0001
1                  TRANSCRIPT OF PROCEEDINGS
2                         BEFORE THE
3                  TEXAS LOTTERY COMMISSION
4                        AUSTIN, TEXAS
5   
    16 TEXAS ADMINISTRATIVE CODE 
6   401.301                     
    16 TEXAS ADMINISTRATIVE CODE 
7   401.302                     
    16 TEXAS ADMINISTRATIVE CODE 
8   401.317                     
9   
10               PUBLIC COMMENT ON RULEMAKINGS
11                 WEDNESDAY, AUGUST 5, 2009
12  
13                 BE IT REMEMBERED THAT on Wednesday,
14  the 5th day of August 2009, the above-entitled public
15  comment hearing was held from 2:02 p.m. to 2:35 p.m.,
16  at the Offices of the Texas Lottery Commission, 611
17  East 6th Street, Austin, Texas  78701, before PETE
18  WASSDORF, ASSISTANT GENERAL COUNSEL.  The following
19  proceedings were reported via machine shorthand by
20  Aloma J. Kennedy, a Certified Shorthand Reporter of
21  the State of Texas, and the following proceedings were
22  had:
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25  
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1                         APPEARANCES
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    ASSISTANT GENERAL COUNSEL:
3        Mr. Pete Wassdorf
4   PRODUCTS MANAGER:
         Mr. Robert Tirloni
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1                      TABLE OF CONTENTS
2                                                     PAGE
3   PROCEEDINGS - WEDNESDAY, AUGUST 5, 2009...........   4
4   COMMENTS ON BEHALF OF THE TEXAS
    ASSOCIATION FOR THE ADVANCEMENT OF
5   CHARITABLE BINGO (MINCH)..........................   5
6   COMMENTS BY DAWN NETTLES..........................   6
7   COMMENTS ON BEHALF OF LITTLEFIELD
    CORPORATION (BUNKLEY).............................  21
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    REPORTER'S CERTIFICATE............................  23
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0004
1                    P R O C E E D I N G S
2                  WEDNESDAY, AUGUST 5, 2009
3                         (2:02 p.m.)
4                 MR. WASSDORF:  Okay.  It's just a couple
5   of minutes after 2 o'clock.  And at the meeting of the
6   Texas Lottery Commission held on July 8, 2009, the
7   Commissioners proposed the creation of a terminal
8   printed instant ticket category of lottery game.  And
9   at that time the Commission directed that a public
10  comment hearing be set on August 5, 2009 at 2:00 p.m.,
11  in the auditorium of the Texas Lottery Commission.
12                My name is Pete Wassdorf.  I'm an
13  Assistant General Counsel in the Legal Services
14  Division of the Texas Lottery Commission, and I will
15  accept public comment on behalf of the Commissioners
16  at this hearing.  In addition, written comment may be
17  mailed to my attention at the Texas Lottery
18  Commission, P.O. Box 16630, Austin, Texas  78761-
19  6630.
20                I'm joined today by Robert Tirloni.  And
21  the purpose of this hearing is to accept public
22  comment and not to engage in dialogue.  And we're
23  going to open the hearing now to anyone who has signed
24  up as a witness or someone interested in making
25  comment.  Do we have anyone in that category?
0005
1                 Okay.  The first person is Jeff Minch.
2   Welcome, Mr. Minch.
3                 MR. MINCH:  Good afternoon.  My name is
4   Jeff Minch.
5                 (Off the record to connect microphone)
6                 MR. WASSDORF:  All right.  Jeff.
7         COMMENTS ON BEHALF OF THE TEXAS ASSOCIATION
8           FOR THE ADVANCEMENT OF CHARITABLE BINGO
9                 MR. MINCH:  Good afternoon.  My name is
10  Jeff Minch.  I'm representing the Texas Association
11  For the Advancement of Charitable Bingo.  And I would
12  like to express my concern about the vagueness of the
13  rule as it relates to the on-line system and the
14  on-line terminals.  I would like you to know that in
15  the charitable bingo industry, there is grave concern
16  that this appears to be the onset of something that
17  would be like a casino or video lottery terminals.
18  And we're concerned about the competition that that
19  will present to the charitable bingo business.
20                I will follow up with a letter to you
21  with a few more specifics.  But in the economy of
22  time, I just would like you to know that the Texas
23  Association For the Advancement of Charitable Bingo is
24  quite concerned about the implications of this as it
25  relates to its impact on the charitable bingo
0006
1   industry.  Thank you.
2                 MR. WASSDORF:  Thank you, Mr. Minch.
3                 The next person that's signed up is Dawn
4   Nettles.
5                 MS. NETTLES:  Is there anywhere we can
6   sit instead of stand?  I have papers, a --
7                 MR. WASSDORF:  I'm sorry?
8                 MS. NETTLES:  I have papers, a lot of
9   them, that I would like to present to you-all.
10                MR. WASSDORF:  Well, you can give them
11  to me.  I'll be happy to take them.
12                MS. NETTLES:  No, sir.  I'll just stand.
13                 COMMENTS BY DAWN NETTLES
14                MS. NETTLES:  For the record, my name is
15  Dawn Nettles.  I'm with The Lotto Report out of
16  Dallas, and I'm here to comment on your proposed Rule
17  401.317 relating to the terminal printed instant
18  games.  I am completely opposed to this.  Before I go
19  any further, though, I do want to thank the Commission
20  for holding this hearing at 2:00 in the afternoon.
21  For me, that was a tremendous help since I drove in
22  from Dallas to comment.
23                The first and foremost reason, the
24  reason that I am completely opposed to this game
25  concept is because of the situation that we have in
0007
1   Texas and in all other states across the country with
2   regard to clerks stealing players' winnings.  This has
3   been an issue of mine that goes back to the Year 2000
4   where I came to the Commission, expressed my feelings
5   and findings to the fact of how clerks steal players'
6   tickets.
7                 I was a part of the Sunset review back
8   in 2003, 2004 -- I don't really remember which year it
9   was -- where I strongly urged them as well as the
10  Commission to stop clerks from being allowed to check
11  players' tickets.  To me this was the only solution to
12  protecting the consumers, which fell upon deaf ears.
13  I also carried this issue to the Capitol, which also
14  fell upon deaf ears.
15                The Commission needs to understand the
16  mentality of the vast majority of lottery players.
17  But in particular, they need to pay attention to
18  scratch ticket players, because scratch ticket
19  players -- and I believe that your reports have
20  confirmed this in the years past on your study of
21  players and their behavior -- have found that it's the
22  least educated folks that really buy the scratch
23  tickets.  Not only do these folks not always
24  comprehend the game concept of the scratch ticket that
25  they're scratching off but many don't speak English,
0008
1   don't read, don't understand and the tickets are just
2   confusing to them.
3                 But then we have the issue of the store
4   clerks who have come to identify their customers that
5   come in every day, buy lottery tickets, come back the
6   next day and hand them to them and ask them to recheck
7   or to check their tickets for them.  These clerks know
8   which players really have no idea if they've won or
9   not.  This enables the clerk, if he's dishonest, which
10  today I would estimate that roughly 40 percent of them
11  are, based on my findings in the past year and a half,
12  to say, "Yeah, you won three dollars," when the truth
13  is he won 50 or he didn't have anything at all when,
14  in fact, he did.
15                But this has made it an easy touch for
16  the clerks and they make and continue to work in
17  stores at that low rate of pay just for their
18  benefits.  And when they finally get caught, they move
19  to the next store and they don't have to worry about
20  it because they know that their previous boss is not
21  going to tell them why they really were fired, for
22  fear of lawsuits.
23                So it's been a continuing problem for a
24  long time.  It has been documented for a very long
25  time that this occurs here.  I group the lottery into
0009
1   five groups.  You have your vendors like GTECH and
2   Scientific Games.  You have the State of Texas, which
3   is the Texas Lottery, runs the lottery.  You have the
4   consumers which are the players.  You have retail
5   owners, which are the owners of the stores that sell
6   your products.  And then you have the store clerks.
7                 This rule, as it's written and as it's
8   being proposed, is going to hurt two of those five
9   groups financially.  The owners of the retail outlets
10  are going to pay royally, because they already have a
11  theft problem, which this Commission already knows,
12  because you-all have had to deal with a great many
13  retail owners who have been ripped off royally by
14  their own employees.  And I'm sure than you-all know
15  of some.  I know you don't know of all of them,
16  because most of them lump their loses, fire the guy
17  and move on.
18                To give you an example of this, in this
19  past year in my research of scratch tickets, which I
20  have been working on for about the past year and a
21  half, I managed to pick up tickets from three
22  different locations at three different times
23  throughout the year, and I was able to identify what I
24  thought was a serious theft problem for the retail
25  owner.  By that, I mean, I picked up tickets, packs at
0010
1   a time, where only the four-letter identifier in the
2   middle of a scratch ticket was uncovered.  I suspected
3   this was not a real player but was, rather, a store
4   clerk killing his time stealing the tickets.
5                 In all three cases, I contacted the
6   owner of the store, met with him, showed him the
7   tickets and very nicely said, "Usually when I see
8   something like this, it's indicative that it's an
9   inside job, that it's not really players."  In all
10  three cases, the owner eventually found out real quick
11  that, yes, indeed, he had been being ripped off.  He
12  thanked me unmercifully, told me I was welcome to pick
13  up his trash any time I wanted, and to please come
14  back and to keep up the good work.
15                In these cases they lost thousands of
16  dollars by this one clerk who just was bored at work
17  and playing.  Clerks aren't supposed to play the
18  lottery while they're on duty, but I walk into stores
19  every day and see it.  But that's kind of getting off
20  of where I'm headed here.
21                It appears to me by the proposal of this
22  game concept that the lottery, GTECH and store clerks
23  are the only ones who will really profit.  The lottery
24  would like to have this game concept due to the
25  reduction in cost.  You don't have to print millions
0011
1   of tickets.  You will have no waste.  You won't have
2   to destroy any tickets at the end of a game, because
3   they weren't printed.  GTECH makes a nickel on every
4   ticket sold -- I mean -- I'm sorry.  The retailer
5   makes a nickel on every ticket sold.  The state makes
6   95 cents.  And GTECH, of course, gets a percentage of
7   that.
8                 The retail owner, with this concept, a
9   clerk can stand in the store and print 10 tickets of
10  this instant game, weed out the winners, pull out the
11  winners, and pass along the losing tickets to the
12  consumer who walks in the door to buy one of these
13  tickets.  As for every store having the terminal
14  highly visible -- the terminal highly visible where
15  the player can see is not true.  In fact, it's rare
16  that this can happen
17                This past week -- I'm going to move off
18  of that for a second -- but I want to share with you
19  three messages that I received just last week from
20  players.  They have no idea that this rule is proposed
21  or this game concept is proposed.  And I am going to
22  present you or give you these because one is a serious
23  complaint, and I'm going to handle her complaint for
24  her.  When I get home tomorrow, I will respond to this
25  e-mail, which I have not done yet, because I haven't
0012
1   had time.
2                 But this is one message that I received
3   on Saturday, July 25th.  The writer is R. * Merit.
4   His short message is, "It is my opinion that the Texas
5   Lottery does not want to catch clerks who steal.  And
6   if they do or have, they won't admit it.  This is one
7   of those many hush-hush issues.  They prefer to say
8   that they check and haven't caught anyone, even though
9   we all know this happens daily."  Now, I don't know
10  this man from Adam.  This is just one of many.
11                The second message received just last
12  week, this is from a guy by the name of Ron Jensen.
13  And he wrote, "Tuesday 28th, 2009.  I took to store
14  Kroger's No. 739 at 9125 West Sam Houston Parkway, I
15  took a ticket dated 24 July with one winning number,
16  36.  I requested 5 Mega Million with the Megaplier and
17  expected to pay two dollars with the eight dollar win.
18  I was told I only won two dollars and had to pay eight
19  more.
20                "I know this is a trivial amount, but
21  she did not consider the megaplier.  This has happened
22  before, and I ignored it.  My concern is the education
23  necessary to do the process correctly.  This happened
24  around 4:15 p.m.  Please look into this matter because
25  who knows how many mistake are made.  The store needs
0013
1   to be advised of this matter."
2                 E-mail No. 3 comes from a lady by the
3   name of Sabrina.  The spelling on it is S-z-a-r-e-k
4   Her message is, "I want to file a complaint on a store
5   and an employee that kept the proceeds from my winning
6   ticket and told me that I only won three dollars when,
7   in fact, I won 100.  He told me I was playing the game
8   wrong.  I felt like I was playing the game correctly,
9   but I figured he knew better.  When I researched how
10  to play the game on the Texas Lottery site, it turned
11  out that I was right and that I was playing the game
12  right.  It was a cash word and I had seven words.
13  Seven words equals $100.  He gave me three.
14                "I went to the store manager the next
15  day and told him of the complaint.  And all he said
16  was, quote, 'Well, he said you only won three
17  dollars.'  I told him that I knew what he said but
18  that I was not mistaken about how to play the game.
19  Anyway, I feel like they are cheating people,
20  obviously; and, therefore, I want to file a complaint
21  on" -- I've got to spell this name because I can't
22  pronounce it.  M-a-n-o-j.  The last name is
23  A-d-h-i-k-a-r -- "of the Lucky Lady 3 Convenience
24  Store located at 3816 Little Road in Arlington, Texas
25  76016.  And just to reassure myself even more, I went
0014
1   to another store and bought the same type of
2   scratch-off, got four words, turned it in and I won
3   $5.00.
4                 "Manajo" -- or whatever his name is --
5   told me that I had to have a letter for each letter in
6   the crossword.  Well, mathematically that is
7   impossible and no one would ever win anything.  I
8   think that they should not be able to sell lotto
9   tickets because there is no telling how many other
10  people have been cheated out of their winnings.  The
11  game I played was Bonus Cash Word, Game No. 1155.
12                "Please let me know what steps I need to
13  take to file a formal complaint."
14                I have not responded to this lady yet.
15  These are just three in a week.  I have hundreds of
16  them, but these were just received last week.
17                I have taken the liberty, while I
18  believe that the Texas Lottery staff is well aware of
19  the hundreds of stories that have been printed and
20  aired on TV with regard to how easy it is for clerks
21  to steal players' winnings, I have taken the liberty
22  to bring you some to put on the record, because I'm
23  not convinced that the Commissioners know.  And I want
24  the Commissioners -- while this is just a few of them,
25  I want the Commissioners to know that these stories
0015
1   exist and how dangerous this game concept is.  The
2   rule contains nothing to protect the consumer.
3                 I have brought you five groups of
4   stories which contain multiple stories each.  They
5   range from store clerks busted in California to
6   Houston -- "KPRC Local 2 investigates Texas With
7   Regard to Clerks stealing tickets -- winnings" --
8   Kentucky, stories from Kentucky, and then the huge
9   story of msnbc.com which was a Dateline story that
10  aired on TV not too long ago.  But I printed the whole
11  story with all the facts for it.
12                In this story from MSNBC, they wanted to
13  take their investigation to New York.  I'm sorry.
14  There's six stories.  New York, upon learning that
15  Dateline was coming their way, sent out a message via
16  their terminal that read, "Retailer Alert.  Warning:
17  NBC is trying to trick lottery retailers into stealing
18  winning lottery tickets.  If caught, you can lose your
19  license and be fined and imprisoned."  That's great!
20  We're out trying to do a sting operation, and the
21  lottery itself alerts the retailers.
22                Then I have an e-mail between the New
23  York Lottery and the California Lottery discussing
24  this very issue.  I won't read it aloud, just to save
25  on time, but this is a disgrace.  There is no
0016
1   integrity in the lottery for these kinds of acts.
2                 And finally, I have just a press release
3   from the State of Iowa, the Citizens Aide/Ombudsman,
4   who has compiled a 210-page report.  But in its press
5   release, its findings with regard to players not being
6   protected, the lottery not protecting the players from
7   the clerks stealing the tickets.  This is a widespread
8   issue, and it's really sad.  And to think that Texas
9   wants to start a game where the clerk knows right up
10  front if the ticket is a winner or not is to me a
11  total disgrace.
12                But here is this advisory.  I will not
13  give you the 210-page report.  It is posted on my
14  website if you would like to read it in its detail.
15                Part of your rule states, that's posted,
16  states that tickets must be readable and legible.  And
17  while most tickets are, there are many that are not.
18  And I have taken the liberty of printing you one, two,
19  three, four, five, six, seven -- seven tickets that I
20  personally had that are illegible.  And I have the
21  originals in this file should anybody want to see
22  them.  But when the ribbon starts going bad on the
23  machine and the clerks don't change it, they print out
24  tickets, I can't tell you how many times I've been in
25  a store where the ticket did not print, the clerk
0017
1   pulls it out and starts to rip it away and throw it in
2   the trash can.  It's my ticket, and I say, "Don't you
3   dare tear that up.  I don't care if it's legible or
4   not.  It's got a bar code and it's registered in the
5   main computer system."  That might account for some of
6   the unclaimed prize monies.
7                 Then where Texas tries to talk about
8   their ticket checkers, the ticket checkers err, as do
9   the terminals.  I have been talking about this for
10  years, too -- not the ticket checkers but the
11  terminals.  I have here a copy of a scratch ticket
12  that I'm going to give to y'all, and it goes back to
13  October the 19th of '08.  That's the day the ticket
14  sold, that's the day the ticket validated.  However,
15  this ticket is an interesting ticket.
16                First of all, the player bought it.  And
17  all he did was uncover the bar code to run it through
18  the ticket checker.  The ticket checker said it was a
19  $10 winner.  So he's standing there at the window, he
20  hands it to the clerk, and he says, "This is $10."
21  The clerk runs it in his terminal, and the play slip
22  shows, "Sorry.  Not a winner."
23                He hands it back and says, "That's a
24  mistake."  The player says, "Huh-uh, it's a $10
25  winner."  Now, this ticket has never even been
0018
1   uncovered.  Thirty seconds later, which is what's on
2   this deal, he reruns it and he does it again and he
3   sees it's a $10 ticket.
4                 No, the clerk did not type in the wrong
5   four digits.  How do I know?  Because when I picked up
6   this ticket -- the store called me this day, but it
7   took me a week to get there, because when I was in the
8   store I said, "Let's run this ticket.  Let's purposely
9   type in the wrong four digits, just for proof."  And,
10  of course, it says, "Invalid serial number."  And then
11  when he ran it with the correct one, it says
12  "Previously Paid."  So I'm giving you this to provide
13  as well.
14                One of the Commissioners at the
15  Commission meeting on July the 8th brought up an issue
16  where he said, "One last question for me, and this is
17  at the point of sale.  I sometimes see at retail
18  locations that the retailers or the clerk has
19  preprinted Quick Pick tickets for people who just want
20  to buy a ticket.  What's to stop someone of a mind to
21  do such a thing, to print out in the morning -- let's
22  say to buy two or three Lotto Texas games with the
23  extra feature on it, they would know immediately by
24  looking at the ticket whether it's a winner or loser.
25  Right?  So why don't they just take the losers, put
0019
1   them up on top of the machine, and then throughout the
2   course of the day as people come in to buy the extra,
3   just keep a rolling inventory of looking to see if
4   they've got a winner, give them the loser or even just
5   keep handing out the losers and screening the next
6   layer of sales to make sure that the -- they're going
7   to give the people that are playing the losers and
8   hold on potentially to the winners?  That's a problem,
9   isn't it?  The retailer right now can't see what's
10  underneath that unless they pinprick."
11                Yes, it's a problem.  I can't believe
12  that the Commissioners approved the rule in the first
13  place.  Clerks are a serious problem.  And lottery
14  vendors, the State of Texas and the store clerks are
15  the only ones who are going to be treated fairly in
16  this deal.
17                I'm sorry.  I was wrong on how many
18  stories I have, because I keep finding more.  I also
19  have one about the GTECH rep who stole the lottery
20  tickets from the retailer and the Canada ordeal, which
21  I think we all know and understand that Canada is
22  where the store clerks were caught stealing a $100,000
23  game or whatever.
24                I beg you-all to withdraw this rule.
25  There's only one way you can offer this game that
0020
1   would be okay and not opposed by me, but it's not
2   being offered.  I ask the Commission to not only
3   withdraw this rule but to finally write it in to where
4   players can't -- or clerks can't check players'
5   tickets, period.  The only way a clerk should have his
6   hand on that ticket is if the player says, "This is a
7   winning ticket.  Would you please cash it for me."
8                 It needs to be halted.  The terminals
9   err, which has also happened to me.  My problem is, is
10  that when I've scanned tickets and it says it wasn't a
11  winner when I knew it was, when I rescanned it the
12  second time, it worked.
13                Out in my car I have a box of tickets,
14  scratch tickets, that I could bring in here and
15  present to the Commission and show you what players do
16  with these tickets and how they scan them and depend
17  on the ticket checkers, thousands of dollars worth of
18  tickets.  And I don't know if they're winners or not,
19  because I haven't scratched them off.
20                I thank you for your time.
21                May I approach you and give you all
22  these papers?  And there are more than five or six
23  stories in here.  There's actually quite a few.  And
24  I'm sorry that I'm so negative.
25                MR. WASSDORF:  Thank you.
0021
1                 Richard Huntley -- or Bunkley.
2        COMMENTS ON BEHALF OF LITTLEFIELD CORPORATION
3                 MR. BUNKLEY:  Hello.  First of all,
4   thank you very much for taking my comment today.  My
5   name is Richard Bunkley.  I work for Littlefield
6   Corporation.  And I oppose the proposed amendments to
7   Rules 401.301 and 401.302, as well as the proposed new
8   rule 401.317.  I think these rules are very vaguely
9   written, and it's difficult to get a clear picture on
10  the ultimate product that the Lottery Commission has
11  in mind.  And I worry that it could be very
12  detrimental to charitable bingo as it could open the
13  door to a potential expansion in gambling.  I also
14  feel that these rules seem to rise to the level of
15  legislation.
16                That's all I have today.  And I have
17  several letters to submit from charities conducting
18  charitable bingo throughout the state who have similar
19  concerns.  Thank you very much.
20                MR. WASSDORF:  Thank you.
21                Are there any other witness affirmation
22  forms that want to testify?
23                Okay.  I'm going to wait until they
24  check out front.
25                (Brief pause)
0022
1                 Okay.  There being no further people
2   that are signed up, we will conclude the hearing,
3   then.
4                 (Hearing concluded:  2:35 p.m.)
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0023
1                    C E R T I F I C A T E
2   STATE OF TEXAS    )
3   COUNTY OF TRAVIS  )
4                 I, Aloma J. Kennedy, a Certified
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 7th day of August 2009.
15  
16  
17  
                          ________________________________
18                        Aloma J. Kennedy
                          Certified Shorthand Reporter
19                        CSR No. 494 - Expires 12/31/10
20                        Firm Registration No. 276
                          Kennedy Reporting Service, Inc.
21                        Cambridge Tower
                          1801 Lavaca Street, Suite 115
22                        Austin, Texas  78701
                          512.474.2233
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