1 1 TRANSCRIPT OF PROCEEDINGS 2 BEFORE THE 3 TEXAS LOTTERY COMMISSION 4 AUSTIN, TEXAS 5 6 REGULAR MEETING OF THE § TEXAS LOTTERY COMMISSION § 7 8 9 10 11 COMMISSION MEETING 12 THURSDAY, OCTOBER 16, 2014 13 14 15 16 BE IT REMEMBERED THAT on Thursday, the 16th 17 day of October, 2014, the Texas Lottery Commission 18 meeting was held from 9:00 a.m. until 10:49 a.m., at the 19 Offices of the Texas Lottery Commission, 611 East 20 Sixth Street, Austin, Texas 78701, before CHAIRMAN 21 J. WINSTON KRAUSE, and COMMISSIONERS JODIE G. BAGGETT 22 and MARY ANN WILLIAMSON; that the following proceedings 23 were reported via machine shorthand by Lou Ray, a 24 Certified Shorthand Reporter. 25 2 1 APPEARANCES 2 CHAIRMAN: Mr. J. Winston Krause 3 COMMISSIONERS: 4 Ms. Jodie G. Baggett 5 Ms. Mary Ann Williamson 6 GENERAL COUNSEL: Mr. Robert F. Biard 7 EXECUTIVE DIRECTOR: 8 Mr. Gary N. Grief 9 CHARITABLE BINGO OPERATIONS DIRECTOR Mr. Alfonso Royal 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, THURSDAY, OCTOBER 16, 2014 ............ 7 4 I. The Texas Lottery Commission will call the meeting to order .............................. 7 5 II. Report, possible discussion and/or action on 6 lottery sales and revenue, game performance, new game opportunities, advertising, market 7 research, trends, and game contracts, agreements, and procedures ................... 9/40 8 III. Report, possible discussion and/or action on 9 transfers to the State and the agency’s budget status ....................................... 9/40 10 IV. Report, possible discussion and/or action on 11 the 83rd and/or 84th Legislature .............. 20 12 V. Report, possible discussion and/or action on agency major contracts, including amendments 13 on the contracts for instant ticket manufacturing and services .................... 22 14 VI. Report, possible discussion and/or action on 15 amendments to the 2010 lottery operations and services contract, including whether 16 the negotiation of the lottery operator's contract in an open meeting would have 17 a detrimental effect on the Commission's position in negotiations of the lottery 18 operator contract ............................. 22 19 VII. Report, possible discussion and/or action on agency contracts, including status of major, 20 prime and operational contracts ............... 22 21 22 23 24 25 4 1 TABLE OF CONTENTS 2 PAGE 3 VIII.Consideration of and possible discussion and/or action on external and internal 4 audits and/or reviews relating to the Texas Lottery Commission, and/or on Internal Audit 5 activities, including approval of Annual Internal Audit Report, Charitable Bingo 6 Operations Division Prize Fee Allocation Audit Report, and Texas Lottery Commission 7 Information Resources Active Directory Audit Report ...................................... 25/40 8 IX. Report by the Charitable Bingo Operations 9 Director and possible discussion and/or action on the Charitable Bingo Operations Division’s 10 activities, including updates on the Business Process Restructuring Project, 11 licensing, accounting and audit activities, pull-tab review, and special projects ......... 29 12 X. Report, possible discussion and/or action on 13 GTECH Corporation ............................. 14 XI. Report by the Executive Director and/or possible discussion and/or action on the 15 agency’s operational status, agency procedures, awards, and FTE status ............ 33 16 XII. Consideration of the status and possible entry 17 of orders in: ................................. 41 18 Lottery NSF License Revocation Cases (Default Unless Otherwise Noted) 19 A. Docket No. 362-14-3933 – Wilson Food Mart B. Docket No. 362-14-3934 – Brayden Market 20 C. Docket No. 362-14-3935 – Forest Food Store D. Docket No. 362-14-3936 – Quick Break 21 E. Docket No. 362-14-4114 – Moe’s Mini Mart 22 Other Lottery Revocation Cases F. Docket No. 362-14-1856 – Hamshire Quick Mart 23 24 25 5 1 TABLE OF CONTENTS 2 PAGE 3 Lottery Agreed Orders 4 G. Case No. 2014-511 – Graves Truck Stop H. Case No. 2014-731 – John Handi Plus #300 5 I. Case No. 2014-732 – Snappy Foods #16 J. Docket No. 362-14-1618 – Canton Twin Stop 6 Bingo Agreed Orders re: Larry Whittington and 7 Related Bingo Accounting Units K. Case No. 2013-278 – Arapaho Bingo 8 Accounting Unit L. Case No. 2013-354 – Larry Whittington 9 M. Case No. 2013-365 – Jupiter Bingo Accounting Unit 10 N. Case No. 2013-416 – North Buckner Bingo Accounting Unit 11 O. Case No. 2013-419 – I-30 Bingo Unit (Accounting Unit) 12 Other Bingo Agreed Orders 13 P. Case No. 2014-388 – Robert Tiffany Q. Case No. 2014-389 – Southside Youth 14 Football League, Inc. R. Case No. 2014-808 – Gold Crown Bingo, 15 Inc. 16 XIII.Public comment ................................ 46 17 XIV. Commission may meet in Executive Session: ..... 47 18 A. To deliberate personnel matters, including the appointment, employment, evaluation 19 reassignment, duties, discipline, or dismissal of the Executive Director and/or the Charitable 20 Bingo Operations Director pursuant to Section 551.074 of the Texas Government Code 21 B. To deliberate the duties of the General 22 Counsel and/or the Human Resources Director pursuant to Section 551.074 of the Texas 23 Government Code 24 25 6 1 TABLE OF CONTENTS 2 PAGE 3 C. To receive legal advice regarding pending or contemplated litigation or 4 settlement offers pursuant to Sections 551.071(1)(A) and (B), and/or legal 5 advice pursuant to Section 551.071(2), of the Texas Government Code, including 6 but not limited to legal advice regarding the following items: 7 Department of Texas, Veterans of Foreign Wars et al. v. Texas Lottery Commission 8 et al. State of Texas v. Equal Employment 9 Opportunity Commission et al. American Legion Department of Texas, 10 Temple Post 133 et al. v. Texas Racing Commission (including 11 intervention request). Fun 5’s Instant Game #1592. 12 Legal advice regarding the State Lottery Act, Texas Government Code Chapter 467, 13 the Bingo Enabling Act, the Open Meetings Act, the Administrative Procedure Act, 14 employment law, personnel law, procurement and contract law, evidentiary and 15 procedural law, and general government law. 16 Legal advice regarding any item on this open meeting agenda. 17 XV. Return to open session for further 18 deliberation and possible action on any matter posted for discussion in Executive Session. 19 Any matter posted for Executive Session also may be the subject of discussion and/or 20 action in open session prior to Executive Session ....................................... 48 21 XVI. Adjournment ................................... 48 22 REPORTER'S CERTIFICATE ............................. 49 23 24 25 7 1 P R O C E E D I N G S 2 THURSDAY, OCTOBER 16, 2014 3 (9:00 a.m.) 4 AGENDA ITEM NO. I 5 CHAIRMAN KRAUSE: Good morning. I'm 6 calling this meeting to order of the Texas Lottery 7 Commission. It is October the 16th. The time is 9:00 8 a.m. Commissioners Baggett and Williamson are present 9 along with me, and so we have a quorum. We are going to 10 set a land speed record today and go through our agenda 11 as fast as possible because there is a House Licensing 12 Committee hearing which begins at 10 a.m. And so we're 13 going to make every effort to talk fast, skip over the 14 things that are not important and that kind of thing, so 15 that we can get finished as quickly as possible. 16 Before we get started, though, I've got a 17 public announcement. We are always -- we are always 18 proud of our Executive Director, but he always gives us 19 even more reason to be proud yet again. And so it is my 20 pleasure to tell you that this past month the Public 21 Gaming Research Institute has inducted our -- not 22 someone else's -- our Executive Director Gary Grief into 23 its Lottery Industry Hall of Fame. 24 Now, Jerry Jones is still waiting to be 25 inducted into a hall of fame, but we've got Gary Grief 8 1 already inducted into a hall of fame. 2 As you know, Gary's experience, knowledge, 3 leadership and uncanny political ability are key 4 elements to our continued success here at the Texas 5 Lottery. His election to this position was made 6 possible by the current members of that organization -- 7 well, actually, it's even a more select group than 8 that -- the current members of that organization's hall 9 of fame. So they saw in him something that told them he 10 needed to join their ranks. 11 We are proud to recognize Gary's 12 contribution to their organization and to ours. And not 13 just that, but to the entire lottery industry as a 14 whole. 15 So, Gary, we are proud of you my friend. 16 (Applause) 17 MR. GRIEF: Like I've said to other 18 people, it just proves that if you get old enough, you 19 know, certain things seem to happen. But I do want to 20 say the same thing that I said at my induction ceremony. 21 I want to recognize the team that we've got here at the 22 Texas Lottery: My management team, all the staff, as 23 well as our valuable partners at GTECH, at LatinWorks, 24 at our three instant ticket printers, SciGames, GTECH 25 printing, Pollard, and all the other many vendors and 9 1 support people that we have. Because I haven't been 2 here since day one at the Lottery, I can promise you -- 3 I know this beyond a shadow of a doubt -- the Executive 4 Director is only as good as the team that supports him. 5 So I consider this a great honor for our team, and I 6 consider that the Texas Lottery team, and I'm very 7 delighted that it occurred. 8 So thank you for that recognition, 9 Mr. Chairman. I appreciate it. 10 CHAIRMAN KRAUSE: Well said, Mr. Grief. 11 AGENDA ITEMS II AND III 12 CHAIRMAN KRAUSE: Kathy Pyka, you've got 13 two things. You are welcome to segue straight one into 14 the other. 15 MS. PYKA: Yes, sir. Good morning, 16 Commissioners. My name is Kathy Pyka. I'm the 17 controller for the Commission. And with me to my right 18 is Robert Tirloni, our products and drawings manager. 19 Commissioners, this morning we'll be 20 presenting to you the final data for fiscal year 2014. 21 Our first chart that we have for you this morning 22 reflects sales through the fiscal year ending 23 August 31st to the previous fiscal year. We ended the 24 fiscal year with $3.28 billon in instant ticket sales as 25 noted on the second orange column. This is a new sales 10 1 record, Commissioners, making the best year of instant 2 ticket sales since we began selling tickets. This 3 reflects a sales increase of more than $57 million over 4 fiscal year 2013, which is when we set the previous 5 sales record. 6 Draw sales concluded the year with 7 $1,100,000,000 in sales as noted on the second blue bar. 8 This was a $49.3 million decline from last fiscal year. 9 However, I think it's important to note that this is our 10 third highest level of draw sales since fiscal year 11 2004. So, Commissioners, both the products combined had 12 total sales of $4,385,000,000 which is an increase of 13 $8.3 million compared to last fiscal year, which is a 14 new, all-time sales record for the Commission. 15 Our next slide provides an overview of the 16 22-year history of instant and draw sales for the 17 Commission. Instant ticket sales are noted with the 18 orange bar beginning with the $591,000 in sales sold in 19 the first year of operations, growing all the way to the 20 $3.28 billion in sales for fiscal year 2014. Our draw 21 sales are noted with the blue bar, noting that -- the 22 increase to 1.1 billion for fiscal year 2014. 23 Our next slide includes a comparison of 24 games, comparing year-end sales by product from fiscal 25 year 2014 to 2013. We'll begin with our jackpot games, 11 1 which are highlighted in the white font. Those include 2 Lotto Texas, Mega Millions, Powerball, and Texas 3 Two-step, which reflect a total sales of 657.9 million 4 which was a $22.3 million decline from last fiscal year. 5 As we look at the details, Lotto Texas concluded the 6 year with a $1.2 million increase and adding Lotto Texas 7 with Lotto Extra. Mega Millions and Megaplier returned 8 a combined increase of $86.7 million over fiscal year 9 2013 with the jackpots what we had reaching 636 million 10 and $400 million last fiscal year. 11 And we saw a decline in Powerball sales of 12 107.9 million as we did not have the jackpot growth in 13 the ranges experienced in 2013. And Texas Two-step 14 wrapped up the year with a decline of $2.4 million. 15 Moving on to the daily games which include 16 Pick 3, Daily 4, Cash 5 and All or Nothing, we had total 17 2014 sales of $446.6 million, which is a $26.9 million 18 decline from last fiscal year. Commissioners, this is 19 our second highest daily game sales amount since 1997. 20 I would like to note the record year that we had for 21 Daily 4, wrapping up with $83.3 million. 22 Commissioners, wrapping up this sales 23 slide, we had instant ticket sales, as we noted before, 24 of $3.28 billion, which was a $57.6 million increase 25 over the previous fiscal year. 12 1 So Robert is now going to provide 2 additional details on sales. 3 MR. TIRLONI: Good morning, Commissioners. 4 For the record, my name is Robert Tirloni, products and 5 drawings manager. 6 This next slide represents the almost $4.4 7 billion in total sales. The pie chart is showing the 8 split between the instant product category and the draw 9 game product category. It's a 75/25 split in favor of 10 instant, and is not abnormal for us in Texas. This is 11 about the split that we've been seeing for quite some 12 time now. 13 Moving into our draw games, this pie chart 14 recommends 1.1 billion in draw game sales. This is the 15 total for the fiscal year. We talked a lot about 16 Powerball and the Mega Millions and the jackpots that 17 those games can create, but Pick 3 was our best selling 18 draw game in fiscal '14, coming in at just under $260 19 million. 20 Mega Millions was the second best game at 21 224, but you'll see that Mega Millions and Powerball are 22 indeed very close in their sales for this fiscal year. 23 So Mega Millions did have a $600 million-plus jackpot, 24 but even without a large jackpot Powerball was very 25 close to it in total sales for the fiscal year. I think 13 1 that speaks to the strength of the Powerball brand. 2 Lotto Texas, our very first draw game ever, introduced 3 in 1992, still generating over $154 million in sales. 4 Same pie chart except now for our instant 5 games, so this represents almost 3.3 billion in instant 6 game sales broken down by price point. Our $5 game 7 continues to be our best selling price point, followed 8 by the 10, the 20 and then the 3. We've had great 9 growth and great success at our 10 and $20 price points, 10 and you'll see that here in a couple more slides. 11 This is our top 15 best selling instant 12 ticket games for the fiscal year. Just some quick 13 things to note. The best selling game was a $20 game. 14 It was a hundred times the cash. This was part of the 15 multiplier suite of games that we put out last January. 16 This is also one of those multiplier suite games. 17 500 million Extreme Cash Blast is one of our $20 18 spotlight games. 10X Megamoney is one of our $10 19 spotlight games. 20 I think the big takeaway when you look at 21 this slide is that if you look at the top 15, almost 22 every price point is represented except the $1 price 23 point. So I think it shows that we do have interesting 24 and good products across the whole product category at 25 all different price points for people to play. 14 1 This is just a year-over-year comparison 2 by price point. So the orange is 2013; the blue is '14. 3 So you'll see we had growth at the 5, the 10 and the 20. 4 The 50 is about even. The 7 is a non-existent price 5 point. We did away with that price point. So this time 6 next year that won't even be represented on this slide. 7 There was declines at the 1, the 2 and the 8 3. Those are introductory price points, and we continue 9 to struggle at those lower-end price points. 10 Kathy is going to give you some stats on 11 our sales and revenue highlights, and then I'm just 12 going to close with highlights of this current fiscal 13 year and what we have planned. 14 MS. PYKA: Commissioners, we completed the 15 fiscal year with total transfers to the state of 16 $1,220,000,000. This is the highest revenue transfer in 17 Texas Lottery history, breaking the previous record set 18 in 2013. And this is our 11th consecutive year that 19 we've transferred over $1 billion to the state of Texas. 20 This represents an almost 20 percent growth in total 21 transfers to the state since fiscal year 2011. 22 Commissioners, of that overall record 23 transfer amount, just over $1.2 billion -- and we'll go 24 to the next slide on that Robert -- just over $1.2 25 billion went to the Foundation School Fund. This was a 15 1 $55 million increase in revenue transfers to the 2 Foundation School Fund, or 4.8 percent in Lottery 3 contributions to public education in Texas. This was 4 again our largest annual transfer to the Foundation 5 School Fund in the history of the Commission. 6 Additionally, we wanted to note that the 7 total transfer of approximately $11.5 million went 8 directly to the Texas Veterans Commission from the sale 9 of our scratch-off game dedicated to the Fund for 10 Veterans Assistance. This is the largest annual 11 transfer also to the fund for veterans assistance since 12 these dedicated games began several years ago. 13 So Robert will now cover some new 14 initiatives. 15 MR. TIRLONI: Since we're wrapping up and 16 reporting on fiscal year '14, we wanted to quickly show 17 you what some of our big product initiatives are for 18 this current fiscal year. So we're only six weeks into 19 '15, but our whole fiscal year product plan has been in 20 place for quite some time now. We plan way, way out in 21 advance. 22 I think this gives us a lot of flexibility 23 to be able to adjust to things that we're seeing in the 24 market. We can delay games. We can move games up 25 sooner. And I think that really gives us a great deal 16 1 of -- like I said of flexibility as we move through the 2 year. 3 So I wanted to just hit some high points 4 for you. On our scratch-off side I've given you a 5 sample of our brand new holiday game book. This is our 6 new $20 holiday ticket. It's the first time we've ever 7 introduced a game book in Texas. It's six games 8 included in this book for $20, and this will be the 9 focal point of our ad campaign that LatinWorks is 10 working on for us right now. 11 In addition to this, there's a full suite 12 of other holiday games. You also have samples of those. 13 And I wanted to show you something that we're really 14 proud of, and the GTECH sales team has done a phenomenal 15 job of executing this in the field. We are going to 16 have over 4,000 supplemental instant ticket dispensers 17 placed at retail to support our entire holiday suite of 18 games. And of those 4100, approximately 2600 are going 19 to be placed at retail locations that have the 20 in-counter dispensers. 21 So this is really going to get us 22 excellent product visibility and product positioning at 23 the point of purchase at retail locations. So we're 24 really, really excited about this initiative. And our 25 holiday game book is going to be merchandised on the 17 1 side of the dispenser. So players can actually touch 2 and feel the product and see what it's about since it is 3 brand new. 4 Continuing on the scratch-off side, I told 5 you we had great success with our multiplier suite. 6 We're going to have another multiplier suite that will 7 start in January, a $20 spotlight game. We need another 8 one of those. That will come out in the spring. And we 9 also have a new annuity suite that will be launching 10 this fiscal year. 11 On the draw game side, we've been 12 aggressively working to meet the sales start date for 13 the Monopoly Millionaire's Club. Sales start this 14 Sunday the 19th. GTECH has helped us get some very good 15 placement for retail signage to support that Monopoly 16 game. These are the Carmanah signs that will hang from 17 our existing jackpot signs that are already placed at 18 retail. So that should help support the introduction 19 and launch of that monopoly game. 20 Powerball, there is a game refresh that is 21 tentatively planned for the spring. Of course that's 22 pending your approval, and we'll most likely be coming 23 forward the next meeting in December to talk to you-all 24 about that. And then as a result of a positive Attorney 25 General opinion, we will be looking to roll out the 18 1 Texas Triple Chance Game in August. 2 So that's the highlights of the major 3 product initiatives for the remainder of this year, and 4 that concludes our report. 5 CHAIRMAN KRAUSE: Questions? 6 Is that both items? 7 MS. PYKA: No, that's just the first item. 8 I'll run through the second item quite quickly. 9 CHAIRMAN KRAUSE: Excellent. 10 MS. PYKA: Commissioners, as we've already 11 covered revenue under this item, the other item under 12 Agenda Item 3 is the fiscal year 2014 operating budget 13 and the final results of that. We wrapped up the fiscal 14 year with expenditures of 94.9 percent of our total $214 15 million lottery dedicated budget. And in the bingo 16 budget, which is $17 million, we expended 97.4 percent 17 of that total budget. I would be happy to answer any 18 questions. 19 CHAIRMAN KRAUSE: How are we publicizing 20 this incredible achievement and breaking all records as 21 far as our transfers to the state? 22 MR. GRIEF: I can speak to that in 23 general, Mr. Chairman. As we do every year, we put out 24 a press release, not just to all the typical media, 25 newspapers, TV, radio, et cetera, but also to all the 19 1 industry publications as well. We send it to all the 2 political publications here in Austin that come out like 3 Strategic Insider, those types of publications. And 4 anyone we can think of, we make sure we put that press 5 release in their hands. 6 In addition it's also on our website as 7 well. 8 CHAIRMAN KRAUSE: All right. That sounds 9 pretty passive for such a wonderful achievement. What 10 can we do? 11 MR. GRIEF: I've thought about going to 12 the top of the mountaintop and singing it, but I -- 13 (Laughter) 14 MR. GRIEF: -- I'm not sure how effective 15 that would be. 16 CHAIRMAN KRAUSE: I want that on video. 17 MR. GRIEF: We are open to any suggestions 18 the Commission might have. 19 (Laughter) 20 CHAIRMAN KRAUSE: All right. 21 Commissioners? 22 COMM. WILLIAMSON: Congratulations. Like 23 I said, it's a team effort. And as Gary said before, 24 this is a great team. 25 COMM. BAGGETT: Yes. 20 1 MS. PYKA: Thank you, Commissioners. 2 AGENDA ITEM IV 3 CHAIRMAN KRAUSE: Ms. Trevino? Big week 4 for our week. 5 MS. TREVINO: It has been a big week and 6 the prior week. 7 Good morning, Mr. Chairman and 8 Commissioners. For the record I'm Nelda Trevino, 9 director of governmental affairs. As you are aware, the 10 10-member legislative review committee established as a 11 result of the agency's sunset legislation met last week 12 on October the 8th to consider the committee's charges. 13 I've provided you today with a copy of the hearing 14 agenda, which notes all the individuals that were 15 invited to testify. 16 In addition to these individuals, other 17 members of the public also testified at the hearing. We 18 are following up and providing the committee with 19 information in response to several questions and 20 requests that were made by members of the committee. 21 The committee's report on its findings and 22 recommendations to the Legislature is due on December 23 the 1st. And as the committee continues its work, the 24 agency remains available to serve as a resource. 25 We will continue to advise you on any 21 1 developments related to the review of the committee's 2 work. 3 As Chairman Krause noted earlier, the 4 House Licensing and Administrative Procedures Committee 5 is meeting today to consider its interim charges. And 6 I've also provided you today with a copy of the 7 committee's hearing notice and the agenda. Under Item 8 5, Gary and Alfonso will be addressing the Committee to 9 provide a status report on the implementation of the 10 agency's sunset legislation, along with a few other 11 updates related to the lottery and charitable bingo. 12 Lastly, the 84th Legislature will convene 13 its regular session on January the 13th, 2015, and 14 prefiling of legislation for the next legislative 15 session begins on Monday, November the 10th. 16 This concludes my report, and I'll be glad 17 to answer any questions. 18 CHAIRMAN KRAUSE: Ladies? 19 COMM. BAGGETT: No questions. 20 COMM. WILLIAMSON: No. 21 COMM. KRAUSE: So we did well? 22 MS. TREVINO: I believe so. 23 CHAIRMAN KRAUSE: Good. All right. 24 Anything else for us? 25 MS. TREVINO: No, sir. 22 1 AGENDA ITEMS V, VI and VII 2 CHAIRMAN KRAUSE: Mr. Fernandez? 3 MR. FERNANDEZ: Good morning, 4 Mr. Chairman, Commissioners. For the record my name is 5 Mike Fernandez. I'm the Director of Administration. I 6 have three items, Mr. Chairman, if you'd like me just to 7 go through all three of them? 8 CHAIRMAN KRAUSE: We will hold our 9 questions until the end. 10 MR. FERNANDEZ: Very good. Item No. 5 in 11 your notebook is an action item for Board approval. 12 Staff is seeking Commission approval to amend our 13 instant ticket printing contracts to provide for revised 14 pricing. This would affect six ticket sizes and 15 approximately 40 different print quantities, and that 16 requires a board approval. 17 The second item, Item No. 6, is also an 18 action item. Staff is seeking Commission approval to 19 execute an amendment to the Lottery Operator Contract, 20 which would result in the removal of requirements that 21 are no longer needed or applicable and add additional 22 services of like value. 23 It's also -- the amendment would also add 24 clarification -- clarifying language regarding system 25 fail-over requirements. 23 1 And then lastly, Commissioner, Item No. 7 2 is a briefing item. We have included in your notebooks 3 a listing of all agency contracts for your information 4 and as a part of response to sunset recommendations. 5 And that's all I have. 6 MR. BIARD: Mr. Fernandez, excuse me. For 7 the record, I'm Bob Biard, general counsel. 8 On the lottery operator contact matter, I 9 just wanted to make sure the Commissioners were aware 10 that you have the ability to meet in executive session 11 if you want to discuss that, and I was going to ask 12 Mr. Fernandez if he thought that the Commission needed 13 to go into executive session. 14 MR. FERNANDEZ: That would not be required 15 on our part, Mr. Chairman. That's all I have. 16 CHAIRMAN KRAUSE: All three items? 17 MR. FERNANDEZ: Yes, sir; 5 and 6 require 18 approval. 19 CHAIRMAN KRAUSE: Right. And I'm looking 20 for a motion on Item No. 5. 21 COMM. BAGGETT: And I would like to make a 22 motion to approve the director's recommendation on all 23 the items needed. 24 CHAIRMAN KRAUSE: Second? 25 COMM. WILLIAMSON: Second. 24 1 CHAIRMAN KRAUSE: All in favor say "aye." 2 (All those voting in favor so responded) 3 CHAIRMAN KRAUSE: Passes by acclamation. 4 Item No. 6? 5 MR. BIARD: Actually, I think we're onto 8 6 now. I think that covered all three of your items. Is 7 that right? 8 CHAIRMAN KRAUSE: Well, I think we have 9 No. 5 is an action item. 10 MR. BIARD: Okay. 11 CHAIRMAN KRAUSE: And we did that. We're 12 going to take an action item on No. 6 -- 13 MR. BIARD: Okay. And then we've already 14 heard on No. 7. So after we pass this motion we're 15 going on to 8. 16 COMM. BAGGETT: Okay. I make a motion 17 that we approve the director's recommendation for No. 6. 18 COMM. WILLIAMSON: Second. 19 CHAIRMAN KRAUSE: Call for a vote. All in 20 favor say "aye." 21 (All those voting in favor so responded) 22 CHAIRMAN KRAUSE: Any opposed? 23 (No response) 24 CHAIRMAN KRAUSE: No opposition; pass by 25 acclamation. 25 1 MR. FERNANDEZ: Thank you. 2 CHAIRMAN KRAUSE: Thank you very much. 3 AGENDA ITEM VIII 4 CHAIRMAN KRAUSE: Darlene? 5 MS. BROWN: Good morning, Commissioners. 6 I'm Darlene Brown, the internal audit with McConnell & 7 Jones. I have three items to discuss today. Two of 8 those require action. 9 The first is the status report of our 10 activity since last period. This does not require 11 action. We completed our 2014 audit plan as approved 12 with three audits. The first was the price fee 13 allocation audit, and we will be issuing that draft 14 report within the next couple of weeks for your review. 15 We are in progress of the instant tech 16 sales -- instant ticket sales audit, and that's 17 scheduled to be finalized by the end of November. And 18 then we also completed the information technology audit, 19 and that is up for your approval today. 20 In addition to completing the audits, we 21 continue to work with the bingo division on the 22 restructuring project, and I'm happy to report that 23 overall the project is 47 percent complete. So we are 24 on target according to the approved schedule. And we've 25 also re-looked at 57 percent of the business processes. 26 1 And that again is on target with our plan. 2 The one thing that continues to hamper us 3 in the restructuring project and in the BOSS 4 implementation is the data integrity issue that we 5 brought up last time. But we have worked together as a 6 team and we've come up with a plan to address that to 7 make sure that all data that does get imported into the 8 BOSS system is clean and accurate. Any information that 9 we can't validate will not be imported into the system. 10 So our action plan on that, we have two 11 goals, No. 1 is to make sure the data is clean; No. 2 12 make sure that the organizations are -- become aware of 13 what their true balances are on their accounts and they 14 will be provided an explanation of any adjustments that 15 might be made. 16 So -- and then the next item is, like I 17 said, we completed our full audit plan for 2014 and I'm 18 happy to report that although we completed it, we 19 actually completed it using only 53 percent of the 20 budget that was allocated to us. So we were able to 21 gain some efficiencies by working with your staff on a 22 daily basis. 23 The next item requires your approval, and 24 it is the report for the information technology audit 25 that we did where we looked at the active directory 27 1 system for the agency. We're more than happy to report 2 to you that there were no observations made and, in 3 fact, the agency has some best practices in place in -- 4 along with being in compliant with the DIR requirements. 5 So that's a very good report, very good outcome. 6 CHAIRMAN KRAUSE: Wow. 7 MS. BROWN: The third item that also 8 requires your approval is the 2014 internal audit report 9 that's required to go to the regulatory bodies. And 10 this report requires all -- it contains all the 11 information that's required of the State Auditors Office 12 and the Internal Auditing Act. So I'm asking today for 13 your approval of the Information Technology Audit Report 14 and also the approval on the 2014 Internal Audit Annual 15 Report. 16 CHAIRMAN KRAUSE: Questions first? 17 COMM. WILLIAMSON: I just want to commend 18 you, the Charitable Bingo Division, and all those that 19 have helped them with the BOSS program and how far that 20 you've gotten. And I'm very much aware of all of the 21 road blocks that have been -- that have been in place in 22 trying to get this implemented, so I complement all of 23 you for working that hard to get it this far along. I'm 24 very impressed with that. Thank you. 25 MS. BROWN: Thank you. 28 1 CHAIRMAN KRAUSE: Go ahead. So your 2 report actually says we are employing best practices. 3 MR. BROWN: Correct. Correct. 4 CHAIRMAN KRAUSE: How do we let people 5 know about that, Legislative Budget Committee, you know 6 our state reps, our senators, Comptroller's Office. 7 MR. BROWN: This report actually goes -- a 8 copy of this report actually goes to all of those 9 agencies, plus gets posted on your website. That's as 10 far as the internal audit takes it. Your leadership 11 team could actually advertise that fact. 12 CHAIRMAN KRAUSE: Well, we have a lot of 13 things to let people know about this Commission. 14 COMM. WILLIAMSON: We do. 15 CHAIRMAN KRAUSE: So anyway -- motion? 16 COMM. WILLIAMSON: I make the motion to, 17 one, approve the Annual Internal Audit Report, and the 18 Information Resources Active Directory Audit Report. 19 COMM. BAGGETT: I second that. 20 CHAIRMAN KRAUSE: Move for a vote, all in 21 favor say "aye." 22 (All those voting in favor so responded) 23 CHAIRMAN KRAUSE: It's on both items. 24 They pass by unanimous vote. 25 MR. BIARD: Thank you. I have a signature 29 1 page for the Chairman on the Annual Internal Audit 2 Report. 3 AGENDA ITEM IX 4 CHAIRMAN KRAUSE: Mr. Royal? 5 MR. ROYAL: Good morning, Commissioners. 6 Alfonso Royal, Director of Charitable Bingo. 7 In addition to the bingo output metrics 8 that are in your briefing booklets, I'd like to 9 highlight the Annual Audit Plan and Risk Assessments 10 which have been prepared in consideration of House Bill 11 2197 the Agency's sunset legislation. Our goal is to 12 audit the highest risk licensees within a four-year time 13 frame and conduct game inspections every three years. 14 The risk factors we used were gross receipts, net 15 proceeds, charitable distribution and expenses, all as a 16 percentage of gross receipts. Gross receipts reported 17 for playing locations, time since last game inspection 18 and at location and compliance history. 19 The results of the risk assessment and 20 resource allocation revealed a projection of 57 audits 21 and 193 game inspections, which translate into 11 22 percent of all active licensees, 24 percent of all 23 active licensees audit coverage over the last four 24 years, 40 percent audit coverage of the highest risk 25 organizations, and 50 percent coverage of all game 30 1 locations. This is the plan as of October 1st, and we 2 will be revisiting it within about six months. 3 Also related to audit, I have completed my 4 management team with the addition of Marshall McDade as 5 audit manager. Marshall is no stranger to bingo, and 6 he's been with us -- with the division for over 11 7 years. I'm pleased to have him in this role. 8 I've recently reorganized the division, 9 creating a separate compliance and education sections. 10 Those two sections are responsible for testing and 11 approving bingo products as well as providing 12 information to the licensees and the public. Education 13 and training will be the vehicles to enhance our 14 relationships with our licensees while, at the same 15 time, quipping them with ongoing regular knowledge to 16 conduct bingo. 17 In an effort to reconnect with our 18 licensees and improve customer service, direct 19 communication in the form of a director's message was 20 mailed, emailed and posted to our website. This is the 21 first mass correspondence to all licensees since 22 December 2011. 23 Transitioning to my continued assessment 24 of the division, I reported in August that there have 25 been some areas and processes that needed further review 31 1 I have completed that assessment and want to share with 2 you the following: We have some problems. We have some 3 backlogs. There's pending backlog of license issuance. 4 As of October there's some 739 pending applications, 5 including 412 renewals, of which approximately 181 are 6 over a hundred days old. 7 Our turnaround time frame is 40 days on 8 renewals and 60 days on original applications. There 9 are some 153 audit-related activities, including audits 10 from fiscal year 2012 that have yet to be finalized. 11 There's a pending backlog of 239 12 compliance activity monitoring process cases, some as 13 old as May 2012 that are still open. 14 Pull-tab testing, which is somewhat 15 manageable, but there is a 60 -- backlog of 68 pending 16 items to date. 17 The bingo account ledger issue that 18 Darlene mentioned earlier from prior conversions was 19 discussed with the internal auditor in August and again 20 today. The team is formulating that process that they 21 will use to review those ledgers. 22 Staff, including myself, are actively 23 working to address the backlog with a renewed focus. 24 And some have been redeployed on a temporary basis to 25 ensure the backlog is revolved. I will continue to 32 1 report on our progress. 2 Finally, an update on Bingo Operating 3 System, we're still on track, as Darlene mentioned, and 4 all of our key deliverables are on schedule. The 5 accounting module will be available for testing this 6 month. Special projects is targeted for January, and 7 our online module system reporting requirements document 8 and prototype will be completed by November. Our 9 stakeholder rulemaking work group will be convening soon 10 to sort through various rules and drafts. 11 That concludes my report, and I'm happy to 12 answer any questions. 13 CHAIRMAN KRAUSE: Questions? 14 COMM. WILLIAMSON: Well, as we can see, 15 this problem has been around for a long time. Certainly 16 prior to Alfonso coming on board. I appreciate the fact 17 that, you know, charitable bingo has some incredible 18 employees, and I think now that there's a good focus and 19 direction and organization to get where you guys need to 20 be. And I know Alfonso has been very complimentary of 21 the staff and how -- how hard they've been working. And 22 so thank you for that. 23 I know we have a lot of things to deal 24 with, and I think we're finally headed in the right 25 direction. 33 1 MR. ROYAL: Thank you. I'm confident we 2 can resolve it and will. 3 CHAIRMAN KRAUSE: Thank you, Alfonso. 4 AGENDA ITEMS X and XI 5 CHAIRMAN KRAUSE: Now we're going to hear 6 from our hall of famer. 7 MR. GRIEF: Thank you for that 8 introduction, Mr. Chairman. If it pleases you, I'll 9 take Items 10 and -- or I'll take my two items, 10 and 10 11. 11 Under Item 10, the item for GTECH, other 12 than what's in your notebook, I have nothing further to 13 report. We do have some members of the senior 14 management team from GTECH present with us today. I 15 think they had a chance to say hello to all the 16 Commissioners this morning. Michael Prescott, General 17 Counsel is here, as well as Jay Gendron -- senior vice 18 president, Jay? Is that correct -- senior VP and 19 obviously in charge of the Texas account. So we're glad 20 to have them here. They're an important part of the 21 Texas Lottery team. 22 Mr. Chairman and Commissioners, in 23 addition to what's in your notebook under Item XI, I do 24 have several items to report to you on this morning. 25 First I'd like to ask Ed Rogers and Mario Valdez to 34 1 stand. I want to tell you about some recent 2 organizational changes. 3 As you know, Ed, to your right, has been 4 doing yeoman's work assisting Alfonso in the Charitable 5 Bingo Division for a number of months now. And I know 6 Alfonso has been very pleased with Ed's help, and Ed 7 will continue to help in that capacity. 8 Ed's real job of Enforcement Director has 9 been manned very capably in the interim, while Ed has 10 been in bingo, by Mario Valdez. And we've had a recent 11 retirement in the Lottery Operations Division. Pam 12 Williams, who has been with the agency for several 13 years, retired, and that left open the position of 14 Retailer Services Manager, which is the position that Ed 15 actually held for many years prior to taking the 16 position in Enforcement. 17 I think I've told you-all about Ed. Ed 18 served as division director at this agency in four or 19 five different divisions over the years. He's forgotten 20 more lottery information that most of us know, and he's 21 just an invaluable resource here. So Ed has decided -- 22 and I support him and Michael Anger supports him as 23 well -- he is going to go back to his position as 24 Retailer Services Manager. I can tell you why. It's 25 because that's where all the action is in the agency, 35 1 and Ed likes to have his finger in everybody's business 2 on that type of thing. 3 (Laughter) 4 CHAIRMAN KRAUSE: You might want to 5 rephrase that. 6 (Laughter) 7 MR. GRIEF: And so Ed will thrive at the 8 Retailer Services Manager position, and we're glad to 9 have him there. However, that won't impact Ed 10 continuing to assist Alfonso as long as he and Alfonso 11 determine that there's a need for Ed to be involved. 12 Now, with Ed moving officially to a 13 different position, that leaves the position of 14 Enforcement Director vacant. And rather than post for 15 the position, I've had a -- I have the great opportunity 16 to promote from within. And I've actually made that 17 decision to promote Mario to the position of Director of 18 Enforcement. That will take effect November 1st. Mario 19 has been with the agency for 20 years, and has done -- 20 has performed in an exemplary fashion as a senior 21 investigator and now, most recently, being in charge of 22 the division while Ed has been on other assignment. 23 So I just wanted to make sure the 24 Commission is aware of these changes and we wish Mario 25 and Ed the best of luck in their new roles. 36 1 (Applause) 2 MR. GRIEF: Other items I need to report 3 to you on, we did have the NASPL annual trade show event 4 and conference in Atlantic City that was held in 5 September, hosted by the New Jersey Lottery. During 6 that conference I passed the gavel, so to speak, to 7 Terry Rich, the CEO of the Iowa Lottery, as the new 8 president of NASPL. And I'll continue to serve on the 9 Board of NASPL for the next year as immediate past 10 president. 11 The NASPL conference -- and I know 12 Commissioner Williamson has attended in the past -- it 13 is by far the largest lottery conference of the year. 14 And in addition to the normal delegation of our 15 attendees from Texas that were there, we sent another 16 group of 10 individuals from the Texas Lottery who 17 served as volunteers, who actually worked the event. 18 And they were there to watch and learn, because we're 19 going to be hosting this NASPL event next October here 20 in Dallas in Texas. 21 So I've asked René McCoy from the Lottery 22 Operations Division, and Casey Austin, who works for 23 Kathy Pyka in the Office of the Controller, to serve as 24 my co-chairs for that event. And they have a big job 25 ahead of them in the next year preparing for the 37 1 thousand or so attendees that will be in Dallas. 2 I've got two short videos to show you this 3 morning, both relating NASPL. The first one will give 4 you a flavor for the conference that was just held in 5 Atlantic City. And then the second video is one that 6 was produced by our own Phillip Bates right here, and 7 this is -- the second video will be the one we showed in 8 Atlantic City to invite the attendees to Dallas next 9 year. And I think Phillip did a great job producing 10 that video. 11 So, Phillip, if you could roll the first 12 one for us? This is a recap of Atlantic City. 13 (Video is played) 14 MR. GRIEF: So that gives you a feel for 15 the Atlantic City event and kind of sets up to know what 16 our job is ahead of us for Dallas. So now I want you to 17 watch the video that Phillip put together to incite all 18 these people to come to Dallas next year. 19 (Video is played) 20 MR. GRIEF: Commissioners, I thought Phil 21 did a great job putting that together. I think we will 22 have record attendance next year. It will be a boon for 23 the City of Dallas, for Texas economic development. I 24 pulled some numbers for Commission Williamson sometime 25 back. I can't remember the numbers right offhand, but 38 1 it's more than a million dollars in economic benefit to 2 Texas to have that conference here in Texas. And we 3 have a big job ahead of us and that just kind of gives 4 you some of the -- a feel for it. 5 The other items I have to cover for you 6 today, just a couple of things. On another note 7 regarding conferences, we have the La Fleur's conference 8 coming up here in Austin November 16th through 19th. 9 Terry Markel (phonetic) and Bruce La Fleur, who are the 10 organizers of that conference are putting together a 11 great program for us. We expect to have at least 200 12 attendees for that, including lottery directors from 13 over 30 different states, as well as leaders from the 14 vendor side of the community, all parts of the lottery 15 community. And I'm very much hopeful that all of our 16 Commissioners will be able to attend that great event. 17 You heard Robert just briefly touch on 18 this morning -- and I've mentioned it in past 19 meetings -- about the Powerball game and the possibility 20 of changes coming to Powerball. I mentioned to you at 21 the last meeting that we were going to have a meeting of 22 the MUSL Committee in Miami in September at the PGRI 23 conference to talk about some changes to that game. 24 That meeting took place, as well as other meetings that 25 occurred in Atlantic City during the NASPL conference, 39 1 and all those meetings have culminated in changes being 2 recommended. And those changes are going to be 3 presented to the Commission in the form of a rule for 4 your consideration to propose at the December meeting. 5 So please know we'll be bringing that to you at that 6 time. 7 And last on my list, I'll be attending the 8 World Lottery Association Conference, or WLA as it's 9 known. That's going to be held in Rome, Italy, 10 October 31st through November 4th. As you know, Texas 11 is a member of the World Lottery Association, but I want 12 to be clear that all the costs associated with my travel 13 are going to be picked up by NASPL in my official 14 capacity as immediate past president, and no costs will 15 be borne by the State of Texas for this travel. 16 I'll be moderating one panel and I'll be 17 serving on another, and I anticipate continued progress 18 in collaborating with lotteries from around the world, 19 with my goal always being to stay abreast of industry 20 best practices not just here in the United States but 21 around the world, and ultimately hoping that that will 22 lead to more revenue to good causes here in Texas. 23 Mr. Chairman, that concludes my comments. 24 I'd be happy to answer any questions. 25 CHAIRMAN KRAUSE: Questions? 40 1 COMM. WILLIAMSON: No. 2 AGENDA ITEMS II, III and VIII 3 CHAIRMAN KRAUSE: Before we go to the next 4 agenda item, I'd like to circle back Agenda Items 2, 3 5 and 8. And is Kelly Cripe here -- come up and talk to 6 us. 7 We received wonderful news today. We have 8 set records for our transfers to the state for 9 education, and we have received from our outside 10 internal auditors, you know, a best practices report. 11 And so when I asked about, you know, how we let other 12 people know -- I mean, I hear about the press release, 13 you know, and it goes hither and yon and that kind of 14 thing. 15 And so anyway, I'd like to ask you to 16 consider how can we really more effectively communicate 17 the great things that we're doing here. And I don't 18 have -- ask you to give us any ideas today, but one of 19 the ways that our agency is different from other 20 agencies is that we make money for the state, and we're 21 run like a business. And so, you know, I'd like for you 22 to feel free to develop ideas that are more consistent 23 with a business that wants to tell the public about its 24 success as opposed to a state agency that feels 25 constrained about what it thinks it can do, you know. 41 1 So anyway, I ask you to take that under 2 advisement, and, if you have ideas, to share them with 3 Gary, me, and let's get the word out about how great our 4 people are doing here. 5 MS. CRIPE: Great. 6 CHAIRMAN KRAUSE: Thank you. 7 AGENDA ITEM XII 8 CHAIRMAN KRAUSE: Next item? 9 MR. BIARD: Thank you, Commissioners. Tab 10 12 in your notebooks contains 18 lottery and bingo 11 enforcement matters. These are cases where Commission 12 staff found a violation and most of the time either the 13 licensee failed to appear at the hearing, or the Staff 14 and licensee have reached a settlement. I'll describe 15 the cases and you can take them up in a single vote. 16 The first five cases, Tabs A through E are 17 NSF lottery retailer license revocations and are handled 18 in a single order. These cases were presented to the 19 State Office of Administrative Hearings for revocation 20 of the retailer's license on the grounds the license 21 failed to have sufficient funds in their bank account to 22 cover electronic fund transfers to the Commission. The 23 Administrative Law Judge recommends revocation in each 24 case, and Staff recommends that you vote to approve the 25 order revoking the licenses. 42 1 Tab F is a lottery license revocation 2 case. In this case the Commission staff discovered that 3 in 2013 the president of the licensed retailer pled no 4 contest to assault on a family member. Because this is 5 a crime of moral turpitude and 10 years has not elapsed 6 since the sentence was terminated, the retailer is 7 ineligible for a sales agent license. The judge 8 recommends revocation and the licensee did not file 9 exceptions to the recommendation. 10 Tabs G through J are lottery agreed 11 orders. These are settlements. In Tab G, the employee 12 of a lottery retailer scanned a player's $1,000 winning 13 ticket, and the employee bought the particular from the 14 player for $750 so the player would not have to travel 15 to claim the prize. The agreed penalty is a 30-day 16 suspension, and the employee involved in the purchase 17 may not be involved in the handling, sales, processing 18 or management of any Texas Lottery products for one 19 year. 20 In Tab H the retailer sold a customer Pick 21 3 tickets and canceled the tickets prior to the drawing. 22 One of the tickets would have been a $250 winner, but it 23 would not validate because it had been canceled. The 24 agreed penalty is a 10-day suspension, and the retailer 25 also voluntarily paid the player the $250 she would have 43 1 won. 2 In Tan I, the manager of the licensed 3 retailer was routinely scratching the VIRN off instant 4 game tickets. VIRN is V-I-R-N. That's the void if 5 removed number. It's used for scanning winning tickets 6 off of scratch tickets. The manager would keep the 7 winning tickets and sell the losing tickets. The agreed 8 penalty in this case is a 30-day suspension and the 9 retailer terminated the manager upon learning of this 10 conduct. 11 And Tab J, the lottery retailer scanned a 12 $1,000 winning ticket, and the owner of the store agreed 13 to cash the ticket for $350. The player had already 14 signed the ticket, so the retailer whited out the 15 signature and tried to claim the prize in Austin. The 16 agreed penalty is a one-year suspension. 17 Moving on to bingo, Tabs K through O are 18 related. They are all bingo agreed orders involving a 19 common audit of four bingo accounting units in the 20 Dallas area. The same person, Larry Whittington, is 21 both the designated agent for each of the units and is 22 the bingo chairperson for each of the 17 charities 23 involved in these four units. There are about 15 to 17 24 violations for each unit dealing mainly with improper 25 payments or accounting. Two of the units accepted 44 1 coupons issued from gaming machines. So the violations 2 in each of the unit orders are similar but not 3 identical. Under the agreed orders for the accounting 4 units, each unit will be required to pay a penalty of 5 between 1,000 and $1150. And the members of each unit 6 must decide within 120 days to either hire a licensed 7 unit manager instead of using Larry Whittington as their 8 designated agent. And in that case the manager would be 9 required to post a bond for each of the units, or the 10 charities may designate a different person as their 11 bingo chairperson, with the further restriction that the 12 same person cannot be the bingo chairperson for more 13 than one organization, and must take an active role in 14 the bingo activities. 15 Under the agreed order for Larry 16 Whittington, which is Tab L, for his involvement in the 17 violations, he is required to reimburse each of the 18 accounting units for $1750 for a total of $7,000 for 19 payments made to him without proper documentation. Each 20 unit will be required to immediately disburse the money 21 for charitable purposes. And within 120 days, at the 22 direction of each of the accounting units, Whittington 23 must either become a licensed unit manager for the 24 units, which posting a bond, or resign as the bingo 25 chairperson for each charity in the unit and allow the 45 1 charities to appoint another person as their bingo 2 chairperson. That covers Tabs K through O. 3 Finally, Tabs P through R are other bingo 4 agreed orders. Tab P is a bingo registry worker case 5 where the worker was playing bingo while on duty. He 6 agreed to pay an administrative penalty of $150. 7 Tab Q involves a charity that committed 8 two violations. Its workers and operators were found 9 not wearing legible ID cards, and it allowed an 10 unauthorized game of chance during a bingo occasion, 11 which was a spin-the-wheel contest to win bingo 12 products. The charity agreed to pay a $600 penalty. 13 Finally, Tab R involves Gold Crown bingo, 14 a commercial lessor in Houston, which operated 15 gaming 15 machines in its bingo hall. The gaming machine awarded 16 players $5 winning coupons that could be redeemed for 17 bingo, pull tabs or computers. They have agreed not to 18 intentionally or knowingly operate or allow the 19 operation of any unauthorized electronic gaming devices. 20 And should they discover that any of their lessees are 21 operating any unauthorized electronic game devices, they 22 will notify them to cease and evict them if necessary. 23 Gold Crown agreed to an administrative 24 penalty of $4500, which the agency would agree to 25 suspend so long as Gold Crown complies with all the 46 1 other terms of the order. 2 That concludes all of the -- presentation 3 of all the enforcement orders. 4 CHAIRMAN KRAUSE: Thank you for offering 5 them all at once. 6 MR. BIARD: Thanks. 7 CHAIRMAN KRAUSE: Any motion -- or 8 comment? 9 COMM. WILLIAMSON: No, I have none. 10 CHAIRMAN KRAUSE: Okay. Motion? 11 COMM. WILLIAMSON: I make a motion that we 12 approve all of the orders as itemized in Item 12 A 13 through R. 14 CHAIRMAN KRAUSE: Second? 15 COMM. BAGGETT: I second it. 16 CHAIRMAN KRAUSE: Call for a vote. All 17 favor say "aye." 18 (All those voting in favor so responded) 19 CHAIRMAN KRAUSE: None opposed, it 20 carries. 21 MR. BIARD: Thank you, Commissioners. I 22 have orders for you to sign. 23 AGENDA ITEM XIII 24 CHAIRMAN KRAUSE: All right. Do we have 25 any public comment? Speak now or forever hold your 47 1 peace. 2 MR. BIARD: I don't believe any witness 3 affirmation forms have been filed. 4 AGENDA ITEM XIV 5 CHAIRMAN KRAUSE: All right. This is the 6 point in time when the Lottery Commission goes into 7 executive session to deliberate personnel matters, 8 including appointment, employment and evaluation, et 9 cetera, et cetera, for the Executive Director and the 10 Charitable Bingo Operations Director, as well as the 11 duties of the General Counsel and the Houston and -- 12 Houston -- the Human Resources Director, all in 13 accordance with the government code, as well as to 14 receive legal advice from the Attorney General's Office, 15 who is here to give us legal advice today regarding 16 contemplated litigation or settlement offers and that 17 kind of thing, also authorized by the Texas Government 18 Code but not limited to those items posted on the Open 19 Meetings notice. 20 Is there a second? 21 COMM. WILLIAMSON: Second. 22 CHAIRMAN KRAUSE: All in favor say "aye." 23 (All those voting in favor so responded) 24 CHAIRMAN KRAUSE: Passes by acclamation. 25 We go into executive session at 10:05 a.m., October 16, 48 1 2014. 2 (Recess: 10:05 a.m. to 10:48 a.m.) 3 AGENDA ITEMS XV and XVI 4 CHAIRMAN KRAUSE: The Texas Lottery 5 Commission is out of executive session at 10:48 a.m., 6 and there will no action to be taken as a result OF the 7 executive session. Everybody gets to keep their job. 8 And so, anyway, I move that we adjourn. 9 COMM. WILLIAMSON: Second. 10 CHAIRMAN KRAUSE: I call for a vote. 11 Everybody ready to say that, say "aye." 12 (All those voting in favor so responded) 13 CHAIRMAN KRAUSE: We are out of session at 14 10:49 a.m. 15 (Proceedings concluded at 10:49 a.m.) 16 17 18 19 20 21 22 23 24 25 49 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 27th day of October, 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 7800 N. MoPac Expressway, Suite 120 Austin, Texas 78750 22 512.474.2233 23 24 25