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 4                  TEXAS LOTTERY COMMISSION
 5      PUBLIC COMMENT HEARING ON PROPOSED ADMINISTRATIVE
 6          RULES 16 TAC SECTION 402.706 AND 402.707
 7   
 8                      November 30, 2005
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10   *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *
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14             BE IT REMEMBERED that the TEXAS LOTTERY
15   COMMISSION PUBLIC COMMENT HEARING ON PROPOSED
16   ADMINISTRATIVE RULES 16 TAC SECTION 402.706 AND
17   402.707 was held on the 30th of November 2005, from
18   11:03 a.m. to 12:58 p.m., before Kelly E. Fisher, CSR
19   in and for the State of Texas, reported by machine
20   shorthand, at the Offices of the Texas Lottery
21   Commission, 611 East Sixth Street, Austin, Texas,
22   whereupon the following proceedings were had:
23   
24   
25   
0002
 1                         APPEARANCES
 2   SANDRA JOSEPH
          Assistant General Counsel, Texas Lottery
 3        Commission
 4   MARSHALL MCDADE
          Audit Manager, Bingo Operations Division
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0003
 1                      November 30, 2005
 2   
 3                  MS. JOSEPH:  Good morning everyone.  My
 4   name is Sandra Joseph.  I'm Assistant General Counsel
 5   for the lottery commission.  With me is Marshall
 6   McDade.  He's audit manager of the Bingo Operations
 7   Division.
 8                  I'll now call to order this hearing for
 9   the purpose of receiving public comments on two
10   proposed rules.  The first rule is Rule 16 TAC Section
11   402.706, which relates to Standard Administrative
12   Penalty Guidelines.  The second rule is Proposed Rule
13   16 TAC Section 402.707, which relates to Expedited
14   Administrative Penalty Guidelines.
15                  Copies of the proposed rules were
16   placed on the table in the foyer, and hopefully y'all
17   were able to pick up a copy of those rules as they
18   appeared in the "Texas Register."  Did everyone get a
19   copy that wanted a copy?
20                  All right.  Also available on the table
21   are appearance forms for you to fill out if you wish
22   to offer comments today.  I have received a number of
23   appearance forms.  I'll be using those to call on you
24   in just a few moments in order for you to offer public
25   comments if you so wish.  If you haven't filled out a
0004
 1   form and you do wish to make comments, please get one
 2   from the table in the foyer and bring it up to us.
 3                  I'm not going to put any time limit on
 4   the comments today.  I believe we'll have time to hear
 5   everything everyone wants to say.  If it gets to be
 6   late in the day and we're still going strong, we may
 7   consider putting on some limits at that point.  But I
 8   would ask that you would consider if you've heard the
 9   same comments made that you plan to make and you've
10   heard that one time or several times, you might want
11   to just state that you agree with the comments that
12   were made by the previous person, or whoever it is you
13   want to agree with, and not necessarily restate
14   everything.  I'll leave that to your discretion.  But
15   y'all are going to be sitting there, and I know you
16   want to be kind to those that are in the audience
17   waiting their turn also.  I think you'll have judgment
18   about when you can just say, "I second what he said."
19                  Now, the purpose of the hearing today
20   is for us to receive your comments.  This is not an
21   adversarial hearing.  We're not going to be formally
22   admitting -- offering or admitting evidence.  This is
23   our opportunity to hear what you have to say about
24   these rules.
25                  In addition to receiving your oral
0005
 1   comment today, we will be accepting written comment
 2   through December 19th.  So if you would like to
 3   supplement what you say today or if you would like to
 4   just put in writing what you say today, you can either
 5   hand us a copy of your comments today, or if you would
 6   like to send it to us, please feel free to do that.
 7   Are there any questions at this point?
 8                  If not, I'm going to go ahead and just
 9   start with these witness affirmation forms and call
10   your name.  If you would like to make comments, then
11   please come forward and sit in front of one of these
12   microphones so that everyone will be able to hear
13   you.
14                  Mr. Cornwell.  I didn't arrange the
15   order of these.  Before you begin, Mr. Cornwell, I
16   would -- although this is not a formal hearing, I
17   would like to administer the oath to you and to anyone
18   else who will be offering comments today.  If you
19   would, raise your right hand.  And anyone else who
20   anticipates they'll be giving comments, just raise
21   your right hand.
22                  (Witnesses sworn.)
23                  Thank you, Mr. Cornwell.  What would
24   you like to tell us today?
25                  MR. CORNWELL:  I'm representing
0006
 1   Goodtime Bingo, which is a distributor in the state.
 2   Looking at the rules as it's written, the problem that
 3   we kind of run into is a lot of these charities that
 4   we're going to are small VFWs, smaller places.  Those
 5   places run their bingo with volunteer workers.  It's
 6   very difficult for some of those people to get even
 7   some of their workers to come in and help with bingo.
 8                  I can see a problem where they have
 9   experienced people coming down to help out to help the
10   post in the bingo, and there's going to be some
11   mistakes that are going to be made, I think, not on
12   any kind of purpose.  But I think that some of these
13   rules are going to hurt these charities that are
14   trying to do good in their community and this type of
15   thing.  I just don't think it's -- without a good -- I
16   don't know what I'm trying to reach at.  I just think
17   that it's not -- unless we get -- I've lost my train
18   of thought.
19                  MS. JOSEPH:  That's all right.  You're
20   first, and that's a difficult position if you're not
21   used to doing this.
22                  MR. CORNWELL:  These are times when
23   everybody's needing to help out in the communities.
24   Some of these just don't have the resources to take
25   care of some of these penalties that may arise from
0007
 1   this type of thing.  Really, that's, I think, the very
 2   bottom part of that, the problem we're running into.
 3   I think that we need to help charities understand what
 4   they need to do instead of penalizing some of these
 5   places that are doing the best they can.  That's about
 6   all I have to say.
 7                  MS. JOSEPH:  Thank you very much for
 8   your comments.
 9                  Danny Henry.
10                  MR. HENRY:  Good morning.  I'd like to
11   say that I'm Danny Henry.  I'm a past state commander
12   for the Department of Texas for the Veterans of
13   Foreign Wars and am now a national council member for
14   the whole organization.  I'm here -- and have been
15   involved in bingo for many, many years.  And I'm here
16   rising against these rules because there's too much
17   harm that will be done.
18                  All the VFWs that I know that operate
19   charities do not have hired CPAs or bookkeepers or
20   anything like that that really know how to do it.
21   This is mainly done by volunteers that just hold a job
22   or they're retired.  And they come in and they sit
23   down and try to do the very best that they possibly
24   can.
25                  And the money that would be penalized
0008
 1   to them for normal -- maybe not normal -- but mistakes
 2   in arithmetic or stuff like that could cost them
 3   valuable money that they put out throughout this state
 4   and that helps the communities and everything else.
 5                  Like last year I know they probably
 6   contributed over a quarter of a million dollars to the
 7   Department of Texas to go to the relief fund for the
 8   hurricane and all the other damages, tornadoes, and
 9   everything else.  And they spend a lot of money at
10   Audie Murphy Hospital, rebuilding for the burn
11   victims, from the Iraq veterans, and help the ones
12   that lost their legs and arms, to learn other
13   occupations and stuff like that and how to go on with
14   their lives.
15                  And this extra money that they would
16   lose because of these little penalties would be very,
17   very costly.  And it would hurt, I know, all the VFWs
18   in the state of Texas, and probably the American
19   Legions and the DAV and everybody else that has
20   bingo.
21                  It's a shame that we have to come to
22   this, because I do realize there are organizations out
23   there that are doing things illegally on purpose.  And
24   they need to be regulated and done away with.  But I'm
25   afraid that the way these rules are structured,
0009
 1   there's going to be a lot of them that will be out on
 2   the street just because of simple mistakes.  I don't
 3   think that's fair, and it should not go that way.
 4                  People work on volunteers.  I realize
 5   there's some halls that do pay workers, but still
 6   don't pay CPAs to come in and do their work.  If they
 7   did it, I could see it, because that would be --
 8   you're paying them to do a job, and then you can have
 9   recourse to recover your money from a CPA or something
10   else like that.
11                  I don't know if you've ever had
12   experience, but people do have dyslexia, and they --
13   on one form, if you make one mistake on there, you'll
14   have violations all the way down the line.  That part
15   needs to be addressed.  We just need some more
16   structure and redoing and everything.  As it stands
17   now, Department of Texas, we're firmly against all
18   these rules the way they're written.
19                  I thank you.
20                  MS. JOSEPH:  Thank you, Mr. Henry.
21                  Trace Smith.
22                  MR. SMITH:  Good morning.  My name is
23   Trace Smith.  I'd like to say that I'm in opposition
24   to these rules.  My main concern is on repeat
25   violations.  It's not clear and it's not defined what
0010
 1   a repeat violation is.  Does one violation relate to
 2   another violation?  It doesn't clarify at all.  For
 3   instance, if you've got an audit for the past three
 4   quarters.  In the first quarter you may have a
 5   violation, a simple violation, of an arithmetic error,
 6   transposing a number; and the second quarter you may
 7   have a violation of a simple error; and maybe in the
 8   third quarter you've got a violation of a different
 9   type, something not related.  Is that the third
10   violation, or is that the first violation on that
11   particular violation?
12                  It's not clear at all whether the
13   violations are related or not related.  It's not
14   defined how those violations will be determined,
15   whether they're the first violation, the second
16   violation, are or the third violation.
17                  Also, bingo is controlled by a lot of
18   volunteers.  A lot of people volunteer their time to
19   come down here and help with the rule-making process.
20                  There are fewer charities that are
21   doing it each year because they're afraid they will
22   make a mistake.  If we make a mistake on one form, it
23   relates to another form.  And is that two violations,
24   or is that one violation for the first time?  It's not
25   clear at all.  It's very abstract what a violation is
0011
 1   or how many violations you would have.
 2                  That's all I've got for you.
 3                  MS. JOSEPH:  Appreciate your comments.
 4   Thank you.
 5                  William T. Smith.  Mr. Smith does not
 6   wish to make any comment.
 7                  MR. SMITH:  I'm opposed to these rules.
 8                  MS. JOSEPH:  All right.  You're opposed
 9   and don't wish to make any further comments?  Thank
10   you, sir.
11                  Rex Stark.
12                  MR. STARK:  My name is Rex Stark.  I
13   want to, first of all, say I'm against this particular
14   rule, the way it's written.  All of our federal,
15   state, local governments, charitable organizations as
16   far as Red Cross and things are saying that we're all
17   strapped for money.  Right now we've suffered a
18   tremendous amount of loss throughout the country.
19   Texas has had more than their share of problems as far
20   as finances.
21                  Every dollar that you take out of
22   charitable bingo in the form of a fine or something
23   that's taken out is one dollar that's not going to
24   go -- ever have a chance of going to charity.  As
25   repeatedly said, these are volunteers.  These are
0012
 1   people that -- if there's a fear of them going to jail
 2   or getting a fine that they can't pay, they're not
 3   going to do it, and you're going to choke off the
 4   charity part of the bingo.
 5                  This is where the money's going: to the
 6   Veteran's Administration, food baskets, for
 7   Thanksgiving, for Christmas, for everything that we
 8   use.  If the federal government, the state, and the
 9   local governments are not doing their part because
10   they're hurting for money just like everyone else is,
11   they're asking the churches and the charitable
12   organizations to step in and do it.  We don't have the
13   money either, because it's being sucked out the back
14   door in the way of fines or something for simple
15   arithmetic mistakes.  I don't think that this needs to
16   go in that direction.
17                  Thank you.
18                  Thank you, Mr. Stark.
19                  Bruce Weatherford.
20                  MR. WEATHERFORD:  My name is Bruce
21   Weatherford, and I'm with the Therapeutic Riding of
22   Texas.  I want to start out by saying that we
23   definitely oppose the adoption of the proposed rules
24   for the penalties and expedited procedures.
25                  Bingo is supposed to give -- or raise
0013
 1   money for charities.  The proposed rules would result
 2   in more money going to the State of Texas rather than
 3   more money going to the charities.  My little
 4   organization, we're small, and our main source of
 5   income is charitable bingo.  And if we do anything to
 6   take funds out of the charitable bingo operation that
 7   we run, that means that we're not going to be able to
 8   serve our clients that we have in our program.  And we
 9   don't turn anybody away because they don't have any
10   money.  We provide the funding for them if they need
11   the financial assistance to participate in the
12   program.
13                  So the commission should make a
14   commitment to the charities that it will not ask the
15   legislature to give it these additional funds so that
16   this rule becomes a back doorway for the agency to get
17   more money.  We are definitely, 100 percent, opposed
18   to any rules that will take funds away from the
19   charitable bingo operations.
20                  Thank you.
21                  MS. JOSEPH:  Thank you,
22   Mr. Weatherford.
23                  Sharon Ives.
24                  MS. IVES:  Good morning.  My name is
25   Sharon Ives with Fort Worth Bookkeeping.  I also
0014
 1   represent over 50 nonprofit organizations here in the
 2   state of Texas.  My office has seen our fair share of
 3   audits.  These two rules will put a hardship on the
 4   charities.  Charitable bingo, in general, needs help,
 5   not penalties, on violations.
 6                  What I have noticed through the audit
 7   process is what I call the domino effect.  It is where
 8   one disallowed expense changes the quarterly report,
 9   the 35 percent distribution and so on, creating
10   multiple violations.  This can be a result of an
11   honest mistake.
12                  I served on the work group meetings,
13   and I was opposed then, and I'm opposed now.  I also
14   agree to the previous testimony here today.
15                  Reading over these rules, the charity
16   is guilty, period.  You either have to settle or go to
17   administrative court.  Either way, it still costs the
18   charity money that is money from their charitable
19   purpose.
20                  Thank you.
21                  MS. JOSEPH:  Thank you.
22                  Renea Tucker.  I apologize if I'm
23   mispronouncing your first name.
24                  MS. TUCKER:  You're fine.  I'm opposed,
25   but I won't talk.
0015
 1                  MS. JOSEPH:  Ms. Tucker does not wish
 2   to offer any oral comments.
 3                  Elizabeth Bennett.
 4                  MS. BENNETT:  I'm opposed, but I do not
 5   wish to speak at this time.
 6                  MS. JOSEPH:  Thank you.
 7                  Earl Markham.
 8                  MR. MARKHAM:  I agree with all that's
 9   been said up to this point.  I'm opposed to all these
10   proposed rules.
11                  MS. JOSEPH:  Thank you.
12                  Jim Ross.
13                  MR. ROSS:  Good morning.  I'm Jim
14   Ross.  I'm a floor worker and a caller for bingo, and
15   I'm opposed to this because it takes away from the
16   charities.  I work for the charities, and this is my
17   livelihood.  Anything that takes away from that, it
18   trickles down and jeopardizes all of us.  I'm in the
19   trenches.  I like bingo, and I work for a lot of good
20   people, with a lot of good people.  I see this just
21   hurting everybody.
22                  Thank you.
23                  MS. JOSEPH:  Thank you, Mr. Ross.
24                  Debra Ross.
25                  MS. ROSS:  I also oppose, but I don't
0016
 1   wish to speak.
 2                  MS. JOSEPH:  Thank you.
 3                  John Bradley.
 4                  MR. BRADLEY:  Good morning.  I'm John
 5   Bradley, and I'm representing the AKIBA Academy.  I
 6   am, like all the others, opposed to the rules.  First
 7   of all, something such as a simple mistake that
 8   doesn't affect anyone, doesn't affect the money, the
 9   charity, or the public, something that can be
10   corrected by an amended copy, I just don't feel that
11   there should be any penalty on that.
12                  MS. JOSEPH:  Thank you.  We appreciate
13   you being here.
14                  Charles Hutchings.
15                  MR. HUTCHINGS:  Good morning.  My name
16   is Charles Hutchings of AMVETS.  I'm out of Dallas.  I
17   am also opposed to this.  There's quite a few AMVETS
18   organizations that play bingo in this state.  This
19   would deplete part of their funds, as has been
20   stated.  Lots of volunteer stuff goes into these
21   charities.  Lots of mistakes get made.  Some of it
22   gets picked up on and gets stopped by our CPAs or the
23   bookkeepers, whoever checks on this stuff.  Lots of
24   mistakes are made.  If they're not caught, this is
25   going to take away from their purpose.
0017
 1                  Also in the rules that's out there on
 2   the table this morning, (h), it says, "The list of
 3   statutory violations and the standard administrative
 4   penalty is not an exclusive list."  If it's not an
 5   exclusive list, where is the list of the rules that's
 6   not in it?  And why aren't they in it?  Are we hiding
 7   something?  That should never happen.  Never.  If
 8   we're going to have a rule, and you're going to make a
 9   list, we should have the list.
10                  Also, under (8), if a person does not
11   accept whatever the commission wishes to hand down, if
12   that is less than the max penalty, if you go to
13   hearing, they want the max, or they can go to the
14   max.  So you want to penalize people for their right,
15   the right to appeal?  This is not necessary.  It's
16   unneeded.  Put it where it belongs, over File 13, and
17   let everybody get on with life.
18                  Thank you very much.
19                  MS. JOSEPH:  Thank you, Mr. Hutchings.
20                  Velma Markham.
21                  MS. MARKHAM:  I'm Velma Markham with
22   AMVETS Auxiliary of Dallas.  I do oppose to these
23   rules.  For one thing, if there's going to be a rule
24   like this, the staff should be required to prove that
25   someone stole the money or did something intentionally
0018
 1   before a penalty is required.  And if they did make
 2   this mistake intentionally, then they should be
 3   fined.  But there are so many mistakes made at times,
 4   and it's just not intentionally.  It's just clerical
 5   error.  And this is going to be hard on us.
 6                  And if any way that you could see to
 7   take this rule out, we would appreciate it.  And it's
 8   going to take from all of our donations to charity.  I
 9   know I'm a volunteer at the VA Hospital, and there are
10   so many things that they need out there.  And we do
11   donate all we can to them and other charities.  But if
12   this rule stands, it's going to hurt us.  It really
13   will.
14                  And I thank you.
15                  MS. JOSEPH:  Thank you.
16                  Don Webb.
17                  MR. WEBB:  Good morning.  My name is
18   Don Webb.  I'm with the AMVETS Department of Texas and
19   the Improved Order of Redmen of Texas.  We oppose
20   these rules because of the simple reason we just --
21   there's no way -- it's taking away from our charities
22   if we have to pay that.
23                  You say if it's a clerical error.
24   Well, we make mistakes.  We're human.  The lottery
25   commission makes mistakes.  They're human.  But should
0019
 1   we be penalized for some simple mistake?  If there is
 2   something wrong, go in there and correct it and then
 3   serve them with a violation.
 4                  But there's just too much stuff to take
 5   away from the charities.  Right now we're scraping the
 6   bottom of the barrel to send -- the charities now are
 7   really hurting for money, but they're really hurting
 8   throughout the state because of the things that's
 9   happened in the past.  Everything.  The food banks are
10   low.  The clothing situation is low.  And we need to
11   have all the money we can.  The VA hospitals need
12   money.  If we're fined for something that is a
13   clerical error, then we don't need that.  So we oppose
14   that.  Everything else has just been said.
15                  Thank you.
16                  MS. JOSEPH:  Thank you.
17                  Richard Bunkley.
18                  MR. BUNKLEY:  I agree with everything
19   said so far.  I'll save the repetition and not
20   comment.
21                  MS. JOSEPH:  Thank you.
22                  Gerald Coldwell.
23                  MR. COLDWELL:  I'm Dr. Gerald
24   Coldwell.  I'm representing Post 74 AMVET.  I would
25   like to go over the logic of this a little bit.  The
0020
 1   bingo commission made a real bad mistake last year
 2   when they went over and changed the rules of the game
 3   and got off the straight six.  They're correcting the
 4   mistake in going to a straight six.  It seems like to
 5   me that you start penalizing people for making
 6   mistakes, then that's kind of a faulty logic.  Bingo
 7   commission lost a lot of money.  They paid for the
 8   mistake.  If you penalize us for making mistakes, it
 9   just won't make logical sense.
10                  Thank you very much.
11                  MS. JOSEPH:  Thank you, Dr. Coldwell.
12                  Edwin Branom.
13                  MR. BRANOM:  It's not just the women
14   that can change their mind.  Thank you so much for
15   letting me speak to you for just a second.
16                  One of the things that has always
17   bothered me about bingo and the way it's regulated is
18   that you have different kinds of bingo halls in the
19   state.  And it's kind of hard to put them all in one
20   basket.  You've heard from several people today that
21   are involved with VFWs, AMVETS, American Legions,
22   particularly organizations that are small.  And then
23   we have the larger bingo halls that are a little more
24   sophisticated that would probably fall under these
25   regulations a lot better.  The job is pretty
0021
 1   difficult.  I'll tell you, from the outside, looking
 2   in, it is tough.  We have to have some regulations, or
 3   we have total chaos.
 4                  In reality, you'll have some
 5   unscrupulous people in the business.  You do have to
 6   keep it straight.  We understand that.  It appears to
 7   me, though, that most of the regulations here that
 8   apply to everyone are pretty strenuous.  They really
 9   only are done to keep very few people out of the
10   industry, the unscrupulous people that don't need to
11   be there.
12                  It appears to me that if we would -- in
13   your position, as opposed to ours, would look after --
14   I was just talking to Steve there, that one of the
15   things that my folks -- country people, we always
16   talking about burning the barn down to get rid of the
17   rats.  That's basically what I see happening to the
18   bingo industry here.  We're overregulating and making
19   life pretty difficult for these charitable
20   organizations to operate.
21                  Really, all I got to say is I don't
22   like this approach.  One of the things that -- when
23   you have charitable organizations and you have
24   volunteers, a lot of these -- especially these elderly
25   people -- and I'm in that same category.  We have a
0022
 1   tendency to forget.  We had an issue in Plano here
 2   recently where name tags -- got severely chastised by
 3   a couple of our folks for not having their name tags
 4   on.  One of them's name tag was turned backwards.  The
 5   other one, the name tag was on his apron, and he got
 6   hot, so he took his apron off.  Very trivial things.
 7   But it became a huge, major issue.
 8                  I can see how volunteers would come in
 9   and say, "Since you didn't wear your tag today,
10   there's a $100 fine or $200 fine."
11                  Volunteer would say, "I don't need
12   this.  I'm out of here."
13                  Next thing you know, you don't have
14   bingo, because there's nobody there to work it.  You
15   need to consider the consequences of some of these
16   things and maybe need to rethink a little bit.
17                  That's all I've got to say.  Thank
18   you.
19                  MS. JOSEPH:  Thank you.
20                  Kay Recio.  Do you wish to make a
21   comment?
22                  MS. RECIO:   No.
23                  MS. JOSEPH:  Thank you.
24                  Jim Caldwell.
25                  MR. CALDWELL:  I'm opposed to the rule,
0023
 1   and I concur with everything that's been said.
 2                  MS. JOSEPH:  Thank you, Mr. Caldwell.
 3                  Louis Kasanovich.
 4                  MR. KASANOVICH:  I don't wish to
 5   testify, but would say that I agree with everything
 6   that's been said so far.  We are opposed to the rule
 7   changes as stated.
 8                  MS. JOSEPH:  Thank you.
 9                  The only witness affirmation forms I
10   have left belong to Steve Fenoglio and Steve Bresnen.
11   Is there anyone else other than those two gentlemen?
12   All right.  I see one more.  Ms. Thompson.  Jane
13   Thompson.
14                  MS. THOMPSON:  I hadn't planned on
15   speaking.  I just mainly came to listen.  As I was
16   sitting there listening to all the folks, I feel like
17   the rules that are proposed here are just a little bit
18   too drastic.  Mainly because I know, I have heard over
19   the years, what's happening to the bottom line of all
20   these charities.  And they are in desperate need of
21   help.  I feel like these rules, if they're passed,
22   it's just going to add to the burden that's already on
23   them.
24                  But I know there needs to be
25   regulation.  Believe me.  I understand that.  I just
0024
 1   want to know if there's some way that you could make
 2   it clear that the little piddly rules, the ones that
 3   are so minor and not critical to anybody, would just
 4   be a warning.  In fact, you know, the majority of
 5   them -- I know there's a lot of things on there that
 6   really need to be fined.  I know there are things that
 7   are done by the unscrupulous people, and they need to
 8   be.  But I also know, and I've seen it over the years,
 9   so many clerical errors are made.  We make them
10   ourselves in my office, just things that everybody
11   makes mistakes.
12                  I don't want to be penalized for that.
13   I don't want these charities to be penalized for these
14   small, insignificant mistakes.  If there's some way
15   that we could just go back to the drawing board on the
16   rules where you all can live with it and where the
17   charities can live with it.  Just don't make them so
18   strict on the penalty amounts, because the charities
19   can't afford it.
20                  MS. JOSEPH:  Thank you, Ms. Thompson.
21                  Mr. Fenoglio.
22                  MR. FENOGLIO:  Thank you.  For the
23   record, my name is Stephen Fenoglio.  I'm an attorney
24   in Austin.  I brought with me some handouts.  I'm
25   bringing two for y'all.  I will submit, Ms. Joseph and
0025
 1   Mr. McDade, electronically, if that's all right, the
 2   list of organizations that I represent.  I'd rather
 3   not read them into the record.
 4                  There was a comment at the last
 5   commission meeting about -- well, I made a comment
 6   that had to do with the Administrative Penalty Rules
 7   are not necessary, and the commissioner asked me a
 8   question, "Wouldn't it be better to know the rules of
 9   the road?"  And in a perfect world, you would.  And
10   the suggestion was, the administrative penalty would
11   give the rules of the road.
12                  If that's the case, there are over 100
13   state agencies that have failed that test.  According
14   to the House of Representatives and Senate Law
15   Library, there are 136 state agencies in the state of
16   Texas.  Less than 25 have the Administrative Penalty
17   Rule.  All of those agencies have, in one manner, the
18   authority to impose penalties.  Some of them don't
19   have the monetary penalty authority, but all of them
20   have the ability to punish licensees.
21                  MS. JOSEPH:  Let me interrupt you.  I'm
22   having a little bit of trouble hearing you.  Could you
23   put the microphone a little bit closer?
24                  MR. FENOGLIO:  Is that better?
25                  MS. JOSEPH:  I think so.
0026
 1                  Can y'all hear?
 2                  Thank you.
 3                  MR. FENOGLIO:  The real concern that
 4   the industry has is, how will this rule -- or these
 5   two rules, if adopted, impact the charities?  And
 6   "impact" in the sense of where the rubber meets the
 7   road, how much will the charities have to pay?  I've
 8   been asking that question since early '04, when the
 9   rules -- or late '04, when the rules were being
10   discussed.  And I was a part of a group of industry
11   reps and Charitable Bingo Division representatives
12   when we were crafting the rule.
13                  And at the end of the discussion and
14   going back and forth on drafts, it was suggested that
15   I send over several representative audits.  We know
16   what happened in those audits before the rule.  And
17   what would be the result if -- with the new rule in
18   place, at the time it was drafted, what would be the
19   result?  How much would the charities pay?  I gave
20   each of you a copy of my March 23, 2005, letter to
21   Mr. McDade transmitting three different audit reports
22   and asking the question again, "How would this new
23   rule impact those audits?"
24                  We know what happened in those audits,
25   because I believe all of them were completed audits.
0027
 1   What would be the difference?  We still don't know the
 2   answer to that question.  And that concerns us.
 3                  Ms. Joseph, you made a comment in one
 4   of the drafting sessions that -- the words to the
 5   effect of, it would be disingenuous for us, meaning
 6   the staff of the Charitable Bingo Division, to leave
 7   you, the industry, with the impression that if this
 8   rule were adopted, licensees wouldn't be paying
 9   increased penalties, monetary penalties.  I take you
10   at your word.
11                  Anecdotally, in a real case that is not
12   yet a finalized case, the staff initially decided to
13   impose a $400 -- or recommend a $400 penalty for a
14   charity that had a single violation in which the
15   charity had communicated an additional worker as an
16   operator.  But for whatever reason, it was never
17   received or logged into the commission.
18                  A number of other organizations sent
19   the same form in, and it was received and logged into
20   the commission.  So when their spot check occurred,
21   this particular charity, we'll call it Charity A, the
22   commission employee said, "You don't have an operator
23   present."
24                  "Yes, we do.  It's Ms. Smith."  Not
25   her real name.
0028
 1                  "She's not on the registry."
 2                  That led to an enforcement action that
 3   is still pending.  And the recommendation at the time
 4   was for a $400 monetary penalty and the signing of a
 5   standard enforcement agreement where the charity
 6   admits fault, which, under the new penalty matrix,
 7   would lead to, if that happened again, a new higher
 8   administrative penalty for a like violation within a
 9   36-month period contained within the drafted rule.
10                  Well, in negotiating this, it was
11   determined that actually this violation occurred
12   before this administrative penalty was being
13   developed.  So the penalty would be zero if the
14   charity agreed to the recommended sanction, which the
15   charity did not.
16                  What I want to highlight to you is,
17   before the rule was in effect, no penalty.  If the
18   rule is in effect today, it would be a $400 penalty
19   for one violation.
20                  I circulated to you a handout from the
21   staff dated April 15, '05, and it's my handwriting at
22   the very top.  Says, "Staff Handout 4-15-05."  And
23   it's a list of the audit activities for 2003 using the
24   maximum penalty at the time that this penalty was in
25   draft form.  It's changed, as you know, Ms. Joseph.
0029
 1   It assumes the maximum violations in that penalty.
 2   And the total in '03 the charities would have paid was
 3   $266,600.  And the total in '04 would have been
 4   $376,900.  This only includes audits.  It does not
 5   include, as I understand what staff said, the other
 6   forms of review, including a review.
 7                  So that's a significant number.  That
 8   would feed a lot of homeless people.  It would provide
 9   needed care to veterans at the Audie Murphy VA
10   Hospital in San Antonio, Texas.
11                  My good friend, representative from the
12   state VFW, Dan Henry, talked a little bit about that
13   where the state VFW obtains funds from its VFW posts
14   throughout the state, combines all -- and many of
15   those funds are made up of charitable bingo monies --
16   combines those funds and sends money to Audie Murphy
17   and other veterans hospitals throughout the state to
18   care for the veterans that are coming back with
19   horrific burns or other wounds from Iraq and
20   Afghanistan, monies that the federal government does
21   not pay, monies that the State of Texas does not pay.
22                  They provide, as he stated, bicycles.
23   Many of these veterans have lost limbs.  They can't
24   walk.  They have to learn to walk again.  They have to
25   learn to ride a bicycle again.  They have to learn the
0030
 1   basics that we take as a given, getting up in the
 2   morning and showering and shaving and going to work,
 3   because these veterans have lost limbs or have other
 4   horrific injuries.
 5                  And the federal government and the
 6   state government does not provide enough healthcare
 7   for them to recover.  So organizations like the VFW
 8   and the American Legion and other veterans
 9   organizations provide those kinds of dollars.
10                  Well, if the rule's in effect, those
11   monies are going to come from licensed authorized
12   organizations.  Ninety-nine percent of the violations
13   that are cited in this rule are directed solely at
14   licensed authorized organizations.  They're not
15   directed at manufactures.  They're not directed at
16   distributors.  And there are very few directed at
17   licensed commercial lessors.
18                  So it's the charities that will pay
19   those dollars.  And it's extremely discomforting.
20   Someone suggested, "It scares the you-know-what out of
21   us."  When we've asked for, Well, how would this rule
22   impact -- we know what's happened in the past.  Assume
23   that the rule's in place, and let's apply it to these
24   discrete audits.  And so we can see what the result
25   would be.  We don't know today.  And I gather we'll
0031
 1   never now.
 2                  And I think that's unfortunate in a day
 3   when most agencies pride themselves on open government
 4   and notification to licensees that we can't find out
 5   how this rule would actually impact a licensed
 6   authorized organization.
 7                  There's been discussion about the
 8   volunteers that work at charity halls in either
 9   accumulating the records necessary when an audit
10   occurs in conducting the actual bingo game and
11   ordering the bingo supplies.  They're either
12   volunteers or low-paid workers.
13                  I gave as my next set of examples two
14   different documents.  One is a case that has been
15   resolved, a November 14, 2004, notice of opportunity
16   to show compliance with a Jewish organization in
17   Dallas, Vaad Hakashrus of Dallas, Inc., in which this
18   organization was cited for a violation.  And I won't
19   go into great detail on it, because it's part of the
20   record now.  But basically that a representative of
21   the organization had not attended the operator
22   training program.  As it turns out, an error was made
23   by the staff and by the charity.  And it turned out to
24   be purely a bookkeeping error.
25                  The sad part is it started in August --
0032
 1   or September of '01 and was only resolved in November
 2   of '04, due in part to the fact that the nonprofit
 3   organization contains volunteers -- or is comprised of
 4   volunteers.  And unlike, I'd like to think,
 5   professionals like lawyers and accountants who have a
 6   case in front of them and have a tickler system, and
 7   if something doesn't happen in a particular series of
 8   days, another tickler is sent out.  This kind of
 9   floated around.
10                  My point is I think that the staff has
11   some degree of culpability in the problems that
12   arose.  I don't raise the issue to throw a brick at
13   staff per se.  What I'm trying to point out is that
14   we're all human and we're all capable of errors.  If
15   you're going to penalize charities, then it seems to
16   me the organization ought to have its ducks in a row
17   first and have, as its goal, 100 percent perfection if
18   it's going to expect that of licensees.
19                  I'm happy to report that a few days
20   after I sent the letter to Mr. Sanderson, the issue
21   was resolved, the case was dismissed, and it's gone.
22   But the sad part is the organization had to mess
23   around with this and ultimately had to retain an
24   attorney, having to be me, and paid me a sum of money
25   to resolve an issue that -- and I believe the agency
0033
 1   had every bit of information multiple times as to what
 2   happened and why there was a violation, and it just
 3   got -- kept falling through the cracks.
 4                  Changing gears now to the second rule,
 5   what I call the second rule, which is the Expedited
 6   Penalty Rule.  And there's been quite a bit of
 7   discussion about that rule in regard to the deadline.
 8   And it's the 20-day period that an organization has to
 9   accept the recommended penalty.  And that's
10   specifically found in Section -- or Proposed Section
11   402.707, subparagraph (e).  Twenty days the charity
12   has to accept the recommendation.  And if the charity
13   doesn't, the next process goes through, which is a
14   contested case.  And the language is very clear.  The
15   opportunity for an agreement in accordance with this
16   section, meaning the expedited penalty, a lower
17   penalty, is withdrawn.  It says, "Will expire."
18                  I don't believe that's required,
19   topside or bottom, by law, and I direct to the
20   commission's attention Section 2001.604, subparagraph
21   (a) of the Bingo Enabling Act, the Texas Occupations
22   Code, which does in part support the commission's
23   position, or at least the staff's position, that you
24   have only 20 days for the charity to accept a
25   recommendation.  That's true.
0034
 1                  But what the statute doesn't address
 2   is, what happens if the charity doesn't take action
 3   and you're starting down the hearing process?  604, or
 4   anything in the Bingo Enabling Act, does not say that
 5   that offer is withdrawn and you must go to hearing.
 6   And it occurs to me, as I've said in public hearings,
 7   meetings with the commission and staff, you need more
 8   time to paint the picture completely.  We're now at
 9   the end of November.
10                  I serve on one board, a nonprofit
11   organization, in town, The ARC of the Capital Area,
12   and we don't have a board meeting in the month of
13   December.  There are hundreds of organizations,
14   nonprofit organizations, many of whom conduct bingo,
15   that only meet quarterly.  The way the rule -- this
16   particular provision is drafted, the organization must
17   accept the recommendation within 20 days, or else it's
18   withdrawn and dies, and then you go to hearing.
19                  And I suggest to you that if, in fact,
20   you want to encourage settlements, which is a part of
21   the introduction of the rule in part -- that's the
22   intent of the rule as found in the notice in the
23   "Texas Register" -- then this is directly contrary to
24   that.  Because there are organizations that will not
25   be able to make the 20-day period.  My suggestion was
0035
 1   60 days.  I've also suggested 90, again, because some
 2   organizations do not meet quarterly.
 3                  And the problem is that under the
 4   expedited penalty -- and someone has suggested, "Well,
 5   why doesn't the charity designate someone with
 6   authority to settle?"  Under your administrative
 7   penalty matrix, it could be several hundred or several
 8   thousand dollars that you're designating to an
 9   individual in that organization with settlement
10   authority in advance, without knowing any of the
11   facts.  And I suggest to you that -- I think I'll make
12   that stronger.  I state to you that that's
13   unreasonable.
14                  I believe it would be unreasonable for
15   the commissioners to designate to anyone at this
16   agency with settlement authority on any type of
17   violation.  And this agency has been subject to, for
18   example, ADA requirements and has been subject to a
19   number of mandatory meetings with federal authorities
20   concerning ADA compliance.
21                  I think it would be inappropriate, and
22   I believe based upon what's published at this agency,
23   that the commissioners did not designate to any
24   individual the authority to settle that matter, but
25   there was a lengthy negotiation, if memory serves me
0036
 1   correctly, extended over two years before a resolution
 2   was finally reached.
 3                  I think the same medicine should apply
 4   equally to a licensed authorized organization.
 5   Granted you're not talking about potentially 16,000
 6   locations which the ADA compliance issue potentially
 7   reached.  But you are talking about real dollars for
 8   nonprofit organizations.  And I would suggest that the
 9   language is changed, that there's a longer window and
10   that, in any event, the opportunity to reach an
11   expedited penalty is not withdrawn, does not expire
12   automatically.
13                  The way I believe the language is
14   written today, if the staff, Mr. Adkins and
15   Mr. Sanderson, believed honestly -- and Mr. McDade
16   believed honestly the charity was trying to reach an
17   agreement with its members or with its board members
18   to agree to an expedited penalty but they couldn't do
19   it within that 20-day window, I think there can be
20   circumstances where Mr. McDade would like to recommend
21   to Mr. Sanderson or Mr. Adkins it could be 45 days.
22   We'd like to keep that offer of a settlement under the
23   expedited rule available.  And I think one way to read
24   that is, you can't.  You've now got to go grind it
25   out.  I don't think that encourages settlement.  I
0037
 1   think that has the effect of reaching the opposite
 2   result.
 3                  As a way of example, I also listed my
 4   next document entitled "Example of Measured Actions by
 5   the Charitable Bingo Operations Division Staff
 6   Regarding Compliance and Audits."  Again, I won't go
 7   through the sequence of that.  Suffice it to say, on
 8   both a compliance review and an audit, these are
 9   real-life cases that are still pending.  It can take
10   the staff months or over a year to get its act
11   together on either a compliance or an audit.  And
12   again, I think if you're going to have the same rules
13   for the licensed authorized organizations, there ought
14   to be the same rule for the commission staff.
15                  I also included an excerpt from the
16   October 31, 2005, commission meeting where I made a
17   presentation, and I'd like that made a part of the
18   record.
19                  We also talked about, a couple of
20   times, the -- and I have two exhibits -- a
21   side-by-side comparison of certain provisions of the
22   lottery commission's existing standard
23   administrative -- Existing Standard Penalty Chart for
24   the lottery side 16 TAC Section Code, Section 401.160
25   and the Draft Proposed Standard Administrative Penalty
0038
 1   Guidelines that are at issue.
 2                  And what I'm trying to do is look at
 3   the existing lottery rule and show on a side-by-side
 4   comparison a similar result under the Proposed
 5   Charitable Bingo Rule.  It's not a perfect comparison,
 6   and I'm not suggesting that it ever would be, because
 7   obviously, there are two different regulatory regimes
 8   in place with the lottery being conducted by the State
 9   of Texas and charitable bingo being conducted by the
10   charitable organizations.
11                  But what comes out to me in this is
12   there are a whole host of penalties, some of which, I
13   think if they were a bingo-side offense, would be
14   considered serious, like selling a ticket from a game
15   that has closed, intentionally and knowingly
16   influencing or attempting to influence the selection
17   of a winner of a lottery game.  And some of those are
18   de minimis offenses, including warning letters for the
19   first offense.
20                  I guess the one that's the closest
21   comparison is the last one on page 1:  A person
22   falsified or made false entries in books and records
23   on the bingo side, and on the lottery side the
24   licensee fails to keep accurate or complete records.
25   And again, the penalty matrix is clear.  It's a
0039
 1   warning letter for the first offense.  And the penalty
 2   made from the lottery side, for the bingo side, is
 3   zero to a thousand per offense for the first offense.
 4                  In trying to compare the lottery to the
 5   bingo division, I spent quite a bit of time looking at
 6   who the lottery retailers are.  The next document is
 7   something I obtained from open records at the lottery
 8   commission.  And it's the list of the licensees of the
 9   lottery division based on weekly average on-line and
10   weekly average instant sales of the organizations that
11   are licensed.
12                  Some of these, Sandy, are grouped.  For
13   example, the last page, page 15 to 15, the last entry
14   is 7-Eleven, Inc.  I don't know how many particular
15   7-Eleven stores there are, but all of them together
16   sold $1.5 million per week for the period of time
17   that's at issue.
18                  Well, in reviewing this list, there
19   are -- appear to be at least 182 licensees with
20   average license sales of lottery product alone of
21   $15,000 or more per week.  That equates to lottery
22   sales alone to $78,000 a year.
23                  It's known in the industry that lottery
24   sales will be less than five percent of the total
25   sales of any particular retailer.  And I believe in
0040
 1   the lottery division there are people who know those
 2   numbers far better than I do, and more precise.
 3                  If that ratio holds, then these
 4   licensees, the 182 larger ones, have sold $14.8
 5   million in lottery sales alone.  Due to the five
 6   percent ratio -- and it's a huge number -- 7-Eleven
 7   alone is a multi-billion-dollar company a year.  And
 8   they're publicly traded.  You can't break it out by
 9   Texas.  But these are huge numbers.
10                  What I'm suggesting is, is on the
11   lottery side there are very sophisticated licensees
12   like 7-Eleven, like national food chains, Albertsons,
13   et cetera, HEB Grocery, that sell lottery product,
14   Citgo.  They have highly-paid individuals who are, in
15   part, responsible for compliance with existing
16   statues, including the Lottery Act.
17                  On the lottery side, the lottery has
18   decided on many of these violations from very
19   sophisticated licensees.  The first example is a
20   warning letter only.  And yet on the bingo side, using
21   the case that I talked about earlier, this was the
22   first time this particular licensee had had a problem,
23   they're going to assess a $400 penalty.  I don't think
24   it's fair, and I don't think it's right.
25                  I'd like to also address the
0041
 1   introductory provisions of the rule that was published
 2   in the "Texas Register."  Under the Administrative
 3   Procedure Act, the agency is required to make certain
 4   findings.  And they're attempted to be made -- and I
 5   guess it's the fourth paragraph of the publication of
 6   November 18, 2005, Tex Reg 7671.
 7                  Specifically, Financial Administration
 8   has determined there will be no significant fiscal
 9   implications for state or local governments as a
10   result of enforcing or administering the sections,
11   period, close quotes.  I believe there will be.  The
12   reason is because I believe this rule will result
13   in, under staff's own comments, new penalties being
14   assessed.  It will result in charities going out of
15   business.  And that will then impact state and local
16   governments.  Because, as you know, the state and
17   local governments get a percentage of the prize fees
18   that are paid by the charities to the State of Texas.
19                  There's also a statement in the same
20   paragraph, there will be no significant effect on
21   small businesses.  And I disagree.  Because again, if
22   the charities go out of business, it will affect a
23   lessor.  And a lessor is considered a small business
24   under the Administrative Procedure Act and under the
25   applicable provisions of the Texas Government Code.
0042
 1                  It's curious that under the government
 2   code a charity is not considered a small business,
 3   because it's not organized for profit.  Although, it
 4   occurs to me that in an error of open government, the
 5   agency ought to look at what the effect will be on its
 6   licensees.  And I guess there could be a trickle-down
 7   effect if charities go out of business, because they
 8   consume profits for profit businesses.  But I'm sure
 9   it would be rather difficult to calculate the impact.
10                  But I think you can look at the impact
11   if there were -- and we know for a fact that at the
12   highlight of bingo, there were about 1900 charities
13   licensed and authorized to conduct bingo, and now
14   there are less than 1400.  There's a concomitant
15   reduction in the number of lessors, which are
16   for-profit small businesses.  And so if that trend
17   continues, and I believe it will continue if this rule
18   is adopted, you will see a drop-off in the number of
19   licensees, and there's already been testimony about
20   that, if their charities are called to task under the
21   new rule.  It will affect commercial lessors, which in
22   turn will affect their small business.
23                  And then there's also the trickle-down
24   effect, again, looking at the lottery commission's
25   Charitable Bingo Division's own numbers on sales of
0043
 1   bingo.  Those are down in statewide and region, total
 2   paper products, total CardMinder products.  And
 3   there's been testimony by Ms. Thompson and by K & B
 4   sales, their concern about this.  One of the reasons I
 5   would suggest to you they're concerned is that if
 6   there are less charities involved in bingo, they have
 7   less market, and it affects their business.  I believe
 8   both of those organizations will be considered small
 9   businesses under the government code.
10                  I find it odd that one of the reasons,
11   as stated, although I think it rings true, because of
12   the evidence that I've discussed about the charity
13   that had a person that either was or wasn't listed on
14   the registry, and the penalty was a $400 penalty
15   initially.  It would have been applied under this
16   penalty matrix, or penalty rule, that one of the key
17   findings is to punish violators in both paragraph 2
18   and 5 of the introductory language of the proposed
19   rule.
20                  I think you're left with, if you
21   believe what the staff handed out in April of '05,
22   that there's a potential for violations in one
23   particular year, $266,000, and the second year,
24   $376,000 in penalties if this rule were fully in
25   effect and applied, or at least the rule that's
0044
 1   drafted.  And it hasn't changed.  Certainly the number
 2   of penalties has been reduced because of an agreement
 3   with the industry that the rule should be shortened
 4   dramatically.
 5                  But I think the staff has also said
 6   that just because there's not an identified violation
 7   in the rule, and the language is clear in the proposed
 8   rule, that if your alleged violation isn't on the
 9   list, it doesn't mean the agency can't punish the
10   licensee for a violation and cannot assess a monetary
11   penalty.  And the language is clear to the contrary to
12   that.
13                  So the point of the matter is, $266,000
14   to $376,000 is a significant number.  And anyone who
15   suggests otherwise at a point when charities are
16   distributing charitable distributions of $24 million,
17   roughly, a year, that's 10 percent or more of that
18   number.  It will have an effect on the charities.  It
19   will result in the closing of doors of nonprofit
20   organizations.
21                  We've asked for the documentation to
22   figure out how it would affect.  We have not been
23   provided that information.  And that's why I think all
24   the organizations are opposed to this rule as
25   drafted.  And I will be supplementing these comments
0045
 1   with further written statements as comments come in
 2   from my clients.
 3                  MS. JOSEPH:  Thank you, Mr. Fenoglio.
 4                  Mr. Bresnen.
 5                  MR. BRESNEN:  My name is Steve Bresnen.
 6   I'm here on behalf of Bingo Interest Group.  First
 7   thing I'd like to say is I haven't heard anything I
 8   disagree with yet, and I'd like to subscribe to the
 9   previous comments.
10                  I made some comments at the last
11   commission meeting at which this rule was authorized
12   for publication, and I will go back and look at the
13   transcript of that.  Anything I leave out today, I'll
14   supplement with written comments later.
15                  I'd like to address some general issues
16   and then go through some specific points in the rule.
17   The Bingo Interest Group is strongly opposed to the
18   rule.  The original rationale offer for this rule was
19   bankrupt to begin with, and it hasn't made any money
20   since then.  So it's still bankrupt.
21                  Some of the broad issues:  It's
22   impossible to tell what's a repeat offense here.  I
23   think I'd recommend, first of all, that if we're going
24   to get stuck with a rule like this, that we start with
25   a clean slate.  You're now imposing a regimen on
0046
 1   people that have some compliance history already
 2   established.  And if they're going forward or then
 3   going to be held accountable for a higher set of
 4   penalties than was previously imposed in the past, or
 5   a new penalty regime, then it would seem that a due
 6   process and just basic fair play would say that
 7   everybody starts with a clean slate.
 8                  Secondly, these audits that are
 9   occurring about every three years, I believe, are
10   covering three-year periods, which is 12 quarters.  If
11   an organization makes a mistake in the first quarter
12   of the third year back from the present and makes the
13   same mistake in the next quarter and the next quarter,
14   they could literally have 12 violations during that
15   time period.  The rule does not describe whether the
16   violation in the first quarter is the first offense,
17   the violation in the second quarter is the second
18   offense, the violation in the third quarter is the
19   third offense.  And everything after that is a, I
20   guess, a subsequent offense.  I notice that the
21   penalty chart tops out at the third offense, so I'm
22   not sure what happens on the fourth one.
23                  So it seems to me that you have to
24   have -- in some way you have to reconcile that there
25   have been offenses that have occurred prior to this
0047
 1   that could be counted as offenses in the future and
 2   may be multiple offenses, so organizations that have
 3   relatively minor offenses but may have screwed up more
 4   than once and just now having to call to their
 5   attention, end up at the top rung of the offense
 6   pattern from here till the end of time.
 7                  It seems to me the only fair way to
 8   reconcile that is to go back and say that everybody
 9   starts at Square One; everybody has a clean record
10   going forward.  Number two, I'm not sure how you deal
11   with it, but in the course of an audit, you can't
12   count the same or multiple offenses within that time
13   period as offenses one, two, and three.  I think
14   that's a challenge for a rule-writing experience.  But
15   it seems fair.  I hope the concept is coming through.
16   I think that's a fundamental flaw in the approach and
17   one that has to be addressed.
18                  Up into the preamble of the rule as
19   published in the Register, the second paragraph, at
20   least the second paragraph in what I have -- yeah,
21   it's the second paragraph -- gives the objectives for
22   applying an administrative penalty.  And I note that
23   there's -- none of the reasons for this rule include
24   maximizing money to the charities, which is a
25   consistent theme that we wrestle with with those of us
0048
 1   who represent people involved in bingo, and it would
 2   seem that this rule fails to do that.
 3                  The money's got to come from
 4   somewhere.  It's going to come from the charities.
 5   They're the vast majority of the folks who can violate
 6   the law and are covered by this rule.  That money's
 7   going to come from the bottom line.  It will be paid
 8   to the State.  The State already gets about six times
 9   its cost of enforcement from charitable bingo, and it
10   seems to me to be working cross-purposes of the
11   statute.  And the whole purpose for legalizing bingo
12   to begin with, to adopt the rule and have that in it.
13                  I note that in the 402.706(a) it says
14   the purpose of this section is to provide guidance for
15   that administrative penalty.  So the rule appears to
16   be only a guideline and does not seem to be binding on
17   the commission if the purpose of the rule is, as it
18   states in the preamble, is to, quote, promote
19   consistent sanctions, then, you know, I guess one
20   person's promotion is another person's something
21   else.  But if it's just a guideline, then it seems to
22   me that it's subject to an arbitrary and capricious
23   application and doesn't do anything to assure the
24   promotion of a consistent set of sanctions.
25                  I note in the last line -- well, that
0049
 1   same idea about promoting consistent sanctions is
 2   included in that 402.706(a) and also says to incur its
 3   settlements, facilitate timely resolution, and promote
 4   consistent sanctions for similar violations.  I'm not
 5   sure that any of those goals are served by the actual
 6   execution of the rule.
 7                  In Section 402.706(e), seems to me not
 8   really to fit within this rule at all and should be
 9   eliminated.  I know that the commission has an ongoing
10   battle, apparently, with the State Office of
11   Administrative Hearings.  It's a recurring theme
12   that's come out in some of the cases that have been
13   explained to the commission, including at the most
14   recent commission meeting, that it's up to the
15   commissioners to decide what penalty will be imposed
16   in a given case.
17                  I submit to you that that's going to be
18   governed by the statutory law and not going to be
19   affected by this rule.  That particular part of the
20   rule seems to me to be more of a declaration to SOAH,
21   or somebody, than it is -- has anything to do with
22   establishing any guidelines for administrative
23   penalties.  It seems inappropriate within this rule
24   and should be stricken.  If the commission wants to
25   adopt that and put it somewhere as declarations of its
0050
 1   omnipotence when it comes to assessing sanctions, then
 2   it could certainly do that at an appropriate place.
 3                  Subsection (f) of 402.706, as proposed,
 4   authorizes the commission to impose additional
 5   penalties along with or in lieu of the administrative
 6   penalty.  So once again, it seems to me that that cuts
 7   against promoting consistent sanctions and that it
 8   basically authorizes the staff to pursue any remedy or
 9   penalty that it chooses to without regard to this
10   rule.
11                  I submit to you that overall, coupled
12   with the potential for $1,000 fines and the voluminous
13   nature of the ways that one can violate the Bingo
14   Enabling Act, that this basically involves a hammer,
15   which may facilitate settlements, as most hammers
16   would.  If I showed up in a street fight and I had no
17   hammer, and you had one, I'd probably be willing to
18   settle too, or at least run, which I think the
19   charities will probably do.  I think this will
20   expedite the exodus of charities from participating in
21   bingo, again, contrary to the statute and contrary to
22   the constitution.
23                  Subsection (g) of 402.706, it says that
24   any agreement or consent order shall contain findings
25   of fact or conclusions of law.  That ties the
0051
 1   commission's hands.  Why you would do that to
 2   yourself, I don't know.  But I think it allows you to
 3   say that when an otherwise acceptable settlement is on
 4   the table, to say but you must insist on findings of
 5   fact and conclusions of law.  I guess the conclusion
 6   of law or finding of fact is that there was no
 7   violation.  But I don't think y'all are going to do
 8   that and then agree to pay a penalty.
 9                  Most settlements in civil litigation
10   have a statement where people agree that nobody admits
11   that they're committing a violation.  But in order to
12   resolve the matter and save the cost of litigation,
13   they are going to reach some agreement for a penalty
14   or change conditions in how they conduct themselves.
15                  In light of the fact that a compliance
16   history can be used against you in a future
17   proceeding, my guess is that people are going to be
18   extremely reluctant to agree to findings of fact or
19   conclusions of law that leave them with a bad
20   compliance history.
21                  In that case I would strike (g)
22   altogether or rewrite it to say simply that there can
23   be settlement agreements that would allow everybody's
24   hands to remain untied.  Literally speaking, if you
25   put this into the statute, or into the rule book,
0052
 1   you're never going to be able to agree to a settlement
 2   that doesn't contain findings of fact or conclusions
 3   of law unless, of course, you can do anything you want
 4   to anyway, which doesn't promote consistent sanctions,
 5   and this paragraph serves no purpose.
 6                  I'm not even sure that it applies --
 7   should be in this rule, because it really doesn't have
 8   anything to do with establishing uniform sanctions for
 9   like types of violations.  So I think ultimately I'd
10   strike (g).
11                  Subsection (h) of 402.706 has a similar
12   defect in that it says it's not -- this provision,
13   "the list of statutory violations in the Standard
14   Administrative Penalty Chart is not an exclusive list
15   of violations," and then goes on to say "If a person
16   is charged with a repeat violation within 36 months of
17   the first violation, then a penalty for a repeat
18   violation will be opposed according to the Standard
19   Administrative Penalty Chart for repeated
20   violations."
21                  The first sentence seems to have
22   nothing to do with the second sentence.  To say that
23   it's not an exclusive list doesn't seem to have
24   anything to do with the 36-month provision in the
25   second sentence.  Maybe there's a grammatical problem
0053
 1   or something that I'm not seeing.  It doesn't seem
 2   that the first sentence has anything to do with the
 3   second sentence.
 4                  The first sentence makes it clear that
 5   there are other potential violations of the act and
 6   the rules that can be dealt with in some manner.  It's
 7   not clear whether they can be dealt with under the
 8   Standard Administrative Penalty Chart or not.  If they
 9   are, I don't know how the staff will figure out
10   whether one of those unlisted violations can go --
11   where it would fit in the penalty chart.  I have to
12   assume that they're not covered there.  To the extent
13   that they're not covered in the Standard
14   Administrative Penalty Chart, then it seems to me
15   you're, once again, opening up for an inconsistent
16   application of the administrative rules or the Bingo
17   Enabling Act.
18                  If we need this rule to promote
19   consistent sanctions, it seems to me the agency's
20   admitting that in the past it has acted in an
21   inconsistent manner with respect to these sanctions.
22   Frankly, although I've voiced many complaints on
23   behalf of people in bingo for the last eight years or
24   so, that's not one of them I think I've ever voiced,
25   to be honest about it.  I don't think it's been a
0054
 1   problem, the inconsistency, in the past.  There have
 2   been problems, but I don't recall having voiced that
 3   one.  Again, the consistency is what's sought after.
 4   The range of discretion that's allowed in this rule is
 5   hardly enough to make for consistency.
 6                  Moving on.  Subsection (i) of 402.706
 7   has a list of things that shall be considered, quote,
 8   considered in determining the degree to which a remedy
 9   is applied.  The amount of a penalty or the degree to
10   which a remedy is applied will be determined by
11   considering the following factors, close quote.
12                  So apparently this list is not just for
13   considering the amount of the penalty that will be
14   required but the degree to which a remedy is applied.
15   Those remedies would be the ones that are in addition
16   to or in lieu of the penalties provided in this rule.
17   So if the degree to which those penalties that are not
18   part of this remedies -- that are not part of this
19   rule may be applied as governed by this, it would seem
20   that it's an inappropriate placement of this, and that
21   list should be placed over in the part of the rules
22   that deals with those particular remedies.  So there's
23   sort of a hybridization going on here that makes it
24   difficult to figure out exactly how all of this would
25   apply.
0055
 1                  As to the specific list of items, I
 2   note that the number of previous violations, the
 3   number of repeated violations are in the list.  But it
 4   doesn't -- the list doesn't say anything about the
 5   character of the past violations.  So I may have had a
 6   number of what I would characterize as minor
 7   violations in the past that will factor against me,
 8   but the character of the violations, unless it's under
 9   the heading of any other matter that justice may
10   require, the character of the violations doesn't seem
11   to really much matter to the staff.
12                  And it seems to me, and the overarching
13   point that we really like to make is, the character of
14   the violations is everything that should matter.
15   Whether somebody stole money, whether somebody cheated
16   a bingo player, those are the things that should
17   matter.  I suppose running in fraudulent paper would
18   be something highly criminal.  Unlicensed bingo
19   product in the market, unlicensed gambling device in
20   the market would be a serious matter.
21                  While the rule attempts to set out a
22   hierarchy of violations, in recognition of the fact
23   that some things are more serious than others, I think
24   it gets way, way, way too complicated and treats too
25   many things that are relatively minor with too high a
0056
 1   potential offense.  Maybe that's the hammer effect
 2   you're looking for.  I don't know.
 3                  It seems to me like it's way out of
 4   whack, considering the nature of the enterprise here,
 5   both in the fact that the potential penalties that can
 6   be incurred for any given offense can be rather high
 7   and that there's a lot of them.  And it really doesn't
 8   get down to the nub of it, which is we should protect
 9   bingo players from cheating, and we should protect
10   charities from people stealing.  Those should be the
11   number one things.
12                  Anything that can be corrected by a
13   filing of an amended report and where the money is
14   still there and still in place, it can be adjusted
15   between accounts.  It seems to me there should be no
16   penalty.  Otherwise, in an instance where the charity
17   has done its job, got its money, its bottom line, it's
18   consolidated accounting for its accounts is in order,
19   then the State is going to take money out of there for
20   the State's purposes rather than for the charitable
21   purposes that The Constitution authorized this money
22   to be spent for.  And that just seems plain wrong.
23                  Under subsection (i) of 402.706, Item
24   No. 5(C), capital C, I'm trying to figure out for the
25   life of me what difference it makes, the length of
0057
 1   time the licensee has held a license.  If that's to
 2   say that an organization that's only been licensed
 3   briefly can have someone steal money and not be
 4   treated with a heavy hand because they haven't been
 5   licensed very long, but a long -- an organization with
 6   a license that's been in effect for a long time can
 7   have a relatively minor violation history and be
 8   penalized because they should have enough experience
 9   to know better doesn't make sense to me.
10                  This whole subsection (i) here really
11   gives you a -- it's sort of a black box that you can
12   throw this list of things to considerations.  I guess
13   they're arguing points.  But it doesn't really give
14   the person who has to comply with the rules any prior
15   notice about how these things would affect them or
16   which way they would even cut.
17                  In addition to that, one of the items
18   under (i)(5)(A), whether the violation was
19   intentional, inadvertent, simple negligence, gross
20   negligence, or the unvoidable result of a related
21   violation.  On the one hand you want to preserve the
22   commission's discretion to impose whatever penalty it
23   thinks is appropriate and not be bound by the SOAH
24   judge's conclusion, and on the other hand you're
25   recognizing that a finding about any one of these
0058
 1   things would -- these states of mind would have some
 2   bearing on what the ultimate penalty would be.  But
 3   nobody's ever required to prove any one of those
 4   things.
 5                  So I would suggest this.  Amend this
 6   rule to say that there will be no monetary penalty
 7   against a charity if the -- if the violation is the
 8   result of inadvertence, simple negligence, or the
 9   unavoidable result of a related violation.  In other
10   words, the commission staff should have to prove that
11   the violation was intentional or that it was committed
12   with gross negligence.  If y'all do that, I suspect
13   you'd have a far more consistent result.
14                  I think if you'll look -- I'll submit
15   these as part of the record.  The other day at the
16   commission hearing I testified about the number of IRS
17   audits.  I think it's a better approach, and I think
18   this rule should be scrapped, and the approach that's
19   evident from the letters from these IRS audits ought
20   to be used to inform whatever you might do in this
21   area.
22                  What they've done where people have
23   screwed up their forms, they've committed violations
24   by filing returns that are in error, is they've
25   corrected -- the IRS corrected the returns, sent them
0059
 1   back to the people with a nice letter that said,
 2   "We've corrected these returns.  Here's what you did
 3   wrong.  We've corrected these returns.  Please sign
 4   them and return them to us if you agree."
 5                  Were that to be done and were it to be
 6   onus to be on the staff to prove an intentional or
 7   grossly negligent violation in order to recover any
 8   monetary penalty, then I think a substantial portion
 9   of this rule could be eliminated and people would
10   understand better what the rules are and the hoops
11   that they need to go through in order to get about
12   their business.
13                  Also under subsection (i), subsection
14   (5), subsection (e), that section reads that -- this
15   is one of the things to be considered under the
16   heading of "Other Matters That Justice May Require,"
17   Whether the organization or person has acknowledged a
18   violation and agreed to comply with the terms and
19   conditions of remedial action through an agreed
20   settlement with the commission.
21                  Well, there are good-faith disputes
22   about whether a person violated or didn't violate the
23   law all the time.  And it seems to me that that
24   particular provision puts a burden on a person's right
25   to due process that's intolerable.
0060
 1                  If you're saying -- this is another
 2   example of where the commission's discretion is not
 3   reigned in by this rule, and therefore the goal of
 4   promoting consistent sanctions is defeated.  Because
 5   you can simply rock back in your chair and say, "If
 6   you don't agree that there was a violation, that's one
 7   of the things that we can consider in applying a
 8   sanction, and that's what we're going to do," even
 9   though the person may have a good-faith dispute and
10   even though the issue might be settled but for the
11   requirement that there be conclusions of findings of
12   fact and conclusions of law.  And I submit to you that
13   these two sanctions dovetail with each other, and
14   you're going to have head-banging where settling could
15   be occurring unless you fix those two sections.
16                  Under 402.706(i), subsection (5),
17   subsection (f), the cost of the investigation,
18   examination, or audit associated with the violation
19   may be considered as a factor as, quote, a matter that
20   justice may require.
21                  What the commission's cost of enforcing
22   the law has to do with whether somebody stole money,
23   cheated a bingo player, or made a minor clerical
24   violation is beyond me.  And it seems to me that where
25   there's a high cost of litigating a good-faith dispute
0061
 1   as to compliance or guilt, that this section puts an
 2   undue burden on the person exercising due process and
 3   has no place in this rule and should be stricken from
 4   this list.
 5                  Moving on.  Subsection (j) under
 6   402.706 provides that If the director or the
 7   director's designee and the authorized representative
 8   for the respondent agree, the two parties may utilize
 9   402.707, Expedited Administrative Penalty Guideline as
10   alternative guidance related to this section.
11                  However, many of the violations that
12   are in the Standard Administrative Penalty Chart are
13   not present in the Expedited Administrative Penalty
14   Guideline under the Expedited Administrative Penalty
15   Rule.  So it seems to me that although that section
16   seems to be a bridge between the two rules and
17   authorizes the use of the Expedited Administrative
18   Penalty Guideline as an alternative, either everything
19   in the Standard Administrative Penalty Chart can be
20   treated under the expedited offense, but it's not
21   clear what sanction would apply, or only those things
22   that are in 402.706 that overlap with the Expedited
23   Administrative Penalty Chart would be the subject of
24   (j), in which case I see no reason for (j) at all, and
25   you can strike it.
0062
 1                  If it's intended that everything in the
 2   Standard Administrative Penalty Chart be available for
 3   the Expedited Administrative Penalty Guideline, then I
 4   see no reason not to include a separate schedule of
 5   potential penalties in the Expedited Administrative
 6   Penalty Chart that would reflect the generally lower
 7   and more certain amounts that are in the second chart
 8   versus the first chart.  I hope that was a coherent
 9   thought, although it was hard to utter.
10                  Moving on to 402.707 in subsection (a),
11   it seems that that is a one-way street.  It's an
12   alternative process if the directors of charitable
13   bingo operations cease to facilitate expeditious
14   resolutions of cases and encourage settlements.
15                  I think to the extent that it
16   authorizes discretion, then it's the consistency
17   that's intended to be promoted will be determined by
18   the personality of the current director of the
19   Charitable Bingo Division of the department, which no
20   rule can encompass.
21                  Subsection (b) of 402.707 says, "The
22   scope of the guideline will be limited to violations
23   of the Bingo Enabling Act and/or the rules that are
24   identified by the director or his designee and may be
25   based on the expedited violations list incorporated
0063
 1   into this section."
 2                  I haven't the slightest idea what that
 3   paragraph means, "will be limited to violations of the
 4   act or the rules that will be identified by the
 5   director or his designee."  If that authorizes the
 6   director or designee to, in effect, amend the list of
 7   items that are in the penalty chart at will, then why
 8   have the chart?  They can just come up with a list
 9   later.
10                  It's not clear to me, if these lists
11   are not exclusive, how one deals with the items that
12   aren't in the list or whether these lists can be
13   supplemented by virtue of subsection (b) here.  It
14   says, "and may be based on the Expedited Violations
15   List incorporated into this section."  "May" is a term
16   of art and is -- denotes total discretion.  So why
17   have the list if a settlement under the expedited rule
18   is not going to be corralled by the list?  So it seems
19   to me there's either some wordsmithing or something.
20   I'm sure somebody had an original thought about what
21   that intended to mean.  But it's unclear to me for the
22   reasons I've just stated.
23                  Moving on to subsection (c).  This ties
24   the hands of both the commission and the licensee by
25   stating that it only applies at a time after which
0064
 1   both parties have agreed that a violation of the act
 2   or the rules can be resolved, quote, expediently.  If
 3   both parties have to agree that it can be resolved
 4   expediently, then -- I don't see why you need to state
 5   it that way, basically.  I would just state that
 6   things can be settled.  Again, this may be something
 7   that would be appropriate in a separate procedural
 8   statute.
 9                  I would, just as a drafting matter,
10   after the first word "violation" -- I mean, before the
11   first word "violation" where the phrase says
12   "violation of the Bingo Enabling Act," I would put
13   "alleged violation."  Also, I'm not sure if the word
14   "expediently" is the word that's needed there.  It
15   probably needs to be "expeditiously."  The word
16   "expeditious" is used in other places.  "Expediently"
17   is not wrong, if that's what you mean, but you may
18   want to use "expeditious."
19                  The note in subsection (d)(3) of
20   402.707, the term "alleged violation" is used there.
21   I just suggest that you make that consistent all the
22   way through.  Down in subsection (d)(5) you see the
23   word "violation" without the word "alleged" again.
24                  Also in subsection (5), the end of that
25   subsection says "comply with the violation."  Strictly
0065
 1   speaking, one doesn't comply with a violation.
 2   There's something wrong with the language there.  You
 3   comply with the section that was violated or the rule
 4   that was violated or something.  So minor editing from
 5   a former drafter of legislation.
 6                  Subsection (f) says that The respondent
 7   will have 60 days from the date of the order to pay
 8   the recommended administrative penalty.
 9                  Why you would want to tie the hands of
10   the respondent or the agency to 60 days, I don't
11   know.  If it's a relatively minor deal, they may pay
12   quickly.  If it's more burdensome, if you want to let
13   that charity go for a while, you could do that.  I see
14   no reason to have the agency or the respondent's hands
15   tied in that manner.
16                  (g) is an interesting paragraph because
17   it says, The list of statutory violations is not an
18   exclusive list of violations that may be expedited.
19                  Then it goes to say, If a person is
20   charged with a repeat violation that may be expedited
21   within three years of the first violation, then the
22   penalty for the repeat violation will be imposed
23   according to the list.
24                  So if every offense -- if it's not an
25   exclusive list, then there are other items that can be
0066
 1   expedited.  If other items can be expedited, all of
 2   them can be expedited.  So the second sentence
 3   basically would read, Any violation that occurs within
 4   36 years of -- 36 months -- it will seem like 36
 5   years -- 36 months of the first violation, then it--
 6   you look to the expedited list.  But if an item that
 7   is not in the list can be expedited, how will the
 8   agency refer to the list to determine what the penalty
 9   is for a repeat violation?  Which is what the end of
10   that second sentence says.  So it would seem to me
11   that requires a substantial workover.
12                  Just as an example, in comparing the
13   two charts, the Standard Administrative Penalty Chart
14   with the expedited chart, just as an example, looking
15   on the Expedited Administrative Penalty Chart, the
16   one, two, three, four -- the fifth and sixth items
17   down have to do with paying more than the per-game or
18   per-occasion limits, and they set amounts for first,
19   second, and third offenses.  And they are -- unless I
20   just have overlooked them, I don't find those in the
21   other chart, the Standard Administrative Penalty
22   Chart.
23                  It's unclear to me, and I see no
24   rationale for including those in one chart and not the
25   other chart, I guess except for the fact that under
0067
 1   either the first rule, 706, or the second rule, 707,
 2   anything can be expedited and anything can fall under
 3   the chart.
 4                  Again, my overarching point: if
 5   corralling discretion is what you have to do to
 6   promote consistency, if the rules don't coral
 7   discretion, they're not going to promote consistency.
 8   And it would seem that the nonoverlapping sometimes
 9   and overlapping at other times, nature of the two
10   charts, unless there's a structure there that is just
11   escaping me, it doesn't seem to me that those things
12   are corralling discretion very much, if at all.
13                  It's also not clear -- you have --
14   under the Standard Administrative Penalty Chart, you
15   have numerous instances in which a zero dollar penalty
16   can be imposed.  But it's not clear from the rule when
17   a zero dollar penalty would be imposed.  I guess it's
18   a matter of pure negotiation, which again does nothing
19   to corral discretion.
20                  I'm looking at the Category 3, Item
21   No. 24.  It cross-references two potential violations.
22   The first is that charitable proceeds -- charitable
23   bingo proceeds weren't used for a charitable purpose.
24   That's not the part I'm referring to.  The second part
25   says, or used by the donee for an activity that would
0068
 1   not constitute a charitable purpose if the activity
 2   were conducted by the donor organization.
 3                  Those are in related provisions.  The
 4   two violations are in related provisions of the Bingo
 5   Enabling Act.  But that doesn't make them related.
 6   They're one after the other.  But it doesn't make them
 7   related as to the gravity of the offense.
 8                  Keep in mind that once the charity
 9   dispenses its charitable proceeds to a donee, that's
10   who the donee is in that sentence.  If the donee fails
11   to use it consistent with the charitable purposes of
12   the organization, that charity has absolutely no
13   control over the donee whatsoever, and yet the penalty
14   can be up to $400 for a first offense, $600, $800.  If
15   you become aware of it, you just won't give them any
16   money the second time around.
17                  I think there are places where things
18   that seem to be similar, and that's an example, have
19   been coupled together in a section where you really
20   need to think about them separately.  And if a
21   licensee has no control over the activity of a third
22   party, I would suggest that you use your prosecutorial
23   discretion to put those things under the heading of,
24   "Oops, nothing they could do about that."
25                  I think the problem of multiple
0069
 1   violations is present in Item No. 25 on the Standard
 2   Administrative Penalty Chart.  One entry in a rule --
 3   I mean, in a report can cause things to be off, not
 4   only for a given quarter, but quarter after quarter,
 5   because information in quarterly reports gets used --
 6   or is relied on for future quarterly reports.
 7                  So -- and also -- let me just back up a
 8   minute.  If you go back to the Category 1 on the
 9   Standard Administrative Penalty Chart, note that in
10   Item No. 2 -- compare the difference between Item
11   No. 1 and Item No. 2.  Item No. 1 applies if a person
12   knowingly participated in the award of a bingo prize
13   to a player based on cheating, is what that's about,
14   knowingly.  Item No. 2 said a person made a false
15   statement in the application for a license.
16                  Now, a statement may be false without
17   the person having intended that it be false or try to
18   pull the wool over anybody's eye or doing anything
19   wrong other than making an error.  Literally speaking,
20   false means -- connotes strict liability, whereas the
21   first one connotes a mens rea of intent to do
22   something bad.
23                  It would seem to me that the commission
24   needs to go through -- if you're going to have a rule
25   like this, you need to tighten up.  This is a good
0070
 1   example where if you tighten up a requirement of proof
 2   that the person knowingly made a false statement or
 3   intentionally made a false statement as opposed to one
 4   in which it was just false, but there's no proof of an
 5   evil mens rea, then it seems to me you'd be onto
 6   something here that would be fair.
 7                  I assume that Item -- well, Category 1
 8   is intended to be the stiffest fines available, and
 9   yet it has several things that -- in there that don't
10   require any mens rea to determine whether the maximum
11   offense would apply.
12                  A similar lack of proportion is over in
13   Category 3.
14                  I'm going to make about three more
15   points, and then I'm going to cut it down.
16                  Category 3, Item No. 28, speaks to
17   deposits that are made later than the end of the next
18   business day.  If the money is the right amount of
19   money that was to be deposited and the money was
20   deposited on the next business day, it seems contrary
21   to the whole purpose of bingo and everything we're
22   trying to accomplish here to hit somebody with an
23   administrative penalty, particularly up to $400, on
24   the first offense.  That just doesn't seem right.
25                  If the money gets stolen because you
0071
 1   didn't deposit it timely and it wasn't secured, then
 2   you might have a bigger hickey.
 3                  But in this case, that seems to lack
 4   proportion.
 5                  Note on Item No. 30 in Category 4 a
 6   similar sort of lack of proportion.  You can get hit
 7   for a $300 fine on a first offense because you failed
 8   to clearly identify the conductor by name exactly as
 9   is shown on the license on an advertisement or
10   promotion of a bingo occasion.
11                  If I'm AMVET's Post X, Inc., that's
12   what's on my license, and on the flyer that goes out
13   it says AMVETS Post X, I've not done it exactly as
14   shown on the license, and yet I can get hit for a $300
15   penalty.  I know the answer from the staff where
16   you're commenting back would be where that list of
17   considerations comes in.  But it's not clear that you
18   have to do that, that you have to look at that.  It's
19   not clear that you have to go prove that.  If the
20   person says, "I'm not agreeing that a violation
21   occurred," you have to go prove that they knowingly
22   did it or there was some harm that it's out of
23   bounds.  So it gives y'all all the discretion and
24   leaves the poor defenseless charity to figure out
25   whether that hammer is going to hit them in the head
0072
 1   or just in the elbow.
 2                  Finally, under Category 7, I would note
 3   that if you don't have a copy of the Bingo Enabling
 4   Act or the rules on the commission on hand, the first
 5   and second offenses are warnings.  And the third
 6   offense could be up to a $125 fine.  I think that
 7   that's a lot more towards the proportion that about 50
 8   of these things could be -- well, there's only 38 of
 9   them, so I guess it would be hard to get 50 under
10   there.  But a lot of these things need to be shoved
11   down into that warning category.
12                  In the same manner, one of these things
13   is for not posting the 1-800 number, compulsive
14   gambling number, on your equipment and in the hall.
15   We all know the 1-800 number, nobody answers that
16   number anymore, because it got defunded by the
17   legislature.  It showed that you can exercise
18   prosecutorial discretion even in your rule, in that
19   item and in this item, by providing for warnings.
20   That's getting down into that end of the spectrum that
21   the IRS is engaged in by telling people, "You're good
22   to go.  You still got your tax exemption.  You made
23   some mistakes on your form.  Here's a new form.  Fill
24   it out and sign it."  That way, the person's on
25   notice, they haven't been hammered, and the IRS has
0073
 1   not wasted its time putting otherwise good people out
 2   of business.
 3                  I appreciate the amount of time that
 4   you've allowed me to speak, on this and other
 5   occasions.  I hope my comments have been clear.  I
 6   will supplement -- I do have a few more things, but
 7   I'll not, in the interest of time, go further.  I'll
 8   supplement those by rule.  And in several instances I
 9   intend to submit written suggestions for -- drafted
10   suggestions for revisions in the rule.  I thank you.
11                  MS. JOSEPH:  Thank you, Mr. Bresnen.
12   We'll be happy to receive your additional comments,
13   and particularly, your suggested rewording of some of
14   those sections or subsections.
15                  Is there anyone who has not yet made a
16   comment that would like to do so?
17                  I want to say that we greatly
18   appreciate your taking time out of your workweek to
19   come and offer these comments.  We'll seriously
20   consider all of them.  Again, we will be accepting any
21   additional written comments until December 19th.
22   Thank y'all very much for coming.  This hearing is
23   closed.
24   
25   
0074
 1                  REPORTER'S CERTIFICATION
 2   
 3   STATE  OF  TEXAS  )
 4                     )
 5   COUNTY OF TRAVIS  )
 6   
 7             I, KELLY E. FISHER, Certified Shorthand
 8   Reporter for the State of Texas, do hereby certify
 9   that the above-captioned matter came on for hearing
10   before the TEXAS LOTTERY COMMISSION as hereinafter set
11   out, that I did, in shorthand, report said
12   proceedings, and that the above and foregoing
13   typewritten pages contain a full, true, and correct
14   computer-aided transcription of my shorthand notes
15   taken on said occasion.
16             Witness my hand on this the 7th day of
17   December 2005.
18   
19   
                       Kelly E. Fisher, Texas CSR No. 2834
20                     Expiration Date:  12-31-07
                       WRIGHT WATSON STEN-TEL
21                     Firm Registration No. 225
                       1801 N. Lamar, Mezzanine Level
22                     Austin, Texas 78701
                       (512) 474-4363
23   
     JOB NO. 051130KEF
24   
25