1 1 BEFORE THE 2 TEXAS LOTTERY COMMISSION 3 AUSTIN, TEXAS 4 5 6 IN RE: ) PROPOSED NEW RULE 402.211,) 7 AND PROPOSED AMENDMENTS TO) RULES 402.300, 402.321, ) 8 402.322, 402.323 and ) 402.325 ) 9 10 11 12 PUBLIC COMMENT HEARING 13 Wednesday, March 19, 2014 14 15 16 17 18 BE IT REMEMBERED THAT at 10:04 a.m., on 19 Wednesday, the 19th day of March 2014, the above- 20 entitled matter came on for hearing at the Texas Lottery 21 Commission, 611 E. Sixth Street Commission Auditorium, 22 Austin, Texas, before JAMES PERSON, and the following 23 proceedings were reported via machine shorthand by Lou 24 Ray, Certified Shorthand Reporter. 25 KENNEDY REPORTING SERVICE, INC. 512.474.2233 2 1 TABLE OF CONTENTS 2 PAGE 3 PROCEEDINGS, WEDNESDAY, MARCH 19, 2014 3 4 COMMENTS ON BEHALF OF TEXAS CHARITY ADVOCATES (Sanderson) 4 5 COMMENTS ON BEHALF OF TEJAS 6 BINGO/PALACE BINGO (Silver) 8 7 COMMENTS ON BEHALF OF DEPARTMENT OF TEXAS VETERANS OF FOREIGN WARS AND K&B SALES (Kiplin) 10 8 COMMENTS ON BEHALF OF RIVER CITY BINGO 9 CHARITIES AND BIG STAR BINGO CHARITIES (Fenoglio) 13 10 COMMENTS ON BEHALF OF BINGO INTEREST GROUP (Bresnen) 22 11 PROCEEDINGS CONCLUDED 29 12 REPORTER'S CERTIFICATE 30 13 14 15 16 17 18 19 20 21 22 23 24 25 KENNEDY REPORTING SERVICE, INC. 512.474.2233 3 1 P R O C E E D I N G S 2 WEDNESDAY, MARCH 19, 2014 3 (10:04 a.m.) 4 MR. PERSON: For the record, my name is 5 James Person, Assistant General Counsel here at the 6 Lottery Commission. And with me is Sandra Joseph, 7 Director of the Charitable Bingo Operations Division. 8 The time is 10:04 on March 19, 2014. The 9 purpose of this hearing is to receive public comments on 10 proposed new rule 402.211, and proposed amendments to 11 rules 402.300, 402.321, 402.322, 402.323 and 402.325. 12 The proposed new rule implements Section 13 2001.416 of the Bingo Enabling Act, which governs other 14 games of chance during a bingo occasion. And the 15 remaining proposed amendments were the result of a 16 rulemaking petition submitted by K&B Sales, 17 Incorporated, and the Veterans of Foreign Wars. The 18 primary purposes of those amendments are to allow 19 multi-play pull-tab bingo tickets to allow customers to 20 utilize video confirmation and/or bar codes to reveal 21 whether a particular ticket is a winning ticket, and to 22 allow bingo patrons the opportunity to set up and use a 23 customer account at a bingo premises. 24 The Commission voted to propose the new 25 rule and amendments at a public meeting held of KENNEDY REPORTING SERVICE, INC. 512.474.2233 4 1 February 13th of this year. The proposed rule and 2 amendments, along with notice of this hearing, were 3 published in the February 28th, 2014 issue of the Texas 4 Register and on the Commission's web site. 5 In addition to this hearing, the 6 Commission is also accepting written comments by mail, 7 email or facsimile. The deadline for submission is 8 March 31st. 9 For today's hearing I have witness 10 affirmation forms from six different witnesses. If 11 anyone has not turned in an affirmation form and wishes 12 to speak, please submit that as quickly as you can. 13 Also for those speaking, please identify which proposed 14 rule or rules you'll be commenting on. 15 And with that I will call on Phil 16 Sanderson, first. 17 COMMENTS ON BEHALF OF TEXAS CHARITY ADVOCATES 18 MR. SANDERSON: Good morning. Is this not 19 turned on? 20 MS. JOSEPH: Now it is. 21 MR. SANDERSON: It is? 22 (Brief pause) 23 MS. JOSEPH: Why don't you see if one 24 works at the table. 25 MR. SANDERSON: How about this one? KENNEDY REPORTING SERVICE, INC. 512.474.2233 5 1 MS. JOSEPH: That one works. Temporarily. 2 Okay. 3 MR. SANDERSON: Good morning. For the 4 record, my name is Phil Sanderson. I'm with Sanderson 5 Consulting Services, and I'm here today representing 6 TCA, Texas Charity Advocates, whose membership is 7 comprised of over 150 conductors, lessors, manufacturers 8 and distributors. 9 Thank you for the opportunity to comment 10 on the proposed rules. I'm here today to provide 11 comments on the proposed rule for 402.211, games of 12 chance; 402.300, pull-tab bingo; and 402.321, 322, 323 13 and 325 of the card-minding rules. 14 Comments that relate to 402.211. First, 15 in paragraph (d), TCA agrees that the Commission should 16 rely on local law enforcement in the relevant 17 jurisdictions to determine whether an amusement device 18 is a gambling device. We believe that the agency does 19 not have adequate resources to investigate each 20 complaint of whether or not an amusement device is a 21 gambling device. 22 Additionally, TCA has been in attendance 23 and closely following the amusement device regulations 24 in Harris County, recently adopted -- or recently passed 25 legislation last session, and the TCA is monitoring KENNEDY REPORTING SERVICE, INC. 512.474.2233 6 1 those meetings Harris County Commissioners' Court, and 2 they're strongly in support of the methodology or the 3 regulation of game rooms that has been outlined and 4 recently adopted by the Harris County Commissioners' 5 court. 6 Moving on to paragraph (f), we question 7 why the limits of bingo products being awarded as a 8 bingo prize are only limited to the bingo game itself 9 and would like to see the same consideration given to 10 charitable raffles and door prizes. 11 Additionally, the requirement of requiring 12 a bingo gift certificate to be utilized for the award of 13 bingo products as a door prize or bingo prize is 14 overburdensome and would recommend that the Commission 15 allow for an alternative method of documentation and 16 accounting for bingo products as prizes. Bingo products 17 awarded as bingo prizes are already required by rule to 18 be listed on the daily schedule of prizes and reported 19 at its current retail value as outlined in 20 administrative rule 402.200(f). 21 And if a bingo product is awarded as a 22 door prize and they were purchased by the organization 23 conducting the bingo, then a flyer, voucher or some 24 other documentation should be used to award -- could be 25 used in awarding the bingo product and to be documented KENNEDY REPORTING SERVICE, INC. 512.474.2233 7 1 on the daily cash reports or daily occasion records. 2 Bingo products awarded as a prize for a raffle would be 3 required to be accounted for in the same manner as other 4 raffle prizes and would not be opposed to utilizing 5 (inaudible) certificates in that scenario. 6 Moving on to comments for 402.300 and 7 402.321, 322, 323, and 325 of the card-minding rules. 8 TCA is in support of proposed amendments to 402.300 and 9 card-minding rules 402.321, 322, 323 and 325. The 10 proposed amendments would generate -- or should generate 11 an increase in net proceeds for licensed authorized 12 organizations. An economic impact study resulted that 13 the card-minding rules -- the net proceeds should see an 14 increase of 8 to $27 million. Pull-tabs should see a 3 15 to 5 percent increase, or 11 to 18 million in gross 16 receipts, and 3 to 5 million in net proceeds. 17 In the preamble of the card-minding rule, 18 the Texas Lottery Commission requests that interested 19 persons, particularly licensed authorized organizations 20 provide comments during the comment period as it relates 21 to those that's used -- utilized card-minding systems 22 for customer accounts and what the costs to those 23 organizations for upgrading to such a card-minding 24 system would result overall -- would result in any 25 adverse economic impact. We do not anticipate such an KENNEDY REPORTING SERVICE, INC. 512.474.2233 8 1 impact to occur; in fact, we still anticipate an overall 2 positive economic impact. 3 We request the Texas Lottery Commission 4 adopt the proposed rule amendments to 402.300, 321, 332, 5 323 and 325 at its April meeting so the amendments can 6 be implemented by conductors as soon as possible in 7 order to maximize the opportunity for net proceeds for 8 the charities. 9 I appreciate the opportunity to provide 10 comments. I look forward to working with the Commission 11 on this matter and any other matters that impact 12 charitable bingo and their (inaudible) fund-raising 13 activities. I'll be happy to answer any questions. 14 MR. PERSON: Thank you. Next we have Earl 15 Silver. 16 COMMENTS ON BEHALF OF TEJAS BINGO/PALACE BINGO 17 MR. SILVER: Good morning. My name is 18 Earl Silver with Tejas Bingo and Palace Bingo. I'd like 19 to thank you for the opportunity to get up and express 20 my comments. 21 To start with, I just question the 22 rationale behind the rule, specifically on (f) which 23 Phil Sanderson spoke about a little bit. I just 24 question why you wouldn't want to give a bingo product 25 as a door prize. I mean, that just seems like you're -- KENNEDY REPORTING SERVICE, INC. 512.474.2233 9 1 it's trying to hamper the charity's ability to promote 2 the bingo hall and be able to get more people in the 3 hall. 4 And I had an additional comment that's 5 actually going to be made a little bit later, but on 6 (d), section (d) and (e), specifically (d) under the 7 subsection local law enforcement determines -- 8 determinations may include a charging instrument such as 9 an indictment or other documented -- document filed with 10 the court by local law enforcement to determine if it's 11 another game of chance. I personally feel that that's 12 guilty before -- guilty before innocence. It should be 13 some type of guilty verdict or final determination or 14 however the verbiage is to determine whether a specific 15 machine is compliant or not compliant with a gambling 16 device. 17 And that was pretty much it. I just 18 question the log -- oh, the log also. An additional log 19 seems to be more redundant because the charities have to 20 do so much work dealing with logs. The environment is 21 to have the charities make additional money and make 22 more money for their charitable purpose. But having 23 them fill out additional logs and other forms of 24 paperwork just adds to labor that drives up expense. 25 And when you drive up expense, then you reduce your KENNEDY REPORTING SERVICE, INC. 512.474.2233 10 1 profit. So I just feel an additional log is just 2 excessive. 3 Thank you. 4 MR. PERSON: Thank you. 5 Next up Kim Kiplin. 6 COMMENTS ON BEHALF OF DEPARTMENT OF TEXAS 7 VETERANS OF FOREIGN WARS AND K&B SALES 8 MS. KIPLIN: Good morning. My name is Kim 9 Kiplin. I'm a lawyer here in town with the law firm of 10 Dykema Gossett. I'm here today on two of the items, 11 402.211, other games of chance. I'm representing the 12 Department of Texas Veterans of Foreign Wars in that 13 matter. And then the other matter, 402.300 pull-tab 14 bingo and the card-minding rules, I'm representing the 15 VFW as well as K&B Sales, Inc., on that. 16 Let me turn to 402.211, other games of 17 chance. The VFW does support the rule, but we request 18 the rule be -- if adopted be revised. We think the 19 proposed definition of game of chance is overly broad, 20 and, for example, would have the effect -- I think this 21 is unintended -- but it would have the effect of 22 prohibiting individuals, for example, who are playing 23 games on their iPhone or games that are free that offer 24 a prize and do have an element of chance. 25 We think the game of chance definition KENNEDY REPORTING SERVICE, INC. 512.474.2233 11 1 should include the three elements of prizes, chance and 2 consideration. You know, a review of the 2001.416 of 3 the occupations code, which is the statute that is the 4 statutory authority for the basis for this rule, looking 5 at that and the prohibition of other games of chance, it 6 specifically accepts certain games. And those games 7 that are specifically identified in that statute can be 8 element of price, chance and consideration. 9 So we suggest that a reasonable 10 interpretation of the phrase "game of chance" is that it 11 really does refer to forms of gambling. So you would 12 have those three elements. 13 We do note in reading the preamble that 14 the Commission is relying, at least in part, upon the 15 Attorney General opinion, John Cornyn-0449. But the 16 facts that were involved in that request had to do with 17 a game where it was consideration and chance and not 18 prize. So if the Commission is inclined to follow the 19 John Cornyn opinion, we suggest that you should at least 20 look at it from the perspective of the consideration of 21 chance. 22 As to the local law enforcement 23 determination, we do support the request that it be 24 based on a final disposition of a matter in a court of 25 competent jurisdiction. Without a final disposition, KENNEDY REPORTING SERVICE, INC. 512.474.2233 12 1 the Commission, if it initiated an administrative 2 enforcement action, would potentially have the impact 3 we're having of disparate outcomes from a criminal 4 proceeding that resulted in dismissal or acquittal and a 5 potential license revocation at the end of the day. 6 So we think it's a better -- a better 7 place for the Commission and for the regulated entities 8 to have the determination beyond the final disposition 9 of the matter. 10 We do appreciate the staff very much 11 conducting stakeholder meetings involving the industry 12 and working through the issues, very much appreciate 13 that and the consideration of the VFW's request, as well 14 as the Commission's consideration of the VFW's comments 15 and (inaudible). 16 If there are no questions on that, I'll 17 move to the other rulemaking. 18 I am appearing on behalf of K&B Sales, who 19 is a licensed distributer, and the Department of Texas 20 Veterans of Foreign Wars. We support the proposed 21 amendments to the rule. We were the petitioners for 22 these rulemakings, and we appreciate very much the 23 Commission granting those petitions and initiating the 24 rulemaking. 25 The proposed amendments are not an KENNEDY REPORTING SERVICE, INC. 512.474.2233 13 1 expansion of gaming and they do not exceed the 2 Commission's statutory authority to adopt. And as such 3 we request the Commission adopt these amendments at its 4 very -- at it's April meeting. We understand it's 5 tentatively scheduled for April 16, 2014. 6 Those are my comments; happy to answer any 7 questions. 8 MR. PERSON: Thank you. 9 MS. KIPLIN: Thank you. 10 MR. PERSON: Steve Bresnen? 11 MR. BRESNEN: Would you mind if I defer to 12 Mr. Fenoglio first? 13 MR. PERSON: Yes, that's fine. 14 Mr. Fenoglio? 15 COMMENTS ON BEHALF OF RIVER CITY BINGO 16 CHARITIES AND BIG STAR BINGO CHARITIES 17 MR. FENOGLIO: Good morning. For the 18 record, my name is Stephen Fenoglio. I'm a board member 19 of the TCA and will be speaking on behalf of TCA, as 20 well as the charities at River City Bingo here in 21 Austin, Texas on Braker Lane, and Big Star Bingo 22 Charities. 23 I want to first address Rule 402.211 as 24 it's proposed, because, as I think most people in the 25 room know, we've had a series of stakeholder meetings KENNEDY REPORTING SERVICE, INC. 512.474.2233 14 1 about some revisions to that. So I first want to 2 comment on the rule as it's proposed and then shift to 3 some comments on some of the revisions we've discussed 4 informally. 5 My clients first support what VFW's Kim 6 Kiplin just said about having the determination be upon 7 final disposition. Having litigated successfully nine 8 of ten or eight of nine game of chance cases across the 9 state, I can tell you that -- and having litigated the 10 issue here at the Lottery Commission, criminal court 11 cases take anywhere from two to three years from the 12 time an arrest is made or a seizure occurs, until some 13 sort of final trial. Occasionally they'll go quicker 14 than that, but I've never seen one, even when my clients 15 wanted to go, were ready to go, the day of the raid for 16 a minimum of nine months. 17 In large counties, Bexar, Travis, Tarrant, 18 Harris, Dallas, it is rare that a prosecutor's office 19 will actually get a file until about 120 days after the 20 raid occurs. So if you wanted to talk with a 21 prosecutors about it, you're kind of talking in the dark 22 because he or she doesn't even have a file to look at. 23 So final disposition makes sense. 24 In the administrative proceeding case, the 25 cases go much faster. It's not uncommon from the time KENNEDY REPORTING SERVICE, INC. 512.474.2233 15 1 the Lottery Commission files a notice of hearing case 2 until your -- many cases you're setting them 60 days 3 after the filing of the date. Occasionally you get a 4 30- or 60-day delay. There have been some cases that 5 have gone on for an extended period of time, but those 6 were cases that dealt with fact situations and 7 production of, I think of that count, about 30,000 pages 8 of documents. So it makes sense for final disposition 9 because then you know what the result is. A court of 10 competent jurisdiction has made that call. 11 I want to turn now to subsection 12 402.211(f) as it was published in the Texas Register. 13 And that language prohibits a charity conducting bingo 14 from awarding bingo cards as a door prize. And we had 15 extensive discussions about that. If that language 16 continues, remains in effect, is adopted, it will 17 devastate some halls' bingo promotions. 18 And I handed out -- or Mr. Bresnen handed 19 out documents that, Ms. Joseph, you've already seen 20 before that highlight this issue. 21 In the case of the one that has our 22 St. Patrick's Day Party -- and this is River City Bingo 23 in Austin, Texas. The -- every customer who came in -- 24 this was two days ago -- came in, was given a 25 movie-theater style ticket they then had a door prize KENNEDY REPORTING SERVICE, INC. 512.474.2233 16 1 run. There was no charge for the ticket. You just had 2 to show up at the bingo hall. 3 Then they drew from that list 10 different 4 drawings. And the person who won came up to the front. 5 There was a bucket with gold coins which I handed out, 6 and I actually have a couple of them if anyone wants to 7 see them. And in the gold coin -- in the bucket there 8 were 400 of these gold coins; 40 of them had an "x" on 9 the back. 10 The process was if you -- if Mr. Bresnen 11 had the winning movie-theater style ticket, he came up 12 to the front and could draw as many coins out of the 13 bucket until he got the one that had the black "x" on 14 the back. Then he stopped. So let's say Mr. Bresnen 15 was fortunate enough to draw 15 coins, and on the 15th 16 coin he got an "x." So he now has 15 coins; each are 17 worth $5 in value at the bingo hall. They're good for 18 either case, $5 cash as a door prize. Cash door prizes 19 are legal as the Commission is well aware. Or they can 20 get $5 worth of bingo product. 21 In the case of this drawing there were a 22 total of 83 $5 awards of bingo product, and then four $5 23 cash winners. In other words, the customers who won, 83 24 of the tickets chosen they chose bingo product. Four of 25 the tickets drawn, they got cash. KENNEDY REPORTING SERVICE, INC. 512.474.2233 17 1 What does that mean for the bingo hall? 2 Well, number one, if we're going to award $20 in cash, 3 we had to have $20 in cash. That's what it cost. If we 4 award $415 in bingo product, the cost to the charity is 5 infinitesimally smaller than the $415. Depending upon 6 which product you buy, if it's a sheet of paper, it 7 might be a fraction of a cent cost, but has a retail 8 value of a dollar. And you can get five of those for a 9 quick shot bingo game. 10 In the case of a pull-tab, it's a dollar 11 retail value, so a dollar gets put into the daily cash, 12 but our cost might be 4 or 5 cents for one one-dollar 13 ticket. If it's a card-minding device, depending upon 14 which hall you're in, it may be $4, it may be $8 for a 15 retail value of a $20 prize. 16 So the charities make much more money if 17 they can encourage their customers to walk away from the 18 door prize drawing with bingo product. It costs them 19 less, creates the excitement in the hall. And on this 20 particular day our deposits were up twice what they 21 normally are. And I'm happy to say we haven't seen any 22 type of significant fall-off. In other words, we're not 23 cannibalizing our sales from the following day or the 24 previous day if you do them right. 25 Well, the point of that is this language KENNEDY REPORTING SERVICE, INC. 512.474.2233 18 1 would prohibit that. It's a very successful program, 2 makes money for the charities, gives the customers a 3 good feeling and they want to come back and play. And 4 that type of program in some form or fashion is 5 replicated all over the state in many bingo halls from 6 Victoria to East Texas to Dallas to Houston, 7 San Antonio. And if this language is kept, you will 8 prohibit a valuable tool from the charities in their 9 tool box to attract new customers and retain their 10 existing customers. It will have an adverse impact on 11 the charity's bottom line. 12 Taking now -- seguing now to the issue of, 13 well, what's the reason for that? And my belief is this 14 language in Subparagraph 4 is a -- it's a 15 misunderstanding of the -- by the regulatory agency 16 about what happens in a hall. And we think if you'll 17 examine closely the comments -- and there are going to 18 be other comments made -- that you'll see that awarding 19 bingo prizes with a door prize drawing is successful for 20 the charities. 21 Now, I want to change now to the other 22 handout that I had, which is -- we've had -- and thank 23 you, Ms. Joseph and your staff, for meeting with us. I 24 think we had a total of three different meetings, and 25 there were a number of phone calls about the revised KENNEDY REPORTING SERVICE, INC. 512.474.2233 19 1 language that we've discussed, and which the staff have 2 recognized that maybe the charities should be able to 3 award bingo products as door prizes. 4 But they need more recordkeeping, and 5 that's the second handout I had as -- that goes into the 6 St. Patrick's Day, I guess, is first handout. But then 7 on the back I've written down the type of log that the 8 staff is recommending. And in that case, I had on 3/17 9 $5 in pull-tabs was awarded. The retail value is 5, the 10 discounted value is zero. It's a door prize and the 11 date the prize awarded was 3/17. 12 The next $5 gold coin they got $5 off a 13 card-minder purchase. So it's a $5 retail value. 14 There's no discount value. It's a door prize. 15 The third example was they got $5 worth of 16 one -- or quick shot bingo cards. Again, $5 retail 17 value, no discount. It's a door prize. And then the 18 third example -- or fourth example was they presented 19 four of these coins and got 20 cash. 20 My point is all of that data that you 21 want -- or the staff wants as a new form is already 22 captured in a sales journal, which I handed you from 23 your own web site, an example of the sales journal, and 24 from the daily cash report or the z tape. All of that 25 data is there already. KENNEDY REPORTING SERVICE, INC. 512.474.2233 20 1 So we're opposed to this type of a 2 log requirement because it's another burden on the 3 charities. And I asked in a meeting yesterday, and I 4 know I caught your staff by surprise, Ms. Joseph, but 5 why is it that we need this new form when the data is 6 already being captured in one form or fashion by other 7 forms required by the Lottery Commission? And I haven't 8 had a substantive response yet. If there is a response 9 from your staff, I'll be happy to respond in writing. I 10 understand our written comments are due by March 30. 11 So the form we've got that's been proposed 12 is an increase in cost on the charities, and it's 13 reporting information that's already captured -- already 14 being captured. BY the way, the problem with THE River 15 Cities example is you had 83 different drawing -- awards 16 of bingo merchandise. So that form -- and the form I 17 handed out, has 26 lines on it. So you'd need four 18 pages of form potentially to record each of those 19 transactions. It could not be recorded on a timely 20 basis, by the way, because they come in, they get their 21 drawing, they come up, they get $5 worth of pull-tabs, 22 maybe they get $10 worth of pull-tabs. They go back, 23 sit down, they come back and get another $5. All of the 24 time that we're trying to making a sale and create and 25 continue the excitement of the bingo hall, someone has KENNEDY REPORTING SERVICE, INC. 512.474.2233 21 1 got to stop, Well, wait a minute, let me write this down 2 right now. Because they wouldn't remember 20 minutes 3 later or an hour after all of the activity has occurred. 4 The session hasn't ended yet. They're doing their 5 paperwork. So after they do their daily cash report, 6 they do their sales journal, they're doing their 7 inventory control -- Oh, there's one other form we've 8 got to do, which could take 10 to 30 minutes. 9 And again, the problem is 30 minutes or an 10 hour after the session is over, do you think anyone is 11 going to remember what one of these coins was redeemed 12 for? It was redeemed for bingo product. The bingo 13 product has been recorded on the sales track. It's on 14 the Z tape. At River City we use everything. We put 15 everything on the point of sale. So it's on the point 16 of sale. It's captured in the sales journal and, 17 ultimately, our inventory management. So some product 18 was awarded, but does it really matter if it's a 19 pull-tab, if it's a card-minder or if it's a paper? I 20 would suggest it doesn't. 21 And I would suggest that this new form is 22 a trap for charities because invariably they'll 23 either -- well, they either (a) they'll stop doing what 24 we're doing, which has been successful; or (b) they 25 won't record it correctly, and then when there's an KENNEDY REPORTING SERVICE, INC. 512.474.2233 22 1 audit occurred there's a ding because, well, you didn't 2 keep everything. 3 By the way, we do keep for the four-year 4 period the promotion, the sheet of paper that says what 5 we're going to do. So there's a record -- if there's an 6 audit, well, how come you had these -- some of these 7 sales transactions? Well, we had a big promotion. 8 And by the way, that's why we had a whole 9 lot larger deposit, twice what we normally have, is 10 because we had that big promotion. It was phenomenally 11 successful. The daily cash report and the deposit 12 match, all the records are there. So we're opposed to 13 that. 14 On the other rules, I think Mr. Sanderson 15 and Ms. Kiplin adequately addressed our comments. And I 16 say the other rules, they are the card-minding and 17 pull-tab rules and we're supportive of the rules as 18 they've been proposed. 19 I'll be happy to answer any questions. 20 Thank you. 21 MR. PERSON: Thank you. 22 Steve Bresnen? 23 COMMENTS ON BEHALF OF 24 BINGO INTEREST GROUP 25 MR. BRESNEN: Thank you. I'm Steve KENNEDY REPORTING SERVICE, INC. 512.474.2233 23 1 Bresnen. I'm here on behalf of Bingo Interest Group. 2 I'd like to first say that I subscribe to the comments 3 of -- made on behalf of the Texas Charity Advocates, on 4 behalf of the VFW and on behalf of K&B Sales, so I'll be 5 brief. 6 I would like to first address 402.211. 7 And just as a general comment, anything y'all do that 8 increases the costs on the charities and limits their 9 ability to be successful, is directly contrary to what 10 the Legislature expressed in -- just in a few months 11 where there's going to be a committee appointed that's 12 going to talk about ways that bingo can be more 13 successful. I think there's a clear legislative 14 expression and intent that bingo be more productive for 15 the charities. So anything that y'all do that has -- 16 puts pressure on -- upward pressure on costs and 17 downward pressure on the ability to operate the 18 enterprise is directly contrary to what the 19 Legislature's expecting out of us. 20 They already pushed y'all to increase our 21 costs on the license fees at a time when the state was 22 already getting about 15 times the cost of regulation 23 into its -- the state and local coffers, and to -- to 24 heat that up is just -- it's not fair to the people in 25 the community and the regulated community, frankly, just KENNEDY REPORTING SERVICE, INC. 512.474.2233 24 1 doesn't make sense. 2 So to talk specifically about the rule -- 3 so those -- one of the comments I just made are relative 4 to the subsection (f) in 402.211 as proposed. We oppose 5 the rule as proposed, but also (inaudible) a lot of work 6 done that I haven't been an immediate part of and 7 acknowledge and appreciate the staff's work on that 8 while this process is -- been going on. 9 So subsection (f) would contract 10 opportunities, as Mr. Fenoglio described, right now at a 11 time where we need to be expanding the opportunities for 12 charities to be successful. And I would -- I would 13 suggest that subject -- subsection (f) is not required 14 by statute. I'm sure it's -- it's not just there for no 15 reason. I'm sure there's administrative concerns that 16 are being expressed, but I really think you have to 17 weigh the pressure that the charities are under before 18 you go down that road. And the same with respect to the 19 log situation which Mr. Fenoglio spoke about, but it's 20 not part of the published rule. 21 The most significant thing to me in the 22 published rule is subsection (d). I would agree with 23 the prior speakers that that needs to be -- that a court 24 of competent jurisdiction needs to restate final results 25 regarding the particular equipment at issue. And I'm KENNEDY REPORTING SERVICE, INC. 512.474.2233 25 1 just sitting here thinking, the rule says may include a 2 charge against but such as an indictment or other 3 document filed with the court. 4 So there's no burden of proof on the -- or 5 at least not one that's been tested on the filing of an 6 indictment, (inaudible) they have probably cause, but 7 that's before the victim -- or even indictment, if you 8 will, or the respondent in the case of the indictment 9 has had any opportunity to test the evidence or really 10 do anything about that. 11 The "or other document filed with the 12 court," could be a petition filed in the course of a 13 civil forfeiture. In the case of the indictment, the 14 prosecutor is weighing whether they can prove beyond a 15 reasonable doubt that the equipment violated the 16 criminal laws. In the case of a civil forfeiture 17 they're trying to determine whether they can win that 18 case by preponderance of the evidence. 19 Neither one in neither circumstance has 20 the respondent had an opportunity to test the evidence 21 in any way. So if they file one of these documents and 22 they come down to y'all, then all you have to prove in 23 a -- in an administrative proceeding is by a 24 preponderance that a document was filed and somebody 25 said it was illegal. KENNEDY REPORTING SERVICE, INC. 512.474.2233 26 1 And it doesn't seem to me -- at least I 2 don't see any procedure -- can't imagine any procedure 3 the way the rule is that would allow the licensee to 4 contest that determination made by the local officials 5 in the administrative proceeding. And I got to believe 6 that there's some kind of due process problem with that 7 if you have no way to contest the basis for -- on which 8 something was filed in Dallas County and all you have to 9 do is prove that a document was filed. That just don't 10 seem right. That's administrative law, don't seem right 11 part of that. 12 Again I subscribe to the other comments 13 that were made. And again, I thank the staff for the 14 work that's gone into -- into this rule while the 15 comment period has been open. 16 To turn my attention to the 402.300, the 17 pull-tab rule, Bingo Interest Group is in support of the 18 pull-tab rule amendments. And with respect to the 19 card-minder amendments, we -- we support the rule, as 20 written, but I think for the record I should make a -- 21 just a couple of detailed comments, one of which is we 22 understand that under this rule, if there's money left 23 in a player account at the end of an occasion, the 24 player forfeits that money, it's incumbent upon the 25 enterprise to inform customers in a -- in an effective KENNEDY REPORTING SERVICE, INC. 512.474.2233 27 1 way that they should cash out before the occasion is 2 over. And it's clear that the -- that those forfeited 3 funds, to the extent they occur, will go into the bingo 4 account, but then must be used for charitable purposes. 5 I'm assuming that means that those funds need to be 6 moved out of the bingo account and over into the general 7 fund or the other nonbingo account funds of the agency 8 there somehow sequestered so you can keep track of that. 9 The concern that I have, the rule also 10 allows, though, where there are two occasions that are 11 occurring in proximity together in the same day, it 12 allows the balance on the player account to be -- that's 13 held over from the first occasion to be played in the 14 second occasion. So it -- I think you can establish 15 probably legislative intent in the final adoption of the 16 rule, but just to clarify that in that circumstance the 17 player doesn't forfeit their money if they don't get a 18 refund of the money before the end of the first session. 19 It's the end of the second session that they have to get 20 the refund from. As long as we can avoid that confusion 21 in the future, then I think we've gone a long way here. 22 I would like to say one final thing again 23 for the record. I think y'all have bent over backwards 24 to make sure that the essential character of bingo as 25 bingo is maintained by the card-minding rule proposals. KENNEDY REPORTING SERVICE, INC. 512.474.2233 28 1 The -- the not being able to deposit money into the 2 device, not crediting winnings, those kinds of things, I 3 think you're really bending over backwards -- probably 4 further than my spine would allow -- but I do -- I do 5 respect and understand what -- underlying the fact that 6 you're making it real clear about the limitations on 7 this equipment and I understand why you're doing that 8 and the nature of it. 9 I think the pull-tab rule goes in the 10 direction of expanding the opportunities for charities 11 to be successful. To the extent that it is an incentive 12 for more transactions to be moved into the card-minder 13 system, security is going to be improved, your 14 auditing -- your ability to audit is going to be 15 improved, the handling of cash should be diminished, 16 which means slippage should be diminished. So I think 17 there's every good reason to adopt the rule as proposed, 18 and I hope the Commission will see fit to do that. 19 That concludes my comments, and if you 20 have any questions, I'll be happy to clarify. 21 MR. PERSON: Thank you. 22 MR. BRESNEN: Thanks. 23 MR. PERSON: Though he doesn't withs to 24 testify, I have an affirmation form for Glenn Deshields 25 on behalf of Texas Charity Advocates. He would like to KENNEDY REPORTING SERVICE, INC. 512.474.2233 29 1 note his opposition to proposes new rule 402.211(f) and 2 his support for the amendments to 402.300, .321, .322, 3 .323, and .325. 4 That's all the witness affirmation forms I 5 have. Is there anyone else who wishes to speak? 6 (No response) 7 MR. PERSON: Okay. I'd like to thank 8 everybody for attending today's hearing and for offering 9 comments. The time is 10:44, and we stand adjourned. 10 (Proceedings concluded at 10:44 a.m.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 KENNEDY REPORTING SERVICE, INC. 512.474.2233 30 1 C E R T I F I C A T E 2 STATE OF TEXAS ) 3 COUNTY OF TRAVIS ) 4 I, Lou Ray, Certified Shorthand Reporter 5 in and for the State of Texas, do hereby certify 6 that the above-mentioned matter occurred as 7 hereinbefore set out. 8 I FURTHER CERTIFY THAT the proceedings of 9 such were reported by me or under my supervision, 10 later reduced to typewritten form under my 11 supervision and control and that the foregoing pages 12 are a full, true, and correct transcription of the 13 original notes. 14 IN WITNESS WHEREOF, I have hereunto set my 15 hand and seal this 25th day of March, 2014. 16 17 _______________________________ 18 LOU RAY Certified Shorthand Reporter 19 CSR No. 1791 - Expires 12/31/15 20 Firm Registration No. 276 Kennedy Reporting Service, Inc. 21 1016 La Posada Drive, Suite 294 Austin, Texas 78752 22 512.474.2233 23 24 Job No. 115446 25 KENNEDY REPORTING SERVICE, INC. 512.474.2233