1 1 TRANSCRIPT OF PROCEEDINGS 2 BEFORE THE 3 TEXAS LOTTERY COMMISSION 4 AUSTIN, TEXAS 5 6 7 REGULAR MEETING OF THE § 8 TEXAS LOTTERY COMMISSION § WEDNESDAY, FEBRUARY 20, 2013 § 9 10 11 12 COMMISSION MEETING 13 WEDNESDAY, FEBRUARY 20, 2013 14 15 16 17 BE IT REMEMBERED THAT on Wednesday, the 20th 18 day of February 2013, the Texas Lottery Commission 19 meeting was held from 10:05 a.m. until 11:45 a.m., at 20 the Offices of the Texas Lottery Commission, 611 East 21 6th Street, Austin, Texas 78701, before CHAIRMAN MARY 22 ANN WILLIAMSON and COMMISSIONERS J. WINSTON KRAUSE and 23 CYNTHIA TAUSS. The following proceedings were 24 reported via machine shorthand by Autumn J. Smith, a 25 Certified Shorthand Reporter. 2 1 APPEARANCES 2 CHAIRMAN: 3 Ms. Mary Ann Williamson 4 COMMISSIONERS: Mr. J. Winston Krause 5 Ms. Cynthia Tauss 6 GENERAL COUNSEL: Mr. Bob Biard 7 EXECUTIVE DIRECTOR: 8 Mr. Gary Grief 9 DIRECTOR, CHARITABLE BINGO OPERATIONS: Ms. Sandra Joseph 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 TABLE OF CONTENTS 2 PAGE 3 PROCEEDINGS - WEDNESDAY, FEBRUARY 20, 2013 ......... 7 4 AGENDA ITEM NO. I - Meeting Called to Order ........ 7 5 AGENDA ITEM NO. II - Receipt of comments of Laveda Brown (President/CEO, Cen-Tex African American 6 Chamber of Commerce) regarding bingo conductor-commercial lessor business relationships, 7 conductor difficulties complying with the Bingo Enabling Act and the Commission's charitable bingo 8 rules, and consideration, discussion and/or action on comments of Laveda Brown ........................ 11 9 AGENDA ITEM NO. III - Report, possible discussion 10 and/or action on lottery sales and revenue, game performance, new game opportunities, advertising, 11 market research, trends, and game contracts, agreements, and procedures ......................... 24 12 AGENDA ITEM NO. IV - Report, possible discussion 13 and/or action on transfers to the State and the agency’s budget status ............................. 28 14 AGENDA ITEM NO. V - Consideration of and possible 15 discussion and/or action on the Lotto Texas procedures ......................................... 29 16 AGENDA ITEM NO. VI - Consideration of and possible 17 discussion and/or action, including proposal, on amendments to 16 TAC § 401.307 “Pick 3” On-Line Game 18 Rule, and 16 TAC § 401.316 “Daily 4” On-Line Game Rule ............................................... 31 19 AGENDA ITEM NO. VII - Report, possible discussion 20 and/or action on amendments to the 2010 lottery operations and services contract, including whether 21 the negotiation of the lottery operator's contract in an open meeting would have a detrimental effect 22 on the Commission's position in negotiations of the lottery operator contract .......................... 34 23 24 25 4 1 TABLE OF CONTENTS (CONTINUED) 2 PAGE 3 AGENDA ITEM NO. VIII - Report, possible discussion and/or action on agency contracts, including 4 amendments on the contract for instant ticket manufacturing and services with Pollard Banknote 5 Limited ............................................ 35 6 AGENDA ITEM NO. IX - Report, possible discussion 7 and/or action on agency contracts, including status of Prime and High Risk Contracts ................... 35 8 9 AGENDA ITEM NO. X - Report, possible discussion and/or action on the 83rd Legislature .............. 36 10 11 AGENDA ITEM NO. XI - Consideration of and possible discussion and/or action on external and internal 12 audits and/or reviews relating to the Texas Lottery Commission, and/or on the Internal Audit Division’s 13 activities ......................................... 38 14 AGENDA ITEM NO. XII - Report, possible discussion 15 and/or action on GTECH Corporation ................. 38 16 AGENDA ITEM NO. XIII - Report by the Executive 17 Director and/or possible discussion and/or action on the agency’s operational status, agency procedures, 18 awards, and FTE status ............................. 39 19 AGENDA ITEM NO. XIV - Report by the Charitable Bingo 20 Operations Director and possible discussion and/or action on the Charitable Bingo Operations Division’s 21 activities, including updates on licensing, accounting and audit activities, pull-tab review, 22 and special projects ............................... 39 23 24 25 5 1 TABLE OF CONTENTS (CONTINUED) 2 PAGE 3 AGENDA ITEM NO. XV - Consideration of the status and possible entry of orders in: 4 A. Docket No. 362-13-0739 – N & A Marquis, LLC B. Docket No. 362-13-0967 – Vietnam Plaza 5 Supermarket C. Docket No. 362-13-0969 – KP Food Store 6 D. Docket No. 362-13-0972 – L & E Shell, LLC E. Docket No. 362-13-1150 – Star Mart Food 7 Store F. Docket No. 362-13-1151 – Sam Market Place 8 G. Docket No. 362-13-1368 – A & M Grocery H. Docket No. 362-13-1369 – Super Food Mart 35 9 I. Docket No. 362-13-1370 – Metroplex Lucky Star, LLC. 10 J. Docket No. 362-13-0637.B – Live Oak Properties ................................. 40 11 AGENDA ITEM NO. XVI - Public comment ............... 40 12 AGENDA ITEM NO. XVII - Commission may meet in 13 Executive Session: A. To deliberate the duties and evaluation of 14 the Executive Director pursuant to Section 551.074 of the Texas Government Code 15 B. To deliberate the duties and evaluation of the Charitable Bingo Operations Director 16 pursuant to Section 551.074 of the Texas Government Code 17 C. To deliberate the duties and evaluation of the Internal Audit Director pursuant to 18 Section 551.074 of the Texas Government Code D. To deliberate the duties of the General 19 Counsel pursuant to Section 551.074 of the Texas Government Code 20 E. To deliberate the duties of the Human Resources Director pursuant to Section 21 551.074 of the Texas Government Code F. To receive legal advice regarding pending or 22 contemplated litigation pursuant to Section 551.071 (1) (A) and/or to receive legal 23 advice regarding settlement offers pursuant to Section 551.071 (1) (B) of the Texas 24 Government Code and/or to receive legal advice pursuant to Section 551.071 (2) of 25 the Texas Government Code, including but not 6 1 TABLE OF CONTENTS (CONTINUED) 2 PAGE 3 limited to: Department of Texas, Veterans of 4 Foreign Wars et al. v. Texas Lottery Commission et al. 5 Willis Willis v. Texas Lottery Commission, GTECH Corporation, BJN 6 Sons Corporation d/b/a Lucky Food Store #2, Barkat N. Jiwani and 7 Pankaj Joshi Employment law, personnel law, 8 procurement and contract law, evidentiary and procedural law, and 9 general government law. G. To deliberate the negotiation of the lottery 10 operator's contract pursuant to Section 467.030 of the Texas Government Code ....... 43 11 AGENDA ITEM NO. XVIII - Return to open session for 12 further deliberation and possible action on any matter discussed in Executive Session .............. 43 13 AGENDA ITEM NO. XIX - Adjournment .................. 43 14 REPORTER'S CERTIFICATE ............................. 45 15 16 17 18 19 20 21 22 23 24 25 7 1 P R O C E E D I N G S 2 WEDNESDAY, FEBRUARY 20, 2013 3 (10:05 a.m.) 4 AGENDA ITEM NO. I 5 CHAIR WILLIAMSON: Good morning. I'd 6 like to call this meeting of the Texas Lottery 7 Commission to order. Today is February the 20th, 2013. 8 The time is 10:05 a.m. Commissioners Krause and Tauss 9 are present. We have a quorum. 10 Before we start our first agenda item, 11 I'm going to turn this over to Gary for a few minutes. 12 MR. GRIEF: Great. Thank you, Chairman 13 Williamson. I'll pull your attention to Item 12 in my 14 report under the GTECH item. We're fortunate today to 15 have some very special guests in the audience with us. 16 It came to my attention last week that Joe Lapinski, our 17 account manager for GTECH, and Tom Stanek, who is our 18 GTECH director of Sales and Marketing, were having 19 meetings this week with the GTECH sales management team 20 right across the street at the Hilton Hotel. The 21 sixteen individuals who make up the GTECH sales 22 management team are each responsible for all the Texas 23 Lottery sales and marketing efforts in their respective 24 geographic areas of the state. Through Joe, I've 25 invited them to take a pause from their meetings this 8 1 morning and join us today so I can recognize them. I 2 would like to call out each of their names along with 3 the geographic areas that they're responsible for and 4 ask them to stand and remain standing for just a few 5 minutes. 6 George Sanchez, the Regional Sales 7 Manager for the North. Chip Breckman, the Sales, 8 Marketing, and Business Development Manager for the 9 North. Brian Finnigan, the Regional Sales Manager for 10 the South. JM Martinez, Sales, Marketing, and Business 11 Development Manager for the South. Allen Beaty from 12 Lubbock. Barbara Broad-us from Fort Worth. Pam Batten 13 from Dallas North. Damon Conrad from Dallas South. 14 Joey Parker from El Paso. Stephen McCurley from Tyler. 15 Chuck Faulkner from Waco. Camille Moore from Austin. 16 Linda Sanderson from San Antonio. Jesse Carrasco from 17 Houston East, Terrance Kearns from Houston North, and 18 Felipe Elizondo from McAllen. 19 Commissioners, at the various lottery 20 conferences that I attend all over the country, the 21 No. 1 subject that I'm usually called upon to discuss is 22 the operating model that we use here in Texas called the 23 Texas Model. The key ingredient of that Texas Model is 24 that unlike most states who use state employees, we 25 outsource our entire field sales and marketing 9 1 organization. And I've spoken about the advantages of 2 that particular model several times over the years: The 3 flexibility that it gives us to quickly respond to 4 market and consumer needs; the fact that we don't have 5 to make the intensive capital investments in people and 6 facilities and vehicles and buildings necessary to run a 7 $4 billion enterprise; and the ability, through GTECH, 8 to financially incentivize our field sales and marketing 9 folks to make sure that we meet the revenue projections 10 that we set out. And those are indeed very important 11 advantages to the Texas Model, and they sound really 12 great when I make my presentations. But the Texas Model 13 is not worth the paper that it's printed on if you don't 14 have the hard work and the dedication of the people who 15 stand behind that contract with the State of Texas, and 16 I will tell you that the GTECH Texas sales and marketing 17 team is second to none in the country. I know that for 18 a fact. Their performance is one of the main reasons 19 why we're able to share with you our wonderful sales and 20 revenue results that we have. 21 I'm proud to be a colleague of these 22 individuals. I'm glad that you're here this morning, 23 and I know that they would be very receptive to any 24 comments that the commissioners might want to make. 25 CHAIR WILLIAMSON: Thank you. 10 1 Commissioners, do either one of y'all have a comment you 2 would like to share? 3 COMM. KRAUSE: Well, I think that the 4 reason why y'all are successful is because y'all are 5 highly skilled and highly motivated, and I really 6 appreciate you-all taking seriously our commitment to 7 customer service. Now, obviously, we have two kinds of 8 customers. We have our lottery players, but we also 9 have our lottery licensees. And those are the people 10 that you-all work with. Thank you for helping us take 11 care of that important piece of this business and come 12 back next year. We'll talk about it again. 13 CHAIR WILLIAMSON: You have anything to 14 say? 15 COMM. TAUSS: I want to echo my fellow 16 commissioner's comments, but I have one question. Who 17 came the farthest: El Paso or McAllen? 18 MR. ELIZONDO: El Paso. 19 CHAIR WILLIAMSON: Thank y'all for coming 20 today. As Gary and I get to brag on the people that 21 work in this building, y'all are also part of this 22 building too, and I know I've met one or two of you at 23 some of the ceremonies that we've had in North Texas. 24 You are also part of the team that makes our job real 25 easy, and we're extremely proud of this -- the group, 11 1 the Lottery direct employees and you as well. Because 2 as a group, I would hold you up to any other business in 3 the world in terms of doing what we do. 4 Thank you. Thank y'all for taking time 5 to walk over here and do this. So now y'all can go back 6 to your exciting meetings. 7 (Applause) 8 CHAIR WILLIAMSON: We'll give them a 9 second to clear out. Let's go on to our first item. 10 AGENDA ITEM NO. II 11 CHAIR WILLIAMSON: It's the receipt of 12 comments of Laveda Brown. She's president and CEO of 13 Cen-Tex African-American Chamber of Commerce regarding 14 bingo conductor-commercial lessor business 15 relationships, conductor difficulties complying with the 16 Bingo Enabling Act and the Commission's charitable bingo 17 rules, and consideration and discussion and/or action on 18 the comments. 19 Ms. Brown, if you would like to come up 20 and ... 21 MS. BROWN: Where would you like me? 22 CHAIR WILLIAMSON: Would you like to sit 23 there? That's fine. And if you'll just state for the 24 record your -- repeat basically what I just said. 25 MS. BROWN: Good morning. My name is 12 1 Laveda Brown, and I'm from Waco, Texas. I'm president 2 and CEO of Cen-Tex African-American Chamber of Commerce. 3 I'm here because of my history and my 4 heritage and my upbringing. I'm the daughter of a 5 Baptist minister and a retired RN. So I am faithful and 6 dedicated to making the change, talking for the 7 underdog, and making sure that issues come to light. 8 Rights are -- wrongs are made right, if at all possible. 9 I truly believe that there needs to be 10 some changes in the Lottery system processes. And I 11 want to speak as an individual, but I also want to speak 12 for conductors that may not be able to or know the 13 process of speaking up. And our organization was 14 started in 2004 -- no one gave me a time limit, so I 15 guess I can go as long as I want to. Is that correct? 16 CHAIR WILLIAMSON: Well, within reason. 17 If we're in an hour, you know, we've got other things we 18 got to do but ... 19 MS. BROWN: But our organization was 20 started in 2004, and we had a mission. And our mission 21 is to strengthen the community by empowering businesses. 22 We want to help the economy, strengthen our economy by 23 helping businesses grow and prospering. And so that's 24 my passion. That's what I am -- my organization is all 25 about, but just like every organization, we have to look 13 1 for ways to raise money to be able to accomplish our 2 goals, our objectives, and our mission. And so in 2011 3 we looked toward Bingo as a way to bring in the money to 4 help us accomplish what we'd like to accomplish. 5 It was a good plan, but it was one that I 6 objected to. But I was overridden, and we went ahead 7 with Bingo. I objected to it because I'm a fanatic 8 about having the expertise and the experience you need 9 to oversee an organization. I am terrified of being in 10 a situation where -- well, the situation we got 11 ourselves in where we didn't know what to do. We didn't 12 know enough about the Bingo Enabling Act and the rules 13 and good and bad practices of Bingo, and so we kind of 14 got caught in between a rock and a hard place. So one 15 of the things that we did was we went out and hired 16 experts to run our organization, to run the Bingo 17 program. 18 We were introduced to a ready-made staff 19 of people who had been in the Bingo industry a very long 20 time. So I, after a while, kind of relaxed and got 21 comfortable with we've got experts running our 22 operation. We're going to be okay. That did not 23 happen. It was not true. 24 I began to focus on our mission, and kind 25 of over -- oversaw what I thought I knew -- our 14 1 operation based on what I thought I knew, and it was 2 definitely not enough. So what I want to do is use what 3 I've learned from this Bingo experience to help other 4 organizations and make the Bingo Lottery Commission 5 experience a lot better for someone else. 6 When I came to Austin, I believe it was 7 in November, there was a hearing; and we were a part of 8 the hearing. There was a hearing for four organizations 9 about their license and issues that had -- may have 10 jeopardized their operation. One of the things I 11 discovered was a lot of the problems with the -- those 12 organizations was due to the paperwork. A lot of them 13 just did not know, did not understand the paperwork. 14 And my question was: Where do you go to get the 15 training to do the paperwork? Because a couple of times 16 in our experience we talked about doing our own 17 paperwork, changing our -- who we worked with and doing 18 our own paperwork, but there was no way for -- no place 19 for us to go to get the training. So we called around. 20 We were told that the people we were currently working 21 with was the only experts within 60 miles. What we 22 discovered was, that was true. There was no one else 23 that was -- that we could contract with to do the 24 paperwork. 25 So I think it's an injustice, and I 15 1 believe it's unfair to ask the new conductors to learn 2 on their own. And everything has a learning curve. So 3 you learn on your own, you mess up, you make mistakes. 4 And who is penalized? The conductors are penalized. 5 You may have industry experts working with you, but they 6 don't get penalized. The conductors get penalized, but 7 there's no support for the conductors. And I think 8 that's an injustice; and I feel that when you start 9 looking for more money for new programs and more 10 whatever you need money for, I think that you need to 11 focus more on the nonprofits, the newbies, the people 12 who it's all about. The mission is to bring in money, 13 of course, to the State, but it's also to help the 14 nonprofits. And I truly believe that this organization 15 is doing the nonprofit conductors a disservice by not 16 providing them resources to be successful. 17 I believe that there needs to be more -- 18 I believe there needs to be more training, whether it's 19 on-line, and I would have been totally willing to come 20 to Austin to get the training that I needed. The person 21 that I am, wanting to have all my ducks in a row, I 22 would have driven. I've driven to Austin many times in 23 this last month or so dealing with this issue. I would 24 have been happy. Understand that I was told that a lot 25 of the programs were cut because of funding. There was 16 1 not funding to go out into the community and train these 2 people. Well, if there was not funding, that's fine. 3 Bring the people here, those who want to -- want to 4 learn and need the -- are willing to make the sacrifice 5 to have a clean operation. Make it available to them 6 one way or the other. I did take the on-line training. 7 It was a good cover-your-anatomy training. It told me a 8 lot of the rules, but it did not give me the resources 9 that I needed to be successful. It was a good: Yes, 10 you've got to do this; yes, we did it; check; move on to 11 the next thing. There needs to be more best practices 12 in there. There needs to be more worst practices in 13 there. There needs to be -- I understand and I'm not 14 taking away from any of the Lottery Commission staff. I 15 think they're good people. The ones I've worked with 16 have been very helpful, very good resources, but they 17 teach the training -- they compile the on-line training 18 from a top down. These are the rules that you need to 19 follow. I think there needs to be more firsthand 20 experience in the training. There needs to be more 21 people who testify and talk about their experience and 22 tell other organizations, yes, you have to pay your 23 employees. It's not exempted in the Bingo operation to 24 not pay your employees. That was some information -- 25 misinformation given us. So there needs to be some 17 1 myth-busting in this training as well. And I'd be happy 2 to share my worst experience. 3 So my recommendation, should you choose 4 to accept it, is that there's better training, that the 5 training and the regulations are written in layman's 6 terms. As I said before, I did research on the 8-liner 7 operations, but what I found was just as confused -- I 8 was just as confused when I did the research and read 9 the regulations as I was before I got started. I even 10 have a lawyer on my board. I gave it to him. He said, 11 "Laveda, frankly, I don't know what it says. It's so 12 vague." So when lawyers don't understand what you're 13 saying there, how can you expect the laypeople to 14 understand what's being said? 15 So I truly encourage you and ask you and 16 plead that you will make sure that when you come up with 17 the rules -- the regulations, that they are written in 18 the language that a small nonprofit who has a passion -- 19 we have a lot of nonprofits who are passionate about 20 homelessness, about welfare, about food, and about 21 children. They can't read the Bingo Enabling Act and 22 understand what it's saying. So the training and the 23 newsletter needs to be more geared toward the -- I think 24 of the sisters in the Catholic charities who are trying 25 to reach their mission and who just probably don't have 18 1 the resources, the time, and the expertise to understand 2 what it takes to run a successful organization. I think 3 we need to think in terms of the little people when 4 you're making these rules and regulations. 5 And also I'd like to say that the 6 conductor should not bear the brunt of the penalties 7 when things goes wrong. If we hire expertise, if we 8 have a leaseholder who is dictating to us what has to be 9 done or knows -- has the expertise that we don't have or 10 so we think they have, they need to pay the penalty too 11 when things go wrong, when they lead a conductor down 12 the wrong road. 13 Those are my comments. I appreciate the 14 opportunity to speak to you. I hope you felt my 15 passion, my concern, and I hope you will take time to 16 look at and make this a operation that is nonprofit, 17 small-operation friendly. 18 CHAIR WILLIAMSON: All right. Thank you. 19 And I appreciate you taking the time out of your life to 20 come down and volunteer and do this. 21 MS. BROWN: This is important to me. 22 CHAIR WILLIAMSON: And we understand 23 that. 24 Bob, I have a question. What are our 25 guidelines in terms of what we can ask Ms. Brown or -- I 19 1 know this is a little bit different than a public 2 comment. 3 MR. BIARD: This has been posted broadly. 4 So y'all can feel free to ask her any questions about 5 any of the topics she raised. 6 CHAIR WILLIAMSON: Okay. Great. 7 Commissioners, do you have any questions or anything you 8 would like to share? 9 COMM. KRAUSE: The upshot at what I heard 10 is, is that, you know, definitely, there is not a lot of 11 guidance from the Bingo Division; and so anyway, the two 12 takeaways from my prospective that I get is that the 13 commercial lessors, the actual operators who their big 14 customer are the charities, that there is lack of 15 confidence there or a lack of, you know, responsibility 16 with what they do because what -- a lot of the times, 17 that's a landlord that provides a turnkey operation to a 18 charity. The charities walk in, they know nothing; and 19 what's offered is the commercial lessor provides the 20 place, provides a lot of the equipment, provides the 21 know-how, provides the people who are supposed to be 22 knowledgeable. But what happens is that when there's a 23 violation, they don't get tagged. It's the charity that 24 gets tagged. 25 And so I completely understand about the 20 1 fact that the charities are ill-equipped to do this. 2 And so I'm not sure I've got a way to resolve that other 3 than to maybe focus a little bit more on the commercial 4 lessors, but it also sounds to me like there might be an 5 entrepreneurial opportunity for you. Because now that 6 you have become way more acquainted with how things run, 7 how they should run, then you might think about offering 8 services to charities to say, 'If you want to get in the 9 Bingo business, here's what you need to know that you're 10 not going to learn from the Bingo Division.' And you 11 know, I can certainly understand that, you know, what we 12 put out, you know, to some extent is hard for people 13 without a background to understand. I mean, it's -- 14 it's really common in my business as a lawyer. I think 15 everybody knows lots of stuff that they don't really 16 know. So I have to be in the business of teaching, and 17 so I can't say that the Bingo Division is really in a 18 position to be able to teach this kind of thing. 19 Now, the Texas Alcoholic Beverage 20 Commission has got this whole educational program around 21 servers and license holders and all that, and before you 22 can be a server, you have to go take a course. And, of 23 course, you pay for it and they offer that all over the 24 state. I don't think we can do that with our budget but 25 guess what -- 21 1 MS. BROWN: Well, we need a new budget 2 for you, then. 3 COMM. KRAUSE: Well, then -- 4 CHAIR WILLIAMSON: We're trying -- we're 5 working on that. 6 COMM. KRAUSE: The legislature is right 7 up the street. 8 MS. BROWN: And I'm going there next. 9 COMM. KRAUSE: But anyway, the Texas 10 Alcoholic Beverage Commission is obviously placed where 11 they have seen the need to be able to educate folks. So 12 that doesn't exist here. Maybe that's an opportunity 13 for you in your organization. But I do see the need, 14 and I also see kind of misallocation of responsibility 15 around this stuff. 16 CHAIR WILLIAMSON: Do you have anything? 17 COMM. TAUSS: How much -- if 18 organizations were charged a fee for training, what is 19 the most -- or how much would you think that a charity 20 could provide? For instance, you -- how much, $25, $50 21 or something to that degree? 22 MS. BROWN: I think that would be 23 feasible, yeah. Of course, they would be willing to pay 24 it when they think they're going to bring in millions 25 for their organization, but I would educate them to the 22 1 fact that that is not true. We went in the hole. 2 CHAIR WILLIAMSON: Your comments -- I'm 3 very sympathetic to a lot of your observations and 4 comments. The Bingo Enabling Act is a very complex 5 statute. I like to think I'm reasonably intelligent 6 until I read that, and then I realized I really wasn't. 7 There are a lot of things I don't understand. The 8 8-liner issue is a very unclear issue even in the 9 statute, even when I keep asking about what obligation 10 or where does that come under our purview; and it's a 11 really muddy area. And we've got at least one gentlemen 12 here that represents the Bingo that I'm sure he's going 13 to take notes, and I know they've talked about it 14 before. 15 So we are not insensitive to your 16 concerns, and I'm sure we'll have many more 17 conversations about that. I would highly encourage you 18 to spend time talking to elected officials. Because at 19 the end of the day, your comments and your passions will 20 be a voice they'll hear. And because a lot of what we 21 do is statute driven here and certainly in the Bingo, 22 our hands are tied in some ways. It's not a rule we 23 created here. It's a statute that we are obligated to 24 follow, and so I'm going to encourage you to stay in 25 contact with our Bingo Division. I'm going to say make 23 1 sure Ms. Brown's involved in whatever we -- out of this. 2 Mr. Joseph and I will have conversations about what can 3 we do based on our current budget to maybe at least 4 address a few of things. Because I'm with you; I'm the 5 same way. If I'm going to do something, I want to make 6 sure I understand everything about it, and it's real 7 frustrating when you can't find answers. 8 MS. BROWN: Exactly. 9 CHAIR WILLIAMSON: So I appreciate that. 10 MS. BROWN: Thank you. I appreciate your 11 time and consideration and allowing me to voice my 12 opinion. 13 CHAIR WILLIAMSON: You're certainly 14 welcome. 15 Now, on -- oh, did you have another? 16 COMM. TAUSS: No. I'm sorry. 17 CHAIR WILLIAMSON: Now, on this same 18 item, I have two witness affirmation forms from a 19 Nicholas Fuentes and Jamie Cohen. If I mispronounced 20 that, please accept my apology. If y'all want to make 21 any public comment in regards to this. 22 MR. FUENTES: No, ma'am. 23 CHAIR WILLIAMSON: Okay. So let's go on 24 to the next item. 25 24 1 AGENDA ITEM NO. III 2 CHAIR WILLIAMSON: Report, possible 3 discussion and/or action on lottery sales and revenue 4 game performance, new game opportunities, advertising, 5 market research trends, and game contracts agreements, 6 and procedures. Kathy and Robert. 7 MS. PYKA: Morning, Commissioners. My 8 name is Kathy Pyka. I'm the controller for the 9 Commission, and with me to my right, is Robert Tirloni, 10 our products management. 11 Commissioners, our first chart this 12 morning that we have for you includes the comparative 13 sales data for the week ending February 16, 2013. This 14 is our 25th week of the fiscal year. Total sales right 15 now are at $1.970 million(sic). That's an increase of 16 98 million or 5.3 percent as compared to the 17 $1,871,000,000 in sales for the same period last fiscal 18 year. 19 As we look at the second blue bar, we've 20 got our Fiscal Year 2013 Instant sales which are 21 $1,440,000,000, which is a $45.9 million increase over 22 last fiscal year. Commissioners, we continue to see 23 exceptional year over year sales increases on the 24 Instant ticket product. We wanted to note that last 25 week we had $71 million Instant ticket sales week. That 25 1 is the second best week of Instant ticket sales in the 2 history of the Commission. 3 So we'll move on to the draw sales. 4 That's our second red bar, at $529.8 million. That's a 5 $52.8 million increase over last fiscal year. And, 6 Commissioners, I think it might be a good time to note 7 that as we look at this increase of $52.8 million, we 8 know that our comparison going through the end of this 9 next month or March will be difficult because last 10 fiscal year we had our record-setting Mega Millions 11 jackpot in which we had a draw week of 84 million in 12 sales. So we know that that current surplus that we 13 have will decline as we get through the period of 14 March 2013. 15 So our next slide that we have for you 16 this morning includes our average daily sales for Fiscal 17 Years 2011, '12, '13. The overall daily average for 18 this fiscal year is $11.67 million. This is a $726,000 19 increase over last fiscal year; and it is a $1,346,000 20 per day increase over Fiscal Year 2011. 21 Our jackpot games are highlighted with a 22 white font. We're at $1,781,000,000 for our jackpot. 23 That's $105,000 increase over last fiscal year and a 24 $258,000 increase over Fiscal Year 2011. And 25 highlighted within this series of draw games is our 26 1 daily average for Powerball at 758,000. 2 Our daily games are highlighted in the 3 green font, and we currently have a daily average of 4 $1,365,000 for those games. And we continue to see very 5 strong sales for the Daily 4 product at 194,000 per day 6 daily average, and that's a 12 percent increase over the 7 previous fiscal years. 8 Instant tickets are outlined in the 9 yellow font at $8.5 million per day, and that's a 10 $368,000 increase over last fiscal year and 832,000 per 11 day increase over Fiscal Year 2011. So that's our daily 12 sales comparison. Robert will now discuss actual sales 13 by product. 14 MR. TIRLONI: Good morning, 15 Commissioners. For the record, my name is Robert 16 Tirloni, products manager for the Commission. 17 So this is our year over year comparison 18 through this past Saturday, February 16th. The same 19 format as the previous slide. Our jackpot games are at 20 the top in white. You'll notice the large gains in 21 Powerball in Fiscal '13 compared to Fiscal '12. That is 22 due to the large jackpot we experienced this past fall. 23 The other jackpot games are in decline, 24 and that is all a result of jackpots in this current 25 fiscal year. But you can see that that large Powerball 27 1 jackpot has caused the $14.6 million surplus in this 2 fiscal year. 3 The daily games are in green in the 4 middle. Pretty much they are all holding constant. Our 5 two Sum It Up features on the Pick 3 and Daily 4 are 6 about even with the previous fiscal. Pick 3 is down 7 slightly. Again, we continue to see good growth with 8 the Daily 4 product. We believe that is Pick 3 players 9 that are moving up to the Daily 4 game. And you'll 10 notice the $41.4 million for the All Or Nothing game. 11 Again, that's all surplus since that game just started 12 in September, which is part of Fiscal Year '13. So all 13 told, the daily games are also up just over 38 million 14 thus far. All told, the draw games are up 52.8 million 15 for this Fiscal Year. 16 And then as Kathy mentioned, our Instant 17 games are doing very well. We are up $46 million 18 through the week ending February 16th, which gives us a 19 grand surplus for the fiscal year of just under 20 $99 million. 21 And that's our presentation for today. 22 We'll be happy to answer any questions you may have. 23 CHAIR WILLIAMSON: Thank you. 24 Commissioners, do you have any questions? 25 COMM. TAUSS: No, ma'am. 28 1 CHAIR WILLIAMSON: All right. Thank you. 2 Kathy, go on to the next item. 3 AGENDA ITEM NO. IV 4 CHAIR WILLIAMSON: Report, possible 5 discussion and/or action on transfers to the State and 6 the Agency's budget status. 7 MS. PYKA: Thank you, Madam Chair. Our 8 first report under this, Commissioners, includes the 9 transfers and allocations to the Foundation School Fund, 10 the Texas Veteran's Commission, and the allocation of 11 unclaimed prizes through the period ending 12 December 31st, 2012. Our total cash transfers to the 13 State amounted to $359.2 million for the first four 14 months of Fiscal Year 2013. As we look at the breakdown 15 of those total transfers, we transferred 346.9 million 16 to the Foundation School Fund. 2.3 million was 17 transferred to the Texas Veteran's Commission, with a 18 balance of $10 million transferred from unclaimed 19 lottery prizes. Commissioners, this represents an 20 11.8 percent increase or $36.7 million over the amount 21 transferred to the Foundation School Fund through the 22 same period last fiscal year. Included in the notebook, 23 we've also got a document that reflects a report of 24 total lottery sales, expenditures, and transfers from 25 1992 to the present. And our total cumulative transfers 29 1 through December of this fiscal year to the Foundation 2 School Fund are at $15.08 billion. 3 Commissioners, the final item under this 4 tab is our Agency's Fiscal Year 2013 method of finance 5 summary for the first quarter ending November 30th. Our 6 lottery account budget for Fiscal Year 2012 is 7 $195.3 million. Of this amount, 71 percent was expended 8 and encumbered through the first quarter. Our Bingo 9 operations budget funded by general revenue is 10 $14.7 million and of that amount 34.4 percent was 11 encumbered and expended through the end of the first 12 quarter. 13 This concludes my presentation. I would 14 be happy to answer any questions. 15 CHAIR WILLIAMSON: Thank you. 16 Commissioners, do you have any questions of Kathy? 17 COMM. KRAUSE: No. 18 CHAIR WILLIAMSON: Thank you. We'll go 19 on to the next item. 20 AGENDA ITEM NO. V 21 CHAIR WILLIAMSON: Consideration of and 22 possible discussion and/or action on the Lotto Texas 23 procedures. Kathy. 24 MS. PYKA: Thank you. Commissioners, in 25 accordance with the Commission's procedure regarding 30 1 approval of procedures that impact the Lotto Texas game, 2 I'm seeking your approval of the winner payment 3 processing and review procedure, which is labeled as 4 OC-WPOO1. Following our November 8, 2012 commission 5 meeting, the proposed procedure was placed in the Texas 6 Register and on that agency's website for public 7 comment. A minimum of 30 days has lapsed since our 8 public comment period that was -- or our hearing that 9 was held on January 3rd of 2013. Today there have not 10 been any comments received in writing or at the public 11 comment hearing on the proposed procedure. 12 Commissioners, it's staff recommendation 13 that the procedure be approved; and if approved, we will 14 place the approved procedure on the Commission's website 15 as well as in the Texas Register. 16 This concludes my presentation. I would 17 be happy to answer any questions. 18 CHAIR WILLIAMSON: All right. This is an 19 action item; but first, Commissioners, do you have any 20 comments or questions? 21 If not, is there a motion? 22 COMM. KRAUSE: I make a motion -- I make 23 a motion that we adopt the actions recommended by the 24 Staff pertaining to the Lotto Texas procedures. 25 CHAIR WILLIAMSON: Is there a second? 31 1 COMM. TAUSS: Second. 2 CHAIR WILLIAMSON: All in favor? 3 COMM. TAUSS: Aye. 4 CHAIR WILLIAMSON: Aye. 5 COMM. KRAUSE: Aye. 6 CHAIR WILLIAMSON: Motions passes 3-0. 7 MR. BIARD: There is no written order for 8 that. Just your vote on the record is sufficient. 9 CHAIR WILLIAMSON: Okay. All right. 10 Thank you. 11 AGENDA ITEM NO. VI 12 CHAIR WILLIAMSON: The next item is: 13 Consideration of and possible discussion and/or action 14 including proposal on amendments to 16 TAC 401.307 "Pick 15 3" On-Line Game Rule, and 16 TAC 401.316 "Daily 4" 16 On-Line Game rule. James and Robert, these are your 17 items, please. 18 MR. PERSON: Good morning, Commissioners. 19 My name is James Person. I'm an attorney here at the 20 Commission. We have proposed changes to both Pick 3 and 21 Daily 4 rules today. The primary changes are we're -- 22 we want to recommend increasing the draw schedule from 23 two per day to four per day for both games, and the date 24 for which that increase would happen would be determined 25 by the executive director, but no later than 32 1 October 13th of this year. 2 The proposed rules would also allow 3 players to purchase consecutive plays for 24 consecutive 4 games instead of 12 currently, and we've also cleaned up 5 some of the language. We've gotten rid of some obsolete 6 language dealing with Sum It Up play and the Pick 3 rule 7 and corrected a spelling error. And I know Robert can 8 go into the reasons behind our recommendation. 9 MR. TIRLONI: Thank you. Commissioners, 10 for the record, once again, my name is Robert Tirloni, 11 products manager for the Commission. 12 Commissioners, as I mentioned a moment 13 ago, our All or Nothing game started in September of 14 2012, and it was the first game in the Agency's 15 portfolio to be drawn four times per day. All or 16 Nothing introduced two new drawing times when it came on 17 board, a 10:00 a.m. morning drawing and 6:00 p.m. 18 evening drawing. Our fiscal analysis shows a revenue 19 increase by increasing the number of drawings to four 20 times per day for both Pick 3 and for Daily 4. So if 21 the Commission eventually adopts this rule, Pick 3, 22 Daily 4, and All Or Nothing will then have the same 23 identical drawing schedule: Four times a day, six days 24 a week, Monday through Saturday. 25 As James mentioned, we believe if this 33 1 rule is adopted in late April or early May, we can have 2 the additional drawings introduced by mid October at the 3 latest. We're going to be aggressive and try to aim for 4 a launch in September, but we definitely believe we can 5 make that happen by mid October. 6 CHAIR WILLIAMSON: Okay. Are there any 7 questions? 8 Is there a motion to publish this rule? 9 COMM. KRAUSE: Yes, there is. I move 10 that the Commission initiate the rule-making process by 11 publishing the amendments proposed by Staff to 16 -- 12 section 16 -- or you know, Chapter 16 of the Texas 13 Administrative Code, Section 401.307 and 401.316. 14 Publish them in the Texas Register to receive public 15 comment. 16 CHAIR WILLIAMSON: Is there a second? 17 COMM. TAUSS: Second. 18 CHAIR WILLIAMSON: All in favor? 19 COMM. TAUSS: Aye. 20 CHAIR WILLIAMSON: Aye. 21 COMM. KRAUSE: Aye. 22 CHAIR WILLIAMSON: Motion passes 3-0. 23 MR. BIARD: Commissioners, I have two 24 T-bar memos for you to sign. 25 CHAIR WILLIAMSON: All right. 34 1 AGENDA ITEM NO. VII 2 CHAIR WILLIAMSON: The next item is: 3 Report, possible discussion and/or action on amendments 4 to the 2010 lottery operations and services contract 5 including whether the negotiation of the lottery 6 operator's contract in an open meeting will have a 7 detrimental effect on the Commission's position in 8 negotiations of this contract. Mike, this is your item, 9 please. 10 MR. FERNANDEZ: Good morning, 11 Commissioners. For the record, my name is Mike 12 Fernandez. I'm the administration director, and also 13 for your information, we're not requesting that the 14 Commission go into executive session on this item. 15 Item No. 7 is to advise the Commission of 16 Staff's intent to amend the current lottery operations 17 contract with GTECH to add clarifying language regarding 18 second chance drawings. 19 So if you have any questions about that, 20 I'll be happy to answer. 21 CHAIR WILLIAMSON: All right. Are there 22 any questions? 23 COMM. TAUSS: No. 24 CHAIR WILLIAMSON: All right. Then we'll 25 go on to the next item. 35 1 AGENDA ITEM NO. VIII 2 MR. FERNANDEZ: Again, Item No. 8 is an 3 informational item and that's to advise the Commission 4 of Staff's intent to amend our current Instant ticket 5 printing contract with Pollard to add another Instant 6 ticket size. 7 I'd be happy to answer any questions 8 regarding that. 9 CHAIR WILLIAMSON: Any questions on that? 10 COMM. KRAUSE: No. 11 CHAIR WILLIAMSON: Okay. Next item. 12 AGENDA ITEM NO. IX 13 MR. FERNANDEZ: And then lastly, what 14 I've included in your notebooks are lists of both Prime 15 contracts and High Risk contracts for your information. 16 As you know, we bring those before the Commission 17 annually so you'll know exactly what contracts we have 18 in those two categories. As you also may recall, the 19 Staff takes no action on any Prime contract before it's 20 come before the Commission. 21 So if you have any questions, I'd be 22 happy to answer. 23 CHAIR WILLIAMSON: All right. Thank you. 24 Are there any questions? 25 COMM. KRAUSE: No. 36 1 CHAIR WILLIAMSON: Thank you. 2 AGENDA ITEM NO. X 3 CHAIR WILLIAMSON: The next item is: 4 Report, possible discussion and/or action on the 83rd 5 Legislature. Nelda. 6 MS. TREVINO: Good morning, 7 Commissioners. For the record, I'm Nelda Trevino. I'm 8 the director of governmental affairs. We have provided 9 you this morning with an updated legislative bill 10 tracking report of bills filed that impact the Agency, 11 and we are currently tracking 78 bills. Since last 12 month's commission meeting, there have been a few 13 additional bills that have been filed that specifically 14 relate to the Agency, and I would like to highlight 15 those for you today. 16 House Bill 1270 by Representative Trey 17 Fischer Martinez. This bill would authorize a portion 18 of unclaimed lottery prizes to be transferred to the 19 Foundation School Fund instead of the General Revenue 20 Fund. 21 House Bill 1443 by Representative Wayne 22 Smith. This bill would dedicate a portion of the 23 unclaimed prizes to the Parks & Wildlife Department to 24 fund the repair and restoration of the Battleship Texas. 25 Senate Bill 282 by Senator Leticia Van de 37 1 Putte. This bill would exempt Bingo prizes of $50 or 2 less from the $2,500 prize cap, and this is the Senate 3 companion to the bill that I mentioned at the last 4 commission meeting that's been filed by Representative 5 Senfronia Thompson. And that's House Bill 394. 6 Senate Bill 663 by Senator Wendy Davis. 7 This bill would allocate $5 million annually from 8 unclaimed lottery prize money to the Fund for Veteran's 9 Assistance, and this allocation would be in addition to 10 the revenue derived from the sale of the Veteran's 11 scratch off ticket. 12 I also want to provide a brief update as 13 it relates to the legislature's consideration of the 14 Agency's appropriations for the next biennium. The 15 Agency has made its appearance before the Senate Finance 16 Committee and also the House Appropriations Subcommittee 17 earlier this month to provide testimony regarding the 18 Agency's appropriations request for the upcoming 19 biennium. 20 Work group meetings are continuing to 21 take place both on the Senate side and with the House 22 Appropriations Subcommittee, and they will continue to 23 discuss our Agency's appropriations request. 24 Lastly, it's anticipated that the 25 Agency's Sunset Bill will be filed in the near future 38 1 that will incorporate the recommendations that were 2 adopted by the Sunset Commission. And this concludes my 3 report, and I'll be glad to answer any questions. 4 CHAIR WILLIAMSON: Thank you. 5 Commissioners, you have any questions? 6 COMM. TAUSS: No. 7 AGENDA ITEM NO. XI 8 CHAIR WILLIAMSON: The next item is: 9 Consideration of and possible discussion and/or action 10 on external and internal audits and/or reviews relating 11 to the Texas Lottery and our Internal Audit Divisions 12 activities. Catherine. 13 MS. MELVIN: Good morning. Thank you, 14 Commissioners. This morning I have no items of update, 15 but I'm happy to answer any questions. 16 CHAIR WILLIAMSON: Thank you. 17 Commissioners, do you have any questions? 18 COMM. KRAUSE: No. 19 AGENDA ITEM NO. XII 20 CHAIR WILLIAMSON: The next is: Report, 21 possible discussion and/or action on GTECH Corporation. 22 Gary. 23 MR. GRIEF: Nothing further on that 24 item, Chairman. 25 CHAIR WILLIAMSON: Commissioners, do you 39 1 have any questions? 2 COMM. TAUSS: No. 3 CHAIR WILLIAMSON: We'll continue on to 4 the next item. 5 AGENDA ITEM NO. XIII 6 CHAIR WILLIAMSON: A report by the 7 executive director and/or possible discussion and/or 8 action on the Agency's operational status, Agency 9 procedures, awards, and FTE status. Gary. 10 MR. GRIEF: Nothing further other than 11 what's already in your notebooks. 12 CHAIR WILLIAMSON: Commissioners, do you 13 have any questions for Gary? 14 COMM. TAUSS: No. 15 CHAIR WILLIAMSON: Thank you. 16 AGENDA ITEM NO. XIV 17 CHAIR WILLIAMSON: The next item is a 18 report by the Charitable Bingo Operations director and 19 possible discussion and/or acton on the Charitable Bingo 20 Operations Division's activities including updates on 21 licensing, accounting, audit activities, pull-tab 22 review, and special projects. Sandy. 23 MS. JOSEPH: Good morning. I have 24 nothing to add other than what's in your notebook and 25 that I'm having a lot of fun. 40 1 CHAIR WILLIAMSON: Good. We'll get more 2 in-depth comments from you later. 3 All right. 4 AGENDA ITEM NO. XVI 5 CHAIR WILLIAMSON: We have no public 6 comment. 7 AGENDA ITEM NO. XV 8 CHAIR WILLIAMSON: So we'll go to the 9 next item which is the consideration of the status and 10 possible entry of orders in cases posted on the agenda. 11 Bob. 12 MR. BIARD: Thank you, Commissioners. We 13 have enforcement cases today. Tabs A through I are all 14 lottery retailer matters I would like to take up 15 together. Tab J is a Bingo commercial lessor license 16 revocation. Tabs A through I are recommended lottery 17 retail license revocations. These cases were presented 18 at the State Office of Administrative Hearings for 19 revocation on the grounds the licensee failed to have 20 sufficient funds available to cover electronic fund 21 transfers to the Lottery Commission's account. The SOAH 22 administrative law judge recommends revocation in each 23 of these cases and staff recommends that you vote to 24 approve the order in each case revoking the license. If 25 you approve, I have a single mass order that covers all 41 1 nine of these cases. 2 CHAIR WILLIAMSON: All right. Are there 3 any questions? 4 COMM. KRAUSE: No. 5 CHAIR WILLIAMSON: Is there a motion? 6 COMM. KRAUSE: I make a motion that we 7 adopt the SOAH judge's recommendation to approve the 8 order revoking the licenses that are identified in 9 item -- agenda item 15 A through 11. 10 CHAIR WILLIAMSON: A through 11? 11 COMM. KRAUSE: A through 1 -- A through 12 5 -- A through I. How about that? A through I. 13 (Laughter) 14 CHAIR WILLIAMSON: All right. Now, that 15 we've had that clarified, is there a second? 16 COMM. TAUSS: Second. 17 COMM. KRAUSE: More coffee, please. 18 CHAIR WILLIAMSON: All in favor? 19 COMM. TAUSS: Aye. 20 CHAIR WILLIAMSON: Aye. 21 COMM. KRAUSE: Aye. 22 CHAIR WILLIAMSON: Motion pas 3-0. 23 COMM. KRAUSE: I, aye, I. 24 (Laughter) 25 MR. BIARD: Thank you, Commissioners. 42 1 The next item Tab J is a final order to 2 revoke the Bingo commercial lessor license of Live Oak 3 Properties of Marlin, Texas. In this case, the lessor 4 failed to file a Bingo lessor quarterly report on three 5 occasions and failed to remit rental tax penalty and 6 interest on three occasions as well. The lessor did not 7 appear at the hearing. Staff recommends that you vote 8 to approve the final order in this case revoking the 9 commercial lessor's license. 10 CHAIR WILLIAMSON: Commissioners, do you 11 have any questions? 12 COMM. KRAUSE: I do. I got a comment. 13 Looks like a rare action against a lessor. So my motion 14 is let's revoke his license. 15 CHAIR WILLIAMSON: Okay. Is there a 16 second? 17 COMM. TAUSS: Second. 18 CHAIR WILLIAMSON: All in favor? 19 COMM. KRAUSE: Aye. 20 COMM. TAUSS: Aye. 21 CHAIR WILLIAMSON: Aye. Motion passes 22 3-0. 23 MR. BIARD: Thank you, Commissioners. I 24 have an order for you. 25 43 1 AGENDA ITEM NO. XVII 2 CHAIR WILLIAMSON: At this time I move 3 the Texas Lottery Commission go into executive session 4 to deliberate the duties and evaluation of the executive 5 director, the charitable bingo director, internal 6 auditor, and deliberate duties of the general counsel 7 and human resources director and receive any legal 8 advice regarding pending or contemplated litigation. 9 Is there a second? 10 COMM. TAUSS: Second. 11 CHAIR WILLIAMSON: All in favor? 12 COMM. TAUSS: Aye. 13 COMM. KRAUSE: Aye. 14 CHAIR WILLIAMSON: Aye. Motion passes 15 3-0. 16 It's 10:51. 17 (Executive Session: 10:51 a.m. to 11:45 a.m.) 18 AGENDA ITEM NO. XVIII 19 CHAIR WILLIAMSON: Okay. The Texas 20 Lottery Commission is out of executive session. The 21 time is 11:45 a.m. There is no action to be taken as a 22 result of the executive session. 23 AGENDA ITEM NO. XIX 24 CHAIR WILLIAMSON: Is there a motion to 25 adjourn? 44 1 COMM. TAUSS: I move we adjourn. 2 CHAIR WILLIAMSON: Is there a second? 3 COMM. KRAUSE: Second. 4 CHAIR WILLIAMSON: All in favor? 5 COMM. KRAUSE: Aye. 6 CHAIR WILLIAMSON: Aye. 7 COMM. TAUSS: Aye. 8 CHAIR WILLIAMSON: Motion passes 3-0. 9 The Lottery Commission adjourns as of 10 12:45 a.m. -- 11:45 a.m. 11 (Commission meeting adjourned: 11:45 a.m.) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 45 1 C E R T I F I C A T E 2 STATE OF TEXAS ) 3 COUNTY OF TRAVIS ) 4 I, Autumn J. Smith, Certified Shorthand 5 Reporter in and for the State of Texas, do hereby 6 certify that the above-mentioned matter occurred as 7 hereinbefore set out. 8 I FURTHER CERTIFY THAT the proceedings of such 9 were reported by me or under my supervision, later 10 reduced to typewritten form under my supervision and 11 control and that the foregoing pages are a full, true, 12 and correct transcription of the original notes. 13 IN WITNESS WHEREOF, I have hereunto set my 14 hand and seal this 27th day of February 2013. 15 16 _______________________________ AUTUMN J. SMITH 17 Certified Shorthand Reporter CSR No. 8871 - Expires 12/31/13 18 Firm Registration No. 276 19 Kennedy Reporting Service, Inc. 1016 La Posada Drive, Suite 294 20 Austin, TX 78752 512.474.2233 21 Job No. 107614 22 23 24 25