 12 been in the most dangerous situations that are out 13 there. So, I went and worked the case myself, and out 14 in the parking lot, you know, it was interesting 15 because there was gang activity. You could see the 16 pools of people out there and a lot of things, but 17 once you got inside, it was not that bad. It was just 18 a lot of people playing bingo, and they were focused 19 on that bingo, and the issue at that case was playing 20 without a license. They were playing what we call 21 ghost sessions or playing without a license, which is 22 a criminal offense. It's a felony. 23 So, actually, I'm in there 24 investigating a felony offense, and I'm not carrying a 25 weapon. I'm not there to do -- effect anything 116 1 because I can't do anything. I don't have the tools 2 to do that. We'll get back to tools in a minute, but, 3 you know, we did identify -- We played bingo. We 4 played lots of sessions that were not licensed to 5 play. We sat and played over and over and over again 6 till they just -- really when they quit is that when 7 people decided that they didn't want to pay anymore 8 and there wasn't anyone to play. 9 But repetitive throughout the state, to 10 make the story short as I can, Houston, Dallas, 11 Fort Worth, around the state, the investigators are 12 saying the same thing. In Houston, way back, we had a 13 situation on a complaint and the investigator comes 14 back, veteran law enforcement officer, says, Mike, you 15 know, they had two people found dead behind the bingo 16 hall out there, but you're asking me to go out there 17 and investigate a complaint. 18 And I said, yes, I am. 19 He said, you're putting me in harm's 20 way. 21 Yes, I am. 22 But we had to play. I said we're going 23 to go out there and do this. We completed the 24 investigation. This is not an uncommon thing from all 25 the tenured officers. 117 1 Myself and Joe Franco, being that we 2 had both experience in law enforcement and 3 administrative investigations, understand what we were 4 supposed to be doing and tried to be functionally, you 5 know, working towards getting the end result, getting 6 the investigation. If we play, then we're going to do 7 a lot of on-site investigations to really try to 8 figure out what this bingo industry's about and to be 9 effective to what we were doing, and as investigators, 10 you know, it's hard to do investigation other than 11 going out there and just really getting into it and 12 looking and see. 13 We do a lot of undercover work, a lot 14 of undercover work. We get complaints where there's 15 cheating or the caller's rigging the games or 16 whatever, and before we ever actually go and announce 17 that we're even there, we're out there playing bingo 18 in those places and watching and seeing, and a lot of 19 places, it is criminal-type investigations that we're 20 conducting, again placing my people out there in the 21 role of what they're supposed to do. 22 I think it's effective. I think that 23 we gather that information at first. I don't think 24 that the end result was what would -- law enforcement 25 would have liked to seen, but over the years from '94 118 1 on up until '98, we've made adjustments. We took 2 investigators -- One of the problems that we had at 3 first was that we had Lottery and bingo, and we 4 strictly did this big dividing line where we sent 5 Lottery investigators out to do Lottery investigations 6 and bingo investigators out to do bingo 7 investigations. Well, that caused me management 8 problems and causes nightmares because you'd send an 9 investigator to a town, say Texarkana, that has 10 Lottery complaints. Then you'd have to turn right 11 around if you had bingo complaints and send someone 12 else. We felt that was, management-wise, not 13 effective. 14 So, we combined and cross-trained our 15 investigators to go out, if they had five complaints, 16 they could do both Lottery and bingo and carry out 17 their responsibilities, save money for the State, and 18 if you look at our staff that we report, we have 19 steadily gone down in cost per investigation through 20 the years by looking at this overall, and our 21 management staff -- we continue to look at how we can 22 save money and still be effective with what we do. 23 Still, up until 1998, we were able not 24 to effect our process. We were able on the criminal 25 side of it, which both Lottery and bingo have 119 1 criminal -- and we'll talk bingo, but we had several 2 complaints of playing without licenses, several 3 complaints where there's theft, criminal violations 4 going on that we could go out there and identify, but 5 effectively, we couldn't effect what we needed to do. 6 We could investigate, present to a criminal or county 7 attorney. They would in turn say, well, you know, 8 what is it, and it's been my experience in law 9 enforcement, if you can effect that process and there 10 is violations, file your complaints, which we could 11 do, and effect the arrest, and the end result is that 12 you stop that activity. 13 In the case that we had, you identify 14 that activity, you go to the county district attorney, 15 file your complaint and wait for someone -- which may 16 be a year, may be longer, and it's very frustrating 17 when you couldn't stop that activity, because, again, 18 that activity still goes on until someone actually 19 effectively goes out there and says, you know, this is 20 illegal and make the arrest. 21 Now, we could go to them and tell them 22 and say, yeah, you're playing without a license, but 23 we receive intelligence, and as soon as we turned 24 around and left and weren't there, they would be doing 25 it again, and there's so much money to be made that 120 1 they had to do that to effect that end result. Here 2 lately, with some of the new things that have come 3 out -- You know, in the gaming industry, things have 4 changed in Texas, and we've had a lot of new things 5 criminally-wise that have caused us, you know, 6 additional duties. 7 I want to move on forward because the 8 activities as far as the criminal element, and I don't 9 want to say organized crime. Mr. Neinast said that -- 10 I didn't hear -- our job is to keep it out. I don't 11 know if that's the right words, but to say criminal 12 activity is not there, I'd be naive to stand up here 13 and tell you that's not true. It is there. It's been 14 there since we started in '94, and I imagine it's been 15 there since '82 when it was started, but we're out 16 there in the midst of it. 17 We have commercial lessors. As of 18 probably a month ago, we had a case -- and this is 19 throughout time, but we effected a search warrant for 20 my people, and the commercial lessor was there in the 21 hall playing the eight-liner machine, and when we 22 effected the search warrant, he raises his hands. He 23 says, I'm armed. And on him, he had a weapon. 24 We effectively took the weapon, no 25 incident, and was licensed to carry -- Really he 121 1 hadn't done anything wrong, because in that situation 2 again, my investigators -- now that they're armed and 3 have the effect that they have, I think that effected 4 that situation. Without that, you know, it's hard to 5 go up there and just effect something or arrest 6 somebody if you don't have the tools, because that's 7 what we're facing. 8 In Houston and Dallas, we have learned 9 that a lot of these lessors or people that operate the 10 large bingo halls, they are armed. In Houston, we've 11 had an occasion -- and I think Willie testified at the 12 BAC that his auditor, same guy that did the same thing 13 to us -- You know, we walk in, he takes his .45, 14 leaves it on the table, says, let's talk, what do you 15 want to talk about. And that's, again, placing your 16 people in harm's way. This is the element that we 17 deal with when we're out there. 18 Till, I think, two years ago, I think 19 one of the most significant -- and the person, as it 20 was categorized in the paper, the Godfather of bingo 21 assassinated at his bingo hall in San Antonio. You 22 know, we've investigated that hall several times. 23 We've been in there undercover, and we've been in 24 there, you know, on open investigations, and, again, 25 they still don't -- I don't think the Government -- 122 1 law enforcement's ever determined, you know, the end 2 of that investigation, but, yet, that's the element 3 that we deal with. 4 CHAIRMAN CLOWE: Okay. Mike, I think 5 you've made that point. 6 MR. PITCOCK: Now, effective and 7 efficient, the numbers that we do, over the years, 8 I've got pie charts here that shown the amount of 9 investigations and the investigative time that we've 10 had to work cases, and I think, effectively, that 11 those numbers speak for themselves. We start off, in 12 our average time of investigations, we're 13 approximately a hundred days plus, and we've worked 14 that down, and we have a policy and procedure in 15 effect that they take 60 days, and if they don't 16 effect in that time, they have to give logical 17 reasons, and our numbers over the last two years have 18 effectively showed the average time of the 19 investigation of bingo has been right at 50 days which 20 is well below the standard that we've set. The end 21 result has been very effective in the end as far as 22 the, you know, final predictions. 23 In the bingo industry -- and I think 24 that, again, the decline of complaints each year down 25 to approximately -- we started at 600. Now we're down 123 1 to just a little bit less than 200, have shown that we 2 are effective out there. I think that the -- not only 3 us, but the auditors are with us, and we have shown 4 out there that we can be effective because we go out 5 there and do it, and I think that that's a team effort 6 that we've had. 7 As far as moving us under bingo, I 8 think that, you know, as long as it's a criminal law 9 enforcement agency or law-enforcement-type agency, 10 plus with administrative responsibilities, I think 11 it's working effectively the way it is right now. I 12 think Kim has alluded to all that. We refer our cases 13 based on what we get from our administrators. 14 Our investigators are cross-trained. 15 They are also both criminal and administrative. They 16 file complaints, identify violations. It's their 17 decision, then, to make those determinations after 18 that, and I think that the thing that I look at is the 19 feedback from DAs, county attorneys, Billy, Kim, and 20 the attorneys and people who -- never anything but 21 excellent work, and I think that if you move this 22 around and do it, I think that, again, I'm going to 23 have to look at it and see if this is going to be 24 effective and is it functional. I think it would add 25 a step in this process that we have right now that I 124 1 think would render it nonfunctional, in my opinion. 2 CHAIRMAN CLOWE: Thank you, Mike. 3 Do you have questions? 4 COMMISSIONER WHITAKER: Very briefly, 5 Mike. In the bingo group position statement, 6 Paragraph 2, there's some statements that I'd like you 7 to comment on. The first is this statement: "The 8 security division does not report to the director of 9 the Charitable Bingo Division either." Can you 10 comment on that, what your reaction to that statement 11 is? 12 MR. PITCOCK: In our process from the 13 beginning of the complaint was someone calls on a 14 1-800 number. Each week I report to both Billy and 15 bingo and also Lottery, which is Gary, and actually to 16 Linda and Kim. We send a report of all incoming 17 complaints. You get that on a weekly basis. On a 18 weekly basis, Kim tries to get it to me. 19 We meet weekly to discuss any cases 20 after investigation that elevate themself to identify 21 violations that need a process, and Billy makes those 22 decisions. Those cases are referred to him, and 23 actually, after we complete the investigations and 24 that process, we give Billy copies of those 25 investigations that Billy has said -- he also has 125 1 access to our tracking system and our investigative 2 system where he can access if he needs to even before 3 that. So, I think throughout this system, we report 4 to him same as I do with Lottery. Gary Greif gets the 5 same thing. I report to Gary exactly the same way I 6 report to Billy as far as those investigations. 7 Now, criminal investigations, Billy 8 doesn't get that, Gary doesn't get that, because the 9 safety of the officers has to be my primary concern, 10 and any way I let information out that would cause 11 them to be in harm's way, I just -- I feel very 12 uncomfortable doing that. So, until the 13 investigations are complete, arrests are made, that 14 information is kept in the security division with 15 access to our legal counsel if there's issues that we 16 need to talk to them about, and they know each time we 17 make arrests and when we plan to make arrests. So, 18 they're aware that if something happens at that scene, 19 that they're ready for that. 20 COMMISSIONER WHITAKER: Second 21 comment -- statement I want you to comment on is in 22 the same document, is, quote, the lottery may need a 23 security division, but charitable bingo does not, 24 unquote. 25 MR. PITCOCK: That is incorrect. I 126 1 think the criminal element, as I spoke to earlier, is 2 out there. There's illegal bingo being played out 3 there. Every day that we are out there, there's 4 something that's happening that I think necessitates 5 an investigative division to go out and identify those 6 violations, and I think, again, if you look at 7 strictly the integrity of that game, I think to keep 8 it in check and balance, you have to have a security 9 division to go out, and if there's cheating or alleged 10 cheating or misconduct by any of those people that 11 conduct bingo, to identify it takes that investigative 12 arm to go out there and research it and bring that 13 information back for people to make decisions, and in 14 bingo in Texas, that happens. 15 I think it's necessitated by -- From 16 '94 to the present, I can tell you by the complaints 17 that we get, I think even previous to that, the TABC, 18 there's a lot of things going on out there. The 19 players are our best tool. I mean, the players are 20 sitting there watching. When they have a complaint, 21 they need somebody to complain to, that they expect 22 action. They expect somebody to come out there and 23 ask them or to -- So, I think that it's needed -- it's 24 necessitated just as in the lottery. I think when 25 there's activity that goes on that's not correct, 127 1 we're out there to find out what that is and bring it 2 back. 3 COMMISSIONER WHITAKER: Finally, where 4 do you think the perception comes that the security 5 division interferes with the customers and employees 6 of bingo halls? 7 MR. PITCOCK: You know, I don't 8 understand that perception. You know, our 9 investigators have been complimented by the industry 10 itself. You know, I was talking to one of the 11 investigators in Dallas this week, and I always ask 12 them how things are going. He used the example that 13 he was out there and this guy was questioned about the 14 firearm, and he says, you know, what do you do that 15 for, and then he turns right around, just as I think 16 I've heard here, and said, well, you know, I 17 appreciate law enforcement officers wearing firearms. 18 I think that, you know, it's our job as 19 professionals to go out there and not only sell 20 ourself, that what we're doing is correct, that we're 21 investigating an issue that's in your bingo hall, but 22 also sell ourself as professionals, and I think we 23 strive to do that. We have people -- and people make 24 mistakes, but, you know, if we have mistakes, I think 25 Mr. Fenoglio will tell you that if he complains, we 128 1 address those issues, but I think the perception is 2 that the effectiveness of what we do -- I don't think 3 the people actually see that. I don't think they see 4 the end results of the disciplinary actions. I don't 5 think -- They don't see the end results of the 6 investigation because they're not here in Austin. 7 They don't see the effect that we have out there. 8 The stats that we provide, I think, 9 show that the functional end result is there, but, 10 yet, I don't think that they see that. They see the 11 investigator come in or players see it and they really 12 don't understand what they're there for or what we're 13 investigating, and the investigators don't go out and 14 tell their whole story to everyone that's out there, 15 and I think there's a mystery left, what are they 16 doing, what's going on, but in the process, where I 17 think it's our responsibility is to, you know, tell 18 that story, to tell the people what we're doing, and I 19 think Billy and Kim have done excellent at doing that. 20 I think -- You know, I've been to every 21 BAC meeting, also, except when I retired for my back, 22 I missed one, but, you know, I sit out there, and 23 several of them I was the only person in the audience, 24 and I think that the people themselves need to come to 25 the meetings, and if they want to involve themself 129 1 with what happens with bingo, come to those BAC 2 meetings or come to these Commission meetings and 3 listen, voice what they have, let their feelings be 4 told, or tell them if they see an investigator and 5 they have a question, you know, they'd be glad to 6 answer your question if they can, and, you know, talk 7 to us, let us know what you're doing. 8 CHAIRMAN CLOWE: Thank you, Mike. 9 We have two additional public 10 individuals who would like to give their comments to 11 the Commission. 12 Mr. Saleem Tawil, are you here? 13 Yes, sir. Come up, please. 14 MS. KIPLIN: Commissioner, I've been 15 told that in about three minutes, we're going to have 16 to flip the tape. 17 CHAIRMAN CLOWE: Let's flip it now. 18 MR. TAWIL: I'm Saleem Tawil. I'm a 19 member of the Bingo Advisory Committee. I'm also a 20 businessman in the community. I own and operate, in 21 conjunction with partners, four different companies. 22 I sit on the chairman of the board of two of them. 23 I'm on members of the board of the directors. So, I'm 24 very steeped in business aspects. 25 I'm compelled to speak based on the 130 1 comments that have been made so far. First of all, I 2 do support what the chair of the Bingo Advisory 3 Committee said, and I'd like to address these in about 4 three or four different points real quickly. 5 Number one, the reason the BAC has been 6 ineffective is because it has been totally immersed 7 and controlled and managed by the way things are 8 presented by the divisions, and that's gotten better 9 over the last year. The members -- 10 COMMISSIONER WHITAKER: That has gotten 11 better? 12 MR. TAWIL: It is starting to get 13 better. It hasn't gotten better, but it is in that 14 direction. We've finely reached the point where we 15 can reduce the influence of the Division so that the 16 Advisory Committee can act as a body. 17 I sat on it for four years, and it's 18 like you come sit there and they come give you 19 information and you leave, and that's the end of it. 20 Nothing happens. Serving on an Advisory Committee for 21 one year is not very practical, I don't think. You 22 get appointed, you come to the first meeting, you meet 23 everybody. The second quarterly meeting they tell you 24 what this is all about. The third meeting you get a 25 chance to propose something. The fourth meeting they 131 1 say good bye. So, that's ineffective. 2 And that's been going on like a 3 treadmill because I sat there for four years. I got 4 frustrated. So, within the last year, I really became 5 proactive. It has been ineffective, but I believe 6 during the last year, through Chairman Neinast's 7 effort, we have gotten sort of focused. 8 I mean, I sat there for four years and 9 get glazed eyes by having Mr. Pitcock give me the 10 sweet talk about what the Division does in security or 11 sometimes legal may come. They don't show up all the 12 time, but they come and say some things, and I'm sure 13 Billy's frustrated in a lot of what he does. He's got 14 a very broad responsibility. 15 So, first comment on the BAC 16 recommendations. I believe the gentleman who 17 submitted his name to the public was deceptive. We 18 were not -- I chaired that subcommittee, and the 19 information that we had presented mentioned that he 20 was a commander or a sergeant within the VFW, and I 21 knew that they have a large statement. So, in my mind 22 the BAC would not have nominated that gentleman had he 23 been forthcoming in his position. 24 Number two, the last 15 minutes of the 25 Advisory Committee meeting, we were asked about the 132 1 nominees, and I stood up and said, wait a minute, we 2 can't be making a recommendation without reviewing the 3 content of information, and, so, they agreed, and they 4 said Mr. Atkins' office had submitted all of the 5 nominees' names, and I do support the Division in the 6 sense that I received three or four nomination forms 7 over the last six months. So, I was aware, and I 8 think everybody else in the public should have been 9 aware, regardless of whether they're in the industry 10 or not, if they were part of the bingo efforts. 11 So -- but Mr. Neinast did make it very 12 clear that whoever wanted to be nominated, here's your 13 chance right now, and I did receive three names of 14 people who did not have a form. Mr. Neinast spoke up 15 and said anybody in this room and told Billy, the 16 Division, that if there's anybody else that wants 17 theirs included, to get their name in. And, so, we 18 never received anything beyond that, but the people 19 that did submit their names were considered. And 20 Ms. Virginia Brackett was the only one that 21 immediately followed up with the background statement, 22 but nevertheless, we considered everybody, including 23 her. 24 There is overregulation. It's the 25 wrong kind of regulation. You don't regulate by 133 1 stifling. You regulate by helping. A good example is 2 one of our companies spent five years trying to get a 3 system approved, five years. If this was my primary 4 business, I would have been under. So, part of their 5 regulation is to hold things off as long as they can, 6 delay, if you can. Whoever is your opposition will go 7 under. 8 Now, I don't understand why it takes a 9 year for the investigative -- security to investigate 10 a single hall incident. One year. I've got the 11 records if you'd like to see them. I'd like for them 12 to explain that, why it takes them a year to do 13 something like that. That's not fair. It's not right 14 to the people. So -- 15 COMMISSIONER WHITAKER: Is that a 16 different issue from this five-year issue that you're 17 talking about? 18 MR. TAWIL: Yes, ma'am. 19 I would also like to remind y'all -- I 20 know you're supposedly aware. The Bingo Enabling Act 21 says bingo or lotto, a game of chance. You go to the 22 lotto in 1663 amended bingo. Bingo was given -- Bingo 23 was called lotto till 1936. So, today, bingo is 24 lotto. Lotto is bingo. The fact that the Division or 25 the commissioners have the responsibility and 134 1 oversight over a game that's licensed to the State and 2 it's played only by the State and managed does not 3 remove it from what the definition is. So, bingo is 4 lotto, and I believe it's in the right place. I 5 believe it's in the right home. 6 What we have to do is change the 7 culture of the regulation. The culture of the 8 regulation says bingo is a game that's played by 9 churches and that's all, or entities of a similar 10 nature, and that they can't do anything else, and 11 that's not true. Pull tabs are not bingo. Pull tabs 12 are lotto. Pull tab is lotto in any form you look at 13 it. So, we have lotto in the bingo division. 14 Why don't we wake up to the fact that 15 we have similar games, and there's a conflict of 16 interest. There is a conflict in managing lottery and 17 with managing bingo. These pull tabs compete with the 18 scratch-off cards in the marketplace. They really do. 19 Let's face the facts. It's to help 20 charities. When you get a license, you get a license 21 for the county. You're licensed for Travis County or 22 Dallas County, wherever. Where, lottery is a 23 statewide license. So, it is different in that 24 fashion, but in terms of regulation, there's 25 conflicts. 135 1 And I will tell you here on the record 2 that I spend over -- our company spends over a million 3 dollars a year on lawyers. Most of it's at the 4 federal level. Most of it is administrative law, and 5 I don't believe all this fluff that was given awhile 6 ago about why it should be centralized. We don't have 7 a single law firm handling our businesses. We have 8 many because of the different aspects, and I believe 9 that's true here as well. 10 Mr. Atkins doesn't need to have a 11 lawyer for labor and the lottery group needs to have a 12 lawyer for labor, but they do need to separate them. 13 Those lawyers whose expertise in administrative law in 14 audit and regulation ought to be under Mr. Atkins' 15 control, totally, 100 percent. They shouldn't be 16 under some person who decides whether it's a conflict 17 with Lottery or not. 18 So, let's really be truthful here to 19 ourselves and open ourselves up and look at, do we 20 really want to help charities. If we do, we need to 21 give them all the tools and all the mechanisms to get 22 done what needs to be done. 23 The pull tab bill, more than two years, 24 and the only reason it started moving forward is 25 because the people started coming to the Advisory 136 1 Committee and crying out and Chairman Clowe asking 2 questions of what's going on, and suddenly it appears 3 and here we are, we're ready to go, but there are some 4 trying to stop it. 5 So, really, this issue of 6 overregulation that Mr. Neinast spoke about I support 7 100 percent. It needs to be loosened up. We need to 8 recognize that -- If you look in this room, there are 9 not players in this room. What's in here is 10 distributors, manufacturers' representation, 11 operators. These are people that make this stuff 12 happen, but their hands are tied. It's really not 13 right, and I believe if you were able to sit down and 14 get people beyond their fears, to sit here and tell 15 you what's really going on, what's really happening, 16 you'd probably feel a lot more sympathetic. You may 17 already be sympathetic, and I hope that you are. 18 And, so, security. Security -- Who 19 cares about a 750-dollar game. What's the difference 20 between a 750-dollar game and a 16-million-dollar 21 game. There's a big world of difference. It requires 22 two different types of concerns. The security 23 division may be going out to bingo halls and what have 24 you. They may be concerned about complaints that come 25 in, but that has nothing to do with retailers or what 137 1 GTech is doing. Those things need to be separated. 2 We need to focus on -- and our agendas 3 in this division and as far as legal in terms of 4 administrative law, auditors, security, those are easy 5 to separate. That's not -- doesn't take a rocket 6 scientist. 7 And, finally, the bingo generates 8 millions of dollars more a year than it gets. Don't 9 we generate more than $10 million a year, Billy, than 10 what is used on bingo? 11 MR. ATKINS: Oh, for the appropriation? 12 MR. TAWIL: For whatever reasons. 13 Isn't there a big amount of cash thrown off by bingo 14 that doesn't go to bingo by the revenue that's 15 generated that comes in? 16 MR. ATKINS: I'm not following you, 17 Saleem. 18 MR. TAWIL: I was told in a public 19 meeting at the BAC that there's more than $10 million 20 a year that bingo generates for the Division that does 21 not go to Division efforts, but goes for other 22 efforts, whether it's state general fund or other 23 divisional Lottery Commission aspects. 24 MR. ATKINS: That's correct. The money 25 that's generated through the license fees, prize fees, 138 1 gross rental tax, all goes to the general revenue 2 funds. 3 MR. TAWIL: Right. And -- 4 MR. ATKINS: None of it goes to the 5 Division or the Lottery Commission. The Division is 6 then appropriated back by the legislature. 7 MR. TAWIL: That's just the point that 8 I'm trying to make. 9 COMMISSIONER WHITAKER: How much money 10 are we talking about, Billy? 11 MR. ATKINS: Total, 12 Commissioner Whitaker, in a calendar year of all the 13 items I mentioned, prize fees, gross receipts, tax, 14 license fees, I believe the amount is 25 to 30 million 15 with about 10 million being allocated back to local 16 jurisdictions, the remainder being deposited into 17 general revenue. 18 MR. TAWIL: And I would believe out of 19 that money, before it goes to that deposit, ought to 20 be allocated whatever legal resources that are needed 21 by the Division to be independent under the 22 commissioners. 23 I don't believe that the legislature 24 would ever consider making this a separate agency. 25 It's too small, and for other reasons, it is lottery. 139 1 It is lotto. Bingo is lotto, and I think we're in the 2 right place. I just hope that people will start 3 realizing that if we can get the security aspects of 4 it and the legal aspects under the divisional 5 responsibility, the human resources, labor law, 6 bankruptcy, all that can be separated into bottle 7 washing where the general counsel is. There's no 8 conflict on those issues. There are on these others. 9 Thank you for your time. Be glad to 10 answer any questions. 11 CHAIRMAN CLOWE: Thank you, sir. 12 Mr. Bresnan, I believe, wants to come 13 forward and speak on this subject, and his is the last 14 appearance form I have. 15 MR. BRESNAN: Thank you, Mr. Chairman. 16 My name is Steve Bresnan. I'm here on behalf of bingo 17 interest group. I would like to ask those people who 18 came here today and have been at the last four or five 19 meetings to work on these rules and these issues to 20 stand up, please. 21 That's the criminal element that Mike 22 was talking about right there, and I've done nothing 23 but been -- I've had a great relationship with the 24 individuals here. The paper that I put together on 25 behalf of my group there, I said a couple of times 140 1 this is not about personalities, it's not about 2 whether the people are performing their jobs with a 3 high degree of acuity and professionalism, and I think 4 I've said that to y'all many times from this podium. 5 It's about organization. It's about poor management 6 structure. 7 It's also about expending more 8 resources than are necessary to regulate this industry 9 and causing higher regulatory costs that diminish the 10 bottom line for the charities out here. 11 I can go to any 7-Eleven, any shopping 12 mall, my mother's apartment complex, outside your 13 offices on 6th Street and describe the same kinds of 14 incidents that Mike described at bingo halls. That 15 happens everywhere. People get shot. They find 16 bodies behind buildings all over the place. That's 17 the reason we got 150,000 prison cells in this state. 18 That's not endemic to bingo, and it's not about an 19 element around bingo. 20 So, I take offense to that on behalf of 21 my clients and the people in bingo. I think it 22 diminishes the argument here. 23 If I wanted to make -- stand up here 24 all day and give you anecdotal evidence in support of 25 that, we could be here for a good while. I could give 141 1 you a couple of examples about what I consider to be 2 conflicts of interest in the legal sense that -- since 3 I've been involved with bingo, that the legal 4 department has. 5 I think Mike stood up here and told you 6 about the kinds of qualifications and training that 7 people in the security division need to have. That 8 costs money. That's expensive. It's unnecessarily 9 expensive. We have police officers in this state that 10 can enforce the criminal laws, and there's nothing to 11 keep people from this Commission from going to those 12 police officers when they find a criminal cause of 13 action, and if the local authorities won't act on it, 14 then, you know, we've got an Attorney General that's 15 running around the state causing local authorities to 16 have legal actions on all kinds of stuff right now 17 that relates to eight-liners. There doesn't seem to 18 be any gap between the state and the local law 19 enforcement on that. I'd suggest maybe a similar 20 approach. 21 So, anyways, you can tell I'm kind of 22 worked up because I don't like people referring to the 23 element that we deal with out there, and I apologize 24 for my tone of voice. My comments have never been 25 about the specific performance of any of these 142 1 individuals. I think they do a very good job. 2 I think what you have is not a 3 centralized legal services. It's centralized as to 4 the agency, but the management is fragmented as to 5 bingo, and what we're trying to do is give this man 6 line authority over the resources that are necessary 7 to do an efficient job here, and if I was doing that 8 and I was saving some money, I could go back to the 9 legislature and say give us a break from some of these 10 taxes and fees. We've gotten very efficient over on 11 the regulatory side and now we need to see some 12 benefit from that to the bottom line. 13 I get tired of hearing people say 14 there's -- not enough money gets to the bottom line in 15 bingo when the State's a huge recipient of that money. 16 We could probably -- Mr. Fenoglio knows these numbers 17 a lot better than I do. We could probably double the 18 bottom line to charity in this state if the State got 19 its fingers out of it. I know that's not y'all's 20 fault, but I need to be able to go back over there and 21 say we are operating things as efficiently as we can 22 and y'all have cut back, and I need to be able to go 23 ask them, help me deliver some of that money to the 24 bottom line of these charities by helping us out on 25 these fees, and there's not a thing that we've 143 1 advocated to cut the lessors's tax, which is the only 2 income tax in Texas on unincorporated people, by the 3 way. 4 We've tried to get the fees on the 5 charities and the system for the charities reduced. 6 My guys will make money if the charities make money. 7 That's why we're here, and I'm sorry for my agitated 8 tone. 9 COMMISSIONER WHITAKER: Steve, let me 10 ask you a quick question. Give me an example of what 11 you consider to be a systemic conflict of interest in 12 the legal department. 13 MR. BRESNAN: The example involves a 14 silver star pull tab that I spoke to you about 15 earlier. At the very time that the Lottery Commission 16 was operating a game that operated on the exact same 17 principle, the bingo division, with the support of the 18 legal division -- because I came down here, and we 19 presented a brief to Kim and the lawyers, and they 20 took this on to the Attorney General's Office -- 21 Actually, they -- the Attorney General got involved 22 after we sued the Commission, but there were two 23 games, the same lawyers, same legal division involved 24 in each of those games, one in the lottery division, 25 one in the bingo division, that acted on exactly the 144 1 same principle, and, yet, even absent a rule, absent a 2 statute, the Commission determined in mid-stride not 3 to approve that game after it had been approved 4 several times already. 5 I don't know how the lawyers here can 6 go in and argue that that's illegal on the one hand, 7 and, yet, it's legal for the State to do it on the 8 other hand. The basis of the argument was that it was 9 a deceptive game. The judge did not find it 10 persuasive that it wasn't deceptive in the lottery 11 context, but it was in the bingo context. I think 12 that's a hard representation to make. 13 I might be able to come up with some 14 others if I wasn't so busy thinking about that 15 criminal element comment. 16 COMMISSIONER WHITAKER: And your view 17 is that the different positions arise out of a greater 18 loyalty to the lottery side? Is that your concern or 19 your view or -- 20 MR. BRESNAN: I think that's the view 21 of people in the industry, and I think that when those 22 kind of fact patterns arise, it just underlines it and 23 puts concrete on it and solidifies it and makes it 24 bigger and bigger until people feel like there's just 25 no way that we're ever going to get a fair shake in 145 1 that circumstance, and I've had the same conversation 2 with Commissioner Meyers when she was chairing the 3 Commission, I think Billy and I and Nelda over in the 4 cafeteria, and she didn't understand it, and I tried 5 to explain to her that, you know, whether we 6 understand it or not isn't going to change the reality 7 of it. That is exactly the way people feel, and they 8 felt that way for a long time. 9 If I look at it from a management point 10 of view -- One time in a previous life, I was in 11 retailing and studying management. If I looked at it 12 from that point of view, it doesn't look to me like a 13 very good management structure. It's hard to hold 14 somebody accountable when the people who are 15 performing around them are not directly responsible, 16 and when I said report, I didn't mean communicate. I 17 meant report in the military sense, and I think it's a 18 fundamental problem with the management of this state. 19 It's kind of like what the Government 20 has. We have a fragmented executive branch in this 21 state. The Governor gets held accountable for the 22 screw-ups over at MHMR, and, yet, those people are 23 appointed to terms. They can't be removed from office 24 once they get appointed, and they serve for six years. 25 So, the previous Governor has appointed them, in all 146 1 likelihood, before they're going to get to stroke and 2 then they can't do anything about it other than 3 jawboning. 4 It's a fundamental problem in Texas 5 government, and I think it's a problem right here. 6 COMMISSIONER WHITAKER: And your 7 concern is limited to legal and security? 8 MR. BRESNAN: Primarily, I think, for 9 the reasons that Saleem talked about. I think the 10 solution to this when you get to the down bottom, 11 nobody's fighting over human resources functions here. 12 Nobody is concerned about who is receiving 13 applications for employment and screening people and 14 that sort of thing. It's policies. It's where the 15 rubber meets the road out there in the community, 16 where the security is and legal services and how the 17 policies are made, not who's doing applications for 18 employment or contracting for data collection or 19 whatever. 20 COMMISSIONER WHITAKER: Are you 21 objecting to security carrying guns? 22 MR. BRESNAN: Yes, ma'am. 23 COMMISSIONER WHITAKER: Are you 24 objecting to security at all completely? I mean -- 25 MR. BRESNAN: No, ma'am. I think 147 1 what -- This is an accident of history. Now, somebody 2 here may know better than I do, but I started working 3 at the Comptroller's office in '87. So, bingo had 4 been in for about five years at that time. 5 Bullock didn't have any peace officers, 6 and things -- from an enforcement point of view, 7 things seemed to go fine, and there were a lot of 8 people griping at that time about the enforcement 9 because there were some people over there that were 10 pretty damn diligent in their job. 11 So, when it went to TABC, their agents 12 are peace officers and have been for a good while. 13 Notice that it doesn't say anything in the Bingo 14 Enabling Act about peace officers. 15 I think the -- I think your statute 16 that creates the Commission authorizes y'all to have 17 peace officers. So, it's kind of -- The same kind of 18 accident that happened with TABC kind of got carried 19 on. I don't recall ever in the legislative process 20 anybody ever sitting down and saying we've got to have 21 peace officers involved in the regulation of bingo. I 22 think it's basically an accident that's occurred in 23 the fashion that I've just described. 24 For one thing, it's more expensive than 25 is necessary. I think they need people like auditors 148 1 that can follow these numbers. I think you need to 2 have some people that can go in, drop in unannounced 3 and check on the bingo halls and find games that are 4 playing without a license, but I don't know that it 5 requires me to carry a gun to go in and find out if 6 somebody's playing during an unlicensed time. Just -- 7 There's a lot of people with different kinds of 8 expertise can do that. 9 COMMISSIONER WHITAKER: And finally, 10 can you give a couple examples of the basis of the 11 statement in Paragraph 2 about interference with 12 customers? 13 MR. BRESNAN: I could. I think they're 14 pretty old and stale, but I think they're still in 15 people's minds. There have been times -- There was a 16 time once when I first started working in bingo that 17 one of my clients told me that an investigator had 18 intercepted a ball coming out of the blower, the bingo 19 ball that comes up. 20 COMMISSIONER WHITAKER: Anything that 21 you would consider current, like a current concern? 22 MR. BRESNAN: Not real recently. The 23 gun issue is probably the primary thing and partly 24 this came up in the discussion -- it's been a 25 discussion of several issues where people have said, 149 1 well, you know, I don't want them coming in here and 2 talking to my customers in the middle of the game. 3 People are trying to sell them product, and people may 4 be interacting with the customers in the middle of the 5 game. Some of that's a little stale. I'll admit to 6 that. 7 COMMISSIONER WHITAKER: Okay. Thank 8 you. 9 CHAIRMAN CLOWE: Thank you, Steve. 10 MR. BRESNAN: Thanks. I appreciate it. 11 CHAIRMAN CLOWE: Ms. Taylor, I believe 12 you want to come up and make another comment. 13 MS. TAYLOR: Hi. Suzanne Taylor. Real 14 quickly, there's one thing that I haven't heard 15 brought up today, and I did want to bring it up. If 16 you'll notice on Item No. 3 of the agenda today, it 17 says report, possible discussion and/or action on 18 lottery advertising and promotions. You notice we 19 never -- and I think one of the reasons that the 20 industry looks at the Lottery and feels you're a 21 competitor -- you promote. You're not trying to 22 advertise it, and I realize that that's probably not 23 written in the rules that that's what you're required 24 to do, but are you a competitor or are you here to 25 help us. We need promotion. 150 1 I mean, some of the reasons bingo's 2 dying is how many advertisements do you see for bingo. 3 The industry is hurting. It's hard to purchase 4 advertising by a specific hall if they're already 5 broke. I've been in that position where the bill 6 comes and we can't pay the advertising bill. So, I 7 think that that's one of the things is that there's a 8 conflict because we've got two different companies 9 here. One is promoted and regulated, and one is 10 regulated. So, that obviously is a major thing in my 11 eyes. 12 I keep pushing the promotion along -- 13 over and over again. We've heard there was -- not the 14 Lottery Commission, but once again, when we needed a 15 new computer system, the charities had to foot the 16 bill for that. That's crazy. They had to come up 17 with $650,000 or $750,000, but the charities had to 18 pay that $750,000. That's incredible. You know, why 19 wasn't this something that was pushed through the 20 legislature. You know that that's required, and it 21 was needed, and I definitely saw the need for it. I 22 didn't see the need for the charities to have to foot 23 the bill. They were already hurting, and now they 24 have to pay for the system. 25 The system's still in place, and it was 151 1 my understanding that -- and their being fined -- are 2 going to be fined $1,000 a day. So, right away, can't 3 we have that $1,000. It's very frustrating that 4 there's never any money to promote bingo. You know, 5 $1,000 a day for something the charities purchased, 6 but they don't -- I mean, that seems like their money 7 to me, but here we go back to the state treasury. 8 So, I'm a little tired of hearing that, 9 you know, bingo is for the charities and we're trying 10 to raise money for charities, and, so, why does 11 their -- I want the money that bingo -- which, in 12 turn, is going to help the State anyway. So, 13 competition, well, yeah, I feel competition. I feel 14 every time I see a Lottery commercial, I want to spit 15 because I want to see a bingo commercial on TV, too. 16 You know, so, there is a conflict. 17 Let's promote bingo. The license fees 18 for the charities -- How much do your charities pay 19 for the license fee? Somewhere between 350 and $400 a 20 year. Well, I guess what -- I guess that other part 21 of the other 500 doesn't -- So, you know, a lot of 22 legislative things, but is it something the Lottery 23 Commission is going to ask for for bingo? Are we 24 going to ask for advertising dollars for bingo? 25 So, that's just my views on where we 152 1 are here, and that's why I do see it as a conflict. I 2 want bingo to be promoted just like the Lottery is 3 promoted. 4 Okay. Thanks. 5 CHAIRMAN CLOWE: Thank you. Any other 6 comments from anyone? 7 Any questions or comments? 8 COMMISSIONER WHITAKER: I think I've 9 asked a number of them. I've got a lot to think 10 about. 11 CHAIRMAN CLOWE: I have a comment. I 12 want to thank each and every one of you who had made 13 comments for being here and doing so today, and I want 14 to thank those of you who have come to this meeting 15 and haven't commented. Your presence is significant, 16 and it is appreciated. 17 I feel to some extent responsible for 18 what's happened here today because I've asked many of 19 you to do exactly what I've done today, and I think it 20 has benefited Commissioner Whitaker tremendously 21 because she was not able to attend the two Bingo 22 Advisory Committee meetings where so much ground was 23 covered that's been covered again here today, and I 24 think it's important for the commissioners, myself 25 included -- and I put my name at the top of the list, 153 1 because I am the designated bingo commissioner, to 2 hear the things that you said in March and April and 3 that you've said today, and I think it's only fair to 4 me, as one commissioner, to respond and to tell you 5 how I feel about what I've heard today. 6 And that doesn't constitute a vote 7 because there is no item on this agenda where a motion 8 can be made and action can be taken, but I would like 9 to give you what I call feedback because I think that 10 when you come to a meeting like this and you appear 11 before a state agency and you have individuals such as 12 myself and Commissioner Whitaker, it's our obligation 13 to react to the extent that we can and tell you how we 14 feel about what you've had to say. 15 My concerns about the bingo industry in 16 this state are real and deep. My perception is that 17 there are many more problems in the bingo industry 18 really than those which have been addressed in this 19 meeting today or the last two months in the Bingo 20 Advisory Committee. 21 It's true that I am not an experienced 22 bingo operator. It is true that I am not a full-time 23 employee of the Commission, but as a commissioner, I 24 get an overview that is very rare and unusual, and I 25 have conversations as a proactive person concerned 154 1 about this industry that give me an insight that gives 2 me concern about where this industry is. 3 On the business side, I'm very 4 empathetic to those of you that are generating an 5 income and have businesses in the bingo industry. It 6 is clearly a real problem of losing market. It may be 7 for a number of reasons. It may be because there are 8 many forms of gambling that are attractive that are 9 drawing your clientele, your players away. It may be 10 because so many of the players are of my age, and 11 that's an older group of people, and the industry is 12 not attracting the younger players. I've been in a 13 number of bingo halls, and I don't see young men and 14 women in their twenties nearly as much as I do folks 15 my age, and we all know as business people, to have 16 your business grow, you must see growth in market 17 share, and you have to have young people coming in. 18 Now, the issue Ms. Taylor just raised a 19 minute ago about what is the role of the Lottery 20 Commission in advertising and promoting bingo to 21 younger players, I know as a commissioner that the 22 bingo division attempted to do some real and tangible 23 things in the last session of the legislature which 24 were not passed that would have increased the player 25 interest, I think, in playing bingo. I have thought 155 1 this morning, as I've listened to your comments, what 2 more we as commissioners can do to help the bingo 3 division in its marketing activities. That's 4 something I have to think more on in the future, but 5 that's a real side of the problem that the industry -- 6 which I think is fragmented between the different 7 interests. I think there are manufacturers, 8 distributors, operators, charities, and I don't see 9 that fragmented industry working together. I think 10 there are business interests that drive those 11 segments, and I haven't seen uniformity there in a 12 cohesive force working yet. That's something for you 13 all to think about. 14 If you want action out of state 15 government, my experience as a regulated operator in 16 an industry in this state is that you've got to get 17 your group together. You've got to appear as a 18 unified entity. That's the way the legislature hears 19 your message. 20 Now, you have heard me say -- and I'll 21 say again, I've spent more time on your side of the 22 table as a regulated business person than I have on 23 what is my side of the table now as a government 24 official or a regulator or a bureaucrat, and I don't 25 think any of the comments that any of you have made 156 1 that I've heard over the last few months are unfair. 2 I am very empathetic about the points that you've 3 made. I do know enough about the system to know that 4 this agency can be more responsive, and that's been my 5 project as the bingo commissioner these last few 6 months by attending the meetings that I have, by 7 asking you to be articulate about your concerns, 8 asking you to come to these meetings, and I think most 9 importantly to appear before the Sunset Committee. 10 Now, let me tell you that this 11 Commission has put the majority of these issues before 12 the Sunset Committee in its self-evaluation report. 13 Gary Greif who is the Lottery Commission's operations 14 director is the chair of that committee, and he has 15 done a marvelous job of working with Billy as the 16 Charitable Bingo Division director and putting forth 17 to the Sunset Committee many of the concerns that 18 you've expressed. There are some that are not in 19 there, but any subject that you have brought up to the 20 Bingo Advisory Committee or to this Commission is fair 21 game to submit to the Sunset Commission. 22 I pointed out at the last meeting of 23 the Bingo Advisory Committee those members of the 24 Sunset Committee that were there. They're here today 25 in this meeting. I'm not going to ask them to stand 157 1 and identify themselves because I think I may have 2 embarrassed them a little bit the last time, but 3 they're here, and they are listening, and they are 4 taking notes, and this is part, I think and I 5 fervently hope, of their report to the Sunset 6 Committee as they draft it. 7 A week ago, Linda Cloud, the executive 8 director of the Lottery Commission, and Billy Atkins 9 and I appeared before a subcommittee of the House 10 Finance Committee. Chairman Hefflin conducted that 11 meeting, and at the end of it, after Linda and Billy 12 had given their testimony, he asked me as chairman of 13 the Commission if I had any comments, and I said, yes, 14 I do, and I said, Mr. Chairman, we have a very unhappy 15 bingo industry, and I, in a short form, gave him much 16 of the discussion that we've covered here today, and I 17 told him that I asked members of the industry to come 18 before the Sunset Committee and express themselves. 19 They were at that meeting. The Sunset members staff 20 was at that meeting. They're here with us, and my 21 hope is that this process, which for an excellent 22 reason has been set up, is going to help us as 23 commissioners deal with many of the problems that you 24 highlighted. 25 I think that I am hesitant as a 158 1 commissioner at this time to make some very 2 substantial and real changes in the structure of the 3 Commission with the Sunset process in such close 4 proximity. Anything can come out of the Sunset 5 process. The bingo industry can be completely 6 deregulated, and it could be audited by auditors from 7 the Comptroller's office, for example, on the one end 8 of the spectrum. That can happen as a result of 9 legislation coming out of the Sunset process. 10 Certainly legislation can come out of 11 that process that would set bingo up as a separate 12 agency. It can do all of the things that you've asked 13 for and some things you haven't asked for which you 14 might like or not like. All the cards are on the 15 table on a Sunset review, and that's why it's such a 16 wonderful and excellent process. 17 I'm most appreciative for what you've 18 said here today, and I'm going to promise you as one 19 commissioner -- and I think I can speak for 20 Commissioner Whitaker as well -- to continue to be 21 very attuned to the things that you're talking about, 22 that you're concerned about. Yes, the Lottery 23 operation is much larger than the bingo industry. 24 There's no question about that. Yes, there are some 25 real differences in the approach to advertising the 159 1 Lottery and how to enhance the market for bingo. 2 Those are things that may take time and effort and may 3 develop over a period of time, but the commissioners' 4 attention to these problems and the staff's attention 5 to these problems, I think, can make it better while 6 we're going through the Sunset process. 7 Now, I invite any of you as individuals 8 in the industry to request that any item you want be 9 put on the agenda for action by this Commission. You 10 have that opportunity. As I said, there's nothing in 11 regard to this report that's on the agenda that we can 12 take action on today. We can take all of what you 13 said under advisement, but there's no motion that can 14 be made, no vote that can be taken that will cause 15 action to be taken on your comments here this morning. 16 That would not be the case in the future, and this 17 Commission will be happy to consider anything it 18 legally can that's put forth as an action item. 19 That's my response to you this morning 20 about the way I feel about what I've heard, and I want 21 to say finally and lastly how much I appreciate the 22 openness, the candor and the willingness that you have 23 to take some of your time and come here to Austin and 24 speak to us today. 25 Commissioner Whitaker, I'll give you 160 1 another opportunity if you'd like. 2 COMMISSIONER WHITAKER: I would say 3 that I've seen more energy and enthusiasm demonstrated 4 here today at today's meeting than during the rest of 5 my tenure on the Commission. It does make a great 6 deal of difference to us to have you show up. We do 7 listen very hard. I hope you feel that you've been 8 listened to, and what I find very exciting is the 9 number of you that showed up as well as the fact that 10 you represent the various constituencies of this 11 industry. 12 I think the fact that Mr. Fenoglio and 13 Mr. Bresnan come and that they are obviously studying 14 the issues very deeply and I know that they represent 15 a number of you also helps a lot. So, please feel 16 free to keep on coming because it's not like there's 17 just a magic answer, but that together we really can 18 figure this out and make things better, and thank you 19 for coming today. 20 CHAIRMAN CLOWE: Now, in regard to 21 Item 5, as a result of discussions that we had and the 22 comments that have been made about the status of these 23 nominations, I'm going to ask the Commission to pass 24 on this item at this time. My view is that there's 25 more study that needs to be done and verification of 161 1 who are the candidates for nomination, and they need 2 to be communicated with to ascertain that they will or 3 will not, in fact, serve. 4 I understand that means that there 5 cannot be a meeting between now and the time 6 nominations are set forth and approved by the 7 Commission, but I'm comfortable with that, and I would 8 request that this item be passed. 9 COMMISSIONER WHITAKER: All right. 10 CHAIRMAN CLOWE: There will be no 11 action, then, on Item 5, Billy. Do you have any 12 comment on this? 13 MR. ATKINS: No, sir. I just wanted to 14 make sure -- I wanted to clarify what action you want 15 to take in the interim. You want us to contact these 16 individuals and ensure their willingness? 17 CHAIRMAN CLOWE: Yes, sir. And I think 18 that there are some failures of communications between 19 the staff and the chair and the nominated committee of 20 the Bingo Advisory Committee that I'd like to give you 21 some more time to work through and see if you can come 22 to unanimity on the nominations. You may not be able 23 to, and I'm not suggesting that you have to, but I 24 think we heard Chairman Neinast say that he got a 25 telephone message yesterday afternoon at 162 1 2:00-something p.m. and there wasn't really time to 2 work through this, and I'd like to see that effort 3 made. 4 MR. ATKINS: We'll do that. 5 CHAIRMAN CLOWE: It is now 12:12, and 6 we still have one bingo item. I know there are many 7 of you here -- 8 MR. ATKINS: Two. 9 CHAIRMAN CLOWE: Two. 10 MR. ATKINS: 10 and 11. 11 CHAIRMAN CLOWE: Oh, sorry. I didn't 12 go on to 11. I would like to continue in the public 13 agenda and deal with the two bingo items and then 14 recess for lunch, if that's agreeable. 15 All right. Then, we're ready to go to 16 new proposed audit rules. 17 MR. ATKINS: Members, the staff, as you 18 know, began working on a rule review, and we presented 19 several to the Advisory Committee, I believe, the 20 latter part of last year that were ultimately 21 published for public comment. Three of them dealt 22 with the acting services section. Those were 23 ultimately adopted by the Commission. These six that 24 you have before you in Item 10 related to the audit 25 section. 163 1 There were two public hearings that 2 were held on these rules, and there were a number of 3 issues raised in connection with these rules. In 4 addition to that, at the same time that this was 5 occurring, I was proposing to the Bingo Advisory 6 Committee and the charitable bingo industry the 7 change -- process went about proposing and adopting 8 rules for consideration. That included, but was not 9 limited to holding two separate readings of the rules 10 before the Advisory Committee so that there would be a 11 time period in the interim between Committee meetings 12 for individuals to take those rules and analyze them 13 and come back to the second meeting on a more informed 14 basis in order to comment. 15 Also we have discussed and we are 16 working on the process of going through a negotiated 17 rule making process whereby we bring in a mediator or 18 a facilitator, if you will, bring together various 19 stakeholders -- and work on receiving and responding 20 to those comments before the rules are ultimately 21 published. 22 Given that fact -- As I mentioned, 23 given the fact of some of the issues that were raised 24 at the public hearing, staff would request that you 25 vote to withdraw those rules for consideration at that 164 1 time, and we would use these rule -- or these rules 2 would then take part of this new proposed process that 3 we have ongoing with the -- as it relates to the 4 adoption of rules, proposal and adoption of rules. 5 MS. KIPLIN: So, your motion would be 6 that you would move to withdraw the proposed new rules 7 that were published for public comment? 8 COMMISSIONER WHITAKER: Is there any 9 urgency to consider them earlier rather than later? 10 Is there any downside to this action? 11 MR. ATKINS: No, ma'am. 12 COMMISSIONER WHITAKER: All right. 13 MR. ATKINS: You know, again, we felt 14 the biggest benefit was that it put the industry on 15 notice of, you know, the Division's functions and how 16 they were going to be performing, but -- 17 COMMISSIONER WHITAKER: So moved. 18 CHAIRMAN CLOWE: Second. 19 All in favor, say aye. 20 Aye. 21 COMMISSIONER WHITAKER: Aye. 22 CHAIRMAN CLOWE: Opposed, no. 23 Vote is approved two zero. 24 Next, Item 11, consideration of and 25 possible discussion and/or action, including adoption 165 1 of repeal, on 16 TAC 402.572, relating to the 2 Temporary Capital Equipment Acquisition. 3 MR. ATKINS: Thank you, Mr. Chairman, 4 members. As Suzanne Taylor referred to earlier, the 5 Texas Legislature, through a rider to the agency's 6 appropriations, made a contingent appropriation of 7 some $743,000 for the Division to use to acquire a new 8 operating system, contingent upon the Division being 9 able to raise that $743,000 through additional license 10 fees. As a result of that, the Commission adopted 11 Charitable Bingo Administrative Rule 402.572 which 12 raised the license fees for the top tier conductor and 13 lessor's licensee 25 percent. Those revenues have 14 been collected. They've been deposited to the general 15 revenue fund. 16 We believe that the usefulness of this 17 rule has expired. It was proposed -- I'm sorry, I 18 don't know when it was -- 19 MS. KIPLIN: It was published in the 20 January 25th, 2002, issue of the Texas Register. No 21 comments were received. The matter is ripe for 22 consideration. 23 MR. ATKINS: And we would ask that the 24 Commission vote to adopt the repeal of 16 TAC 402.572 25 for the reason that it has fulfilled its purpose and 166 1 is no longer necessary. 2 COMMISSIONER WHITAKER: So moved. 3 CHAIRMAN CLOWE: Second. 4 All in favor, say aye. 5 Aye. 6 COMMISSIONER WHITAKER: Aye. 7 CHAIRMAN CLOWE: Opposed, no. 8 The vote is two zero in favor. 9 MS. KIPLIN: I have an order. 10 CHAIRMAN CLOWE: Okay. Does the 11 cafeteria across the way in the lobby of this building 12 serve lunch? Does anybody know? 13 MR. BRESNAN: Do you want me to go 14 look? They have sandwiches. 15 CHAIRMAN CLOWE: I'm going to put a 16 time limit on our lunch break because we still have a 17 lot of agenda to cover. I'm going to ask for a recess 18 where we reconvene in 30 minutes, and that will allow 19 us just time for those of us that are continuing to go 20 across and get a sandwich and come right back and 21 start just about ten till 1:00. We're in recess at 22 12:17. 23 (Recess.) 24 CHAIRMAN CLOWE: Commission will come 25 back to order after lunch and recess. The time is 167 1 12:52, and we are ready now to go to Item 2 on the 2 agenda, report, possible discussion and/or action on 3 lottery sales trends. Linda. 4 MS. CLOUD: Okay. Toni's got the 5 report. 6 CHAIRMAN CLOWE: Toni. 7 MS. SMITH: Good afternoon, 8 Commissioners. I'd like to take a moment to wish you 9 happy birthday. 10 CHAIRMAN CLOWE: Thank you. 11 COMMISSIONER WHITAKER: I want to know 12 what the age is. 13 MS. SMITH: You just missed it. You 14 said 69. 15 COMMISSIONER WHITAKER: I wouldn't have 16 guessed a day over 20. 17 MS. SMITH: For the record, my name is 18 Toni Smith. I'm the marketing director of the Texas 19 Lottery Commission. 20 To look at year-to-date total sales for 21 week ending April 20th, 2002, sales were 22 1,855,046,506. This is down 2.89 percent from fiscal 23 year 2001 total sales to date of 1,910,226,351. Our 24 current weekly average for fiscal year 2002 is 25 54,560,191. The reason that we're still behind, 168 1 although it's less than what we have been in the past, 2 we're still sort of trying to compete with ourselves 3 on those larger Lotto Texas jackpots that we had at 4 the beginning of last fiscal year. 5 MS. CLOUD: Our jackpot got hit last 6 night by two winners, one in Paris, Texas, and one in 7 Wichita Falls, at $17 million. So, we start over 8 today. 9 CHAIRMAN CLOWE: What was the coverage? 10 MS. CLOUD: I haven't even had a chance 11 to find out what the coverage was. 12 MS. SMITH: To look at year-to-date 13 sales by product for the same week ending April 20th, 14 2002, instant tickets are at 1,225,894,750, 15 representing 66.8 percent of sales, compared to fiscal 16 year 2001 instant ticket sales of 1,135,359,899, and 17 at that time, the instant product represented 59.44 18 percent in sales. So, that's a 7.97 percent increase 19 comparing this year to last year's instant sales. 20 Lotto Texas for fiscal year 2002 is at 21 351,676,801, and it represents 18.96 percent of sales, 22 compared to fiscal year 2001 of 515,153,844. 23 CHAIRMAN CLOWE: I think we can read 24 those. 25 MS. SMITH: Okay. 169 1 CHAIRMAN CLOWE: Did you have any 2 questions? 3 COMMISSIONER WHITAKER: No. Except 4 that, aren't we -- by August, aren't we going to be 5 statistically predicting some larger jackpots? 6 MS. CLOUD: Yes. My statistician 7 assures me that I will have a big jackpot roll this 8 year. So, I am still holding onto that. 9 Let me just say one thing. The instant 10 ticket game plan -- our new game plan continues to be 11 a huge success as you've just seen. If you compare 12 the last six weeks of instant ticket sales this year 13 to last year, it's $46.9 million over last year. The 14 increase equates to about 7.8 million per week with a 15 new game plan than it was last year. So, we're still 16 doing real well with that, thank God. 17 MS. SMITH: Did you have any other 18 questions? 19 CHAIRMAN CLOWE: No. 20 MS. SMITH: Thank you. 21 CHAIRMAN CLOWE: Thank you, Toni. 22 I have attached to my revenue report -- 23 I guess I do have a question. These instant 24 scratch-off tickets, did you want to comment on those 25 or were they -- 170 1 MS. SMITH: Oh, I just put those there 2 for you to see some samples of some of our more recent 3 games. 4 CHAIRMAN CLOWE: Which one is the 5 ten-dollar game? 6 MS. SMITH: Actually, there's not a 7 ten-dollar there, but I can get those to you depending 8 on what you -- 9 CHAIRMAN CLOWE: That's all right. I 10 understand it's very successful. 11 MS. SMITH: Yes, sir, it is. It was 12 our tenth anniversary ticket. I'll make sure that you 13 both get a copy of it. 14 CHAIRMAN CLOWE: Okay. Thank you very 15 much. 16 MS. CLOUD: The next ones, 17 Commissioners, that's going to probably -- it's going 18 to be interesting to see how it sells in this state. 19 It's done very well in other states, is the Harley 20 Davidson game, and that would roll out on June 1st. 21 CHAIRMAN CLOWE: Very good. 22 Is there anything on lottery 23 advertising and promotions, Item No. 3? 24 MS. CLOUD: No, sir. 25 CHAIRMAN CLOWE: Then we'll go to Item 171 1 No. 6, consideration of and possible discussion and/or 2 action on State Auditor's Office and/or internal audit 3 reports relating to the Texas Lottery Commission 4 and/or the Internal Audit Department's activities. 5 Debra. 6 MS. McLEOD: Good afternoon, 7 Commissioners. I'm Deborah McLeod. 8 On, I think, the last Commission 9 meeting, I had presented to the commissioners two 10 draft reports, one on the follow-up to the human 11 resources, and the other is shipping and temporary 12 costs. I'd like to release these reports to the 13 appropriate state agencies. 14 In addition, we've completed two 15 investigations. One draft report has gone to general 16 counsel. We anticipate getting a final draft to the 17 executive director today or tomorrow. We are 18 finalizing issues on two other investigations, and by 19 the next Commission meeting should be able to report 20 to the commissioners. So, possibly four 21 investigations by that point. We also will have two 22 audits that we've completed. The SEO bingo management 23 control follow-up audit and the telecommunication 24 purchase follow-up audit. 25 I'm sorry that I wasn't able to 172 1 introduce my new employee here, but I believe both 2 commissioners have met her. She's a CPA and brings 3 with her -- experience with her from a variety of 4 state agencies, Railroad Commission, State Auditor's 5 Office, and brings in great current business 6 experience with Tivoli and several other 7 organizations. 8 Other projects, I have provided you a 9 list of what I've done in addition there. I wanted to 10 return now to external audits, and the State Auditor's 11 Office began an audit statewide on petty cash, travel 12 advance and funds. We've received a few 13 communications. They are not on-site. The other 14 piece was we had reported for several months now about 15 the Comptroller's audit, and if the commissioners have 16 not received a copy of the report, we'll make sure 17 that you get copies. 18 I think that's about it. 19 CHAIRMAN CLOWE: My recollection, 20 Deborah, is that you're telling us and we're 21 acknowledging that you are releasing those internal 22 audits? 23 MS. McLEOD: Yes. 24 CHAIRMAN CLOWE: No motion is required. 25 MS. McLEOD: Okay. And general 173 1 counsel's given me a note that there's a person in the 2 audience from the State Auditor's Office. Is there 3 somebody? 4 MS. KIPLIN: Commissioners, I met Tom 5 at the rule making comment hearing on Cash 5, and I 6 think he's new to the State Auditor's Office, and he's 7 on the team, I think, support the lottery. So, I 8 thought it might be a nice opportunity for you to meet 9 him. 10 MR. HILL: Basically I'm here just as a 11 listener. 12 CHAIRMAN CLOWE: Well, you got an 13 earful, didn't you? 14 COMMISSIONER WHITAKER: Yeah, what do 15 you think? 16 MR. HILL: No comment. 17 CHAIRMAN CLOWE: I thought you were a 18 bingo man. 19 MR. HILL: I was asked that question 20 after the Bingo Advisory Committee meeting -- when is 21 that? April 10th? And I had never been in a bingo 22 hall in my life. 23 MS. KIPLIN: Want to go? 24 MR. HILL: I've played church bingo, 25 but that's about the extent of it. I need to go. I 174 1 just hope I can put up with the smoke. 2 CHAIRMAN CLOWE: We're happy to have 3 you here. 4 MR. HILL: And as you said, 5 Commissioner, I'm about that age. 6 CHAIRMAN CLOWE: You said that. I 7 didn't. 8 MR. HILL: My name is Tom Hill, by the 9 way, and I'm with the State Auditor's Office. I've 10 been with the office for just over a year now. In 11 fact, about a year and four months, and I'm on what we 12 call our fast team. It's functional advisory 13 specialists, and just about each agency has a group of 14 auditors that are assigned to various agencies, and 15 we're supposed to specialize in the functions of those 16 agencies and be able to advise them should they come 17 to us for any information. 18 Well, rest assured, I'm learning as I 19 go along because I've been with that fast team for 20 about six weeks now, and being new to Texas and being 21 new to bingo and lottery, other than for a person who 22 puts in a dollar every Wednesday and Saturday night, 23 all of this is a new experience to me. So -- Anyway, 24 it's interesting being here, and I appreciate the job 25 that y'all are doing, and I'd like to compliment 175 1 y'all. Thank you. 2 CHAIRMAN CLOWE: Thank you. 3 COMMISSIONER WHITAKER: Thank you for 4 coming. 5 MS. McLEOD: Thank you, Kim. 6 CHAIRMAN CLOWE: Thank you, Deborah. 7 Next, Item 7, report, possible 8 discussion and/or action on the Sunset process 9 involving the agency. Gary Greif. 10 MR. GREIF: Good afternoon, 11 Commissioners. For the record, my name is Gary Greif, 12 and I'm the director of lottery operations for the 13 Texas Lottery Commission, and I'm also serving as our 14 project manager for the Sunset review process. 15 The review of our agency by the Sunset 16 Commission has begun in earnest. Initial meetings 17 with the Sunset team have consisted of overviews given 18 to Sunset staff by your executive director and each 19 division director, as well as a presentation by our 20 lottery operator, GTech. The GTech overview also 21 included a tour of the data center and the instant 22 ticket warehouse. Staff from the leadership offices 23 and from Senator Jane Nelson's office were also in 24 attendance at the division overview sessions. 25 The Sunset staff have taken some time 176 1 to visit some of our retailer lottery locations, and 2 that has included both a large chain store location 3 and an small independent operation. I believe that 4 this has provided Sunset staff with an opportunity to 5 see firsthand the importance of our relationship with 6 our retailers. 7 The Sunset team has also taken time to 8 witness our nightly draw process in our studio, and 9 they have toured our promotional merchandise warehouse 10 and our business resumption site. Meetings between 11 Sunset staff and individual division management have 12 also begun. By the end of this week, Sunset staff 13 will have met with management from the legal, 14 security, lottery operations and charitable bingo 15 divisions. We're providing materials and backup 16 documentation to the Sunset team as they requested, 17 and I anticipate that the pace of the review is going 18 to pick up considerably beginning next week since 19 public hearings on certain other agencies that have 20 just undergone the review process were concluded on 21 Tuesday and Wednesday of this week. Both Nelda 22 Trevino and I were in attendance at the opening part 23 of the hearings on Tuesday so we could try to gain 24 some insight into that process. 25 I am in close contact with Karen Lotick 177 1 who is the project manager for the Sunset Commission 2 review time, and I'm going to continue to ensure that 3 her requests for meetings or documentation are 4 responded to timely and appropriately, and I'll 5 continue to keep the commissioners and our executive 6 director informed on a regular basis as the project 7 moves forward. I'm also making an effort to keep 8 agency staff involved as we go through the process 9 through some regular periodic e-mails. 10 And that concludes my report this 11 afternoon. Our Sunset team was in attendance earlier. 12 I anticipate they'll be back momentarily. I'm sure 13 they'd be open for questions or I'd be happy to try to 14 answer any questions you might have. 15 CHAIRMAN CLOWE: Thank you, Gary. We 16 appreciate the job you and your committee are doing 17 and the updates which you are getting. The 18 commissioners as well as others are very timely and 19 helpful. We'd ask you to continue that. 20 MR. GREIF: Yes, sir. 21 CHAIRMAN CLOWE: Thank you. 22 Item 8 is next, consideration and/or 23 possible discussion and/or action, including adoption 24 of amendments, on 16 TAC 401.308, relating to Cash 5 25 on-line game rule. 178 1 MS. KIPLIN: Commissioners, I'll go 2 ahead and handle this. The -- As you know, you all 3 voted to propose for public comment amendments to the 4 Cash 5 on-line game rule. They were published in the 5 March 22nd, 2002, issue of the Texas Register. We did 6 have comment in the form of written comment. We did 7 notice up a rule-making comment hearing. There were 8 no persons in attendance at that rule-making comment 9 hearing. The comment that we received has been 10 summarized, and it is contained in your -- the 11 preamble to the rule that you received. The reasons 12 why the agency disagreed with the comment to the 13 extent that the agency did is also contained in the 14 preamble. 15 The staff, at this point, is 16 recommending that you do adopt the amendments to the 17 Cash 5 rule, but with changes. The change is just 18 changing the name of the game from Cash 5, 5 being the 19 number, to Cash Five, five being the word. In my 20 opinion, the change is not substantive, but it is 21 consistent with comment that was received from players 22 and focus group testing. This -- The amendments are 23 ripe for your consideration for adoption today, and 24 the staff would recommend that. 25 If you do vote to adopt, the staff 179 1 would like the effective date to be July 28th, 2002. 2 If you don't put an effective date, then it's 3 determined to be 20 days after it's filed with the 4 Texas Register. 5 COMMISSIONER WHITAKER: Is there any 6 member of the public that is here today to comment on 7 this rule? 8 I don't see anybody. 9 I will so move, then. 10 CHAIRMAN CLOWE: Second. 11 All in favor, aye. 12 Aye. 13 COMMISSIONER WHITAKER: Aye. 14 CHAIRMAN CLOWE: Opposed, no. 15 The vote is approved two zero, with the 16 effective date you recommended. 17 MS. KIPLIN: Thank you. 18 CHAIRMAN CLOWE: Next item is No. 9, 19 consideration of and possible discussion and/or 20 action, including proposal on amendments, new rules, 21 and repeal on 16 TAC 401 -- Chapter 401, Subchapter B, 22 licensing of sales agents rules. 23 MS. KIPLIN: Commissioners, this is in 24 large part a product of a rule review that each agency 25 is required to undertake on their rules every four 180 1 years. This is the subchapter. If you'll recall, you 2 have moved forward on amendments on two other 3 subchapters to the lottery rules, administration of 4 lottery rules, and that was Subchapter D and 5 Subchapter E. These are the rules that pertain to the 6 licensing of sales agents. 7 In large part, these rules are to make 8 consistent -- have the rule language be consistent 9 with agency practice and to eliminate redundancy where 10 there's language that was the same as the State 11 Lottery Act. There is one -- I think one important 12 part of the rule making and that is to propose a 13 standard penalty chart which is contained in the new 14 rule which is part of this package, and that was, in 15 large part, a product of the Lottery Operations 16 Division, but also review by other divisions of the 17 agency, and it's an opportunity to put into a rule the 18 way in which the enforcement aspects of the license -- 19 lottery licensing is to go forward with first, second 20 and third offenses. It is an opportunity because we 21 have amassed the experience that we have in terms of 22 how the agency staff is handling those particular 23 violations, and it's a tool for not only the agency 24 staff, but also for the licensees so that they'll know 25 if they engage in a particular area of conduct and 181 1 it's a violation of either an act or a rule, what the 2 range of penalties are depending on whether it's a 3 first, second or third offense. 4 So, in summary, from my perspective -- 5 and Mr. Greif may have some other comments he'd like 6 to make -- the staff is proposing amendments to the 7 Rules 401.152, '153, '155, '156, '157, in repeal of 8 '151, '154, and an addition of a new rule '158 and 9 '160. 10 I do see what I think may be an 11 oversight on my part, and I want to just check on that 12 because this -- The first paragraph is proposing 13 amendments to '160, but also a new rule '160. So, 14 I'll be quiet while Gary Greif has any comments he 15 wants to make, and I just want to take a look at this 16 and see what I might have missed. 17 CHAIRMAN CLOWE: Do you have any 18 questions? 19 COMMISSIONER WHITAKER: What's 20 your recommend -- Well, I'd like to -- 21 MR. GREIF: Well, again, I'll reiterate 22 some of what Kim said. Our review of this rule is 23 part of our regular rule making process. We have been 24 working on this for approximately 18 months with input 25 from all the divisions that are involved in this 182 1 process and the agency. 2 The most substantive change to our 3 licensing rule as Ms. Kiplin pointed out is the 4 penalty chart, and we have the luxury of going out and 5 looking at various state agencies who are in the 6 regulation business who use similar-type penalty 7 charts and picking the best points from each of those 8 charts along with the best language to accompany that, 9 and I feel very comfortable and very pleased with what 10 we've been able to come up with before you today. 11 I'll be happy to answer any questions. 12 CHAIRMAN CLOWE: This codifies the 13 practice. 14 MR. GREIF: Yes, sir. Most of your 15 enforcement conclusions that we take, we prefer to 16 enter into agreed orders with our retailers, and if 17 both sides have an idea of what the penalty is for 18 each subsequent violation, it makes it easier for 19 everyone. 20 COMMISSIONER WHITAKER: We have not 21 gotten comments? 22 MS. KIPLIN: We're proposing for public 23 comments. This is the beginning of the process, and 24 we'll get public comment. I'm just trying to do a 25 little bit of housekeeping right now to see -- 183 1 COMMISSIONER WHITAKER: So moved. 2 CHAIRMAN CLOWE: Second. 3 All in favor, aye. 4 Aye. 5 COMMISSIONER WHITAKER: Aye. 6 CHAIRMAN CLOWE: Opposed, no. 7 Vote's approved two zero. Thank you. 8 Now we're going to Item No. 14, 9 consideration of and possible discussion and/or action 10 on the agency's strategic plan. Keith Elkins. 11 MR. ELKINS: Good afternoon, 12 Mr. Chairman, Commission Whitaker. For the record, my 13 name is Keith Elkins. I'm director of the 14 Communications Division and, for this purpose, the 15 chair of the agency's 2003-2007 strategic plan task 16 force. I'll keep my comments brief today. I do not 17 have any action items for you. 18 I would like to tell you that progress 19 on the strategic plan is moving forward. We continue 20 meeting as a group, along with the executive director 21 and the Charitable Bingo director on a weekly basis, 22 if not more frequent. 23 There are three deadlines and three 24 distinct parts of this plan that must be presented, as 25 you might remember. The first one is proposed changes 184 1 to the mission statements, goals, objectives and 2 measures. That has already been presented to the 3 legislative budget board to meet their April 2nd 4 deadline. It has not yet been approved by you. We 5 had sent this to you last week for your approval, and 6 I'm here today to tell you that since that time, it 7 has also changed. There were some requested changes 8 brought to your attention by the LBB. Respective 9 staffs from both agencies are working through those 10 changes, and we will bring that back to you next 11 month. 12 The second deadline that we must meet 13 is May 31st. That is for a customer service appendix. 14 We will have that to provide to you by mid-May, and 15 then the most important document, of course, is the 16 plan itself. We are very close to having a final 17 document prepared ready for review by the team. We 18 hope to do that and get signed off on it in early 19 May to get to you by mid-May hopefully to allow enough 20 time for your independent review before we ask you for 21 approval at your late May meeting. 22 I'll be glad to answer any questions if 23 you have any. 24 CHAIRMAN CLOWE: Thank you, Keith. 25 MR. ELKINS: Thank you. 185 1 CHAIRMAN CLOWE: Commissioner Whitaker, 2 with your permission, we'll stay on the public agenda 3 and finish it before going into executive session. 4 Then we'll go to Item No. 17, 5 consideration and status of the possible entry of 6 orders in various cases identified through the letters 7 A through N. 8 MS. KIPLIN: Commissioners, what you 9 have before you are orders. They're all lottery sales 10 agents orders. All of them are -- were contested case 11 proceedings before the State Office of Administrative 12 Hearings. All of them are a recommendation for 13 revocation for various violations of the State Lottery 14 Act. The staff does recommend that you vote to adopt 15 the administrative law judge's proposal for decision 16 and proposed order. 17 COMMISSIONER WHITAKER: So moved. 18 CHAIRMAN CLOWE: Second. 19 All in favor, say aye. 20 Aye. 21 COMMISSIONER WHITAKER: Aye. 22 CHAIRMAN CLOWE: Opposed, no. 23 The vote is two zero in favor. 24 We'll take a minute now to sign these 25 orders. 186 1 We're now ready to go to Item 18, 2 report by the executive director. 3 MS. CLOUD: Commissioners, on April the 4 15th, we transferred to the State $73,635,639. That 5 is a total transfer since inception of 8,865,399,021. 6 On April the 16th, we -- as you have mentioned before, 7 we did go before the House Appropriations Committee 8 for the subcommittee general government meeting, and I 9 think that was a good session for the agency. 10 FTE status, we have 304 active FTEs. 11 We have 31 vacant positions. We have 4 in the 12 selection/acceptance, nine in the recruiting 13 screening. No positions are -- new positions have 14 been posted, and we have 18 positions to fill. 15 We have made an offer to an individual 16 as our IT director. He has 28 years with another 17 state agency as an IT director. He has about 300 18 employees where he is now. So, we feel real good 19 about his qualifications and him coming into our IT 20 division. He is going to retire where he is. So, 21 we'll have a 30-day period of time where he has to 22 have a break in service before he can pick up. So, it 23 would be mid-June possibly before he comes on board. 24 CHAIRMAN CLOWE: Very good. 25 MS. CLOUD: Okay. On April the 23rd, 187 1 we had a town hall meeting in Houston. This was well 2 attended. We had 154 retailers at this meeting. Our 3 next town hall meeting will be in Plainview on May the 4 21st, and that -- We've been to Plainview one time 5 before, and that was a very well attended meeting. 6 Those people really like to come out to the town hall 7 meetings. We're all thinking about dressing western 8 when we go to that meeting. We were talking about 9 that. 10 That's my report. 11 CHAIRMAN CLOWE: Any questions? 12 We're ready now to go to your report, 13 Billy, Item No. 19. Billy. 14 MR. ATKINS: Thank you, Commissioners. 15 We have two positions in the division in the new 16 special project section. We posted for those two 17 positions and received over 200 applications. Those 18 have been screened. The interviews are taking place 19 this week, and we will hopefully be able to make 20 offers this month or early next month. 21 We made some changes to our Web site in 22 order to more easily disseminate information. At the 23 end of Advisory Committee meetings when they have 24 tentatively scheduled their next meeting, we've gone 25 ahead and posted that tentative schedule with a link 188 1 to the legal section where they can go and see when it 2 has actually been scheduled what the agenda is, and, 3 also, we have put out on the Web site our automated 4 forms manual which I think we've discussed with the 5 Commission previously. What we've done is we've taken 6 the recommended books and records that we encourage 7 organizations to keep, put them in an Excel format so 8 that the forms link to one another, that by the end of 9 the quarter, organizations will essentially have their 10 entire quarterly report completed. All they'll have 11 to do is fill in one or two form -- or one or two 12 fields, print that out and send that in to us. That 13 went up on April 22nd and, again, is available for 14 download for anyone who wants it. 15 I did return yesterday from the North 16 American Gaming Regulators Association meeting in 17 Charleston, South Carolina. It was a very busy 18 meeting. Saturday was spent -- All day Saturday was 19 spent with the committee chairs and the board of 20 directors working on a strategic plan for NAGRA. 21 Sunday the convention started. 22 As you know, I'm cochair for the 23 Charitable Gaming Committee. That committee handles 24 planning sessions, etcetera, for charitable gaming 25 activities that the different jurisdictions conduct. 189 1 That day we had a committee meeting with all of the 2 interested jurisdictions in attendance, and one of the 3 things we do in those meetings is what's called a 4 state-by-state update, whereby every jurisdiction in 5 the room takes a couple of minutes and talks about all 6 of the issues that they're facing in their state, and 7 to quote the great American philosopher Yogi Bera, it 8 would have been -- it was deja vu all over again. It 9 very well could have been everything we heard today, 10 declining revenues, the limited number of products 11 that are out there, legislation that's, you know, 12 cumbersome or inefficient. Everything we heard today 13 you could almost, you know, pick up and change to any 14 other jurisdiction either in the United States or 15 Canada. 16 I took part in two sessions. I served 17 on a panel with -- on communicating with legislators 18 and regulatory decision makers. I moderated a panel 19 on how NAGRA could better serve charitable gaming 20 members and attended another session that I thought 21 was very interesting because of the number of Canadian 22 representatives that were on the panel, and a lot of 23 the provincial governments seem to be a step ahead. 24 They're again facing a lot of these same issues, but 25 they've started the stakeholder process, or involved 190 1 in that now. 2 So, I was able to make some contacts 3 that I think I'll be able to stay in touch with and 4 get information from them on their programs and how 5 they're progressing and any discoveries they've made 6 that can better assist either the regulation of bingo 7 or the bingo activities in their state or 8 jurisdiction. 9 One interesting thing -- One of the 10 things that I added to your report is a list of 11 legislative activities, and what drew my attention to 12 it is one of the members that -- on the panel 13 communicating with legislators that I served with was 14 a representative from Kentucky, Representative Jack 15 Coleman, and he discussed what is in your notebook 16 House Bill 743 that was under consideration by the 17 Kentucky legislature. It, among other things, would 18 have increased their prize payout limits allowed for a 19 progressive bingo game and allowed for linked bingo 20 games, and this bill was progressing smoothly through 21 the legislature. Everyone thought that it was well on 22 its way to passing. At the last minute, a group of 23 organizations decided that they didn't like something 24 that was contained in it, and as he described it, it 25 died a very quick death on the vine. 191 1 So, that's just kind of an example. I 2 think it is similar to what the chair was talking 3 about, how the fractured industry not having consensus 4 on a lot of stuff can affect legislation or rules as 5 it moves forward. 6 I guess the last thing that I'd like -- 7 Oh, one other thing on NAGRA, the next conference is 8 scheduled for October 20th in Milwaukee. That's where 9 the conference was scheduled just prior to the events 10 of September 11th last fall. That conference, as a 11 result of September 11th, was canceled, and Milwaukee 12 is now scheduled for this fall, October 20th. I have 13 already started working with my new cochair, which I 14 got at this meeting and I was very thankful for, on 15 programs for that next meeting. 16 You have a graph showing the licensing 17 activity, and you'll see that that has gone up 18 slightly just over the 200 mark. That is because 19 we're approaching June which is normally one of our 20 peak times because of grandfathered commercial lessors 21 licensees. Those are coming up for renewal. 22 And that is, Commissioners, my report. 23 CHAIRMAN CLOWE: Billy, under your 24 report, you have the Charitable Bingo Committee -- 25 Charitable Bingo Advisory Committee tentatively 192 1 scheduled for May the 8th and Lame Duck 2 Chairman Neinast is here. 3 In light of my request regarding the 4 nominations, which I think Commissioner Whitaker 5 agreed to, Bill, what's your sense of a May 8th 6 meeting? 7 Come to the podium, if you will, 8 please, so you can be heard on the record. 9 There seems to be some good momentum 10 going, and my sense is, if it's within the rules, I'd 11 like to see that meeting take place. 12 CHAIRMAN NEINAST: Well, when I said 13 we, the members of the Committee were here, there's 14 four of us. So, we didn't have a majority. We were 15 not violating the open meetings act, Kim. I decided 16 not to have the meeting. I had not communicated that 17 to Billy. So, it's been canceled. 18 CHAIRMAN CLOWE: Okay. That's fine. 19 Thank you. 20 Any questions? 21 That concludes the agenda as it is 22 stated. Is there any member of the public here 23 wishing to address the Commission? 24 I see no one. 25 Commissioner Whitaker, in regard to our 193 1 next meeting, the auditorium will be ready for 2 occupancy at the Lottery Commission building May the 3 26th, and there are meetings scheduled on May the 31st 4 which makes that, I think, a bad date to try to plan a 5 Commission meeting, and that gives us Monday through 6 Thursday, the 27th through the 30th. 7 COMMISSIONER WHITAKER: How about the 8 28th? 9 CHAIRMAN CLOWE: Sounds fine. The 10 Commission, then, will tentatively schedule its next 11 meeting in the Lottery Commission building on Tuesday, 12 May the 28th at 8:30 a.m. 13 There has also been a suggestion that 14 the Commission plan its meetings to fall on the same 15 day every month, similar to some other agencies' 16 activities, to allow people to plan ahead for that 17 meeting, and I just wanted to raise that publicly in 18 this meeting and ask everyone to think about it, see 19 what the reaction to it is, and we could discuss that 20 at the next meeting publicly. 21 COMMISSIONER WHITAKER: Okay. The 22 chair -- 23 MR. ATKINS: Commissioner Clowe? 24 CHAIRMAN CLOWE: Yes. 25 MR. ATKINS: In the interim, would 194 1 there be any objection to doing with the Commission 2 meeting similar to what we do with the Advisory 3 Committee meetings and just say that that May 28th 4 meeting is tentatively scheduled so that folks will at 5 least know that's out there? 6 CHAIRMAN CLOWE: It is tentatively 7 scheduled. 8 MR. ATKINS: But are you okay with us 9 posting on the Web site similar to what we -- 10 CHAIRMAN CLOWE: Yes. Certainly. We 11 can do that without publishing an agenda? 12 MS. KIPLIN: It's tentative. You can 13 put what you want on the Web site. The downside is 14 that people make plans to come on a particular day 15 once it's out there. The upside is that you're giving 16 notice that you're intending to have a Commission 17 meeting, and it does say tentative. 18 CHAIRMAN CLOWE: We intend to put it on 19 the Web site. 20 MR. ATKINS: Yes, sir. 21 CHAIRMAN CLOWE: Now, 22 Commissioner Whitaker, what is your departure time? 23 COMMISSIONER WHITAKER: 4:15. 24 CHAIRMAN CLOWE: Is there any other 25 business before I move that we go into executive 195 1 session? 2 At this time, I move the Texas Lottery 3 Commission go into executive session to deliberate the 4 duties and evaluation of the executive director, 5 internal auditor and Charitable Bingo Operations 6 director pursuant to Section 551.074 of the Texas 7 Government Code; to deliberate the duties of the 8 general counsel and security director pursuant to 9 Section 551.074 of the Texas Government Code; to 10 receive legal advice regarding pending or contemplated 11 litigation and/or to receive legal advice pursuant to 12 Section 551.071(1)(A) or (B) of the Texas Government 13 Code and/or to receive legal advice pursuant to 14 Section 551.071(2) of the Texas Government Code, 15 including but not limited to, TPFV Group, Inc., versus 16 Texas Lottery Commission; Retired Sergeant Majors' 17 Association et al versus Texas Lottery Commission et 18 al; Loretta Hawkins versus Texas Lottery Commission; 19 AT&T versus Couer D' Alene Tribe; Scientific Games and 20 Pollard Bank Note versus Texas Lottery Commission and 21 Linda Cloud, executive director; contract regarding 22 the charitable bingo system, employment law, personnel 23 law, procurement and contract law and general 24 government law. 25 Is there a second? 196 1 COMMISSIONER WHITAKER: Second. 2 CHAIRMAN CLOWE: All in favor, say aye. 3 Aye. 4 COMMISSIONER WHITAKER: Aye. 5 CHAIRMAN CLOWE: The vote is two zero 6 in favor. 7 Texas Lottery Commission will go into 8 executive session. The time is 1:31 p.m. Today is 9 April 25th, 2002. 10 The Commission will go into executive 11 session across the lobby, and I don't know the number 12 of the room, but -- 13 MS. KIPLIN: My understanding, it's 14 Room 102. 15 CHAIRMAN CLOWE: 102. 16 (Recess.) 17 CHAIRMAN CLOWE: The Texas Lottery 18 Commission is out of executive session. The time is 19 3:30 p.m. 20 Is there any action to be taken as a 21 result of the executive session? 22 There being none, we are ready to 23 adjourn. This meeting is adjourned at 3:30. 24 25 197 1 REPORTER'S CERTIFICATION 2 3 STATE OF TEXAS ) 4 COUNTY OF TRAVIS ) 5 6 I, LEIGH ANNE WILLIAMS, Certified 7 Shorthand Reporter for the State of Texas, do hereby 8 certify that the above-captioned matter came on for 9 hearing before the TEXAS LOTTERY COMMISSION as 10 hereinafter set out, that I did, in shorthand, report 11 said 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 2nd day of 17 May, 2002. 18 19 20 21 LEIGH ANNE WILLIAMS, CSR No. 4446 22 Expiration Date: 12-31-02 1609 Shoal Creek Boulevard, Suite 202 23 Austin, Texas 78701 (512) 474-4363 24 JOB NO. 020425LAW 25