0001 1 2 3 4 ****************************************************** 5 6 7 TEXAS LOTTERY COMMISSION 8 MEETING 9 10 APRIL 23, 2003 11 12 13 ****************************************************** 14 15 16 17 BE IT REMEMBERED that the Texas Lottery 18 Commission meeting was held on the 23rd day of April, 19 2003 from 8:37 a.m. to 11:48 a.m., before David 20 Bateman, RPR, CSR in and for the State of Texas, 21 reported by machine shorthand, at the Offices of the 22 Texas Lottery Commission, 611 East 6th Street, Austin, 23 Texas 78701, whereupon the following proceedings 24 were had: 25 0002 1 A P P E A R A N C E S 2 3 Chairman: 4 Mr. C. Tom Clowe, Jr. 5 6 Commissioners: 7 Mr. James A. Cox, Jr. 8 9 General Counsel: 10 Ms. Kimberly L. Kiplin 11 12 Executive Director: 13 Mr. Reagan E. Greer 14 15 Charitable Bingo Operations Director: 16 Mr. Billy Atkins 17 18 Deputy Executive Director: 19 Mr. Gary Grief 20 21 22 23 24 25 0003 1 I N D E X 2 PAGE 3 Appearances...................................... 2 4 AGENDA ITEMS 5 Item Number 1.................................... 4 6 Item Number 2.................................... 4 7 Item Number 3.................................... 6 8 Item Number 4.................................... 8 9 Item Number 5.................................... 12 10 Item Number 6.................................... 17 11 Item Number 7.................................... 17 12 Item Number 8.................................... 17 13 Item Number 9.................................... 21 14 Item Number 10................................... 26 15 Item Number 11................................... 28 16 Item Number 12................................... 29 17 Item Number 13...................................54/58 18 Item Number 14...................................56/59 19 Item Number 15................................... 30 20 Item Number 16................................... 39 21 Item Number 17................................... 46 22 Item Number 18................................... 54 23 Item Number 19................................... 60 24 25 Reporter's Certificate........................... 61 0004 1 AGENDA ITEM NO. 1 2 CHAIRMAN CLOWE: Good morning. It is 3 8:37 a.m. Today is April 23rd, 2003. 4 Commissioner Cox is here. I'm Tom 5 Clowe. Commissioner Whitaker is absent due to bad 6 weather in Dallas and will not be able to be present 7 for this meeting. But we have a quorum, so we will 8 convene the Commission and move forward with our 9 agenda. 10 AGENDA ITEM NO. 2 11 First item is report, possible 12 discussion and/or action on lottery sales and trends, 13 Toni Smith. Good morning, Toni. 14 MS. SMITH: Good morning, Commissioners. 15 For the record, my name is Toni Smith and I'm 16 Marketing Director of the Texas Lottery Commission. 17 The total fiscal year 2003 sales to date 18 are 1.9 billion. This is up 7.4 percent from the 19 previous fiscal year 2002 total sales to date of 1.8 20 billion. And there's additional detail in your memo. 21 And the one that is -- was placed on your table this 22 morning has the most current information. 23 I'd be happy to answer any questions 24 that you might have. 25 COMMISSIONER COX: Toni, this looks 0005 1 great. Are there -- are there any trends that we 2 should notice here? 3 MS. SMITH: Well, one thing that I'm 4 excited about is that on the instant product, we have 5 now experienced 21 weeks of sales above 40 million. 6 So that's a nice little wave to ride right now. We're 7 real excited about that. 8 CHAIRMAN CLOWE: Toni, with a jackpot at 9 35 million, what's the current selling rate? 10 MS. SMITH: I'm sorry. I don't know 11 that off the top of my head, but I will -- you mean 12 like per day or hourly or... 13 CHAIRMAN CLOWE: Per day or -- 14 MS. SMITH: Per day? 15 CHAIRMAN CLOWE: -- per hour, just 16 whatever you can -- 17 MS. SMITH: We can find that out. Ramon 18 can help me out on that one, yes. 19 CHAIRMAN CLOWE: You know, we had a lot 20 of discussion about Lotto Texas and the rule change. 21 And I think it's always interesting to see when the 22 jackpot gets over 20 million how high the selling rate 23 goes. I would anticipate we'll have a very high 24 selling rate this evening, not as high on Wednesday 25 night as on Saturday nights, but... 0006 1 MS. SMITH: It should be good. 2 CHAIRMAN CLOWE: If you'd bring that 3 back to us, I'd like to hear. 4 MS. SMITH: Yes, and I can give it to 5 Mr. Greer when he does his Executive Director's 6 report. 7 MR. GREER: Great. 8 CHAIRMAN CLOWE: That would be fine. Do 9 you want to cover the next item on the agenda, which 10 covers lottery advertising, promotions and 11 effectiveness of lottery advertising? 12 AGENDA ITEM NO. 3 13 MS. SMITH: I really don't have anything 14 new to report with regard to what we have going on in 15 addition to what's already in your binders. 16 I would like to share with you, though, 17 we conducted some advertising research focus groups 18 where we show lottery players some different campaigns 19 that we have already shown in the past to get some 20 feedback of how they feel about that advertising. I'd 21 like to share with you briefly a little bit of that 22 summary. 23 Players want to see winners or people 24 winning. They want to know which game the person won 25 on and how much they had won. Many players reported 0007 1 that they did not need to see big jackpot winners, 2 that -- rather they would be motivated to play the 3 game if they saw someone in a reasonable -- a 4 realistic amount, hundreds or thousands of dollars in 5 winnings. 6 As some players put it, "Seeing someone 7 win gets you pumped up to think that you could win, 8 too." 9 This report is supported by the data 10 from the monthly tracking -- monthly tracking, 11 indicating that the primary reason people play less is 12 lack of winning or a lack of knowledge of winning by 13 others. 14 Players reported that "Knowing people 15 had won encourages me to play more." Additionally, 16 players reported that they would try a new game if 17 they knew how much you can win. 18 And then finally, players noted that 19 they did not see ads very often and would like to see 20 them more. However, the more important thing for them 21 to see was the billboards with regard to the jackpot 22 games. Not only could they learn what the jackpot was 23 for the next draw, but they saw the billboards as a 24 reminder to play those games. 25 So that's just a little bit of an 0008 1 overview. I can get you the full report for your 2 information. 3 CHAIRMAN CLOWE: Thank you, Toni. 4 MS. SMITH: You're welcome. 5 AGENDA ITEM NO. 4 6 CHAIRMAN CLOWE: Next item, Nelda 7 Trevino, please: Report, possible discussion or 8 action on the 78th Legislature. 9 Good morning, Nelda. 10 MS. TREVINO: Good morning, 11 Commissioners. For the record, I'm Nelda Trevino, the 12 Director of Governmental Affairs. 13 The first in my report, I'm very pleased 14 to report that the Senate Nominations Committee on 15 April the 7th considered Commissioner Cox's 16 reappointment to the Commission and Commissioner Cox 17 appeared before the committee and the committee 18 approved his reappointment. 19 CHAIRMAN CLOWE: Yea. 20 MS. TREVINO: And subsequently, on April 21 the 9th, the whole Senate confirmed Commissioner Cox's 22 reappointment by a vote of 31 to 0 for a term to 23 expire on February the 1st, 2009. 24 CHAIRMAN CLOWE: Yea. 25 MS. TREVINO: Secondly, we provided to 0009 1 you this morning an updated copy of our legislative 2 tracking report. And at the last several Commission 3 meetings, I have highlighted those bills that had 4 directly impacted the Lottery or Charitable Bingo that 5 had been filed as of that date. 6 And since our last Commission meeting, 7 there has been an additional bill that has been filed 8 that directly impacts the Lottery, and that is Senate 9 Bill 6 by Senator Leticia Van de Putte relating to 10 extending the time to claiming lottery prize for 11 certain military personnel. 12 And that bill is actually scheduled to 13 be considered before the Senate Veteran's Affairs and 14 Military Installations Committee later today. And 15 Colin Haza will be there as an agency resource for the 16 committee. 17 With regard to the agency Sunset Bill, 18 Senate Bill 270 by Senator Mike Jackson is scheduled 19 to be considered this afternoon by the Senate 20 Government Organization Committee. And the committee 21 is scheduled to meet in the Senate chamber at one 22 o'clock or upon adjournment of the Senate and 23 appropriate staff from the agency will be there to be 24 a resource for the committee. 25 Also in the Senate Government 0010 1 Organization Committee this afternoon two bills will 2 be considered by Senator Leticia Van de Putte. That's 3 Senate Bill 1818 and Senate Bill 1819. And these two 4 bills relate to the awarding of contracts and the 5 procurement procedures by the Lottery Commission and 6 Ridgely Bennett will be there as the agency's resource 7 for the committee. 8 In regards to other committee hearings, 9 the House Licensing and Administrative Procedures 10 Committee held hearings on April the 3rd and April the 11 10th and considered several bills relating to 12 Charitable Bingo and the Lottery. 13 Bills related to a multi-jurisdictional 14 lottery game, a keno game and a -- and video lottery 15 were considered by the committee and were left 16 pending. 17 The committee did approve the following 18 bills: House Bill 1317 by Representative Haggerty 19 relating to a progressive bingo game, House Bill 2442 20 by Representative Kino Flores relating to -- relating 21 to card-minding devices, House Bill 2443 by 22 Representative Kino Flores relating to authorizing a 23 satellite bingo game, House Bill 2519 also by 24 Representative by Kino Flores relating to bingo 25 regulations, House Bill 2792 by Representative Kino 0011 1 Flores relating to electronic pull-tab devices, and 2 House Bill 20 -- excuse me -- House Bill 1241 by 3 Representative Mark Homer relating to amending the use 4 of the whole bond fund to indemnify the State from 5 potential losses due to stolen tickets by retailers. 6 So that's the status of current 7 committee hearings with bills that directly impact 8 either the Lottery or Charitable Bingo. 9 One other item: We continue to monitor 10 the appropriations process. And once a conference 11 committee is appointed on House Bill 1, we will 12 provide any necessary information to that conference 13 committee as it relates to our agency's 14 appropriations. 15 And that concludes my report and I'll be 16 happy to answer any questions. 17 CHAIRMAN CLOWE: Nelda, by way of 18 information, it's my intention to go with the staff 19 over to the Senate chamber this afternoon. And I 20 wanted to ask Commissioner Cox if he plans to be 21 there. 22 COMMISSIONER COX: Yes, I do. 23 CHAIRMAN CLOWE: And he is indicating 24 that he is going to be there. And we are authorized 25 to appear at that committee meeting without a meeting 0012 1 of the Commission. And we will not be conducting any 2 business. We will be there to observe and to answer 3 any questions if we're asked. 4 MS. TREVINO: Very good. 5 CHAIRMAN CLOWE: Thank you very much. 6 MS. TREVINO: Thank you. 7 AGENDA ITEM NO. 5 8 CHAIRMAN CLOWE: Next is report, 9 possible discussion or action on the implementation of 10 new rule 16 TAC 401.305 relating to Lotto Texas. 11 Mr. Greer? 12 MR. GREER: Sir, we brought this before 13 you last month. Toni had a few points that she was 14 going to -- I'm sorry. 15 Toni had a few points that she was going 16 to bring forward in the form of an update for you on 17 this item. 18 MS. SMITH: I basically wanted to report 19 that we're on track for sales to begin on Sunday, May 20 4th with the first drawing taking place on May 7th. 21 We have all of the materials delivered 22 to the districts by this Friday. All of the roll 23 stock and point of sale will be out there where it 24 needs to be and we have a teaser campaign that started 25 this week. 0013 1 And then we'll actually run a launch 2 campaign in radio to support the game as soon as the 3 game starts. So we're on track. 4 COMMISSIONER COX: I saw one of your 5 teaser spots last night. 6 MR. GREER: Did you like it? 7 COMMISSIONER COX: It was good. 8 MS. SMITH: Thank you. 9 MR. GREER: I wanted to thank Toni and 10 her group. They did a great job. I've been involved 11 in getting this off the ground. 12 I also wanted to acknowledge our 13 Security Division and Commander Pitcock. They did a 14 great job in getting everything put together. And we 15 will continue to keep you apprised as we move forward 16 to our date of the first drawing April -- I mean May 17 the 7th. 18 And tickets begin to sell on May the 19 4th. 20 CHAIRMAN CLOWE: And if we have a 21 jackpot that's rolled when we go into the new game, 22 that rolls into the jackpot? 23 MS. SMITH: Yes, sir. It will stay what 24 it is at that time. 25 CHAIRMAN CLOWE: Great. Is it going to 0014 1 roll tonight? 2 MS. SMITH: I hope so. 3 MR. GREER: I'm going to be there to do 4 my part. 5 COMMISSIONER COX: What is your part, 6 Reagan? 7 CHAIRMAN CLOWE: Thank you. I was dying 8 to ask that. 9 MR. GREER: I do that quite well on the 10 sideline. 11 CHAIRMAN CLOWE: Thank you, Toni. 12 MS. SMITH: I do have the information 13 that you had asked for previously. Ramon was kind 14 enough to make a phone call for me. 15 CHAIRMAN CLOWE: Great. 16 MS. SMITH: Regarding the Lotto -- 17 current Lotto Texas jackpot sales, yesterday we did 18 1.46 million. But today, it's estimated we'll do 19 between seven and eight million because of that higher 20 jackpot. 21 And the last time we were at this 22 jackpot level, we were at that 33 million on a 23 Wednesday and 45 on Saturday and we did 24.4 million 24 for that week. 25 CHAIRMAN CLOWE: And maybe you might 0015 1 want to call Ramon if he has institutional knowledge 2 to answer this question: What's the selling rate when 3 the jackpot is four million the day of the drawing? 4 MR. GREER: Can you come up, Ramon? 5 MR. RIVERA: Yeah. Good morning, 6 Commissioners. My name is Ramon Rivera. I'm the 7 Accountant General Manager for Gtech. 8 Typically, Commissioners, when we have a 9 jackpot at four million, our weekly sales run anywhere 10 from eight to nine million on that particular week. 11 CHAIRMAN CLOWE: For the week? 12 MR. RIVERA: For the week, yes, sir. 13 CHAIRMAN CLOWE: Now would that be a 14 three-day period when you say "week" or... 15 MR. RIVERA: Well, I'm talking about 16 if -- you know, the typical jackpot roll, which would 17 be a four million going to a five million, we would 18 be -- 19 CHAIRMAN CLOWE: For those two drawings? 20 MR. RIVERA: For those two drawings, 21 yes, sir. 22 CHAIRMAN CLOWE: It would be seven to 23 eight million? 24 MR. RIVERA: Seven, eight million, yes, 25 sir. 0016 1 CHAIRMAN CLOWE: And we're -- again now 2 Toni, give us the figure at 35 million today and 3 yesterday. 4 MS. SMITH: Yesterday we did 1.46 5 million and today's estimation based on where we are 6 right now for the day, we'll probably do between seven 7 and eight million. 8 CHAIRMAN CLOWE: So today we're going to 9 do as much as you would in a week of sales where you 10 have a four and five million dollar? 11 MR. RIVERA: That's correct. 12 CHAIRMAN CLOWE: Am I understanding that 13 correctly? 14 MR. RIVERA: That's correct, 15 Commissioner. 16 CHAIRMAN CLOWE: Okay. The point to me 17 there then is that players are voting about the size 18 of the jackpot with their purchases of Lotto Texas 19 tickets and it is heavily weighted towards: We like 20 big jackpots. 21 MS. SMITH: Yes, sir. 22 CHAIRMAN CLOWE: Would that be a correct 23 assumption? 24 MR. RIVERA: I believe that is a very 25 correct assumption 0017 1 AGENDA ITEM NO. 6 2 CHAIRMAN CLOWE: Thank you. Next item 3 is No. 6, consideration and possible appointment and 4 employment of an Internal Audit Director. I'm going 5 to pass that subject on the agenda and we may return 6 to it later in the meeting. 7 AGENDA ITEM NO. 7 8 Next is Item 7, consideration, possible 9 discussion or action on State Auditor's Office, 10 external audit reports, and other internal matters. 11 Is there a report on this subject? 12 MS. KIPLIN: Commissioners, not that I'm 13 aware of. 14 AGENDA ITEM NO. 8 15 CHAIRMAN CLOWE: Thank you. Next item 16 is No. 8, report, possible discussion and/or action on 17 HUB and/or minority business participation. 18 Mr. Hall, good morning. 19 MR. HALL: Good morning, Mr. Chairman. 20 Good morning, Commissioners. For the record, my name 21 is Robert Hall, Director of Business Development 22 Compliance. 23 The Business Development Compliance 24 Division is requesting Commission's consideration and 25 possible discussion on its HUB and/or minority 0018 1 participation report. There's no action required for 2 this agenda item, Commissioners. 3 As it relates to HUB and/or minority 4 business participation, all state agencies are 5 required to have a budget of 10 million dollars and 6 required to have a mentoring program. This is in 7 accordance with the Texas Government Code, Chapter 8 2161.065. 9 As reported previously, the purpose of a 10 mentoring program is to foster long-term relationships 11 between prime vendors and also HUBs. The ultimate 12 goal of the program is to provide development 13 assistance to HUBs that will potentially increase 14 their ability to contract directly with the State of 15 Texas while obtaining subcontracting opportunities. 16 I am pleased to report once again the 17 development of a new mentoring project relationship. 18 At this time, I'd like to refer to Mr. Greer, our 19 Executive Director, to identify and sign our new 20 mentor project relationship agreement. 21 MR. GREER: I'd ask that you gentlemen 22 come up. First we have are Davila Schaubhut & 23 Company. I have to learn how to say those words. 24 Thank you. And they're represented by -- would you 25 introduce yourselves again? 0019 1 MR. DAVILA: Good morning. My name is 2 Dan Davila and we're the on-site drawing auditors. 3 MR. BUSCHHORN: Lane Buschhorn. 4 MR. GREER: Thank y'all for being here 5 this morning. And our new mentor company is Financial 6 Management Partners. Mr. Arthur Lee, right? 7 MR. LEE: Yes. 8 MR. GREER: All right. 9 MR. LEE: Arthur Lee, CPA. 10 MR. GREER: We're thrilled to have you 11 guys on board. I'm going to be signing the document 12 now to make that official. 13 And Commissioners, if you have any 14 questions... 15 CHAIRMAN CLOWE: We're very happy to 16 have you participating and we appreciate you being 17 here this morning. 18 The Commission is a hundred percent 19 behind this project or program, whichever you might 20 want to call it. And we're -- appreciate your 21 involvement and we look forward to a long relationship 22 in regard to this. 23 MR. LEE: Thank you. 24 COMMISSIONER CLOWE: Thank you. 25 MR. GREER: Thank you for being here 0020 1 this morning. We look forward to working with you. 2 CHAIRMAN CLOWE: Where are you from, by 3 the way? I'd like to know where you came from to be 4 with us this morning. 5 MR. LEE: I'm out of Round Rock. 6 CHAIRMAN CLOWE: Round Rock? 7 MR. LEE: Yes. 8 MR. DAVILA: Here in Austin, North 9 Austin. 10 CHAIRMAN CLOWE: Great. Thank you. 11 MR. HALL: Commissioners, it's also 12 important to note the Texas Lottery Commission 13 continues to be a leader among state agencies to 14 continue to have six mentor protege agreements. And 15 we will be reporting this agreement to TDPC this 16 morning. 17 In closing, I just would like to add so 18 we're clear on what the established relationship would 19 entail. All mentors and proteges have agreed that the 20 relationship among themselves is strictly voluntary 21 and there is no guarantee for contract, no guarantee 22 for relationship or promise for business as a result 23 of being involved with this relationship. 24 The second report I have for you in 25 regards to HUB/minority business participation is 0021 1 related to a monthly contract activity report. 2 I've included in your notebooks a 3 report, which includes the total expenditures of 75 4 million dollars and a total utilization of HUBs at 5 13.2 million dollars, which equates to 17.62 percent. 6 I also want to make you aware as it 7 relates to page four of your report as it relates to 8 DB Dallas. Their percentage and their payment to 9 their subcontractor exceeds the total payments they 10 have received. 11 I've been informed that they have agreed 12 -- they have an agreement with their media placement 13 to pay them in advance prior to the submission as a 14 form of receipt of invoices and they're paid within 15 five days. So you may see the percentage and also 16 payment exceeds their total payment from us to DB 17 Dallas. 18 That's all I have to report on. I'd be 19 happy to answer any questions you have in regard to 20 this agenda item. 21 AGENDA ITEM 9 22 CHAIRMAN CLOWE: Thank you, Robert. I 23 believe you have the next item on the agenda, as well, 24 No. 9, report, possible discussion or action on the 25 agency's contracts. 0022 1 MR. HALL: Yes, sir. This is just a 2 follow-up to inform you or keep you apprised. The BDC 3 Division is in the process of formulating the 4 committee report and recommendation as it relates to 5 Contract Planning Committee. And we will be 6 submitting that report hopefully for the month of May, 7 for the May Commission meeting. 8 The second report that's in your 9 notebook is related to Commission's contracts that 10 exceed over 25 thousand dollars and all contract 11 activity that's going on. 12 I'll be happy to answer any questions 13 you may have with regard to either one of those 14 reports. 15 COMMISSIONER COX: Robert, looks like 16 we've got two and a half pages of contracts that 17 expire on August 31 each year. Does it make any sense 18 to renew some -- when we award those contracts, we 19 make some of them for 12 months, some of them for 14 20 months, some of them for 16, some for 18, etcetera, 21 and do something about that peak load it looks like 22 you got there at August 31st? 23 MR. HALL: If I understand your question 24 correctly, are we planning in advance for those 25 contracts expiring on August 31st? 0023 1 COMMISSIONER COX: Well, the question 2 is: It looks like -- is it true that you have a great 3 big peak load at 8/31? 4 MR. HALL: We have a number of contracts 5 expiring, yes, sir, on August 31. 6 COMMISSIONER COX: And would it make 7 sense to set those things up with a term so that some 8 of them expire on other dates and you spread your 9 workload a little more evenly throughout the year? 10 MR. HALL: I think I -- I'm new. I've 11 been here three years and that was the process that it 12 involved when I was here. I'd like to refer that to 13 Kim to try to answer. 14 MR. BENNETT: Good morning, 15 Commissioners. For the record, my name is Ridgely 16 Bennett. I'm the Deputy General Counsel. 17 The reason that the contracts all end on 18 that date in general is because it coincides with the 19 end of the fiscal year. The agency does do planning 20 so that we don't take the renewals or put out all the 21 procurements at the same time. 22 We start in advance and take renewals in 23 a progressive manner so we don't do it all at one 24 time. But for tracking purposes, it's just much 25 easier to have them coincide with the end of the 0024 1 fiscal year. 2 COMMISSIONER COX: Okay. So you are 3 spreading your workload, even though the contracts all 4 expire the end of the fiscal year. 5 MR. BENNETT: We do our best to, yes. 6 COMMISSIONER COX: Thank you. 7 MS. KIPLIN: But I would -- I would 8 say -- Mr. Bennett, you can correct me. I don't 9 believe that given the Lottery-related contracts for 10 business services that there's a statutory requirement 11 to tie it in to the end of the fiscal year. 12 MR. BENNETT: There's no statutory 13 requirement to do that. That's simply for tracking 14 purposes. 15 CHAIRMAN CLOWE: Robert, I know there's 16 been an organizational change since Mr. Greer came on 17 board as Executive Director regarding this function. 18 Do you have adequate staff to perform 19 the oversight and direction in this area? 20 MR. HALL: We believe -- we believe that 21 we do at this time, yes, sir. 22 CHAIRMAN CLOWE: I want to make it clear 23 that the Commission looks to you now for the proper 24 execution of the responsibilities in this area. And 25 we want to have a very high level of performance in 0025 1 our contracts, performance as well as oversight. 2 And I think I can speak for the 3 Commissioners in saying if you need help or 4 assistance, we want you to call on us. 5 MR. HALL: Yes, sir, I will. 6 CHAIRMAN CLOWE: Now not to any way step 7 around Mr. Greer, but we want you to know that these 8 contracts are a high priority with us. They're a lot 9 of money and they're very important. 10 We get interest expressed from time to 11 time by members of the leadership of the Legislature 12 and we're very confident that you're going to monitor 13 these and direct them with the help of the Legal 14 Division and others in the Commission. 15 MR. HALL: Yes, sir. It is my intent to 16 work with our staff and the Executive Director of the 17 Commission to keep you apprised and informed of all 18 activity. 19 CHAIRMAN CLOWE: And this is a new area 20 of responsibility for you -- 21 MR. HALL: Yes, sir. 22 CHAIRMAN CLOWE: -- in addition to your 23 other duties that you had prior to this 24 reorganization. 25 MR. HALL: And I'm looking forward to 0026 1 the opportunity. Appreciate that. 2 CHAIRMAN CLOWE: Any comment, Mr. Greer? 3 MR. GREER: Yes, sir. I would like to 4 just reinforce that and how much I've enjoyed working 5 with Robert in this area. Yesterday we had a very 6 productive meeting. As a matter of fact, it was very 7 appropriate in reference to long-range planning so 8 that we can get a better handle on this like 9 two-years-outs and begin to develop some plans there 10 that will continue to benefit the organization. 11 CHAIRMAN CLOWE: Great. 12 MR. HALL: Thank you. 13 CHAIRMAN CLOWE: Thank you, Robert. 14 AGENDA ITEM NO. 10 15 CHAIRMAN CLOWE: Next Item No. 10, 16 consideration, possible discussion or action on the 17 agency's business plan. 18 Mr. Anger, good morning. 19 MR. ANGER: Good morning. For the 20 record, my name is Michael Anger and I'm the Lottery 21 Operations Director. I'm here this morning to give 22 you an update on the Commission's business plan. 23 I want to begin by reporting to you on 24 our progress in reviewing the agency's vision, mission 25 and values. The task force is continuing to meet and 0027 1 work through revisions of these statements based on 2 your feedback. I anticipate that we will complete 3 revised drafts in May and submit them to you for 4 consideration. 5 Work has begun on two sections of the 6 business plan. Karen Blizzard, Senior Editor, is 7 overseeing the work on Commission history section. 8 Jim Richardson, Human Resources Director, is 9 overseeing work on the agency management and 10 organizational structure section of the plan. 11 Executive Director Greer will be 12 focusing on goal setting at the agency in the coming 13 weeks. It is my intent to incorporate this work with 14 the agency's stated objectives and strategic plan to 15 begin forming the core of the business planning. 16 I'm continuing to work in monitoring the 17 Commission Sunset legislation for changes in guidance 18 with regard to the business plan and will adjust that 19 plan accordingly. 20 This concludes my report and I'd greatly 21 appreciate any feedback that you have for me. 22 COMMISSIONER COX: Michael, what does 23 your time frame look like on this for completion? 24 MR. ANGER: The Sunset legislation 25 requires September 1st, 2004. However, I anticipate 0028 1 that we will be pursuing a much more aggressive date. 2 A lot depends on what happens with the culmination of 3 the legislative session and its impact here on the 4 agency. 5 But if I were to give you an approximate 6 date at this time, I'm looking at around January 1st, 7 2004, first of next year for completion. 8 CHAIRMAN CLOWE: Thank you, Michael. 9 MR. ANGER: Thank you. 10 AGENDA ITEM NO. 11 11 CHAIRMAN CLOWE: Next Item No. 11, 12 report, possible discussion or action on the financial 13 audit services procurement. 14 Mr. Bennett? 15 MR. BENNETT: Thank you, Commissioners. 16 Again for the record, my name is Ridgely Bennett. 17 The financial audit services procurement 18 was issued on April 15th, 2003. This year the title 19 of the procurement has changed. It is now called the 20 Annual Auditing Services RFP. A copy of the scheduled 21 events has been provided for you in your Commission 22 notebooks and each Commissioner should have received a 23 copy of the actual RFP. 24 I'll be happy to answer any questions 25 you might have. 0029 1 CHAIRMAN CLOWE: Thank you. 2 MS. KIPLIN: I would say -- and you 3 might have mentioned this. I'm sorry if I missed it. 4 But for these procurements, the attorneys serve as the 5 sole point of contact. 6 And so for this one if I'm not mistaken, 7 Mr. Bennett, you are the sole point of contact -- 8 MR. BENNETT: That's correct. 9 MS. KIPLIN: -- for proposals and any 10 communications. 11 MR. BENNETT: For any communications, 12 that's correct. 13 AGENDA ITEM NO. 12 14 CHAIRMAN CLOWE: Thank you. Next Item 15 12, report, possible discussion or action on the 16 drawings audit services procurement. 17 Mr. Marker? 18 MR. MARKER: Good morning, 19 Commissioners. My name is Andy Marker. For the 20 record, I'm the Assistant General Counsel. 21 On April 10th, the Commission issued a 22 request for proposal for lottery drawing audit 23 services. The proposals are due in next month. 24 I'd be happy to answer any questions. I 25 believe a copy of the RFP was provided in the 0030 1 Commissioners' packet. 2 COMMISSIONER COX: No questions. 3 CHAIRMAN CLOWE: Thank you, Mr. Marker. 4 MS. KIPLIN: Mr. Marker serves as the 5 sole point of contact for communications on this one, 6 as well. 7 CHAIRMAN CLOWE: Very good. 8 We are moving rapidly through the 9 agenda. And instead of going into Executive Session 10 at this time, I'd like to go directly to Item 15. And 11 then following that, I'm going to call on the 12 Executive Director and the Charitable Bingo Operations 13 Director for their reports. 14 AGENDA ITEM NO. 15 15 CHAIRMAN CLOWE: We will now consider 16 the status and possible entry of orders in cases 17 listed in letters A through U. 18 MS. KIPLIN: Commissioners, what you 19 have before you, with the exception of U, are cases 20 that were -- occurred or were held over at the State 21 Office of Administrative Hearings. In all those 22 cases, those were Lottery cases. 23 I want to carve out item F, New J.C. 24 Supermarket, and talk about the other ones. The other 25 ones recommended -- recommendation by the 0031 1 administrative law judge was to revoke the license due 2 to insufficient funds at the time that the Lottery 3 swept the account. And the staff does recommend that 4 you adopt the administrative law judge's Proposal for 5 Decision and proposed Order in those cases. 6 Item F is different than what you've 7 seen before in the sense that this was a matter that 8 was reopened and the respondent produced bank error 9 letters that indicated that the reason for the 10 insufficient funds at the time that we swept the 11 account was due to bank error. 12 The practice of this agency is when we 13 do receive bank error letters, we do not move forward 14 in taking disciplinary action against that licensee. 15 This Order, as a result, was a no revoke. Staff does 16 recommend that you sign that Order, as well. 17 Onto -- if I could -- U. That is the 18 one that is a proposed Settlement Agreement and Agreed 19 Order between a distributor, bingo supply distributor 20 and the Bingo Division. The Agreed Order is to 21 require the respondent to implement procedures to 22 ensure that the violation that was noted would not 23 occur again. 24 And the violation had to do with a 25 statutory requirement that bingo distributors do not 0032 1 allow debt from the authorized organizations to 2 continue past 30 days. In other words, they have to 3 pay upon receipt or within 30 days. And in this case, 4 that wasn't occurring. Staff does recommend that you 5 enter that Agreed Order as well. 6 I'd be happy to answer any questions 7 that you have. 8 CHAIR CLOWE: Any questions? 9 COMMISSIONER COX: I have a question. 10 CHAIRMAN CLOWE: Yes, sir. 11 COMMISSIONER COX: Kim, I'm looking at 12 Item F, New J.C. Supermarket. 13 MS. KIPLIN: Yes, sir. 14 COMMISSIONER COX: It says here on page 15 three, item eight, A, B, C and D that these NSFs 16 occurred on May 22, November 20, November 27 and 17 December 4. 18 MS. KIPLIN: Uh-huh. 19 COMMISSIONER COX: Why did it take so 20 long for us to find out that there were bank errors? 21 MS. KIPLIN: It's my understanding that 22 the respondent -- and I'll ask Ms. Wilkov. And Mr. 23 Bennett, I think you handled the first part of this 24 hearing. It's my understanding that this was a 25 reopened matter in the sense that the respondent did 0033 1 not appear at the first hearing and then submitted the 2 bank error letters. 3 The administrative law judge treated 4 that -- these are generally pro se respondents. And 5 it's been my experience that when people appear 6 without counsel, that the administrative law judges do 7 try to make sure that there's ample due process 8 provided these respondents. 9 She treated the sending of the bank 10 error letters as a request to reopen the hearing. And 11 so those letters -- so that's what caused the hearing 12 to be reopened. 13 With regard to the particular 14 nonsufficient funds, we tracked those three in a 15 calendar year. And so they're straggled out. And we 16 would not have caught the May 22nd until we had -- as 17 you can tell, these were one week in succession. 18 COMMISSIONER COX: Uh-huh. 19 MS. KIPLIN: And so as a result, those 20 weeks just piled up and we were in the process of -- 21 my hunch is -- following our normal process, 22 suspending this license and moving forward to revoke. 23 And so that was the issue. 24 I'm sure that they could probably do a 25 better job in terms of the detailed information in 0034 1 this case. 2 COMMISSIONER COX: Well, the B, C and 8 3 -- B, C, and D look like they could all be somebody 4 closing an account they shouldn't have. And maybe it 5 would carry over for that length of time, but I'm -- I 6 guess I'm really asking a procedural question. 7 When we get an NSF notice on one of 8 these things, do we contact the licensee and say: 9 "What are you going to do about payment?" 10 And do they say, "Well, it was a bank 11 error" or do they say "We'll pay you when we get it" 12 or how does all that work? 13 MR. BENNETT: I believe that Mike Anger, 14 the Director of the Lottery Operations Division is the 15 appropriate person to respond to that question. 16 MR. ANGER: Commissioner, when we have a 17 retailer that goes NSF as a result of an account 18 sweep, essentially what happens is we begin action 19 with regard to that account. And we -- you know, we 20 halt sales at that location and we take action with 21 regard to collection of those monies. 22 If we don't receive collection of those 23 monies, we begin the process of revocation of the 24 license. And so in this case, this retailer went NSF 25 with us, made payment and continued to go NSF with us 0035 1 on multiple occasions. 2 And so they fell into the criteria where 3 we went ahead and decided to take action with regard 4 to the license for final revocation. 5 Does that answer your question? 6 COMMISSIONER COX: Kind of. Would it be 7 true that if they were able to establish that there 8 was a bank error in only one of these that they would 9 not then have the four and they would not be eligible 10 for revocation? 11 MR. ANGER: They would be with -- with a 12 total of three, we could take action with regard to 13 revocation. That's been our practice. What happened 14 was is this party came forward, contacted the 15 administrative law judge, and presented bank error 16 letters for all four -- 17 COMMISSIONER COX: For all four? 18 MR. ANGER: -- incidents. I believe 19 that's correct. 20 MS. KIPLIN: Not May. Let me -- let me 21 correct that. 22 MR. ANGER: Not for May. 23 MS. KIPLIN: Not for May. 24 MR. ANGER: Okay. 25 MS. KIPLIN: Commissioners, we have a 0036 1 three strikes and you're out rule. So if you -- if 2 you go NSF three times in a calendar year, regardless 3 of whether you make the Lottery whole, make the State 4 whole, we're still going to take your license away 5 because we're done. 6 If you go down one time and you make the 7 Lottery whole, two times you make the Lottery whole, 8 then we're not done. We'll continue to do business 9 with you. In May, the respondent went down, was NSF, 10 but made the Lottery whole. 11 And so along comes the three that -- 12 that trigger the three strikes and you're out rule and 13 those were the three in which, it's my understanding, 14 she was able to produce bank error letters. 15 COMMISSIONER COX: Okay. Thank you. 16 MS. WILKOV: Commissioner, my name is 17 Penny Wilkov for the record. I was the attorney at 18 this hearing. 19 And one of the reasons that she came 20 forward at this late date was that she alleged there 21 was some theft at her store and she was not able to 22 bring the balance current. 23 I think she owed around nine thousand 24 dollars or so. And so she brought -- she had 25 submitted that money, I think, the week before. Plus 0037 1 she had the bank error letters. So she was completely 2 current and had the bank error letters at the time of 3 the hearing. 4 MS. KIPLIN: But we don't -- we don't 5 take theft as a mitigating circumstance. We hold 6 those respondents responsible for their own operations 7 in the store and we look to what they owe the Lottery. 8 COMMISSIONER COX: Thank you, Penny. 9 Thank you, Kim. 10 CHAIRMAN CLOWE: Michael, what is the 11 percentage of bad debt write-off the Lottery 12 experienced in the last fiscal year? 13 MR. ROGERS: .02. 14 MR. ANGER: Ed Rogers, the Retailer 15 Services Manager is indicating that it's .02 percent. 16 CHAIRMAN CLOWE: .02 percent on an 17 annual basis? 18 MR. ANGER: Yes, sir. That's correct. 19 MR. GRIEF: That's in total sales. 20 CHAIRMAN CLOWE: Total sales? And that 21 would be in all the games? 22 MR. ANGER: That's correct. 23 MS. KIPLIN: I would say that we have a 24 pretty aggressive -- and Mr. Anger and Mr. Rogers in 25 the back, the Section Chief for -- or mid-level man or 0038 1 I don't know the title is for the Retailer Accounting. 2 And we have a very aggressive collections department. 3 We have the authority to treat these 4 debts as if they were tax. And so we have the 5 authority under the Tax Code to file liens and levy 6 accounts. And a goodly bit of the portion of the debt 7 that goes to the .02, I'm going to guess, are 8 bankruptcies where we are stayed. We have automatic 9 stays that prevent us from moving forward on the 10 pre-petitioned debt. 11 And I'm sure either one of them can 12 correct me if I'm wrong. 13 MR. GRIEF: You had asked the amount. 14 If I remember correctly, it's approximately 400 15 thousand dollars. 16 COMMISSIONER COX: Thank you. 17 CHAIRMAN CLOWE: Any further questions? 18 COMMISSIONER COX: No. 19 CHAIRMAN CLOWE: Move the adoption of 20 the recommended Orders, staff recommendations for 21 cases covered listed letter A through U. 22 Is there a second? 23 COMMISSIONER COX: Second. 24 CHAIRMAN CLOWE: All in favor, aye. 25 COMMISSIONER COX: Aye. 0039 1 CHAIRMAN CLOWE: Aye. 2 Opposed, no. 3 The vote is two zero in favor. 4 We'll take a minute to sign these Orders 5 now. I'll be calling on you next, Mr. Greer. Are you 6 ready? 7 MR. GREER: Always ready, sir. 8 AGENDA ITEM NO. 16 9 CHAIRMAN CLOWE: Now Mr. Greer under 10 Item 16 we'd like your report please, sir. 11 MR. GREER: Commissioners, it's my 12 pleasure this morning to bring you up to date on some 13 of the things that have been going on here at the 14 Commission since our last meeting together. 15 The first thing I wanted to bring you 16 aware of as a group was the fact that the Amber Alert 17 press conference went off very well. The governor 18 came over, introduced the project to the media and the 19 staff was present. 20 I have in front of you one of the nicer 21 marketing pieces that we utilized in that press 22 conference. It was well-received. We had a very good 23 response to that. Specifically, I wanted to thank and 24 mention the great job that was done by Marketing 25 Operations in getting it set up. There's a lot of 0040 1 work that goes into having the governor on board, as 2 well as Security. 3 We did a drawing for the governor, as 4 well as a brief tour and it was well-received and I 5 was really pleased to be a part of that. 6 Secondly, we had a wonderful retailer 7 forum in San Antonio the first part of April. I 8 participated in that. We had about 80 some-odd 9 contestants or retailers, whatever you want to call 10 them, in the crowd. They were great, asked a lot of 11 tough questions, actually. We rolled out the new game 12 to them, got a lot of good feedback, and I was proud 13 to be a part of that. 14 One of the new projects that is on 15 track, hopefully will move through the legislative 16 process, is to set up an on-line store. The on-line 17 store will be available to the public, as well as 18 employees, for Lottery items, logos, products, things 19 like that. And that's moving ahead. 20 We focus this month on who moved my 21 cheese, which is to create a change-ready 22 organization. There's a book and a video that we 23 participated in. We'll be doing a series of training 24 events to follow that up. It was well-received by the 25 staff. That's kind of one of the jokes around here 0041 1 right now that I'm moving their cheese on a regular 2 basis and look toward to continuing to do that. 3 We have an internal newsletter that will 4 begin at the end of the month. The Marketing 5 Department and Communications have worked with me and 6 I'm excited about moving that forward. There will be 7 varying things in there about the organization, 8 including Bingo. And I look forward to presenting you 9 with that here in the next couple of weeks. 10 Our theme in May will be goal setting. 11 I'll be doing a series of talks on goal setting. My 12 theme of teamwork will continue to move forward and 13 goal setting is a part of that and look forward to 14 bringing you a report on that next month. 15 We have changed some things in the 16 Communications area. We're moving people around to 17 create an environment that will be a more 18 press-oriented organization and have changed the name 19 to Media Relations Department. 20 I will begin interviewing for the Media 21 Relations Director the next week and hope to move 22 forward on that quickly. We have some great 23 applicants. I'm looking forward to getting that 24 process underway. 25 We took a tour of the Multimedia Group 0042 1 operations center, the video lottery thing, obviously 2 one thing that we're considering and looking at. And 3 it was especially beneficial for me to get an overview 4 of what VLTs is all about. They gave us a great tour 5 and overview and I was pleased to be a part of that. 6 Last week I was in Midland. I went to 7 our Odessa claim office, had a visit with the staff 8 there, was a part of a check presentation to the 9 retailers. Our $5 million winner showed up, as well. 10 It was a great day for me to have an opportunity to 11 visit with people outside of Austin and look forward 12 to continuing to do that to be the ambassador for the 13 Lottery. 14 May the 9th the Gtech operation will be 15 having a seminar here in Austin. I will be 16 participating. The CEO of Gtech will be here, Mr. 17 Bruce Turner, as well as other high-level management 18 from Gtech. And I'm looking forward to bringing you 19 the report on how that goes. 20 With us this morning is our new 21 Financial Director, Mr. Lee Deviney. Lee, will you 22 stand up? I think y'all met him back there, but just 23 to re-acquaint you with him. He comes with a great 24 resume and background with the Legislative Budget 25 Board. He served as numerous organizations here in 0043 1 Austin and most recently was with the Agriculture 2 Department. 3 He started yesterday and I'm glad to 4 have him on the team and look forward to getting to 5 know him better and look forward to you getting to 6 know him better, as well. 7 On Saturday, I will be presenting a 8 million-dollar check on Texas Two-Step in San Antonio 9 to some winners that were up here bouncing around 10 yesterday, very excited, literally bouncing around. 11 And we're also looking to re-acquaint the San Antonio 12 media market with the fact that we have a $5 million 13 outstanding ticket that has not been claimed yet and 14 hopefully bring that to their attention. 15 CHAIRMAN CLOWE: Is that a bunch of 16 truck drivers -- 17 MR. GREER: It is. 18 CHAIRMAN CLOWE: -- from San Antonio? 19 MR. GREER: A bunch of truck drivers 20 from San Antonio, four of them. 21 CHAIRMAN CLOWE: Wear your boots and big 22 hat. 23 MR. GREER: I'm going to. 24 And lastly, and a very great opportunity 25 to thank you, Chairman Clowe, for all you've done for 0044 1 the Commission. We understand that there's a special 2 day coming up in your life I believe tomorrow. And we 3 have a birthday card that I'd like to present you with 4 at this point upside down, but it's still right. 5 It's a big birthday and we wanted you to 6 know that we all care about you and thank you. 7 CHAIRMAN CLOWE: Oh, that's nice. Thank 8 you. 9 MR. GREER: And take a quick picture. 10 Hold that thought. Hold that thought. 11 CHAIRMAN CLOWE: It's digital, so you 12 can't tell when it goes off. Thank you. 13 MR. GREER: Thank you. And in summing 14 up, I just want to thank you again for the opportunity 15 to be here. Love this job. Things are going well. 16 We continue to move forward making positive changes 17 and look forward to bringing another good report next 18 month on what's going on. 19 And I'd be open to any questions you 20 might have. 21 CHAIRMAN CLOWE: In order of importance, 22 least thank you for acknowledgment of my 70th 23 birthday. And I remember when I was younger and I 24 thought people 70 years old ought to go somewhere with 25 the elephants, you know. 0045 1 Being part of this Commission and this 2 agency is one of the things that keeps me young. It's 3 really a pleasure for me at my advanced age to be a 4 part of what's going on here and I enjoy it and I 5 thank all of you who signed this. It's very 6 thoughtful and I'm very grateful. 7 Next, Lee, we're very glad to have you 8 on board. You and I go back, you reminded me this 9 morning. How many years was it, 16 years? 10 MR. DEVINEY: 14. 11 CHAIRMAN CLOWE: 14? To when I was with 12 the Railroad Commission and Lee was auditing. And 13 it's always great to run into a person that you have 14 worked with in the past. And I think I can say on 15 behalf of Commissioner Cox and myself and Commissioner 16 Whitaker, as well, that we're very happy to have you 17 here in a very vital job as part of this Commission. 18 And lastly, I've been talking about you 19 behind your back, Reagan. So I'll now talk about you 20 in front of your face. I ran into an employee of the 21 Commission in the parking lot this morning when I 22 rolled in about seven o'clock. And it's a person that 23 I respect and I think is a very solid employee here. 24 And without any preamble, that 25 individual said: You know that guy, Reagan Greer, is 0046 1 doing a good job. And we're glad he's here. 2 And he talked about leadership and team 3 building, which is your theme. And I think it's good 4 to have that kind of feedback on an informal impromptu 5 basis outside of a meeting in a parking lot. 6 And when you begin to hear that from 7 folks who are being impacted by your leadership style, 8 your message, that's a true sign in my opinion of 9 results producing efforts. And I think that's what we 10 need here at this Lottery. And I'm most appreciative 11 of the fact that you're dwelling on that and I think 12 you'll get even more results in the future. 13 So we're glad you're here. We're glad 14 you're finding this job exciting. And I also want to 15 comment on what I know is the support that Gary Grief 16 is giving you. Gary is a great Deputy Executive 17 Director and has kept it in a position where you can 18 come in and do the things that you want to do. And 19 you two make a great team. 20 MR. GREER: Thank you. It's going 21 great. 22 AGENDA ITEM NO. 17 23 CHAIRMAN CLOWE: Next I want to call on 24 Billy Atkins, Item 17, report by the Charitable Bingo 25 Operations Director. 0047 1 Good morning, Billy. 2 MR. ATKINS: Good morning, Mr. Chairman. 3 Happy birthday. 4 CHAIRMAN CLOWE: Thank you. 5 MR. ATKINS: I don't have a lot to add 6 to my report. Just real quickly to update, we're 7 continuing on the background for the position, the 8 audit position in our Houston Regional Office. 9 We do have an Advisory Committee meeting 10 scheduled for tomorrow. And I understand, 11 Commissioner Clowe, you're going to try to make all or 12 part of that meeting as your schedule allows. 13 CHAIRMAN CLOWE: I am. What's your 14 plan, Commissioner Cox? 15 COMMISSIONER COX: If you need to miss 16 part of it, I can fill in. 17 CHAIRMAN CLOWE: Could I be there at the 18 kick off 10:30? 19 MR. ATKINS: 10. 20 CHAIRMAN CLOWE: 10 o'clock and maybe 21 excuse myself around noon and then you can attend? 22 COMMISSIONER COX: That would be fine. 23 CHAIRMAN CLOWE: I think it's really 24 great to have two commissioners able to sit in on the 25 meeting the way we're doing it. So that's what we'll 0048 1 plan. 2 MR. ATKINS: Okay. Great. We did -- 3 the memo that I handed out, I'm sorry it wasn't 4 included in your notebook. It should have been. It 5 was for allocations for the fourth quarter of 2002. 6 We made those at the beginning of March. 7 And again as the memo indicates, 8 allocations are up over previous quarters. And one of 9 the things that we attribute that to is the increase 10 that we've seen in pull-tabs. We should have final 11 figures, preliminary final figures for the first 12 quarter of 2003 by the 25th of this month. And we 13 will continue to monitor those for sales. 14 We did conduct one presentation in Waco 15 at the Redman Convention and a survey of those 16 attendees is included in your notebook. And also I've 17 included a bulletin from the upcoming Niagra 18 Conference in Winnipeg from May 4th to the 7th. 19 Even though we're not attending 20 personally, two of my staff members have prepared 21 videos to be presented at two of the sessions. So 22 we're at least able to participate that way. 23 And other than that, I'd be happy to 24 answer any questions you may have. 25 COMMISSIONER COX: Billy, the fees that 0049 1 are allocated to the cities and the counties, do those 2 typically go into the general fund or are they 3 designated for some purpose? 4 MR. ATKINS: The revenue that the cities 5 and counties receive? 6 COMMISSIONER COX: Uh-huh. 7 MR. ATKINS: It goes to their general 8 fund. 9 COMMISSIONER COX: Thank you. 10 CHAIRMAN CLOWE: Billy, do you have any 11 additional comment on the implementation of the Bingo 12 Accounting System? 13 MR. ATKINS: I don't. We continue with 14 testing. We did have a situation last week where the 15 server was down and we lost approximately two days of 16 testing, but we are working with the manufacture on 17 negotiating a change request to the schedule. 18 Testing has resumed and I believe we're 19 over 80 percent complete now on the testing and should 20 have all of the modules tested by the middle of May. 21 CHAIRMAN CLOWE: Good. So you're moving 22 right along. 23 MR. ATKINS: Yes, sir. 24 CHAIRMAN CLOWE: I am reading a 25 substantial bit of information in the Dallas paper 0050 1 about the no smoking ban in the city of Dallas. And 2 there's been some coverage talking about the impact on 3 bingo operations in Dallas. 4 Would you give us your take on where 5 that is, as far as any feedback that you may or may 6 not be getting. 7 MR. ATKINS: I haven't personally 8 received any calls from any operators in the Dallas 9 area. We've been monitoring those same reports or 10 news articles that you've been seeing. Because the 11 ban took effect, I believe, March 1st, which is in the 12 middle of one of our reporting quarters, it will be 13 difficult for us to identify any real impact from 14 those total quarterly figures. 15 So one of the things that we're going to 16 try and do is access some card-minding systems via the 17 modem, which they're required to have, and see if we 18 can identify any changes at least to the information 19 that's contained on those systems immediately prior to 20 and sometime after the implementation of that smoking 21 ban to see if we can confirm that effect. 22 CHAIRMAN CLOWE: Great. 23 COMMISSIONER COX: Billy, this morning's 24 Metro section in the Austin American-Statesman had an 25 article on just this issue and indicated that they're 0051 1 planning litigation. Kim, is that going to have any 2 impact on us? 3 MS. KIPLIN: I read the headline and 4 briefly scanned the article and it's my understanding 5 they've already filed that litigation claiming that 6 the ordinance is unconstitutional. 7 We are not a party to that action. I 8 can't imagine that we would be a party to that action. 9 Their issue is with the Austin City Council adopting 10 an ordinance. So it seems to me that it's a -- it's 11 litigation against the City. 12 And I will get the pleadings and will 13 begin to monitor that lawsuit. But I don't -- I don't 14 see that we will be considered to be a party. We may 15 be brought in on some sort of third party discovery. 16 And they may be wanting to be able to prove up damages 17 or injuries and may wish to try to get information 18 from the Bingo Division regarding sales information. 19 We'll just have to -- I'll have to take 20 a look at the pleadings and go from there. The City 21 Attorney has in-house counsel, and as I understand, a 22 very strong litigation section. And I imagine that 23 that will be the section that will defend. 24 COMMISSIONER COX: Thank you. 25 MR. ATKINS: This is -- I think we've 0052 1 talked in the past, Commissioners. These types of 2 smoking bans are becoming more and more common in 3 municipalities, not only in Texas but around the U.S. 4 And also from my position on Niagra, I'm aware of a 5 number of the Canadian provinces that have imposed 6 similar smoking bans that affect bingo operations. 7 Again, we have heard from other 8 operators and I'm -- the first one I'm thinking of is 9 the City of Lubbock. A number of our operators were 10 concerned when that smoking ban went into effect. It 11 has gone into effect. However, they still seem to be 12 in operation. 13 So again, we'll monitor it as closely as 14 we can. 15 COMMISSIONER COX: Billy, in the 16 material that you included with your report, there was 17 information about an on-line bingo game. 18 MR. ATKINS: Yes, sir. 19 COMMISSIONER COX: And of course, in an 20 on-line bingo game, one could smoke or not smoke as 21 one chose. Is there any indication what kind of 22 impact the on-line bingo games are having, if any, on 23 the bingo operations that our licensees conduct? 24 MR. ATKINS: We don't have any 25 information other than the collection of newspaper 0053 1 articles, etcetera, that we have ready access to. 2 That is one of the things that we anticipated. One of 3 the items under the Advisory Committee's work plan is 4 an examination of other types of gaming, which could 5 include on-line bingo games, and their possible 6 effect. 7 No operators have reported to me that 8 they have any impression that their attendance, 9 etcetera, is affected by on-line bingo games. I do 10 know that there is current activities taking place in 11 England among several of the larger gaming companies 12 to offer on-line bingo games. 13 And the English jurisdictions seem to be 14 a little more progressive than we are here in North 15 America on the introduction of those types of new 16 games. So that again is something that we're 17 following closely. 18 What we have heard in the past from both 19 players and operators is that at least from your 20 traditional bingo player, what is as important to them 21 as the game is the social aspect of it, which of 22 course is lost on the Internet, although most of the 23 gaming -- most of the bingo gaming sites that we have 24 reviewed have a chat room feature. 25 But you know, it's still not the same as 0054 1 sitting across the table from a person. But it could 2 be that these on-line games would draw potential new 3 players from the bingo hall. So again, that's 4 something that we'll be monitoring as information 5 becomes available. 6 COMMISSIONER COX: Thank you. 7 CHAIRMAN CLOWE: Billy, if it's properly 8 noticed for the BAC meeting tomorrow, it would be nice 9 to see what feedback there is from that group on this 10 subject. 11 MR. ATKINS: Okay. We'll have to look 12 at the agenda. 13 AGENDA ITEM NO. 18 14 CHAIRMAN CLOWE: Is there anyone wishing 15 to make public comment to the Commission at this time? 16 AGENDA ITEM NO. 13 17 CHAIRMAN CLOWE: Commissioner Cox, if 18 you have no objection, I'm going to move we go into 19 Executive Session. Anything further? 20 COMMISSIONER COX: No, sir. 21 CHAIRMAN CLOWE: I want to point out to 22 everyone that we have moved over Item 6, which is 23 still on the agenda and may be considered when the 24 Commission comes back in to the public meeting 25 following Executive Session. 0055 1 At this time, I move that the Texas 2 Lottery Commission go into Executive Session to: 3 Deliberate the duties of the Executive 4 Director and/or Deputy Executive Director pursuant to 5 551.074 of the Texas Government Code;. 6 To deliberate the appointment, 7 employment, and duties of the Internal Audit Director 8 pursuant to Section 551.074 of the Texas Government 9 Code;. 10 To deliberate the duties and 11 reassignment of the Internal Audit Division Senior 12 Auditor and/or Auditor VI pursuant to Section 551.074 13 of the Texas Government Code;. 14 To deliberate the duties of the 15 Charitable Bingo Operations Director pursuant to 16 Section 551.074 of the Texas Government Code;. 17 To deliberate the duties of the General 18 Counsel pursuant to Section 551.074 of the Texas 19 Government Code;. 20 To deliberate the duties of the Security 21 Director pursuant to Section 551.074 of the Texas 22 Government Code;. 23 To receive legal advice regarding 24 pending or contemplated litigation and/or to receive 25 legal advice pursuant to Section 551.074 (1)(A) or (B) 0056 1 of the Texas Government Code and/or to receive legal 2 advice pursuant to Section 551.074 (2) of the Texas 3 Government Code, including but not limited to: TPFV 4 Group Inc. versus Texas Lottery Commission, Retired 5 Sergeant Majors' Association et al versus Texas 6 Lottery Commission et al, Scientific Games and Pollard 7 Banknote versus Texas Lottery Commission and Linda 8 Cloud, Executive Director, Keane versus Texas Lottery 9 Commission, Patsy Henry versus Texas Lottery 10 Commission, Ieric Rogers versus Doyle Miller et al, 11 Sandy Suber et al versus Gtech Corporation, contract 12 regarding the charitable bingo system, employment law, 13 personnel law, procurement and contract law and 14 general government law. 15 Is there a second? 16 COMMISSIONER COX: Second. 17 CHAIRMAN CLOWE: All in favor, say aye. 18 COMMISSIONER COX: Aye. 19 CHAIRMAN CLOWE: Aye. 20 The vote is two zero in favor. 21 The Texas Lottery Commission will go 22 into Executive Session. The time is 9:37 a.m. Today 23 is April the 23rd, 2003. Thank you. 24 (Executive Session from 25 9:37 a.m. to 11:09 a.m.) 0057 1 AGENDA ITEM NO. 14 2 CHAIRMAN CLOWE: The Texas Lottery 3 Commission is out of Executive Session. The time is 4 11:09 a.m. 5 Is there any action to be taken as a 6 result of Executive Session? 7 COMMISSIONER COX: Mr. Chairman, I'd 8 like to offer a motion. I move that we offer the 9 position of Director of Internal Audit of the Texas 10 Lottery Commission to Catherine Melvin at an annual 11 salary of 85 thousand dollars a year with her to 12 assume those duties as soon as -- as soon as possible. 13 CHAIRMAN CLOWE: I second the motion. 14 All in favor, please say aye. 15 COMMISSIONER COX: Aye. 16 CHAIRMAN CLOWE: Aye. 17 Opposed, no. 18 The vote is two zero in favor. 19 Would you like to come forward and be 20 offered employment? 21 MS. MELVIN: I certainly would. 22 CHAIRMAN CLOWE: Catherine, we're happy 23 to have you here and you heard the motion that the 24 Commissioner made and that has been approved by the 25 Commissioners. 0058 1 We'd like to hear from you if you would 2 accept employment here as Director of Internal Audit. 3 MS. MELVIN: Commissioners, thank you 4 very much for that offer. And I certainly do accept 5 it. 6 CHAIRMAN CLOWE: Very good. Do you have 7 anything else you'd like to say to us? 8 MS. MELVIN: I just want to thank you 9 for this opportunity. I look forward to working with 10 and having a strong partnership with management. And 11 I consider this quite an honor to be asked to join 12 your team. 13 And I just want you to know that I take 14 very seriously the confidence and trust that you place 15 in the Internal Audit position and look forward to 16 contributing to the continued success of the 17 Commission. 18 CHAIRMAN CLOWE: Thank you. 19 MS. MELVIN: Thank you. 20 CHAIRMAN CLOWE: Any comments, 21 Commissioner? 22 COMMISSIONER COX: No, sir. 23 CHAIRMAN CLOWE: Thank you very much, 24 Katherine. 25 AGENDA ITEM NO. 13 0059 1 CHAIRMAN CLOWE: And now I'm going to 2 move that the Texas Lottery Commission go into 3 Executive Session to: 4 Deliberate the duties of the Executive 5 Director and/or Deputy Executive Director pursuant to 6 Section 551.074 of the Texas Government Code;. 7 To deliberate the appointment, 8 employment and duties of the Internal Audit Director 9 pursuant to Section 551.074 of the Texas Government 10 Code;. 11 To deliberate the duties and 12 reassignment of the Internal Audit Senior Division 13 Auditor and/or Auditor VI pursuant to Section 551.074 14 of the Texas Government Code;. 15 To deliberate the duties of the 16 Charitable Bingo Operations Director pursuant to 17 Section 551.074 of the Texas Government Code;. 18 To deliberate the duties of the General 19 Counsel pursuant to Section 551.074 of the Texas 20 Government Code. 21 Is there a second? 22 COMMISSIONER COX: Second. 23 CHAIRMAN CLOWE: All in favor, please 24 say aye. 25 COMMISSIONER COX: Aye. 0060 1 CHAIRMAN CLOWE: Aye. 2 The vote is two zero in favor. 3 The Texas Lottery Commission will go 4 into Executive Session. The time is 11:10 a.m. Today 5 is April 23rd, 2003. 6 (Executive Session from 7 11:12 a.m. to 11:48 a.m.) 8 AGENDA ITEM NO. 14 9 CHAIRMAN CLOWE: The Texas Lottery 10 Commission is out of Executive Session. The time is 11 11:48 a.m. 12 Is there any action to be taken as a 13 result of Executive Session? I believe not. 14 Is there any other business to come 15 before the Commission at this time? I believe not. 16 AGENDA ITEM NO. 19 17 CHAIRMAN CLOWE: Therefore, we are 18 adjourned. Thank you all very much. 19 (Meeting adjourned at 11:48 a.m.) 20 21 22 23 24 25 0061 1 REPORTER'S CERTIFICATION 2 3 STATE OF TEXAS ) 4 COUNTY OF TRAVIS ) 5 6 I, David Bateman, RPR, Certified Shorthand 7 Reporter in and for the State of Texas, do hereby 8 certify that the above-captioned matter came on for 9 hearing before the TEXAS LOTTERY COMMISSION as 10 hereinafter set out, that I did, in shorthand, report 11 said proceedings, and that the above and foregoing 12 typewritten pages contain a full, true, and correct 13 computer-aided transcription of my shorthand notes 14 taken on said occasion. 15 16 Witness my hand this the ^ day of April, 17 2003. 18 19 ___________________________________ 20 David Bateman, RPR, Texas CSR #7578 21 Expiration Date: 12/31/03 22 1609 Shoal Creek Blvd, Suite 202 23 Austin, Texas 78701 24 (512) 474-4363 25 JOB NO. 030423DPB