0001 1 TRANSCRIPT OF PROCEEDINGS 2 BEFORE THE 3 TEXAS LOTTERY COMMISSION 4 AUSTIN, TEXAS 5 6 16 TEXAS ADMINISTRATIVE CODE § § 7 §402.500, §402.708, §402.715 § 8 9 PUBLIC COMMENT ON RULEMAKINGS 10 TUESDAY, AUGUST 21, 2007 11 12 BE IT REMEMBERED THAT on Tuesday, the 13 21st day of August 2007, the above-entitled public 14 comment hearing was held from 11:02 a.m. to 11:25 15 a.m., at the Offices of the Texas Lottery Commission, 16 611 East 6th Street, Austin, Texas 78701, before 17 SANDRA JOSEPH, OFFICE OF THE GENERAL COUNSEL. The 18 following proceedings were reported via machine 19 shorthand by Aloma J. Kennedy, a Certified Shorthand 20 ``Reporter of the State of Texas, and the following 21 proceedings were had: 22 23 24 25 0002 1 APPEARANCES 2 ASSISTANT GENERAL COUNSEL: 3 Ms. Sandra Joseph 4 CHARITABLE BINGO ASSISTANT DIRECTOR: Mr. Philip D. Sanderson 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0003 1 P R O C E E D I N G S 2 TUESDAY, AUGUST 21, 2007 3 (11:02 a.m.) 4 MS. JOSEPH: Good morning. My name is 5 Sandra Joseph, Assistant General Counsel. With me is 6 Philip D. Sanderson, Director of the Charitable Bingo 7 Operations Division. We are here this morning to hold 8 a public hearing and receive public comments on three 9 pending proposed rulemaking matters. 10 These include the repeal of 16 TAC 11 §402.500 relating to general audit, proposed new rule 12 §402.715 relating to compliance audit, and proposed 13 new §402.708 relating to dispute resolution. 14 I would like to note that the 15 Commission is receiving comments on these rules 16 through September 9th. I became aware this morning of 17 an error on our website that indicated we would be 18 receiving comments through September 30th. That was 19 an inadvertent error, and the deadline will be 20 September 9, 2007. 21 I have received a witness affirmation 22 form from Mr. Steve Bresnen, and I would like to 23 invite him to offer any comments he has at this time. 24 MR. BRESNEN: Thank you. My name is 25 Steve Bresnen. I'm here on behalf of the Bingo 0004 1 Interest Group. And if it's okay with you, I will 2 just do them in the order that you announced them. 3 MS. JOSEPH: That's fine. And, 4 Mr. Bresnen, it's our custom to ask you to take the 5 oath, although this is not an evidentiary proceeding. 6 So at this time if you do solemnly swear that the 7 testimony you will give will be the truth, the whole 8 truth and nothing but the truth, please answer. 9 MR. BRESNEN: I so swear. 10 MS. JOSEPH: Thank you. Please 11 proceed. 12 MR. BRESNEN: I thought you were going 13 to make me apologize for my informal dress today. But 14 it was kind of impromptu. Sorry about that. It's not 15 a measure of the importance that I hold this process. 16 COMMENTS BY STEVE BRESNEN ON BEHALF 17 OF THE BINGO INTEREST GROUP 18 MR. BRESNEN: With respect to the first 19 rule, 402.500, repealing the general audit rule, we 20 support that repeal and understand why you're doing 21 it. 22 My comments on 402.715, as proposed, 23 and 402.500 as proposed, are going to be in the nature 24 of issue-spotting and suggested corrections in the 25 text. These comments are not intended to say that we 0005 1 disagree with the purpose and the general approach of 2 these rules, but to try to make them work better and 3 end up with a clear product to the regulated 4 community. 5 And I'm going to use, for purposes of 6 the record, the copies that were laid out on the 7 tables in the front and refer to those by page 8 numbers, if that's works for y'all. 9 Starting with 402.715 as proposed, on 10 the Register Page 4871, in the left-hand column, under 11 proposed 402.715(a)(1), the current version says an 12 audit finding is an instance of non-compliance with 13 Occupations Code Chapter 2001, et cetera. I would 14 suggest sticking the word "alleged" before the word 15 "non-compliance," so the audit finding at that point 16 is an alleged, an instance of alleged non-compliance. 17 I'm going to try to remember what I was 18 thinking when I made some of these notes, so if you'll 19 bear with me just a . . . 20 Okay. On the same page in the 21 right-hand column, at the bottom of the page on 22 proposed 402.715(m), it says -- the question is, "Who 23 attends the entrance conference?" And it says, "The 24 following individuals . . . are required to attend the 25 entrance conference:" 0006 1 I think you're tying your hands and 2 those of the licensee. There may be instances where 3 it's perfectly proper for one individual representing 4 the organization to attend. In some cases, that might 5 be a lawyer or other person who has the capacity to 6 bind the organization or provide adequate 7 documentation. 8 I understand that there is a general 9 concern within the agency that all the responsible 10 parties for a charity be aware of the business of the 11 organization with regard to bingo. I just think that 12 once you say they're all required to attend, you can't 13 back off that. I think you could say something like 14 "may be required to attend as appropriate." That 15 would leave you open -- you-all know that there are 16 members of the regulated community who have good 17 control of their business, and you can interact with 18 one or more key people there. There may be instances 19 where people are so out of whack that you find it 20 important to have other folk involved. So I would 21 suggest that you untie your hands and untie the 22 regulated community's hands on that. 23 On the next page, Page 4872 of the 24 Register, the same comment I would make on proposed 25 402.715, Subsection (r) in the left-hand column, just 0007 1 about a third of the way down the page. On proposed 2 402.715, Subsection (s), you have that the licensee 3 would have 10 calendar days from the date of the exit 4 conference to request in writing a meeting of the 5 audit manager. I would suggest that that be extended 6 to 20 days and not 10. You also have 10 calendar 7 days. You might want to consider working days or 8 business days there. 9 On the right-hand column of that same 10 page, Page 4872, proposed 402.715(y)(2), it says that, 11 "If there are audit findings, a Determination Letter 12 outlining the next steps will be sent to the licensee 13 no later than 14 calendar days after the date of the 14 final audit report." 15 Unless I'm missing something, I don't 16 see any place in the rule where it assures the 17 licensee that they will (A), receive a copy of the 18 final audit report and (B), the time frame in which 19 they will receive a copy of the final audit report. 20 MR. SANDERSON: May I interject -- 21 MR. BRESNEN: Sure. 22 MR. SANDERSON: -- just so you will 23 know? It's at Paragraph (x) at the bottom of the 24 right column -- I'm sorry -- left column. 25 MR. BRESNEN: Okay. That does say who 0008 1 will receive it, but it doesn't -- again, unless I'm 2 missing something, it doesn't say, No. 1, when they 3 will receive it. And I would recommend that (y)(2) be 4 changed to say they'll get a Determination Letter 5 within 14 calendar days of the receipt of the final 6 audit report by the licensee. 7 What I'm trying to do is make sure that 8 the licensee has some point at which they know they're 9 either getting a Determination Letter or they're not. 10 One of the concerns of the regulated community in the 11 past has been that they see draft reports, they never 12 see the final report. So I commend you for (A), 13 providing for one; (B), for providing it to them. And 14 I just think the timing on that needs to be tightened 15 up a little bit. 16 Moving to proposed 402.708 -- 17 MS. JOSEPH: Can I ask a question just 18 again on that one? 19 MR. BRESNEN: Sure. 20 MS. JOSEPH: Again, that's on (y)(2), 21 and that's saying a Determination Letter will be sent 22 to the licensee. So that's not imposing anything on 23 the licensee. I mean, it's a time constraint on the 24 Commission to send the Determination Letter. So the 25 Commission wouldn't have any way of knowing when the 0009 1 licensee has received the letter. Your suggestion to 2 change it to 14 days after receipt would be difficult. 3 MR. BRESNEN: Well, I don't want to 4 drive your costs up by requiring that it be, you know, 5 served maybe return receipt requested. If that's your 6 current practice, then you will have noticed there may 7 be some delay in getting the return receipt back, that 8 it would make the 14 days need to be changed. 9 I guess what I'm trying to figure 10 out -- and I think the concern -- we don't need to, 11 you know, figure it out here. I guess it's not 12 appropriate in a public hearing to negotiate it out 13 anyway. But we know somebody is going to receive it, 14 but we don't know when they're going to receive it. 15 And the date of the final audit report is not set, at 16 least in the rule, in relation to any time that they 17 receive it. 18 So I'm just thinking you can tighten 19 that up and make it a little more sequential so 20 everybody knows when the clock starts running. It's 21 conceivable to me the final audit report could be 22 finished on April 1st, your 14 days would start 23 running then. But, you know, for whatever reason, 24 they may not receive it until April 15th. What's the 25 date of the report? Is it the date that's on the 0010 1 report? Is it the date it comes to their awareness? 2 I'm just thinking you might be able to tighten that up 3 a little bit better, something for you to consider. 4 MS. JOSEPH: Thank you. 5 MR. BRESNEN: Actually, there is a 6 corresponding part in the next rule that I think 7 relates back to that, and I will come to that in a 8 moment. 9 On 402.708 on (a), on Page 4869 of the 10 Register, in the left-hand column, it defines a 11 determination letter as "a notice issued by the 12 director stating the basis for the conclusion that a 13 violation occurred, recommending that an 14 administrative penalty be imposed on the person 15 alleged to have committed the violation, and 16 recommending the amount of the proposed penalty." 17 That assumes that there would always be 18 an administrative penalty. Typically we've been 19 talking about administrative penalties as a dollar 20 amount. But I think your rules provide for you to 21 give a warning in the schedule of actions that you 22 might take. We know that some of these things are 23 going to be relatively minor or easily fixable. And I 24 don't think you want to negate your definition, 25 because the determination letter is a definition as 0011 1 used throughout the rules. You'll negate your 2 definition of determination letter if you don't make 3 some savings amendment to this. So I would say 4 something like administrative penalty or other action 5 or administrative penalty, if any, or something like 6 that, that just clarifies. You probably need to do 7 that in a couple of places in that Paragraph No. 8 (a)(1). 9 On the right-hand column, it appears 10 from this dispute resolution rule that only a licensed 11 authorized organization can use the dispute resolution 12 process that's established in this rule. And since 13 you audit manufacturers, distributors -- not just 14 audit, but enforce the Act and the rules -- I guess 15 other types of licensees on behalf of commercial 16 lessors at least, who I represent, I think we would 17 like to make sure that this informal process is 18 available as well to other licenseholders. There may 19 be a reason y'all have chosen not to do that, but I 20 can't imagine why it wouldn't be made available to 21 everyone, probably better for you and for them. 22 On this same page in the right-hand 23 column under proposed 402.708(c)(4), the current 24 proposal reads, "You must submit the completed Request 25 for Informal Dispute Resolution Form no later than 20 0012 1 calendar days from the date you receive a 2 determination letter, the final audit report, or 3 notice of opportunity to show compliance letter." 4 It seems like the 20-day -- when the 20 5 days starts is a moving target. In every situation 6 where there is an audit at issue, you should have a 7 final audit report followed by a determination letter. 8 So it's not clear to me when the 20 days starts to 9 run. 10 I understand that where there is a 11 notice of opportunity to show compliance letter, I'm 12 assuming that would be, say, on the basis of a hearing 13 about a complaint or being in the hall observing a 14 violation or alleged violation and issuing that, 15 rather than as a result of an audit followed by a 16 determination letter. So I think that needs to be 17 tightened up, and it relates back to my earlier 18 comments in 402.715. 19 Notice also that in (d), in that same 20 column, proposed (d)(2) withdraws the right to have a 21 dispute resolution conference if a person fails to 22 timely submit the request for informal dispute 23 resolution. So unless those timelines are absolutely 24 clear, it won't be clear at what point a person has 25 lost their right to engage in that. 0013 1 Moving back up to (d)(1), that it 2 refers again to a licensed authorized organization, it 3 says you will not grant a request for a dispute 4 resolution if you are not a licensed authorized 5 organization that disputes the findings in a final 6 audit for a notice of opportunity to show compliance 7 letter. That's another place where you would need to 8 make an amendment in order to extend this to all 9 licensees. If I miss one of those, you get the point 10 that, you know, we would like to see it be made to all 11 licensees. 12 Under proposed (e)(3), it allows for a 13 rescheduling of a dispute resolution conference due to 14 unforeseen events upon agreement of the parties. Then 15 it says you must contact the Commission within 24 16 hours prior to the scheduled conference to reschedule 17 a dispute resolution conference. 18 If it's unforeseen, it may happen 19 within the 24-hour period. The way the rule is 20 written, you wouldn't have any authority to reschedule 21 the conference, because the rule says I have to tell 22 you about something before 24 hours from the 23 conference. So I don't know why you wouldn't say just 24 a dispute resolution conference may be rescheduled due 25 to unforeseen events upon the agreement of the 0014 1 parties. I understand you guys would want some 2 notice. There may be another way to do that. But I 3 think you're tying your hands from rescheduling again, 4 and I don't think you want to limit your discretion. 5 A hurricane striking Brownsville this morning should 6 be a reason to be able to reschedule a conference 7 scheduled for this afternoon. 8 Down to (g) on that page, and same on 9 the right-hand column, this has the attendance at a 10 dispute resolution conference dependent on a 11 regulatory classification -- I'm not sure what that 12 means, if that means a licensee other than a licensed 13 authorized organization or if it means a 14 classification, say Class A through J, however many 15 classes we have. I'm not sure what that means. But 16 we do like the fact that you have that certain 17 individuals may be required to attend, in essence. 18 That would be consistent with our earlier suggestion 19 of not tying hands on who got to attend an audit. 20 And also the last sentence says you 21 have to notify the director at least 24 hours before 22 the scheduled dispute resolution conference of who is 23 attending. I'm afraid that people are going to have 24 legitimate representatives and resources to bring in 25 attendance that may be disqualified by your failure to 0015 1 notify y'all. And I'm not really sure what difference 2 that makes. Somebody may bring a lawyer, they may 3 bring their bookkeeper, and they may bring the long 4 lost employee who is alleged to have committed a 5 violation and has facts. 6 So I would ask that you not tie 7 anybody's hands. It would be one thing to request a 8 notification but another -- in fact, you might want to 9 say, if you're going to bring somebody you hadn't 10 notified us of, we might reschedule. But I'm not 11 really sure what your purpose was there. I think a 12 licensee ought to be able to bring with them anybody 13 they want to bring with them who may be able to help 14 in this informal dispute resolution process. 15 On the next page, Page 4870, in the 16 left-hand column, -- well, I can't remember what my 17 note means, so I'll skip that one. 18 On proposed (k)(2) -- this is proposed 19 402.708(k)(2) -- it says, 20 "(2) The Agreement will include: 21 "(A) The violations." 22 I would suggest that you put "if any." 23 Since that assumes there would be violations after an 24 informal dispute process, you may determine that there 25 weren't any violations, or the settlement agreement 0016 1 may be such that nobody is admitting to a violation 2 but they've agreed to, say, pay money back to the 3 Bingo account or something without admitting a 4 violation. So I think you're tying your hands there. 5 I would just put "the violations, if any," or strike 6 Subdivision (2)(A), (k)(2)(A), altogether and just 7 put, "The resolution of the disputed issues and the 8 corrective action you must take, if any." I'm 9 assuming that one outcome of an informal dispute 10 resolution process might be that y'all would say, "Oh, 11 I see, and there's not a violation." That is a 12 possible outcome. 13 And then finally, in proposed 14 Subsection (l) on the left-hand column on Page 4870, 15 the second sentence says, "The matter will proceed to 16 a formal administrative hearing." I would put "may 17 proceed." You would be required by law -- if there is 18 no agreement reached at the dispute resolution 19 conference, this rule would require you by law to 20 proceed to a formal administrative hearing. 21 But it's entirely possible in an 22 informal administrative -- or dispute resolution 23 process where you might see weaknesses in your case 24 and decide that it would not be smart to go forward to 25 SOAH with that case. That often happens out of 0017 1 mediations and other ADR type deals. And so I would 2 not tie my hands or you would literally be required to 3 proceed to formal dispute resolution process. If the 4 charity thinks that's what you're going to be required 5 to do, then in all likelihood they're going to hire a 6 lawyer or may hire a lawyer and engage in expenses 7 that might otherwise be avoided. And my guess is, 8 that may start the clock running where they need to 9 request a formal hearing if they're going to contest 10 it or initiate a contested case. 11 That concludes my comments. 12 MS. JOSEPH: Do you have any questions, 13 Mr. Sanderson? 14 MR. SANDERSON: I do not at this time. 15 MR. BRESNEN: Okay. Thank you. 16 MS. JOSEPH: Thank you, Mr. Bresnen. 17 Is there anyone here who would like to 18 offer comments, anyone else? I have no other 19 affirmation forms. 20 If there is nothing further, I would 21 like to thank you again, Mr. Bresnen, for the 22 organized and concise way you presented your comments. 23 This hearing will now be adjourned. It 24 is 11:25. Thank you. 25 (Hearing adjourned. 11:25 a.m.) 0018 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 4th of September 2007. 15 16 ________________________________ 17 Aloma J. Kennedy Certified Shorthand Reporter 18 CSR No. 494 - Expires 12/31/08 19 Firm Certification No. 276 Kennedy Reporting Service, Inc. 20 Cambridge Tower 1801 Lavaca Street, Suite 115 21 Austin, Texas 78701 512.474.2233 22 23 24 25