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, APRIL 4, 2013 § 9 10 11 12 13 COMMISSION MEETING 14 THURSDAY, APRIL 4, 2013 15 16 BE IT REMEMBERED THAT on Thursday, the 4th 17 day of April 2013, the Texas Lottery Commission 18 meeting was held from 10:03 a.m. until 11:35 a.m., at 19 the offices of the Texas Lottery Commission, 611 East 20 6th Street, Austin, Texas 78701, before CHAIRMAN MARY 21 ANN WILLIAMSON and COMMISSIONER J. WINSTON KRAUSE. The 22 following proceedings were reported via machine 23 shorthand by Lorrie A. Schnoor, Certified Shorthand 24 Reporter. 25 2 1 APPEARANCES 2 CHAIRMAN: Ms. Mary Ann Williamson 3 COMMISSIONERS: 4 Mr. J. Winston Krause 5 GENERAL COUNSEL: Mr. Robert F. Biard 6 EXECUTIVE DIRECTOR: 7 Mr. Gary N. Grief 8 CHARITABLE BINGO OPERATIONS DIRECTOR: Ms. Sandra K. Joseph 9 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, APRIL 4, 2013 .............. 7 4 AGENDA ITEM NO. I - Meeting Called to Order ........ 7 5 AGENDA ITEM NO. II - Report, possible discussion and/or action on lottery sales and revenue, game 6 performance, new game opportunities, advertising, market research, trends, and game contracts 7 agreements, and procedures.......................... 7 8 AGENDA ITEM NO. III - Report, possible discussion and/or action on transfers to the State............. 17 9 AGENDA ITEM NO. IV - Consideration of and possible 10 discussion and/or action on the Lotto Texas procedures.......................................... 18 11 AGENDA ITEM NO. V - Consideration of and possible 12 discussion and/or action, including adoption, on amendments to 16 TAC §§401.101 Lottery Procurement 13 Procedures; 401.102 Protests of the Terms of a Formal Competitive Solicitation; 14 401.103 Protests of Contract Award; and 401.104 Contract Monitoring Roles and 15 Responsibilities.................................... 20 16 AGENDA ITEM NO. VI - Report, possible discussion and/or action on the 83rd Legislature............... 21 17 AGENDA ITEM NO. VII - Report, possible discussion 18 and/or action on HUB and/or minority business participation, including the agency's Fiscal 19 Year 2012 Minority Business Participation Report.... 26 20 AGENDA ITEM NO. VIII - Consideration of and possible discussion and/or action on external and 21 internal audits and/or reviews relating to the Texas Lottery Commission, and/or on the 22 Internal Audit Division’s activities................ 31 23 AGENDA ITEM NO. IX - Report, possible discussion and/or action on GTECH Corporation.................. 31 24 25 4 1 TABLE OF CONTENTS 2 PAGE 3 AGENDA ITEM NO. X - Report by the Executive Director and/or possible discussion and/or 4 action on the agency’s operational status, agency procedures, awards, and FTE status........... 32 5 AGENDA ITEM NO. XI - Report by the Charitable 6 Bingo Operations Director and possible discussion and/or action on the Charitable Bingo Operations 7 Division’s activities, including updates on licensing, accounting and audit activities, 8 pull-tab review, and special projects............... 32 9 AGENDA ITEM NO. XII - Consideration of the status and possible entry of orders in: 10 A. Docket No. 362-13-1582 – Gateway #30 11 B. Docket No. 362-13-1583 – Express Lane Fuel 12 C. Docket No. 362-13-1584 – Save A Lot Food Store 13 D. Docket No. 362-13-1585 – Circle H 14 E. Docket No. 362-13-1586 – I&Z Food Mart 15 F. Docket No. 362-13-1728 – D.J.’s Beverage Stop 16 G. Docket No. 362-13-1731 – Johnny D. Salinas 17 H. Docket No. 362-13-2074 – Time Saver Food Store 18 I. Docket No. 362-13-1751.B – Kris Keller Bingo Worker’s 19 Registration J. Docket No. 362-13-1752.B – 20 Gary Hello Bingo Worker’s Registration 21 K. Docket No. 362-13-1753.B – Monica Weber Bingo Worker’s 22 Registration........................... 37 23 AGENDA ITEM NO. XIII - Public comment............... 41 24 25 5 1 TABLE OF CONTENTS 2 PAGE 3 AGENDA ITEM NO. XIV - Commission may meet in Executive Session: 4 A. To deliberate the duties and evaluation of the Executive 5 Director pursuant to Section 551.074 of the Texas 6 Government Code. B. To deliberate the duties and 7 evaluation of the Charitable Bingo Operations Director pursuant to 8 Section 551.074 of the Texas Government Code. 9 C. To deliberate the duties and evaluation of the Internal 10 Audit Director pursuant to Section 551.074 of the Texas 11 Government Code. D. To deliberate the duties of the 12 General Counsel pursuant to Section 551.074 of the Texas 13 Government Code. E. To deliberate the duties of the 14 Human Resources Director pursuant to Section 551.074 of the Texas 15 Government Code. F. To receive legal advice regarding 16 pending or contemplated litigation pursuant to Section 551.071 17 (1)(A) and/or to receive legal advice regarding settlement offers 18 pursuant to Section 551.071 (1) (B) of the Texas Government Code 19 and/or to receive legal advice pursuant to Section 551.071 20 (2) of the Texas Government Code, including but not limited to: 21 Department of Texas, Veterans of Foreign Wars et al. v. Texas 22 Lottery Commission et al. Willis Willis v. Texas Lottery 23 Commission, GTECH Corporation, BJN Sons Corporation d/b/a Lucky Food 24 Store #2, Barkat N. Jiwani and Pankaj Joshi 25 6 1 TABLE OF CONTENTS 2 PAGE 3 Employment law, personnel law, 4 procurement and contract law, evidentiary and procedural law, 5 and general government law............. 41 6 AGENDA ITEM NO. XV - Return to open session for further deliberation and possible action on 7 any matter discussed in Executive Session........... 42 8 AGENDA ITEM NO. XVI - Adjournment................... 42 9 REPORTER'S CERTIFICATE ............................. 43 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 7 1 P R O C E E D I N G S 2 THURSDAY, APRIL 4, 2013 3 (10:03 a.m.) 4 AGENDA ITEM NO. I 5 CHAIRMAN WILLIAMSON: Good morning. I'd 6 like to call the meeting of the Texas Lottery Commission 7 to order. Today is April the 4th, 2013. The time is 8 10:03 a.m. Commissioner Krause is present, so we have a 9 quorum. 10 Before we start, I was just going to let 11 everyone know, as you can see, Commissioner Tauss is not 12 here. She has accepted a position with another agency. 13 We will certainly miss her. She was an asset to this 14 Commission and to this agency. I was always impressed 15 with the amount of time she spent trying to learn, 16 trying to understand and researching and reading. So 17 anyway, she will be missed, and I just want to let 18 everybody know that. 19 AGENDA ITEM NO. II 20 CHAIRMAN WILLIAMSON: All right. Let's 21 get on with the agenda. The first item is the report, 22 possible discussion and/or action on lottery sales and 23 revenue, game performance, new game opportunities, 24 advertising, market research, trends, and game 25 contracts, agreements, and procedures. Kathy and 8 1 Robert, this is your item. And I understand Kathy is 2 not here this morning, so we'll let y'all proceed. 3 MR. TIRLONI: Good morning, Commissioners. 4 For the record, my name is Robert Tirloni. I'm the 5 products and drawings manager for the Commission. And 6 as you noted, Kathy is not here. Kelly Stuckey, our 7 financial operations manager, is filling in for her 8 today. 9 MS. STUCKEY: Okay. And so with that, our 10 first chart this morning reflects comparative sales 11 through week ending March 30th, 2013. Total fiscal year 12 sales through this 31-week period are $2,531,000,000, 13 which is an increase of 67 million or 2.7 percent 14 compared to 2,464,000,000 in sales in the same time 15 period last year. For fiscal year 2013 instant sales 16 reflected on the second blue bar are 1,087,000,000, an 17 81.6 million increase over the sales figure for 2012. 18 We continue to see an exceptional year 19 over week over week sales growth in instant ticket 20 product with a cumulative 4.6 percent increase over the 21 2012 sales. 22 Since our last meeting we've experienced a 23 new record in instant ticket sales and have seen a high 24 of 75.4 million, and we've now seen seven weeks with 25 more than 70 million in instant ticket sales this fiscal 9 1 year. 2 Fiscal year 2013 draw sales reflected in 3 the second red bar are 660.6 million, which is a 4 14.9 million decline from the 67.5 million figure for 5 last year. The decline is attributed to the 84 million 6 draw sales week that we had last fiscal year for the 7 record setting Mega Millions jackpot of an advertised 8 640 million. 9 Our next slide reflects cumulative average 10 daily sales for Fiscal Year 2011, '12 and '13. And the 11 overall daily average sales value for 2013 is just over 12 $12 million, which is a $435,000 per day increase over 13 2012 and a 1.4 million increase from 2011. 14 The jackpot games highlighted in white 15 reflect an average daily total of 1.77 million for 16 FY2013, a 270,000 decline from last fiscal year and 17 170,000 increase over FY2011. 18 As mentioned earlier, we're now reflecting 19 comparative data to the period of the $640 million Mega 20 Millions jackpot as reflected with daily average in the 21 2012 as $737,000 sales. 22 The daily games highlighted in green 23 reflect a daily average of 1.36 million for the current 24 year with more than $200,000 increase over the previous 25 two fiscal years. 10 1 And then the new All or Nothing game is 2 presently generating an average daily sales value of 3 246,000 per day and cumulative sales of 15 million. 4 Daily 4 continues to reflect strong 5 year-to-date sales with a 13 percent increase over prior 6 year sales. And instant tickets reflect an average 7 daily sales at this fiscal year of 8.8 million, which is 8 an increase of 466,000 over the prior fiscal year and 9 more than $1 million over fiscal year 2011. 10 And now I'll turn it over to Robert. 11 MR. TIRLONI: So Commissioners, this next 12 slide is fiscal year 2013 compared to 2012 and it's 13 through this past Saturday, the week ending March 30th. 14 As Kelly mentioned, on our jackpot games, 15 you're going to see a decline for that category of 16 $61 million. The bulk of that decline can be attributed 17 to the decline in Mega Millions sales year over year. 18 And, again, that's because of the advertised 19 $640 million Mega Millions jackpot that occurred a year 20 ago. So we're competing this year with very high sales 21 levels last year as a result of that jackpot and the 22 roll-up to that high jackpot amount. 23 The growth in the jackpot category is with 24 the Powerball game. Year over year, that game is up 25 just over $69 million. The green font, or type, in the 11 1 middle is the daily games. Most of those games are 2 just -- are experiencing slight decline: Daily 4-Sum It 3 Up is basically even. Pick 3-Sum It Up is down 4 slightly. We continue to see good growth with our Daily 5 4 game. And, of course, All or Nothing are all new 6 sales this fiscal because that game started in 7 September. So as a whole, the daily games are up just 8 over 46 million. Again, most of that can be attributed 9 to the new All or Nothing game. 10 So if you look at the draw game category 11 as a whole, we're seeing decline of $14.9 million. 12 We're actually very happy with that figure. We were 13 fearful that that decline was going to be substantially 14 higher because of the Mega Millions jackpot I referenced 15 a little bit earlier, but we've had strong draw game 16 sales through this fiscal year. So when we hit this 17 March time period and we took that big hit because of 18 Mega Millions, it's resulted in this 14.9 or $15 million 19 deficit, which, like I said, we're usually not happy 20 with deficits, but in terms of the sales that we are 21 competing with a year ago, we're comfortable with this 22 and hope to be able to make up some ground through the 23 rest of the fiscal year. 24 Our instant ticket sales are very, very 25 strong, as Kelly mentioned. We're seeing very strong 12 1 sales week after week. And as a whole, that product 2 category is up over $81 million through the end of 3 March. So all told, the portfolio as a whole is up 4 $66.7 million through the end of March. 5 CHAIRMAN WILLIAMSON: All right. 6 MR. TIRLONI: I do have an update for you. 7 We have a new game that started just this past Monday. 8 We hope that this game is going to help contribute to 9 the strong instant sales that I just talked to you 10 about. 11 So this game started on the 1st. It's our 12 new Star Trek game. It's a $3 price point. 13 Before sales started on Monday, we had a 14 game launch kick-off event up in Dallas on Saturday. It 15 was kind of a dual purpose. We were kicking off the new 16 game, but we were also trying to set Guinness World 17 Record for the most number of people in Star Trek 18 costume at one location. 19 We did not set that record, but we did 20 have a really good event. We had over 560 people there 21 in costume that qualified for the Guinness attempt, and 22 we also had probably 700 people there total. If you 23 bear with me for one second, I have -- 24 COMMISSIONER KRAUSE: Little video? 25 MR. TIRLONI: -- a little video for you 13 1 that was prepared by our media relations division. 2 (Video playing) 3 MR. TIRLONI: So Commissioners, as you can 4 see, it was a very good event. We didn't set the world 5 record, like I said, but what this event allowed was it 6 was a hook. So if we had put out the Star Trek game 7 without this kind of event, without William Shatner, 8 without the Guinness attempt, we probably wouldn't have 9 gotten very much media coverage because it would have 10 been one out of, you know, 96 other games that we 11 launch. But this was a great hook. Gary got to do a 12 lot of media interviews. There was a lot of media 13 interest, and so we got a lot of publicity and a lot of 14 press. 15 A lot of happy attendees. The retailer 16 that sold tickets at this event sold just under $5,000 17 worth of Star Trek scratch-off tickets in three hours, 18 so that's very good. He was very happy as well. 19 And just my closing comments about this 20 event are that there are a lot of people here that 21 worked for many, many months to make that happen. It 22 was a real team effort between a lot of different 23 divisions and a lot of different departments here 24 working very closely to pull this off, so we're very 25 happy with it. 14 1 CHAIRMAN WILLIAMSON: And that's a great 2 video that you put together, too. 3 MR. TIRLONI: Philip and the media 4 relations team did a very good job on that video. Very 5 good job. 6 COMMISSIONER KRAUSE: Well, my questions 7 are as follows, and that is: What other states offer a 8 Star Trek game? 9 MR. TIRLONI: Well, a lot of states are 10 introducing it now because the new movie or the next 11 version of the Star Trek movie comes out in May. So 12 that was why we were very strategic about wanting to 13 launch it right at the end of March, right at the 14 beginning of April, so that when the game is out there 15 for sale, we hopefully can capitalize on the publicity 16 that CBS Studios is putting behind the launch of the 17 movie. So I don't have an exact number, but I know when 18 we were at this event, Pollard Banknote, that's their 19 licensed property game, they were telling us there are 20 many other states that are going to launch. 21 COMMISSIONER KRAUSE: Well, so can only 22 Texas residents or people here in Texas buy the tickets? 23 MR. TIRLONI: At our locations? 24 COMMISSIONER KRAUSE: Well, I suppose they 25 have to be here but -- 15 1 MR. TIRLONI: Yeah. 2 COMMISSIONER KRAUSE: -- you know, we 3 can't offer this outside the state, can we? 4 MR. TIRLONI: No, sir. No, sir. 5 COMMISSIONER KRAUSE: That's too bad. 6 There's a lot of trekkies out there. 7 (Laughter) 8 My last question is: Who told Gary he 9 couldn't wear his uniform? 10 (Laughter) 11 MR. TIRLONI: I think that was a decision 12 Gary made on his own. 13 MR. GRIEF: Very strategic decision, 14 Commissioner. 15 One other thing I'd like to add, just a 16 side note, Mr. Shatner, William Shatner, he's 82 years 17 old, so he was phenomenal. The performance he gave and 18 the enthusiasm -- you heard his wonderful speech about 19 how the money goes to education -- he did a great job. 20 He was an amazing guy at that event. 21 CHAIRMAN WILLIAMSON: As always, I'm 22 impressed with what y'all do here. And I know you do it 23 in conjunction with GTECH and all of our partners. And, 24 you know, I know y'all are going to be so tired of me 25 saying this, but you really make our job so easy. I 16 1 mean -- 2 COMMISSIONER KRAUSE: Keep it up. 3 CHAIRMAN WILLIAMSON: Things like that, 4 your All or Nothing advertisement, I see it frequently 5 in the north Texas market and what you've done up there, 6 and I -- you know, like I said, you just make this so 7 easy for us. And y'all are doing a phenomenal job, 8 so... 9 MR. TIRLONI: Well, thank you. 10 CHAIRMAN WILLIAMSON: All of you. And I 11 know that there were a lot of people involved. And, 12 like I said, it's an incredible endeavor so... 13 MR. TIRLONI: Well, thank you. We never 14 tire of hearing you say that about the staff. 15 (Laughter) 16 CHAIRMAN WILLIAMSON: Well, see, that way 17 if I say that, then hopefully you won't be saying too 18 many negative things certainly about Winston. 19 MR. TIRLONI: We never do that. 20 (Laughter) 21 CHAIRMAN WILLIAMSON: Or I. 22 COMMISSIONER KRAUSE: It makes for a loop 23 to play over the intercom. 24 CHAIRMAN WILLIAMSON: So anyway, thank 25 you. That's impressive. 17 1 AGENDA ITEM NO. III 2 CHAIRMAN WILLIAMSON: All right. We will 3 go on to the next item. It's report, possible 4 discussion, and/or action on transfers to the State. 5 MS. STUCKEY: Good morning. For the 6 record, again, my name is Kelly Stuckey with the Office 7 of Controller. And under this tab includes information 8 on the agency's transfer to the State. 9 The first report reflects transfers and 10 allocations to the Foundation School Fund, the Texas 11 Veterans Commission, and allocation of unclaimed prizes 12 for the period ending February 28th, 2013. 13 Total cash transfers to the State amounted 14 to 530.3 million for the first six months of Fiscal Year 15 2013. And then on the second page of your notebook, it 16 reflects the detailed information for the monthly 17 transfer. So of that 530.3 million transferred to the 18 State, 502.1 went to the Foundation School Fund, 2.9 to 19 the Veterans Commission, and the balance of 25.3 million 20 was transferred from unclaimed prizes. 21 This represents a 1.8 percent increase, or 22 8.6 million, over the total amount transferred to the 23 Foundation School Fund through February of 2012. 24 The next document just provides details of 25 the calculation of the monthly transfer. 18 1 And then the final document in your 2 notebook includes a report of lottery sales expenditures 3 and transfers from fiscal year 2000 -- I'm sorry -- 1992 4 to date and shows a cumulative transfer to the 5 Foundation School Fund through February of this year 6 totaled 15.2 billion. 7 This concludes my presentation, and do you 8 have any questions? 9 CHAIRMAN WILLIAMSON: Thank you. 10 Commissioner, do you have any questions? 11 COMMISSIONER KRAUSE: No, ma'am. 12 AGENDA ITEM NO. IV 13 CHAIRMAN WILLIAMSON: All right. Let's go 14 on to the next item. It's consideration of and possible 15 discussion and/or action on the Lotto Texas procedures. 16 MS. STUCKEY: Okay. Under this Tab 4 17 includes information on the Commission's jackpot 18 estimation procedure. And in accordance with the 19 Commission's procedure regarding approval of procedures 20 that affect Lotto Texas players, I am seeking your 21 approval of the Lotto Texas jackpot estimation procedure 22 OC-JE-002. 23 So following the January 11th, 2013, 24 Commission meeting, the proposed procedure was placed in 25 the Texas Register and on the agency's website for 19 1 public comment. A minimum of 30 days has elapsed since 2 public comment hearing that was held on February 15th -- 3 I'm sorry -- February 25th, 2013. And today, there have 4 not been any comments in writing or received at the 5 public comment hearing. 6 It's our recommendation that the procedure 7 be approved and, if so, the approved procedure would be 8 published in the Texas Register and on the agency's 9 website. 10 This concludes my presentation. 11 CHAIRMAN WILLIAMSON: All right. Thank 12 you. 13 Commissioner, do you have any questions? 14 COMMISSIONER KRAUSE: No, but I'd like to 15 make a motion that we approve the change in the 16 procedure that is outlined in Section IV of our agenda. 17 CHAIRMAN WILLIAMSON: I second. All in 18 favor? 19 COMMISSIONER KRAUSE: Aye. 20 CHAIRMAN WILLIAMSON: Aye. Motion passes 21 2-0. 22 MS. STUCKEY: Thank you, Commissioners. 23 MR. BIARD: Thank you. There's no written 24 order for that. 25 20 1 AGENDA ITEM NO. V 2 CHAIRMAN WILLIAMSON: All right. Next 3 item is consideration of and possible discussion and/or 4 action, including adoption, on amendments to 16 TAC 5 Sections 401.101 Lottery Procurement Procedures; 401.102 6 Protests of the Terms of a Formal Competitive 7 Solicitation; 401.103, Protests of Contract Award; and 8 401.104 Contract Monitoring Roles and Responsibilities. 9 Lea? 10 MS. BURNETT: Thank you. Good morning. 11 For the record, my name is Lea Burnet. I'm an assistant 12 general counsel with the agency. 13 Chairman, before you, you have a draft of 14 the rule submission for publication to the Texas 15 Register that would authorize the adoption of the rules 16 that you summarized in your presentation. We proposed 17 amendments to these four rules that govern lottery 18 procurement procedures within our agency. I won't go 19 back over the titles of each of the rules. But 20 basically these rules are presented for your 21 consideration without changes to the proposed versions 22 that were published in the Texas Register on 23 January 25th, 2013. 24 We did not receive any comments in writing 25 or otherwise to these proposed rules, and these 21 1 amendments generally are nonsubstantive. We do intend 2 them to improve clarity and function of our procurement 3 processes. They do also add the ability to serve 4 certain contract notices by email. 5 The staff recommends that the Commission 6 adopt the draft rules as presented in your notebooks. 7 We do have one T-bar memo, because we did submit them 8 under a common preamble, so all the rules are in one 9 package. I'm available to answer any questions that you 10 have. 11 CHAIRMAN WILLIAMSON: Thank you, Lea. 12 Commissioner? 13 COMMISSIONER KRAUSE: I make a motion that 14 we adopt the amendments to 16 TAC Sections 401.101, 102, 15 103 and 104. 16 CHAIRMAN WILLIAMSON: I second. All in 17 favor? 18 COMMISSIONER KRAUSE: Aye. 19 CHAIRMAN WILLIAMSON: Aye. Motion passes 20 2-0. 21 MR. BIARD: Thank you, Commissioners. I 22 have one order for you to sign. 23 AGENDA ITEM NO. VI 24 CHAIRMAN WILLIAMSON: All right. The next 25 item is report, possible discussion and/or action on the 22 1 83rd Legislature. 2 Nelda? 3 MS. TREVINO: Good morning, Commissioners. 4 For the record, I'm Nelda Trevino, the Director of 5 Governmental Affairs. 6 There have been nearly 6,000 bills that 7 have been filed this legislative session, and we are 8 currently tracking 183 of them that address different 9 subjects and interest to the agency. You've been 10 receiving regular legislative bill tracking reports, and 11 you have a copy of the full tracking report in your 12 meeting notebook. 13 Today, we have provided you with a 14 tracking report of about 50 bills or so, and these bills 15 are more specific but have an impact either to the 16 Commission, to the lottery or to charitable bingo or is 17 a bill that is some form of gaming. 18 There are a few bills from this report 19 that I'd like to highlight for you this morning. The 20 first is the agency sunset bill. This is House Bill 21 2197 by Representative Rafael Anchia. And this bill was 22 considered by the House Licensing & Administrative 23 Procedures Committee earlier this week. The bill 24 basically tracks the recommendations that were adopted 25 by the Sunset Advisory Commission. And Chairman 23 1 Williamson was in attendance at the hearing this week, 2 along with Gary and Sandy, who provided a brief overview 3 of the agency and served as a resource on this bill to 4 the committee. Other public testimony was provided on 5 the bill and the bill was left pending. It is 6 anticipated that the bill will be voted out of the 7 committee for the full House to consider. And then once 8 that process is completed, we anticipate it being -- be 9 considered over on the Senate side. 10 House Bill 394 by Representative Senfronia 11 Thompson. This is a bill that I've mentioned in the 12 past. This is a bill that would exempt bingo prizes of 13 $50 or less from the $2500 price cap. And this bill was 14 also considered by the House licensing committee last 15 month, and this bill has been voted out favorably from 16 the committee. 17 Senate Bill 871 by Senator Wendy Davis. 18 This bill would require the Lottery Commission to spend 19 an equivalent amount of its marketing and advertising 20 budget to promote the veterans game as the Commission 21 spends on any other instant ticket. This bill was 22 considered yesterday by the Senate veterans affairs 23 committee, and Gary served as a resource at this 24 committee hearing and answered many questions from the 25 committee members. This bill was voted out favorably 24 1 from the committee. 2 There are five bills that seek to address 3 the use of unclaimed lottery prizes. These include 4 House Bills 1270, 1443, 2027 and its companion Senate 5 Bill 663 and House Bill 3635. 6 The remaining bills on this report 7 authorize, again, some form of gaming, either the 8 authorization of casino gaming in some form, whether on 9 land base, resort-style locations or on tribal lands, or 10 the authorization of video lottery terminals at 11 parimutuel tracks or in bingo halls. And there are also 12 bills that would authorize poker gaming, whether on the 13 Internet or in local poker parlors. 14 And lastly there are bills that would 15 permit the operation of 8-liner machines and game rooms. 16 The appropriations bill, which includes 17 the agency's budget for the 2014-2015 biennium, is being 18 considered by the full House this morning. The agency's 19 requested items are included in the bill and we'll, you 20 know, continue to monitor the progress of this bill. 21 This concludes my report, and I'll be glad 22 to answer any questions. 23 CHAIRMAN WILLIAMSON: Thank you. 24 Commissioner, do you have any questions? 25 COMMISSIONER KRAUSE: What's all the 25 1 interest around the unclaimed prizes? There are five 2 bills. 3 MS. TREVINO: I think, Commissioner 4 Krause, because of the amount of money of unclaimed 5 prizes, the historical amount of money, we average 6 somewhere between 40 and $50 million of unclaimed prize 7 money that gets transferred each fiscal year. And so I 8 think as a result of that amount of funding and 9 different members looking for different sources of 10 funding for whatever cause it might be -- 11 COMMISSIONER KRAUSE: So they want to take 12 it away from what we'd normally do, which is give it to 13 the education fund? 14 MS. TREVINO: In fact, one of the bills 15 that's filed would divert all that unclaimed prize money 16 to the Foundation School Fund. 17 COMMISSIONER KRAUSE: Isn't that where it 18 goes now? 19 MS. TREVINO: It does not. 20 COMMISSIONER KRAUSE: General revenue? 21 MS. TREVINO: A portion of it goes to the 22 multicategorical teaching hospital account. That's 23 basically UTMB, University of Texas Medical Branch in 24 Galveston, if I have that correctly. So a portion of it 25 goes there, and then the remainder of it goes to general 26 1 revenue. 2 COMMISSIONER KRAUSE: Okay. Thank you. 3 CHAIRMAN WILLIAMSON: All right. I have 4 no questions. Thank you. 5 AGENDA ITEM NO. VII 6 CHAIRMAN WILLIAMSON: The next item is 7 report, possible discussion and/or action on HUB and/or 8 minority business participation, including the agency's 9 Fiscal Year 2012 Minority Business Participation Report. 10 Joyce. 11 MS. BERTOLACINI: Good morning, 12 Commissioners. For the record, my name is Joyce 13 Bertolacini, coordinator of the TLC's Historically 14 Underutilized Business program. I'd first like to 15 provide a brief update this morning on the agency's HUB 16 program. 17 At the beginning of this current fiscal 18 year, the agency set its annual internal HUB goals as 19 required by the comptroller's HUB rules. And if you 20 recall, you received an update about this in your 21 October packet. 22 The TLC's Mentor Protege Program is an 23 ongoing initiative to match HUB vendors with mentor 24 companies that can assist with specific business 25 development goals. Although the TLC does not have any 27 1 current mentor protege relationships in place, we 2 recently refreshed our pool of mentor companies and are 3 now working to establish new relationships. 4 And the TLC's annual HUB forum, which will 5 take place this summer, I believe in June, is also 6 currently being planned. So that's just a short summary 7 on some of the high points of the HUB program. 8 The main reason I'm before you today is 9 that a copy of the agency's finalized FY2012 minority 10 business participation report has been included in your 11 notebooks. This report, which is required by Section 12 466.107 of the State Lottery Act must be made available 13 annually to the governor, lieutenant governor, speaker 14 of the house and members of the legislature. The report 15 requires your formal approval prior to being published 16 on our website and being printed. 17 The current minority business 18 participation report documents the level of minority and 19 HUB participation in the agency's contracting activity 20 during Fiscal Year 2012. It also includes information 21 on the number of licensed minority lottery retailers. 22 During Fiscal Year 2012, the agency 23 achieved an overall participation rate of 27.84 percent 24 in its minority HUB contracting activity. In addition, 25 of the 18 largest spending state agencies, the TLC 28 1 ranked second by overall HUB percentage. 2 Finally, during Fiscal Year 2012, the 3 agency had 7,360 minority retailers which represented 4 43.34 percent of the lottery's total retailer base. 5 I'd be happy to answer any questions 6 regarding the report at this time. And if there are 7 none, this is an action item, and the staff recommends 8 your approval of the FY12 minority business 9 participation report. 10 CHAIRMAN WILLIAMSON: All right. Thank 11 you, Joyce. Commissioner -- 12 COMMISSIONER KRAUSE: I got a question. 13 CHAIRMAN WILLIAMSON: -- do you have 14 any -- 15 COMMISSIONER KRAUSE: I got a question. 16 CHAIRMAN WILLIAMSON: -- questions or 17 comments? 18 COMMISSIONER KRAUSE: I don't know if it 19 was during this period or not, but, you know, we had a 20 major change in advertising vendors so that -- now that 21 Tracey Locke is no longer the lead, it's LatinWorks; and 22 I was really kind of expecting that to have a pretty 23 significant impact. I was shooting for number one, not 24 number two or seven. 25 MS. BERTOLACINI: Well, also remember that 29 1 I'm only looking at the top 18 spending agencies. So 2 only the agencies that outspent us in total expenditures 3 are included in that. I would say that that contract 4 probably did have some impact as LatinWorks, I believe, 5 started doing work -- 6 COMMISSIONER KRAUSE: It became the prime. 7 MS. BERTOLACINI: -- as the prime in May, 8 but there was an overlap. So during the last, what -- 9 COMMISSIONER KRAUSE: How often do we -- 10 MS. BERTOLACINI: -- four months of the 11 fiscal year, we had two concurrent things going. So we 12 still got subcontracting dollars from Tracey Locke that 13 counted as HUB expenditures during that time period, and 14 we also got some credit for paying LatinWorks directly. 15 COMMISSIONER KRAUSE: So the numbers next 16 year are going to be great. 17 MS. BERTOLACINI: Well, we've already been 18 looking at the draft report. And, again, we had a 19 period of overlap for the first few months of this 20 fiscal year. So keeping our fingers crossed, you know, 21 we may be seeing some increase for this year. 22 COMMISSIONER KRAUSE: All right. 23 MS. BERTOLACINI: But I don't want to, you 24 know, give you any hopes or give you any information 25 that's not official yet. The next report will be coming 30 1 out April the 15th. That will be the official report. 2 COMMISSIONER KRAUSE: All right. Well, I 3 make a motion that we approve your report. 4 CHAIRMAN WILLIAMSON: I second. 5 All in favor? Aye. 6 COMMISSIONER KRAUSE: Aye. 7 CHAIRMAN WILLIAMSON: Motion passes 2-0. 8 Joyce, thank you so much. You always do a 9 good job with this, and I appreciate that. 10 Let me know how the mentor thing goes when 11 you start getting some of those relationships back 12 again. 13 MS. BERTOLACINI: Okay. I will. 14 CHAIRMAN WILLIAMSON: Going to always be 15 hard to compete with Texas A&M University on this, but I 16 think -- because we are not at that size and at that 17 level, I think we should all feel very proud of where we 18 always end up here. I know that's an ongoing endeavor 19 within this agency that's important. 20 MS. BERTOLACINI: Thank you. And I 21 believe Bob has a letter for you to sign. 22 MR. BIARD: Yes, I do. 23 MS. BERTOLACINI: Okay. If I could just 24 get that from you. 25 CHAIRMAN WILLIAMSON: Okay. All right. 31 1 MS. BERTOLACINI: Then I can proceed with 2 the rest of the posting of the report. 3 Thank you very much. 4 AGENDA ITEM NO. VIII 5 CHAIRMAN WILLIAMSON: Thank you. 6 The next item is consideration of and 7 possible discussion and/or action on external and 8 internal audits and/or reviews relating to the Texas 9 Lottery Commission, and/or on the Internal Audit 10 Division's activities. 11 Catherine? 12 MS. MELVIN: Thank you. Commissioners, 13 for the record, Catherine Melvin, Director of the 14 Internal Audit Division. This morning I do not have any 15 items for you but am happy to answer any questions you 16 might have. 17 CHAIRMAN WILLIAMSON: Thank you. 18 Commissioner, do you have any questions? 19 COMMISSIONER KRAUSE: No. 20 AGENDA ITEM NO. IX 21 CHAIRMAN WILLIAMSON: All right. The next 22 item is report, possible discussion and/or action on 23 GTECH Corporation. 24 Gary? 25 MR. GRIEF: Commissioners, other than 32 1 what's in your notebook, I have nothing further to 2 report this morning. 3 AGENDA ITEM NO. X 4 CHAIRMAN WILLIAMSON: All right. And 5 we'll continue on to the next item, is report by the 6 Executive Director and/or possible discussion and/or 7 action on the agency's operational status, agency 8 procedures, awards, and FTE status. 9 Gary? 10 MR. GRIEF: Again, Chairman, other than 11 what's in your notebook, I have nothing further to 12 report. 13 CHAIRMAN WILLIAMSON: Commissioner, do you 14 have any questions or comments? 15 COMMISSIONER KRAUSE: No, ma'am. 16 AGENDA ITEM NO. XI 17 CHAIRMAN WILLIAMSON: All right. The next 18 item is report by the Charitable Bingo Operations 19 Director and possible discussion and/or action on the 20 Charitable Bingo Operations Division's activities, 21 including updates on licensing, accounting and audit 22 activities, pull-tab review, and special projects. 23 Sandy? 24 MS. JOSEPH: Good morning, Commissioners. 25 In addition to what's in your notebook, I do have a few 33 1 items that I would like to share with you. 2 First of all, the online bingo operator 3 training has been updated and is now on the website. 4 We're very happy about that. 5 In addition to that, we are going to offer 6 an onsite bingo operator training class here in Austin 7 on April 22nd. We have a few people already registered. 8 Registration is online. This will be the first time 9 that that's been offered onsite in a couple of years, 10 and we're hoping that that will benefit some people who 11 prefer the one-to-one. 12 Secondly, I'd like to let you know that in 13 order to better know the bingo staff, I met with each 14 individual bingo employee here in Austin headquarters 15 for a half hour to an hour over the past number of 16 weeks, and I asked them to share their job history, 17 their goals, their experiences and their current job 18 duties. I also asked them to share any ideas they might 19 have for improving the way bingo does its work. And 20 literally, I have dozens of suggestions now. Some of 21 them seem more minor. Some require some, perhaps major 22 review of processes, but I was really impressed with the 23 staff's experience, their knowledge and their commitment 24 to their jobs, also their patience in my asking lots of 25 questions. 34 1 Just to, you know, reinforce my 2 impressions of the staff, I received two emails in the 3 past few weeks praising some of our employees. I'd like 4 to read just portions of those to you. 5 First of all, this one is from Thomas 6 Gasper, president of Forever Young Activity Center. He 7 says, "Ms. Joseph, I want to say thank you to your 8 staff, especially Ms. Lana Sosa, for all the help I 9 received in preparing the license application for 10 Forever Young Activity Center. Ms. Sosa was more than 11 patient with me as I called her many times in order to 12 make sure that I had everything right. Thank you 13 again." 14 And then -- and I'll have her -- 15 CHAIRMAN WILLIAMSON: I want -- stand up 16 as you talk about her so we can see her. 17 (Applause) 18 CHAIRMAN WILLIAMSON: Congratulations. 19 COMMISSIONER KRAUSE: Thank you. 20 CHAIRMAN WILLIAMSON: Thank you. 21 MS. JOSEPH: And then received another 22 one, and I'll read a portion of this. It says, "I have 23 been working on getting a new bingo hall and unit 24 started in Hidalgo County called the Bingo Ranch Bingo 25 Unit, and it has been like pulling teeth to get the 35 1 applications from the charities done correctly. I had 2 help from Alice before she left, and since she returned, 3 along with Donna, Lana and Mary Ann. I could not have 4 accomplished this without their competent assistance and 5 guidance and I want to especially thank and acknowledge 6 them all. They have and continue to help the charities 7 and me to get the charities licensed and the unit 8 formed. Alice had been especially helpful to the 9 charities in getting them to understand correct 10 procedures and proper follow-through. She also has been 11 invaluable in assisting the hall manager, who is new to 12 bingo, understand and comply with all the procedures and 13 making him comfortable with his new position. I so 14 appreciate all that your staff does on an ongoing basis 15 to help me and the charities. Sincerely, Eddie 16 Heinemeier." So I just want to say -- 17 CHAIRMAN WILLIAMSON: Wait. I want those 18 ladies to stand up, too. 19 MS. JOSEPH: Yes, I do, too. We have 20 Alice Banks -- 21 (Applause) 22 MS. JOSEPH: Alice Banks, Donna LeDeaux 23 Mary Ann Gomez and Lana Sosa. 24 And I just want to say that, you know, we 25 receive these compliments on them, but I've, you know, 36 1 found and sincerely believe that all the staff is just 2 as committed to helping the licensees as these ladies 3 are. I appreciate it. 4 Thank you. 5 CHAIRMAN WILLIAMSON: Thank you so much. 6 I'm in a business where I have to deal with a regulatory 7 agency on a ongoing basis, and I'm very much aware of 8 how confusing and difficult sometimes it is to maneuver 9 in the maze of statutes and rules; and staff is key in 10 helping those of us on the outside that have to do that. 11 So I particularly understand and appreciate what you do. 12 I continue to try and figure out how can 13 we make this process easier to understand for our 14 charities and those people, and that's one of my 15 directions I've given to Sandy. Let's see what we can 16 do to make this easier and clearer for everyone. But be 17 that as it may, thank you so much. 18 FROM THE AUDIENCE: Thank you. 19 MS. JOSEPH: That's all I have. 20 CHAIRMAN WILLIAMSON: All right. Thank 21 you. 22 Commissioner, do you have any comments or 23 questions? 24 COMMISSIONER KRAUSE: Well, I was going to 25 ask about the training, and that is, I suppose, 37 1 responsive to a witness we had from Waco last time. 2 MS. JOSEPH: Well, actually our timing was 3 good. We're already in the planning stages and already 4 working on updating, but I'm happy to say that, you 5 know, we have some bit of offering towards satisfying 6 her comments, although we want to go a lot further with 7 our exploration of what we can do in the way of training 8 and assisting. 9 COMMISSIONER KRAUSE: Good. 10 CHAIRMAN WILLIAMSON: Thank you. 11 AGENDA ITEM NO. XII 12 CHAIRMAN WILLIAMSON: The next item is 13 consideration of the status and possible entry of orders 14 in cases posted on the open meetings agenda. 15 Bob? 16 MR. BIARD: Thank you, Commissioners. 17 This morning we have 11 enforcement cases. Tabs A 18 through H in your notebook are lottery retailer matters 19 I'd like to take up together. Tabs I through K are 20 bingo agreed orders involving three persons. 21 Tabs A through H are recommended lottery 22 retailer license revocations. These cases were 23 presented at the State Office of Administrative Hearings 24 for revocation on the grounds the licensee failed to 25 have sufficient funds available to cover electronic fund 38 1 transfers to the Commission's account. The SOAH 2 administrative law judge recommends revocation in each 3 of these cases, and staff recommends that you vote to 4 approve the order in each case revoking the license. If 5 you approve, I have a single mass order that covers all 6 eight of these cases. 7 CHAIRMAN WILLIAMSON: Thank you. 8 Commissioner, do you have any questions? 9 COMMISSIONER KRAUSE: I make a motion that 10 we accept the recommendation of the administrative law 11 judge's order in Items A through H, Item No. XII on the 12 agenda. 13 CHAIRMAN WILLIAMSON: I second. All in 14 favor? 15 COMMISSIONER KRAUSE: Aye. 16 CHAIRMAN WILLIAMSON: Aye. Motion passes 17 2-0. 18 MR. BIARD: Thank you, Commissioners. I 19 have one order for you. 20 Tabs I, J and K are bingo agreed orders 21 with three persons relating to the same incident. In 22 each one of these orders, there is an agreed 200-dollar 23 penalty. 24 Each of the persons in these cases are on 25 the registry of approved bingo workers, and the facts 39 1 show that each person was paid money over time by a 2 licensed bingo equipment distributor. The staff alleges 3 this activity was in violation of the terms of the 4 distributor's license, which, if it is true, would 5 render the distributor ineligible. 6 In these cases, the three persons were 7 cited as having assisted or participate in a violation 8 of the Bingo Enabling Act and in taking action that 9 affects the integrity of the game of bingo. 10 The parties have agreed to settle the 11 matter without admission of any violations and without 12 removing these persons from the bingo registry for a 13 fine of $200 for each person because the three 14 individuals had a good faith disagreement with the 15 agency over whether these activities were violations of 16 the bingo act. 17 CHAIRMAN WILLIAMSON: All right. 18 MR. BIARD: And staff recommends that you 19 vote to approve the agreed orders in each of these three 20 cases. 21 CHAIRMAN WILLIAMSON: Commissioner, do you 22 have a question? 23 COMMISSIONER KRAUSE: I have one question, 24 that is: Were these actual charity employees or were 25 they loaned employees from the hall operator? 40 1 MR. BIARD: The attorney who handled this 2 matter is not here today; but based on my review of the 3 file, my understanding is these were not people who 4 worked for the charities. I don't know if there's 5 anybody here who could speak to that, but... 6 COMMISSIONER KRAUSE: Well, see, I guess 7 this is something that I've got a little bit of an issue 8 with. And I'm not going to try and, you know, do 9 anything other than approve these; but if the hall -- if 10 the landlord is providing a turnkey deal to the 11 charities and its employees mess up, they don't pay. 12 It's the charity. And, you know, I'm interested in -- 13 if we're interested in compliance, I'd like to rethink 14 some of that. Other than that, I make a motion that we 15 approve the agreed orders identified on the docket 16 numbers for I, J and K under Item No. XII. 17 CHAIRMAN WILLIAMSON: I second. All in 18 favor? 19 COMMISSIONER KRAUSE: Aye. 20 CHAIRMAN WILLIAMSON: Aye. Motion passes 21 2-0. 22 MR. BIARD: Thank you, Commissioners. I 23 have three orders. 24 And just for clarification, these orders 25 are against these particular individuals in this case, 41 1 so they will each be responsible for the 200-dollar 2 penalty. 3 COMMISSIONER KRAUSE: Okay. 4 AGENDA ITEM NOS. XIII and XIV 5 CHAIRMAN WILLIAMSON: Okay. And we do not 6 have any public comments at this time. 7 So at this time, I move the Texas Lottery 8 Commission go into executive session to deliberate the 9 duties and evaluation of the Executive Director, 10 Charitable Bingo Operations Director and Internal Audit 11 Director and to deliberate the duties of the General 12 Counsel and Human Resources Director pursuant to Section 13 551.074 of the Texas Government Code and to receive 14 legal advice regarding pending or contemplated 15 litigation and/or settlement offers pursuant to Section 16 551.071(1)(A) and (B) and to receive legal advice 17 pursuant to Section 551.071(2) of the Texas Government 18 Code, including but not limited to those items posted on 19 the open meetings notice for purposes of receiving legal 20 advice. Is there a second? 21 COMMISSIONER KRAUSE: Second. 22 CHAIRMAN WILLIAMSON: All in favor? 23 COMMISSIONER KRAUSE: Aye. 24 CHAIRMAN WILLIAMSON: Aye. Motion passes 25 2-0. 42 1 The Texas Lottery Commission will go into 2 executive session. The time is 10:55 a.m. Today is 3 April the 4th, 2013. 4 (Executive Session: 10:55 a.m. to 11:35 5 a.m.) 6 AGENDA ITEM NOS. XV and XVI 7 CHAIRMAN WILLIAMSON: The Texas Lottery 8 Commission is out of executive session. The time is 9 11:35 a.m. And there is no action as a result of the 10 executive session. So is there a motion to adjourn? 11 COMMISSIONER KRAUSE: I move we adjourn. 12 CHAIRMAN WILLIAMSON: I second. All in 13 favor? 14 COMMISSIONER KRAUSE: Aye. 15 CHAIRMAN WILLIAMSON: Aye. Motion passes 16 2-0. The Lottery Commission is out of session at 17 11:35 a.m. 18 (Proceedings concluded at 11:35 a.m.) 19 20 21 22 23 24 25 43 1 C E R T I F I C A T E 2 STATE OF TEXAS ) 3 COUNTY OF TRAVIS ) 4 I, Lorrie A. Schnoor, Certified Shorthand 5 Reporter in and for the State of Texas, Registered Merit 6 Reporter, Certified Realtime Reporter and Texas 7 Certified Realtime Reporter, do hereby certify that the 8 above-mentioned matter occurred as hereinbefore set out. 9 I FURTHER CERTIFY THAT the proceedings of such 10 were reported by me or under my supervision, later 11 reduced to typewritten form under my supervision and 12 control and that the foregoing pages are a full, true, 13 and correct transcription of the original notes. 14 IN WITNESS WHEREOF, I have hereunto set my hand 15 and seal this 12th day of April, 2013. 16 17 _________________________________ LORRIE A. SCHNOOR, RMR, CRR, TCRR 18 Certified Shorthand Reporter CSR No. 4642 - Expires 12/31/13 19 Firm Registration No. 276 20 Kennedy Reporting Service, Inc. 1016 La Posada Drive, Suite 294 21 Austin, Texas 78752 512.474.2233 22 23 24 Job No. 108775 25