1 1 TRANSCRIPT OF PROCEEDINGS 2 BEFORE THE 3 TEXAS LOTTERY COMMISSION 4 AUSTIN, TEXAS 5 6 7 REGULAR MEETING OF THE § 8 TEXAS LOTTERY COMMISSION § THURSDAY, DECEMBER 15, 201l § 9 10 11 12 COMMISSION MEETING 13 THURSDAY, DECEMBER 15, 2011 14 15 16 17 BE IT REMEMBERED THAT on Thursday, the 15th 18 day of December 2011, the Texas Lottery Commission 19 meeting was held from 9:03 a.m. until 10:25 a.m., at 20 the Offices of the Texas Lottery Commission, 611 East 21 6th Street, Austin, Texas 78701, before CHAIRMAN MARY 22 ANN WILLIAMSON and COMMISSIONERS J. WINSTON KRAUSE and 23 CYNTHIA TAUSS DELGADO. The following proceedings were 24 reported via machine shorthand by Aloma J. Kennedy, a 25 Certified Shorthand Reporter. 2 1 APPEARANCES 2 CHAIRMAN: 3 Ms. Mary Ann Williamson 4 COMMISSIONERS: Mr. J. Winston Krause 5 Ms. Cynthia Tauss Delgado 6 GENERAL COUNSEL: Ms. Kimberly L. Kiplin 7 EXECUTIVE DIRECTOR: 8 Mr. Gary Grief 9 DIRECTOR, CHARITABLE BINGO OPERATIONS: Mr. Philip D. Sanderson 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 TABLE OF CONTENTS 2 PAGE 3 PROCEEDINGS - THURSDAY, DECEMBER 15, 2011 .......... 7 4 AGENDA ITEM NO. I - Meeting Called to Order......... 7 5 AGENDA ITEM NO. II - Report, possible discussion and/or action on the 2011 6 demographic report on lottery players............... 8 7 AGENDA ITEM NO. III - Report, possible discussion and/or action on calendar year 8 3rd quarter conductor information................... 22 9 AGENDA ITEM NO. IV - Consideration of and possible discussion and/or action, including 10 adoption of repeal, of 16 TAC §402.703 (Books and Records Inspection), 16 TAC 11 §402.704 (Tax Review Inspection), and 16 TAC §402.715 (Compliance Audit)......................... 17 12 AGENDA ITEM NO. V - Report by the Charitable 13 Bingo Operations Director and possible discussion and/or action on the Charitable 14 Bingo Operations Division’s activities, including updates on licensing, accounting and 15 audit activities, pull-tab review, special projects, and upcoming operator training............ 19 16 AGENDA ITEM NO. VI - Report, possible 17 discussion and/or action on lottery sales and revenue, game performance, new game 18 opportunities, advertising, market research, trends, and game contracts, agreements, and 19 procedures.......................................... 21 20 AGENDA ITEM NO. VII - Report, possible discussion and/or action on transfers to the 21 State and/or the agency’s operating budget.......... 27 22 AGENDA ITEM NO. VIII - Consideration of and possible discussion and/or action, including 23 adoption, on amendments to 16 TAC §403.401 relating to Use of Commission Motor Vehicles........ 31 24 25 4 1 TABLE OF CONTENTS (CONTINUED) 2 PAGE 3 AGENDA ITEM NO. IX - Report, possible discussion and/or action on the 82nd 4 Legislature and/or federal gaming legislation....... 32 5 AGENDA ITEM NO. X - Report, possible discussion and/or action on the Sunset 6 review process involving the agency................. 36 7 AGENDA ITEM NO. XI - Report, possible discussion and/or action on amendments to 8 the 2010 lottery operations and services contract, including whether the negotiation 9 of the lottery operator's contract in an open meeting would have a detrimental effect on 10 the Commission's position in negotiations of the lottery operator contract; and/or contract 11 for instant ticket manufacturing and services- secondary vendor.................................... 38 12 AGENDA ITEM NO. XII - Report, possible 13 discussion and/or action on amendments on and/or renewal of the drawing studio and 14 production services contract and/or audit services contract................................... 40 15 AGENDA ITEM NO. XIII - Consideration of and 16 possible discussion and/or action on external and internal audits and/or reviews 17 relating to the Texas Lottery Commission, and/or on the Internal Audit Department’s 18 activities.......................................... 41 19 AGENDA ITEM NO. XIV - Report, possible discussion and/or action on GTECH Corporation....... 42 20 AGENDA ITEM NO. XV - Report by the Executive 21 Director and/or possible discussion and/or action on the agency’s operational status, 22 agency procedures, and FTE status................... 43 23 24 25 5 1 TABLE OF CONTENTS (CONTINUED) 2 PAGE 3 AGENDA ITEM NO. XVI - Consideration of the status and possible entry of orders in: 4 A. Docket No. 362-12-0259 – Seago Pantry B. Docket No. 362-12-0258 – Texaco On The 5 Move #4 C. Docket No. 362-11-8444 – Rosharon Shell 6 D. Docket No. 362-11-8442 – Kristi Market E. Docket No. 362-11-8443 – Star Mini Mart 7 F. Docket No. 362-11-8445 – T Liquor G. Docket No. 362-11-8437 – Blanco Grocery 8 H. Docket No. 362-11-8438 – On the Go Food Mart 9 I. Docket No. 362-11-8440 – Western Beverages J. Docket No. 362-11-8441 – Beverage Palace 10 K. Docket No. 362-11-9102 – Ross Avenue Liquors 11 L. Case No. 2011-1022 – Disabled American Veterans 17 Randolph Area................... 44 12 AGENDA ITEM NO. XVII - Public comment.............. 44 13 AGENDA ITEM NO. XVIII - Commission may meet 14 in Executive Session: A. To deliberate the duties and evaluation 15 of the Executive Director pursuant to Section 551.074 of the Texas Government 16 Code. B. To deliberate the duties and evaluation 17 of the Internal Audit Director pursuant to Section 551.074 of the Texas Government 18 Code. C. To deliberate the duties and evaluation 19 of the Charitable Bingo Operations Director pursuant to Section 551.074 of 20 the Texas Government Code. D. To deliberate the duties of the General 21 Counsel pursuant to Section 551.074 of the Texas Government Code. 22 E. To deliberate the duties of the Human Resources Director pursuant to Section 23 551.074 of the Texas Government Code. 24 25 6 1 TABLE OF CONTENTS (CONTINUED) 2 PAGE 3 F. To receive legal advice regarding pending or contemplated litigation pursuant 4 to Section 551.071(1)(A) and/or to receive legal advice regarding settlement offers 5 pursuant to Section 551.071(1)(B) of the Texas Government Code and/or to receive 6 legal advice pursuant to Section 551.071(2) of The Texas Government Code, including but 7 not limited to: Department of Texas, Veterans of 8 Foreign Wars et al. v. Texas Lottery Commission et al 9 Willis Willis v. Texas Lottery Commission, GTECH Corporation, 10 BJN Sons Corporation d/b/a Lucky Food Store #2, Barkat N. Jiwani 11 and Pankaj Joshi Employment law, personnel law, 12 procurement and contract law, evidentiary and procedural law, 13 and general government law G. To deliberate the negotiation of the 14 lottery operator's contract pursuant to Section 467.030 of the Texas Government 15 Code......................................... 49 16 AGENDA ITEM NO. XIX - Return to open session for further deliberation and possible action on any 17 matter discussed in Executive Session............... 50 18 AGENDA ITEM NO. XX - Adjournment.................... 50 19 REPORTER'S CERTIFICATE.............................. 52 20 21 22 23 24 25 7 1 P R O C E E D I N G S 2 THURSDAY, DECEMBER 15, 2011 3 (9:00 a.m.) 4 AGENDA ITEM NO. I 5 CHAIRMAN WILLIAMSON: Good morning. I 6 would like to call the meeting of the Texas Lottery 7 Commission to order. Today is December 15, 2011. The 8 time is 9:00 a.m. Commissioners Krause and Delgado are 9 present, so we do have a quorum. 10 First I would like to recognize Gary 11 regarding Tom Clowe. 12 MR. GRIEF: Thank you, Madam Chair and 13 Commissioners. This morning I have some very sad news 14 to report that many of you already know about. Our good 15 friend and former colleague, Tom Clowe, and his dear 16 wife Martha were involved in a very serious car accident 17 Tuesday night of this week in their hometown of Waco. 18 I'm sure that several members of the public who are in 19 attendance today have had an opportunity to meet and 20 interact with Tom over the years, as he served for a 21 long and distinguished period of time as both a 22 commissioner and as Chairman of this agency. 23 I'm very sad to report that Tom's wife, 24 Martha, was lost in this accident. Tom was also 25 seriously hurt, but we understand that he is recovering 8 1 in the hospital in Waco. Memorial services for 2 Ms. Clowe will be held at 11 o'clock this Saturday, 3 December 17th, at St. Paul's Episcopal church in Waco. 4 Tom and Martha had just this month celebrated their 57th 5 year of marriage, and our thoughts and prayers certainly 6 go out to Tom and his family. 7 CHAIRMAN WILLIAMSON: Thank you. I'm not 8 sure if the other two commissioners have met Tom or 9 interacted with him. I have had the opportunity to do 10 that. He mentored me when I first came on, and I 11 appreciate everything that he's done, and our thoughts 12 and prayers are with him and his family. 13 Thank you. 14 AGENDA ITEM NO. II 15 CHAIRMAN WILLIAMSON: Item No. II is -- 16 the next item is report, possible discussion and/or 17 action on the 2011 demographic report on lottery 18 players. 19 Mike Fernandez, this is your item, please. 20 And I understand we have the folks at the University of 21 Houston here to present the report for us. 22 MR. FERNANDEZ: Good morning, Chair and 23 Commissioner. My name is Mike Fernandez. I'm the 24 Director of Administration. With me this morning I have 25 Dr. David Sizemore, who is our research analyst in the 9 1 Administration Division. And also with us today, we 2 have Dr. Jim Granato, Director of the Hobby Center for 3 Public Policy. 4 As you know, the agency or the Executive 5 Director of the agency is required by statute to have 6 conducted once every two years a demographic study of 7 lottery players, and he's also required to report the 8 findings of that to the Commission, to the Governor and 9 the Texas Legislature. As you may recall, we also do 10 this study every year. 11 So with that, I will turn it over to 12 Dr. Granato to present the study. 13 DR. GRANATO: Good morning. 14 The sample, as in samples in the past, we 15 sampled 1,700 people. We also split the sample into 16 landline and cell phone. As you already know, cell 17 phones are becoming increasingly used, particularly by 18 people that are younger. So in order to get a more 19 representative sample of the population, you want to 20 include a segment that uses cell phone only. Margin of 21 error for this survey, for this sample of 1,700 people 22 is 2.4 percent. 23 The first thing we'll focus on is the 24 revenue forecast. Our forecast, the revenue for this 25 past year was $2.74 billion. The margin of error -- you 10 1 notice the upper bound is lower than the -- the upper 2 bound is less than the lower bound. That should be 3 reversed. I think I was putting these numbers in when 4 we were playing Southern Mississippi, got distracted. 5 The key thing about this forecast is, it's 6 based on recollection, and the recollection for people 7 on how much they have spent in a given month can be 8 quite loose and inaccurate. So, for example, the 9 monthly average in the survey we found was $31. If the 10 number went to 40, the forecasted revenue will be 11 $3.5 billion. If they guessed -- or if they guessed, 12 recollected $25 a month, it would drop down to 13 $2.2 billion. So there is a good deal of sensitivity in 14 recollection and what they spent per month. The actual 15 forecast -- the actual numbers we believe -- were told 16 was $3.8 billion, so we are under. And I think the 17 issue here is again recollection. 18 Now, an overview of the general findings, 19 the first thing is that participation rates are up. 20 We're up to 40 percent. Last year I believe we were at 21 33 percent. So there is substantial increase in 22 participation. This is statistically significant. This 23 change is not by chance; it actually is real. 24 In addition, the monthly expenditures, if 25 you look at the tally for the last four years, it's the 11 1 lowest in four years. So more people are playing. But 2 based on the recollection of what they're spending, they 3 appear to be spending less. 4 In terms of the demographic differences 5 between players and non-players for the entire sample, 6 we find differences in income, marital status and gender 7 this year. For income, we find players tend to be 8 skewed towards higher incomes. For marital status, 9 players tend to more likely be married. For finally, 10 for gender differences, we find females are more likely 11 to be non-players than males. And the players are 12 basically split 50/50. 13 For individual game results in changes 14 between this year and last year, participation rates for 15 almost all games are either up or the same 16 statistically. There is no drop. 17 Secondly, frequency of purchases, we look 18 at weekly, monthly and whether or not people purchase a 19 few times a year. They're either up or the same. In 20 terms of the number of times you play per week, month or 21 year, it's either up or about the same. And, finally, 22 the average dollar spent per player is down or 23 statistically the same, again in keeping with the 24 recollection. 25 For game results, for specific game 12 1 results, what we're looking here is comparing the 2 distribution of the people that play, the demographic 3 characteristic of each game and comparing it to the 4 people that play the entire -- the entire sample. And 5 we are looking at, in this particular case, just the 6 participation. 7 For Pick 3 Day we find the distribution is 8 different based just on race. And for Pick 3 Day 9 African-Americans tend to play more than whites, for 10 example. 11 For Cash 5 we find there is an increase 12 over the prior year. People that have less education 13 tend to play Cash 5. They have less income, and they 14 tend to be female. 15 For Lotto Texas, the people that play 16 Lotto Texas -- that's the most popular game -- tend to 17 be better educated, have higher income, and they're 18 older. For scratch-off they tend to have less 19 education, lower income, they tend to be female and 20 they're younger. 21 For Two-Step they tend to be older. They 22 tend to be retired as well. And for Mega Millions, 23 Megaplier and Powerball, each one of those, the only 24 difference we found this year between this year and last 25 year is an increase in participation. 13 1 And I'll just give you a few selected 2 figures of participation. You can actually see several 3 of the numbers, looking at just the bar charts. 4 For playing any game, as you can see, the 5 participation rate has gone up substantially from last 6 year. In fact, it's as high as it was in 2009. And in 7 keeping with what -- you probably -- it's in the forties 8 since 19 -- or since 2006. So we see a substantial 9 increase in -- and it looks like it's stabilizing 10 from -- in the last, say, six or seven years, it's 11 either between the high thirties and mid-forties. 12 That's what we're seeing. And again, this difference 13 between this year and last year is statistically 14 significant. 15 For Pick 3 Day, again another increase, 16 from 14.7 percent to 18.8 percent. For Cash 5, a fairly 17 large increase, from 16.6 percent to 22 percent. For 18 Lotto Texas, an increase from -- going from 67.3 percent 19 to about 72 percent. For scratch-off, an increase from 20 about 54 percent to about 57 percent. For Texas Two- 21 Step, an increase from 9.4 to 11. That one is fairly 22 stable. Given the sample size, there is no statistical 23 difference there, because the number of people playing 24 that game in the survey was only 76. 25 For Mega Millions, a substantial increase, 14 1 from about 40 percent to about 51 percent. For 2 Megaplier, another substantial increase, from 9 percent 3 to about 14 and a half percent. 4 And that concludes the presentation. I'll 5 be glad to answer any of your questions. 6 CHAIRMAN WILLIAMSON: Thank you. 7 Commissioners, do you have any questions? 8 COMMISSIONER DELGADO: No, ma'am. 9 COMMISSIONER KRAUSE: No, ma'am. 10 CHAIRMAN WILLIAMSON: Okay. To repeat 11 your opening statement, you said the demographics have 12 changed some. I guess the one that really caught my ear 13 was that people that have more income were now playing. 14 Is that correct? 15 DR. GRANATO: Yes. For this year, when we 16 compare players to non-players, the entire sample, we're 17 finding that it's skewed towards upper income folks. 18 The players tend to be skewed in the upper income 19 echelon as opposed to the non-players. 20 CHAIRMAN WILLIAMSON: Okay. Interesting. 21 All right. Thank you. 22 AGENDA ITEM NO. III 23 CHAIRMAN WILLIAMSON: Our next item is 24 report, possible discussion and/or action on calendar 25 year third quarter conductor information. Phil, this is 15 1 your item, please. 2 MR. SANDERSON: Good morning, 3 Commissioners. I'm here to report to you the 4 information as reported by conductors for Calendar Year 5 2011, the first three quarters. We compared the first 6 three quarters of 2011 to the first three quarters of 7 2008, '09 and '10. And as you can see in this chart, 8 gross receipts continue to increase overall. Regular 9 bingo sales, which is the cards and electronic, has a 10 slight decrease, while instant bingo pull-tabs have a 11 slight increase as far as gross receipts. 12 Prize payouts continue to increase for 13 overall, as well as the instant and pull-tabs. The 14 regular bingo prizes awarded does have a slight 15 decrease. And overall, this results in the net receipts 16 for the third quarter of two thousand -- should be 2011. 17 I'm sorry. There is a slight decrease from last year 18 for net receipts overall. Instant pull-tabs has a 19 significant increase of almost $4 million, while regular 20 bingo, the decrease of $54 million there, indicates that 21 there is a problem with regular bingo payouts being a 22 little bit higher than what they should be percentage 23 wise, and this will result in net proceeds for the first 24 three quarters. 25 The blue line is the net proceeds overall 16 1 for each quarter, drops from 28.6 million in 2008 to 2 23.2 million in 2011. The distributions have gone from 3 24.9 million up to a high of 27.9 million, then dropped 4 down to 22.4 million for this year, while the required 5 distributions for this time period have decreased from 6 7.8 million to 5.4 million for this time period. 7 In your notebook is two charts, one that 8 gives you more detailed information for 2011. And then 9 the second page also provides a comparison of all four 10 years in a more detailed format. 11 And I will be glad to answer any 12 questions. 13 CHAIRMAN WILLIAMSON: Okay. 14 Commissioners, do you have any questions? 15 COMMISSIONER DELGADO: No. 16 CHAIRMAN WILLIAMSON: So are they playing 17 more of the pull-tabs? Is that kind of what I'm 18 hearing? 19 MR. SANDERSON: The sales in pull-tabs, 20 the percentage is increasing as far as overall percent 21 of sales related to pull-tabs and regular. The 22 decreases are coming at the point of where regular 23 sales, the regular bingo sales for cards and electronics 24 had about a 4 percent decrease, and prizes only 25 decreased about one percent. So they're still paying a 17 1 higher -- they're paying a higher percentage out for the 2 regular bingo than historically has taken place. There 3 are several locations I think that probably use it kind 4 of like a loss leader. They give away the maximum 5 $2,500, irregardless of what they take in in sales, 6 hoping to do better on the pull-tab. 7 CHAIRMAN WILLIAMSON: Okay. And so 8 pull-tab is kind of like -- 9 MR. SANDERSON: Kind of like the instant 10 scratch-offs, yes. 11 CHAIRMAN WILLIAMSON: Right. It's an 12 instant -- you win or you lose. 13 MR. SANDERSON: Yes. 14 CHAIRMAN WILLIAMSON: All right. Thank 15 you. 16 MR. SANDERSON: Yes. 17 AGENDA ITEM NO. IV 18 CHAIRMAN WILLIAMSON: Going to Item No. 19 IV, is consideration of and possible discussion and/or 20 action, including adoption of repeal of 16 TAC 402.703 21 (books and records inspection), 16 TAC 402.704 (tax 22 review inspection), and 16 TAC 402.715 (compliance 23 audit). 24 Sandy, this is your item, please. 25 MS. JOSEPH: Good morning, Commissioners. 18 1 For the record, my name is Sandra Joseph, Special 2 counsel of the Legal Services Division. 3 Before you is a draft order prepared for 4 submission to the Texas Register to adopt the repeals of 5 the rules that you have just identified, with no changes 6 to the proposed text as they were published in the Texas 7 Register on November 4, 2011. The purpose of the 8 repeals is to eliminate these rules because they are no 9 longer needed. The reasons for them no longer exist. 10 A public comment period was held. No one 11 appeared, and no written comments were received. 12 Therefore, I recommend that you adopt this order. 13 CHAIRMAN WILLIAMSON: Thank you. 14 Commissioners, do you have any questions? 15 COMMISSIONER KRAUSE: No, but I'm always 16 happy to get rid of a rule. 17 CHAIRMAN WILLIAMSON: Then would you like 18 to make a motion so we can? 19 COMMISSIONER KRAUSE: I move that the 20 Commission repeal these three rules -- 16 TAC §402.703, 21 .404 and .715 -- immediately. 22 CHAIRMAN WILLIAMSON: All right. Thank 23 you. 24 Is there a second? 25 COMMISSIONER DELGADO: There is a second. 19 1 CHAIRMAN WILLIAMSON: All in favor? 2 COMMISSIONER KRAUSE: Aye. 3 COMMISSIONER DELGADO: Aye. 4 CHAIRMAN WILLIAMSON: Aye. 5 Motion passes 3-0. 6 MS. KIPLIN: Commissioners, I have an 7 order. 8 CHAIRMAN WILLIAMSON: All right. Thank 9 you. 10 AGENDA ITEM NO. V 11 CHAIRMAN WILLIAMSON: The next item is 12 report by the Charitable Bingo Operations Director and 13 possible discussion and/or action on the Charitable 14 Bingo Operations Division's activities, including 15 updates on licensing, accounting and audit activities, 16 pull-tab review, special projects and operator training. 17 Phil, please. 18 MR. SANDERSON: Good morning once again. 19 In your notebook are the reports for the 20 October and November bingo activities. I would like to 21 just point out, we've added one other section to each of 22 these reports under the taxpayer services, and we're 23 tracking monthly the average processing time for 24 applications. 25 CHAIRMAN WILLIAMSON: Okay. 20 1 MR. SANDERSON: I think that's one of the 2 things that we had discussed previously, due to the 3 reduction in staff and allocation of resources that may 4 be impacted. And, for example, the temporaries and the 5 amendments, which are the most time-sensitive 6 applications that we give, in October they are averaging 7 two days for a temporary and three days for an 8 amendment. 9 And then if you look in November, they 10 went to three days for a temporary and 7.6 days for an 11 amendment. And we're starting to get more frequently 12 organizations submitting these applications wanting a 13 quick turnaround, and so we're working on putting out a 14 bulletin on our website, along with an article in the 15 next Bingo Bulletin to, you know, reaffirm the 16 allocation of resources and the impact that it has on 17 processing these type of applications. 18 CHAIRMAN WILLIAMSON: Okay. 19 MR. SANDERSON: With that, I don't have 20 anything else to add. 21 CHAIRMAN WILLIAMSON: All right. Thank 22 you. 23 Commissioner, do you have any questions or 24 comments? 25 COMMISSIONER DELGADO: No. 21 1 COMMISSIONER KRAUSE: Well, I know you've 2 got less to work with. So, you know, I know you do the 3 best you can with it. 4 MR. SANDERSON: Thank you. 5 CHAIRMAN WILLIAMSON: And you have our 6 full support, as you and I talk about frequently. And 7 maybe at some point we can talk about, you know, another 8 way to deal with that whole process of the emergency or 9 short-term ones and try to put something else in place 10 if we can. 11 MR. SANDERSON: Yes, ma'am. 12 CHAIRMAN WILLIAMSON: All right. Thank 13 you. 14 MR. SANDERSON: Thank you. 15 AGENDA ITEM NO. VI 16 CHAIRMAN WILLIAMSON: The next item is 17 report, possible discussion and/or action on lottery 18 sales and revenue, game performance, new game 19 opportunities, advertising, market research, trends, and 20 game contracts, agreements, and procedures. 21 Kathy and Robert, please. 22 MS. PYKA: Good morning, Commissioners. 23 My name is Kathy Pyka, Controller for the Commission. 24 And with me to my right is Robert Tirloni, our Products 25 Manager. 22 1 Our first chart, Commissioners, that we 2 have before you this morning reflects the comparative 3 sales through the week ending December 10, 2011. 4 Totals for this figure are 2012 sales 5 through this point were $1.038 billion, with an increase 6 of $39.8 million, compared to the $997.9 million figure 7 for last fiscal year. 8 Our Fiscal Year 2012 instant ticket sales 9 reflected on the second blue bar are at $770.4 million, 10 which is a $20.1 million increase over last fiscal year. 11 And our Fiscal Year 2012 on-line sales 12 reflected on the second red bar are at $267.4 million, 13 which is a $19.8 million increase over the same time 14 period for last fiscal year. 15 Commissioners, I wanted to note on this 16 specific chart, as we look at the ratio of the sales mix 17 between instant and on-line this fiscal year compared to 18 last fiscal year, instant ticket sales represent 74.2 19 percent of total sales, while instant ticket sales last 20 fiscal year represented 75.2 percent of sales, and a 21 similar difference, obviously, on the on-line sales. 22 We've got a full one percent shift between the two 23 product categories. 24 So our next slide before you reflects 25 cumulative average daily sales for Fiscal Years 2010, 23 1 Fiscal Year 2011 and Fiscal Year 2012. As reflected by 2 cumulative sales, our daily sales average for Fiscal 3 Year 2012 is $10.3 million, which is a 5 percent 4 increase over Fiscal Year 2011 sales and a 2.2 percent 5 increase over Fiscal Year 2010 sales. 6 The jackpot games highlighted in white 7 font reflect a daily average total of 1.55 million, 8 which is a $224,000 increase over last fiscal year and a 9 $16,000 increase over Fiscal Year 2010. As noted on the 10 slide, each of the jackpot games is reporting an 11 increase over Fiscal Year 2011 sales. 12 Now we'll move on to our daily games, 13 highlighted with the green font, which reflect a daily 14 average of just under $1.1 million. This is half of a 15 percent decline from last fiscal year and a half a 16 percent increase over Fiscal Year 2010. 17 We wanted to note within this category, 18 our Daily 4 sales at this point in time this fiscal year 19 are 10 percent higher than Fiscal Year 2011, and they're 20 20 percent higher than Fiscal Year 2010. 21 Our instant tickets daily average at the 22 bottom of the chart is $7.6 million. This is a $271,000 23 increase over last fiscal year and a $206,000 increase 24 over Fiscal Year 2010. 25 With that, Robert will now cover actual 24 1 sales by product. 2 MR. TIRLONI: Good morning, Commissioners. 3 For the record, my name is Robert Tirloni, Products 4 Manager for the Commission. 5 This next slide shows our fiscal year 6 sales through the week ending December 10th. This slide 7 has the same layout as the previous. The jackpot games 8 are up at the top in white. And if we look at those as 9 a whole, sales are up $21.3 million this fiscal compared 10 to last fiscal. 11 We have had some good jackpot rolls on all 12 of our games. Lotto recently climbed up to $30 million. 13 We did a have a winner on Saturday for the $30 million 14 jackpot. Texas Two-Step climbed over 1.5 million, and 15 Powerball reached a jackpot of 245 million earlier this 16 year. And we're currently at $116 million on Mega 17 Millions for tomorrow night's jackpot. So that 18 $21 million increase is a result of some good jackpot 19 rolls that we've experienced. 20 In the middle is our daily games, a slight 21 decline of 1.7 million. If we look at the on-line game 22 category as a whole, including the jackpot games and the 23 daily games, we are realizing just under $20 million in 24 Fiscal '12 compared to Fiscal '11. 25 Our instant games are up for Fiscal '12 25 1 by, again, $20 million roughly, and that all combined is 2 leading to a year-over-year increase of just under 3 $40 million. So we're obviously happy with the results 4 through the second week in December. 5 I'm not sure when our meeting will be in 6 January, so I wanted to give you a quick update on the 7 new $2.00 Powerball game. So as of -- after the 8 Powerball drawing last night, we have started tapering 9 down or winding down our multi-draw feature. So you can 10 typically buy up to ten drawings in advance for 11 Powerball. Again, after the drawing last night, we cut 12 that back to nine, and we'll continue to diminish that 13 by one after every drawing. That will take us right up 14 to Saturday, January 14th. That will be the last 15 Powerball drawing under the current game. And then on 16 Sunday the 15th, we'll actually start up sales for the 17 new $2.00 game. And the first drawing for the new $2.00 18 game will be Wednesday, January 18th. 19 So staff has been working very hard to get 20 this change in place, and I just wanted to let you know 21 everything is on track and we should be up and selling 22 on Sunday the 15th. So we're looking forward to that 23 change. All point-of-sale that will be distributed to 24 the retail locations around the state is being produced, 25 and that distribution will start on Monday, 26 1 December 26th, by the GTECH sales force. 2 So we're in good shape on that upcoming 3 game change. And the only other thing I had to report 4 to you today is our holiday scratch-off games. I've 5 given you samples of all of those. We have holiday 6 games at the one, two, three, five, ten and $20 price 7 points, and so you have samples of each. 8 And we right now are in the middle of a 9 retailer contest to support some of these games. And I 10 think the suite looks good, and I think it's been 11 well-received by players. 12 And that concludes our report. Kathy and 13 I are happy to answer any questions if you have any. 14 CHAIRMAN WILLIAMSON: Thank you. 15 MR. GRIEF: Madam Chair, could I add one 16 thing to their report -- 17 CHAIRMAN WILLIAMSON: Sure. 18 MR. GRIEF: -- while Robert is still 19 seated. And I'll point your attention to those items 20 that are right there adjacent to Ms. Melvin's seat. 21 Those are two of the National Association of State and 22 Provincial Lottery awards that we recently won at the 23 NASPL conference in Indianapolis. The one to the left 24 is a delegate's award which was actually voted on by the 25 attendees to the conference as they reviewed different 27 1 points-of-sale material, and that particular award is 2 for our holiday standee that we have in retailer 3 locations that has the gift envelopes inside it. 4 But the one on the right is the big 5 enchilada. That is our NASPL award for the best new 6 instant scratch-off game in the country in 2011, and 7 that's for Texas Lottery Black. I just want to 8 recognize Robert and his team for working closely with 9 our instant ticket vendor and GTECH to produce that 10 game. 11 CHAIRMAN WILLIAMSON: Yes. We're all very 12 proud of you guys for this. And having attended a 13 conference and see the competition out there, that is no 14 small matter to win that, and so everybody should be 15 patting you on the back, as we are up here. That's 16 great. 17 MR. TIRLONI: Thank you; thank you very 18 much. 19 AGENDA ITEM NO. VII 20 CHAIRMAN WILLIAMSON: All right. Let's go 21 on to Item No. VII. It's the report, possible 22 discussion and/or action on transfers to the state 23 and/or the agency's operating budget. 24 Kathy, if you'll continue, please. 25 MS. PYKA: Thank you, Madam Chair. Again 28 1 for the record, my name is Kathy Pyka, Controller for 2 the Commission. 3 Commissioners, the first report in your 4 notebook includes the transfers and allocations to the 5 Foundation School Fund, the Texas Veterans Commission 6 and the allocation of unclaimed prizes through the 7 period ending October 31, 2011. Our total cash 8 transfers to the state amounted to $151.7 million 9 through the period ending October 31st. 10 And the second page of your notebook 11 reflects the detailed information for the monthly 12 transfers. Of the $151.7 million transfer to the state, 13 150.9 million was the amount transferred to the 14 Foundation School Fund. We transferred $780,000 to the 15 Texas Veterans Commission, with a balance of 10,000 -- 16 just over $10,000 transferred from unclaimed lottery 17 prizes. 18 Commissioners, this represents an 19 8.85 percent increase, or 12.3 million over the total 20 amount transferred to the Foundation School Fund in 21 October of 2010. Regarding this 12.3 million, or 22 8.85 percent increase to the Foundation School Fund, our 23 two-month cumulative increase is attributed to the 24 following: We had a sales increase of $30.4 million, or 25 5.2 percent, including a sales mix between our instant 29 1 ticket product and our on-line as follows: 2 This was a $17.6 million, or 4 percent 3 increase in instant ticket sales, a $12.8 million, or an 4 8.7 percent increase in on-line sales. The 8.85 percent 5 increase in net revenue transferred to the state -- or 6 to the Foundation School Fund -- versus this 5.2 percent 7 in total gross sales can be explained primarily by a 8 shift between on-line and instant ticket sales this 9 fiscal year. 10 At this point last fiscal year, our 11 on-line sales, which have a lower prize payout 12 percentage, accounted for 25.3 percent of total sales, 13 while this fiscal year through the same period, our 14 on-line sales have accounted for 26.2 percent of total 15 sales. 16 And, Commissioners, as you know, our 17 on-line sales levels are driven primarily by jackpot 18 levels of which we have no control. So thus far in 19 Fiscal Year 2012, we've enjoyed higher jackpot levels 20 across the board for Lotto Texas, Two-Step, Powerball 21 and Mega Millions, thus the higher return to the State 22 of Texas. 23 And, Commissioners, the other component 24 that I wanted to highlight on this revenue increase is a 25 $2.2 million decrease in our payment to the lottery 30 1 operator vendor, and this is a direct result of the new 2 rate outlined in the new contract with that vendor, 3 decreasing the rate from 2.6999 percent to 2.2099 4 percent. So for the first two months of the fiscal 5 year, this was $2.2 million in additional transfers to 6 the Foundation School Fund. 7 The last document in your notebook on 8 transfers includes the cumulative transfers to the 9 Foundation School Fund through October, which is a 10 $13.8 million cumulative figure at this point in time. 11 And then the final item under this tab is 12 our final tally for Fiscal Year 2011 expenditures. Our 13 Commissioners lottery account budget for '11 is 14 $211.2 million, of which we expended 94.2 percent. And 15 our bingo operations budget funded by general revenue is 16 $15.5 million, of which we expended and encumbered 17 95.8 percent of that total budget. 18 Commissioners, this concludes my 19 presentation. I would be happy to answer questions that 20 you might have. 21 CHAIRMAN WILLIAMSON: Thank you. 22 Commissioners, do you have any questions? 23 COMMISSIONER DELGADO: No, ma'am. 24 COMMISSIONER KRAUSE: I have none. 25 CHAIRMAN WILLIAMSON: All right. So 31 1 because our product sales mix changed a little bit, 2 basically you're saying on-line is a little more 3 profitable than scratch-offs. Right? 4 MS. PYKA: Correct. 5 CHAIRMAN WILLIAMSON: All right. Thank 6 you. 7 MS. PYKA: You're welcome. Thank you, 8 Commissioners. 9 AGENDA ITEM NO. VIII 10 CHAIRMAN WILLIAMSON: On to Item VIII. 11 The next item is consideration of and possible 12 discussion and/or action, including adoption on 13 amendments to 16 TAC 403.401 relating to use of 14 Commission motor vehicles. 15 And Pete is not here. So, Kim, if you 16 would take that for us, please. 17 MS. KIPLIN: Yes, I'll be happy to. 18 Commissioners, what you have before you is the adoption 19 of the amendments to the use of Commission motor vehicle 20 rule. At an earlier Commission meeting, you-all voted 21 to propose amendments to this rule. We have gone 22 through a public comment period, and no comments were 23 received. The staff recommends that you do adopt the 24 amendments to this rule. 25 This rulemaking was an outcome of the rule 32 1 review of Chapter 403, and we're conforming this rule to 2 delete the existing Subsection (b), because the 3 underlying statute was repealed, and to add a new 4 subsection to reflect the statutory requirement that was 5 not previously reflected in this agency rule. 6 So with that, staff would request that 7 you-all adopt the amendments. 8 CHAIRMAN WILLIAMSON: All right. 9 Commissioners, do you have any questions or discussion? 10 Do I hear a motion? 11 COMMISSIONER KRAUSE: I make a motion that 12 we adopt the proposed amendments to 16 TAC §403.401. 13 CHAIRMAN WILLIAMSON: Is there a second? 14 COMMISSIONER DELGADO: Second. 15 CHAIRMAN WILLIAMSON: All in favor? 16 COMMISSIONER DELGADO: Aye. 17 COMMISSIONER KRAUSE: Aye. 18 CHAIRMAN WILLIAMSON: Aye. 19 Motion passes 3-0. 20 MS. KIPLIN: Commissioners, I have an 21 order. 22 CHAIRMAN WILLIAMSON: Okay. Thank you. 23 AGENDA ITEM NO. IX 24 CHAIRMAN WILLIAMSON: Item IX is report, 25 possible discussion and/or action on the 82nd 33 1 Legislature and on federal gaming legislation. 2 Nelda, I believe this is yours. 3 MS. TREVINO: Good morning, Commissioners. 4 For the record, I'm Nelda Trevino. I'm the Director of 5 Governmental Affairs. And with me today is Colin Haza 6 who is also in the Governmental Affairs Division. 7 As I reported at the last Commission 8 meeting, during the legislative interim, the Speaker of 9 the House and the Lieutenant Governor assigned charges 10 to each committee to study particular issues for the 11 purpose of making recommendations to the next 12 Legislature. While the Lieutenant Governor has yet to 13 assign all committee charges for the Senate, the Speaker 14 of the House, Speaker Straus, has assigned committee 15 charges for the House of Representatives. 16 We included in your notebook a summary of 17 those House committee charges. And while none of those 18 House committee charges are specific to the Lottery 19 Commission, most of the charges noted in that summary 20 that we provided you are of general interest and 21 applicable to state agencies across the board. 22 It is anticipated that House committees 23 will conduct hearings on these issues, and the Speaker 24 has requested that each committee report be submitted no 25 later than December 1, 2012. 34 1 Governmental Affairs staff continues to 2 monitor these interim activities and we will keep you 3 advised of any actions that may be of interest to the 4 agency. 5 We also want to provide you a brief report 6 on federal gaming legislation, and I've asked Colin to 7 provide that report to you, so I'll turn that over to 8 Colin. 9 MR. HAZA: Morning, Madam Chairman and 10 Commissioners. I'm Colin Haza from the Governmental 11 Affairs staff, and I'm here to provide you with some 12 information concerning some bills of interest in the 13 Congress. 14 In your notebooks you will find two 15 documents related to federal legislation that's of 16 interest to the lottery industry. I invite your 17 attention to the document prepared by Edwards Wildman 18 Palmer, LLP. It provides a summary and compares some of 19 the salient provisions of three bills under 20 consideration by the 112th Congress. 21 Senator Reid's bill has received some 22 publicity, but it has not yet been introduced. His bill 23 would authorize and regulate only Internet poker among 24 people playing against each other and not against the 25 "house." 35 1 Representative Joe Barton's bill also 2 applies only to Internet poker. It was filed in June 3 and has been referred to three committees and 4 re-referred to three subcommittees, but no hearing has 5 been held on it yet. 6 Representative John Campbell's bill 7 co-authored by Representative Barney Frank. It would 8 overturn the Unlawful Internet Gambling Enforcement Act 9 of 2006 and provide for the licensing of Internet 10 gambling activities by the Secretary of the Treasury. 11 It does provide some consumer protections, and it 12 includes an opt-out provision for states. This bill has 13 also been referred, but no hearings are scheduled. 14 The second document in your notebook was 15 prepared by the staff of the House Committee on Energy 16 and Commerce to provide background information for a 17 November 18th hearing on Internet gaming. Note that the 18 panelists included Representatives Campbell and Frank as 19 well as parties that would be affected by the 20 authorization of Internet gambling. The North American 21 Association of State and Provincial Lotteries has long 22 supported the right of the individual states to regulate 23 gambling within their respective borders. This position 24 was presented on behalf of NASPL and on behalf of the 25 state lottery industry by the Executive Director of the 36 1 New Hampshire Lottery. 2 Subcommittee Chairman Mary Bono Mack's 3 opening statement summarized the current state of 4 Internet gaming and some of the issues she wanted the 5 subcommittee to examine. No specific bills were heard, 6 so no action was taken. 7 Thank you. We'll continue to monitor 8 these bills, and we'll keep you informed of any action. 9 And I'll try to answer any questions you may have now. 10 CHAIRMAN WILLIAMSON: All right. Thank 11 you. 12 Commissioners, do you have any questions? 13 COMMISSIONER KRAUSE: No, ma'am. 14 COMMISSIONER DELGADO: No. 15 CHAIRMAN WILLIAMSON: I think this is -- 16 I'm glad we're staying abreast of this. I think this is 17 something we all need to watch carefully and see where 18 it's headed. I am always concerned about how it will 19 impact us here. So thank you. 20 AGENDA ITEM NO. X 21 CHAIRMAN WILLIAMSON: And, Nelda, if 22 you'll stay there, please, and report to us on the 23 Sunset review process. 24 MS. TREVINO: Thank you, Madam Chair and 25 Commissioners. Again for the record, I'm Nelda Trevino, 37 1 Director of Governmental Affairs, and I have a very 2 brief report regarding the agency's Sunset review. 3 As you are aware, the Sunset Advisory 4 Commission staff is in the process of conducting their 5 review work of the Lottery Commission. And as part of 6 their review work, Sunset staff has held various 7 meetings with agency staff, and discussions continue to 8 be held as the Sunset staff evaluates the agency's 9 operations. I also understand that the Sunset staff has 10 received some feedback from interested groups and 11 members of the public. 12 Based on the initial timeline provided to 13 us, just as a reminder, it is anticipated that the 14 Sunset staff report will be issued in March of 2012, 15 with a public hearing before the Sunset Advisory 16 Commission tentatively scheduled for the week of April 17 9, 2012. 18 This concludes my report on this agenda 19 item, and I'll be glad to answer any questions. 20 CHAIRMAN WILLIAMSON: Thank you. 21 Commissioners, do you have any questions 22 of Nelda or the Sunset staff, the ones that are here? 23 And they have assured me, Amy and her 24 group has assured me that y'all have done an outstanding 25 job of providing them the information that they 38 1 requested and being as helpful as they possibly can, and 2 I thank you for that feedback. 3 MS. TREVINO: Thank you. 4 AGENDA ITEM NO. XI 5 CHAIRMAN WILLIAMSON: On to item No. XI, 6 report, possible discussion and/or action on amendments 7 to the 2010 lottery operations and services contract, 8 including whether the negotiation of the lottery 9 operator's contract in an open meeting would have a 10 detrimental effect on the Commission's position in 11 negotiations of the lottery operator contract and/or 12 contract for instant ticket manufacturing and services- 13 secondary vendor. 14 Mike Fernandez, this is your item. 15 And, Kim, you had some comments as to why 16 I laid this out in this manner. 17 MS. KIPLIN: Yes. Commissioners, the 18 lottery operator contract is actually an exemption in 19 the statutes governing the Texas Lottery Commission. 20 And if you wanted to, you could go into an executive 21 session to deliberate the negotiations of the lottery 22 operator contract. It's been in statute since the late 23 nineties. You have to make a written determination in 24 the public if you wanted to do that. And the 25 determination is to talk about in the public would 39 1 affect your negotiation. 2 The Commission historically has exercised 3 this I would say less than a handful of times, but it's 4 just something that I want to make sure y'all are aware 5 of that Mike is going to talk about. 6 CHAIRMAN WILLIAMSON: So I'm compelled to 7 ask Mike: Do you think that this would be detrimental 8 to have this conversation in the public meeting? 9 MR. FERNANDEZ: No, Chairman, I do not. 10 CHAIRMAN WILLIAMSON: All right. 11 Commissioners, do you have any questions or comments 12 about this -- 13 COMMISSIONER KRAUSE: No, ma'am. 14 CHAIRMAN WILLIAMSON: -- before we 15 proceed? All right. Thank you. 16 MR. FERNANDEZ: Again, good morning, Madam 17 Chair and Commissioners. My name is Mike Fernandez. 18 I'm the Director of Administration. 19 This item is to advise the Commission of 20 staff's intent to amend the contract with GTECH for 21 lottery operations and services and instant ticket 22 manufacturing. The purpose of these amendments is to 23 take advantage of proposed service offerings in lieu of 24 sanctions or liquidated damages currently available 25 under the contract. Also its service offerings will 40 1 result in a cost savings to the agency. 2 I would be happy to answer any questions 3 if you have any. 4 CHAIRMAN WILLIAMSON: All right. Thank 5 you. 6 Commissioners, do you have any questions? 7 COMMISSIONER KRAUSE: No, ma'am. 8 COMMISSIONER DELGADO: No, ma'am. 9 CHAIRMAN WILLIAMSON: So are you satisfied 10 that you're getting value of goods and services in 11 exchange? 12 MR. FERNANDEZ: Yes, Commissioner. In 13 fact, I've worked very closely with both our General 14 Counsel staff and Ms. Pyka, our Controller, to ensure 15 that there will be a savings realized, significant 16 savings. 17 CHAIRMAN WILLIAMSON: All right. Thank 18 you. 19 AGENDA ITEM NO. XII 20 CHAIRMAN WILLIAMSON: The next item is 21 report, possible discussion and/or action on amendments 22 on and/or on renewal of the drawing studio and 23 production services contract and/or audit services 24 contract. 25 Mike, if you'll continue, please. 41 1 MR. FERNANDEZ: And again for the record, 2 my name is Mike Fernandez. I'm the Director of 3 Administration. 4 This item is to advise the Commission of 5 Staff's intent to amend and extend two current 6 contracts. Those are the drawing studio and production 7 services contract that is an extension of one year and 8 the audit services contract, which will also be an 9 extension of one year. 10 I would be happy to answer any questions, 11 Commissioner. 12 CHAIRMAN WILLIAMSON: All right. Thank 13 you. 14 Commissioners, do you have any questions? 15 COMMISSIONER DELGADO: No. 16 COMMISSIONER KRAUSE: No. 17 CHAIRMAN WILLIAMSON: All right. Thank 18 you, Mike. 19 AGENDA ITEM NO. XIII 20 CHAIRMAN WILLIAMSON: On to Item XIII, 21 consideration of and possible discussion and/or action 22 on external and internal audits and reviews relating to 23 the Texas Lottery Commission and the Internal Audit 24 Department's activities. 25 Catherine, if you would -- 42 1 MS. MELVIN: Absolutely. Thank you, Madam 2 Chair. Good morning, Commissioners. For the record, 3 Catherine Melvin, Director of the Internal Audit 4 Division. 5 This morning I would like to provide an 6 update on the agency's annual financial audit, which 7 actually you're aware is statutorily required. The 8 auditors have completed their work, and yesterday an 9 exit conference was held. Chair Williamson was in 10 attendance at that meeting. The auditors presented 11 their opinion, which is a clean opinion again this year. 12 If it pleases the Commissioners, I will ask that the 13 auditors come back to the next scheduled Commission 14 meeting and formally present their results. 15 Certainly, commendations go to our 16 controller, Ms. Pyka and her staff, for their efforts 17 during this process. 18 And that's all I had to report today. 19 CHAIRMAN WILLIAMSON: All right. Thank 20 you. 21 AGENDA ITEM NO. XIV 22 CHAIRMAN WILLIAMSON: Go on to Item XIV, 23 report, possible discussion and/or action on GTECH 24 Corporation. 25 Gary. 43 1 MR. GRIEF: Madam Chair and Commissioners, 2 other than what's in your notebook, I have nothing 3 further to report under that item. 4 CHAIRMAN WILLIAMSON: Commissioners, do 5 you have any questions? 6 COMMISSIONER KRAUSE: No, ma'am. 7 CHAIRMAN WILLIAMSON: Thank you. 8 AGENDA ITEM NO. XV 9 CHAIRMAN WILLIAMSON: Let's go on to the 10 next item, XV, report by the Executive Director and/or 11 any possible discussion or action on the agency's 12 operational status, agency procedures and FTE status. 13 MR. GRIEF: Likewise, Madam Chair. Other 14 than what is in your notebooks this morning, I have 15 nothing further to report, be happy to answer any 16 questions. 17 CHAIRMAN WILLIAMSON: All right. Thank 18 you. 19 Commissioners, do you have any questions? 20 COMMISSIONER KRAUSE: No, ma'am. 21 COMMISSIONER DELGADO: No, ma'am. 22 CHAIRMAN WILLIAMSON: And at this time we 23 will -- it's 9:45. We'll take a 15-minute break, and 24 we'll get back and finish the meeting. 25 (Recess: 9:45 a.m. to 10:05 a.m.) 44 1 CHAIRMAN WILLIAMSON: The time is 10:05, 2 and we're back in session. 3 AGENDA ITEM NO. XVII 4 CHAIRMAN WILLIAMSON: I'm going to skip to 5 Item XVII, public comment, and I have no forms 6 indicating any witness affirmation forms for that. 7 AGENDA ITEM NO. XVI 8 CHAIRMAN WILLIAMSON: So we'll go back to 9 XVI. It's consideration of the status and possible 10 entry of orders in cases posted on the agenda. 11 Kim, if you'll take us through those, 12 please. 13 MS. KIPLIN: Yes. Thank you. 14 Commissioners, what you have before you are -- from 15 Letters A through K are lottery retailer revocation 16 cases. They're all for insufficient funds at the time 17 the Lottery swept their account. The staff is 18 recommending that you vote to adopt the Administrative 19 Law Judge's recommendation in each one of these cases 20 and revoke the licenses. We're taking these up in a 21 mass docket so there would be only the one order to sign 22 to adopt the Administrative Law Judge's. And so with 23 that, staff does recommend. 24 CHAIRMAN WILLIAMSON: All right. 25 Commissioners, do you have any questions of Kim or of 45 1 Michael on these? 2 COMMISSIONER KRAUSE: No. I'm ready to 3 make a motion. 4 CHAIRMAN WILLIAMSON: All right. 5 COMMISSIONER KRAUSE: I move that the 6 cases identified on our Agenda Item XVI.A through L, 7 that we adopt the Administrative Law Judge's 8 determination in those cases. 9 MS. KIPLIN: Can I ask for one correction? 10 Letters A through K. 11 COMMISSIONER KRAUSE: Okay. A through K. 12 MS. KIPLIN: Thank you. 13 CHAIRMAN WILLIAMSON: Is there a second? 14 COMMISSIONER DELGADO: Second. 15 CHAIRMAN WILLIAMSON: All in favor? 16 COMMISSIONER KRAUSE: Aye. 17 CHAIRMAN WILLIAMSON: Aye. 18 COMMISSIONER DELGADO: Aye. 19 CHAIRMAN WILLIAMSON: Motion passes 3-0. 20 The next item, please, Kim. 21 MS. KIPLIN: Yes. Commissioner, the 22 remaining enforcement order is Letter L, and that is the 23 matter involving Disabled American Veterans 17 Randolph 24 area. Commissioners, this is a settlement agreement 25 between the staff and the respondent, with the proposed 46 1 order. The circumstances were that the conductor 2 engaged in bingo occasions that were unlicensed and 3 unauthorized, and the staff has recommended that you 4 adopt the proposed agreed order. The respondent is 5 being assessed an administrative penalty in the amount 6 of $250 and an agreement that they won't engage in this 7 kind of conduct in the future. 8 CHAIRMAN WILLIAMSON: Thank you. 9 Commissioners, do you have any questions 10 of Kim or Phil in terms of this case? 11 COMMISSIONER KRAUSE: I do. 12 CHAIRMAN WILLIAMSON: Okay. 13 COMMISSIONER KRAUSE: We're making sure 14 that they understand what to do right from now on? 15 MR. SANDERSON: Yes, sir, most definitely. 16 I met with the individual personally last week, or two 17 weeks ago, and we discussed the ramifications and the 18 problems. And they actually played two occasions 19 without a license. 20 COMMISSIONER KRAUSE: Were they aware of 21 it or did they intend to do it? 22 MR. SANDERSON: They were not aware of it. 23 COMMISSIONER KRAUSE: Okay. 24 MR. SANDERSON: There's some other factors 25 involved that will come up in some other cases that are 47 1 being discussed right now, are in settlement 2 negotiations right now. 3 MS. KIPLIN: And just to add on that, as 4 part of the consent order, this respondent has agreed to 5 cooperate in any investigations and proceedings 6 regarding those other organizations that will likely 7 come before you at a subsequent Commission meeting. 8 CHAIRMAN WILLIAMSON: Okay. Commissioner, 9 do you have any questions or -- 10 COMMISSIONER DELGADO: No, ma'am. 11 CHAIRMAN WILLIAMSON: Phil, just to 12 enlighten us, because I'm always not clear exactly, what 13 is required? I mean, are these charities limited to a 14 certain number a week, a day? Kind of give us just a 15 little brief overview of this whole process. I know it 16 ties back to these other requests that you get. 17 MR. SANDERSON: By statute, organizations 18 are allowed to conduct three bingo occasions per week. 19 If you have a location that has more than one 20 organization -- we'll say five organizations -- they can 21 usually play their full complement of two sessions per 22 day for the week, each organization playing their share. 23 And I think in this case here, there was an organization 24 that had quit playing bingo or had moved out, and they 25 just continued having bingo sessions, and there wasn't a 48 1 license for that time slot. 2 CHAIRMAN WILLIAMSON: Okay. So you're 3 limited on how many you can conduct per week? 4 MR. SANDERSON: Yes. 5 CHAIRMAN WILLIAMSON: And then depending 6 on the configuration of where you hold these events 7 might change that number that you play. Is that right? 8 MR. SANDERSON: You can only play three a 9 week, and there cannot be more than two occasions per 10 day at a single location. 11 CHAIRMAN WILLIAMSON: Okay. All right. 12 MR. SANDERSON: So if you have, like I 13 said, five organizations, four of them can play three 14 sessions a week and the other one will play two 15 sessions, so you had the full complement of 14 sessions. 16 CHAIRMAN WILLIAMSON: Okay. All right. 17 Thank you. all right. Any other questions or comments? 18 Is there a motion? 19 COMMISSIONER KRAUSE: I make a motion that 20 we give the Commission's authorization for the consent 21 order. 22 COMMISSIONER DELGADO: Second. 23 CHAIRMAN WILLIAMSON: All in favor? 24 COMMISSIONER KRAUSE: Aye. 25 COMMISSIONER DELGADO: Aye. 49 1 CHAIRMAN WILLIAMSON: Aye. 2 Motions passes 3-0. 3 MS. KIPLIN: Commissioners, I have orders 4 for each of those. Thank you. 5 CHAIRMAN WILLIAMSON: Okay. 6 AGENDA ITEM NO. XVIII 7 CHAIRMAN WILLIAMSON: At this time I move 8 that the Texas Lottery Commission go into executive 9 session to deliberate the duties and evaluation of the 10 Executive Director, Internal Audit Director and 11 Charitable Bingo Operations Director, and to deliberate 12 the duties of the General Counsel and Human Resources 13 Director, pursuant to Section 551.074 of the Texas 14 Government Code and to receive legal advice regarding 15 pending or contemplated litigation pursuant to Section 16 551.071(1)(A) and/or to receive legal advice regarding 17 settlement offers pursuant to Section 551.071(1)(B) of 18 the Texas Government Code and to receive legal advice 19 pursuit to Section 551.071(2) of the Texas Government 20 Code, including but not limited to those items posted on 21 the open meetings notice for purposes of receiving legal 22 advice. 23 Is there a second? 24 COMMISSIONER DELGADO: Second. 25 CHAIRMAN WILLIAMSON: All in favor? 50 1 COMMISSIONER KRAUSE: Aye. 2 CHAIRMAN WILLIAMSON: Aye. 3 COMMISSIONER DELGADO: Aye. 4 CHAIRMAN WILLIAMSON: The vote is 3-0. 5 The Texas Lottery Commission will go into executive 6 session. The time is 10:10 p.m. Today is December 15, 7 2011. 8 MS. KIPLIN: Sorry; a.m. 9 CHAIRMAN WILLIAMSON: A.M. 10 (Off the record for executive session: 11 10:10 a.m. to 10:25 a.m.) 12 AGENDA ITEM NO. XIX 13 CHAIRMAN WILLIAMSON: The Texas Lottery 14 Commission is out of executive session. The time is 15 10:25 a.m. And there is no action to be taken as a 16 result of executive session. 17 AGENDA ITEM NO. XX 18 CHAIRMAN WILLIAMSON: So is there a motion 19 to adjourn? 20 COMMISSIONER DELGADO: I would like to 21 make that motion. 22 COMMISSIONER KRAUSE: I second it. 23 CHAIRMAN WILLIAMSON: All in favor? 24 COMMISSIONER KRAUSE: Aye. 25 COMMISSIONER DELGADO: Aye. 51 1 CHAIRMAN WILLIAMSON: Aye. 2 Motion passes 3-0. 3 (Commission meeting adjourned: 10:25 a.m.) 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 52 1 C E R T I F I C A T E 2 STATE OF TEXAS ) 3 COUNTY OF TRAVIS ) 4 I, Aloma J. Kennedy, a Certified Shorthand 5 Reporter in and for the State of Texas, do hereby 6 certify that the above-mentioned matter occurred as 7 hereinbefore set out. 8 I FURTHER CERTIFY THAT the proceedings of 9 such were reported by me or under my supervision, later 10 reduced to typewritten form under my supervision and 11 control and that the foregoing pages are a full, true 12 and correct transcription of the original notes. 13 IN WITNESS WHEREOF, I have hereunto set my 14 hand and seal this 23rd day of December 2011. 15 16 17 ________________________________ 18 Aloma J. Kennedy Certified Shorthand Reporter 19 CSR No. 494 - Expires 12/31/12 20 Firm Registration No. 276 Kennedy Reporting Service, Inc. 21 8140 North Mo-Pac Expressway Suite II-120 22 Austin, Texas 78759 23 24 25