0001 1 TRANSCRIPT OF PROCEEDINGS 2 BEFORE THE 3 TEXAS LOTTERY COMMISSION 4 AUSTIN, TEXAS 5 6 16 TEXAS ADMINISTRATIVE CODE ? ?402.104 ? 7 16 TEXAS ADMINISTRATIVE CODE ? ?402.153 ? 8 9 10 PUBLIC HEARING ON RULEMAKINGS 11 TUESDAY, OCTOBER 27, 2009 12 13 BE IT REMEMBERED THAT on Tuesday, 14 the 27th day of October 2009, the above-entitled 15 public comment hearing was held from 11:00 a.m. to 16 12:05 p.m., at the Offices of the Texas Lottery 17 Commission, 611 East 6th Street, Austin, Texas 78701, 18 before PETE WASSDORF, ASSISTANT GENERAL COUNSEL. The 19 following proceedings were reported via machine 20 shorthand by Lorrie A. Schnoor, a Certified Shorthand 21 Reporter of the State of Texas, RMR, CRR, BRCP, and 22 the following proceedings were had: 23 24 25 0002 1 APPEARANCES 2 ASSISTANT GENERAL COUNSEL: 3 Mr. Pete Wassdorf 4 DEPUTY DIRECTOR OF BINGO DIVISION: Mr. Bruce Miner 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0003 1 TABLE OF CONTENTS 2 PAGE 3 PROCEEDINGS - TUESDAY, OCTOBER 27, 2009........... 4 4 COMMENTS BY WILLIAM T. SMITH...................... 5 5 COMMENTS ON BEHALF OF FORT WORTH BOOKKEEPING (IVES)..................... 7 6 COMMENTS ON BEHALF OF KENNEDALE COMMUNITY ACTION 7 COUNCIL (MANNING)................................. 8 8 COMMENTS ON BEHALF OF AMVETS (HUTCHINGS).......... 9 9 COMMENTS ON BEHALF OF SOD SOCKS UNIT 96 (CLARK)................................... 10 10 COMMENTS ON BEHALF OF AMVETS POST 87 (MANNING).... 11 11 COMMENTS ON BEHALF OF AMVETS 12 POST 52 AUX. (COLWELL)............................ 11 13 COMMENTS ON BEHALF OF NORTH TEXAS FIREMEN AND FIRE MARSHALL FOR ROCKY TOP BINGO (WILSON)............. 12 14 COMMENTS ON BEHALF OF THE 15 BINGO INTEREST GROUP (BRESNEN).................... 13 16 COMMENTS ON BEHALF OF K&B SALES (CLARK)................................. 37 17 COMMENTS ON BEHALF OF BENBROOK 18 LAKESHORE NEIGHBORS ASSOCIATION (KOSANOVICH)...... 47 19 REPORTER'S CERTIFICATE............................ 49 20 21 22 23 24 25 0004 1 P R O C E E D I N G S 2 TUESDAY, OCTOBER 27, 2009 3 (11:00 a.m.) 4 MR. WASSDORF: Okay. Good morning. My 5 name is Pete Wassdorf. I'm an assistant general 6 counsel for the Texas Lottery Commission. And we're 7 having a public hearing this morning on some proposed 8 new rules and some proposed amended rules to the 9 Texas -- to the Texas Administrative Code and the 10 Texas lottery section. 11 The proposed new rules are at 16 Texas 12 Administrative Code, ?402.104 and the proposed rules 13 for -- or the proposed amendments to the Texas lottery 14 rules are at 16 Texas Administrative Code 401.153. 15 They both deal with the same subject matter; that is, 16 a definition for professional gambling. The bingo 17 rules have -- in addition to a definition for 18 professional gambling, they have a rule for gambling 19 promoter. 20 And at the October 2nd Commission 21 meeting, the Commissioners proposed these new rules 22 and amendments and ordered a public hearing to be held 23 to take comments from the public, and that's the 24 purpose of this meeting. 25 And it's about two minutes after 11:00 0005 1 now. The meeting was scheduled for 11:00 o'clock, and 2 so we will begin. 3 I am joined by Bruce Miner of the bingo 4 division of the office, and we'll start hearing from 5 interested parties. 6 I have a number of witness affirmation 7 forms. I'm just going to go down these in line and 8 call the people's name, and to the extent that they 9 want to be heard, they can come forward and have a 10 chair at the table and give whatever testimony they 11 wish. And if they don't wish to be heard, then we 12 will just make their form where they indicate whether 13 they're for or against the rules part of the record. 14 The first form that I have here is for 15 William T. Smith. Welcome, Mr. Smith. 16 COMMENTS BY WILLIAM T. SMITH 17 MR. SMITH: Thank you, sir. Thank you. 18 My name is William T. Smith, III, and I 19 represent several charities, Texarkana Sheltered 20 Workshop, CASA, Running W.J. Ranch, Harvest Texarkana, 21 Senior Citizens Services, Texarkana Historical 22 Society, Alzheimer's Alliance, AMVETS, Knights of 23 Columbus. I'm also on the foundation for the Board of 24 the Improved Order of the Redmen. 25 I think we need to be careful not to 0006 1 knock somebody out of the market that may be an 2 innovative part of our market. 3 The -- the way I read the rule is, 4 it's -- it's kind of unclear who all it will 5 encompass. I think we might need to try to narrow it 6 down a little bit. The -- the definition is real 7 broad. 8 Also, the rule is, the way I understand 9 it, retroactive, so it would go backwards if anybody 10 had been accused of it or anything like that back in 11 1964 or something like that before they got into the 12 bingo industry. It would affect them greatly. I 13 really would like it if we didn't work backward, maybe 14 just worked forwards on it. 15 Also, if we knock somebody out of the 16 market, if history is any indication of how things go 17 in the bingo industry, when we first had electronics 18 approved in Texas, there was no competition. If I 19 remember correctly, it was one manufacturer and one 20 distributor had the electronic bingo. The prices were 21 pretty high then. If we knock somebody out of the 22 boat and don't keep a competitive market in the bingo 23 industry, we're going to have less competition. Less 24 competition equals higher prices, and higher prices, 25 that equals to less money for the charities. 0007 1 Competitive pricing is a necessity for this industry. 2 Helps keep our prices low. 3 That's all I have. Any questions? 4 MR. WASSDORF: No, sir. Thank you, 5 Mr. Smith. 6 MR. SMITH: Thank you. 7 MR. WASSDORF: The next person's form I 8 have is Sharon Ives. 9 COMMENTS BY SHARON IVES 10 MS. IVES: Good morning. My name is 11 Sharon Ives with Fort Worth Bookkeeping, and I 12 represent 82 active charitable bingo organizations 13 which consist of 17 unit bingo halls. 14 I am opposed to the proposed rule that 15 defines professional gambler and gambling promoter as 16 written because it is way too broad. There's no 17 telling who might have done something a long time ago 18 that would violate this rule so they can never be a 19 bingo manufacturer or distributor. The way this rule 20 is written, people are going to be eliminated from 21 selling bingo products to charities, and that's going 22 to limit who we can buy our supplies from. 23 The last time we were limited in that 24 way, the one or two distributors who could sell card 25 minders, electronic bingo, to us set their prices so 0008 1 high, we could not make any money. That set the 2 charities back for years, or the halls had to go to 3 straight paper halls only. 4 This new rule would put definitions in 5 the rules that no one had a chance to know about in 6 the past. So it would be unfair to make people answer 7 for their conduct that might have occurred a long time 8 ago. I think a person should have to be convicted of 9 something before you keep them out of bingo. Thank 10 you. 11 MR. WASSDORF: Thank you, Ms. Ives. 12 David Manning. 13 COMMENTS BY DAVID MANNING 14 MR. MANNING: Good morning. My name is 15 David Manning. I represent today the Kennedale 16 Community Action Council, playing bingo at Lake Worth 17 Bingo in Forth Worth, Texas. 18 I'm opposed to the proposed rules that 19 defines professional gambler and gambling promoter as 20 written. It potentially penalizes people for things 21 they might have done in the past, though never 22 convicted of doing anything wrong. This would allow 23 someone to come in and complain about things that 24 happened a long time ago, something the police cared 25 nothing about. That then puts the manufacturer and 0009 1 distributor in a position, potentially, spending a lot 2 of money to defend themselves -- a lot of time and 3 money defending themselves for this type of thing. 4 It's simply not fair. Thank you. 5 MR. WASSDORF: Thank you, Mr. Manning. 6 Charles Hutchings. 7 COMMENTS BY CHARLES HUTCHINGS 8 MR. HUTCHINGS: Good morning. My name 9 is Charles Hutchings. I'm a member of AMVETS Post 52, 10 Sad Sack 3, both of which play bingo. I'm a past 11 department commander for AMVETS Department of Texas. 12 Right now, I'm the foundation president for AMVETS 13 Department of Texas. 14 I'm opposed to the -- I'm opposed to the 15 proposed rule that defines professional gambler and 16 gambling promoter as written because I think it is 17 wrong to treat conduct that occurred in Texas 18 different from that conduct that occurred in some 19 other state. It seems to me a person and a 20 professional gambler or a gambling promoter, whether 21 they did it in Texas or another state, there is 22 nothing in the Bingo Enabling Act that says people in 23 Texas ought to be treated differently from people in 24 other states. 25 The rules should treat everybody the 0010 1 same -- pardon me -- by saying that persons have -- 2 person has to be convicted of either the crime either 3 in Texas or somewhere else. Thank you. 4 MR. WASSDORF: Thank you, Mr. Hutchings. 5 Mark Clark. 6 COMMENTS BY MARK CLARK 7 MR. CLARK: Hello, my name is Mark 8 Clark. I am a past national vet district manager for 9 AMVETS, the past department manager for AMVETS, and 10 the present judge advocate for the Department of 11 Texas. I'm also a member of Sad Sack Unit 96 who has 12 a bingo license, and I'm representing it -- them 13 today, Dallas, Texas. 14 I am posed -- I am opposed to the 15 proposed rule that defines professional gambler or 16 gambling promoter as written because I don't think we 17 need anymore of these rules. 18 The Bingo Enabling Act says you can't be 19 a distributor or a manufacturer if you have ever been 20 a professional gambler -- gambler or gambling 21 promoter. This should be enough. If there's a 22 problem, then let a judge sort it out. We have too 23 many bingo rules and not enough attention on helping 24 charities. I don't believe we need any more rules. 25 Thank you. 0011 1 MR. WASSDORF: Thank you, Mr. Clark. 2 William Manning. 3 COMMENTS BY WILLIAM MANNING 4 MR. MANNING: Good morning. Hello, my 5 name is William Manning, past department commander for 6 AMVETS Department of Texas. I represent AMVETS Post 7 87 as commander of that post in Cedar Hill. 8 I am opposed to the proposed rule that 9 defines professional gambler and gambling promoter as 10 written because it treats people who are in another 11 state different from the way it treats people here in 12 Texas. I don't like that. Thank you. 13 MR. WASSDORF: Thank you, Mr. Manning. 14 Stephanie Colwell. 15 COMMENTS BY STEPHANIE COLWELL 16 MS. COLWELL: Hi. My name is Stephanie 17 Colwell, and I am a member of AMVETS Post 52 Auxiliary 18 in Dallas. 19 I am opposed to the proposed rule that 20 defines professional gambler and gambling promoter as 21 it is written because it could take in way too many 22 people. 23 If this rule is passed as it is now, a 24 person who meets the definition could never get a 25 bingo license. If a person is going to be banned for 0012 1 life for doing something that he wasn't even convicted 2 of, the rule ought to be very limited and not take in 3 too many people. 4 I think that one of the main problems 5 with this rule is that the Lottery Commission has no 6 idea how many people it could affect. Thank you. 7 MR. WASSDORF: Thank you, Ms. Colwell. 8 Steven Wilson. 9 COMMENTS BY STEVEN WILSON 10 MR. WILSON: Good morning. My name is 11 Steven Wilson, and I represent North Texas Fireman and 12 Fire Marshall's Association for Rocky Top Bingo. 13 I am opposed to the proposed rule that 14 defines professional gambler or gambling promoter as 15 written because it does nothing good for the 16 charities. This looks like people squabbling over who 17 can sell bingo supplies to the charities. I say let 18 them all sell to the charities and let the charities 19 decide who they come -- who they're going to buy from. 20 This rule looks like it is intended to 21 cut some people out and help some others get an 22 advantage, and I do not see how the charities are 23 going to help -- be helped by that. Thank you. 24 MR. WASSDORF: Thank you, Mr. Wilson. 25 Denise Hutchings? 0013 1 MS. HUTCHINGS: No testimony. 2 MR. WASSDORF: Douglas Colwell. 3 MR. COLWELL: No testimony. 4 MR. WASSDORF: Kelly Marsh. 5 MS. MARSH: No testimony. 6 MR. WASSDORF: Steve Bresnen. 7 COMMENTS ON BEHALF OF THE BINGO INTEREST GROUP 8 MR. BRESNEN: Thank you, Mr. Wassdorf. 9 My name is Steve Bresnen, and I'm here on behalf of 10 The Bingo Interest Group. 11 I would subscribe to the comments that 12 have previously been made and add the following: 13 The Bingo Interest Group is an 14 organization of commercial lessors. As such, their 15 interest in this issue is indirect in that we think, 16 for the reasons I'm about to explain, that this 17 proposed rule as written would have a very negative 18 effect on the charities in general who are the 19 customers of the commercial lessors. And I'd like to 20 make a few general comments by way of expressing our 21 opposition and then talk for -- about some specific 22 items in the rule and suggest some amendments. 23 Our primary concern reason for being 24 against the rule is that we want to maintain a 25 competitive marketplace for bingo equipment and 0014 1 supplies. Just three distributors serve more than 2 80 percent of the bingo market today. The elimination 3 of any one of them would have a dramatic impact and 4 affect the competitive balance of -- in the 5 marketplace for bingo equipment. 6 We very well remember a time when the 7 industry became dominated by one or two distributors, 8 principally one. Basically, that was caused by an 9 action of the Commission that I think the Commission 10 now regrets, to their credit. But the effect of 11 having one provider in the marketplace was to drive to 12 an extraordinary level the prices paid by charities 13 for card minders in the marketplace. So we -- we 14 know, although this is a fairly simple market and the 15 range of products that are for sell is fairly 16 simple -- in the marketplace, we know that eliminating 17 or strictly limiting the number of competitors, 18 whether intended or not, could have a dramatic effect 19 on those who are intended -- the intended 20 beneficiaries of this whole regulatory apparatus, 21 which is the charities. 22 During that time, it took some seven 23 years to dismantle what was a -- if not a monopoly, it 24 certainly had market power. And after that fell 25 apart, the price of the products came down, the 0015 1 technology improved, and the charities' profits went 2 up. 3 So we're afraid that this rule is -- has 4 the potential to take people out of the marketplace 5 who have done nothing wrong, certainly haven't been 6 convicted of anything wrong, and might be knocked out 7 nonetheless. And I'll explain how easily that could 8 be done in just a moment. 9 Specifically, we have five concerns 10 about the rule. As I've -- its effect on the 11 marketplace due it -- due to its potentially 12 retroactive application, the potentially absurd 13 results under the rule as currently drafted, the 14 unfair disparate treatment of similarly situated 15 persons, overly broad application due to failure to 16 adhere to sound principles and statutory construction; 17 and five, the administrative nightmares that this 18 agency will affect. 19 I'd like to talk about that -- that last 20 one just for a minute and -- and then come back to it 21 in some more detail. 22 We have consistently supported more 23 money for the bingo division at the legislature, and 24 the legislature has not been willing to accommodate 25 that. We believe that unless there's equal and 0016 1 uniform enforcement across the state of the bingo laws 2 that various people gain a competitive advantage. And 3 when your resources are stretched to the point that 4 you cannot enforce the statute uniformly across the 5 state, then those competitive disadvantages or 6 advantages are going to inevitably raise their head. 7 It would be easy for me to take this 8 entire agency around the block for years and drive up 9 somebody else's expenses in a way that there's not a 10 thing you could do to me about it. I could even be 11 acting in good faith or in a way that made it very 12 difficult to prove that I wasn't acting in good faith 13 and still jerk you around. And let me just give you a 14 quick and dirty insight into how that might happen. 15 In Chapter 47 of the Government Code, 16 the term "gambling promoter" is defined. And in 17 ?47.034, it provides that if a person sells chances on 18 the partial or final result or on the margin of 19 victory in any game or contest -- blah, blah, blah, 20 blah, blah -- you've invited -- you -- you violate the 21 statute. 22 Now, there is an affirmative defense 23 that says if that took place in a private place, no 24 person received any economic benefit and that except 25 for the advantage of skill or luck, the risks of 0017 1 losing or winning were the same for everybody, that's 2 an affirmative defense. 3 So if I run a betting pool in a public 4 place -- for example, a bar -- and I have one of these 5 sheets where everybody picks their numbers -- 6 everybody has an equal chance of winning there, but 7 I've done it in a public place, and I've sold a chance 8 on a partial result, that happens all up and down, all 9 over the place, all the time, especially during 10 football season. Hook'em Horns. (Laughter) 11 Now -- or if I promote a lottery -- now, 12 if I get any -- if I get any gain out of that, that's 13 a lottery. If I get any gain out of that, I've 14 violated the statute. Again, I don't have the benefit 15 of that affirmative defense. Now, why am I raising 16 that? 17 It would be possible for me to come in 18 and say that a person sold a raffle ticket operating 19 outside the raffle act. As I recall, you can only do 20 a couple of raffles a year. People do them multiple 21 times every year. We -- we know this. They do them 22 multiple times every year all over the state. I'm not 23 just taking about bingo people. 24 So if I was to catch, for example, my 25 good friend Jane Thompson at Allstate Bingo Supply 0018 1 selling that third round of raffles for the Methodist 2 church, then I could come down here and tell y'all 3 that Jane does not have the benefit of this 4 affirmative defense. She has sold a chance on a -- on 5 a lottery, and I'm not sure who -- who has to gain out 6 of this statute. It doesn't say who has to gain. 7 Certainly the church is going to gain out of it, and 8 the church has -- has something to gain, and she has 9 an interest in the church. 10 So I believe it would be possible for me 11 to try to gain a competitive advantage for someone 12 else or just in the -- in a -- in a fit of peak to try 13 to knock Ms. Thompson out of the business, even though 14 Ms. Thompson is one of the most reputable people and 15 love to buy the charities and a major beneficial 16 participant in this industry. 17 Now, the -- so the problem with just 18 dovetailing with the definition of gambling promotion 19 ends, the gambling promotion statute itself is so 20 broad and the affirmative defenses available in that 21 statute so few and so easily defeated that I can use 22 this agency to effect the competitive advantage in 23 this state. And that would be well worth it, because 24 it would open up a lucrative opportunity to me to do 25 that. 0019 1 In fact -- and I might point out that 2 the reason we're here is because of a commercial 3 squabble between a -- the person who got the original 4 market power on card minders and the -- was a 5 distributor -- and the manufacturer who had a falling 6 out, and they've been accusing each other of various 7 things in various courtrooms and I -- presumably 8 administrative venues all across the country, and they 9 have chased each other all over the place. They've 10 spent certainly tens of thousands, if not hundreds of 11 thousands, and maybe more than a million dollars in 12 legal fees, tied up the courts. 13 I'm not expressing a opinion about the 14 validity of any of their claims, but one of them saw a 15 big target on one of the executives of Game Tech and 16 filed a complaint under the statute in an attempt 17 to -- at a minimum knock the executive out of his job, 18 if not to take Game Tech's license away from them. So 19 these hypotheticals that I've just talked about are 20 pretty darn real. 21 And now, the agency found its way to 22 deal with those things. I'm not sure how many 23 resources you had to expend, but for reasons I'm about 24 to make clear, I think I could cause you to spend a 25 whole lot of resources doing this -- not that I would, 0020 1 but you shouldn't put the agency in the position of -- 2 of doing that. 3 I want to acknowledge that I think the 4 agency has a difficult time with this statute because 5 it's an absolute mess. But I also think under the 6 rules of statutory construction that you're required 7 not to reach an absurd result. And when the statutes 8 are vague or require you to turn yourself into a 9 pretzel to interpret them, I think that you're under 10 an obligation not to achieve an absurd result, and I 11 think the rule, as drafted, would do just that. 12 In -- in 27 years, as far as I can tell, 13 the agency has never really had to invoke the Bingo 14 Enabling Act provisions that we're talking about here. 15 If they have, it's -- must have happened long ago and 16 far away. I certainly don't remember it. 17 So you're not talking about a problem 18 that's a clear and present danger to the morals of the 19 state, the health and welfare of the state. You're 20 talking about a basic problem of statutory 21 construction that is being presented to you by people 22 attempting to wield the statute like a sword. And I 23 submit to you, you should not allow yourselves to be 24 used that way. 25 Consequently, my first recommendation 0021 1 would be that you exercise your prosecutorial 2 authority by -- when you make these definitions and at 3 a minimum define that the conduct that's going to be 4 prohibited that these definition -- definitions will 5 apply to conduct going forward. 6 I understand that the statute says "is" 7 or "has been." I think that that's a -- presents an 8 extreme problem for the agency, and I would suggest 9 that you elect to exercise your authority going 10 forward on this because nobody's known what the rules 11 are. If they had known what the rules are, that would 12 be a different story, but they don't know -- they 13 haven't known what the rules are. 14 Now, some of the absurd results that 15 might occur under the rule as drafted, if we've got a 16 guy in Vegas who pays all his bills from his winning, 17 buys a penthouse condo overlooking the strip so he can 18 walk to work, he would not be a professional gambler 19 under the rule as drafted because gambling's legal in 20 Las Vegas. Presumably, he's not -- on the face of it, 21 he's not doing anything to -- that would violate the 22 gambling laws in Vegas if he's merely playing the 23 game, he's not cheating, he's not counting cards. 24 So under a plain language reading of the 25 statute, you'd be required to find that he was a 0022 1 professional gambler. 2 I submit to you under the most recent 3 case to go down this road, Entergy versus Summers, the 4 Texas Supreme Court has made it absolutely clear that 5 it's going to adhere to the plain language of the 6 statute, wrongly, I might add, in that case, because 7 there was ample legislative intent that the statute 8 didn't say what the Court says it said. But there is 9 no legislative intent. 10 I believe the agency has expressed in 11 public and private that you have no legislative intent 12 to go on here. You have -- you can surmise what they 13 might have been doing and you can borrow from other 14 states and surmise that they may have intended that, 15 but I submit to you that there's no evidence that they 16 intended that. If you find some, we, you know, would 17 certainly be interested in quibbling about it. But I 18 submit to you there is no legislative intent because 19 this was done a long time ago, and the legislative 20 record was not very robust. 21 So I think that you're required to go 22 with the plain language of the statute by Entergy, by 23 Fleming Foods, another well-known case that I believe 24 was embraced by the Court in the Entergy case, at 25 least in Entergy 1, and I would commend those cases to 0023 1 you. 2 So you'd reach an absurd result because 3 that person would not be a professional gambler, even 4 though to deny that would fail the "any damn fool" 5 rule. 6 Now if that person is doing that 7 conduct, there's nothing in the statute that indicates 8 that a person who's a professional gambler in Las 9 Vegas is any different from a person's who's a 10 professional gambler in Texas or if the conduct 11 occurred in Texas. In fact, I'll go to some reasons 12 why some other parts of the statute should not be 13 included in the definition of professional gambler, 14 but a person could make all their winnings and -- and 15 take advantage of this affirmative defense of keeping 16 a gambling place and in fact be a professional gambler 17 in the street sense of the word but not be held 18 accountable -- even -- even though the conduct 19 occurred in Texas, would not be held accountable under 20 this statute because the -- he has an affirmative 21 defense under 47.04 -- 47.04(b) of the penal code. 22 Secondly, a person may have actually 23 been acquitted of gambling promotion under our Texas 24 Penal Code but still be denied a license under the 25 proposed rule because that rule does not require a 0024 1 conviction for the person to be determined to be 2 gambling. 3 Now, at the risk of -- since my -- I 4 can't work my computer well enough to do a really cool 5 chart, let me just see if I can describe one, and I'll 6 see if I can come up with one. 7 In our opinion, the conduct that the 8 people -- whether the conduct occurs in Texas or 9 outside of Texas should be treated identically, and 10 there's no statutory basis to treat them any 11 differently. 12 And if you will, imagine for a moment 13 that the conduct that is proscribed -- in particular, 14 I want to focus on the gambling promotion part right 15 now as a -- as an example. 16 You can describe the conduct. There are 17 five or six elements of it in 47.03. There are five 18 descriptions of conduct. One of them is -- or two of 19 them are sort of lengthy. Could be -- probably be 20 broken down into about 30 descriptions of conduct, 21 just actions, things that people do, in 47.03. 22 So if you think of that as the universe 23 of conduct, it could be legal in another state, it 24 could be illegal in the other state, or it could be 25 legal only if conducted in conjunction with a license 0025 1 in the other state. That's the universe. And 2 that's -- those are the possibilities. 3 As a subset of that, you have illegal 4 conduct. Now, it could be illegal -- it could be 5 illegal as a criminal matter, it could be illegal with 6 no criminal sanction but an administrative sanction, 7 or it could be illegal because it would be legal to do 8 it in that state but it -- but it was unlicensed, the 9 person was unlicensed, or it could be illegal because 10 the person was not compliant with their license. 11 Either way, the things that people were doing would be 12 identical between the universe and the subset. 13 A subset of the illegal conduct would be 14 people who were charged for the illegal conduct. And 15 that -- by "charged," I mean that loosely to say 16 someone brought an administrative action against them 17 or a criminal action against them. The conduct would 18 have been exactly as described in 47.03(a)(1) through 19 5, but in this case, at a minimum, they would have 20 been charged for it in some manner. And then finally, 21 the subset of that would have been convicted, either 22 by a criminal conviction or some administrative 23 proceeding. In every level of activity, the conduct 24 was the same and there is no basis for distinguishing 25 between those actors throughout the statute. 0026 1 Now, the problem you've got on the 2 gambling promotion side is, people do do these things 3 in a legal manner all over the country. And in fact 4 they've done them in Texas in a manner where it used 5 to be illegal and it's now legal. 6 It used to be illegal to advertise -- in 7 other words, you didn't get the benefit of the 8 affirmative defense of 2001 of the occupation code if 9 a lessor advertised bingo. So you were promoting a 10 lottery, a lessor was promoting a lottery; legislature 11 subsequently amended the law and allowed lessors to 12 advertise and -- but you would be able to knock a 13 distributor out for promoting a lottery in Texas 14 because the Bingo Enabling Act doesn't authorize a 15 distributor or manufacturer to promote a lottery. I 16 personally think that's a clearcut violation of the 17 first amendment of the U.S. constitution; but unless 18 that's considered to be an affirmative defense under 19 this rule, you wouldn't have that defense. So 20 everyone of them could be knocked out. 21 Arrow Manufacturing, who is may be 22 located outside the state -- I know they got a 23 manufacturing plant in Mexico -- you'd know better 24 than I would, Bruce, but I don't believe they're 25 headquartered in Texas. But if they're a manufacturer 0027 1 of bingo products in Texas, and they're promoting a 2 lottery by -- by moving their equipment in Texas, 3 they've engaged in conduct in Texas. I guess they'd 4 have the -- the defense of 2001, the occupations code, 5 in that case presumably if they were operating within 6 their license. 7 Now, I'm going to -- I'm going to 8 perfect my chart, but I'm -- what I'm going to point 9 out here is, is that you're setting up an intenible 10 situation for the Lottery Commission to have to 11 enforce this, partly because the conduct of similarly 12 situated people is going to be identical. 13 You're not going to have any record of 14 their conduct in another state whether it was 15 conducted within a license. So if you just take it on 16 the face of it that somebody was licensed in Las 17 Vegas, or whatever Nevada requires for you to be able 18 to promote, say, Harrah's or the games at Harrah's, 19 and you say, "Well, they've got a license," that begs 20 the question: Did they act with their license? Do 21 they have to be criminally convicted or can they be 22 administratively charged? And it just seems to me 23 like a huge can of worms. 24 What you'd be much better to do -- and I 25 understand the reasons for not doing it. What you'd 0028 1 be much better to do is require -- let a person have 2 been convicted of illegal conduct. And I'll elaborate 3 that on -- in some written comments between now and 4 the end -- when is the end point by -- on the comment 5 period? Do y'all remember? 6 MR. WASSDORF: It was 30 days -- it 7 was -- 8 MR. BRESNEN: Like I said, maybe it says 9 in the rule or the proposal. 10 MR. WASSDORF: I'm not sure. 11 MR. BRESNEN: Okay. If -- if you'll 12 just let us now know when it's -- oh, wait. It's 30 13 days from October the 16th. Yes. So it's going to be 14 somewhere first couple of weeks of November. Okay. 15 Next, it -- it's -- it's hard to imagine 16 that the Texas legislature would have ever intended 17 that a Texas based businesses -- business or citizen 18 would have been placed at a disadvantage to an 19 out-of-state competitor. Now, I realize the 20 out-of-state competitor and the Texas person are each 21 capable of engaging in conduct either -- in Texas, and 22 I recognize that a Texan is capable of engaging in 23 presumably legal conduct outside the state. 24 But the fact of the matter and the 25 practical matter is, is people in Texas tend to 0029 1 conduct their activities in Texas. People out of 2 state tend to conduct their activities in both places. 3 And I think the practical effect of this rule is 4 likely to result in the Commission placing Texas based 5 businesses and citizens at a disadvantage to their 6 out-of-state competitors. I don't think the 7 legislature ever intended that, and I -- I think 8 it's -- I think it's a bad policy and one you 9 shouldn't adopt. 10 And secondly, it could very well be -- 11 violate the commerce clause of the constitution, 12 although it's the -- the flip side of what you usually 13 see, which is a state trying to advantage its own 14 citizens to the disadvantage of another. 15 It -- it is absurd that a citizen can 16 successfully defend themselves against a criminal 17 charge brought against themselves -- brought against 18 them under the penal code and yet still face an 19 administrative proceeding here. 20 Now, it's easy to say -- we have other 21 context where people are subject to a civil penalty. 22 OJ Simpson had to -- was the victim of a -- the 23 victim -- the defendant in a civil lawsuit for the 24 events related to Nicole Simpson's murder. So it 25 clearly happens. 0030 1 But here's what you don't have. You 2 don't have search warrants, subpoenas, wire taps, 3 undercover investigation. Y'all do a little bit of 4 that but not very well and not very much; and your 5 resources are not really up to par on that, so you 6 really don't have those tools. 7 So one of the reasons it's absurd is 8 that you don't really have the ability to go through 9 and investigate out of state, for example, whether 10 someone operated outside their license there. You -- 11 it would be easy for you doing as a matter of 12 conviction, but it would also be easy for you to do it 13 in Texas as a matter of conviction. And so I don't 14 think in this case administrative-ease is a good or 15 bona fide reason to treat people similarly situated 16 differently when it comes to the denial of a license 17 here. 18 Pointing specifically now to the part of 19 the rule that addresses professional gambler, you have 20 invoked -- you've gone past the definition of gambling 21 in the penal code, which is 47.02, on professional 22 gambling and invoked the gambling promoter rule, the 23 maintaining a gambling place rule -- I'm sorry -- 24 keeping a gambling place rule and the commuting -- 25 commuting -- communicating gambling information rule. 0031 1 First of all, that goes past the plain 2 language of the statute. Gambling is defined in the 3 statute. One might reasonably conclude that a 4 professional gambler is, at a minimum, a person who 5 engages in gambling, and yet the promoter's not 6 required by the statute to engage in gambling to have 7 violated it, the person that keeps the gambling place 8 is not required by the statute to have gambled, and 9 the communicating gambling information does not 10 require the -- the violator to have engaged in 11 gambling. So it's absurd and beyond your statutory 12 authority to include those three additional references 13 in there. 14 Secondly, you have defined a 15 professional gambler as a person whose primary source 16 of income is, at a minimum, gambling. So you're going 17 to put the agency and its resources under the 18 challenge to prove what primary source of income is. 19 And I submit to you that you can't do that. 20 Is it -- is it do I get deductions for 21 my losses? Is it my gross income or my net income? 22 Is it -- does it -- to be primary, does it have to be 23 more than something else, or -- and if it's secondary, 24 am I no longer a professional gambler because 25 49 percent of my income, net or otherwise, comes from 0032 1 gambling? I grant you that it's a -- it's a struggle 2 to determine what that is. But this rule, I submit to 3 you, you don't have the resources to do it, and you 4 don't have the ability to drill down on that and make 5 a determination ahead of time as to what constitutes 6 primary source of income. 7 The proposed Subsection 3 of the 8 professional gambler rule 402.104(b)(3) defines as a 9 professional gambler one who has, on three or more 10 occasions, be convicting -- convicted of a gambling 11 offense in any state or governing jurisdiction. A 12 gambling offense. 13 Under the Bingo Enabling Act, Section 14 2001.207, Subsection 1, and 2001 -- I think it's -- 15 yeah, 202, Subsection 1, a person who has been 16 convicted of a gambling offense is barred from holding 17 one of these licenses for ten years after the -- more 18 than ten years has elapsed since the termination of 19 the sentence, parole, community supervision or 20 mandatory supervision. So this Subsection 3 says if 21 you've been convicted three times of a gambling 22 offense in any state or governing jurisdiction, you're 23 barred for life. 24 But Subsection 1 of 200 -- 200 -- 207 25 and 202 in the Bingo Enabling Act is saying if you've 0033 1 been convicted of a gambling offense, you're barred 2 for ten years. So it looks to me like you have a 3 great direct statutory conflict between 104(b) -- I'm 4 sorry -- yeah, 104(b)(3) and the statute. 5 Bear with me just a second. I want to 6 make sure I'm not repeating myself so we don't run 7 this too long. 8 Okay. Again on the definition of 9 professional gambler, it seems to me that the plain 10 language of the statute requires a person to be, 11 whatever a professional is, to have engaged in 12 gambling. Gambling is defined uniformly to include 13 making a bet. And this statute, by invoking the 14 gambling promotion, may -- keeping a gambling place, 15 and -- whatever the third one is -- communicating 16 gambling information doesn't require the person to 17 have made a bet on anything and therefore there's no 18 statutory authority for including those three 19 sections. 20 The -- the solution to your problem with 21 this messed-up statute is simply to require a 22 conviction on either one of these. It's 23 administratively easy. It will diminish the impact on 24 your resources. It will keep you from being jerked 25 around by people trying to gain an unfair advantage or 0034 1 acting out of spite, easily provable. It treats 2 people outside the state and inside the state 3 identically. 4 Now, the problem you've got is trying to 5 reconcile Subsection 1, which says if you've been 6 convicted of a gambling offense, then you're out for 7 ten years; and Subsection 2 that says if you're a 8 professional gambler or promoter, it appears to say 9 you're out forever. And I guarantee you that I -- I 10 agree with you that those are difficult to reconcile. 11 In fact, they're probably impossible to reconcile 12 since the Subsection 2 is subsumed within Subsection 13 1. 14 I think it would -- what it comes down 15 to is, you're going to have to do something that's 16 capable of enforcement, doesn't run afoul of the 17 interstate problem, and does allow the agency to be 18 jerked around in a way that I don't think the 19 legislature could ever have intended. 20 Now let me make three suggestions about 21 how the agency can practically solve these problems. 22 The first is to -- and this -- you can 23 leave your definitions and everything just like they 24 are. If you add a provision that said this rule 25 applies to conduct that occurs after the effective 0035 1 date of the rule. Now, you're going to be concerned 2 because the statute says a person who is or has been. 3 All I'm suggesting is is that you act under the 4 statute for conduct that occurred prior to the 5 effective date of the rule, and you act under the rule 6 for conduct that occurred after the effective date of 7 the rule. 8 If the statute's there and it means 9 something, this -- this law -- Bingo Enabling Act is 10 full of statutes for which you haven't defined -- you 11 haven't defined things or don't have a rule, and 12 people are prosecuted, if you will, under the statute 13 all the time. That will -- there's nothing that you 14 can do about the statute existing prior to the 15 effective date of this rule, but you can do something 16 about the rule. 17 And so I would say that whatever 18 happened before the effective date of the rule is -- a 19 person who's accused under the statute is on their 20 own. They're going to have to lawyer it. Y'all are 21 going to have to lawyer it. It ain't the best 22 solution in the world. I wish I fixed this during 23 session, but I didn't. So I'd recommend that that's a 24 very practical, sensible use of your resources and 25 within your authority to do. 0036 1 If you're not going -- if you're not 2 going to do that, I would suggest that you apply these 3 definitions only to final convictions for gambling. 4 In fact, you could do my first suggestion and this one 5 together and say going forward, you're only going to 6 apply it to final convictions. 7 And finally, I suggest -- it should be 8 inclusive of my remarks -- that the definition of 9 professional gambler, you strike 47.03, 47.04, 47.05 10 of the penal code because I don't think you have the 11 authority to -- to adopt that. 12 When I produce this chart, which will 13 look a lot better, I would appreciate it if you would 14 think your way through each level where the conduct is 15 the same and see if you can principally distinguish on 16 a plain language reading of the statute why those 17 should be treated differently. And when you realize 18 that they shouldn't -- whether they occurred in state 19 or out of state -- and when you realize that they 20 shouldn't, your dilemma will be whether you're going 21 to treat everybody to just engaged in this conduct. 22 If you do that, it would take everybody out of bingo 23 who's provided bingo products and had their license 24 granted and renewed every year for -- since 1983. And 25 that won't work. 0037 1 I submit to you the only reasonable 2 conclusion that doesn't ruin the bingo market is to 3 make the changes that I have suggested explicitly. 4 And thanks for letting me take my time. 5 MR. WASSDORF: Thank you, Mr. Bresnen. 6 Michelle Clark. 7 COMMENTS ON BEHALF OF K&B SALES 8 MS. CLARK: Good morning, just barely. 9 My name is Michelle Clark. I represent 10 K&B Sales, Inc., the largest distributor of bingo 11 supplies in Texas. I have a few more comments to add 12 and also wish to subscribe to the majority of the 13 comments that have been made this morning. 14 First of all, I want to make it clear 15 that K&B Sales shares the Commission and the Staff's 16 interest in maintaining the integrity of charitable 17 bingo in Texas and understand that there is harm in 18 being associated with people who have been convicted 19 of illegal gambling whether in Texas or in other 20 states. 21 Certainly, it's in K&B's interest as 22 well to keep charitable bingo a competitive industry 23 in Texas and certainly above all else to make 24 charitable bingo continue to generate profits for 25 charities. 0038 1 Finally, the preservation of staff 2 resources and the clear decisions when unlawful 3 conduct is alleged is in the interest of the industry 4 and the charities at the same time. 5 The statutes that Rule 402.104 are 6 attempting to interpret, I'm going to kind of look at 7 both subparagraphs Subsection 1 and Subsection 2. And 8 the rule attempts to define with more clarity what in 9 particular are meant by gambling -- or professional 10 gambler or gambling promoter. 11 And as been stated already, there's no 12 clear legislative intent to explain the perceived 13 differences between Subsection 1, which requires a 14 conviction for a gambling offense, and the omission of 15 the mention of a conviction in Subsection 2. Because 16 it's clear that the most certain way to determine if 17 someone is or has been a professional gambling or 18 gambling promotion promoter is through a conviction by 19 an agency that is charged with interpreting and 20 enforcing the law in the State of Texas and elsewhere, 21 it is within the agency's authority to construct these 22 two statutes harmoniously. 23 The only prohibition on the agency is 24 not to interpret the statutes in a way that is clearly 25 contrary to the plain language of the statute. Here, 0039 1 the plain language of the statute in Subsection 1 is 2 relatively easy to follow; and in Subsection 2, some 3 have expressed the idea that it is intended or that it 4 does encompass undesirable activity as well as 5 unlawful activity. 6 This result is not the only one that is 7 consistent with the statute, nor does this result 8 serve to protect the charitable bingo activities in 9 the state or to continue to maintain that market as 10 healthy. Let me give you an example of this. 11 In the manufacturer's, particularly, and 12 some of the distributors in Texas, it is a good 13 business strategy to employ people who have engaged in 14 legal gambling activities in other states. The 15 persons who are engaged in this type of business in 16 other states that is lawful activity know the bingo 17 market. They know how to develop software that 18 increases profits for charities in Texas. They know 19 how to distribute a product effectively. The -- they 20 know how to increase the demand, keep the market 21 active. And it is certainly within the interest of 22 charitable bingo in Texas to continue to be able to 23 associate with and to employ persons who have 24 experience in this business and in this industry. 25 A lot of people have talked about 0040 1 treating out-of-state and in-state activity 2 differently, and I do believe that it is clear that we 3 don't wish to do so. 4 And so by requiring convictions out of 5 state, what you do is preserve the agency's resources 6 because it is impossible to imagine that a Texas state 7 agency would be able to evaluate, investigate and look 8 into activity that occurred outside of the state 9 within the construct of the statutes in the other 10 state and then prohibit or limit their activity in 11 Texas. Clearly, this raises commerce clause questions 12 as well as anti-competitive questions. The same 13 statute should be -- or the same standard should be 14 applied to conduct that occurs in Texas. 15 In addition to this, if you look at what 16 the legislature may have intended by using the terms 17 "professional gambler" or "gambling promoter" as early 18 as the anti-gambling act of 1951, the model codes were 19 designed to construe professional gambler and gambling 20 promoter as -- as synonymous. These were the same 21 activity. These were the people -- you have people 22 who make the bets and you have people who take the 23 bets. 24 And for the most part, the statutes in 25 other states, the criminal statutes in other states 0041 1 about professional gamblers or gambling promoters and 2 the anti-gambling act are understood for the most part 3 to mean the people who make -- or who take the bets, 4 basically, who encourage the gambling. And in this 5 sense, a conviction would be required. It is unlawful 6 activity. It's -- it's perfectly legal in other 7 states. 8 Now, one of the ways to construe the 9 statutes in such a way that supports the requirement 10 of a conviction under No. 2 is to say, "Okay. In No. 11 1, you have a ten-year ban on convictions for gambling 12 offenses. In No. 2, specifically for convictions of 13 these gambling offenses or this gambling offense, 14 that's really bad and you're out for a lifetime." 15 So there is an interpretation that is 16 possible that requires convictions in both No. 1 and 17 No. 2, which, again, is the way to do -- to enforce 18 this law and to investigate this law that is the most 19 efficient, is the most clear, guards against making 20 arbitrary decisions about conduct whether intended or 21 not. 22 There is a concern that the broadness or 23 the breadth of the language in the current proposed 24 rule engaged in conduct prescribed by various statutes 25 would knock out competitors unfairly and raise 0042 1 concerns about antitrust and anticompetitive 2 regulations and standards adopted by the Federal Trade 3 Commission and the U.S. Department of Justice. It is 4 a saturated market. And to knock out one of the top 5 three competitors would clearly have a detrimental 6 effect on prices and cut immediately into the profits 7 and the distributions that the charities are able to 8 make. 9 And because the agency has the ability 10 to -- to construe these statutes in a way that 11 prevents that result that is still in keeping with the 12 plain language of the statute, this is the best 13 decision for the agency to make because it -- it 14 protects the industry. It allows lawful activity to 15 continue to benefit the industry. It eases the burden 16 of the investigation on Staff because it requires the 17 conviction when another agency has made the 18 investigation, and it keeps the market healthy and 19 active. 20 Another possibly unanticipated outcome 21 from the current drafting of the rule is that it puts 22 the manufacturers and distributors in the position of 23 having to conduct the most complete and thorough 24 background checks on their employees that I have ever 25 heard of. 0043 1 Because the statute says that anyone who 2 is active or employed by a licensee can't have engaged 3 in this unlawful conduct, the type of investigation 4 that a potential employer would have to conduct would 5 not just encompass a regular criminal history 6 background check. It would also require questioning 7 into your whole entire life experience up to this 8 point. And if you had ever engaged in the conduct 9 prescribed in the very broad prohibitions referenced 10 in the penal code statutes, your employer could be 11 knocked out of the market. 12 How is a manufacturer or distributor 13 supposed to protect themselves from this unintended 14 result? And when there is a way, again, for the 15 agency to construe these prohibitions in a more 16 limited manner, that's going to be the most productive 17 and protective. 18 Comments have been made in the past that 19 there is some concern in Texas that legal gambling 20 activity in some way takes money away from charitable 21 bingo. There's no conclusive or comprehensive study 22 that has reached this determination. And, in fact, in 23 some locations, depending upon the arrangement, 24 charities have benefited from the operation of legal 25 gambling activities in connection or in conjunction 0044 1 with their charitable activities. 2 What hurts the charities clearly are 3 illegal cash paying gambling activities in Texas. 4 There's certainly no -- no question in that regard. 5 But in terms of a reason to encompass legal gambling 6 activity in Texas, which is what can happen the way 7 the rule is drafted, unfairly knocks out, again, 8 businesses or -- or individuals or activities that do 9 in some instances and conceivably in many instances 10 increase the profits of the charitable bingo 11 organizations. 12 If we determine that the best definition 13 for the professional gambler or gambling promoter is 14 that -- which is prescribed by the specific provisions 15 of the law, there's no need to talk about the primary 16 source of income of that person because professional 17 gambler or gambling promoter can be construed not 18 necessarily as a financial consideration but as a term 19 of art describing criminal offenses whether in the 20 state or in other states. 21 And again, construing the statute in 22 such a way that the agency does not have to delve into 23 basically an impossible or very difficult 24 interpretation of what a primary source of income 25 would be when it would have no difference on limiting 0045 1 the impact or the effect of illegal gambling 2 operations on the conduct of charitable bingo in 3 Texas, then that determination should simply be 4 eliminated because it is encompassed by the 5 definitions of professional gambler or gambling 6 promoter that are limited to the convictions in Texas 7 and outside of Texas. 8 I will concur with the other comments 9 about applying this rule prospectively to conduct that 10 occurs after its adoption simply because it is 11 conceivably unclear based upon conduct in the past 12 about what may or may not be prohibited depending upon 13 the language that is adopted in this rule. It could 14 conceivably broaden the range of activity as to be 15 inclusive of almost everything that a bingo 16 manufacturer or distributor could have engaged in. 17 There are also -- I'm not sure of the 18 status of the Attorney General opinion request that 19 was first presented when this rule -- or when the rule 20 language was first presented in November of '08, I 21 think it was. And to the extent that that opinion 22 request has been updated to inquire about the legality 23 of this language or not, I would encourage staff and 24 the commissioners to consider awaiting the 25 determination of the Attorney General's office about 0046 1 the legality of the proposed rule language and whether 2 it is in meeting with the statutory intent as it can 3 be construed by the Attorney General's office or 4 perhaps even by members of the legislature, if that's 5 possible. 6 Even so, without that clarification of 7 much more limited construction of the definitions of 8 these terms is within the agency's authority in 9 enforcing and interpreting the statute. It does not 10 fly in the face of the plain language of the statute, 11 and it can maintain a very healthy competitive bingo 12 industry as well as increasing the profits to 13 charities and diminishing the load and the burden on 14 staff. 15 I appreciate your time and your very 16 hard work in this matter. And that concludes my 17 comments. 18 MR. WASSDORF: Thank you, Ms. Clark. 19 I have one more witness affirmation 20 form; but before I call that person, I would like to 21 thank everybody. As I look through these affirmation 22 forms, I notice that people came from all over the 23 state, and I appreciate your having taken the time out 24 of your busy schedules to come to Austin. I know that 25 that's an inconvenience to you, and we appreciate 0047 1 having your input on -- on that. And I wanted to -- 2 to recognize that and let you know how much we 3 appreciate it. 4 I also wanted to say that the purpose of 5 this hearing is to gather your comments, and it's not 6 to engage in colloquy or debate on the issues. And 7 so, you know, we're not, you know, expressing the 8 justification or why we did things or proposed things 9 the way we have. We have talked to Mr. Bresnen and 10 some of the other interested parties before, and so 11 they're probably well aware of that. But I just 12 wanted to let you know that because we're not having 13 anything to say that there -- that there is nothing to 14 say with respect to that. 15 That said, I will call the last person 16 whose form I have, and that is Lou Kosanovich. 17 MR. KOSANOVICH: Kosanovich. 18 COMMENTS ON BEHALF OF 19 BENBROOK LAKESHORE NEIGHBORS ASSOCIATION 20 MR. KOSANOVICH: You got it right. 21 My name is Lou Kosanovich. I represent 22 Benbrook Lakeshore Neighbors Association, and we are 23 against these proposed rules. And the problem seems 24 to be, from what I've heard from everybody, is that 25 it's not necessarily the rule. It's the 0048 1 interpretation afterwards by all the bean counters. 2 If the rule is vague, which it seems to 3 be, then there's going to be, you know, different 4 interpretations, and it's not going to be very helpful 5 to the bingo industry. Thank you for your -- for your 6 time. 7 MR. WASSDORF: Thank you. Well, is 8 there anyone else that wants to be heard? 9 (No response) 10 MR. WASSDORF: Okay. Well, that will 11 conclude the hearing, then. And I, again, appreciate 12 everybody having -- having taken the time to come this 13 far to -- to give us their views. Thank you very 14 much. 15 (Hearing concluded: 12:05 p.m.) 16 17 18 19 20 21 22 23 24 25 0049 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, a Certified 5 Shorthand Reporter in and for the State of Texas, do 6 hereby certify that the above-mentioned matter 7 occurred as hereinbefore set out. 8 I FURTHER CERTIFY THAT the proceedings 9 of such were reported by me or under my supervision, 10 later reduced to typewritten form under my supervision 11 and control and that the foregoing pages are a full, 12 true and correct transcription of the original notes. 13 IN WITNESS WHEREOF, I have hereunto set 14 my hand and seal this 5th day of November 2009. 15 16 17 _________________________________ 18 Lorrie A. Schnoor, RMR, CRR, BRCP Certified Shorthand Reporter 19 CSR No. 4642 - Expires 12/31/11 20 Firm Registration No. 276 Kennedy Reporting Service, Inc. 21 Cambridge Tower 1801 Lavaca Street, Suite 115 22 Austin, Texas 78701 512.474.2233 23 24 25