1 1 ****************************************************** 2 BEFORE THE 3 4 TEXAS LOTTERY COMMISSION 5 6 AUSTIN, TEXAS 7 8 MAY 12, 2000 9 ****************************************************** 10 11 BE IT REMEMBERED that the above-entitled matter 12 came on for hearing on the 12th day of May, 2000, 13 beginning at 8:31 a.m., and ending at 12:32 p.m., at 14 the TEXAS LOTTERY COMMISSION, 611 East Sixth Street, 15 Austin, Texas, and the following proceedings were 16 stenographically reported by MARY SCOPAS, RPR, CSR for 17 the State of Texas. 18 APPEARANCES 19 CHAIR C. TOM CLOWE, JR. 20 COMMISSIONER ANTHONY J. SADBERRY 21 COMMISSIONER ELIZABETH WHITAKER 22 MS. KIMBERLY L. KIPLIN, GENERAL COUNSEL 23 MS. LINDA CLOUD, EXECUTIVE DIRECTOR 24 MR. BILLY ATKINS, CHARITABLE BINGO OPERATIONS 25 DIRECTOR. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 2 1 CHAIR CLOWE: And now, if everyone is 08:40 2 ready, we'll call the meeting to order. It is 8:31 on 08:40 3 May the 12th. And commissioners are present -- all 08:40 4 commissioners are present. We'll go immediately to 08:40 5 Item 3, which I had just mentioned off the record. 08:40 6 For the record, my name is C. Tom Clowe Junior. And 08:40 7 I'll ask Mr. Rick Johnson to come and address The 08:40 8 Commission. 9 MS. KIPLIN: And the item is the 08:40 10 consideration of and possible discussion and/or 08:40 11 possible action, including public comment, on proposed 08:40 12 amendments to the Lotto Texas on-line game rules, 08:40 13 16 TAC Section 401.305. 08:41 14 CHAIR CLOWE: Thank you, counselor. 08:41 15 Good morning, Rick. 08:41 16 MR. JOHNSON: Good morning. Thank you. 08:41 17 I am Rick Johnson, president of the Texas Food 08:41 18 Industry Association and the Texas Lottery 08:41 19 Association. I'd like to speak before you today to 08:41 20 clarify some of the issues that we discussed about -- 08:41 21 on our survey last time I was here. 08:41 22 I've been questioned about the 08:41 23 procedures that were used in the survey that TALR 08:41 24 initiated. And I would like to explain exactly how 08:41 25 the survey was compiled and eliminate any confusion. 08:41 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 3 1 Nelda Trevino called me after the March 08:41 2 commissioners meeting to inform me of the proposed 08:41 3 changes in the matrix for the lotto game from 50 to 54 08:41 4 balls. She asked that we help by informing the 08:41 5 retailers of the proposed changes. I agreed to assist 08:41 6 her and offered to mail a bulletin to our members 08:41 7 explaining the changes with an agree or disagree 08:42 8 response from the retailers that they could return to 08:42 9 us. Nelda then faxed us a copy of the proposed 08:42 10 changes and anticipated benefits if the changes were 08:42 11 implemented. I turned this information over to our 08:42 12 director of communications, Leslie Hunt, to compose 08:42 13 the survey. She faxed the survey back to Nelda to 08:42 14 ensure accuracy of the fact. Nelda then made a few 08:42 15 superficial changes to the document, but nothing 08:42 16 significant. 08:42 17 Leslie informed me that in no way did 08:42 18 the Lottery Commission employees influence the content 08:42 19 of the survey. Nelda then called and said GTECH had 08:42 20 volunteered their sales force to help distribute the 08:42 21 surveys since they were in the stores twice a month. 08:42 22 I welcomed their assistance in distributing the 08:42 23 surveys so they could reach all retailers selling 08:42 24 lottery products. A representative of GTECH came by 08:42 25 our office and picked up the survey. GTECH printed 08:42 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 4 1 the survey and distributed it to their sales force, 08:42 2 who in turn distributed the documents to the 08:43 3 retailers. 08:43 4 About two days before the April 08:43 5 commissioner's meeting, Larry King and Ramona Vera 08:43 6 brought the surveys to my office with a total count. 08:43 7 I added the totals they had given me with the totals 08:43 8 we received in our office and found -- and then 08:43 9 reported those totals to the commissioners at the 08:43 10 April meeting. I did not personally count all the 08:43 11 surveys that GTECH brought into our office. They had 08:43 12 a tally sheet. And I just added those with those. 08:43 13 I just wanted to clarify that, because 08:43 14 like I said, I had been questioned about the 08:43 15 procedures. Does anybody have any questions? 08:43 16 MS. WHITAKER: Do you have any reason 08:43 17 to believe -- do you have any reason to believe that 08:43 18 the results or vote by any of the retailers would not 08:43 19 reflect their true view? 08:43 20 MR. JOHNSON: No. 08:43 21 MS. WHITAKER: Have you -- you, of 08:43 22 course, have read the survey? 08:43 23 MR. JOHNSON: Yes. 24 MS. WHITAKER: And you're aware of 08:43 25 comments about how it characterized the New York 08:43 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 5 1 lottery. 08:44 2 In your opinion, is the statement in 08:44 3 the survey about the New York lottery correct or 08:44 4 incorrect? 08:44 5 MR. JOHNSON: In my opinion, if we 08:44 6 were -- it's correct, because we were using 08:44 7 information that was supplied to us. My own personal 08:44 8 opinion is that the retailers weren't necessarily 08:44 9 voting to change it from 50 to 54 balls. They didn't 08:44 10 care whether it goes from 50 to 54 balls or 40 balls. 08:44 11 What they were voting on was an opportunity to 08:44 12 increase their sales. So how that's accomplished, 08:44 13 they really don't care. 08:44 14 This was a proposal that was presented 08:44 15 to them. Presented by people who are in the business 08:44 16 and are experts in the business. And they were -- in 08:44 17 my opinion, they were basically voting on their 08:44 18 recommendations. 08:44 19 MS. WHITAKER: Is that based on any 08:44 20 feedback you've gotten from any retailers? 08:44 21 MR. JOHNSON: Some, yeah. Not a lot. 08:44 22 It's more just a gut feeling than anything else. 08:44 23 MS. WHITAKER: Do you have any reason 08:44 24 for believing that the mention of the New York lottery 08:44 25 in the survey was or was not important to the 08:44 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 6 1 retailers? 08:45 2 MR. JOHNSON: I really don't know. 08:45 3 MS. WHITAKER: Is it your best judgment 08:45 4 that it was or was not important to them? 08:45 5 MR. JOHNSON: I really can't answer 08:45 6 that one way or the other. 08:45 7 MS. WHITAKER: Thank you. 08:45 8 CHAIR CLOWE: Commissioner Sadberry, do 08:45 9 you have any questions? 08:45 10 MR. SADBERRY: As a follow-up -- thank 08:45 11 you for being here again -- 08:45 12 MR. JOHNSON: Sure. 08:45 13 MR. SADBERRY: -- and your efforts. As 08:45 14 a follow-up to those questions, are you aware of a 08:45 15 second communication with the retailers that was 08:45 16 generated by the Lottery Commission concerning the 08:45 17 survey and concerning the opportunity for the 08:45 18 retailers to make additional comments if they 08:45 19 preferred to do so? Are you aware of that? 08:45 20 MR. JOHNSON: No, I was not aware of 08:45 21 that. 08:45 22 MR. SADBERRY: Perhaps staff at some 08:45 23 point in time can answer my question. 08:45 24 I did have an opportunity, as the other 08:45 25 commissioners, to look at some of the materials. If I 08:46 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 7 1 understand correctly, there were retailers who 08:46 2 expressed favorable opinions concerning these proposed 08:46 3 changes and there were retailers who expressed 08:46 4 unfavorable opinions. Do you have any concerns -- any 08:46 5 concerns at all about the process, procedure, or the 08:46 6 substance or the content of the survey? 08:46 7 MR. JOHNSON: No, I don't. 08:46 8 MR. SADBERRY: Do you feel comfortable 08:46 9 that your position is representative of your 08:46 10 organization that enables you to make such an 08:46 11 expression? 08:46 12 MR. JOHNSON: Yeah. I feel like, you 08:46 13 know, that the survey -- what I basically did was 08:46 14 report the results of the survey. And that's the 08:46 15 majority opinion of the retailers. And here again, I 08:46 16 would like to stress that I really think they were 08:46 17 voting for the concept of something that would change 08:47 18 the games to increase the sales. 08:47 19 MR. SADBERRY: Are you comfortable in 08:47 20 your representative capacity for your organization 08:47 21 with the participation that GTECH had in this process 08:47 22 of the survey? 08:47 23 MR. JOHNSON: Yes. 08:47 24 MR. SADBERRY: Are you comfortable in 08:47 25 your representative capacity for your organization 08:47 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 8 1 with the participation that members of the staff of 08:47 2 the Lottery Commission had regarding the survey? 08:47 3 MR. JOHNSON: Yes, sir. 08:47 4 MS. WHITAKER: Mr. Johnson, one more 08:47 5 question. Did you have a chance to review this 08:47 6 presentation by GTECH? 08:47 7 MR. JOHNSON: I have not. I got a copy 08:47 8 of that late yesterday afternoon. I really have not 08:47 9 had a chance to look at it. 08:47 10 MS. WHITAKER: Did anybody with your 08:47 11 association have a chance to review it? 08:47 12 MR. JOHNSON: No. 08:47 13 MS. WHITAKER: Thank you. 14 CHAIR CLOWE: Commissioner Sadberry, 08:47 15 did you want a comment from staff in regard to the 08:47 16 survey? 08:47 17 MR. SADBERRY: I would appreciate that. 08:47 18 I had presumed Mr. Johnson was aware of it. But since 08:47 19 he is not, I'd like the staff -- your position on it, 08:47 20 to speak to that issue. 08:47 21 MS. KIPLIN: Sure. In an effort to 08:48 22 ensure that the retailers were aware of the proposed 08:48 23 amendments, The Commission had already been in the 08:48 24 process of working on a letter that was going to go to 08:48 25 all retailers on the changes that would affect the 08:48 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 9 1 retailers. The Commission included a paragraph that 08:48 2 indicated that The Commission was involved in the 08:48 3 proposed rule making and wanted to ensure that the 08:48 4 retailers knew the different ways that they could 08:48 5 comment on the proposed amendments. There was a 08:48 6 reference to the website so that retailers could go 08:48 7 and read the proposed amendments for themselves and 08:48 8 make what they thought of those amendments, and then 08:48 9 offer whatever comments they wished to make on that. 08:48 10 That was -- that letter was mailed out, I believe it 08:48 11 was late April. 08:48 12 MR. SADBERRY: That would have been 08:48 13 after the survey? 08:48 14 MS. KIPLIN: Yes. 08:48 15 MR. SADBERRY: And after the most -- 08:48 16 next most recent meeting of The Commission? 08:48 17 MS. KIPLIN: Yes. I believe it was -- 08:49 18 it was for sure after the April 13th Commission 08:49 19 meeting. And it was after the April 19th public 08:49 20 comment hearing. 08:49 21 MR. SADBERRY: And -- 22 MS. KIPLIN: Although the letter was 08:49 23 already in draft form. And there had been discussions 08:49 24 before the April 19th public comment hearing about it, 08:49 25 including this particular language referenced in the 08:49 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 10 1 proposed changes, to ensure that retailers knew about 08:49 2 the proposed amendments and could go to the website 08:49 3 and look at it for themselves. 08:49 4 MR. SADBERRY: And you, of course, are 08:49 5 aware that the commissioners have reviewed materials, 08:49 6 public comment materials, as well as the survey 08:49 7 materials. Would any responses that were received to 08:49 8 that letter have been included among those materials? 08:49 9 MS. KIPLIN: Yes. Let me just say that 08:49 10 each commissioner has individually come in and 08:49 11 reviewed the comments. And any comment that would 08:49 12 have been received by e-mail, by letter, would have 08:50 13 been in that room amongst those documents unless they 08:50 14 were subsequent to the time that the commissioner had 08:50 15 come in and reviewed them. But you-all's individual 08:50 16 review was very recent. 08:50 17 MR. SADBERRY: This week. 08:50 18 MS. KIPLIN: It was this week. 08:50 19 MR. SADBERRY: Thank you, Mr. Chairman. 08:50 20 CHAIR CLOWE: Thank you, sir. Any 08:50 21 other questions for Mr. Rick Johnson? Thank you, sir. 08:50 22 MR. JOHNSON: Thank you. 08:50 23 CHAIR CLOWE: The next appearance form 08:50 24 I have is for Mrs. Dawn Nettles. This is the last 08:50 25 appearance form I have, by the way, in case anyone 08:50 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 11 1 else wants to appear. Good morning, Dawn. 08:50 2 MS. NETTLES: Good morning, 08:50 3 Commissioner Clowe. 08:50 4 CHAIR CLOWE: How are you this morning? 08:50 5 MS. NETTLES: I'm fine. Before I get 08:50 6 started, my name is Dawn Nettles. I am the publisher 08:50 7 of the Lotto Report. I'm from Dallas. And I've come 08:51 8 down to visit your fair city. 08:51 9 Commissioner Clowe, before I get 08:51 10 started, I want to congratulate you on your 08:51 11 appointment. I know we're going to miss Harriet 08:51 12 Miers. But you're a good man. You've always been 08:51 13 nice to me. And I am proud to see you there. 08:51 14 CHAIR CLOWE: Thank you, ma'am. 15 MS. NETTLES: Ms. Whitaker, I've never 08:51 16 met you. But welcome on. 08:51 17 MS. WHITAKER: Thank you. 18 MS. NETTLES: Before I get started, did 08:51 19 I understand you to say a while ago that this proposed 08:51 20 amendment is not going anywhere today? 08:51 21 CHAIR CLOWE: No, ma'am, I did not say 08:51 22 that. 08:51 23 MS. NETTLES: Okay. So you-all could 08:51 24 rule on it today? 08:51 25 CHAIR CLOWE: Yes, ma'am. 08:51 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 12 1 MS. NETTLES: Oh, okay. 2 CHAIR CLOWE: It could come before The 08:51 3 Commission this morning, yes. 08:52 4 MS. NETTLES: Okay. So you -- okay. I 08:52 5 did misunderstand you. So you do need to hear comment 08:52 6 on it? 08:52 7 CHAIR CLOWE: Absolutely. And let me 08:52 8 just remake that comment since you've raised that 08:52 9 issue for clarification. It is on the agenda. And 08:52 10 Kim has read the item as it is noticed on the agenda. 08:52 11 So the Commission is open to receiving public comments 08:52 12 on this and can take action if that is a result of the 08:52 13 deliberation. 08:52 14 MS. NETTLES: Okay. 08:52 15 CHAIR CLOWE: Am I clear on that with 08:52 16 you? 08:52 17 MS. NETTLES: Yes. 08:52 18 CHAIR CLOWE: Okay. 19 MS. NETTLES: I just wasn't sure what 08:52 20 you said a while ago. So I wanted to really make 08:52 21 sure. 08:52 22 CHAIR CLOWE: I appreciate you asking 08:52 23 me to clarify that. 08:52 24 MS. NETTLES: Okay. I'm going to start 08:52 25 by saying one more time to you-all that Texans do not 08:52 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 13 1 want you to add four balls to the Lotto. To the best 08:52 2 of my knowledge, you have received 3,384 e-mails, 08:52 3 comments, individual signatures. These petitions -- 08:53 4 you have right at 1700 or so signatures on the 08:53 5 petitions that I had done. The people printed their 08:53 6 name, wrote their address, wrote their city, and 08:53 7 signed those petitions. The Texans have called 08:53 8 you-all. We told you six months ago we don't want you 08:53 9 to add four balls. That is not the answer to your 08:53 10 sluggish sales. Okay. 08:53 11 I'm not going to elaborate on what the 08:53 12 people want because I think you two -- you-all already 08:53 13 know. Okay. I don't think that there is any question 08:53 14 at all. 08:53 15 But I will say for the record that you 08:53 16 have sluggish sales because, number one, players have 08:53 17 been playing the Lotto for seven years. They've lost 08:53 18 and they've lost and they've lost and they've lost. 08:53 19 The more they lose, the less they spend. Okay. 08:54 20 That's just human nature. 08:54 21 Your sales are also down because the 08:54 22 retailers -- many retailers have removed Lotto signs. 08:54 23 There is no signage anymore. That's a clear 08:54 24 indication to this -- to the Commission that you have 08:54 25 a problem in your sales field. The clerks hear 08:54 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 14 1 disgruntled players all the time. They construe that 08:54 2 to mean that they'll only play when it's a great big 08:54 3 jackpot. It is true when you have a big jackpot, of 08:54 4 course you have excitement. Okay. I don't deny that. 08:54 5 But that's not the reason that your sales are down. 08:54 6 You no longer have your drawings shown 08:54 7 on TV. That has also hurt you. Okay. 08:54 8 What -- the way I sort of view this 08:54 9 move to add these four balls to make it hard to win so 08:54 10 the jackpot will grow is the way I view big companies 08:55 11 that have big sales organizations. And the sales 08:55 12 people that they have, they work and they work and 08:55 13 they work and they work real hard. And they're good. 08:55 14 They're the best workers that the company has. And 08:55 15 the company devotes all their attention, however, to 08:55 16 the employees who do not produce. They're the ones 08:55 17 who get all the special training and all this good 08:55 18 stuff. And the good employees are always overlooked. 08:55 19 Then some other company comes along and says, hey, 08:55 20 I'll offer you this for -- you know, for the same job. 08:55 21 So they lose that good employee. 08:55 22 And that is precisely where The 08:55 23 Commission is placing itself with this move. You've 08:55 24 got good retailers out there that work really hard. 08:55 25 They depend on the Lotto for their living. It came 08:55 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 15 1 and it just really helped increase their sales. They 08:55 2 were excited seven years ago. They have seen things 08:55 3 that they have never seen. So yes, they are hollering 08:55 4 today for help to get their sales up, back to where it 08:55 5 was, because it was really their salvation. But then 08:55 6 you have 80 percent of all the other retailers that 08:56 7 have ceased selling. Okay. 08:56 8 So what you're doing is, you're trying 08:56 9 to make it harder win to assist that 80 percent that 08:56 10 don't sell, trying to guarantee them. And what you're 08:56 11 ultimately going to do is put your good ones out of 08:56 12 business. And you're going to lose them in the end if 08:56 13 you add those four balls. 08:56 14 And I have -- I have already verified 08:56 15 in New York and in California the same identical deal 08:56 16 of adding four balls was done, and it failed. Now, I 08:56 17 spoke with GTECH the other day. He keeps trying to 08:56 18 say, well, it's a little bit different. Well, it may 08:56 19 be different today in maybe the games, but we're -- 08:56 20 when you compare an apple to an apple, okay, they had 08:56 21 a matrix, and they added four balls. So people 08:56 22 rebelled. And that's the way -- and then they had to 08:56 23 take the balls away. In order to survive, they 08:56 24 removed those four balls in both those states. The -- 08:56 25 we don't even need to argue about California and 08:57 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 16 1 New York because it's a fact. You can't deny it. 08:57 2 Nobody can. That did happen in those two states. 08:57 3 Florida six months ago added four 08:57 4 balls. Their sales have increased by 30 percent, so 08:57 5 they report by phone. Now, not only did they add 08:57 6 those four balls, but they also added the second 08:57 7 drawing. And you've got probably 30 percent of the 08:57 8 population who are not going to let a Lotto drawing go 08:57 9 and not have their numbers played because they are 08:57 10 that determined that they will always have those 08:57 11 numbers. To me, in my opinion, you should have -- 08:57 12 Florida should see their sales double. And the 08:57 13 Florida players are already rebelling. I've heard 08:57 14 from them. And they are telling me that they've quit. 08:57 15 They've backed off. Okay. 08:57 16 For the record, I am begging you-all, 08:58 17 do not add four balls. Okay. 08:58 18 I want to talk about how unhappy I am, 08:58 19 too, about how this entire situation has come to pass. 08:58 20 On March the 14th, you-all proposed -- this proposal 08:58 21 was made. And on March 14th, you sent out one press 08:58 22 release to the media to reach the people. And the 08:58 23 people are your customers. Not the retailers. The 08:58 24 people. You can't survive without both retailers and 08:58 25 players. You posted one paragraph on your home page. 08:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 17 1 You had to click to go see something else. One 08:58 2 paragraph mentioned. Okay. Not everybody has access 08:58 3 to the Internet. And that one press release, you 08:58 4 depended on it to notify the people. Yet because of 08:58 5 what happened six months ago, you were -- you backed 08:59 6 off and cancelled your plans to add the four balls 08:59 7 because you had an outpour from people. 08:59 8 Well, so this time you've gone after 08:59 9 the retailers. You -- on March the 14th, as Rick 08:59 10 Johnson explained, he was called, asked to contact all 08:59 11 of them. This notice was done. You have massive 08:59 12 amounts -- you have 4,600-and-some-odd surveys 08:59 13 upstairs. Okay. There was great efforts to get the 08:59 14 word out about this and to get agreement. I'm going 08:59 15 to put it that way. 08:59 16 Now, surveys -- let's forget first that 08:59 17 on a survey, to get really good results, first of all, 09:00 18 anybody in the marketing industry knows that you're 09:00 19 going to get a two percent return. Now, if you 09:00 20 hand-deliver them and get them back, you might do a 09:00 21 little bit better. Okay. But these went to 09:00 22 convenience stores. Okay. 09:00 23 So let's just forget the fact that that 09:00 24 survey was real long. It was entirely too long to 09:00 25 read. It was easy to fill out, but it was too long. 09:00 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 18 1 And we'll forget, too, that it did not 09:00 2 tell the retailers specifically that the increase was 09:00 3 from three to five dollars and from 100 to 105. And 09:00 4 everybody who works in those stores hear those 09:00 5 complaints. And that's how come they don't sell those 09:00 6 tickets. It did not tell the four of six payout. But 09:00 7 it did imply explicitly, for anybody who did read it, 09:00 8 that the prize categories would be boosted. I don't 09:00 9 remember the exact words. 09:00 10 Now, I read the testimony of all those 09:00 11 retailers that appeared here, which is another problem 09:00 12 I have, on April 13th at your commissioners meeting. 09:01 13 That was a last-minute deal. I'm sure it was legal. 09:01 14 I'm sure it was posted in time and all that good 09:01 15 stuff. And Kim even sent me an e-mail and told me two 09:01 16 days ahead of time. She made mention in the e-mail 09:01 17 that, hey, there is a commissioners meeting and we're 09:01 18 going to take comment. So I can't say I didn't know 09:01 19 what I did know. And I know it. I knew it at 5:40 09:01 20 two days ahead of time or a day and a half before. 09:01 21 But I did wonder about that. 09:01 22 Then after that meeting, the reporters 09:01 23 started calling me. And they said, Dawn, what do you 09:01 24 think about these names? I said, what names? They 09:01 25 said, well, didn't you know that the Commission has 09:01 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 19 1 4,000 surveys. And out of that 4,000 surveys, 88 09:01 2 percent are in favor of these proposed changes. 09:01 3 Well, because of something that 09:01 4 happened to me back in 1991 -- which I'm going to tell 09:02 5 you about so that everybody here can finally 09:02 6 understand what it is that drives me. Back in 1991 in 09:02 7 the Dallas area, I am very well known for a magazine 09:02 8 that I published titled Unexaggerated Homes of Dallas. 09:02 9 It's a relocation magazine that I started in 1979. I 09:02 10 did very well with it. 09:02 11 And in 1991, my competitor -- there was 09:02 12 only two of us. I had all the business. And he was 09:02 13 hurting. His magazine had gone from 200, 250 pages 09:02 14 down to like 64 pages. So he decided he needed to 09:02 15 boost his sales. So to boost his sales, he hired a 09:02 16 company. And they did a survey. And they surveyed 09:02 17 everybody who had purchased a new home from June 1st 09:02 18 through August 31st. And according to his survey that 09:02 19 was sent out -- then after the survey came out, they 09:03 20 tallied it. And then they sent out in this other 09:03 21 company's name a big announcement about the results of 09:03 22 this survey. And according to this survey, everybody 09:03 23 read his magazine. Okay. He was number one. He was 09:03 24 right there on top. 09:03 25 One of my builders called me with these 09:03 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 20 1 results. And I said, where do I fit in there? And he 09:03 2 said, well, Dawn, you're not at the bottom, but you're 09:03 3 close. And I said, really? I said, well, who is on 09:03 4 there? So he started telling me. He said, this one 09:03 5 magazine was number one with like 90-some-odd percent 09:03 6 was in favor of his. And I said, well, tell me who's 09:03 7 on that list. He says, well, the Dallas Morning News 09:03 8 comes in second. And the Fort Worth Star Telegram 09:03 9 comes in third or fourth. And the Dallas Times Herald 09:03 10 comes in somewhere. Well, the minute he said that to 09:03 11 me, I knew that there is no way that a magazine is 09:03 12 ever going to outdo a metropolitan newspaper. Okay. 09:03 13 So to make a long story short, I ended 09:03 14 up -- because my name was mentioned and because it was 09:03 15 part of the company that did this survey and they have 09:04 16 to prove the validity of these deals, that I audited 09:04 17 those surveys. Okay. And it was basically very easy, 09:04 18 because all I had to do was go to the county 09:04 19 courthouse and get all the closings for that time 09:04 20 span. And then we went and saw each one of the 09:04 21 homeowners to ask them. And we had them sign 09:04 22 affidavits as to whether or not they had ever seen 09:04 23 that survey. Well, needless to say, we didn't find 09:04 24 any. Out of all those homes that we went to, we 09:04 25 didn't find any. 09:04 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 21 1 So I was really mad, as you can 09:04 2 imagine. I'd spent a lot of time, a lot of work, and 09:04 3 a lot of effort on this deal. And he was trying to 09:04 4 hurt my business. He was trying to put me out of 09:04 5 business. So -- and it was a dirty trick. Okay. 09:04 6 So I did the ultimate. Besides having 09:04 7 the fact that I had all those affidavits from all 09:04 8 those people that said they never saw a survey, 09:04 9 okay -- because this survey that was done at least 09:05 10 listed who the builder was. And so you knew -- and 09:05 11 the area, I believe. So anyway, my ultimate was that 09:05 12 besides having that, I was afraid they could come back 09:05 13 on me. So I then sent out and hired the very best, 09:05 14 the finest, most renowned forensic handwriting or 09:05 15 document examiner there was back in those days. Her 09:05 16 name was Doctor Mary Lynn Brighton. By working on 09:05 17 those surveys, Doctor Brighton taught me a lot. 09:05 18 And the day she handed me her report 09:05 19 which stated conclusively that it was her opinion that 09:05 20 a group of people filled out all those surveys, I was 09:05 21 scared. And I was scared because of what I had 09:05 22 actually found. And I knew it was going to hit some 09:05 23 newspapers. And I knew that everybody in Dallas was 09:05 24 behind me because everybody knew he was a rotten egg 09:05 25 and that he had done all this and was trying to hurt 09:05 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 22 1 everybody. 09:06 2 So I sat at Doctor Brighton's house the 09:06 3 day she gave me that -- her report. And I said, 09:06 4 Doctor Brighton, aren't you a little bit scared? 09:06 5 You're taking some real important people down when 09:06 6 this becomes public knowledge. And she said, no, 09:06 7 Dawn. I never worry. She says, okay. Leave. 09:06 8 Well, it hit the newspapers. Everybody 09:06 9 heard about it. People lost their jobs. Companies 09:06 10 went out of business. Everybody -- there was lots of 09:06 11 damage done as a result of that survey. But the worst 09:06 12 part was is that it was shortly thereafter that I got 09:06 13 word that Doctor Brighton had been murdered. And I've 09:06 14 never recovered from her murder. Okay. 09:06 15 So you can imagine how I felt the day 09:06 16 that the reporters called me and told me that there 09:07 17 was 4,000 surveys here. And it struck me because in 09:07 18 the first place, you can't have 88 percent of the 09:07 19 retailers behind it because I'm in those stores every 09:07 20 day. I know them. I know they're not for it. Okay. 09:07 21 They are for getting sales up. So nobody questioned 09:07 22 them wanting to get their sales up. 09:07 23 So I -- my first thought was, there 09:07 24 was -- there was 4,000 surveys. There was 88 percent 09:07 25 in favor of it, according to the newspaper reports. I 09:07 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 23 1 wondered first that -- I had already made open record 09:07 2 requests and had not seen any of them that had come 09:07 3 through. How could this be? So I decided I had to 09:07 4 see it. 09:07 5 And I was also upset, too, because the 09:07 6 reporter had called. He had just left this meeting 09:07 7 where there was 22 retailers that had testified, who 09:08 8 all told you that they wanted it. And I have since 09:08 9 read their testimony. And I'm going to point out to 09:08 10 you commissioners that if you'll please reread their 09:08 11 testimony, you will see that almost every one of them 09:08 12 that spoke to you said, we want -- our sales are down. 09:08 13 We want sales up. They tell you that. And that you 09:08 14 also notice where they read -- where they state in 09:08 15 their testimony -- because I have it. It's on my 09:08 16 website. That it's been done elsewhere. And 09:08 17 therefore, it's bound to work here. So let's do it. 09:08 18 And I understand why they would say that. 09:08 19 So anyway, I was -- I didn't have that 09:08 20 knowledge at that time. But anyway, so I came to 09:08 21 Austin to see those surveys. And 4,000 surveys -- at 09:08 22 the time I arrived, it was 4,600. And I knew I was 09:08 23 either going to buy all of them or buy none, or at 09:09 24 least that's what I thought. So I looked at those 09:09 25 surveys. And I saw the same thing I saw back in 1991. 09:09 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 24 1 But I am not an expert at all. I have no expertise in 09:09 2 these, even though I -- there are some things that I 09:09 3 know how to check for. So I didn't believe that the 09:09 4 surveys -- I didn't believe them. 09:09 5 Then I was up here two days ago 09:09 6 yesterday to see the original surveys. And the one 09:09 7 box that I went through was a box that was Tyler on 09:09 8 top. So many for, so many against, whatever. And I 09:09 9 went through that entire stack of them. And then I 09:09 10 realized how you got the 4,000 count, because what I 09:09 11 saw in that pile was one survey received that was 09:09 12 faxed in at -- oh, let's just take Fred 09:09 13 Usap (phonetic). He had 36 in one part of the pile. 09:10 14 Then he had another 26. And then he had another pile 09:10 15 in that one big pile. You know, you're going through 09:10 16 there and you see -- and then all of a sudden you come 09:10 17 across 36 that are exactly the same. His signature. 09:10 18 But it counts 36 times because there are 36 stores. 09:10 19 So he faxed in one deal because it has the time -- 09:10 20 well, his isn't a fax. 09:10 21 Anyway, what they did -- I saw how they 09:10 22 got their count, because what they did is, they took 09:10 23 him and they counted him 36 -- they counted him a 09:10 24 total of 69 times or something. I don't know the 09:10 25 exact counting. But anyway, there are 69 surveys of 09:10 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 25 1 the same signature up there for Fred Usap. For Kidd 09:10 2 Jones, there's 18 of the very same. Easy Shop, you 09:10 3 have five of them. But they are one minute apart on 09:10 4 the time for the fax. You had for Kirby Overton 09:10 5 Shamrock, there was 14 copies of the very same 09:11 6 identical deal. And this is what I saw up there. So 09:11 7 now I've seen how you got your 4,000 count, how you 09:11 8 got 4,600. You have one survey with one signature, 09:11 9 and it's copied repeatedly. Okay. All right. 09:11 10 Now, I didn't buy those. I came down 09:11 11 here to look at those to see the original surveys 09:11 12 because I, quite frankly, was looking for something 09:11 13 else. I was trying to find something else. And I had 09:11 14 to do that for my own benefit, for my own sake, for my 09:11 15 own safety. I don't care what you want to call it. 09:11 16 But I had to come and see the original surveys. 09:11 17 Now, what I did when I came down 09:11 18 here -- and I did buy 600 surveys. I'm going back 09:11 19 now. I drove to Austin. I saw those surveys. And 09:11 20 what I ended up doing was, I bought 600 -- according 09:11 21 to Lizzy, I bought 601 copies. I took them back to 09:11 22 Dallas. And I took them to three -- I ended up taking 09:11 23 them to three different forensic document examiners. 09:12 24 And it's cost me a fortune. Okay. And I have in 09:12 25 these envelopes the full report from two of them. I 09:12 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 26 1 didn't realize we were going to go so fast. I wanted 09:12 2 to read you their -- who these ladies are. 09:12 3 The first one's name is Linda 09:12 4 Collins -- Linda Collins James. I'm sorry. Ms. James 09:12 5 is a -- just a minute, because I want to make sure 09:12 6 that this is exactly correct on this. Her clients 09:12 7 that she works for is the FBI, the government, 09:12 8 U.S. Army government affairs. She teaches -- she's 09:12 9 certified -- she's certified, qualified under the 09:13 10 Daulbert/Dupont guidelines. You-all are attorneys, so 09:13 11 I'm sure you probably know what that is. She is board 09:13 12 certified for -- she is a forensic science program. 09:13 13 American Institute of Applied Science. She's got -- 09:13 14 she's got three pages of credentials here. Okay. 09:13 15 She's one of the leading ladies. She teaches it. She 09:13 16 does all this -- her clients are the police academy, 09:13 17 the security -- top security people. She is very well 09:13 18 known. In fact, she's supposed to be the leader. And 09:13 19 that's why I went to her first -- well, actually, I 09:13 20 didn't. I went to her second. Okay. Because the 09:13 21 first person told me I had to have the very best on 09:13 22 this job due to the fact of what it entailed. 09:13 23 The other lady's name was Sue Abbey 09:14 24 and Sue Albee is also a certified document examiner. 09:14 25 And she, too, is a teacher. She's also into 09:14 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 27 1 graphology, because we wanted to analyze the 09:14 2 handwriting, too, which that's not part of this 09:14 3 report. It is, however, something that I have 09:14 4 firsthand knowledge of the use that I paid for on the 09:14 5 deal. 09:14 6 Bottom line to this is, I have reports 09:14 7 here that I want to give to you-all of these two 09:14 8 ladies. And their conclusions are -- and I'm going to 09:14 9 read it to you. Well, I'll just read you the report. 09:14 10 That will make it a whole lot simpler. 09:14 11 The subject matter was: "The Texas 09:14 12 Lottery retailers survey changes on the horizon." 09:14 13 They just -- for legal reasons, they put that on 09:14 14 there. "Lottery Commission proposes amendments to 09:14 15 Lotto Texas games" request. "The question posed is 09:14 16 whether or not the same -- the name, store name, and 09:15 17 the handwritten mark for either agree or disagree 09:15 18 boxes on each of the appropriate 560 surveys to the 09:15 19 Lottery Commission proposes amendments to Lotto Texas 09:15 20 games are written by separate individuals. After a 09:15 21 verbal report, a request was made to reduce to writing 09:15 22 the main points of that verbal point." 09:15 23 "Evidence received: Photocopies of 09:15 24 approximately 560 surveys to the Lottery Commission 09:15 25 proposed amendments to Lotto Texas game were 09:15 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 28 1 hand-delivered to the Plano office by Ms. Dawn 09:15 2 Nettles." 09:15 3 "Examination conducted, to establish 09:15 4 identity in the handwriting, the personal 09:15 5 idiosyncracies, spacing of letters, proportionate size 09:15 6 of the zones, consistency of letter formations, 09:15 7 connecting strokes, baseline, beginning and ending 09:15 8 strokes, and unusual markings were examined and 09:15 9 compared." 09:15 10 "In this case, a preliminary 09:15 11 examination was necessary to first match handwriting 09:15 12 which demonstrated the same personal 09:15 13 idiosyncracies --" I have a hard time with that 09:16 14 word -- "spacing of letters, proportionate size or 09:16 15 zones, consistency of letter formations, connecting 09:16 16 strokes, baseline, beginning and ending strokes, and 09:16 17 unusual markings. Once the separation of significant 09:16 18 similarities was completed, a more in-depth 09:16 19 examination was conducted of each group." 09:16 20 "Because of limited times and fees, 09:16 21 this report will reference and demonstrate eight 09:16 22 groups of the approximately 560 surveys which 09:16 23 demonstrates the conclusion stated in this report." 09:16 24 These reports are -- her report is 64 09:16 25 pages. The -- her actual report is only two pages. 09:16 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 29 1 Her credentials is three pages. What makes this up 09:16 2 are copies of the surveys, the exhibits, okay, where 09:16 3 it shows you precisely what she has found. 09:16 4 Her conclusion is -- or conclusion: 09:16 5 "The following conclusions, rendered with reasonable 09:16 6 scientific certainty, are based on the comparison of 09:17 7 certain distinctive characteristics imprinted in the 09:17 8 individual writing. Any conclusions resulting 09:17 9 therefrom can be based only upon the data submitted to 09:17 10 me and examination of the same." 09:17 11 One: "The handwriting. Exhibit A, one 09:17 12 and two; Exhibit B, one and two; Exhibit C, one and 09:17 13 two; Exhibit D, one and two; Exhibit E, one, and two; 09:17 14 and Exhibit F, one through three show similar personal 09:17 15 idiosyncracies, spacing of letters, proportionate 09:17 16 sizes of the zones, consistency of letter formation, 09:17 17 connecting strokes, baseline, beginning and ending 09:17 18 strokes, and unusual markings. And it's very 09:17 19 persuasive evidence. Therefore, it is my professional 09:17 20 opinion that it is highly probable that the writings 09:17 21 on each was not written by separate individuals." 09:17 22 Number two: "The graphic movement and 09:18 23 letter formation on Exhibit F, four and five is 09:18 24 similar and points rather strongly toward having been 09:18 25 written by the same individual. And these are 09:18 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 30 1 attached for you to see. Therefore, it is my 09:18 2 professional opinion that it is probable that they 09:18 3 were not written by separate individuals." 09:18 4 Number three: "The written name 09:18 5 compared to the printed store name on Exhibits G, one 09:18 6 through six show similar personal idiosyncracies, 09:18 7 spacing of letters, proportionate size of the zones, 09:18 8 consistency of letter formations, connecting strokes, 09:18 9 baseline, beginning and ending strokes, and unusual 09:18 10 markings, and points rather strongly toward having 09:18 11 been written by the same individual. Therefore, it is 09:18 12 my professional opinion that it is probable that they 09:18 13 were not written by separate individuals." 09:18 14 And you know, it goes on. There is one 09:18 15 more, Exhibits H -- through one. 09:18 16 This is doctor -- I mean, this is Linda 09:18 17 James' report, which I have a copy for you-all to see. 09:19 18 Hers is 64 pages. Sue Abbey's report -- hers is 09:19 19 short, too. Hers is only 26 pages, because I used 09:19 20 her -- before I came here to you-all, I used her to 09:19 21 make for sure I wasn't basing my findings on just one. 09:19 22 I wanted to have conclusive double coverage on what I 09:19 23 had. 24 This same survey -- I'm not going to 09:19 25 bother with the -- what it's about. The request -- to 09:19 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 31 1 her, my request was to conduct a preliminary 09:19 2 examination on approximately 560 copies of the surveys 09:19 3 returned to determine to see -- no. Determined if the 09:19 4 same individual or individuals signed any of the 09:19 5 surveys. 09:19 6 "Examination conducted: Preliminary 09:19 7 examination was conducted grouping similar writing 09:19 8 styles. I looked at approximately 400 of the surveys. 09:20 9 A thorough examination was not conducted at this 09:20 10 point. The reason for this was that a thorough review 09:20 11 of each signature would have been extremely time 09:20 12 consuming and costly. Ms. Nettles indicated that if 09:20 13 any signatures could be identified as having been 09:20 14 written by the same individual or individuals, that 09:20 15 would be sufficient. A more thorough review of 09:20 16 suspicious signatures were conducted as they were 09:20 17 found." 09:20 18 "Findings: Upon conducting the 09:20 19 preliminary examination, I found that numerous of the 09:20 20 store name lines were filled out by the same 09:20 21 individual. As this was not the main purpose of the 09:20 22 investigation, but to determine if the signatures were 09:20 23 actually filled out by the same individual or 09:20 24 individuals, I did not qualify my findings." 09:20 25 "In my opinion, subject to the 09:20 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 32 1 examination of the originals, it is highly probable 09:20 2 that same individuals wrote the signatures below. 09:21 3 Same alpha letters signify that signatures were by 09:21 4 same individual. Copies of all surveys referred to 09:21 5 below are attached." 09:21 6 And then she names there, and they're 09:21 7 attached. Then she has one more group. 09:21 8 "In my opinion, subject to the 09:21 9 examination of the originals, the same individual 09:21 10 probably wrote the following signatures." 09:21 11 And she does another group. Why 09:21 12 they're separate, I don't know. I should know, but 09:21 13 anyway. 09:21 14 Bottom line is that you don't have a 09:21 15 survey from 4,600 retailers. You won't find 4,600 09:21 16 retailers who want you to make winning harder. You 09:21 17 will find 16,000 retailers who want to see happy 09:21 18 players. And those happy players need to win. And 09:21 19 that's the only way you're going to get sales up. You 09:22 20 are not going to do it by adding those four balls. 09:22 21 This upsets me. You have no idea, nor 09:22 22 do you have any idea how it has hurt my pocketbook. I 09:22 23 have given, due to the law of this stuff -- which 09:22 24 you-all are lawyers and I'm not. I have given 09:22 25 permission for anybody -- these ladies can talk to 09:22 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 33 1 you. They will discuss these surveys with you. I 09:22 2 give them full permission for them to talk to you-all 09:22 3 or any members of the press. 09:22 4 As we speak right now, this is already 09:22 5 on my website. And I have scanned in all of the 09:22 6 surveys and all of the documentation for the people to 09:22 7 see on these surveys. 09:22 8 To me, all that Texas is doing is 09:23 9 trying to copy other states. So and so adds four 09:23 10 balls and make it harder to win. What I want to know 09:23 11 is, why is it we can't be original? Why can't we -- 09:23 12 because I know how to keep your sales up. I could do 09:23 13 it. I could take her job or I could take Toni's job. 09:23 14 I'd get sales up that fast. Okay. Because I know 09:23 15 how. Linda is a good lady. But she is a finance 09:23 16 wizard. And I don't believe she is a salesman. And I 09:23 17 don't believe Toni is, either, because if anybody told 09:23 18 Texas Association of Lottery Retailers that that 09:23 19 survey was okay to send out from this marketing 09:23 20 division, you need to hang them out to dry, because 09:23 21 they don't know anything, because that survey is too 09:23 22 long for anybody to read. And those people didn't 09:23 23 read it. 09:23 24 If -- you know, in light of all this 09:23 25 other stuff, I would like for this commission to do 09:23 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 34 1 three things for me. Don't add four balls. I would 09:24 2 like to be reimbursed. I had to buy everything. 09:24 3 Every one of these they made me buy at ten cents 09:24 4 apiece. I said, can I bring in my own paper and get a 09:24 5 reduction? No. Can I bring in my own Xerox machine? 09:24 6 No. I've been out a lot of money. And I am giving 09:24 7 you these reports. And I think you ought to reimburse 09:24 8 me. And third, I think you need a new staff. I think 09:24 9 that's in order. Now, does anybody have any questions 09:24 10 for me? 09:24 11 CHAIR CLOWE: Thank you, Dawn. You are 09:24 12 open to questions at this point? 09:24 13 MS. NETTLES: Well, if you're nice. 09:24 14 CHAIR CLOWE: Certainly. 09:24 15 MS. WHITAKER: Yes. I have some 09:24 16 questions, Ms. Nettles. 09:24 17 It's your opinion that the survey is so 09:24 18 long that it would not be read. Is that correct? 09:24 19 MS. NETTLES: The survey that was sent 09:25 20 out? 09:25 21 MS. WHITAKER: Yes. 22 MS. NETTLES: No. My contention is 09:25 23 that when you go into those stores, these GTECH reps 09:25 24 go in there, and they're there for 20 minutes. And I 09:25 25 go in them all the time, and I try to leave pieces of 09:25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 35 1 paper like that. The store personnel say, you don't 09:25 2 expect us to read that. We don't even have time to 09:25 3 read our own reports from corporate. So I do not 09:25 4 believe that a survey of this length would be read, 09:25 5 no. 09:25 6 MS. WHITAKER: You mentioned talking to 09:25 7 three document examiners? 09:25 8 MS. NETTLES: Yes. 09:25 9 MS. WHITAKER: What's the name of the 09:25 10 third one? 09:25 11 MS. NETTLES: I don't have a report on 12 the third one. The third one was really the first 09:25 13 one. And he took one look at this and he said -- 09:25 14 well, he took one look at these. The pile was about 09:25 15 that big. He started tossing them here, here, here, 09:25 16 and here and putting them together as an expert, just 09:25 17 with the naked eye, though. Then he asked me what 09:25 18 this was. And when I told him, about 30 or 45 minutes 09:25 19 later, he started gathering all these papers. He put 09:25 20 them together. He said, you've got to have the very 09:26 21 best. And I won't stand up to the heat on this. So I 09:26 22 did not get a report from him. 09:26 23 MS. WHITAKER: What is his name? Can 09:26 24 you -- you don't have to say it if you don't wish to. 09:26 25 MS. NETTLES: Well, there is no -- 09:26 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 36 1 there is no need in it because he did not supply a 09:26 2 report. You've got members of your document -- I've 09:26 3 gone blank. You've got -- you've got legitimate stuff 09:26 4 here. He is not -- he does not have the credentials. 09:26 5 He is certified, and he testifies in court and all 09:26 6 that good stuff. But he didn't do a report. He's is 09:26 7 just the one that got me started. Anyway go ahead. 09:26 8 MS. WHITAKER: So you're not relying on 09:26 9 him in any way? 09:26 10 MS. NETTLES: Oh, not at all. I rely 09:26 11 on these two right here. 12 MS. WHITAKER: Okay. Have you kept 09:26 13 track of the number of press releases that have been 09:26 14 issued concerning this rule change? Do you have 09:26 15 copies of them? 09:26 16 MS. NETTLES: Yes. 09:26 17 MS. WHITAKER: How many are there? 09:26 18 MS. NETTLES: One. 09:27 19 MS. WHITAKER: How many articles have 20 been disseminated throughout Texas on this, do you 09:27 21 know? 22 MS. NETTLES: Well, I don't know. I'm 23 supposed to get a press release, though that's 09:27 24 wishy-washy sometimes from the Commission. But I am 09:27 25 supposed to see a press release on everything. And 09:27 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 37 1 since I'm a member of the media, I should get it. As 09:27 2 far as the newspapers, ma'am, I live in Dallas. And 09:27 3 it's impossible for me to tell you what's done across 09:27 4 the state. 09:27 5 MS. WHITAKER: Okay. So you do not 09:27 6 have a grouping of all the newspaper articles that 09:27 7 would have been published in these papers across 09:27 8 Texas? 9 MS. NETTLES: Not at all. 09:27 10 MS. WHITAKER: Or television reports? 09:27 11 MS. NETTLES: Okay. After -- on April 09:27 12 the 12th, because there had been no press, I issued a 09:27 13 press release. And it was that press release is when 09:27 14 all the coverage finally came to pass. I am aware of 09:27 15 two newspaper stories in Houston. I'm aware of one in 09:27 16 Dallas prior to that. Okay. 09:27 17 MS. WHITAKER: Is it your -- is it your 09:27 18 opinion that there was no press coverage of this 09:27 19 before April 12th? 09:27 20 MS. NETTLES: There was one press 09:28 21 release sent out. 09:28 22 MS. WHITAKER: Okay. Is it your view 09:28 23 or your statement to us that there was no press 09:28 24 coverage, no newspaper articles? 09:28 25 MS. NETTLES: There was no advertising 09:28 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 38 1 purchased. There was no -- 09:28 2 MS. WHITAKER: I'm not being clear in 09:28 3 my questions. Excuse me. 09:28 4 Is it your statement to us that before 09:28 5 April 12th, you knew of no newspaper articles of any 09:28 6 kind discussing this rule change? 09:28 7 MS. NETTLES: No. There had been one 09:28 8 or two in each newspaper from that original press 09:28 9 release. 09:28 10 MS. WHITAKER: But you don't have the 09:28 11 numbers on that? 09:28 12 MS. NETTLES: No. 09:28 13 MS. WHITAKER: You prepared some 09:28 14 petitions. Is that correct? 09:28 15 MS. NETTLES: Uh-huh. 09:28 16 MS. WHITAKER: Could you describe for 09:28 17 us how you went about preparing those petitions and 09:28 18 who you presented those to and the method by which you 09:28 19 gathered signatures? 20 MS. NETTLES: I certainly will. And I 09:28 21 have all the originals in the car if you'd like to 09:28 22 have them. Y'all have copies. But I have the 09:28 23 originals in the car. That petition was on my 09:28 24 website. People printed it off my website and had 09:28 25 them filled out and mailed them to Dallas. And I have 09:29 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 39 1 the envelopes that they all came in. Petitions were 09:29 2 also placed in some stores in the Dallas area. In 09:29 3 fact, I've got three stores where they kept getting 09:29 4 stolen from. But we won't go there. Okay. Then I 09:29 5 personally carried them as I ran to the stores and had 09:29 6 them -- and got them signed by customers and store 09:29 7 personnel as well. 09:29 8 MS. WHITAKER: When you would have 09:29 9 somebody sign the petition, what did you tell them in 09:29 10 advance about it? 09:29 11 MS. NETTLES: I told them that they 09:29 12 were trying to add four balls to the Lotto. That the 09:29 13 jackpot prices would increase from three to five 09:29 14 dollars, 100 to 105, and from 1500 to 2500, and add 09:29 15 four balls, and did they want it? And without a 09:29 16 doubt, everybody said no. 09:29 17 MS. WHITAKER: Did you tell them about 09:29 18 the expectation of higher jackpots or -- 09:29 19 MS. NETTLES: Sure. That was how I 09:29 20 started this, as a matter of fact. They're trying to 09:29 21 add four balls to make sure that we can't win. Their 09:30 22 plan is to make sure nobody wins. The jackpots will 09:30 23 climb. And people will come from everywhere to buy a 09:30 24 Lotto ticket. That's how I started it, actually. 09:30 25 MS. WHITAKER: Do you have anything in 09:30 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 40 1 writing that you would have given these people other 09:30 2 than the petition? 09:30 3 MS. NETTLES: No. I mean, they -- the 09:30 4 petition very clearly at the top of it says -- no, I 09:30 5 do not. The reason -- and I guess I ought to clarify 09:30 6 for you. You see, when I spoke with Linda in the very 09:30 7 beginning before that March 14th meeting -- no. I 09:30 8 take it back. Maybe it was afterwards. It was said 09:30 9 to me that the reason for this proposal is because the 09:30 10 last time people didn't understand what was going on. 09:30 11 And that it was the confusion over the bonus ball is 09:30 12 the reason that everybody was confused. But they 09:30 13 didn't object to having four balls. 09:30 14 So when I heard that, I wanted to make 09:30 15 for certain that there was no misunderstanding. That 09:30 16 people knew that they were saying, do not add four 09:31 17 balls, because that's all that we object to. 09:31 18 MS. WHITAKER: What is your 09:31 19 understanding of the date that California increased 09:31 20 the number of balls for its lottery? 09:31 21 MS. NETTLES: I'm sorry. Would you say 09:31 22 that again? 09:31 23 MS. WHITAKER: What is your 09:31 24 understanding of the date that California added the 09:31 25 four balls? 09:31 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 41 1 MS. NETTLES: I don't recall. But I 09:31 2 know that when I was speaking with Larry King the 09:31 3 other day, he said, but that was ten years ago. 09:31 4 Doesn't matter if it was last month or if it was ten 09:31 5 years ago. It's not going to change. You add four 09:31 6 balls, it's not going to change. 09:31 7 MS. WHITAKER: So you're not 09:31 8 referencing the most recent rule change in California? 09:31 9 MS. NETTLES: No. As a matter of fact, 09:31 10 as I understand, the rule change in California is, 09:31 11 instead of picking six numbers out of whatever their 09:31 12 deal is -- okay. They've been playing a game where 09:31 13 it's pick six out of 49 or 50 or 51, whatever it is. 09:31 14 What they're doing is, they are switching their game 09:31 15 to where they're going to pick five numbers from 42 09:31 16 balls or 47, and then one number from another group. 09:31 17 But to me, they're totally changing the game. It is 09:32 18 not the same as picking six numbers from 50. 09:32 19 MS. WHITAKER: But you're not 09:32 20 referencing in your comments to us the most recent 09:32 21 rule change in California? 09:32 22 MS. NETTLES: No. 09:32 23 MS. WHITAKER: Okay. You're talking 24 about a rule change that you believe occurred about 09:32 25 ten years ago? 09:32 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 42 1 MS. NETTLES: Well, I don't know when 09:32 2 it occurred. I didn't know it was that long ago. But 09:32 3 that's what Larry King said the other day. 09:32 4 MS. WHITAKER: Is it your understanding 09:32 5 that New York has added balls? 09:32 6 MS. NETTLES: No, ma'am. 7 MS. WHITAKER: What is your 09:32 8 understanding? 09:32 9 MS. NETTLES: One year ago, in March of 09:32 10 '99, they reduced their balls. And their sales -- 09:32 11 they're happy now. The players are happy now. 09:32 12 MS. WHITAKER: Do you have the names of 09:32 13 any retailers that have removed signage? 09:32 14 MS. NETTLES: Race Track. 7-Eleven 09:32 15 have removed all their -- they have -- they've 09:32 16 replaced it with a -- 7-Eleven replaced it. Race 09:32 17 Track has none. Diamond Shamrock has none. Exxon has 09:32 18 none. Chevron has none. 09:32 19 MS. WHITAKER: By signage, you mean 20 what, sir -- ma'am? Excuse me. I'm sorry. 09:32 21 MS. NETTLES: I'm sorry. What was your 09:33 22 question? 09:33 23 MS. WHITAKER: By signage, you mean 09:33 24 what? 09:33 25 MS. NETTLES: You know, your Lotto 09:33 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 43 1 signs, the -- with your emblem on it. 09:33 2 MS. WHITAKER: Okay. So you're 09:33 3 referencing those stores you list as not having 09:33 4 signage today. Is that what you're trying to tell us? 09:33 5 MS. NETTLES: The stores have removed 6 them. Racetrack has issued an entire upgrade on their 09:33 7 stores and a facelift. Racetrack corporate has issued 09:33 8 that everything Lottery retailers -- Lottery related 09:33 9 be removed from sight in their stores. Now, I'm not 09:33 10 referring to the scratch-off tickets. I'm referring 09:33 11 to signs. I'm referring to the playoff -- the 09:33 12 ticket -- that -- the ticket holder stands. And 09:33 13 they're all in the back of the stores. Many stores 09:33 14 have moved them to the back. The store personnel in a 09:33 15 lot of stores, they're not -- they're not pushing it 09:33 16 because they only make a nickel. They've never had a 09:33 17 raise. 18 MS. WHITAKER: Is that a complete list 09:34 19 of the stores that -- 09:34 20 MS. NETTLES: No, ma'am. 21 MS. WHITAKER: -- you have seen? 22 MS. NETTLES: I'm not -- I don't work 09:34 23 here. I am -- I'm just from Dallas. Okay. I can 09:34 24 only report what I know of in Dallas and what I hear 09:34 25 of from other places. 09:34 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 44 1 CHAIR CLOWE: The court reporter is 09:34 2 asking that the questions and the answers -- 09:34 3 MS. WHITAKER: Not overlap? 09:34 4 CHAIR CLOWE: -- not overlap. 5 MS. NETTLES: Yeah. I'm sorry. 6 CHAIR CLOWE: And in order to get a 09:34 7 perfectly clear record, I would ask everybody to try 09:34 8 to help us with that. 09:34 9 MS. NETTLES: I'm so sorry. I am so 09:34 10 bad at that. And I will shut up. Go ahead. 09:34 11 MS. WHITAKER: Have you listed for us 09:34 12 today the names of the retailers that you know of that 09:34 13 you believe have removed signage? 09:34 14 MS. NETTLES: No, ma'am. 09:34 15 MS. WHITAKER: Could you give us the 09:34 16 additional names that you believe have removed 09:34 17 signage? 18 MS. NETTLES: I just did. Racetrack. 09:34 19 MS. WHITAKER: Thank you. 09:34 20 MS. NETTLES: And that I was told who 09:34 21 didn't have signs, who won't put them up. 09:34 22 MS. WHITAKER: But you've given us a 23 complete list -- in other words, I wanted to give you 09:35 24 the opportunity to give us a complete list. 25 MS. NETTLES: Why would I want to do 09:35 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 45 1 that? 2 MS. WHITAKER: I mean, what I'm trying 09:35 3 to get at is what you know so that we can have a 09:35 4 record of that, Ms. Nettles. And my question to you 09:35 5 is: Do we now have on the record a complete list to 09:35 6 your knowledge? Is that correct? 09:35 7 MS. NETTLES: Yes. 09:35 8 MS. WHITAKER: Thank you. I have no 09:35 9 more questions. 09:35 10 CHAIR CLOWE: Thank you, Commissioner 11 Whitaker. 12 Commissioner Sadberry, do you have 09:35 13 questions? 09:35 14 MR. SADBERRY: Yes. Thank you, 15 Mr. Chairman. 16 Good morning. 17 MS. NETTLES: Hi. 18 MR. SADBERRY: Thanks for being here 09:35 19 and your efforts. You had the opportunity, as did 09:35 20 each of the commissioners, or for that matter, any 09:35 21 public member of the state, to look at the documents 09:35 22 that are kept here and responses, public comments, 09:35 23 etcetera, including the surveys. Is that -- am I 09:35 24 understanding that correct? 09:35 25 MS. NETTLES: Yes, sir. I request them 09:35 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 46 1 all from open records. I -- supposedly, I was 09:35 2 supposed to have a copy of everything. 09:35 3 MR. SADBERRY: Did you observe in the 09:35 4 materials that you reviewed the comments from 09:35 5 citizens, players who were in favor of the rule 09:36 6 change? 09:36 7 MS. NETTLES: Yes, sir. There are 17 09:36 8 of them. And I wouldn't exactly say that there are 17 09:36 9 that are in favor of them. I just give you credit for 09:36 10 that, even though some of them are simply comments. I 09:36 11 just pulled them out of the "no" pile. 09:36 12 MR. SADBERRY: And I say credit because 09:36 13 it's not our position to solicit for or against. I'm 09:36 14 just asking if you saw those documents? 09:36 15 MS. NETTLES: Yes, I did. 09:36 16 MR. SADBERRY: Have you made any 09:36 17 efforts to determine the position of citizens and 09:36 18 players who are in favor of a rule change of this 09:36 19 nature? 09:36 20 MS. NETTLES: Well, Commissioner 09:36 21 Sadberry, I don't mean to upset you. But I can't find 09:36 22 anybody in -- well, I know one person who is in favor 09:36 23 of it. Well, I know two people when I think of Linda. 09:36 24 MR. SADBERRY: It won't upset me. 25 Don't worry about it ever. 09:36 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 47 1 MS. NETTLES: Okay. I don't know of 09:36 2 anybody that's for it. 09:36 3 MR. SADBERRY: Well, my question is, 09:36 4 have you made any effort to determine that? I guess 09:37 5 what I'm getting at is, would you -- would you believe 09:37 6 it a fair characterization that your efforts have been 09:37 7 to find and document persons who are not in favor of 09:37 8 the rule change? 09:37 9 MS. NETTLES: Okay. I see where you're 09:37 10 going with that. And I'm going to retract what I said 09:37 11 a while ago, too, because I'm remembering as I would 09:37 12 carry the petition around, I did see some people who 09:37 13 said, no, I don't want to sign it. I don't care. I 09:37 14 quit playing. Or something like that. And I recall 09:37 15 one man in a 7-Eleven store over in Lewisville, and he 09:37 16 said, no, I'm for these changes. And everybody in 09:37 17 there was signing the petitions. And all the 09:37 18 customers were standing in line. And we all looked up 09:37 19 at him. He said, no. It's good for us. We'll make 09:37 20 more money that way. And it was obvious that he was a 09:37 21 retailer. But he kind of dashed out on it. So I did 09:37 22 encounter him. 09:37 23 No. On my website, I state that I'm 09:37 24 not for it. But you should send in your comments. So 09:38 25 if somebody is reading where I'm totally against it, 09:38 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 48 1 it would stand reason to me that they would -- if they 09:38 2 were in favor of it, would send out -- and I did get 09:38 3 two or three e-mails myself that claimed they were for 09:38 4 it. In fact, you have your Lotto clubs that should 09:38 5 they win, I think they'd be in trouble because they 09:38 6 sell and make profit on their tickets and their deals. 09:38 7 And they're for it to get the jackpots up so they can 09:38 8 make more money. And I had one or two other 09:38 9 individuals that were for it. 09:38 10 MR. SADBERRY: Did you document those? 09:38 11 MS. NETTLES: Sure. I've given them to 09:38 12 The Commission. 09:38 13 MR. SADBERRY: Now, you mentioned 09:38 14 something about historical experience of what type of 09:38 15 return anyone might anticipate from any survey, 09:38 16 whether it's short or long. That is, you're going to 09:38 17 have a base of silence, normally speaking. 09:38 18 Can you quantify what percentage of the 09:39 19 player base your survey represents or any of the 09:39 20 negative comments? There were some negative comments 09:39 21 from players and citizens independent of your survey. 09:39 22 Can you quantify what percentage of the player base 09:39 23 that data represents? 09:39 24 MS. NETTLES: No, sir, because I didn't 09:39 25 do a survey. I didn't do anything other than just try 09:39 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 49 1 to get comments. I acted as a media to get comments 09:39 2 to here. And everything that I have is -- I would say 09:39 3 98 percent of the people are against it. 09:39 4 MR. SADBERRY: I understand. And 09:39 5 whatever yours is considered to be, survey or 09:39 6 otherwise, what -- can you quantify what percentage of 09:39 7 the player base that would represent in Texas? 09:39 8 MS. NETTLES: Oh. Well, no, sir, 09:39 9 because our counts are 3300 comments. But your -- 09:39 10 very few people speak up. So I don't know the 09:39 11 percentage. I don't know that answer. 09:39 12 MR. SADBERRY: And in that regard, in 09:40 13 the meetings or the minutes of the meeting that you've 09:40 14 read, you -- have you seen where the commissioners in 09:40 15 their discussions and deliberations on this rule 09:40 16 proposal and previous rule proposals have referred to 09:40 17 the people speaking through their player conduct, that 09:40 18 is, the frequency of their play and the amount, 09:40 19 etcetera, the numbers that we get? Have you seen 09:40 20 those comments? 09:40 21 MS. NETTLES: Yes, sir, I have. And I 09:40 22 think you're referring to your focus group studies? 09:40 23 MR. SADBERRY: No. The commissioners, 09:40 24 where commissioners have stated that players are 09:40 25 speaking in the manner in which they play, and that is 09:40 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 50 1 in declining sales. I'm just asking, have you seen 09:40 2 those comments? 09:40 3 MS. NETTLES: No, sir. 09:40 4 MR. SADBERRY: Because you haven't seen 09:40 5 them, so you wouldn't have any comment as to whether 09:40 6 that's an accurate perception on the commissioners' 09:40 7 part? 09:40 8 MS. NETTLES: I don't know what you-all 09:40 9 have received, no. I mean, if you've seen what The 09:40 10 Commission has gotten, I've seen that, yes. 09:40 11 MR. SADBERRY: Well, maybe I'm not 09:41 12 clear. What we have stated -- a perception that the 09:41 13 players are speaking in the form of declining sales. 09:41 14 I'm just asking if you are aware of those comments? 09:41 15 Because I want to get your feedback to that if you are 09:41 16 aware of it. 09:41 17 MS. NETTLES: No, sir, I'm not aware of 09:41 18 it. 19 MR. SADBERRY: Okay. At this time, 20 Mr. Chairman, those are all the questions I have. 09:41 21 CHAIR CLOWE: Dawn, I want to respond 09:41 22 to the three items that you requested of The 09:41 23 Commission, if I may. The issue of a change in the 09:41 24 matrix or the increase of four balls is what all the 09:41 25 comments are about right now and deliberations and 09:41 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 51 1 whatever action The Commission would take up. So that 09:41 2 issue is being examined. 09:41 3 MS. NETTLES: Sure. 09:41 4 CHAIR CLOWE: Second issue is your 09:41 5 request for reimbursement. There are no provisions 09:41 6 saying -- and I just want to tell you honestly that 09:41 7 The Commission does not have the authority to do that. 09:41 8 The third item that you mentioned in 09:41 9 regard to staff, The Commission feels the staff is 09:42 10 doing their jobs. And this is not the kind of issue 09:42 11 that enters into that sort of evaluation of 09:42 12 performance. And maybe from zeal and your strong 09:42 13 feeling, you mentioned that. But I wanted to respond 09:42 14 to you that The Commission feels the staff has done 09:42 15 their best to put this issue squarely out in the 09:42 16 public. 09:42 17 And in that regard, I want to thank 09:42 18 you, because I know that you have done your best to 09:42 19 state your position. You have worked hard. I have no 09:42 20 knowledge of what your expense has been. You say it's 09:42 21 been substantial, and I'm sure it has been. And I'd 09:42 22 just like to say that you represent the kind of 09:42 23 comment and input that any deliberating body is 09:42 24 appreciative of from a public person. And I know 09:42 25 you're sincere, and that certainly shows through. And 09:42 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 52 1 I, for one, and I think the other commissioners 09:43 2 appreciate your informing us with the level of 09:43 3 intensity that you have. 09:43 4 MS. NETTLES: Okay. 09:43 5 CHAIR CLOWE: Thank you very much. 09:43 6 MS. NETTLES: You're welcome. 09:43 7 CHAIR CLOWE: I have another 09:43 8 appearance -- did you have another comment? 09:43 9 MS. NETTLES: Yes -- well, no. I just 09:43 10 want to say, these are very lengthy reports. I know 09:43 11 I'm going to give one to the court reporter. Would 09:43 12 one suffice for you-all personally, or one is enough 09:43 13 for everybody, or what? 14 CHAIR CLOWE: I believe you can give 09:43 15 that to the court reporter. And that makes it 09:43 16 available to the commissioners. I don't think you 09:43 17 have to worry about additional copies. 09:43 18 MS. NETTLES: Okay. 19 MS. KIPLIN: That's fine. 09:43 20 CHAIR CLOWE: At this point, before we 09:43 21 hear from another person wishing to make an 09:43 22 appearance, I'd like to ask the question of you, 09:43 23 counselor, and guide The Commission relative to 09:43 24 Ms. Nettles' comments regarding her examination of 09:43 25 petitions which have been received into evidence and 09:44 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 53 1 are part of the public comment being questioned in the 09:44 2 way that she has. Would you give us a comment for 09:44 3 guidance in that regard to that matter? 09:44 4 MS. KIPLIN: Well, I'll try to -- try 09:44 5 to respond to your request. I guess the first item I 09:44 6 want to address is, you used the phrase "received into 09:44 7 evidence." This isn't an evidentiary proceeding. 09:44 8 CHAIR CLOWE: I tried to correct myself 09:44 9 and said, received into comments. 09:44 10 MS. KIPLIN: Okay. 09:44 11 CHAIR CLOWE: They have been received 09:44 12 as part of the comments. 09:44 13 MS. KIPLIN: They have. 14 CHAIR CLOWE: And she has raised an 09:44 15 issue. And I want, at this point before we go any 09:44 16 further, guidance from you on that subject. 09:44 17 MS. KIPLIN: Sure. With regard to the 09:44 18 comments that she has raised about the surveys, The 09:44 19 Commission through me received those surveys in the 09:44 20 order and in the form in which they were tendered. 09:44 21 And we didn't do anything with them other than try to 09:45 22 go through and identify what we're required to by the 09:45 23 Administrative Procedure Act, which is the name of the 09:45 24 group or association, and then an indication of 09:45 25 whether they were in favor or opposed to the 09:45 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 54 1 amendments. We certainly didn't conduct any sort of 09:45 2 analysis to determine whether they were credible or 09:45 3 not credible, just like we didn't on any other -- any 09:45 4 other comment that came in. I don't believe the 09:45 5 Administrative Procedure Act rises to that level. 09:45 6 I will say that it was clear in going 09:45 7 through -- my staff going through those surveys 09:45 8 that -- Ms. Nettles referred to in particular Kidd 09:45 9 Jones. There were a number of Kidd Jones. They were 09:45 10 different stores, different -- apparently different 09:45 11 store locations. We treated those in an abundance of 09:45 12 caution as a different group or association. The same 09:45 13 with the Diamond Shamrock where there might be a 09:45 14 different store number. Didn't know whether they were 09:45 15 incorporated individually or not. Didn't feel as 09:46 16 though it was required under the Administrative 09:46 17 Procedure Act to conduct that kind of review by going 09:46 18 to the Secretary of State or reaching out to any sort 09:46 19 of information. 09:46 20 I will say that I've heard quite a bit 09:46 21 today and in other -- in other settings regarding a 09:46 22 tally or a count. I think Ms. Nettles herself 09:46 23 indicated 4600 retailers. The surveys suggest there 09:46 24 were 4600 retailers that were in favor. Frankly, 09:46 25 that's not required by the APA account of those who 09:46 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 55 1 are opposed or those who are in favor. As a matter of 09:46 2 fact, I've been involved in rule making where every 09:46 3 comment received was opposed. And The Commission, 09:46 4 based on their reason and justification, adopted the 09:46 5 proposed rules. A tally or a count is not required by 09:46 6 the APA. What is required is a reason or 09:46 7 justification, a summary of comments, and where the 09:46 8 agency disagrees, the reasons why the agency 09:47 9 disagrees, along with some other issues. But those 09:47 10 are the ones on point. 09:47 11 CHAIR CLOWE: I think that answers my 09:47 12 question. Do you have a comment, Commissioner 09:47 13 Sadberry? 14 MR. SADBERRY: Yes, Mr. Chairman. I 09:47 15 wanted to follow up on that question. I thought 09:47 16 that's where your question was going, and I kind of 09:47 17 anticipated the answer. And I just want to make 09:47 18 sure -- for the record, I was thinking along the 09:47 19 lines, realizing that the process requires that public 09:47 20 comment, to the extent it is -- it is received at this 09:47 21 meeting, be taken into account. And deliberations on 09:47 22 an action item, such as this rule, and that being part 09:47 23 of the -- it's definitely part of the reason why we 09:47 24 have so much paper here at times, in that staff has 09:47 25 responded to the public comment received by mail, 09:47 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 56 1 e-mail, and otherwise in the document here. 09:47 2 My question would be -- to follow up on 09:47 3 that question is in that this issue, which appears to 09:47 4 have been raised for the first time, I haven't heard 09:48 5 of it before, I guess you would refer to it as the 09:48 6 authenticity of the documents. And on that, I might 09:48 7 say a survey may be oral. And you might authorize a 09:48 8 person to check off your name if you care to. So that 09:48 9 doesn't necessarily mean it's infirm. But I'm asking, 09:48 10 if raising the issue -- legally infirm. I'm asking, 09:48 11 if raising the issue in the public comments received 09:48 12 today any way legally impairs the commissioners' 09:48 13 ability to act on this action item without some 09:48 14 further documentation in response to those comments 09:48 15 since it has not been raised before, to my knowledge, 09:48 16 and therefore could not have been responded to. 09:48 17 MS. KIPLIN: Correct. The issue of 09:48 18 the -- I guess the process of gathering the surveys 09:48 19 has been raised. But the issue as to the authenticity 09:48 20 of signatures or the credibility of responses in 09:48 21 the -- regard to that they've been raised today has 09:49 22 not been raised. I do believe it would require a 09:49 23 summary. That's what's required under the 09:49 24 Administrative Procedure Act, is a summary of 09:49 25 comments, and then an agency response if it's 09:49 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 57 1 warranted, an agency response where warranted. We've 09:49 2 received quite a bit of comment -- I'll just make a 09:49 3 general statement, quite a bit of comment from the 09:49 4 public. We're not required to summarize individual 09:49 5 comments. We are required to summarize comment. So 09:49 6 to the extent that we got -- we received X number of 09:49 7 comments that said, if you raise the odds, people 09:49 8 won't play, we're not required to tally that. We're 09:49 9 just required to summarize it. 09:49 10 So to the extent that what you may hear 09:49 11 today is repetitive, redundant, or duplicative of 09:49 12 comment that has already been received and already 09:49 13 been summarized and already been considered, we're not 09:49 14 required to do any further. New comment, which I've 09:49 15 mentioned the matter with regard to the survey and 09:49 16 authenticity of the signatures, as far as I know, as 09:50 17 far as I can recall, is new comment and would require 09:50 18 a summary to -- 09:50 19 MR. SADBERRY: Am I to understand, 09:50 20 then, you'd have to add more pages to this to do that? 09:50 21 MS. KIPLIN: We'd have to have more 09:50 22 text. Don't know about the number of pages. 09:50 23 MR. SADBERRY: At least more text. And 09:50 24 what was that -- the standards for our action is 09:50 25 reasonable? 09:50 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 58 1 MS. KIPLIN: The agency, as part of the 09:50 2 required rule making -- let me just read this into the 09:50 3 record. This might be helpful. Does require there to 09:50 4 be a reasoned justification. And the purpose of a 09:50 5 reasoned justification is to put down the governing 09:50 6 body's reasons for the adoptive rule making. There 09:50 7 has to be the -- a factual basis for the rule. And 09:51 8 then what result proposed amendments are trying to 09:51 9 achieve. That is a concern or before The Commission 09:51 10 as an issue. 09:51 11 MR. SADBERRY: Thank you. 09:51 12 CHAIR CLOWE: I think in this 09:51 13 commentary that Ms. Nettles has given to The 09:51 14 Commission that she and I are the only two here that 09:51 15 are not lawyers, so -- 09:51 16 MS. KIPLIN: Sorry. 09:51 17 CHAIR CLOWE: As a lay person, I want 09:51 18 to interpret what I think you have told me about the 09:51 19 issue of her raising this concern about the 09:51 20 authenticity. What I think I heard you say in answer 09:51 21 to that issue is that that goes to the weight in each 09:51 22 commissioner's mind. And they are free to make a 09:51 23 judgment on into issue. 09:51 24 MS. KIPLIN: Yes, like they would be on 09:51 25 any comment. 09:51 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 59 1 CHAIR CLOWE: On any comment? 09:51 2 MS. KIPLIN: Correct. 3 CHAIR CLOWE: Okay. That's what I was 09:52 4 trying to get as a lay person, not a lawyer. 09:52 5 The next public witness that has filed 09:52 6 an appearance form -- 09:52 7 MS. WHITAKER: Let me just follow up on 09:52 8 something. 09:52 9 CHAIR CLOWE: Certainly. I didn't mean 09:52 10 to -- 11 MS. WHITAKER: I had indicated I had no 09:52 12 comments. But you raised one in my mind. Ms. Kiplin, 09:52 13 is it fair to say that the commissioners, in addition 09:52 14 to giving weight to each comment, can choose to 09:52 15 disregard certain comments or not? 09:52 16 MS. KIPLIN: I think you can -- you can 09:52 17 determine that the -- let me be careful about what I 09:52 18 say. I think in terms of considering comment, you can 09:52 19 decide in your mind that regardless of the comment, 09:52 20 there is a reasoned justification that supports the 09:52 21 action that you would take. Does that respond to your 09:52 22 question? 09:52 23 MS. WHITAKER: Yes, it does. Thank 09:52 24 you. 25 CHAIR CLOWE: Good. Now, I'd like to 09:52 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 60 1 call Mr. F.R. Dailey, I believe it is. Is that 09:52 2 correct? 09:52 3 MR. DAILEY: That's correct. 09:52 4 CHAIR CLOWE: Come forward, please, 09:52 5 sir. Good morning. 6 MR. DAILEY: Good morning. 7 CHAIR CLOWE: Thank you for being here. 8 MR. DAILEY: I'm happy to be here. I 09:53 9 have a -- 10 MS. KIPLIN: I'm sorry. Would you mind 09:53 11 just identifying yourself for the record? 09:53 12 MR. DAILEY: Yes. My name is -- my 09:53 13 initials are F.R. Daily. I live in Houston, Texas. 09:53 14 Good morning, commissioners. 09:53 15 COMMISSIONERS: Good morning. 09:53 16 MR. DAILEY: I have testified before 09:53 17 this commission in years past, specifically to 09:53 18 Commissioner Sadberry, Judge Hill, and Commissioner 09:53 19 Miers. So this isn't my first time to visit The 09:53 20 Commission. And I'll be happy to answer any questions 09:53 21 for you once I read my statement. 09:53 22 I am here to support the proposed 09:53 23 changes. I am here to support the proposed changes 09:53 24 the Texas Lottery Commission, I'll refer to as the 09:54 25 agency, is considering for Lotto Texas. And I have 09:54 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 61 1 four points that won't take very long, but I would 09:54 2 like to discuss them with you. 09:54 3 The first is, if you review the 09:54 4 philosophy of the Texas Lottery as it is published in 09:54 5 all public documents, it states in its first sentence 09:54 6 that the Texas Lottery Commission will be operated 09:54 7 using private businesses management principles and 09:54 8 public service standards of conduct. That is the 09:54 9 essence of this agency. And I think that that 09:54 10 statement is very important to the way this business 09:54 11 is operated. 09:54 12 The present sales trends for the Lotto 09:54 13 fails to meet the test of the philosophy. Private 09:54 14 management principles suggest that the agency adjust a 09:54 15 configuration and strategy of Lotto Texas until the 09:54 16 unfavorable sales trends are reduced. Strategically, 09:55 17 the agency has been diligent in attempting to adjust 09:55 18 the marketing strategy in order to improve the sales 09:55 19 trends. In fiscal year 1999, the creative focused on 09:55 20 selling the value of the lower jackpots as the sales 09:55 21 of the lower jackpot levels, the per capita sales 09:55 22 levels diminished. In the current fiscal year, we see 09:55 23 on television that the strategy appears to be focusing 09:55 24 on reminding players to play both on Wednesday and 09:55 25 Saturday. 09:55 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 62 1 While both of these approaches appear 09:55 2 to be reasonable solutions, neither has fixed what has 09:55 3 emerged as the root cause. The matrix needs to be 09:55 4 adjusted to increase the likelihood of the jackpot 09:55 5 growing to levels above 25 million dollars. 09:55 6 Review of the sales data shows that per 09:55 7 capita, participation ranges from 25 cents to 50 cents 09:56 8 for jackpots ranging from three to four million 09:56 9 dollars to less than 25 million dollars. It is not 09:56 10 until jackpots get larger -- on a typical basis, get 09:56 11 larger than 25 million dollars that per capita 09:56 12 spending increases and builds sales. Until the matrix 09:56 13 is adjusted, The Lottery can expect Lotto Texas sales 09:56 14 to continue falling annually. 09:56 15 Number two, the Florida Lottery 09:56 16 adjusted its matrix, attempting to build jackpots and 09:56 17 sales, and has been able to realize a 30 percent 09:56 18 increase in sales year to year since the change was 09:56 19 implemented. I've reviewed the rolls on the Web of 09:56 20 the -- of the Florida lottery prior to and after the 09:56 21 change in the matrix in Florida. Prior to the change, 09:57 22 it was basically getting hit every time or every other 09:57 23 time, with few exceptions. By observing the results 09:57 24 since the change, it appears that the average has 09:57 25 risen to about six, five to six. As a rule, it's five 09:57 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 63 1 to six times. That's what drives sales. That's what 09:57 2 creates interest. That's what builds sales for the 09:57 3 retailers and generates consumer interest. 09:57 4 The recent jackpot experience with the 09:57 5 big game that produced the jackpot in excess of 300 09:57 6 million dollars clearly demonstrates that people 09:57 7 respond to big jackpots. 09:57 8 And finally, the competitive framework 09:57 9 for the Texas Lottery is likely to expand sooner 09:57 10 rather than later. With the Internet and the 09:57 11 possibility of online gaming, while many suggest that 09:57 12 governmental bodies will never allow online gaming, my 09:58 13 professional experience leads me to a scenario that 09:58 14 says that ultimately, it will be approved. The 09:58 15 explosive growth of e-business is going to seriously 09:58 16 lighten tax receipts that are fundamental to 09:58 17 legislative budgets. 09:58 18 I'm sure most of us are familiar with 09:58 19 the fact that the United States Legislature, House of 09:58 20 Representatives this week has passed a resolution to 09:58 21 prohibit taxing of Internet businesses for five years. 09:58 22 And the Senate is likely to also pass this. There as 09:58 23 not been a determination as to where it goes. But the 09:58 24 likelihood is that the Internet is going to be 09:58 25 tax-free. 09:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 64 1 The result of that is, local 09:58 2 municipalities and state coffers are going to be 09:59 3 severely lightened because receipts are not -- tax 09:59 4 receipts are going to be hindered by the business 09:59 5 that's done on the Lottery [sic]. Therefore, 09:59 6 legislatures are going to look for other ways to fund 09:59 7 their budgets. That is, in my estimation, one of the 09:59 8 reasons that lotteries will be seriously considered. 09:59 9 And the reason for even bringing up this final point 09:59 10 is to say that it's time for the Texas Lottery to 09:59 11 regain its leadership position in this country, become 09:59 12 competitive, and get itself prepared for the future 09:59 13 and what the Lottery will represent to the budgets in 09:59 14 the state of Texas. 09:59 15 Now, that's -- some background for 09:59 16 people who might know -- not know why I am here and 09:59 17 why I'm making these points. Since the inception of 09:59 18 the Texas Lottery, I have been involved as a customer, 09:59 19 a consultant, and as a player. I want the record to 09:59 20 reflect that. 09:59 21 When the Texas Lottery started, I was 09:59 22 the chief marketing officer for national convenience 09:59 23 stores that were better known as the Stop-N-Go stores 10:00 24 that were purchased by Diamond Shamrock. The 10:00 25 introduction of the Texas Lottery had a very positive 10:00 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 65 1 impact on the business at Stop-N-Go. In fact, it 10:00 2 generated ten million dollars' income annually for the 10:00 3 chain. And as a matter of fact, that's what the total 10:00 4 income for the chain was for a couple of years. 10:00 5 In 1998, I participated in an RFP and 10:00 6 was asked to work with the staff and do a thorough 10:00 7 analysis of the business and help the staff, work with 10:00 8 the staff in the development of the marketing plan for 10:00 9 fiscal year '99. The plan was based on facts, 10:00 10 strategy to improve the sales performance of both the 10:00 11 instant games and the Lotto Texas. The public record 10:00 12 reflects the responses that the commissioners made to 10:00 13 me at the conclusion of that report, because it was 10:01 14 very factual, and it drove home what the strategy 10:01 15 needed to be. 10:01 16 Fortunately, the 75th legislature made 10:01 17 the right decision and improved the payout for instant 10:01 18 games. The recent sales results indicate that the 10:01 19 decision was right. I believe that the sales had 10:01 20 fallen to around 23 million dollars from a high of 10:01 21 about 44 million dollars a week. I understand that 10:01 22 they have -- they are now running in the mid 10:01 23 30 million dollars a week range. So that decision was 10:01 24 a very wise decision on the part of the legislature. 10:01 25 The problems with Lotto Texas are 10:01 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 66 1 harder to define. When we worked on the plan in 1998 10:01 2 for 1999, the question was raised, is the problem a 10:01 3 creative problem or is it a matrix problem? Very 10:01 4 difficult to identify that at that point in time. And 10:01 5 the agency opted to work on creative solutions rather 10:02 6 than on the matrix at that point in time. And I think 10:02 7 that was a conservative decision and probably the 10:02 8 right decision. And that led to the advertising that 10:02 9 tried to boost play in the lower jackpot levels, and 10:02 10 then I believe has ultimately led to the advertising 10:02 11 strategy that you're seeing today be executed. 10:02 12 The fact of the matter is, those 10:02 13 creative solutions have not solved the basic root 10:02 14 problem. In my estimation as a professional marketer, 10:02 15 the root problem is the matrix. And the matrix needs 10:02 16 to be adjusted. 10:02 17 And then one final comment for the 10:02 18 record. Last fall, the agency asked me to evaluate 10:02 19 whether or not the Texas Lottery should consider 10:02 20 entering the multi-state game, one of the multi-state 10:02 21 games. I was provided with all of the multi-state 10:03 22 data by GTECH. And it was, in my opinion, my 10:03 23 professional opinion, based on building the database 10:03 24 and running a series of tests and analysis, that 10:03 25 participation in a multi-state game would at best be 10:03 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 67 1 break even for the State of Texas. In addition to the 10:03 2 fact that if you introduced a multi-state game, you 10:03 3 would have to spend millions of dollars to build that 10:03 4 game in the minds of the consumer. Therefore, my -- 10:03 5 at that point in time, I'm glad that nothing was done 10:03 6 to move Texas into a multi-state game. I think that 10:03 7 the recent 330 million dollar multi-state game jackpot 10:03 8 is somewhat of an aberration. It may happen again. 10:03 9 But it's not likely to happen again. 10:04 10 Thank you very much. And I'm open to 10:04 11 any questions that you may have. 10:04 12 CHAIR CLOWE: Before I ask the 10:04 13 commissioners for their questions, I would like to 10:04 14 thank you for appearing here today and your comment 10:04 15 about appearing before the august panel that existed 10:04 16 before. We are all admirers, I think, of Chair Miers 10:04 17 and Judge Hill. And Commissioner Whitaker and I 10:04 18 aspire to do as good a job as they did. 10:04 19 And with that said, are there comments 10:04 20 or questions from the commissioners? 10:04 21 MS. WHITAKER: I have a couple of 10:04 22 questions. By creative, you mean by dealing with the 10:04 23 marketing of the games as well as advertising. Is 10:04 24 that correct? 25 MR. DAILEY: Yes, the approach to the 10:04 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 68 1 games. 10:04 2 MS. WHITAKER: And if somebody were to 3 say, well, the key to getting sales up for the four 10:04 4 million jackpot would be better advertising, would you 10:04 5 have an opinion about that? 10:04 6 MR. DAILEY: I did have an opinion at 10:04 7 that point in time, and that was -- first of all, we 10:04 8 went through an analysis and identified what we 10:04 9 thought the problems may be, because marketing is not 10:05 10 an exact science. And that is when we came to the 10:05 11 conclusion that what we needed to do was build sales 10:05 12 at the lower jackpot levels. And then ultimately, 10:05 13 probability would take care of itself and we would 10:05 14 begin to once again have the jackpots. I believe the 10:05 15 larger jackpots -- a larger number of large jackpots, 10:05 16 I believe, occurred in fiscal years '95 and '94. I'd 10:05 17 have to go back into the records and look at that. So 10:05 18 yes, that's what I mean by creative. 10:05 19 MS. WHITAKER: In your opinion, has the 10:05 20 advertising that has been done for the lower-level 10:05 21 jackpots been adequate, in your opinion? 10:05 22 MR. DAILEY: I believe that the 10:05 23 advertising is on strategy. The strategy is to build 10:05 24 the lower -- the lower jackpots, number one, a year 10:05 25 ago. The strategy, I've noticed this year, has been 10:05 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 69 1 adjusted to focus on Wednesday, remind people to play. 10:05 2 And I believe that the creative executes against that 10:06 3 strategy. 4 MS. WHITAKER: Which is why you're here 10:06 5 today to say that you think the issue that needs to be 10:06 6 addressed is the matrix and not the advertising? 10:06 7 MR. DAILEY: That is correct. 10:06 8 MS. WHITAKER: Okay. Can you give us 10:06 9 for the record a brief summary of your background in 10:06 10 marketing? 10:06 11 MR. DAILEY: Yes. I graduated from the 10:06 12 University of Notre Dame in 1973 with a degree in 10:06 13 marketing. And I was awarded the dean's award. I led 10:06 14 a group of students and developed a marketing plan for 10:06 15 Ford Motor Company at that point in time. 10:06 16 I was hired by the Lever Brothers 10:06 17 Company, which is part of Unilever. And I was trained 10:06 18 as a professional marketer in New York. I worked for 10:06 19 Lever Brothers for four years. 10:06 20 I then joined R.J. Reynolds and worked 10:06 21 in the foods division of R.J. Reynolds for a number of 10:06 22 years. I worked on the -- on the team that introduced 10:06 23 the further processed poultry products to this country 10:06 24 in 1978. 10:07 25 And then I joined JTL Corporation, the 10:07 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 70 1 world's largest bottler of Coca-cola, in 1981 to start 10:07 2 local marketing. I did that until 1986, when JTL was 10:07 3 purchased by the Coca-cola Company when the Coca-cola 10:07 4 Company formed CCE, which is the world's largest 10:07 5 bottling company now. At that point, I was 10:07 6 transferred to Atlanta and I was named the director of 10:07 7 Cola brand marketing for Coca-Cola USA. So I ran all 10:07 8 of the marketing for Coca-Cola USA. 10:07 9 In 1989, I had an opportunity to move 10:07 10 back to the great state of Texas, and I did. And I 10:07 11 joined National Convenience Stores as their chief 10:07 12 marketing officer and did that until 1995, when I 10:07 13 decided to form my own company, Dailey Communications. 10:07 14 And I write business plans for a host of clients 10:08 15 around the country, help them do the hard strategic 10:08 16 work to get to strategy that drives their business. 10:08 17 MS. WHITAKER: Thank you very much. 10:08 18 MR. DAILEY: Thank you. 10:08 19 MR. SADBERRY: And Mr. Chairman, I -- 20 good morning. And I'd just like to add my 10:08 21 appreciation for your assistance upon request in the 10:08 22 past and for your voluntary service and appearance 10:08 23 here today. That's quite a help to us to have that 10:08 24 type of interest and input from you, as well as all 10:08 25 members of the public who have responded to this 10:08 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 71 1 effort and assisted us in this very challenging but 10:08 2 necessary process that we are engaged in on behalf of 10:08 3 the Lottery and the people of Texas. Thank you so 10:08 4 much. 5 MR. DAILEY: Thank you. If I didn't -- 10:08 6 if I professionally didn't believe this matrix would 10:08 7 fix this sales problem, I wouldn't be here. The 10:08 8 matrix is the problem. And I think the fact that 10:09 9 Florida is doing so well really is the acid test that 10:09 10 demonstrates that fixing this matrix will create 10:09 11 interest and excitement. 10:09 12 Let me just share one other fact. 10:09 13 Prior to the decisions made by the 75th legislature, 10:09 14 this Lottery would have generated almost four billion 10:09 15 dollars in sales in fiscal year 1998. I think it 10:09 16 wound up at 3.7 billion. It only grew seven 10:09 17 percent -- or no. It was actually down, I believe, 10:09 18 that year. This Lottery would be close to five 10:09 19 billion dollars in sales. That is -- and then 10:09 20 multiply that times what the return to the State is. 10:09 21 I believe it's 30 percent or something. 10:09 22 MS. CLOUD: 31. 10:09 23 MR. DAILEY: 31 percent. Take the 10:09 24 difference of that answer from where we are today. 10:09 25 And it demonstrates that we need to take some 10:10 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 72 1 aggressive marketing action to rebuild The Lottery 10:10 2 sales and be consistent with the philosophy. 10:10 3 CHAIR CLOWE: Thank you, Mr. Dailey. 10:10 4 We appreciate you being here this morning. 10:10 5 MR. DAILEY: Thank you. 10:10 6 CHAIR CLOWE: That concludes the 10:10 7 appearance forms that I have from members of the 10:10 8 public. Is there anyone else who would like to appear 10:10 9 before The Commission on this issue this morning? 10:10 10 Hearing none and seeing no indication, 10:10 11 I conclude that that is all the public comment that we 10:10 12 have. 13 I'm going to ask that we have a 10:10 14 ten-minute recess in order that The Commission have a 10:10 15 short break now. And we'll end the recess at 12 10:10 16 minutes after 10:00. 10:10 17 (RECESS) 18 CHAIR CLOWE: If we may come back out 10:20 19 of recess now. I would remind you that we have now 10:20 20 concluded the public commentary on this proposed 10:56 21 action. I think it would be appropriate to ask the 10:56 22 commissioners at this point if they have any questions 10:56 23 or comments that they'd like to enter into at this 10:56 24 time. 25 Yes, ma'am. 10:56 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 73 1 MS. WHITAKER: Go ahead. 10:56 2 MR. SADBERRY: Mr. Chairman? 10:56 3 CHAIR CLOWE: Sir. 10:56 4 MR. SADBERRY: If I may. First, I want 10:56 5 to go back just a page or two and join the Chair in 10:56 6 expressing comments regarding our staff. I certainly 10:56 7 want to concur with the Chair in expressing 10:56 8 appreciation, and as well acknowledging the objective 10:56 9 evaluation of our staff that this Commission -- the 10:56 10 commissioners here make of our staff's efforts. I 10:56 11 have been privileged to be around for a while. And a 10:56 12 number of our members of our staff have also been here 10:56 13 for a while. And I -- you know, we would strive for 10:56 14 standards of perfection. That's certainly my 10:56 15 standard, professionally speaking. That's always our 16 objective. We understand the constraints and the 10:56 17 situations that our staff is faced with in carrying 10:56 18 out their duties. And we objectively and carefully 10:56 19 and diligently, very strictly, I might add, evaluate 10:56 20 our staff. Our Chair, as an example, has moved us 10:56 21 even to a higher level of documented evaluation from 10:56 22 our staff, and all conduct gets considered in that 10:56 23 regard. I think it would be appropriate, though, that 10:56 24 I share the Chair's comments now in expressing 10:56 25 appreciation for the work of our staff and their 10:56 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 74 1 dedication to the work of this agency. 10:56 2 CHAIR CLOWE: Thank you, Commissioner 10:56 3 Sadberry, for that emphasis. It's well done. 10:56 4 MS. WHITAKER: Mr. Chairman, I would 10:56 5 like to call Mr. King to respond to certain comments, 10:56 6 if possible. 10:56 7 CHAIR CLOWE: Mr. King, are you 10:56 8 available? 10:56 9 MR. KING: Yes, I am. 10:56 10 CHAIR CLOWE: Would you -- would you 10:56 11 fill out an appearance form for the record, please, 10:56 12 sir? 13 MR. KING: Absolutely. Do you want me 14 to do it before or after? 15 CHAIR CLOWE: I think if you'll just do 10:56 16 it, and at the conclusion of your appearance make 10:56 17 certain that I have it, that would be adequate. 10:56 18 Do you, then, have a comment to make to 10:56 19 The Commission, or are you open to questions from The 10:56 20 Commission? 21 MR. KING: I'd say both. I would, for 10:56 22 the record -- 23 CHAIR CLOWE: Identify yourself. 10:56 24 MR. KING: My name is Larry King. I'm 10:56 25 the account general manager for GTECH Texas. I would 10:56 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 75 1 first like to maybe clarify for the record that we 10:56 2 were involved with the survey. And I will hopefully 10:56 3 shed some light as how that -- to how that came about. 10:56 4 I was at a meeting at the Lottery and 10:56 5 did run into Nelda. And Nelda informed me that the 10:56 6 TFIA was, in fact, doing a survey. And at the time, I 10:56 7 did volunteer our sales force, as we are in stores 10:56 8 twice monthly as required by the contract, to deliver 10:56 9 the survey and receive the survey and bring it back. 10:56 10 Nelda informed me that it's not up to the Lottery. 10:56 11 She would have to talk to Rick Johnson, the president 10:56 12 of the TFIA. In fact, we met with Rick Johnson. 10:56 13 And that was the only offer that GTECH 10:56 14 made, was to hand-deliver and to receive the survey 10:56 15 and deliver it back to Rick Johnson. Had I known that 10:56 16 this survey would have so much scrutiny, I'm not sure 10:56 17 I would have volunteered our services so freely. 10:56 18 We had nothing to do with the content 10:56 19 of the survey. We did not write the survey. We did 10:56 20 not influence the retailers that filled out the 10:56 21 survey. What we did was, on our weekly visits to 10:56 22 retailers, we dropped it off. We asked them to read 10:56 23 it. And if they so chose not to read it or disregard 10:56 24 it, we didn't force it upon them. At the conclusion, 10:56 25 they were either for or against it. And we brought 10:56 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 76 1 those surveys back. There were instances, and I -- 10:56 2 after following up after sort of gauging the level of 10:56 3 scrutiny the survey got, we went back to some of the 10:56 4 corporates. And in fact, Kidd Jones -- we ran into a 10:56 5 district manager -- filled out 18 of them because they 10:56 6 had 18 stores or -- I'm not sure because I didn't go 10:56 7 through every single one. Maybe Easy Serve filled out 10:56 8 25, the same person. 10:56 9 We also found, unfortunately, that one 10:56 10 of our sales reps disregarded the order. One of our 10:56 11 sales reps in the Austin district polled his 10:56 12 retailers, asked the question, filled it out, and in 10:56 13 fact, put the store number down on the survey. That 10:56 14 sales rep informed us that if you go back to the 30 or 10:56 15 so retailers, that is, in fact, their opinion, whether 10:56 16 it was for or against. I regret to inform you we 10:56 17 terminated the employment of this sales rep for not 10:56 18 following the orders. 10:56 19 So I think the other comment I would 10:56 20 make is that we did not poll all 16,500 retailers. We 10:56 21 were halfway through one of our cycles, which is a 10:56 22 ten-day cycle. So we only got to about half the 10:56 23 retailers, which we thought was a pretty good gauge to 10:56 24 see whether they were for or against. Our numbers 10:56 25 came pretty close to what Rick Johnson -- he mailed to 10:56 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 77 1 his group and received back. I think his was in the 10:56 2 high 70s, and ours was in the 80s. 10:56 3 It would have been fairly simple had we 10:56 4 wanted to go to the Diamond Shamrocks and the 10:56 5 corporates since 50 percent of our retail base are 10:56 6 corporates. We probably could have contacted 25 10:56 7 people and got 8,000 names. But we didn't do that. 10:56 8 We wanted to get a good gauge to see if this is the 10:56 9 right thing, you know, for the State of Texas. 10:56 10 So that is -- that's all the comments I 10:56 11 have to make. And I'd be happy to answer any 10:56 12 questions. 10:56 13 MS. WHITAKER: Have you read the 10:56 14 survey? 10:56 15 MR. KING: Yes, I have. 10:56 16 MS. WHITAKER: You've seen the 10:56 17 statement about the New York Lottery? 10:56 18 MR. KING: Yes, I have. 10:56 19 MS. WHITAKER: Do you consider that to 10:56 20 be accurate or inaccurate, or how would you 10:56 21 characterize it? 10:56 22 MR. KING: I would -- I would 10:56 23 characterize it -- and I would -- I would -- maybe 10:56 24 I'll answer it by going back to our presentation on 10:56 25 March the 14th. And I think we talked about the 10:56 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 78 1 New York Lottery in fairly good detail. We did not 10:57 2 recommend the change that New York made for Texas. We 10:57 3 would also say that sales are down in New York for the 10:57 4 Lotto game. 10:57 5 Now, if you take a step back and look 10:57 6 at all the changes New York made at the same time last 10:57 7 year, they changed their matrix at the same time. 10:57 8 They went from two plays to a -- for a dollar to one 10:57 9 play for a dollar. In other words, they doubled their 10:57 10 odds. Yes, in fact, they did lower the balls by two 10:57 11 balls, from 53 to 51. But it's one play for a dollar 10:57 12 now. So that's never been brought out. 10:57 13 MS. WHITAKER: So New York reduced 10:57 14 balls and their sales went down? 10:57 15 MR. KING: That's correct. 10:57 16 MS. WHITAKER: Florida Lottery 17 increased balls, and their sales went up? 18 MR. KING: That's also correct. 10:57 19 MS. WHITAKER: Is it correct to say 10:57 20 that each lottery's system is somewhat different and 10:57 21 needs to be evaluated separately? 10:57 22 MR. KING: Very different, yes. Last 10:57 23 year, the New York Lottery also implemented a 10:57 24 millennium game for four weeks. At that time, they 10:57 25 gave a 100 million dollar prize away. We would -- we 10:57 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 79 1 would strongly tell you that that cannibalized the 10:57 2 Lotto sales. So that is probably one reason why their 10:57 3 sales are down. They also implemented a regional 10:57 4 Lotto game. 10:57 5 MS. WHITAKER: The recent change the 10:57 6 California Lottery is implementing has not yet gone 10:57 7 into effect. Is that correct? 10:57 8 MR. KING: No, it has not. 10:57 9 MS. WHITAKER: Is that increasing balls 10:57 10 or decreasing balls? 10:57 11 MR. KING: They are -- they are not -- 10:57 12 well, I'd like to bring Marty Goldman, if I could. 10:57 13 But Marty -- if Marty could come up. Marty presented 10:57 14 it, and he knows a lot more about other states. 10:57 15 MS. WHITAKER: I only have a very short 16 question about them, so -- 17 MR. KING: Okay. I can tell you the 18 new matrix. Basically, it's a five of 47, one of 27 10:57 19 matrix. The overall odds for the top prize are going 10:57 20 from one in 18 million to one in 41 million. I'll 10:57 21 turn it to Marty Goldman. 10:57 22 MS. WHITAKER: I just have one question 10:57 23 as to the increased balls. 24 MR. GOLDMAN: Actually what they -- 10:57 25 they went -- 10:57 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 80 1 CHAIR CLOWE: Would you identify 10:57 2 yourself? 10:57 3 MR. GOLDMAN: I'm sorry. Marty 10:57 4 Goldman, director of marketing for gamescape, GTECH 10:57 5 marketing. 10:57 6 California is changing their style of 10:57 7 game. They're going from a Lotto style game, six of 10:57 8 51, closer to the power ball big game. Their new 10:57 9 matrix is five of 47, one of 27. But their overall 10:57 10 odds, which is really the critical component, is going 11 from 18 million to one for a jackpot winner to 41 10:57 12 million to one, making it harder to win the jackpot, 10:57 13 and obviously increasing potential for a large game. 10:57 14 MS. WHITAKER: Thank you. 10:57 15 Mr. King, in connection -- you had 10:57 16 mentioned that you had done some -- had some feedback 10:57 17 from retailers yourself, or that GTECH had? 10:57 18 MR. KING: That's correct. 10:57 19 MS. WHITAKER: Did any of that feedback 10:57 20 indicate that any of the retailers were relying on 10:57 21 statements in the survey about the New York Lottery in 10:57 22 making their decision? 10:57 23 MR. KING: Not to my knowledge. I 10:57 24 concur with what Rick Johnson had to say. I think 10:57 25 most retailers are in favor of increasing sales. And 10:57 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 81 1 I'm not sure they specifically care about New York or 10:57 2 Florida. But based on the sales projections that were 10:57 3 given in that survey, I think that the more commission 10:57 4 to the retailers is what got their attention. 10:57 5 MS. WHITAKER: How much feedback did 10:57 6 you get from retailers? 10:57 7 MR. KING: Me personally? 10:57 8 MS. WHITAKER: Or GTECH. 10:57 9 MR. KING: Well, I think we talked to 10:57 10 about 4,000 retailers, and overwhelmingly it was about 10:57 11 85 to 90 percent positive. 10:57 12 MS. WHITAKER: Did any of them -- or 10:57 13 did any of them mention the New York Lottery? 10:57 14 MR. KING: Not to my knowledge, no. 10:57 15 Commissioner, if I may back up, too. 10:57 16 We also received feedback last October when the 10:57 17 proposed matrix change was -- I can't say it was even 10:57 18 proposed. Maybe it was discussed, and it was printed 10:57 19 in the newspaper. Some retailers, on our visit after 10:57 20 it was pulled down, were a little confused that they 10:57 21 had no input into the decision-making process and 10:57 22 really didn't know what was being proposed. I think 10:57 23 they've got a far better understanding this time 10:57 24 around, you know, whether they are for or against it. 10:57 25 And quite frankly, some were against it. 10:57 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 82 1 MS. WHITAKER: I'd like your comments 10:57 2 in response to Ms. Nettles' statements about signage 10:57 3 being removed from retailers. 10:57 4 MR. KING: I am not aware. In fact, we 10:57 5 recently installed about 4500 neon signs that the 10:57 6 Lottery purchased. And these are point of sale. And 10:57 7 quite frankly, I think there is a huge demand out 10:57 8 there. We probably could use a lot more signs. 10:57 9 As far as retailers moving their play 10:57 10 stations to the back of the stores, that happens on a 10:57 11 daily basis. Corporates will make a decision to move 10:57 12 things around. I would -- I would probably argue that 10:57 13 some have moved them to the front of the store as 10:57 14 well. 15 MS. WHITAKER: Do you agree or disagree 10:57 16 with her statement about signage being moved? 10:57 17 MR. KING: I disagree. If that were 10:57 18 the case, I think our first recommendation to the 10:57 19 Lottery is, don't print any signage because we don't 10:57 20 need it. But we are -- we are in constant 10:57 21 communication with the marketing department and trying 10:57 22 to gear their spending towards what retailers are 10:57 23 using. 10:57 24 MS. WHITAKER: Are you familiar with 10:57 25 the Racetrack retailers? 10:57 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 83 1 MR. KING: I am familiar with the store 10:57 2 itself. I am -- I am not -- you know, specifically if 10:57 3 they are removing or adding point of sale, I couldn't 10:57 4 tell you specifically. But I could find out. 10:57 5 MS. WHITAKER: Do you have any 10:57 6 knowledge about their attitude about the rule change? 10:57 7 MR. KING: No. 10:57 8 MS. WHITAKER: Either way? 10:57 9 MR. KING: Either way. 10:57 10 MS. WHITAKER: Can you comment about -- 10:57 11 well, you have already made some comments. Do you 10:57 12 have any additional comments to make about her 10:57 13 statements about signatures on the survey forms? 10:57 14 MR. KING: Well, as I stated, I think 10:57 15 you will find that there are some duplicate signatures 10:57 16 from -- I think she mentioned a few of the chain 10:57 17 accounts. I would say I can't deny that, nor have I 10:57 18 seen the surveys themselves. But some individuals, if 10:57 19 they had 18 stores, they filled out 18 different 10:57 20 forms. That was not at our instruction at all. 10:57 21 But -- and I did mention to one sales rep that 10:58 22 misunderstood the instructions. And we took action 10:58 23 upon that employee. 10:58 24 MS. WHITAKER: Do you know of instances 10:58 25 in which the same person would have signed another 10:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 84 1 person's name to the survey? 10:58 2 MR. KING: No, none whatsoever. 10:58 3 MS. WHITAKER: If that occurred, what 10:58 4 would be an explanation? 10:58 5 MR. KING: If someone signed another 10:58 6 person's name, I wouldn't have an explanation. I 10:58 7 would say that would be falsifying a survey. 10:58 8 MS. WHITAKER: Did you have an 10:58 9 opportunity to talk with Ms. Nettles about this before 10:58 10 today? 11 MR. KING: I spoke to Ms. Nettles, I 10:58 12 believe, on Tuesday for about 90 minutes. I also 10:58 13 invited Ms. Nettles over to our building, because 10:58 14 basically, I had seen my name and my company's name on 10:58 15 her Web page. And it was clear that she did not 10:58 16 understand the relationship that we have with the 10:58 17 Lottery, nor what we do in the field. So I wanted to 10:58 18 hopefully give her a better understanding. And she'd 10:58 19 indicated she may take me up on the offer yesterday. 10:58 20 But I was there all day, and I didn't see Ms. Nettles. 10:58 21 MS. WHITAKER: Did she indicate to you 10:58 22 anything about her analysis of the surveys? 10:58 23 MR. KING: She asked for our 10:58 24 involvement, basically what I've told you today. And 10:58 25 I told Ms. Nettles exactly the same thing I've told 10:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 85 1 you, what our involvement was. 10:58 2 MS. WHITAKER: But she did not indicate 10:58 3 to you anything about forensic examinations? 10:58 4 MR. KING: No. 10:58 5 MS. WHITAKER: I have no more 10:58 6 questions. 10:58 7 CHAIR CLOWE: Any other questions for 10:58 8 Mr. King? 10:58 9 MR. SADBERRY: I think my colleague has 10:58 10 about covered the authenticity question exceptionally 10:58 11 well. 10:58 12 But bottom line, to put it in a lay 10:58 13 person's posture, hopefully, is there any reason or 10:58 14 any basis -- you sat here and heard Ms. Nettles' 10:58 15 comments. I presume if you would care to, you could 10:58 16 look at the report from the forensic experts. Is 10:58 17 there a basis for concern as far as you see it 10:58 18 concerning authenticity, any other aspect of the 10:58 19 survey, based upon what you've heard and seen this 10:58 20 morning? 10:58 21 MR. KING: No, sir, I know of none. No 10:58 22 concern on my part. 10:58 23 CHAIR CLOWE: Thank you, gentlemen. 10:58 24 Thank you very much. 10:58 25 Commissioners, are there any other 10:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 86 1 members of audience that you would like to call and 10:58 2 ask for comments or statements at this time? 10:58 3 MS. WHITAKER: I would just say that if 10:58 4 there are individuals who had heard the comments this 10:58 5 morning and believe they have information that's 10:58 6 pertinent to it, that we'd appreciate hearing from 10:58 7 you. And I see nobody indicating that. 10:58 8 CHAIR CLOWE: Commissioners, do you 10:58 9 have any comments that you'd like to make at this 10:58 10 time? 11 Hearing none, I am advised by general 10:58 12 counsel that this issue is properly before The 10:58 13 Commission at this time, and that it is ripe for 10:58 14 action if it is the desire of The Commission. Is 10:58 15 there a motion? 10:58 16 MR. SADBERRY: Mr. Chairman, I would 10:58 17 move the adoption or approval, whichever is correct 10:58 18 legal action, of the proposed amendment to the rule, 10:58 19 which I understand correctly is 16 TAC Section 10:58 20 401.305. 10:58 21 CHAIR CLOWE: Is there a second? I 10:58 22 will second the motion. All in favor, say aye. 10:58 23 MR. SADBERRY: Aye. 24 MS. WHITAKER: Aye. 25 CHAIR CLOWE: Aye. All opposed, say 10:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 87 1 nay. 10:58 2 The vote is three to zero. The motion 10:58 3 passes. The rule to be adopted. 10:58 4 MS. KIPLIN: Commissioners, I will -- 10:58 5 as you know, I've been working on a draft document, 10:58 6 which each of you have that. I've been working on an 10:58 7 order in the event that this was the vote of The 10:58 8 Commission. Based on the vote and the action taken by 10:58 9 The Commission, there -- as I mentioned earlier, there 10:58 10 is a bit of comment that you received today that does 10:58 11 need to be summarized and need to be responded. And 10:58 12 I'm going to ask that that occur, I guess, while we're 10:58 13 either taking up other business at the call of the 10:58 14 Chair or on a recess, and then bring that order before 10:58 15 you and ensure that that order is consistent with your 10:58 16 vote today. 10:58 17 CHAIR CLOWE: Very good. Linda Cloud, 10:58 18 at this time, with the adoption of the proposed 10:58 19 changes, would you give us a schedule as you see it 10:58 20 for the changes in this matrix to occur? 10:58 21 MS. CLOUD: Yes, sir. Based on your 10:58 22 approval today, there -- after today, there will be a 10:58 23 20-day period of time when -- before the rule is 10:58 24 actually enforced. So we will have that 20-day wait 10:58 25 after your approval today. And then we have to roll 10:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 88 1 down the multi-draw feature for the present Lotto 10:58 2 game, which takes ten draws, five weeks. So looking 10:58 3 at that rolldown period and the 20 days, it would be 10:58 4 mid-July before the new game would start. 10:58 5 CHAIR CLOWE: Very good. 10:58 6 Any questions, Commissioners? 10:58 7 MS. WHITAKER: No questions. 10:58 8 CHAIR CLOWE: Very good. Well, then, 10:58 9 having taken the vote and that projection of the time 10:58 10 frame from the implementation of the new game, I would 10:58 11 like to say we hope the players of Texas like this 10:58 12 change and play Lotto Texas and are enthusiastic about 10:58 13 the results that are being created here today and they 10:58 14 will benefit all. 10:58 15 We'll now conclude item three on the 10:58 16 agenda and return to item two, which is report, 10:58 17 possible discussion and/or action on lottery sales and 10:58 18 trends. And that would be Toni Smith and Linda. 10:58 19 Good morning. 10:58 20 MS. SMITH: Good morning, 10:58 21 commissioners. For the record, I'm Toni Smith, 10:58 22 marketing director of the Texas Lottery Commission. 10:58 23 For a brief review of current sales, year-to-date 10:58 24 total sales for FY 2000 are 1,809,105,276.5. This is 10:58 25 down only one-half of one percent of the FY '99 total 10:58 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 89 1 sales to date of 1,818,138,393. To take a look at the 10:58 2 same figures at a weekly average for FY 2000 is at 10:58 3 50,252,924.35. Again, that represents the one and -- 10:59 4 the one-half of one percent decrease from FY '99. 10:59 5 And I'd also like to just touch briefly 10:59 6 on the year-to-date sales comparisons by product, 10:59 7 particularly looking at our two products that take up 10:59 8 the largest percentage of our sales. The instant 10:59 9 product for FY 2000 is 1,124,307,903. This product 10:59 10 represents 62.1 of our -- percent of our sales, 10:59 11 compared to last year FY '99 sales of 975,270,143. So 10:59 12 we see an increase of 15.28 percent in the instant 10:59 13 product from this year to last year. 10:59 14 And to look at Lotto Texas, we are 10:59 15 currently at 401,199,334. And it currently represents 10:59 16 22 percent of our sales. And it is down by 23.14 10:59 17 percent from last year. 10:59 18 So what we've made up in instants, we 10:59 19 have lost on the Lotto side. And that's -- but I 10:59 20 guess the good news is that the percentage of decrease 10:59 21 is changing. We're only at one-half of one percent. 10:59 22 So we're finally going to cross over that line on our 10:59 23 charts. We feel good about that. 10:59 24 CHAIR CLOWE: Questions? 10:59 25 MS. WHITAKER: No questions. Thank 10:59 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 90 1 you. 2 CHAIR CLOWE: I think, Toni, we are now 10:59 3 seeing in a tangible way what Linda and staff as well 10:59 4 as yourself predicted with the prize payout being 10:59 5 increased to the higher level in the instants. And we 10:59 6 would hope we'd see that trend continue. And as a 10:59 7 result of the action the commissioners have taken here 10:59 8 this morning, we hope we see Lotto Texas increasing in 10:59 9 the remainder of the fiscal year. 10:59 10 MS. SMITH: Yes, sir, I agree. 10:59 11 CHAIR CLOWE: And in the next year. 10:59 12 Thank you. 13 MS. SMITH: Thank you. 14 CHAIR CLOWE: The next item is also 10:59 15 yours, I believe, on the agenda. Item four, report, 10:59 16 possible discussion and/or action on lottery 10:59 17 advertising and promotions, including print media 10:59 18 criteria. 10:59 19 MS. SMITH: I really have nothing new 10:59 20 to report. The campaigns that I mentioned in the last 10:59 21 Commission meeting continue to run. 10:59 22 MS. CLOUD: Commissioners, on the print 10:59 23 media criteria, we have a meeting -- we have a letter 10:59 24 going out that summarizes the meeting that we had with 10:59 25 the print media advertising this week coming up. 10:59 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 91 1 Also, we have a meeting set with the radio 10:59 2 producing -- producers with -- on October -- I mean, 10:59 3 on May the 22nd at 10:30 to be held in Yvonne Davis -- 10:59 4 Representative Yvonne Davis' office in Dallas. So we 10:59 5 welcome the opportunity to sit down with those people 10:59 6 as well as the print media people. So this is the 10:59 7 same type of meeting. It lays out the minority 10:59 8 participation in the radio broadcasting industry. And 10:59 9 so we think we're going in the right direction with 10:59 10 our minority advertising campaign. 10:59 11 CHAIR CLOWE: And in that regard, 10:59 12 Linda, I'd like to again emphasize The Commission's 10:59 13 interest in those subjects, and remind all that we had 10:59 14 considerable testimony on that issue in prior meetings 10:59 15 this year, and urge you and the staff to continue to 10:59 16 work and develop the improved communications and the 10:59 17 best possible solution in that field. And keep us 10:59 18 advised on that, if you will. 10:59 19 MS. CLOUD: Sure will. 10:59 20 CHAIR CLOWE: Any questions for Linda 10:59 21 or Toni? Thank you. 10:59 22 Ms. McLeod, the next agenda item is 10:59 23 yours. Consideration of, possible discussion and/or 10:59 24 action on State audit reports relating to the Texas 10:59 25 Lottery Commission. Good morning. 10:59 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 92 1 MS. MCLEOD: Good morning, 10:59 2 commissioners. My name is Debra McLeod, director of 10:59 3 audit. I'd like to bring to your attention -- we only 10:59 4 have two findings left from the State auditors as a 10:59 5 result of the procurement practice audit. On both of 10:59 6 those items, we had to delay the implementation dates 10:59 7 until the end of August. One has to do with the 10:59 8 rule -- one has to do with the rule changing. Another 10:59 9 is, we've been working with marketing and getting a 10:59 10 lot of information from the subcontracted print media 10:59 11 vendors. They're slow in responding and slow in 10:59 12 getting us the information that we've asked for. We 10:59 13 have completed our analysis and provided that to 10:59 14 marketing of what has been received. We think some 10:59 15 additional expertise is needed to evaluate the 10:59 16 auditing firms that do the print media circulation 10:59 17 verification as the final leg of what we promised 10:59 18 management in our audit review. So that's it to date. 10:59 19 And in mid May, we're required -- at 10:59 20 the end of May, required to give a formal report to 10:59 21 the State auditors based on what's been done to date. 10:59 22 But I am very confident that action is taking place in 10:59 23 both of these findings. So they're moving forward on 10:59 24 it. 10:59 25 CHAIR CLOWE: Very good. Questions? 10:59 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 93 1 Thank you, Debra. 10:59 2 MS. MCLEOD: Thank you. 10:59 3 CHAIR CLOWE: Patsy, we've gotten to 10:59 4 your subject. Come forward, please. Consideration 10:59 5 now of and possible discussion and/or action on the 10:59 6 agency's strategic plan for fiscal years 2001 to 2005. 10:59 7 Patsy is entering a very important subject and one 10:59 8 that a great deal of work has gone into. 10:59 9 Good morning. 10:59 10 MS. HENRY: Thanks, Mr. Chairman. Good 10:59 11 morning. Good morning, commissioners. I have extra 10:59 12 copies of the -- 13 THE REPORTER: Would you identify 14 yourself? 15 MS. HENRY: My name is Patsy Henry, 10:59 16 executive -- deputy executive director of The Lottery 10:59 17 Commission. 18 CHAIR CLOWE: Almost gave yourself a 10:59 19 raise. 20 MS. HENRY: I have extra copies for you 10:59 21 this morning if you need a draft to look at. But I 10:59 22 just wanted to let you know that we are proceeding 10:59 23 with refining the document further. And would 10:59 24 appreciate any comments or suggestions that you have 10:59 25 about the document. Our plan at this point is to turn 10:59 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 94 1 it over to our internal production experts at the end 10:59 2 of next week after we have finished our edits and 10:59 3 refinements. Produce a final copy that we would send 11:00 4 out to you, but which we would plan to also submit on 11:00 5 the deadline, June 1st, to the budget offices and the 11:00 6 other distribution required of those. And then have 11:00 7 it on the agenda for the June meeting to make a formal 11:00 8 approval. And then send a follow-up acknowledgment to 11:00 9 that same distribution list that the final approval 11:00 10 had taken place. And include with that also any 11:00 11 adjustments or changes that might occur between the 11:00 12 time we submit the deadline copy and your final 11:00 13 approval. So that kind of is where we're at. If you 11:00 14 would like to give us any guidance or direction on it, 11:00 15 we'd appreciate that. 11:00 16 MS. WHITAKER: May I? 11:00 17 CHAIR CLOWE: Certainly. 11:00 18 MS. WHITAKER: I have been reviewing 11:00 19 it. It's a fairly lengthy document, and it looks very 11:00 20 thorough and complete. Are there any area -- and I 11:00 21 will continue to complete my analysis of it. But are 11:00 22 there any areas of particular note that you'd like us 11:00 23 to particularly pay attention to? 11:00 24 MS. HENRY: Well, I think the 11:00 25 external-internal assessment is really the frame of 11:00 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 95 1 reference that we put forward for our oversight 11:00 2 agencies to view everything that happens at this 11:00 3 agency. And so that really is the most important 11:00 4 portion. There are some policy sections in there that 11:00 5 deal with emerging issues. And under our governmental 11:00 6 affairs, some of the issues for legislative 11:00 7 consideration that might be of most interest to you. 11:00 8 Other than that, I would just say that that is the 11:00 9 section that we've spent the most time on and tried to 11:00 10 restructure and refine to better reflect what we do 11:00 11 and just be a better explanation for the members of 11:00 12 the legislature and for the governor. 11:00 13 MS. WHITAKER: Thank you. 11:00 14 MR. SADBERRY: I would -- I would 11:00 15 concur and thank you and the members of your staff or 11:00 16 committee who are working on this document. If it's 11:00 17 appropriate, you might want to consider providing the 11:00 18 minutes of whatever meeting -- I recall it was the 11:00 19 subject of quite a bit of discussion last time we 11:00 20 undertook it. I might like to see that, because I was 11:00 21 looking to see some comparison of the previous 11:00 22 document. This is -- this is not a red-lined version. 11:00 23 But I -- what I've seen thus far I think is quite good 11:00 24 and quite consistent with what I recall being in the 11:00 25 previous efforts. And I might just -- for me, I'd 11:00 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 96 1 like to see a comparison. 11:00 2 MS. KIPLIN: I'll be happy to search 11:00 3 out that transcript from that particular Commission 11:00 4 meeting. And frankly, there might be two. 11:00 5 MR. SADBERRY: I think it was two. 11:00 6 MS. KIPLIN: And I'll -- every other 11:00 7 year. And make a copy and send it to each 11:00 8 commissioner so that they'll have that for historical 11:00 9 benefit. 11:00 10 MS. CLOUD: And we can send you a copy 11:00 11 of the last strategic plan as well. This one is quite 11:00 12 a bit more information than you had in the last one. 11:00 13 MS. HENRY: If I could, Mr. Chairman, 11:00 14 I'd also like to acknowledge the extensive time that 11:00 15 has been put into this document by all the division 11:00 16 directors, by your internal auditor, and by Mr. Atkins 11:00 17 and Sheila Sanchez for pulling it all together. So I 11:00 18 want to acknowledge their extensive work and my 11:00 19 appreciation for their involvement. 11:00 20 CHAIR CLOWE: Patsy, this is good work. 11:00 21 And I think maybe I might mention at this point in 11:00 22 time, some of the input may have come from Mr. Albert 11:00 23 Hawkins, who came over and met with the senior staff 11:00 24 and spent, I think, almost two hours, perhaps, 11:00 25 visiting the staff about a number of subjects. And I 11:00 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 97 1 hope strategic plan implementation was one of those. 11:00 2 Unfortunately, I was not able to be there. But the 11:00 3 governor's office has stressed how important they view 11:00 4 strategic planning to be and how this document should 11:00 5 be a real living item in regard to the running of this 11:00 6 agency. We take this seriously. And we want to 11:00 7 perform against the goals that we put in our strategic 11:00 8 plan. Good work. Thank you. Keep it up. And we'll 11:00 9 look forward to the finished document. 11:00 10 MS. HENRY: Thank you, sir. 11:00 11 CHAIR CLOWE: That concludes this 11:00 12 portion of the agenda of The Commission. 11:00 13 MS. KIPLIN: Commissioners, I'm sorry 11:00 14 to interrupt you. But it's been brought to my 11:00 15 attention that there was an item that was skipped. It 11:00 16 may have been intentionally. It may not have been. 11:00 17 I'm sorry. And I wanted to bring it to your 11:00 18 attention. It had to do with the lottery operator 11:00 19 audit procurement. Correct me, anybody, if I'm wrong 11:00 20 on that. It's item -- it's five. 11:00 21 CHAIR CLOWE: I think -- I'm sorry. 11:00 22 That's the first mistake I've ever made in my life. 11:00 23 I'm sure glad you called it to my attention. I'll 11:00 24 remember that. 11:00 25 MS. KIPLIN: I'm sure you will. 11:00 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 98 1 CHAIR CLOWE: And let me correct myself 11:00 2 and go back to that. The status report, possible 11:00 3 discussion and/or action on the Lottery operator audit 11:00 4 procurement. Linda Cloud, please, ma'am. 11:00 5 MS. CLOUD: Commissioners, there is 11:00 6 nothing new to report from the last meeting. It would 11:00 7 have been just as well to have skipped it, I guess. 11:00 8 We are still waiting on the State auditors to come 11:00 9 back and to provide us with some guidance on going 11:00 10 forward. So we have not got that feedback yet. 11:00 11 CHAIR CLOWE: Very good. Thank you, 11:00 12 Kim. 11:00 13 At this time, I move the Texas Lottery 11:00 14 Commission go into executive session to deliberate the 11:00 15 duties and evaluation of the executive director, 11:00 16 internal auditor, and charitable bingo operations 11:00 17 director pursuant to Section 551.074 of the Texas 11:00 18 Government Code. 11:00 19 To deliberate the duties of the general 11:00 20 counsel and security director pursuant to Section 11:00 21 551.074 and of the Texas -- of the Texas Government 11:00 22 Code. 11:00 23 To receive legal advice regarding 11:00 24 pending or contemplated litigation and/or to receive 11:00 25 legal advice pursuant to Section 11:00 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 99 1 551.07(a)(b) or (b) [sic] Of the Texas Government Code 11:00 2 and/or to receive legal advice pursuant to Section 11:00 3 551.071(2) of the Texas Government Code, including but 11:00 4 not limited to T&T Interest, Inc. versus Texas Lottery 11:00 5 Commission, et al. 11:00 6 Matter involving the Department of 11:00 7 Justice pursuant of a complaint regarding the 11:00 8 Americans with Disabilities Act. 11:00 9 Matter involving request for open 11:00 10 records decision in attorney general open records file 11:00 11 number 119718-98 relating to request for information 11:00 12 in connection with the Lottery operator audit. 11:00 13 Matter involving Wild Card Cash instant 11:00 14 game. 11:00 15 Matter involving employee complaint. 11:00 16 Matter involving agency purchases. 11:00 17 Matter involving brokerage arrangements 11:00 18 insofar as HUD/minority business participation is 11:00 19 concerned. 11:00 20 Employment law, personnel law, 11:00 21 procurement law, and general government law. 11:00 22 MS. KIPLIN: Commissioner, one 11:00 23 reference. I heard Section 551.07 then 1(a). It's -- 11:00 24 I may have misunderstood or misheard. But it's 11:00 25 Section 551.071(1)(a) or (b) in the Texas Government 11:00 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 100 1 Code -- 2 CHAIR CLOWE: Correct. 3 MS. KIPLIN: -- relating to receiving 11:00 4 legal advice. 5 CHAIR CLOWE: Very good. Thank you. 11:00 6 Is there a second? 7 MR. SADBERRY: Second. 11:00 8 CHAIR CLOWE: All in favor, say aye. 11:00 9 MS. WHITAKER: Aye. 10 MR. SADBERRY: Aye. 11 CHAIR CLOWE: All opposed, nay. And I 11:00 12 vote aye. The vote is three-zero. 11:00 13 We -- the Texas Lottery Commission will 11:00 14 go into executive session. The time is 11:46 a.m., 11:00 15 and the day is May the 12th, 2000. I make no 11:00 16 prediction as to the length. 11:00 17 MS. KIPLIN: One correction on the 11:00 18 record. The time is 10:46, not 11:46. 11:00 19 (EXECUTIVE SESSION) 20 CHAIR CLOWE: The Texas Lottery 12:23 21 Commission is out of executive session. The time is 12:23 22 12:15 p.m. 12:23 23 Is there any action to be taken as a 12:23 24 result of executive session? If not, we'll move to 12:23 25 the next item on the agenda. 12:23 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 101 1 Before we do that, I would like to 12:23 2 correct where I misspoke on the motion to go into 12:24 3 executive session. I announced that it was 11:46. 12:24 4 And it was, in fact, 10:46 a.m. And with that 12:24 5 correction, now I believe the record is correct. And 12:24 6 we are ready to go forward on the public agenda. 12:24 7 And Kim, I believe we should go to you 12:24 8 for information you have for us. 12:24 9 MS. KIPLIN: Yes. Thank you. 12:24 10 Commissioners, as you know, earlier in 12:24 11 the meeting today you considered the item related to 12:24 12 the Lotto Texas rule. And after you had heard comment 12:24 13 today in person from certain folks, you voted and had 12:24 14 a motion seconded and you voted three-nothing to adopt 12:24 15 the proposed amendments to the Lotto Texas rule. As 12:24 16 you know, just by way of background, each of you had 12:24 17 been provided a draft document which came to you -- I 12:24 18 believe it was on Thursday, which was just yesterday. 12:25 19 That document incorporated a summary of all the 12:25 20 comments that we received both at the public meetings 12:25 21 and the public hearing as well as written comment by 12:25 22 e-mail, fax, or letter or otherwise in terms of 12:25 23 writing. The document also included a reasoned 12:25 24 justification. In other words, it established the 12:25 25 rational basis for your reasons for why you voted to 12:25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 102 1 adopt the proposed amendments. That's what's 12:25 2 considered to be part of the preamble. 12:25 3 The other part of the preamble is an 12:25 4 identification of interested groups or associations 12:25 5 and an indication of whether those groups and 12:25 6 associations were either in favor or against the 12:25 7 proposed amendments. As a matter of fact, the 12:25 8 document, I'll just say, is now 104 pages long. And I 12:25 9 think at the time that it was provided to you, it 12:26 10 was -- I want to say it was 101 pages. The -- I may 12:26 11 be off on that, and I'll make that clear. I'm just 12:26 12 going on my own recall. 12:26 13 What was not in the document before you 12:26 14 were comments that you received today -- a summary of 12:26 15 those comments, pardon me, that were not otherwise 12:26 16 redundant, repetitive, or duplicative to comment that 12:26 17 you had already seen summarized in a document that had 12:26 18 been provided to you yesterday. 12:26 19 Also, just for the purpose of the 12:26 20 record, I do know personally that each of you 12:26 21 individually came -- took the time to come to The 12:26 22 Commission and review the comment that had been 12:26 23 received in written form. The comment that was 12:26 24 received today that was not repetitive, redundant, or 12:26 25 duplicative has been summarized now in this document. 12:27 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 103 1 And the response -- the accompanying response follows 12:27 2 that comment. 12:27 3 In particular, I will mention 12:27 4 Mr. Johnson coming forward today, the representative 12:27 5 of the Texas Association of Lottery Retailers, and 12:27 6 clarifying the process in connection with the retailer 12:27 7 surveys. I will, just by way of recall, remind you 12:27 8 that he did come forward at an earlier Commission 12:27 9 meeting and did speak on those surveys. And to the 12:27 10 extent that any comments he made today were repetitive 12:27 11 of earlier comments, those were not included in the 12:27 12 summary of the comments today. 12:27 13 You also had another commentor who came 12:27 14 forward who has also provided comment at public 12:27 15 comment hearing, in particular the April 19th, 2000 12:27 16 public comment hearing. And she offered for the most 12:28 17 part by and large the same comment to you today that 12:28 18 she did on that day. There was some new information, 12:28 19 new comment that she offered today that had not been 12:28 20 summarized and was not repetitive, redundant, or 12:28 21 duplicative to comment that had either been offered by 12:28 22 her or by others. That comment has been summarized, 12:28 23 and the response follows. I'm going to direct you to, 12:28 24 in particular, page 95 and direct you to the last 12:28 25 comment at the bottom of the page and the response 12:28 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 104 1 that carries over. And then page 96. And I'd like 12:28 2 for you to take this opportunity to read that drafting 12:28 3 and ensure that that drafting is consistent with your 12:29 4 vote today and your reasons for your vote today. 12:29 5 If you've had an opportunity to read -- 12:30 6 not to rush you. If you've had an opportunity to read 12:30 7 that, as I recall, that's about the only change that 12:31 8 you-all have not seen. There may have been drafting 12:31 9 edits to make things more clear. Then they were in 12:31 10 the document that you saw that you received just the 12:31 11 day before today, just yesterday. 12:31 12 And with that -- I'm going to put this 12:31 13 to you. You've already voted to adopt the rule. But 12:31 14 the order is the adoption of the rule. I believe it's 12:31 15 consistent with the vote you took today and the 12:31 16 reasons that you set out in the proposed rule making 12:31 17 and -- but this is your document. So I want to make 12:31 18 sure that you-all are comfortable with it. And if you 12:31 19 are, we'll go ahead and request that you sign it. 12:31 20 CHAIR CLOWE: I think Commissioner 12:31 21 Whitaker has a -- 12:31 22 MS. KIPLIN: Okay. 23 CHAIR CLOWE: -- comment to make. 12:31 24 MS. WHITAKER: Yes. On page 96 towards 12:31 25 the bottom where it's -- authenticity is misspelled, 12:31 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 105 1 as well as in the following line where it says -- the 12:31 2 line that starts, representative that did not follow. 12:32 3 Fifth to the bottom line, authenticity is misspelled. 12:32 4 And then the following line, which is fourth from the 12:32 5 bottom, should say that did not follow. And I would 12:32 6 suggest in lieu of "the correct" the word "certain" so 12:32 7 that the line would read, representative that did not 12:32 8 follow certain procedures in gathering the surveys. 12:32 9 MS. KIPLIN: If those are the only 12:32 10 changes, I do not believe that that will affect -- if 12:32 11 you-all want to go ahead and sign the signature block, 12:32 12 I don't believe it will affect that. And we will -- 12:32 13 consistent with your vote today and your direction 12:32 14 today, we will make those changes. 12:32 15 CHAIR CLOWE: By virtue of our 12:32 16 signatures, we signal our satisfaction with the 12:32 17 document. 12:32 18 MS. KIPLIN: And that it is consistent 12:32 19 with your reasoned justification for the order and for 12:32 20 the adoption of the rule. Correct? 12:32 21 MR. SADBERRY: Correct. 12:32 22 MS. WHITAKER: Correct. 12:32 23 CHAIR CLOWE: Correct. Let the record 12:32 24 reflect at this point, Commissioner Sadberry has 12:33 25 excused himself. The Commission remains in session 12:33 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 106 1 because we have a quorum in place to take care of 12:33 2 other business. Thank you, Commissioner Sadberry. 12:33 3 Drive safely. 12:33 4 Now, I think Kim, we're to you on 12:33 5 consideration of the status and possible entry of 12:33 6 orders in certain docket matter. 12:33 7 MS. KIPLIN: Commissioners, in your 12:33 8 notebook today are contested case proceedings. And in 12:33 9 particular is a proposal for a decision, a company 12:33 10 proposed order for each of these contested case 12:33 11 proceedings. They're all, if I recall, Lottery cases, 12:33 12 contested cases. No bingo. In the main, all of 12:33 13 these -- let me strike that. 12:34 14 All of these contested case proposed 12:34 15 orders are recommending revocation of the license on 12:34 16 the basis of insufficient funds. All but, I believe, 12:34 17 one are because the retailer in question had three or 12:34 18 more NSFs in the calendar year. There is one where it 12:34 19 was one insufficient fund, but the retailer still owes 12:34 20 us money. And on the order, the rule regarding the 12:34 21 three or more, they have to clear their account before 12:34 22 we'll reactivate their account with us. And in this 12:34 23 case, they did not. 12:34 24 With that, I recommend signing the 12:34 25 orders and revoking these licenses. 12:34 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 107 1 CHAIR CLOWE: Question -- 2 MS. WHITAKER: Got questions? 12:34 3 CHAIR CLOWE: I move the adoption. 12:34 4 MS. WHITAKER: Okay. Second. 12:35 5 CHAIR CLOWE: All in favor, say aye. 12:35 6 Aye. Let the reflect the vote is two-zero in favor. 12:35 7 On my agenda, we have reached the point 12:35 8 where we are ready for the report from the executive 12:35 9 director, Linda Cloud. 12:35 10 MS. CLOUD: Commissioners, in April 12:35 11 2000 we transferred to the Treasury $86,487,069. That 12:35 12 gives a total accumulative transfers to the State from 12:35 13 start-up until now $7,082,337,668. 12:35 14 CHAIR CLOWE: That's since 1992. 12:35 15 Correct? 12:35 16 MS. CLOUD: That's correct. 12:35 17 Under the FTE status, we have 295 12:35 18 active FTE's at this time. We have 39 vacancies. We 12:35 19 have ten in the selection acceptance pending portion. 12:36 20 We have 19 that are being recruited, screening, or 12:36 21 interviewed. We have one position presently being 12:36 22 posted. And we have 19 positions -- I mean, I'm 12:36 23 sorry, nine positions that the directors are working 12:36 24 on providing HR with the posting information. 12:36 25 Retailer forums. We have -- in your 12:36 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 108 1 notebooks, there are three dates, three -- the next 12:36 2 three retailer forums. One is -- I'm sorry. One of 12:36 3 them is past us. April 27th in Victoria is past us. 12:36 4 And that was a very good retailer town home meeting. 12:36 5 CHAIR CLOWE: How many did you have 12:36 6 attending that meeting? 12:36 7 MS. CLOUD: About 56 retailers. 12:37 8 CHAIR CLOWE: That's a good turnout. 12:37 9 MS. CLOUD: It was a good turnout for 12:37 10 that area. It really was. 12:37 11 The next one is May the 25th in 12:37 12 Fort Worth. This is at the Ramada Plaza Convention 12:37 13 Center on Commerce Street in Fort Worth. 12:37 14 CHAIR CLOWE: And that's a good meeting 12:37 15 date and place, even with the storm that went through 12:37 16 and the damage that was done there? 12:37 17 MS. CLOUD: Yes. That's what -- Laura 12:37 18 has been working on scheduling that and making sure of 12:37 19 that. 12:37 20 CHAIR CLOWE: Good. 12:37 21 MS. CLOUD: The one following will be 12:37 22 June the 22nd, and that will be in Beaumont at the 12:37 23 Hilton Hotel. 12:37 24 So these are -- we're continuing with 12:37 25 our retailer town hall meetings. And they're proving 12:37 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 109 1 to be, as I've said in the past, very beneficial for 12:37 2 us to have this type of feedback from our retailers. 12:37 3 That's my report. 12:37 4 CHAIR CLOWE: Any questions? 12:37 5 MS. WHITAKER: No. Thank you. 12:37 6 CHAIR CLOWE: Thank you. 12:37 7 Billy, may we have your report, please? 12:37 8 MR. ATKINS: Commissioners, the only 12:38 9 thing I have to add to what's in my report is, I've 12:38 10 been in contact with the chair of the advisory 12:38 11 committee, Bill Neinast. And we've set a tentative 12:38 12 meeting date of June 13th. 12:38 13 CHAIR CLOWE: Would you comment on that 12:38 14 for Commissioner Whitaker's benefit, please? 12:38 15 MR. ATKINS: Comment on what part? I'm 12:38 16 sorry. 12:38 17 CHAIR CLOWE: The activities of that 12:38 18 group and how often you meet. 12:38 19 And has that been covered with you? 12:38 20 I'd like for her to be aware of that. 21 MR. ATKINS: Okay. Sure. We have a 12:38 22 bingo advisory committee, which is made of 12:38 23 representatives of the bingo industry as well as the 12:38 24 general public. And they serve to provide input to 12:38 25 The Commission on the needs of the bingo industry in 12:38 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 110 1 the state. They meet quarterly or at the call of the 12:38 2 Chair. And they -- the members are free to bring 12:38 3 agenda items forward that they receive presented to 12:38 4 them that they may be aware of themselves or that are 12:38 5 put forth by the staff. And we provide them with 12:39 6 regular updates on the status of the bingo industry in 12:39 7 Texas. They also serve to review any potential rules 12:39 8 that affect charitable bingo prior to them being 12:39 9 presented to The Commission. 12:39 10 MS. WHITAKER: Thanks. 12:39 11 CHAIR CLOWE: And how many members are 12:39 12 there? 12:39 13 MR. ATKINS: It's a nine-member -- 12:39 14 nine-member commission -- nine-member committee. 12:39 15 MS. WHITAKER: And who is the chair? 12:39 16 MR. ATKINS: The chair is a man named 12:39 17 Bill Neinast from Burton, Texas. 12:39 18 CHAIR CLOWE: And the next meeting is 12:39 19 scheduled for June the 13th? 12:39 20 MR. ATKINS: Yes, sir. 21 CHAIR CLOWE: And I will tell you I 12:39 22 would like to attend. But I have another board 12:39 23 meeting scheduled, and I will not be able to attend. 12:39 24 I'm sorry. 12:39 25 MR. ATKINS: Okay. 12:39 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 5-12-00 111 1 CHAIR CLOWE: You will notify 12:39 2 Commissioner Sadberry? 12:39 3 MR. ATKINS: I will. 12:39 4 CHAIR CLOWE: Very good. 5 MR. ATKINS: The only other thing is, 12:39 6 under the seminars, we've been asked to attend the 12:39 7 Texas State -- Texas Shriners Association state 12:39 8 meeting. That was a tentative verbal request. We 12:39 9 have gotten that confirmed in writing. 12:40 10 MR. ATKINS: We've also received an 12:40 11 additional request for another presentation to the 12:40 12 American Legion in Odessa out in June. We are waiting 12:40 13 to get that confirmed in writing. 12:40 14 CHAIR CLOWE: Very good. And you set 12:40 15 an all-time record on weight loss. 12:40 16 MR. ATKINS: So far. 12:40 17 CHAIR CLOWE: A shadow of your former 12:40 18 self. Thank you, Billy. 12:40 19 At this point in time, we've come to 12:40 20 the agenda item for public comment. Is there anyone 12:40 21 that wishes to make a comment to The Commission? 12:40 22 Anything further? 12:40 23 MS. WHITAKER: Nothing further. 12:40 24 CHAIR CLOWE: We are adjourned, then, 12:40 25 at 12:32 p.m. Thank you all very much. 12:40 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 112 1 REPORTER'S CERTIFICATION 2 3 STATE OF TEXAS ) 4 COUNTY OF TRAVIS ) 5 6 I, MARY SCOPAS, Certified Shorthand 7 Reporter for the State of Texas, do hereby certify 8 that the above-captioned matter came on for hearing 9 before the TEXAS LOTTERY COMMISSION as hereinafter set 10 out, that I did, in shorthand, report said 11 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 on this the 19th day of 17 May, 2000. 18 19 20 21 MARY SCOPAS, RPR, Texas CSR No. 5313 22 Expiration Date: 12-31-00 1609 Shoal Creek Boulevard, Suite 202 23 Austin, Texas 78701 (512) 474-4363 24 25 JOB NO. 000512MSH WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363