1 1 2 3 4 * * * * * * * * * * * * * * * * * * * * * * * * * * * * 5 6 BINGO ADVISORY COMMITTEE MEETING 7 8 APRIL 10, 2002 9 10 * * * * * * * * * * * * * * * * * * * * * * * * * * * * 11 12 13 14 15 16 17 18 BE IT REMEMBERED that the BINGO ADVISORY 19 COMMITTEE meeting was held on the 10th of April, 2002, 20 from 10:00 a.m. to 4:20 p.m. before Cynthia B. Ramsay, 21 CSR in and for the State of Texas, reported by machine 22 shorthand, at the Texas Department of Housing and 23 Community Development, 607 Sabine, 4th Floor, Board 24 Meeting Room, Austin, Texas, whereupon the following 25 proceedings were had: WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 2 1 APPEARANCES 2 3 Chairman: Mr. William Neinast - Burton, Texas 4 Vice-Chairman: 5 Ms. Virginia Brackett - Lubbock, Texas 6 Committee Members: Ms. Suzanne Taylor - Corpus Christi, Texas 7 Mr. Lexford Speed - Plano, Texas Mr. Saleem Tawil - Austin, Texas 8 Mr. David Castillo - Kingsville, Texas Mr. Robert Rinehart - Amarillo, Texas 9 Ms. Mary Magnuson 10 Charitable Bingo Operations Director: Mr. Billy Atkins 11 Mr. Phil Sanderson 12 INDEX 13 AGENDA ITEMS Item Number 1.................................. 3 14 Item Number 2.................................. - Item Number 3.................................. - 15 Item Number 4.................................. 4 Item Number 5.................................. 99 16 Item Number 6.................................. 156 Item Number 7.................................. 168 17 Item Number 8.................................. 187 Item Number 9.................................. 199 18 Reporter's Certificate......................... 207 19 20 21 22 23 24 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 3 1 MR. NEINAST: It is 9:00 o'clock. We do 2 have a quorum present. Every member is present except 3 for Louie George. I call this meeting of the Bingo 4 Advisory Committee to order. 5 Ms. Cynthia Ramsay is our court reporter 6 today, and out of consideration for her, I will call a 7 recess of about 10 minutes every hour. So just be on 8 notice that you might be in the middle of a presentation 9 when I interrupt and ask for a recess. 10 When you do speak, if you would identify 11 yourself for the record and only one speak at a time 12 because she has to take down everything that's said. 13 If you do wish to address the committee 14 this morning, I ask that you fill out a witness 15 affirmation form which is here on the front desk. Just 16 fill it out and pass it up to me, and we'll call -- or 17 I'll call on you when we get to an item that you want to 18 address. 19 The first item on the agenda this morning 20 is consideration of and possible action including 21 approval on the minutes of the March 20th Bingo Advisory 22 Committee meeting. We have not received those minutes, 23 so I would accept a motion that the -- that item be 24 tabled until further meeting. 25 MS. BRACKETT: I so move. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 4 1 MR. NEINAST: Is there a second? 2 MR. SANDERSON: Second. 3 MR. NEINAST: Any discussion? 4 All in question -- all in favor of tabling 5 the approval of the minutes of the March 20th, 2002 6 advisory committee, aye. 7 SPEAKERS: Aye. 8 MR. NEINAST: Opposed? 9 Motion carried. 10 We're going to pass Item Number 3, which 11 is a discussion and action on nominations for the Bingo 12 Advisory Committee until later in the meeting. 13 We will go to Number 4, Consideration of 14 and possible discussion and/or action on the inclusion of 15 legal and security activities within the Charitable Bingo 16 Division. 17 There was considerable discussion of this 18 at the last meeting. I see we have one person 19 who would like to address that subject at this time. 20 Mr. Young, Robert Young. 21 MR. YOUNG: Good morning. Robert Young, 22 AMVETS, Post 77. 23 I'm in favor of this, of combining the 24 legal and the security activity. In fact, I feel that, 25 you know, bingo should be separate and its own function. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 5 1 The -- we pay a lot of money back into it, and I think it 2 could be self-funded. Bingo is a different animal than 3 lotto, and I think it ought to be dealt with differently. 4 I also feel like there should be some kind 5 of military guy like me, some kind of chain of command or 6 whatever, where somebody is responsible, somebody above 7 them and so on. And I think it just needs to be totally 8 restructured and have its own division. Having the 9 legal, security -- I mean, it's -- I think that's just 10 logical that that should be done. 11 Under the lotto, it's police officers and 12 stuff that are going out there on I guess what I consider 13 minor violations and stuff like that. It seems like an 14 added expense than just having someone to go out -- you 15 know, like a lot of the times they complain when the same 16 people win all the time or something like that. It's 17 kind of ridiculous to me that you would send some kind of 18 police officer or whatever out there. 19 And I think if we had our own division 20 that we could function and it would benefit the charities 21 in Texas. And I appreciate your time. 22 MR. NEINAST: Any member of the committee 23 have any questions? 24 MR. TAWIL: Mr. Young, do you feel like 25 that since the lottery is dealing with issues where you WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 6 1 could have millions of dollars involved, security is 2 certainly a lot different? That's what you're getting 3 at? 4 MR. YOUNG: Yes, that's correct. I mean, 5 you know, we're, I guess for lack of a better word, kind 6 of in the private sector and deal with the contractors 7 and stuff. We're -- the lotto, from my understanding -- 8 I can't speak to it because I'm not part of the lotto, 9 but it's more of a state in itself, I guess would be the 10 best way to say it. And I think -- like I say, I think 11 bingo is so much different than the lottery that it -- 12 just to me, it demands having its own division. 13 MR. NEINAST: Okay. Anyone else have a 14 question or comment on Mr. Young's -- okay. Thank you, 15 Mr. Young. 16 MR. YOUNG: Thank you. 17 MR. NEINAST: All right. Mr. Fogleman 18 or -- I assume E. T. Fogleman. 19 MR. FOGLEMAN: Good morning. I'm E. T. 20 Fogleman. I represent AMVETS Post 83. And I'm inclined 21 to go along with Mr. Young. 22 Thank you. 23 MR. NEINAST: Okay. Any -- does anyone 24 have a comment or -- okay. 25 Ms. Markham. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 7 1 MS. MARKHAM: I'm Velma Markham, Post 52 2 Auxiliary in Dallas. And I go along with Bob Young 3 because we fully believe in everything he said. And 4 that's all I have on this one. 5 Thank you. 6 MR. NEINAST: Okay. Thank you, 7 Ms. Fogleman (sic). 8 Stephen Fenoglio. 9 MR. FENOGLIO: Good morning, Mr. Chairman 10 and Members. I'm sorry I came in late. 11 Which item are we on? 12 I've registered for several -- 13 MR. NEINAST: We're establishing the 14 general counsel and the security division as separate -- 15 or part of the bingo division. 16 MR. FENOGLIO: I'm actually taking this 17 for Mr. Bresnen, who could not be here today. He had 18 agreed to the April 3rd deadline, and when he found out 19 it was April 10th, he had already scheduled clients in 20 from out of town. 21 I also -- the clients that I have 22 indicated, the 949 charitable organizations, support 23 making the director of bingo responsible for their own 24 destiny. 25 And in that regard, it occurs to us as WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 8 1 well as Mr. Bresnen -- and I believe y'all have 2 Mr. Bresnen's paper on that in the agenda item -- that 3 bingo ought to be able to direct the activities that are 4 related to the regulation of bingo within that division. 5 And so we support creating within bingo a legal division 6 and a security division. 7 Coincidentally -- and this is no 8 disrespect to Mr. Pitcock, who I have a great deal of 9 admiration and respect for, but some of these 10 investigators insist on wearing guns and badges in the 11 bingo halls. And I think all of y'all who have had that 12 happen, the players, the customers, immediately assume, 13 mostly wrongly, that there is illegal gambling going on 14 or there's something -- there's a fix on the bingo game. 15 And it is an intimidation to the customers 16 and to the employees, and I think if we -- quite frankly, 17 I'm not real, real sure why you need a gun and a badge 18 when most of your clientele are blue-haired ladies or 19 baldheaded men like me, only a little older perhaps. 20 And it is something that I can understand 21 in a few situations where an investigator might have the 22 need to wear the gun and the badge, but for the most 23 part, we don't think that's necessary. And we think that 24 if the bingo division controlled all of that, we wouldn't 25 have that type of activity. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 9 1 I'll be happy to answer any questions you 2 have; Mr. Bresnen's position paper on that. 3 MR. TAWIL: I've got a question. 4 MR. FENOGLIO: Yes, sir. 5 MR. TAWIL: Being an attorney, would you 6 know if any of these fall within the civil or criminal 7 statutes? It's all civil. Right? 8 MR. FENOGLIO: Well, certainly the Bingo 9 Enabling Act -- 10 MR. TAWIL: That's what I'm saying. It's 11 all civil statute. 12 MR. FENOGLIO: -- is civil. There are 13 gambling prohibitions -- 14 MR. TAWIL: But -- 15 MR. FENOGLIO: -- that are found in the 16 Penal Code. 17 MR. TAWIL: That's only after the fact 18 when they have reason to say that someone is doing 19 something illegal. Then it triggers the -- that section 20 of the code. 21 MR. FENOGLIO: That's correct. There's 22 actually a technical definition of probable cause -- 23 MR. TAWIL: But within our industry -- 24 THE REPORTER: Y'all are both talking at 25 the same time. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 10 1 MR. TAWIL: Within our industry, it's all 2 civil. Right? 3 MR. FENOGLIO: Yes. 4 MR. TAWIL: It would seem to me like that 5 in criminal behavior where guns are wielded is probably 6 the wrong place to have these to begin with. And this is 7 something that was put upon us here about a year or two 8 ago by the security division. 9 And the reason it won the course of the 10 day was because -- maybe three years ago -- was because 11 lottery -- when a retailer or someone else may be -- 12 because there's so many -- there's 16,000 places you 13 can -- or tickets can be purchased through these 14 machines. It is a totally different venue than playing 15 for a $500 game or $750 game versus four million or more. 16 So, I mean, the contract is so drastically different. 17 MR. FENOGLIO: I would agree with that, 18 yes. 19 MR. TAWIL: Would it be fair to say that 20 we should maybe ask the commission to do away with that 21 part of it regardless of -- even including security 22 within the bingo division? Would you be in favor that we 23 do away with having guns around, period? 24 MR. FENOGLIO: You know, I always worry 25 about always saying always or never, but -- WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 11 1 MR. TAWIL: We never had them before. 2 MR. FENOGLIO: Well, I think the 3 comptroller did not, but TABC had licensed peace 4 officers. Of course, bingo was -- 5 MR. TAWIL: Again, it was the alcohol. 6 MR. FENOGLIO: Right. I can't think of a 7 situation that comes to mind in the -- for the clients 8 that I've represented where an investigator has shown up 9 where they need the gun and the badge. The security 10 division may have a different view. I'm not here to try 11 to defend them or suggest to them. 12 But the clients that I have -- I mean, you 13 know, again, the average bingo hall, if y'all -- and I 14 assume all of you have been in and I know some of you 15 work in bingo halls. It's not the criminal element 16 that's there. I mean, they really are, as I kiddingly 17 refer to, the blue-hired ladies and the baldheaded men. 18 And that's your clientele. It's not a hardened criminal 19 element by any means. 20 Some halls do have licensed security. The 21 hall that I'm most familiar with, as you know, Mr. Tawil, 22 is River City Bingo on Braker Lane in north Austin. 23 MR. TAWIL: Right. 24 MR. FENOGLIO: And we have, because of the 25 neighborhood we're in, licensed peace officers as WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 12 1 security. And many halls do. More don't have a licensed 2 peace officer, but we also conduct midnight bingo. And, 3 you know, at 2:00 o'clock in the morning, the parking lot 4 is a little dark. And I am aware of other bingo halls 5 where there have been robberies of the bingo proceeds, 6 armed robberies. But that's not when the security 7 division folks are there anyhow. That's after everyone 8 has left, typically. 9 So I'm not going to say that they should 10 never. I just -- as a normal course, I can't think of a 11 good reason why, when they come to a bingo hall, they 12 have to have the gun and the badge. 13 It always helps to have it on. As you can 14 tell, I am not an engineer. I'm just a lawyer. 15 MR. SPEED: Have you had some bad 16 instances happen that you're aware of that you could give 17 us -- 18 MR. FENOGLIO: Yes. 19 MR. SPEED: -- some activities that have 20 happened? 21 MR. FENOGLIO: Yes. I represent a bingo 22 hall that in 1997 was visited by licensed security. One 23 of the employees was Hispanic, and the investigator with 24 the gun and the badge asked to see the green card. You 25 can imagine the effect that had. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 13 1 It turns out the employee was a -- born in 2 Texas and a Texas and U.S. citizen. But the mere 3 question of someone of hispanic ethnicity... 4 We have had situations where a security 5 officer has come to a bingo hall and said, The caller is 6 the primary operator, and that's illegal. 7 In fact, as Mr. Sanderson is aware, the 8 procedures manual that's going -- undergoing review today 9 says in plain black and white that a caller -- the bingo 10 caller can be the primary operator and can wear both hats 11 at the same time. And in many small halls, that happens 12 regularly. But the security investigator said, That's 13 illegal. Stop it immediately. 14 Another incident that happened, the 15 primary operator -- there was an accident in the 16 bathroom. This person was not conducting bingo in the 17 normal sense. He wasn't the caller, he wasn't selling, 18 but he was the primary operator. 19 So he goes to clean up the bathroom and 20 takes the trash outside to the dumpster. And the 21 investigator observed that and stopped the bingo game 22 because the primary operator was not on the premises. 23 Well, the parking lot happens to be part 24 of the bingo premises. But, you know, instead of just 25 perhaps issuing a warning -- I personally think that was WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 14 1 a poor judgment call on the part of the primary operator, 2 but the game was stopped immediately and warnings were 3 issued. 4 So we have examples, yes, where that has 5 happened. And again, the worst one was where the bingo 6 procedures manual specifically allows a primary operator 7 to be the caller; yet, the investigator decides 8 otherwise. 9 I have asked for written documentation -- 10 as you know, Mr. Speed, I represent a number of bingo 11 charities and other licensees -- for these types of 12 examples. And whenever I can get that written 13 documentation, I intend to share it with TABC. 14 MR. SPEED: Thank you. 15 MR. NEINAST: Well, Stephen, are you 16 claiming that neither of those examples you just gave 17 would have happened if this had just been a security 18 investigator from the bingo division who was not a peace 19 officer? 20 MR. FENOGLIO: I don't think it would 21 have. I mean -- you know, I mean, the auditors who come 22 in on occasion and do inspections while a bingo hall is 23 going on, for the most part, I think, are very familiar 24 with the Bingo Procedures Manual. I wasn't until very 25 recent. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 15 1 And you may recall, Mr. Neinast, my last 2 presentation on the audit rules. I mean, the Bingo 3 Procedures Manual is I think 150 or 200 pages. And it 4 occurs to me that the licensed peace officers -- I mean, 5 most of my bingo hall clients were not aware -- and I'm 6 going to just ask. I don't mean to put you on the spot. 7 Have you seen the Bingo Procedures Manual? 8 MR. NEINAST: No. 9 MR. FENOGLIO: And that's been the common 10 response from every charity I've represented. 11 Ms. Taylor happens to be I think one of 12 the most knowledgeable people in the industry. And until 13 I raised the issue with her about six weeks ago, she was 14 not aware, I believe was our discussion, that there was a 15 Bingo Procedures Manual in existence. 16 It's my experience that every auditor at 17 the bingo division knows that the Bingo Procedures Manual 18 exists. And I'm not going to say that they can recite 19 chapter and verse of every provision in the 150-page 20 document, but they're familiar with it. 21 So, yes, I would -- I would like to think 22 that if an auditor is there that he or she is not going 23 to make that kind of mistake and certainly wouldn't stop 24 the bingo game. 25 MR. NEINAST: One of the comments made in WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 16 1 Mr. Bresnen's memo that he submitted to us at the last 2 meeting, which each member of the committee has now, was 3 just the opposite because there are instances where 4 different interpretations are applied in different 5 regions by an audit office. 6 MR. FENOGLIO: And that's a different 7 issue than the licensed peace officer. It is a concern 8 that we have, yes, that auditors can give different 9 opinions. And I'm going to give you an example of a live 10 case of that. I don't want to mention names. 11 About six years ago, a charity was 12 audited. And as you may know, the Bingo Enabling Act 13 requires that if there's an insufficient fund check, a 14 hot check, if you will, that's paid to the bingo account, 15 that the account has to be made whole and general fund 16 monies have to flow into that bingo account. Otherwise, 17 that would be free bingo, which is prohibited under the 18 Bingo Enabling Act. 19 So -- and that happens, as you might 20 imagine, in any business. There's an uncollectible 21 insufficient fund occurrence. And in bingo halls, it's 22 the same way. 23 This particular charity was told in the 24 audit, Well, as long as you true those up on an annual 25 basis, that's okay. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 17 1 And that's what they have done. They're 2 undergoing an audit now, and they were told they had to 3 true them up on a monthly basis informally in the audit. 4 And they pointed out, Well, when you say monthly, if the 5 check -- insufficient fund is written on the 20th, we 6 find out about it the 27th, we start trying to chase the 7 money, are you saying we have to true up that account 8 before the 30th of that specific month? 9 Well, I see your point. Well, maybe you 10 can do it on a quarterly basis. 11 And I don't think that's unnatural for 12 auditors to be out there. And, I mean, I've had -- I've 13 had disagreements on behalf of clients with the way 14 auditors apply the law, but you can't write a rule or a 15 procedure manual for every occurrence without question. 16 I mean, if you did, the manual would be thousands of 17 pages long, and it would be so cumbersome that no charity 18 could ever figure out what the rules were because they 19 could never finish the thousands of page before a new 20 procedure was inserted based on a new occurrence. So I 21 think there has to be some flexibility. 22 We have had occurrences as Mr. Bresnen has 23 pointed out. I'm aware of them where an auditor three 24 years or four years ago has said, You do it this way, and 25 today they do it differently. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 18 1 That troubles me if you're punishing, in 2 the latest audit, an occurrence or a procedure that a 3 previous auditor, maybe not the same auditor, sanctioned 4 three or four years ago. But I also recognize that the 5 law, as you know, Mr. Chairman, as a lawyer -- that the 6 law is a living, breathing thing. And what was precluded 7 yesterday or three or four years ago by a different 8 auditor or, if it's long enough, by a different agency 9 may not be what they want done today. 10 I think what you have to do is empower 11 Mr. Atkins and his staff -- and this is a recurring 12 concern that I've raised publicly with the staff and with 13 y'all. I think the salary structure needs to be 14 increased for the staff so that you can retain the good 15 people and you can -- and you can attract -- I mean, the 16 auditors have a lot on their plate. And part of the 17 frustration that we have is we don't think they're 18 adequately compensated. And that goes against I guess 19 what most people think of as government. But if you're 20 going to have government regulation, you ought to have 21 talented people regulate it. 22 I can give you chapter and verse 23 throughout of the different nuances of interpretations of 24 bingo auditors, but it's a lot different, Mr. Neinast, 25 when it's in an audit proceeding that's going on for WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 19 1 three months or a year. And I've had audits that have 2 gone on that long where an auditor is banging the table 3 saying, No. That's illegal. You can't do that. You 4 must change your accounting practice, and I'm on the 5 other side saying, Well, maybe we will and maybe we 6 won't. Here is our view, and we're going to negotiate. 7 And we have negotiated many times as 8 Mr. Sanderson is aware of. It's a different matter where 9 a guy with a gun and a badge holds up the badge, shows 10 the gun and says, You're going to stop or else. 11 I mean, I got to tell you, not too many 12 people are going to say, Well, you just go ahead and do 13 what you got to do. I'm going to do what I got to do. 14 It's a different playing field when that 15 happens. And I would suggest to you that -- I mean, in 16 your ordinary lives, you can imagine when that happens 17 you're going to do exactly what he or she tells you to do 18 and nothing else. 19 MR. TAWIL: Can you give us an instance 20 when they would use that weapon? 21 MR. FENOGLIO: I'm not aware -- 22 MR. TAWIL: Maybe Mr. Pitcock can 23 explain -- 24 MR. FENOGLIO: I'm not aware that they've 25 ever had to use the weapon. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 20 1 MR. TAWIL: What's a condition that they 2 would have to be tempted to? 3 MR. NEINAST: I'm going to ask Mr. Pitcock 4 to address that in a minute. 5 A housekeeping note: Make sure that the 6 little green light is on in front of your mike if you're 7 going to be talking. 8 My comment earlier to Steve was that with 9 the size of the State of Texas and the regions we have, 10 regardless of who is doing it, whether it's someone from 11 the security division or someone from the audit division, 12 whether they're under the lottery commission or under the 13 bingo division, you're going to have individual 14 interpretations on the point. 15 The two examples you gave, the same thing 16 could have happened if you had had a -- call him a 17 security person who was not a licensed peace officer but 18 under the direction of a bingo division -- been that 19 person's interpretation is the only point I was making. 20 MR. FENOGLIO: And I would concede that it 21 could happen, but, you know, again, go back. I would 22 expect that a licensed peace officer has a higher salary 23 structure. They certainly have a different level of 24 training. And for most bingo hall investigations and 25 visits, I just don't see the need in having the gun and WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 21 1 the badge. 2 MR. RINEHART: Steve, are you aware of 3 this happening where an investigator had come in and 4 showed his gun and his badge? 5 MR. FENOGLIO: Yes. It happens 6 practically every time -- I mean, I hear about it when 7 someone -- a client calls. 8 MR. RINEHART: And they go out of their 9 way to show their badge and their gun? 10 MR. FENOGLIO: Yes. 11 MR. RINEHART: The gun -- the badge -- 12 MR. FENOGLIO: And their windbreaker, if 13 you don't know, says across the back Texas lottery 14 commission Investigator. And, you know, I don't know if 15 you've had that visit, Mr. Rinehart, at the hall where 16 you conduct bingo or your charity conducts bingo, but at 17 River City they have come in like that. 18 And the customers are extremely nervous 19 and will come up to the employees saying, What's going 20 on? What have you guys done wrong? Is this a crooked 21 game? 22 We've had that type of question come up 23 not at River City Bingo but at other halls. 24 I mean, there is legitimate reasons for -- 25 if a complaint has been made, there are legitimate WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 22 1 reasons that I would hope that this agency -- and I know 2 Mr. Pitcock applies it. If there's a complaint, he's 3 going to pursue it. And they should. Some complaints 4 are meritless; some are good. 5 MR. RINEHART: I can understand them 6 showing their badge, but I really can't understand them 7 showing a weapon, you know. 8 MR. FENOGLIO: Okay. I would be happy to 9 answer any questions. 10 Thank you. 11 MR. NEINAST: Any other questions or 12 comments? 13 Okay. Thank you, Steve. 14 Look at the item we're considering, and I 15 think that we're going off in maybe possibly a different 16 tangent. The question that is before the committee is 17 should there be a recommendation that the security 18 division be a separate entity of the bingo division with 19 direct supervision over the security personnel rather 20 than having it as a division of the lottery commission. 21 All of this is related to it, but I think 22 we're getting down more to a discussion of whether the 23 security personnel, when they make a visit, should be 24 armed and is there -- how they present themselves. 25 And I'm not sure that if we were to create WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 23 1 a separate entity of the bingo division for security 2 purposes whether there might not still be, in that setup, 3 a requirement that the security personnel be armed and 4 carry their arms when they go to the bingo halls. 5 But to address that -- and I'll discuss 6 this a little bit. Pardon me. May I ask first 7 Mr. Pitcock to -- 8 MR. PITCOCK: Yes. 9 MR. NEINAST: -- come and address this? 10 Mike, if you could come -- Mike is the -- 11 if you don't know him, is the director of security for 12 the lottery commission. And the personnel we're talking 13 about -- 14 MR. PITCOCK: I'll be glad to let him 15 speak if he -- you know, if he wants to. 16 MR. NEINAST: Well, why don't you set the 17 framework addressing some of these issues first. And I 18 think it will put possibly a different understanding of 19 the issue. 20 MR. PITCOCK: You know, I speak to law 21 enforcement from -- 22 MR. NEINAST: Excuse me. Would you 23 identify yourself? 24 MR. PITCOCK: Mike Pitcock, the manager of 25 security, Texas lottery commission. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 24 1 I have over 32 years' experience. The 2 investigators that I have average in excess of 20 years 3 of law enforcement plus average ten years excess of 4 investigative experience. 5 You know, when we started in 1994, we 6 stressed, you know, a lot of things. And one of the 7 biggest things that I've always stressed is the quality 8 of investigation, because for a person to call themselves 9 an investigator is a title that is something that you 10 just can't place on someone without showing skills, just 11 like an auditor. 12 The people that we hire, you know, when we 13 first hired, you know, possess those qualities. And I 14 look at the quality of the investigation. And when you 15 start salaries and you start looking for people, that is 16 always the basis as to what kind of quality that you will 17 be able to get as far as investigators. 18 As far as I know, the training academies, 19 the schools that are offered to train someone to be an 20 investigator are almost, you know, entirely, you know, 21 law enforcement; from the FBI, which I had, when we 22 started bingo, two of those, down to local law 23 enforcement, which we had a mixture to understand, you 24 know, the local needs. But it really wasn't even that. 25 It was the quality of the person. Because when I hire, I WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 25 1 look at an individual as far as their skills, which are 2 good on paper, but I want to see what that individual 3 offers me as far as a person and what they can do as far 4 as being a professional, which I expect that when they go 5 into the bingo halls, and also the quality of their work. 6 And that's the most important thing, because when we 7 present a case, whether it be administrative or it be 8 criminal -- which the Bingo Act does carry criminal 9 sanctions. Playing bingo without a license is a felony, 10 which is a felony type offense. And I think if no one 11 knows that, you know, it's an oversight. But the Bingo 12 Act does have criminal type sanctions tied to it. 13 And I'll be honest with you, when I 14 started bingo in 1994, I didn't know anything about 15 bingo. I went with my mother. I'm, you know, from 16 Texas, born and raised. I went to the VFW, American 17 Legions in Smithville, Texas, just like all the kids that 18 are brought up, played a little but more played outside 19 and didn't pay attention to it. But, you know, it's one 20 of those that I understood what bingo was about. I just 21 didn't understand it entirely till we started this 22 profession. 23 You know, my background in law 24 enforcement, I worked narcotics and internal affairs, and 25 I was a state trooper. And I didn't cross that many WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 26 1 bingo halls in that aspect either. But, yet, when I 2 undertook my next profession, which was administrative 3 type, an investigator with the State Dental Board, I 4 studied administrative investigations and how they're 5 done and how they're conducted. 6 And then on to the lottery commission. 7 Plus, in internal affairs, I conducted internal 8 investigation on personnel, which was quite extensive and 9 very difficult. 10 All those thrown into the packet, you 11 know, it doesn't make me a great investigator. It just 12 gives me the skills and knowledge of how to do this. And 13 that's what you're buying into when you hire an 14 investigator. 15 But back to bingo, in the administrative 16 side, I agree that there's times when we get complaints 17 that, you know, someone is doing something that is of a 18 minor nature that could be handled by an auditor or an 19 investigator, but more common than not, we get complaints 20 that involve, you know, a variation from said gambling 21 offenses, which involve bingo, to, you know, the playing 22 without a license. 23 You know, we've had several cases where 24 we've had illegal bingo games throughout the state, not 25 one in a specific area, and it results in arresting WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 27 1 people, seizing money and doing things right there when 2 they're actually in the act of conducting that. An 3 administrative investigator can't do that. If they were 4 there, they would have to wait, go off and then try to 5 find it. 6 In several cases in south Texas, they're 7 coming up from Mexico. So if you go off, you're not 8 going to catch them anyway. We've caught those people 9 playing illegal bingo down in south Texas. 10 You know, we've made several search 11 warrants. When an investigator goes into a bingo hall, 12 he goes in with many different hats. We work undercover, 13 and they're not going to be wearing a badge and a gun 14 working undercover while they're in there watching based 15 on a complaint someone has filed to see if there is 16 violations going on from failing to play the prizes, 17 playing too much prizes or the bingo caller, you know, 18 having problems with palming balls A to Z. They're 19 looking for that aspect of cheating. And they're sitting 20 there watching and playing in an undercover capacity. 21 More likely than not, they're probably not 22 going to be carrying a gun, but they can carry a gun. 23 But it won't be shown, and there won't be a badge shown. 24 They're just sitting there playing bingo like everybody 25 else, watching that game. And they do that all day and WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 28 1 night because, as you know, bingo is played seven nights 2 a week, 24 hours a day. And at 3:00 or 4:00 o'clock in 3 the morning, we've had investigators out there playing 4 bingo and seeing what's going on based on complaints. 5 Yeah, we've done search warrants to answer 6 your question. It's a court order to go in and seize 7 complete bingo halls. And we've done that, and we've 8 done it effectively. 9 One of the things when we had our Blue 10 Ribbon Committee three or four years ago, as Saleem knows 11 about, to justify whether we should carry guns or not, we 12 had the power as commissioned officers. And part of that 13 is, you know, I think to do criminal background checks 14 and to gain information that law enforcement people get, 15 was the rationale for that. But we had to come in and 16 not only justify it through our commission but through a 17 panel of veteran law enforcement that included Texas 18 Rangers, TABC head, several different varieties of 19 commissioned and noncommissioned to say, Do they need to 20 carry guns? 21 And we described our duties not only in 22 bingo but in the lottery in that Blue Ribbon Committee -- 23 to that committee. And it was a unanimous vote that we, 24 you know, were justified in doing the things that we do; 25 that we needed to carry, you know, weapons. So we set up WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 29 1 policies and procedures. 2 You know, the officers I have, again, with 3 their average, you know, length of time and they are 4 commissioned law enforcement, know the standards about 5 when to use a gun. 6 When to use deadly force I think was your 7 question. When to pull that gun and use it is the basic 8 concept of all law enforcement officers. I got that when 9 I was a trooper. And working internal affairs, I will 10 tell you the hardest part about doing cop work is if you 11 have to pull that gun and use it, because it's not an 12 easy thing to do. And I don't think any of the guys or 13 ladies that I have take that lightly. And I somewhat get 14 offended if somebody takes it lightly on the other side 15 saying, They sit there with their hand on a gun and 16 showing a badge. 17 You know, that's just not called for. And 18 I haven't received any of the complaints that I've heard 19 the first meeting or this meeting saying that some of my 20 people have brandished a firearm or a badge and done it 21 in an unprofessional manner. 22 Yeah, they wear windbreakers that say 23 "Investigator" on the back. I think that's -- part of 24 our training is to identify to you that we are law 25 enforcement officers and we're there for a purpose. And WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 30 1 it's just like that guard that was talked about that's 2 wearing a uniform and carrying a gun. That's part of his 3 tools to do his work. And I think that it's one that -- 4 you know, I would expect that. I will be honest with 5 you. If I were on your side, I would expect them to 6 identify themselves and be professional. 7 I think the word "professional" is what I 8 would look for. If they come in from any aspect of law 9 enforcement, whether it be FBI, Texas Rangers, whoever in 10 our society that comes into your bingo hall or anywhere 11 and they're not professional, then they should be looked 12 at. I think that I require that and I expect that out of 13 my people. 14 And I'll be honest with you. Since 1994 15 in bingo, I haven't received that many complaints. Our 16 complaints start off six, 700, you know, a year, and 17 they're down to, you know, just a little over -- you 18 know, 190 to I think 193 is where we're at today. So I 19 think we've been effective at going out there and 20 addressing the complaints. And we've taken pride in 21 saying that we do on-site visits to bingo halls instead 22 of, you know, calling up and not following up. 23 But the biggest thing is, again, quality 24 of investigative reports. Our legal staff and the 25 district and county attorneys and everyone that we've WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 31 1 dealt with as far as quality of our investigation have 2 gave us a ranking of extremely high. I mean, the reports 3 are well written. Whether it be a minor complaint 4 dealing with fail to pay prize as he said or a felony 5 arrest for playing bingo without a license, the quality 6 of the investigative report has been no short of 7 excellent. And I compliment the auditors. I don't think 8 they've been any short of excellent. 9 And I'll be honest with you. If you look 10 at the numbers from 600 plus -- and it's gone down slowly 11 over the years, it's down to 193 -- that shows that we're 12 effective when we're out there. And I think the public 13 expects some kind of balance out there. It's not the 14 audit that you come in and spend three, four weeks doing. 15 It's -- sometimes you've got to go in there and not be 16 announced and watch and listen because there's things 17 that happen in bingo halls that it takes a different 18 skill level than an auditor. 19 And sometimes, you know, in the hall, I 20 agree it's not that dangerous once we get in there. 21 Sometimes the areas of town and the places we go to are 22 dangerous. And bingo is played 7/24. And some of the 23 lottery retailers, the same goes there. Some are 24 dangerous in areas and parts of town where they sell 25 tickets and some aren't. And my guys adjust to that. As WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 32 1 law enforcement officers, they are given tools and 2 training. And that's the key thing, is training. 3 They're trained on how to handle themselves and do what 4 they're supposed to do to try to keep them from getting 5 hurt or anybody that they deal with from getting hurt. 6 But they do go out there. We have not 7 shied away and said, "Well, we're not going to go out 8 there because that's 3:00 o'clock in the morning and it's 9 a dangerous place of town. We're just not going to go 10 out there." 11 We don't do that. We go. My ladies and 12 guys all do that without hesitation. Now, we adjust as 13 far as what we do, and we've gotten new equipment that 14 makes our cases better. We film, we tape-record, and we 15 do a lot of things, you know, that -- a lot of 16 departments wish they had that equipment. The lottery 17 just furnished that. And we use it both for lottery and 18 bingo. And our lawyers think it's excellent work. And 19 we get, the majority of the time -- not all the time, but 20 the majority of the time, people plead guilty to our 21 cases because of the excellent investigations. 22 We don't intend to intimidate, scare or do 23 anything to people. We -- we respect being called 24 professionals. You know, we think that that's the key 25 thing, is being professionals. And I think on most WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 33 1 occasions when the investigators -- you know, the summer 2 heat is 110 degrees, and if a guy comes in and he has -- 3 you know, a routine officer, an investigator -- if you 4 look at APD, Houston PD or whatever, during the summer 5 they may wear a shirt like I wear with a gun and a badge 6 on the belt. That's common dress attire for a police 7 officer. That's not brandishing a firearm nor is it 8 brandishing a badge. That's just the way we dress. 9 Now, I think each of you that's been out 10 there and each of -- back here that has been out there 11 have seen that. We find it, you know, somewhat -- it's 12 not to us more than a challenge. But we have a couple, 13 three lessors that walk around inside their bingo halls 14 carrying a gun, and they have a right to carry. I mean, 15 it's not illegal that they do that. And our 16 investigators have talked with them. One of them lays a 17 45 on the table and says, Yeah. Let's talk. What do you 18 want to talk about? 19 It's a challenge. We do our work. And it 20 happens, but that's what they deal with in the real 21 world. We can sit here and talk about examples and 22 stuff, but the investigators -- you know, the way I judge 23 it is professionalism and quality of the work. And I 24 think if you talk to any lawyer, they judge an 25 investigator based on the quality of their work that they WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 34 1 present to them. If they have to go prosecute a case -- 2 and I think Kim would echo that -- or if it's a county -- 3 you can pick anyone in the state that we've dealt with 4 and look at the quality of our work that's presented on 5 bingo. And I think that's what y'all should expect, is 6 professionalism and quality, because we're representing 7 to you a profession; that we do it with that in mind. 8 And even if it goes to another agency, you should expect 9 that. You should expect quality investigation and 10 quality work, however it comes about. And I think that 11 that's what we do at the lottery. 12 And I will tell you again -- again, by 13 example, it's more positive. And the complaints I've 14 heard from Mr. Fenoglio I've never heard. I've never 15 heard from him nor have I heard from a person out there. 16 And if I had an officer that flipped his jacket back and 17 showed his gun and did something that I thought was 18 unprofessional, I would take care of that. That wouldn't 19 happen again. But I just don't think that happened 20 because I've never heard of that. 21 MR. TAWIL: Is a weapon for personal 22 safety? Is that what you're implying mostly? 23 MR. PITCOCK: No, I'm not implying that. 24 It's a tool to do their job. 25 MR. TAWIL: How do they use it in a hall? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 35 1 How would they use it? 2 MR. PITCOCK: It's just -- it's, again, 3 through training. They know when to use the weapon. If 4 there's something that -- 5 MR. TAWIL: Let's say someone won't 6 cooperate with them. They can't take him in. They can't 7 say, "I'm going to take you to jail." 8 MR. PITCOCK: No. 9 MR. TAWIL: They can't say, "Come on. 10 I've got the gun on you." They can't do -- 11 MR. PITCOCK: I'm just -- again, I'm 12 addressing his -- I didn't say that happened. 13 MR. TAWIL: Yeah. But, I mean, the gun is 14 strictly for personal safety is -- 15 MR. PITCOCK: I've never -- Saleem, I've 16 never heard of that happening. I've never heard of what 17 his example was happening nor have I seen -- 18 MR. TAWIL: No, I'm not talking about 19 that. I'm trying to -- I'm trying to support and 20 justify -- because of what you're talking about, 21 professionalism and all of that, I'm supportive, 22 100 percent, quality. 23 But what I'm saying to you, Mike, is I'm 24 one of your employees. I'm in a hall. I have no legal 25 right to order anybody to do anything with that weapon WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 36 1 whatsoever. 2 MR. PITCOCK: That's correct. 3 MR. TAWIL: Okay. It's only -- it's 4 similar to if I went to Travis County and asked for a 5 concealed weapons permit for my personal protection. So 6 that's what we're really saying about that weapon. 7 MR. PITCOCK: It's more than that for a 8 police officer. For -- 9 MR. TAWIL: They're not police officers, 10 Mike. Let's stop that. They're -- 11 MR. PITCOCK: No. Yeah, they are. 12 They're fully commissioned, trained, certified police 13 officers by the Penal Code, Code of Criminal Procedures, 14 and they meet all requirements in the State of Texas -- 15 MR. TAWIL: That's fine. But in terms of 16 the jurisdiction they have, they have no jurisdiction to 17 arrest anyone -- 18 MR. PITCOCK: Oh, yes, they do. They have 19 full jurisdiction to make full arrests and anything any 20 police officer from Austin PD, Houston PD -- there's no 21 difference. Our guys are fully commissioned and fully 22 certified police officers. 23 MR. TAWIL: Do they have that right in the 24 bingo hall to take someone in? 25 MR. PITCOCK: They have the right -- if WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 37 1 there's a violation that they see in their eyes that 2 justifies the elements of a case, they can make arrest. 3 MR. TAWIL: Okay. That's what I wasn't 4 clear on. 5 MR. PITCOCK: If there's two -- let me 6 change the example so -- to make it a little bit -- if 7 there was like -- they're in a hall and a fight breaks 8 out and, you know, they're starting to fight and hurt 9 each other or somebody, they can arrest somebody for 10 assault just like a cop on the street can. 11 MR. TAWIL: Okay. 12 MR. PITCOCK: Or that security guard that 13 they hire -- 14 MR. TAWIL: Let's deal with the 15 administrative rules -- 16 MR. PITCOCK: The security guard that you 17 hire at a bingo hall to guard, he -- you know, why are 18 you hiring him there? It's more of a presence. I think 19 Steve would tell you that. 20 MR. TAWIL: Right. 21 MR. PITCOCK: But if there's something 22 that breaks out, they have him there for a reason, to -- 23 you know, to take action necessary. 24 You could go hire Stanley Smith or one of 25 the security -- WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 38 1 MR. TAWIL: So it's primarily deterrence, 2 deterrence -- 3 MR. PITCOCK: What you're talking about is 4 Stanley Smith, and they wear a uniform. That's a visible 5 deterrent. You hire a commissioned officer for more than 6 that. You want the visible deterrent plus the ability 7 for him to carry out arrests and take care of action. 8 MR. TAWIL: Is there any cases wherein 9 your security personnel, in implementing the rules and 10 regulations that we all operate under, that they have the 11 right to use a weapon in those -- enforcement of those 12 efforts? 13 MR. PITCOCK: Yes. In playing without a 14 license, if there's something that breaks out -- let's 15 say that, you know, they're in there doing a search 16 warrant. It's not just that. Or any gambling offense, 17 if somebody pulls a weapon on them, they're going to take 18 necessary action. 19 MR. TAWIL: That's self-protection. 20 MR. PITCOCK: Self-protection. 21 MR. TAWIL: But in terms of someone says, 22 "You're not following the rules. I'm taking you in," 23 they don't do that? 24 MR. PITCOCK: I've never heard of that 25 in -- you know, I did narcotics. I've done the most WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 39 1 dangerous forms of law enforcement. And I don't just 2 walk in there and stick the gun in somebody's face and 3 say, "Come go with me." 4 MR. TAWIL: Yeah. 5 MR. PITCOCK: That's not professional. 6 That's not the way you do it. 7 MR. TAWIL: Yeah. Well, one of the 8 complaints I heard about in one of the halls up in 9 Dallas, a fairly large hall, where one of the -- one of 10 your personnel walked in right in the middle of a game 11 and having moved their coat or jacket or whatever aside, 12 since the primary operator wasn't in the room, they said 13 immediately, "Stop this game." 14 Well, then it created havoc. 15 MR. PITCOCK: I can understand that, but I 16 have to have more. I've never heard of this story. If 17 it was an illegal bingo session, they probably -- 18 MR. TAWIL: It wasn't illegal. It's just 19 the operator -- the primary operator was not in the room 20 and -- 21 MR. PITCOCK: Well, I would find that very 22 difficult to believe. I know the investigators in 23 Dallas. I would have to hear the complaint again. If 24 that was such a bad event that took place in Dallas, 25 knowing the people that are involved in bingo, they would WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 40 1 have called and complained on the 1-800 number or called. 2 I never heard a complaint in Dallas about that 3 happening, but I find that very difficult to believe -- 4 MR. TAWIL: They said Dallas area. 5 MR. PITCOCK: I find it very difficult. 6 If that's something that happened -- I mean, most people 7 are like yourself. They would call and say, you know, 8 Your officer came in here and did something -- 9 MR. TAWIL: Okay. 10 MR. PITCOCK: -- because I think the 11 society and the bingo players are very knowledge of what 12 professionalism is. And I would feel they would 13 complain. They would say that that's not called for. 14 And I have not heard those type complaints. 15 MR. NEINAST: Let me reiterate that the 16 issue before the committee is whether the security 17 division and the general counsel should be separate and 18 apart from the lottery division and be under the bingo 19 division directly. 20 I think the things that we are talking 21 about to this point are administrative things that could 22 be worked out regardless of whether the security division 23 is under the lottery commission or under the bingo 24 division. They're administrative things that don't 25 affect whether it should be a separate agency, and I WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 41 1 think the question on whether it should be a separate 2 part or separated from the lottery division in a separate 3 security division created within the bingo division is 4 whether the security division of the lottery commission 5 is responsive to the needs of the bingo division. And I 6 think the best one to answer that is Phil Sanderson. 7 MR. PITCOCK: Can I say a couple -- just 8 two more things? 9 MR. NEINAST: Sure. 10 MR. PITCOCK: To address that issue, I 11 think the transfer deal with the supervision of the 12 investigators by the bingo director -- and I'm not saying 13 against Billy, but it's one of those that -- you know, 14 the signing of investigations I think has to be totally 15 objective and without political interference or any other 16 interference as to who gets investigated, who does not 17 get investigated. 18 And I can tell you unequivocally that's 19 what goes on now. We don't listen to any politician that 20 represents bingo lessors, charities or whatever. If it's 21 a complaint, we try to treat everybody equally. That's 22 the key factor I think in this, is how they're assigned 23 as far as investigations. 24 The bingo director does get all of our, 25 you know, finished investigative reports. He is the one WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 42 1 that actually recommends punishment. It's reviewed by 2 him and the general counsel as to adequacy and 3 effectiveness. He gets a copy of all of our intake 4 calls. As far as every call that comes in, as far as 5 complaints against bingo, they get copies of. They get a 6 copy of that ledger of the calls. 7 The assignment of the investigations is 8 done through the investigative side or police side 9 through their supervisors. They actually assign the 10 cases based on priority. We have Priority 1, 2 and 3. 11 Based on how serious the incident, it's assigned to go 12 out. 13 Our investigators travel. They do both 14 lottery and bingo. That was one of the problems we had 15 is that when we undertook this that -- if you have five 16 complaints, when I first started, and three of them were 17 lottery and two of them were bingo in Texarkana, you 18 would have to send two different investigators to 19 Texarkana, two to do the bingo and three to -- you know, 20 one to do bingo and one to do lottery. And that was a 21 problem. 22 And so for a conservative manner, we 23 trained -- we cross-trained our investigators to do both 24 lottery and bingo. So mechanically you've got to 25 understand how it works. And again, that's just the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 43 1 mechanics of it. But again, when you come back to it, 2 you've got to look at the final product, is that are you 3 addressing the complaints that are filed by the bingo 4 industry and lottery and are they doing it effectively, 5 and then is the punishment that's necessary being 6 mandated to that. 7 And I stand in front of you and say, yes, 8 those are, and it's very high quality, you know, type 9 work that's being done by the investigators and the 10 auditors. And I think it leads Billy to the final 11 determination as to what does he do with that charity 12 operator, lessor, whatever that's in violation to make 13 the recommended punishment. 14 If that -- if there's a fallacy in that 15 system, I haven't seen it. I haven't seen the fallacy 16 nor have I seen the poor work or something there. If 17 it's there, it's just not, you know, evident to us. And 18 that's where -- I think when you start talking, you know, 19 about how that process works is first you've got to say, 20 "Is what we're doing effective?" 21 And those that I've heard speak, you know, 22 I don't think they know. I don't think they've seen how 23 the system works. And maybe we haven't been effective at 24 communicating how it works. That may be the problem, is 25 the ability to tell you how it works. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 44 1 But I think that they get complete 2 information and are able to make a decision based on the 3 industry. And it's reflected in what I look at, and I've 4 done this a long time. If the complaints are on an 5 increase and we're getting more complaints, then 6 something is not working correctly so that the level 7 should go down or remain at a level that's acceptable. 8 And that's where I see it in bingo at this time. And I 9 think it's because of, again, the professional auditors 10 and investigators that are out there doing the work. 11 That's all I've got. 12 MR. CASTILLO: I have a question at this 13 point. You aroused my curiosity saying that south Texas 14 was rather unique in some cases. It jumped the river and 15 gone. Could you give us an example? Because -- 16 MR. PITCOCK: Sure. 17 MR. CASTILLO: -- I know -- I was a bail 18 bondsman. Don't ever bail a guy out of Cameron County 19 because if it goes wrong, they will cross the border and 20 you're done. 21 MR. PITCOCK: It was down in south Texas. 22 But I think they were coming up into -- I think the 23 convention center out at South Padre -- Laredo. And they 24 were coming up. And we missed the first time. They were 25 set to schedule, and we set up, and they didn't show up. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 45 1 So we had somebody that was playing that would tell us if 2 they'd come up -- and again, they're not regulated, so 3 they set high stakes bingo, jackpots -- they usually 4 would base it on how many players that they had, but, you 5 know, it's one of those that they set up in a convention 6 center or leased a facility to run the bingo. 7 The second time, they -- we got word they 8 were coming, they did come. And our investigators 9 arrested them and seized all the assets and put it to the 10 courts in your county to take care of it. 11 But, you know, that's a case where, you 12 know, it took us a couple, three times to actually get in 13 sync. But they do it. And they will come up and do 14 that. And they do that all over the state. We've had -- 15 we call it ghost sessions in security. I don't know what 16 you call it. But we've had people that set up a bingo 17 operation just out of the blue, and then they operate 18 illegally with no license, no requirements and no 19 limitations that you have with licenses. 20 And if we can get the information, we try 21 to set up -- and again, having the police officer there, 22 you can effect the arrest. If not, you're not going to 23 do that. You can't effect the arrest because then you've 24 got to go to a court and file a case, and hopefully a 25 constable or somebody can go find them. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 46 1 You're not going to find them in Mexico 2 because you can't go down there anyway. But it's just -- 3 it's a futile effort of doing nothing. And they're going 4 to come back because they know that. They know there's 5 no deterrent because, "You can't catch us. By the time 6 you know about it, we're long gone." 7 It's like the latino scam we're doing with 8 the lottery. I mean, it's very, very difficult to catch 9 those people. But the cops study that and they try to 10 find that fatal error. 11 The one other thing I remember is 12 training. Your peace officers are required to -- and 13 mandated to take 40 hours every two years of training. 14 Just like any licensed professional, they have mandated 15 training. Administrative investigators don't have that. 16 So if you go to an administrative type investigator, 17 they're not required or mandated to take training. 18 I'm not saying they don't, because I 19 required it when I worked at the dental board. But, you 20 know, the required mandates of a peace officer, you know, 21 again, are there; that you have to have that. If you ask 22 for that type investigation, they have to meet the 23 mandates based on the law that's out there. 24 That's another thing that you need to 25 remember. Whatever y'all do is that you want quality, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 47 1 you want good investigators and professional. 2 MR. CASTILLO: The next question that 3 leads to that, once you have them, you have to take them 4 to MR. NEINAST: -- the county court in the jurisdiction 5 there? 6 MR. PITCOCK: That's right. It's filed in 7 the jurisdiction -- any of our cases that are criminal 8 are in the county that it's filed in. In lottery we have 9 a leeway because the statute -- lottery says we can file 10 in Travis County. They have statewide jurisdiction. But 11 in bingo, it's in the county that it's committed in. So 12 we have to follow their -- in Cameron County or in 13 Laredo. 14 MR. CASTILLO: Thanks. 15 MR. NEINAST: Thank you, Mike. 16 I'd like to call on Phil Sanderson now to 17 comment on -- really the question is is the security 18 division responsive to the needs of the bingo division 19 and the bingo industry. 20 Phil, could you comment on that? 21 It doesn't look like it's on. Is it on? 22 MR. SANDERSON: Chairman and members of 23 the VAC -- 24 MR. NEINAST: Is it on? 25 UNIDENTIFIED SPEAKER: Yeah. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 48 1 MR. NEINAST: Okay. 2 MR. SANDERSON: -- as far as the security 3 division's response to bingo, I'm personally not aware of 4 any conflicts, and there are other activities that 5 Security does for bingo besides investigating 6 administrative complaints. You do have some criminal 7 complaints that have to be investigated. They also do 8 background investigations, which you -- in order to do 9 that, you have to be a certified peace officer. There 10 are other investigations of the -- you know, the 11 manufacturing and distributor inspections. 12 I have read some of the reports. They do 13 have good investigative reports. Complaints are down 14 from when bingo first transferred over as far as in the 15 games themselves. 16 So, you know, as far as I'm aware, there's 17 not any -- well, the security division, as far as I know, 18 is meeting the needs of the bingo division. And it's 19 just a matter of the -- who reports to who. Maybe the 20 issue is, you know, what y'all are looking at today as to 21 whether the security investigators need to report 22 directly to the charitable bingo director or if they, you 23 know, go through the security director, who meets with 24 the bingo director on a regular basis. 25 MR. NEINAST: Okay. Mr. Heinlein, you had WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 49 1 a -- said you would like to address this item. 2 Again, if we can, keep it to whether the 3 security division should be one that reports directly to 4 the director of a bingo division. 5 MR. HEINLEIN: Hello. Good morning. I'm 6 David Heinlein with Jetta Management, accountants for 42 7 charitable bingo conductors. 8 And I would like to comment about the 9 activities of the -- Legal and Security being with the 10 Charitable Bingo Operations Division. I think enough has 11 been said about the security, so I want -- I really 12 wanted to address the legal part. 13 I saw Ms. Kiplin earlier, and I don't see 14 her here now. But I wanted to address it in reference to 15 what her activity is. 16 Our experience has been, it seems, that 17 the Charitable Bingo Division has sometimes not been able 18 to operate as efficiently as we would like to see them 19 operate in legal matters. And perhaps that reason might 20 be because they don't have the kind of direct supervision 21 over that particular area. 22 And it would seem to me that if they did 23 have direct control over the legal division and they had 24 some needs, they would be able to direct their legal 25 department to address their needs immediately and WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 50 1 expeditiously so that an answer could be given on any 2 particular legal issue, whereas if the general counsel is 3 for both the lottery commission and charitable bingo, 4 then there is a division and a conflict. 5 If, in fact, the lottery commission has 6 some pressing legal matters that would overwrite the 7 pressing legal matters that Mr. Atkins has or 8 Mr. Sanderson has, I would imagine that the lottery is 9 going to get first dubs on Ms. Kiplin's services. 10 So it would seem that there would 11 certainly be a great enhancement on the reporting time 12 frame if the Charitable Bingo Division had their own 13 general counsel and could operate within being able to 14 give the counsel directions for their needs. If there's 15 a question that needs to be voted on or needs to be 16 looked at and approved very rapidly, that general counsel 17 then could be able to do that. So we would support them 18 having the direct control and supervision over the legal 19 and security divisions. 20 MR. NEINAST: Any questions for 21 Mr. Heinlein? 22 MR. TAWIL: Is it your feelings that there 23 might be conflict in review of the rules and promulgating 24 of rules by not having a separate legal department? 25 MR. HEINLEIN: I don't know of any WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 51 1 specific example except that one of the issues that we'll 2 be talking about today has been a very long -- lengthy 3 time finding out if it's Legal. And I wonder if that's 4 because our bingo division does not have direct 5 supervision over the legal department. 6 And if that's hindering their being able 7 to expeditiously rule -- 8 MR. TAWIL: And give opinions. 9 MR. HEINLEIN: -- and give an opinion, 10 maybe Ms. Kiplin has got her hands full covering -- or 11 her plate's too full covering two separate types of 12 operations. And we might be better served if we had a 13 general counsel that would address those needs that we 14 have. 15 MR. NEINAST: Any other questions. 16 MR. HEINLEIN: Thank you. 17 MR. NEINAST: There was another gentleman 18 who wanted to speak earlier. Do we have a certificate 19 from you? 20 MR. GARRISON: Yes. I didn't check 4. I 21 checked 5 and 6, but I decided I would like to say 22 something on this. 23 MR. NEINAST: Okay. 24 MR. GARRISON: I think -- Gene Garrison, 25 Midland, Texas. I represent Daytime Bingo and B'Nai WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 52 1 B'Rith Men's Club. 2 Now, I think you're trying to get the 3 situation back where I think it ought to be. It's not 4 the effectiveness or efficiency of what's happening from 5 the security division or the legal division. It's should 6 they be on the same chain of command or should they not. 7 You try to draw an organization structure 8 of this -- of the -- of bingo, and you start with the 9 executive director. Well, then the outside comes in 10 with the security and comes in with Legal. And when 11 complaints arise -- and that's the problems that I've 12 heard, is that when complaints arise, then they say, 13 Well, that's Legal. And -- well, it's tied up in Legal. 14 We can't do that. 15 And that is where the problem is. This 16 problem should be a direct line of the chain of command 17 from the top to the bottom of the organization. You can 18 look at any basic business textbook, and it will show you 19 that. 20 We have an executive director that doesn't 21 have any authority in some areas that are critical to the 22 total operation. 23 Thank you. 24 MR. NEINAST: Any questions? 25 Okay. Thank you. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 53 1 MR. SANDERSON: I have a comment. 2 MR. NEINAST: Yes. 3 MR. SANDERSON: One thing that I would 4 like to say on the matter is the legal division is within 5 the lottery and the security division is within the 6 lottery. Billy and Mike and Kim, they meet on a regular 7 basis and go over all the complaints and all of the 8 issues and legal opinions and legal requests that bingo 9 has submitted or that security has referred up to legal. 10 From the beginning, when a complaint comes 11 in, we know about the complaint in bingo. The field 12 offices, the lieutenants and the audit managers get 13 together, and they discuss the complaint. And there are 14 some complaints that auditors do actually go out and 15 investigate. 16 As far as on the legal side, one thing 17 this -- you know, this is state government. We have an 18 FTE cap. There are a lot of activities going on both on 19 the bingo side and the lottery side. And, you know, 20 staffing may be more of an issue than where the staff is 21 located. 22 There's one attorney that is -- probably 23 80 percent of her time is spent doing bingo cases and 24 bingo opinions and agreed orders. We started doing more 25 requests for, you know, agreed orders and to finalize WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 54 1 complaints and finalize the audits that had violations. 2 The other option that we have is going to hearing and 3 just revoking a license or denying a license. And now 4 we're reaching some agreed orders that have lesser 5 penalties associated with those. 6 Legal also does open records requests for 7 us. There are -- weekly we get several dozen open 8 records requests. So it's not just legal opinions and 9 it's not just administrative hearings. So there are -- 10 there are other functions that both Security and Legal do 11 besides just hearings and just investigations. And like 12 I said, they meet regularly, and they go over the list. 13 They prioritize the ones that need to be, you know, moved 14 to the top, and they work together on trying to resolve 15 any outstanding issue that is out there. 16 MR. NEINAST: Thank you. 17 Let's take a ten-minute recess. We'll 18 reconvene at 11:12. 19 And I'd failed to mention that we do have 20 present Mr. Tom Clowe, chairman of the lottery commission 21 and also the bingo representative of the commission. And 22 if you have something you want to take up with him -- is 23 he still in or -- there he is. You can kick me later for 24 sicking them on you. 25 MR. CLOWE: No problem. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 55 1 MR. NEINAST: He's the chairman. If you 2 would like to visit with him, he's here, and I'm sure he 3 would be glad to listen to you. 4 (Recess) 5 MR. NEINAST: I would like to call the 6 committee back to order. 7 Okay. Mr. Young has asked if he could 8 address the committee again, and I'd be glad to have you, 9 Mr. Young. 10 MR. YOUNG: Thank you. Robert Young, 11 AMVETS, Post 77. Thank you for letting me come back up 12 here again. 13 One of the things that, you know, just 14 stirred me a little from the -- from what we were hearing 15 and, like you say, getting off a little bit on the legal 16 and security activities being a division of its own, what 17 was said a while ago about the attorney being 80-20, you 18 know, that may be satisfactory to some, but I think 19 100 percent bingo would more satisfy me. And I'm just 20 wondering if on the lotto side of it, only 20 percent of 21 their time being done to lotto, it looks like lotto 22 people would want attorneys that would spend 100 percent 23 of their time on lotto. 24 That's not satisfactory. And if this was 25 separated, we would have them doing 100 percent. Also -- WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 56 1 MR. NEINAST: Pardon me, Mr. Young. 2 MR. YOUNG: Okay. 3 MR. NEINAST: Clarification here. If I 4 understood Mr. Sanderson correctly, he said that that one 5 person spent 80 percent of her time on just one aspect of 6 bingo. That is -- I've forgotten what you -- Phil, you 7 said one of the ladies spent 80 percent of her time on -- 8 what was it? 9 MR. SANDERSON: 80 percent of her time on 10 bingo activities. 11 MR. NEINAST: Okay. Go ahead. I'm sorry. 12 MR. YOUNG: Yeah. That's what I'm saying. 13 MR. SANDERSON: And there are other 14 attorneys out there that also do bingo activities. 15 MR. YOUNG: Well, you know, to me, that's 16 unsatisfactory. I cannot see where you would have 17 several attorneys, if I understand you correctly, that 18 would spend 80 percent of their time on bingo and 19 20 percent on lotto. Looked like lotto is getting 20 shorted and so is bingo. So somebody -- it looks like to 21 me if you had a division, which this is what we're 22 speaking to, they would be completely separate, and they 23 could concentrate on bingo. Under the lotto, they could 24 concentrate on lotto. And it just looked like it would 25 be a better working situation from that aspect, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 57 1 especially if you have several attorneys that are doing 2 80-20 or 20-80 or 40-60 or whatever. 3 MR. SANDERSON: There are four attorneys, 4 I believe, plus the general counsel. 5 MR. YOUNG: Right. 6 MR. SANDERSON: And they handle everything 7 from contracts to agreed orders to administrative 8 hearings to requests for legal opinions, employee 9 relations. There's -- you know, there's a lot of 10 activities. 11 And like I said in the beginning, it may 12 not necessarily be whether or not they spend their time 13 doing bingo or lottery; it's just the fact that the FTE 14 cat that the legislature places on us that -- you know, 15 just the staffing itself -- 16 MR. YOUNG: Right. 17 MR. SANDERSON: -- that may be more of an 18 issue. 19 MR. YOUNG: Well, and I'm sure they're 20 quite qualified in everything else, but, you know, that's 21 like -- you know, I'm a firm believer in specialists and 22 what you do more of you're better at, I guess is my old 23 country way of saying it. But looks like to me, you 24 know, you don't go to an M.D. if you need heart surgery 25 or whatever. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 58 1 You know, that may be too far of an 2 example, but if they specialize in one area, which this 3 is what this is speaking to, they would be dealing only 4 with bingo, I think we would get faster results, and it 5 would make the people that are doing that an easier job 6 from a standpoint they would be spending 100 percent of 7 their time dealing with bingo, and the other division, 8 they would be spending 100 percent of their time doing 9 the lotto. 10 That's basically what I had to say on 11 that. 12 Also, talking about the security and the 13 police officers, in this day and time, especially -- I 14 think the majority of good Americans and especially 15 veterans, which, you know, I represent, that, you know, 16 we really believe in our police force. And I think here 17 in Texas we can be as proud as any. And, you know, I 18 want -- I just want to say we appreciate what you guys do 19 and -- you know, but we look at police officers as our 20 protection, and I would hope that they would be educated 21 and know when to draw that gun and when they don't, 22 because we don't hear too much of that. 23 But, you know -- you know, the difference 24 in protection and actually going in and doing an 25 investigation, if you had an investigator that went in WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 59 1 there, as was said earlier, that was plainclothed or 2 whatever and seen a major violation enough to be making 3 an arrest, there is ample police access to get police 4 officers or whatever to come in there and help them out. 5 I just -- I do not see the need of them 6 coming in there with weapons and -- plastered across it. 7 And, I mean, just common sense would tell you that if 8 Grandma is in there playing bingo and she sees somebody 9 coming in there to investigate or -- and they -- you 10 know, it just -- you know, they get to wondering are you 11 doing something wrong. I mean, that's just common 12 nature. If you seen an investigator walk into your next 13 door neighbor's house, you're going to be asking 14 questions. What's going on over there? What is it? Did 15 they do something wrong? 16 And, you know, even though everything 17 could be fine, it just brings questions. And at this 18 point in time with bingo down, we don't need that. And I 19 would never, ever knock what our police officers do. I 20 think they do a very fine job. 21 Also, I think if the investigators or 22 whatever name would be applied, security, whatever, these 23 people -- instead of being educated and spending the time 24 of police officers and what you do as police officers, 25 they can be spending more time and maybe having -- going WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 60 1 to seminars, schools or whatever to learn more about the 2 bingo and the bingo rules and regulations, which would 3 make them higher qualified. Not to say that the people 4 are -- that are doing it now are not qualified but to say 5 they could be more up to date because they would be 6 spending 100 percent of their time doing that, if I 7 understand this right. You wouldn't be having -- as was 8 said earlier, they would go off and they had -- wearing 9 two hats, going to one community dealing with the lotto 10 and bingo at the same time. 11 Yes, that would be two separate 12 individuals, but as has been stated and never rebutted, 13 that we carry our weight and then some on the amount of 14 money and what it costs to administrate bingo. 15 And I guess that's about it. 16 MR. NEINAST: Mr. Young, do you -- 17 MR. YOUNG: Till you spur me again. 18 MR. NEINAST: Mr. Young, do you have a 19 specific example of an action that was unnecessarily 20 delayed you think because of the general counsel not 21 getting an opinion or guidance to the bingo division? 22 MR. YOUNG: Personally, no, but I -- you 23 know -- you know, you hear. And I'm just hearing from 24 some other people that -- the amount of time and stuff 25 that it takes. Personally, no. To answer your question, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 61 1 personally, no. 2 MR. NEINAST: Any other questions of 3 Mr. Young? 4 Okay. Thank you, Mr. Young. 5 MR. YOUNG: Thank you. 6 MR. NEINAST: Mr. David Helton, you wanted 7 to address this topic. David Helton. 8 Oh, yeah. Okay. 9 MR. HELTON: No, sir, it wasn't this topic 10 I wanted to speak about. 11 MR. NEINAST: Would you -- pardon me? 12 MR. HELTON: It wasn't this topic I wanted 13 to speak about. It was some -- 14 MR. NEINAST: Okay. You had down Number 4 15 also. 16 MR. HELTON: Yes, sir. Well, I'm sorry. 17 MR. NEINAST: Okay. Have I missed anyone 18 who wanted to address -- yes, sir. 19 MR. HUTCHINGS: I'd like to ask a 20 question. 21 MR. NEINAST: Okay. 22 MR. HUTCHINGS: My name is Charles 23 Hutchings, AMVETS, Post 52, Dallas, Texas. 24 I'd like to address this to Mr. Sanderson. 25 Mr. Sanderson, in your years with the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 62 1 bingo division, has any of your auditors or anyone ever 2 been attacked at a bingo hall by someone running the 3 bingo hall? 4 MR. SANDERSON: We've had -- we have had 5 one instance that I know that they have pulled a 45 out 6 and set it down on the desk and said, "Now let's talk." 7 MR. HUTCHINGS: Okay. That would seem 8 threatening, but that's one incident. That's one 9 incident out of -- how many visits do you think the 10 auditors make? And did they actually threaten them with 11 the gun or was it that implied, landed up on the counter? 12 MR. SANDERSON: I think if there was an 13 actual threat, probably more would have been done about 14 the situation. 15 MR. HUTCHINGS: That's what I figured. 16 So... 17 MR. SANDERSON: But it's still 18 intimidating. There are -- as Mr. Pitcock said, there 19 are locations that are not necessarily located in safe 20 parts of town. Some of our female auditors do feel 21 reluctant in going to those places. They still do. 22 MR. HUTCHINGS: I can understand that very 23 well. 24 MR. SANDERSON: But, I mean, it's -- 25 MR. HUTCHINGS: But they don't carry guns, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 63 1 being my point. I mean, you know, the times that -- 2 well, what I mean -- or where I'm trying to go with this 3 is I cannot, for the life of me, think -- and I've not 4 heard of it, but that doesn't mean that it hasn't taken 5 place somewhere within the industry, and I've been around 6 it for quite a while -- of anyone, an operator or someone 7 running a bingo game that has physically attacked anyone 8 from the lottery, TABC, the comptroller's from -- any of 9 those people when they had it. I've just not heard of 10 that. That's the reason for asking the question. That's 11 just where I wanted to go with it. 12 And, you know, on -- I heard a while ago 13 that the number of complaints are down. I'm sure they 14 are, and I'm sure maybe, you know, the security division 15 has something to do with that. 16 Mostly what you get for complaints is the 17 ones that were stated up here: same person wins every 18 day, the same numbers come out of the machine all the 19 time, these kind of things. This is the majority of the 20 complaints. 21 And when bingo first started, everyone 22 that got upset about something would say, Well, I'll just 23 call in. I'll get you in trouble. I'll call down there 24 and tell them you did so and so. 25 Any of you that run bingo, you know that's WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 64 1 the way it was. And they did it, and someone came out, 2 you know, and looked around and everything just went on. 3 Well, over the years, they've quit that. 4 They found out they can't get you in trouble for that. 5 You know, someone will do it now and then. I can't think 6 of even having that done to one of the halls that I 7 represent or anything for a while. 8 But, you know, that's where the majority 9 of the complaints come from, is such things as that, or 10 it is in the Dallas area. I can't say for the whole 11 state. And that kind of stuff I think has drastically 12 dropped off. 13 And like I say, I'm not taking anything 14 away from the security division. You know, they have 15 never personally came into one of my places and flashed a 16 badge that I know of and showed their gun and really 17 tried to intimidate anyone, which, you know, I would 18 consider that -- and I would call in if that happened. 19 But there's a lot of people who don't. It could happen. 20 They just wouldn't call in. 21 So -- anyway, that's all I have to say. 22 Thank you for listening. 23 Any questions? 24 MR. NEINAST: Do we have -- do we have one 25 of these forms from you? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 65 1 MR. HUTCHINGS: You have one. I didn't 2 put this one on it. 3 MR. NEINAST: Okay. 4 MR. HUTCHINGS: Okay? 5 Thank you, sir. 6 MR. NEINAST: Virginia, you had a 7 question, I think? 8 MS. BRACKETT: I'm just -- kind of as a 9 point of information for myself, at the last meeting, we 10 did pass the motion that we would pursue becoming 11 separate from the lottery commission and be a bingo 12 commission. And I just wondered if that would not take 13 care of the problem and if that -- if we -- just kind of 14 a point of information, should that be what we're 15 pursuing at this point in time? 16 MR. NEINAST: In my opinion, it would kind 17 of muddy the water, I think, if we went in with a 18 recommendation or proposed legislation to create the 19 bingo division as a separate state agency and then go in 20 with another proposal at the existing division, be given 21 its own legal -- or general counsel and enforcement 22 division. I think we would be giving the legislature a 23 choice we wouldn't want to give them and say, Hey, this 24 is the cheapest and easiest way out. 25 Oh, let's give them their general counsel WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 66 1 and security division and they then should be happy. 2 So that's just my view -- 3 MR. TAWIL: I don't agree with that. I 4 don't think you have to go to the legislature to do what 5 we're talking about today. Is that -- Chairman Clowe, 6 can you advise us on this, sir? Is this under your 7 power, sir, and the other commissioners? 8 Because if it's not, we shouldn't even be 9 wasting our time on it. 10 MR. CLOWE: My name is Tom Clowe, and I'm 11 chairman of the Texas Lottery Commission. And I will 12 tell you that I think the question that you've asked is 13 one that bears further investigation if you want the 14 commissioners to look at that by way of bringing that 15 before them for a motion. 16 And one of the questions that's unanswered 17 in my mind about that is what Phil Sanderson commented on 18 earlier this morning, and that is the funding and the 19 allocation of full-time equivalents, FTEs, relative to 20 the funding of the lottery operation's budget as a 21 percentage of revenue and the bingo division's budget 22 being funded by specific funds as a result of the 23 legislation passed by each session of the legislature. 24 So it's a broader issue, and it's one that 25 in order for the commission to deal with, we have to have WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 67 1 some parameters set so we can understand whether funding 2 and people are available and within our jurisdiction. 3 So without in any way biasing myself, 4 because this might be something that I might have to vote 5 on later on, I will tell you there's some questions that 6 have to be answered before -- as I understand it, the 7 question you asked me can be fully answered, and that is 8 can the bingo division have its own security and legal 9 division. 10 MR. TAWIL: I just felt like that that was 11 a -- kind of a compromise. I don't hold a lot of hope 12 for the bingo to be a separate agency -- I haven't dealt 13 with the legislature since '94 within this industry -- 14 mainly because the bingo division is too small to be its 15 own -- this is my personal opinion. I'm not a lawyer, 16 but I just can't see it considering this day and age, 17 where we are in the world today, what our government has 18 to worry about in terms of taxation and deficit and so on 19 to create a whole new entity with administrative -- a 20 complete agency. I just don't see that. 21 And in my mind, what we're talking about 22 today is really a middle ground. And in the end it -- to 23 me the enabling act says bingo or lotto, a game of 24 chance. 25 We're in the right place in my mind, but WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 68 1 we're not being managed. And what most of the people 2 have proven -- and I myself feel the same way as most of 3 the people who are speaking -- we're not having the fair 4 due, what we have coming to us as a division. 5 And I know of a couple of instances where 6 things were deferred to Legal. It's like saying, Let's 7 send them to David Jones' locker. 8 We don't hear about it for a year. And 9 then we go through -- a good example is the instant bingo 10 we're going to be talking about today. You know, there 11 were rules that were proposed in 2000. This is 12 April 2002. I got a draft here about instant bingo 13 again. Where did it go in the meantime? 14 Well, have you talked to Billy? 15 Oh, it went to Legal. We'll see about it 16 later. 17 That's the problem, sir. 18 MR. CLOWE: Well, I understand that, and 19 that's why it's so educational and beneficial for me to 20 be here at your meetings and hear these folks give 21 testimony and comments to you. And I would like to say 22 this in regard to your direction. And, Ms. Brackett, I 23 think you brought up an excellent question. 24 The perfect venue in my mind is coming to 25 the lottery commission, and that is the Sunset Review. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 69 1 The Sunset Review is ready made for the concerns I think 2 that you folks have and you're expressing. The entire 3 lottery commission is undergoing review as to all of its 4 procedures and practices and its rules, and that includes 5 the operation of the instant games, the on-line games, 6 which is the lottery operation and the Charitable Bingo 7 Division. 8 And we have invited -- "we" being the 9 commissioners and the management of both the lottery 10 commission and the Charitable Bingo Division. We've 11 invited the Sunset committee members to come to all of 12 our meetings and see what we're doing. Those folks are 13 here in this room today, and they were here at the last 14 Bingo Advisory Committee meeting. And I think that's 15 wonderful that they're taking the time to educate 16 themselves and get this input. 17 Now, the staff is currently giving 18 overview presentations, and Billy Atkins has given his 19 overview presentation to the committee. We'll then 20 proceed very shortly to go into open hearings, and then 21 the Sunset committee will draft their report and they 22 will propose legislation. Then it goes to the 23 legislature. 24 And any kind of change -- everything that 25 is imaginable can come out of that Sunset Review. The WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 70 1 lottery commission can be abolished, and the duties of 2 the lottery commission can be put in some other agency. 3 I mean, that's how far on one side of the scale I can see 4 a result of Sunset Review. 5 And people have asked me, Well, what do 6 you think should happen? 7 And I say, Wait a minute. It's far too 8 early for that. Let's wait and have the input like you 9 folks are getting here today. 10 But the thing is, Ms. Brackett -- an 11 excellent point that you raised. You know, you come to 12 the commission and say, Well, we'd like to do this right 13 now. 14 The Commission may be focused on the fact 15 that they're going into Sunset Review and some big 16 changes are possible. And I would tell you I think 17 they'll be good changes, whatever happens. 18 So that's why I'm so pleased that you had 19 the meeting you had the last time. You're having this 20 meeting today, and I know that your chair is going to 21 report to the commission on the 26th, which is our next 22 meeting. And I think the timing is absolutely perfect, 23 and I'm convinced there are a lot of problems in the 24 operation of bingo in this state. I want you to know I'm 25 very concerned about the things that I've learned and I'm WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 71 1 hearing, and I'm very hopeful that the Sunset commission 2 will look into this and help us deal with some of these 3 issues. 4 And again, I want to say, in anything that 5 I'm saying to you this morning, it's as, one, 6 commissioner, giving you my read on the situation, trying 7 to be responsive to your question and in no way commits 8 me to any vote that I may have to make on some issue in 9 the future. I have to give you that disclaimer, so to 10 speak, because some issues may come out of your 11 recommendations that I have to vote on later on. But I 12 do want to be responsive to you. 13 MS. BRACKETT: Let me ask you a question. 14 MR. CLOWE: Sure. 15 MS. BRACKETT: In the Sunset process, when 16 is the right time for the consumer and the people in this 17 room to respond to the findings of the Sunset commission? 18 MR. CLOWE: I would defer to a higher 19 authority. The folks with the Sunset commission are here 20 in this room. And why don't we ask them to come up and 21 answer that question for you. I think they can tell you 22 when they would like to have your input. 23 MS. BRACKETT: They're not rushing up. 24 MR. CLOWE: They're going to come up. 25 MS. LUERA: Hello. My name is Michelle WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 72 1 Luera (phonetic), and I'm with the Sunset commission. 2 And to answer your question, pretty much 3 throughout the whole process, pretty soon we'll be 4 sending out interest group -- an interest group letter 5 where we seek people's feedback about lottery operations 6 and bingo operations, and that will be coming soon. 7 We will also be seeking input from 8 committee members, also from the commissioners. So I 9 would -- sometime soon you will be receiving a letter 10 from the staff to, you know -- and give you the 11 opportunity if you want to meet with us, stuff like that; 12 as far as the public, as well. 13 Like I mentioned, we'll be sending out 14 letters based on the agency identified. You know, 15 different state holders. And we'll be sending them 16 letters. 17 There should also be a Sunset notification 18 on the agency Web site so that the public can contact the 19 right staff person to talk about, you know, any issues 20 that they have with the agency. 21 So -- and then later on, after our report 22 has come out, when we have our recommendations for 23 changes in the agency, there will be a public hearing. 24 And also at that time, the public also has an opportunity 25 to testify to the commission -- Sunset commission members WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 73 1 and provide any new issues or say they agree with our 2 recommendations or don't agree, stuff like that. 3 MS. BRACKETT: Will these questionnaires 4 be sent to lessors and the charities and the primary 5 operators or exactly how would that be? 6 MS. LUERA: Well, we're still working on 7 that right now as far as who will be getting these -- 8 like you said, like a questionnaire, how to work that out 9 because I know they're -- I mean, like, for example, 10 lottery retailers, there's about -- I don't remember if 11 it's like 16,000 or something like that. I don't know. 12 I can't remember off the top of my head how many lessors 13 are here in Texas. 14 MS. BRACKETT: I'm really talking about 15 the bingo people. 16 MS. LUERA: Right. But I'm just saying 17 like different people that the agency licenses. We're 18 working that out right now as far as how it's going to go 19 out and how we seek people's input. 20 MR. CASTILLO: Ms. Luera, give us a 21 background as to how often the commissions are reviewed. 22 Every 12 years and then you get all this input? And if 23 they're going to do away with it, when, the next 24 legislative session or what? 25 MS. LUERA: This coming -- WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 74 1 MR. CASTILLO: Will you give us a 2 background? 3 MS. LUERA: Right. Most state agencies go 4 through a Sunset process, and that -- like you said, it 5 happens every 12 years. There are times where an 6 agency's Sunset date is moved up. 7 So if -- for example, when we make 8 recommendations, we're trying to -- our work, we're 9 looking at whether there is a need to continue the agency 10 and whether it's effective, whether it's efficient, 11 whether the operations of the agency should stay with the 12 agency or if they could be consolidated with another 13 agency like if there's overlap between two agencies. 14 We make recommendations. We could 15 hypothetically make a recommendation not to continue the 16 lottery commission. And then the Sunset commission 17 members will make decisions on our recommendations, and 18 then that all -- gets all translated into a bill. We -- 19 we'll draft a bill with our recommendations, and then 20 that goes through the process like any other bill. 21 I don't know if I've answered your 22 question, but -- 23 MR. CASTILLO: Well, last time we were 24 attached to the TABC. 25 MS. LUERA: Right. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 75 1 MR. CASTILLO: When were we separated from 2 them and put into the lotto commission or was the lotto 3 commission born and you've got the bingo commission 4 attached to it? 5 MS. LUERA: I'm not sure I understand your 6 question. I can -- 7 MS. BRACKETT: It was when the lottery 8 became legal, when the lottery was created -- 9 MR. CASTILLO: Has it been 12 years since 10 or -- 11 MS. LUERA: Well -- 12 MR. SPEED: Seven or eight years. 13 MS. BRACKETT: Yeah. 14 MR. CASTILLO: Seven or eight years? 15 MS. LUERA: If I remember correctly, this 16 will be the first Sunset Review for the lottery 17 commission. And like you had mentioned, the TABC -- 18 bingo was reviewed along with TABC when it was at that 19 agency. But now that, you know, it's obviously been 20 transferred to the lottery commission, we'll be looking 21 at the bingo part of the agency as well. 22 MR. CASTILLO: So it's important that we 23 have all the recommendations presented to you so that you 24 can -- 25 MS. LUERA: Well, right. We -- part of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 76 1 the Sunset process is talking with all the various state 2 holders and talking with agency staff, talking to board 3 and commission -- members of boards and commissions and 4 also with committees to talk about, you know, if you see 5 any changes that need to be added to the agency, stuff 6 like that. It's at that -- it's at this point where we 7 just get feedback from you all. 8 MR. TAWIL: Can you formally ask us for 9 participation or we just do it on our own initiative? 10 MS. LUERA: Well, like I mentioned -- 11 MR. TAWIL: I'm talking about as a group. 12 MS. LUERA: As a group? 13 MR. TAWIL: Yeah, the Bingo Advisory 14 Committee. 15 MS. LUERA: I mean, I -- I'm not 16 remembering offhand if you-all need -- I mean, we can 17 meet separately with members if that would be better for 18 you all. 19 MR. TAWIL: No. I'm thinking in terms of 20 we as a group -- 21 MS. LUERA: Uh-huh. 22 MR. TAWIL: -- advising the commissioners 23 and listening to our colleagues and partners in life that 24 we work with out in the industry -- 25 MS. LUERA: Uh-huh. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 77 1 MR. TAWIL: -- to where we, as a unified 2 group, have distilled the concerns of everyone in a 3 practical sense and then have that -- 4 MS. LUERA: Presented -- 5 MR. TAWIL: I think it would carry a lot 6 more -- 7 MS. LUERA: Uh-huh. 8 MR. TAWIL: -- in terms of y'all -- 9 MS. LUERA: Well, I'm sure if that's the 10 way you wanted to present your feedback to us, if you 11 want to -- 12 MR. TAWIL: Well, I'll defer to the chair 13 and see what... 14 MR. NEINAST: Well, you've been at both of 15 our meetings, this one and -- what more do you think we 16 could give to them? 17 MR. TAWIL: A written -- for example, what 18 we're talking about today would be a good example. You 19 know, what we ought to do is end up having -- it makes it 20 easier for our commissioners to know what we 21 altogether -- all of the minds combined come up with 22 recommendations that truly reflect the concerns of, as 23 they say, the stakeholders, which has to do with 24 everyone, the operators, manufacturers, distributors, 25 lessors, instead of -- I mean, honestly, you and I can WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 78 1 pick up -- or anyone of us, for that matter, can pick up 2 the phone and go see Ms. Luera on an individual basis. 3 And I don't believe that serves the 4 industry's best interest, as we are empowering as a 5 group. Our power comes through knowledge and not any 6 other way. And being able to present that in a concise 7 manner as a group I think would have more effect in their 8 considerations of what they make decisions on and how 9 they write up their proposal to the legislature. 10 MR. NEINAST: Well, as you know, I make 11 a -- what's called an executive summary of these meetings 12 that is furnished to the commission, and then I meet with 13 the commission the next meeting to elaborate on -- I try 14 to keep that executive summary as short as possible for 15 their -- so they can be able to read it; so the lottery 16 commission gets a complete report in one form or another 17 of what we do here. 18 If you're suggesting we have another 19 meeting to consider something else, we can certainly do 20 that. It would have to be an agenda item to be 21 published. If we're going to meet with a quorum, it's 22 got to be published and conducted as an open meeting 23 under the Open Meetings Act. 24 MR. TAWIL: Well, I'm making reference to 25 what we had last meeting and today and how many people WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 79 1 expressed concern. 2 In my mind, as Chairman Clowe was stating, 3 we really can't move into areas where he has to be 4 impartial in his votes. So that can't be a venue for us 5 as far as the Sunset commission. We should maybe 6 consider what was presented to us just now, is that we 7 make an opinion as a group, the Bingo Advisory Committee, 8 directly to them. 9 MR. NEINAST: Well, we will be, of course, 10 acting on each of these items. I'm just not following 11 you, Saleem, because we're going to be taking action on 12 each of these agenda items yes or no or deferred or 13 something that will be reported in writing and verbally. 14 I don't know what else -- 15 MR. TAWIL: To the Sunset commission I'm 16 saying. 17 MR. NEINAST: Pardon me? 18 MR. TAWIL: Directly to the Sunset 19 commission. 20 MR. NEINAST: I would not tell the Sunset 21 commission anything different from what I'm going to tell 22 the -- 23 MR. TAWIL: I don't think it's the same 24 thing, Mr. Neinast. I think if we deal with them with 25 the document, they will give that document attention. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 80 1 MS. TAYLOR: You weren't present at the 2 February meeting, so you might not be aware of the fact 3 that there was a motion and a second that -- 4 MR. TAWIL: Unanimous -- 5 MS. TAYLOR: -- a unanimous vote that you 6 were to write a letter on behalf of the Bingo Advisory 7 Committee to the Sunset Review. 8 MR. NEINAST: It's news to me. Thanks for 9 telling me. Since you were there and sharing that, 10 Virginia, I think you -- I mean, Suzanne, I think you -- 11 MR. TAWIL: I thought you were aware of 12 this. Okay. 13 MR. NEINAST: This is the first I've 14 heard of it. First I've heard of it. 15 I can do that. I'll have to go back and 16 review my notes, but -- 17 MR. RINEHART: Well, the motion was made 18 and surely it will be carried by someone to the Sunset 19 committee and whoever else it might need to go to to give 20 consideration for pulling out the lottery commission and 21 charitable bingo going on and standing on its own as a 22 state agency. 23 MR. NEINAST: Well, I can certainly do 24 that. I was not aware of the fact that there had been 25 such an action taken. And I'll be glad to do it. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 81 1 Thanks. 2 Thank you. Any further comments on -- 3 MS. TAYLOR: I have one comment that I -- 4 every time I hear about the jackets and I see the jackets 5 and it says "Investigator" on them, I don't understand 6 why -- this is the security division -- it just can't say 7 "Security" on the back of the jacket. Because I agree 8 with the investigator; when somebody comes in a hall and 9 they're wearing a jacket that says "Investigator," 10 immediately it's assumed that there is problem and 11 they're investigating because you're cheating or you're 12 stealing or there's a problem. 13 I would love to see the jackets say 14 "Security." It's the security division. And security 15 means a different thing in my mind than investigator. 16 And we all like to feel secure, and security is not a bad 17 thing. Investigator -- I just like the name on the 18 jacket. 19 MR. TAWIL: It means searching. 20 MR. PITCOCK: You know, we have several 21 jackets. We also have one that says "Police," you know, 22 across it. And that's when we do our search warrants and 23 stuff. We don't wear the investigator jacket. We wear 24 the police. 25 The investigator jackets were an idea for, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 82 1 you know, the investigators to identify themselves not 2 only for our facilities' security but, you know, when 3 they're out doing investigations. It identifies them as 4 to who they are. 5 In the cop world there's recognized terms 6 in the legal field that if you identify yourself as a 7 police officer and you're assaulted or something happens 8 in that job, that you've got to clearly identify 9 yourself. And the terms that they use are set out by 10 case law and different law that investigator, police, 11 whatever -- that way if they get in trouble or something 12 happens, a person can't say, Well, I didn't know he was a 13 cop or I didn't know she was a cop or whatever. 14 Security has a lot of connotations. Most 15 people would relate that to a security guard or someone 16 that is there for a visible deterrent. It doesn't 17 identify you as a police officer. 18 Investigator goes towards that direction, 19 and police is police. And we have those jackets also. 20 So it's one of those that -- you know, we try to stay 21 within what the law allows us to do to identify ourself 22 so that if something does happen, that -- if one of our 23 persons get hurt or assaulted or, you know, whatever, 24 that we reach that threshold as identifying ourself 25 because sometimes you don't have a chance to say, "I'm a WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 83 1 police officer." 2 If you don't identify part of the wardrobe 3 that's, you know -- again, a badge on a belt and stuff -- 4 that's laid out, again, by case law, as to how we are 5 identified. And to do that -- if we don't identify 6 ourself, then we're just like anyone else. If they get 7 assaulted or hurt, they haven't identified correctly as a 8 police officer. 9 Now, a small badge is hard to see and say 10 what does that -- you know, "What does that say?" 11 If it says "Investigator" or "Police" on 12 the back, then you know what those people are. 13 And we're not going to a bingo hall to 14 scare your customers off or to intimidate the players or 15 to whatever. I think a lot of you that's been 16 investigated, most of the time, the guys or ladies show 17 up after your session or before your session and talk 18 with you before you ever get started. 19 There are times when it necessitates that 20 we do it during the session, but, you know, it's one of 21 those that's just the way that it's operated and that's 22 the way it's done. And it's not there to intimidate or 23 scare anybody off. 24 And we have people -- actually, players 25 come and talk to us in the halls just like anybody else. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 84 1 And we are as friendly as we can be and talk to them and 2 try to answer their complaints, too. 3 Thank you. 4 MR. NEINAST: Okay. I think we've had 5 quite a bit of discussion primarily on the activities of 6 the security division. And again, I think most of the 7 problems can be worked out administratively. 8 I would like to comment, though -- since 9 this is involving two things, the general counsel's 10 office and the security division, I'd like to address 11 the secure -- the general counsel's office from the 12 viewpoint -- two viewpoints, really. 13 First, I am a retired attorney and spent 14 27 years in what could be considered a general counsel 15 role sometimes being the general counsel and sometimes 16 being assistant general counsel. And the other role is 17 needing the advice of the general counsel of the lottery 18 commission. 19 First of all, a general counsel is there 20 to answer basically questions that come into the office. 21 There is some prioritizing. It's usually done on the 22 basis of first question in is the first one answered. 23 Every once in a while you'll get something that is 24 labeled as high priority, and you give it that. 25 My contact with Kim's office, the general WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 85 1 counsel's office, has been nothing but the best. You 2 couldn't ask for any faster service. Frequently when 3 Billy and I are in discussions on something, one or the 4 other of us will say, Well, we ought to get Kim's advice 5 on this. 6 And we do, and we get very prompt response 7 on every one of those. And it's not, in my opinion, just 8 because I happen to be on the advisory committee. 9 Saleem, in response to your complaint 10 about the pull-tab. I take full responsibility for that. 11 It's not Kim's responsibility. I tried to get that done 12 from -- in-house here; assigned it to a member. I did 13 not stay on his tail to get it done. And you can't lay 14 that in either Billy's bailiwick or the general counsel's 15 office. 16 MR. TAWIL: I got -- 17 MR. NEINAST: That was my -- I take full 18 responsibility, and I'm sorry. 19 MR. TAWIL: That's okay. The reason I got 20 involved, I guess, is that I'm not inhibited in any way 21 nor do I have an agenda. So I'm kind of a catchall from 22 a lot of people that are willing to talk to me because 23 they know I will just bring it up if there's a concern, 24 issue. 25 And this came to me from the industry out WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 86 1 there where I was called. They said -- you know, this 2 has to do with talking about us being ineffective. 3 They said, Yeah. Y'all are so effective. 4 I wish y'all would do something about the pull-tabs. 5 I said, What do you mean? 6 He says, Well, y'all dealt with it in 7 2000, 2001. It's 2002. We're going to talk about it 8 today. 9 It don't take that long to make a rule, 10 and I agree with all those people. 11 MR. NEINAST: I agree with you 12 100 percent -- 13 MR. TAWIL: But the negative impact, 14 Mr. Neinast, doesn't help the process. That's the only 15 reason I was bringing it up to you, sir. 16 MR. NEINAST: Okay. I brought it up. And 17 I agree with everything you said. 18 MR. TAWIL: Okay. 19 MR. NEINAST: But you laid it at the feet 20 of the general counsel, and you were just put -- 21 MR. TAWIL: No, no. I -- 22 MR. NEINAST: You were putting it at the 23 wrong door. It should have been at my door. And I 24 accept responsibility, and I apologize. 25 MR. TAWIL: All right, sir. I'm sorry if WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 87 1 it came across as the legal counsel's door. I was just 2 told that it went to David's -- I mean, to -- not David 3 Jones' locker. It went from Billy to legal counsel and 4 it never came back. 5 MR. NEINAST: Okay. 6 MR. TAWIL: And that's kind of a sad thing 7 to be hearing from the people out there whose total 8 livelihood depends on surviving whether they make that -- 9 make their margins or not. And if pull-tabs are going to 10 be the thing that keeps them in business, I do have a 11 heartfelt feeling for them. 12 MR. NEINAST: I agree with you, but again, 13 you gave that as an example of why there should be a 14 separate general counsel for the Bingo Advisory Division. 15 And I'm saying the example you gave does not have any 16 feet because it was not the general counsel's fault. 17 It did not -- 18 MR. TAWIL: Let me give you another 19 example, sir, is that it was said to me personally by a 20 member of the legal staff that "the bingo division is a 21 client of ours." To me, that was kind of a -- being in 22 business for 30 years, I know what the definition of a 23 client is, and I don't believe Legal should be looking at 24 bingo as a client of theirs. 25 They should be subordinate to the bingo WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 88 1 division. They're an employee of the division providing 2 services and needs of the division and the industry. 3 They're not above them. 4 MR. NEINAST: Well, I disagree with you on 5 that, too. See, coming from a -- being a general 6 counsel, I considered the people we were representing as 7 our client. That's the way a lawyer looks at it. 8 MR. TAWIL: Oh. 9 MR. NEINAST: They are our client. 10 They're our only client, but they're our client. That's 11 just -- you might call it legalese. But again, I don't 12 want -- 13 MR. TAWIL: I'm an engineer, sir, not a 14 lawyer. I'm sorry. 15 MS. TAYLOR: Back -- I will give you 16 credit for it's your fault that -- from the first meeting 17 that you indicated they did not bring a definition to the 18 next meeting. And I will give you full credit for that 19 because back in February of 2001, that's what the two of 20 you were supposed to do. 21 But at the next meeting, Billy Atkins did 22 tell us that the staff was at that time currently working 23 on a definition for -- a new definition to be an expanded 24 definition and a broader definition for pull-tabs. 25 And at each and every almost consecutive WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 89 1 meeting since then, I've raised the same question and 2 asked where it is. And at each meeting, we've been 3 told -- and if you go back and look in the minutes, I'm 4 sure you can find it because I did -- where they were 5 still working on a definition because this was not 6 something that was going to be done very fast because 7 they want it to be a comprehensive definition. So -- and 8 it wasn't ready yet. 9 So each and every meeting that we've asked 10 about that, staff was working on that, which made it seem 11 to me that obviously this wasn't a top priority on the 12 agenda. And I think the advisory committee has been very 13 vocal in that it is a top priority and bingo needs this 14 and the industry needs this. And it should have been a 15 top priority. 16 So I will give you full credit for the 17 first three months, but after that, I think that we can 18 lay the blame back on it not being as an important thing 19 as coming up with new audit rules. 20 MR. NEINAST: But is that staff or Legal? 21 The question is is Legal -- general counsel not being 22 responsive to the -- 23 MS. TAYLOR: I believe that that goes back 24 into the legal because the staff has to feed the 25 definition through the legal department. So I'll just WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 90 1 lay it on the whole lottery commission. 2 I would like the pull-tab rule. And we've 3 been asking for it for a long time, and I think it should 4 have been far more important than new audit rules which 5 managed to be produced, a whole lot of them. 6 MR. NEINAST: Okay. Any further 7 discussion on Item Number 4, the consideration of and 8 possible and/or action on the inclusion of legal security 9 activities -- 10 MR. CASTILLO: I just -- excuse me. I 11 just remember the definition of the Code of Ethics for 12 the attorneys. I think that the attorney is an attorney, 13 and the committees or the bingo, whatever, they're lay 14 people. And so that's why they refer to them as their 15 client. Even if it's -- even if the committee or the 16 commission or whatever is their boss, their legal ethics 17 require that they treat them as clients. 18 MR. TAWIL: Mr. Castillo, as an 19 engineer -- a practicing engineer in past years, my 20 clients were the ones that told me what to do and set the 21 timetable. I didn't set it as an engineer. And I'm sure 22 the lawyers that -- Mr. Fenoglio can tell you that the 23 client makes most of the decisions on how and when things 24 happen. 25 MR. CASTILLO: He'll pay, but he's under WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 91 1 the advice and guidance of the attorney. And if he 2 doesn't take it, that's his problem. He's still going to 3 pay. 4 MR. TAWIL: But do you get what I mean in 5 terms of the division needs to -- if Billy tells them 6 that this is a priority, that's the end of it right 7 there. It needs to be handled. But he can't fire his 8 attorney where you can in private sector. 9 MR. SPEED: Let's not turn this into a 10 legal seminar. We'll let Steve and some other lawyers do 11 that. 12 MR. CASTILLO: All right. 13 MR. NEINAST: What is the committee's 14 desire on this issue that's before the committee, Item 15 Number 4? Is there a motion? 16 MR. RINEHART: Well, I'm like Virginia. I 17 thought this would come under our motion we made at the 18 last meeting, that this would be included in that motion 19 that you move security and everything into charitable 20 bingo as a separate organization. 21 MR. NEINAST: And, of course, that would 22 definitely follow -- if there were a separate agency -- 23 MR. RINEHART: Yeah. 24 MR. NEINAST: -- it would follow that they 25 would have to have -- WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 92 1 MR. SPEED: That's my opinion also. 2 MS. TAYLOR: I think that the reason this 3 was put on the agenda and that it was brought up is 4 because the idea of a separate bingo agency or a separate 5 commission for bingo under the lottery commission -- in 6 the lottery commission, I should say, a separate agency 7 within an agency is something that could happen. But it 8 won't happen until the legislature meets, and then it 9 won't happen until the laws are enacted, which would 10 probably be next September. 11 And I'm talking, you know, two Septembers 12 down the road here, whereas I really think the reason 13 this was put on the agenda is because this is something 14 that has a possibility of happening a lot sooner, not to 15 take away from the other item, which I hardly agree with. 16 I'm kind of caught on this, too, because I 17 don't want it to water down and make it look like it's 18 okay to stay with the lottery commission if we have this 19 because I really think -- and I love you coming to the 20 meetings, Mr. Clowe, because it's really great to see 21 somebody is interested in bingo because it's the first 22 time we've really had this. But I would love to see you 23 be a separate bingo commissioner, too, and not be 24 beholding to the lottery commission. So I would love to 25 have you as a member of the bingo commission. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 93 1 But be that as it may, I think that this 2 is something that has the chance of happening a lot 3 sooner than we can possibly see bingo becoming separate. 4 And I have to agree with Mr. Young. I 5 would love to see people put 100 percent in just for 6 bingo. I think that most of the people that are working 7 for bingo do a great job. But I would love to see 100 8 percent effort and see the concern for bingo only and for 9 everybody to know that if bingo doesn't succeed, their 10 job is on the line. Whereas now, you know, they're a 11 member of the lottery commission and part of their job is 12 bingo and part of it is the lottery. And if bingo fails, 13 well, there's always the lottery. 14 I just feel that it would make everybody a 15 lot more concerned about bingo and how bingo was doing 16 and the operation and the regulation of bingo if it meant 17 their job was on the line. Bingo. You know, bingo, 18 100 percent of their lives. 19 So that's why I'm really caught on this 20 particular item because I understand the reason for it 21 and I -- but I don't want to water down the big picture 22 either at the same time. 23 MR. NEINAST: Would you like to make a 24 motion yea or nay? 25 MS. TAYLOR: I don't even know which way I WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 94 1 would vote. 2 MR. NEINAST: Is there a motion from 3 any -- 4 MR. TAWIL: Let me ask a question, sir. 5 What would the difference be if we had everything with 6 the exception of the commissioners within the lottery 7 commission? What would be the -- in other words, if we 8 had a separate agency is one thing. But if 9 Chairman Clowe and the other commissioners were to see 10 their way through the process to have all of the elements 11 as a separate division, including just the -- where 12 the -- right now the -- there's two different 13 administrative heads that talk to the commissioners. And 14 so if you had the staff, including Legal and Security and 15 everything, under bingo 100 percent, they would be 16 reporting up the line to the same three commissioners. I 17 don't see that being too different than being a separate 18 agency, in other words, as opposed to continuing like we 19 are and getting turned down in the future. 20 MR. NEINAST: The only difference I can 21 see, Saleem, would be that -- let's take the motion that 22 we acted on last time to create the division as a 23 separate agency. That would have to go no further than 24 just you make the recommendation to the agency and they 25 say, Okay. We're going to go. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 95 1 Now, even though we have the separate 2 Legal and -- or the bingo has its own legal and security 3 division, we would still have to make a recommendation 4 through the -- to the lottery commission. It would still 5 have to go through the lottery commission -- 6 MR. TAWIL: Sir -- 7 MR. NEINAST: -- still would have that 8 additional step. 9 MR. TAWIL: The preamble of the act says, 10 Bingo or lotto, a game of chance. 11 Okay? I don't see any way of getting out 12 of that. I think that we would not be allowed, just on a 13 legal basis, legal terminology, unless you change the act 14 to be separate. You can ask these lawyers. 15 MR. NEINAST: Unfortunately, the other 16 game of chance -- 17 MR. TAWIL: Your lawyer. 18 MR. NEINAST: -- the racing -- you've got 19 other -- you've got other games of chance also. You have 20 racing -- 21 MR. TAWIL: Racing commission. 22 MR. NEINAST: Okay. But it's a game of 23 chance. 24 MR. TAWIL: It's horses. 25 MR. NEINAST: Okay. But you still have WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 96 1 other games -- 2 MR. TAWIL: No. Bingo is lotto, though. 3 MR. NEINAST: Okay. 4 MR. RINEHART: We had bingo before we had 5 lottery, did we not? 6 MR. TAWIL: But it's still lottery. Go 7 back and look at the history of bingo. It is lotto. 8 MR. RINEHART: Well, it may be, but we had 9 bingo when we began before lottery came in to -- 10 MR. TAWIL: That was the only form of 11 lotto we had, sir. 12 MR. RINEHART: I realize -- 13 MR. TAWIL: Bingo is lotto. We've got to 14 recognize that. You can ask anybody that's researched 15 this subject in any detail. 16 Let's not glaze our eyes from the concept. 17 And I don't believe the commissioners would be interested 18 in getting rid of us anyway. I believe that if we could 19 just get our grievances through administrative control 20 and management and Legal separated, everybody would be 21 happy, because then we have a direct line of 22 responsibility, as Mr. Young pointed out, up the line. 23 Right now they shuffle things back and 24 forth. Security or Legal, which one would you like? How 25 much delay do you need? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 97 1 MR. RINEHART: The only thing we can do, 2 Saleem, is give them our recommendation and hope that 3 they would see our side of it. And I know there's a lot 4 of sides that have to be covered. And I would just hope 5 that they would come forward and see our side of -- and 6 our needs for different organizations. 7 MR. NEINAST: Regardless of the 8 definition, there is just a wide -- couldn't be further 9 apart on the purpose of the two lottos, if you want to 10 call it that. 11 The lotto is to generate funds for the 12 State of Texas. 13 MR. TAWIL: Yeah. A single entity -- 14 MR. NEINAST: And bingo is to generate 15 funds for charities. And it does have a little side 16 effect of generating some funds for the state. 17 But in my opinion, those two are just 18 complete opposites. And the purpose of the lotto, if you 19 want to call it -- 20 MR. TAWIL: But they're both nonprofit, 21 sir. The state -- they've got a single license and they 22 do it statewide. And then the charities get -- they're 23 nonprofit. They do it on a county-wide basis in a legal 24 sense. 25 MR. NEINAST: Well, I think there's a wide WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 98 1 difference. 2 Again, we're getting nowhere with this. 3 We need a motion to either recommend that the legal and 4 security activities be established as independent parts 5 of the Bingo Operations Division or a motion that they be 6 left as is. 7 MS. BRACKETT: I move that the legal and 8 security activities become part of the bingo -- 9 Charitable Bingo Operation Division. 10 MR. TAWIL: I second that motion. 11 MR. NEINAST: Any further discussion? 12 Okay. The motion is that the legal and 13 security activities be established as independent parts 14 of the Charitable Bingo Operations Division. 15 Call to question. All in favor, aye. 16 SPEAKERS: Aye. 17 MR. NEINAST: Opposed, no. 18 Motion carried. 19 MR. TAWIL: Thank you, sir. 20 MR. NEINAST: Okay. It's a little past 21 12:00. I'll call a lunch recess until 1:30. We will 22 regather at 1:30. 23 MR. NEINAST: It is 1:30. Back in 24 session. All the members are present who were present 25 this morning. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 99 1 We move now to Item Number 5, which is the 2 consideration of amendments to 16 TAC Section 402.554 3 concerning Instant Bingo. 4 And Mary, you are a committee member with 5 the responsibility of chairing that one. 6 MS. MAGNUSON: Thank you. 7 Before I begin, I want to do one thing, 8 and that is apologize to all the members of the BAC for 9 missing the last meeting. I felt so rotten that I just 10 couldn't get on an airplane and fly down here. 11 My intent at the last meeting was to have 12 prepared this draft and give it to you personally upon my 13 arrival. When it turned out that I wasn't able to come, 14 things sort of evolved differently than I had 15 anticipated. But I understand that Jay Thompson did a 16 nice job presenting a draft to you. And at a minimum, 17 the whole issue was placed in the record and on the 18 agenda for consideration. 19 By way of background, I -- this is only my 20 second meeting on the BAC. And I was nominated last 21 August to replace Fabian Hoffner, who was the executive 22 director of NAFTA, the group that I represented. 23 And since we didn't have a meeting until 24 February, February was my first meeting. And it was a 25 meeting where I sat here trying to absorb a lot of what WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 100 1 was going on in Texas and a lot of the concerns that the 2 people attending the meeting had. 3 And what became readily apparent 4 throughout the meeting was that there were a number of 5 people in the audience who consistently came forward and 6 told us that bingo in Texas is bleeding to death and that 7 if something isn't done immediately, there are going to 8 be more and more charities who are going to go out of 9 business and more and more worthwhile causes that are not 10 going to have the funding that they so desperately need. 11 One of the things that those people 12 consistently said to us was, Please help us try to figure 13 out a way to put a shot in the arm in this industry so 14 that we can continue to survive. 15 It's my understanding that over the course 16 of the last couple of years one of the things that has 17 been repeatedly discussed by this body has been looking 18 for ways to look for perhaps some new products or some 19 new style of products that might be introduced into Texas 20 that the players might find interesting and that might 21 serve as a basis for generating some additional revenue 22 for the charitable organizations that are conducting 23 bingo. 24 Specifically, those products have, in many 25 instances, revolved around instant bingo and the products WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 101 1 that might be available to use by the charities under the 2 definition of instant bingo. 3 For a long time, Texas has had a very, 4 very restrictive rule on instant bingo, and it wasn't 5 until three years ago, I think, that the legislature, in 6 my opinion wisely, actually put the definition on 7 Pull-Tab bingo in the statute and allowed charities then 8 to use a more conventional Pull-Tab or instant bingo 9 ticket rather than a simple bingo format ticket that had 10 been -- what had been played in the state since the 11 inception of instant bingo back in -- it was the 1980s or 12 something. 13 So I think we are looking toward some 14 continuing evolution of the types of instant bingo 15 products that are available in Texas and hoping that 16 maybe if there's a greater variety of product available, 17 there might be some additional revenues that can be 18 generated by the charities who are finding it so hard to 19 simply make money in this business. 20 So hearing all of that and listening to 21 what was a considerable amount of frustration on the part 22 of the people who came to the table for not having 23 anything happen for the last couple years, I took it upon 24 myself to just sit down and write some amendments to the 25 instant bingo rule solely for the purpose of getting WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 102 1 something on the table for discussion and consideration. 2 From my perspective, just because a lot of 3 you don't know my background, I've been really doing 4 legal work in this area for about 15 years and have 5 worked in virtually every state in the country that deals 6 with bingo and instant bingo. 7 So to sit down and do it, I didn't make 8 things up that haven't been done elsewhere. Anything 9 that I put in the draft are things that have been tried 10 and succeeded in other areas of the country. It's not a 11 draft that is something that I just pulled out of air and 12 said, Gee, we've never tried this before, but, hey, let's 13 try it in Texas and see if it works. 14 It was a draft of basically tried and true 15 products that have been around for a long time in various 16 other parts of the country. They simply haven't been 17 available in the State of Texas. 18 So I also took largely into consideration 19 the parameters that were set by the Bingo Advisory 20 Committee at the February meeting. And if you will 21 recall, we passed a motion at that meeting that said that 22 we would support amendments to the instant bingo rule 23 that contained essentially three things. 24 The first was a definition of instant 25 bingo that would permit sealed cards and bingo event WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 103 1 tickets. The second was an amendment that would 2 eliminate the Texas Lottery Commission's seal on the 3 tickets. And the third was an amendment that would 4 streamline or shorten the approval process for tickets so 5 that tickets could get into the marketplace a little bit 6 quicker than is currently the practice. 7 So with those parameters in place and not 8 going beyond the parameters that were set by the Bingo 9 Advisory Committee, I simply drafted a draft of an 10 amendment that was presented to you by Ms. Thompson at 11 the last meeting and that for the last three weeks has 12 been available for review by the bingo division and by 13 the lottery legal counsel's office for any input that 14 they deem to be appropriate. 15 So I think if you would like -- I know 16 we've all had an opportunity to look at it. I can go 17 through it and explain some of my rationale for what is 18 in there or we can simply open up discussion on the 19 presumption that you've all had the opportunity to look 20 at it and may have questions or comments. I'm sort of -- 21 it's up to you at this point, Mr. Chair. 22 MR. NEINAST: Well, rather than go through 23 it you might say line by line, I want to point out to -- 24 we've got two different versions here -- not two 25 different versions but versions submitted by -- one by WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 104 1 Mary and one by the staff for our comparison. 2 Why don't we, first of all, the committee, 3 discuss these two before we open it up to discussion from 4 the audience. 5 In my opinion, I much prefer Mary's 6 version to the staff's because, for one thing, I think 7 that your definition of instant bingo and card and 8 instant bingo game is much more flexible and I think it 9 will allow a lot faster approval of more type games. 10 In my opinion, the draft by the staff has 11 too much detail, and there just -- it limits -- again, 12 we're getting back to the point that we are at right now 13 where there is just such a limited number of games that 14 can be brought in and get approval. 15 So I think that the broader -- the general 16 definition that Mary has suggested is much better than 17 what's submitted by the staff. 18 Those are my comments, and I'll open it to 19 other members of the committee. 20 MS. TAYLOR: I'd like to make a comment. 21 I'm in complete agreement with you. I see 22 that the one that the staff has given us has expanded the 23 definition to include more, which was one of the things 24 that we had asked for, but it did not eliminate the seal. 25 The seal is contained throughout this that the Texas seal WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 105 1 has to be on there, the lottery commission's seal. And 2 the third thing it didn't do was it did not streamline 3 the process. 4 So I'm in complete agreement. I like 5 Mary's best. It's a whole lot better than the one that 6 was presented by the lottery commission's staff. 7 MR. NEINAST: Any other comments by 8 members of the committee? 9 MS. MAGNUSON: I'm just -- I wasn't going 10 to get into the staff draft, but I'll just point a couple 11 of things out. 12 The staff draft -- in my -- in the draft 13 that I've prepared and Steve Fenoglio was kind enough to 14 put into appropriate rule making form for Texas, I 15 attempted to eliminate the seal on the ticket. But 16 because I know that the commission will have some 17 concerns about security, I replaced it with a seal on the 18 flare card that accompanies each game and then also 19 drafted in the rule a requirement that the flare card has 20 to be posted at essentially the point of sale where the 21 tickets are sold. 22 The point in doing that is so that you can 23 still look at a game and very easily discern that it is a 24 game that was designed for the State of Texas and has the 25 appropriate Texas Lottery Commission seal on it. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 106 1 I do want to reiterate that with the 2 exception of Texas, New Hampshire is the only state in 3 the country that has a ticket seal. Most states have 4 either never had them or have gotten rid of them because 5 they, quite frankly, are not particularly effective for 6 any purpose whatsoever. 7 I did, however, know that there would be 8 concerns about elimination, and total elimination might 9 be a little too much too fast, so I opted to put it on 10 the flare card rather than on the ticket. 11 The approval process that I incorporated 12 in here I actually just lifted from the State of 13 Minnesota. And I took Minnesota's approval process for 14 two reasons. One most -- for those states that do have 15 an approval process, many of them are not very detailed. 16 It simply says, We will approve tickets, but it doesn't 17 give you any standards or guidelines or the information 18 that needs to be submitted. 19 Minnesota has some very specific 20 requirements on what needs to be submitted for purposes 21 of approving product. Quite frankly, I think it's a good 22 amount of product that comes in. I think at the last -- 23 at the February meeting I told you that there are 24 probably upwards of 20,000 different games approved for 25 sale in the State of Minnesota. Just in the month of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 107 1 December of last year, there were 308 different forms 2 that were approved, all of which were approved within a 3 30-day period by the three people at the gambling control 4 board that are responsible for doing that approval 5 process. 6 It's not a cumbersome process. It is one 7 that is effective, but at the same time, it allows for a 8 little more of a streamline process than what's currently 9 in place in Texas, which involves artwork as well as 10 three complete deals of the product that have to be 11 tested before the game can go into play. 12 So, again, it wasn't a process that I made 13 up. It was a process that I simply lifted from another 14 state because it had proven to be effective for the last 15 20 years, something like that. 16 With respect to the staff proposal, 17 there's a couple of things I want to point out. One is 18 that it not only does not eliminate the seal on the 19 ticket, but it adds a seal on the flare so that instead 20 of having just a ticket seal now, there's a ticket seal 21 and a flare seal. Rather than streamlining the process, 22 it adds to it. 23 The approval process contained in the 24 staff draft is actually more detailed than what is 25 currently in the rule in Texas. Although, I have to say WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 108 1 I don't know that they've made it more complicated. I 2 think all of the policies and procedures that have been 3 adopted over the last couple of years seem to simply have 4 been codified into this particular draft. 5 So I don't think I can say that it's more 6 cumbersome than currently exists. It's more detailed 7 than currently exists in the current rule, but it seems 8 to be fairly consistent with the policies that have been 9 adopted sort of intimately by the staff over the last 10 couple of years as they have gone about approving games. 11 The third thing I want to say about the 12 staff rule is that it mentions or describes a number of 13 games -- 11, I think -- that currently would not be 14 permitted in the State of Texas. And those games include 15 bingo event tickets, which I think we all support. 16 There's some reference to seal cards but no definition of 17 seal cards, and so I don't know that that's necessarily 18 clear. There's also some definitional language or at 19 least descriptive language with respect to PunchBoard, 20 Paddlewheel tickets, tri-wheel Jar-tickets, single window 21 Popp-ettes type tickets, You-Pick'em Bingo and TipBoards. 22 And I have to say that I do not want to do 23 anything to discourage the staff from exploring the 24 authorization of any of those games. I think that if 25 they think they have the legal authority to do that under WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 109 1 the current statute, great. I don't know if they do, and 2 my reading of the statute suggests that it might be a 3 little more restrictive than some of those games would 4 permit, but I'm not their lawyer. 5 So if their lawyers or their legal counsel 6 says that they can have Jar-Tickets, PunchBoards, 7 Tri-wheels, Paddlewheels and other games, you know, 8 utilizing roulette wheels, great. But I'm not sure we're 9 there yet or that we're prepared to go forward on those 10 things without some advice from the legal counsel to 11 determine whether or not they would be permitted under 12 the current statute. 13 So my concern with the staff draft is I'm 14 not sure -- and maybe Phil can answer this -- but I don't 15 know that it's ready to move forward. And based on what 16 I've heard in my short time on the Bingo Advisory 17 Committee, we don't need a lot more study or a lot more 18 time to devote to this issue. 19 We have some charities who are hurting 20 pretty badly right now who are in desperate need of some 21 help. And in my at least hearing, we need to try to do 22 something to move this issue along sooner rather than 23 later so that we don't have some continued disintegration 24 of the bingo industry if there is something we can do 25 about it. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 110 1 MR. NEINAST: Mary, I've got one question 2 for and you then one for Phil. If I understood you 3 correctly, you said that your draft had a requirement 4 that both the flare and the cards have the lotto -- 5 lottery commission seal on it. It looks to me that 6 that's been eliminated. Did I understand you correctly? 7 I don't find that in here. 8 MS. MAGNUSON: No. My draft eliminates 9 the ticket seal and requires a seal on the flare. The 10 staff draft leaves the ticket seal in place and adds an 11 additional seal to the flare. 12 MR. NEINAST: Okay. Well, that's what I 13 thought you said, but looking at -- what am I missing on 14 your definition of a flare there? 15 It says what it must contain -- I don't 16 find -- 17 MS. MAGNUSON: Oh. I put it -- 18 MR. NEINAST: -- that requirement that it 19 have the seal. 20 MS. MAGNUSON: I put it under -- on Page 3 21 of 7 at the bottom. There's a subitem C called 22 identification staff. And it says, The flare for each 23 deal of instant bingo cards shall have affixed in the 24 lower right corner a stamp containing a no less than a 26 25 point diameter circle and impression of the commission WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 111 1 seal with the words Texas Lottery Commission engraved 2 around the margin and a five point star in the center. 3 MR. NEINAST: Okay. And now my question 4 for Phil is why is the staff so adamant about having that 5 seal on cards or even on the flare? What's the magic of 6 it? 7 MR. SANDERSON: The draft that you have 8 from staff is one that we've been working on, you know, 9 for about the last six or eight months, and so there are 10 some things in there that we're still considering. The 11 previous rule did not have any reference to the flare, so 12 that's why we added the flare to this rule. 13 As far as the seal goes, we still, to a 14 certain extent, you know, feel like we need it. It's -- 15 as far as I understand from Billy, there's still some, 16 you know, areas of discussion we can have with the seal. 17 One item that we -- you know, that I see 18 is that we have several licensed distributors. And I'm 19 not aware of any distributor within Texas that does 20 business outside of Texas, but we do have some 21 distributors outside of Texas that does business both in 22 Texas and outside of Texas. And there could be confusion 23 of getting deals that have been approved for our -- not 24 approved for our state within our state. So that's 25 where, you know, we would like to have the seal for that WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 112 1 identification purpose. 2 There is going to be a working group 3 appointed to iron out the differences between these two 4 rules for two drafts. We've -- in the process of getting 5 contract with the State Office of Administrative Hearings 6 to have a mediator to expedite that process and try to 7 get input from as many people that, you know, want to put 8 the input in. If there's any other drafts of this rule 9 that anyone has that they would like to submit, you know, 10 we would be glad to look at those areas also. 11 And it's my understanding that, you know, 12 in talking with Billy that this working group will be put 13 together, you know, fairly quickly. 14 MR. NEINAST: Another question for you, 15 Mary, since you've had a -- worked with this with some 16 detail. And you mentioned some of the specific games 17 mentioned in the staff's draft. 18 As I read your definitions, which I like 19 because they're so broad, are there any of those games 20 that you mentioned that would not be permissible under 21 your definitions in both the instant bingo card or the 22 instant bingo game? Would all of those come under those 23 definitions? 24 MS. MAGNUSON: Well, the definition that I 25 think we all have to be aware of is the statutory WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 113 1 definition of Pull-Tab bingo. And the statute defines it 2 specifically -- and I don't have it in front of me here, 3 but the statute basically says -- well, I'll tell you 4 what it says. 5 UNIDENTIFIED SPEAKER: Page 4. 6 MS. MAGNUSON: Pull-Tab bingo means a form 7 of bingo played using tickets with perforated, break-open 8 tabs made of paper or paper product, the face of which is 9 covered or otherwise hidden from view to conceal numbers, 10 letters or symbols, some of which have been designated -- 11 THE REPORTER: Slow down. 12 MS. MAGNUSON: Sorry. 13 (Continuing) -- as prize winners. 14 Now, the thing that I -- at least that 15 caught my attention was the language about tickets with 16 perforated, break-open tabs in the statute. And just 17 kind of as a conversational piece, punch boards aren't 18 tickets at all. They are punch boards where the paper 19 slips are inserted in the holes in the board, and you use 20 a little device to punch through and punch the paper out 21 of -- out of the board. There isn't a ticket associated 22 with that and certainly no perforated, break-open tabs. 23 Jar tickets are little paper tickets that 24 are folded, banded with a paper band and glued. They are 25 very tiny. They are a single winning sort of ticket. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 114 1 They're very popular around the country, but again, they 2 do not have any type of perforated, break-open tab. So 3 I'm concerned that a jar ticket would not meet the 4 statutory definition of Pull-Tab bingo. 5 Some of these other things pop open and 6 pop in. Those are probably -- more possibly permissible 7 because they are a conventional sort of Pull-Tab bingo 8 ticket, but it has a single window with a perforated, 9 break-open tab as opposed to three windows or five 10 windows. 11 Bingo event tickets, I think we've talked 12 about it, and those are sort of like game card games, but 13 they're a Pull-Tab game where the winner is determined by 14 the draw of a bingo ball. So what will happen is you'll 15 purchase your tickets, and as you open them, a certain 16 number of tickets in the game will contain the numbers 17 from B-I-N-G-O and the 75 numbers associated with the 18 bingo game. And those are called hold tickets. 19 And if I open a ticket and my ticket 20 happens to be one of those pull tickets -- perhaps it 21 will identify B-6. So at some point, then, in the course 22 of the bingo occasion, there will be a draw of a ball 23 that would be designated as for the bingo event ticket 24 game. And if I -- if the ball drawn happens to be B-6, 25 I, as the holder of that particular ticket, would be the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 115 1 winner of the prize. 2 If there is a conventional Pull-Tab 3 ticket, the difference is instead of having the winner 4 basically determined within the ticket, it's determined 5 by the draw of the bingo ball. 6 Those are apparently incredibly popular 7 games in California and most recently in Louisiana. And 8 I'm told that they have been tremendous in putting a real 9 shot in the arm in bingo games, particularly in 10 Louisiana. And it helped to introduce your traditional 11 bingo player to a form of the Pull-Tab game so that they 12 become more familiar with pull-tabs and maybe engage in a 13 crossover. 14 So again, that's a conventional sort of 15 Pull-Tab bingo game which shouldn't be a problem. 16 Paddle tickets -- paddle tickets are -- 17 they're like raffle tickets sort of in that they are 18 designed to be played with a paddlewheel. And there are 19 various different types of paddlewheels, but they're 20 basically vertical wheels -- kind of a Vanna White thing. 21 You know, a vertical wheel that you spin and there's 22 numbers on them. And if your ticket number happens to 23 match the number that is spun on the wheel, you win the 24 prize. 25 And you can have 30-number wheels; you can WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 116 1 have larger number wheels. They're sort of a unique and 2 distinct form of gaming but, again, not using a ticket, 3 any kind of a break-open tab, so I question whether or 4 not it would be permitted here. 5 The tri-wheel is a very, very unique 6 beast, but the tri-wheel is a game that was developed by 7 a guy in North Dakota some years back. And it's 8 actually -- the full name is Minnesota Tri-Wheel, and 9 it's a game legal only in Minnesota and North Dakota. 10 And it's a paddlewheel that is played with a table. 11 And the intent is to simulate roulette, 12 except by using red and black and various numbers, you 13 use four or five different colors. And the odds will be 14 determined based on the color that you actually get on 15 the spin of the wheel. Blue might be a large piece of 16 the wheel; red might be a very small piece of the wheel. 17 Your odds might vary depending on the number of blue 18 sections on the wheel versus the number of red sections 19 on the wheel. And then you place bets using chips on the 20 table much like roulette, and you can lay out your bets, 21 and then the wheel is spun. 22 But again, it doesn't have a whole lot to 23 do with Pull-Tab bingo. 24 And the last one is tip boards, and tip 25 boards are generally another name for a seal card game. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 117 1 The difference between a seal card game and a tip board 2 game is the tip board takes the little paper jar tickets, 3 and typically they are attached to the card that bears 4 the seal. 5 So you could technically have a tip board 6 game that might have tickets with perforated seals, but 7 more often than not, they are simply games that bear a 8 seal. But the individual tickets -- the little jar 9 tickets are actually attached to the placard. So, again, 10 we're dealing with tickets that don't have perforated, 11 break-open tabs. And again, you know, depending on the 12 legal interpretation that is offered, may not be deemed 13 statutorily permitted within Texas. 14 So my concern, I guess, with some 15 additional study is we might be spending an awful lot of 16 time talking about games that, while on the one hand are 17 really interesting and might be important, might not be 18 appropriate to be placed in a rule at this time and might 19 need a statutory change. And now we're looking at next 20 year, and the legislative session doesn't start until 21 next January. So now we've pushed it back, you know, 22 even further for the purpose of looking at those types of 23 things. 24 So I guess I'd propose that this thing be 25 moved along, moved a little bit more quickly than that. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 118 1 MR. NEINAST: If I can summarize what you 2 said -- correct me if I'm wrong -- is that there is a 3 need for amending the current rule to enlarge the number 4 of instant bingo games that can be played. And we can do 5 that by an amendment. But there's also a need for 6 legislation to broaden the definition within the Texas 7 statute, which is a separate action. That latter one we 8 cannot act on today because it's not on the agenda. 9 So getting back to just the proposal of 10 amending the rules, I think that it's incumbent on this 11 committee to -- today to make a recommendation to the 12 lottery commission on amending the rule in some manner. 13 And of the two drafts we have in front of 14 us, I'll reiterate that I like the one that you prepared 15 much better. I think it -- I think it's broader and will 16 take in more of the bingo games we can now take on. 17 Any comments from anyone else on the 18 committee before I ask for a comment from the -- okay. 19 Would anyone in the audience care to address this issue? 20 Some of you may not have both drafts in 21 front of you, but they're kind of long and detailed. 22 Steve. 23 MR. FENOGLIO: Thank you. 24 For the record, my name is Stephen 25 Fenoglio. I'm an attorney in Austin, and I've already WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 119 1 given my list of identified charitable organizations I 2 represent. I neglected to point out earlier that I also 3 represent the entire VFW membership, Veterans of Foreign 4 Wars in the State of Texas, which is comprised of about 5 75,000 members. 6 I have worked with Ms. Magnuson and others 7 in trying to move the ball on the Pull-Tab rule. This 8 issue has been discussed, if memory is correct, since 9 November of 2000. And I believe that Ms. Taylor has 10 repeatedly asked where we are in moving the ball on 11 innovative -- an innovative rule that will allow for 12 innovative and new Pull-Tab products to be put into the 13 State of Texas. And I think that discussion and dialog 14 has been going on for over a year. 15 And here we are today, year, year and a 16 half later, and we have a rule that I would submit to you 17 is in Texas Register format, Ms. Magnuson's rule that she 18 and I have collaborated with. And I have either e-mailed 19 or given to each of the Bingo Advisory Committee members 20 the version that I consider the final version. It's 21 Draft Number 2 dated April 8, 2002. And I'll give a copy 22 to the court reporter. I also have extra copies if 23 anyone in the audience wants a copy. 24 But my point is that rule is ready. I 25 have made the offer to the staff that we're willing to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 120 1 sit down at any time to discuss the nuances of our rule. 2 On April 8th, Monday, Billy Atkins did 3 call me and said they had a rule. And I obtained that 4 from him via e-mail and was able to open up the product 5 at 6:32 p.m. on the 8th. 6 It's not ready in my view for publication 7 in the Texas Register. I spoke briefly this morning with 8 Kim Kiplin. She hasn't -- and her staff have not been 9 able to review it. 10 I think there are a lot of great things in 11 the draft rule, staff, but my clients are in unanimous 12 agreement that we need relief today, not 60 days or 13 180 days from today. We should have had it over a year 14 ago, but we don't. 15 And I don't really want to plow that old 16 ground. We want to move forward. We want -- and I've 17 asked Chairman Clowe -- I sent him a letter about two 18 weeks ago asking that the issue of consideration and 19 action on the Pull-Tab rule be put on the commission's 20 agenda for the 26th of April, and I believe I'll have 21 that on the agenda. 22 I don't want to leave anybody out of the 23 process, Mr. Chairman. I hope you know me well enough 24 that I'd like to work -- I want to work with everyone. 25 We need action today. We don't need it in a study WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 121 1 committee. Our goal is to have the advisory committee 2 tell us today where we stand on the rule, let's call 3 it -- I've had people call it the 949 rule, the Mary 4 Magnuson rule. 5 Whatever you want to call it, let's vote 6 on it today so that we can get it published for public 7 comment at the commission meeting on April 26th if the 8 commission is willing. And obviously y'all can't tell 9 the commission what to do. You know that far better than 10 I. But we can push, and we can push hard. 11 That doesn't foreclose some of the 12 innovative concepts that Mr. Sanderson and his staff have 13 been working on in the draft rule that was circulated for 14 the first time this Monday. 15 As you may know, in the publication for 16 public comment period, it's a mandatory 30-day comment 17 period. Anyone can propose any rule provision that's 18 within the ambient of what is published. And I would 19 suggest to you that what Ms. Magnuson has defined in the 20 definitions in that rule would cover most of what the 21 staff has tossed out for discussion. 22 Now, there may be some problems with the 23 statutory definition of a pull tab and whether the 24 paddlewheel concept or any of those -- and I'm not 25 familiar with those much -- whether they can be folded in WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 122 1 under the ambient of a Pull-Tab rule. 2 A lawyer with the commission at some point 3 needs to take a look at that. But my client's goal is to 4 get a decision today and to keep pushing to get a 5 favorable decision. And the first favorable decision in 6 our view starts with y'all today. And it would 7 hopefully -- and my clients -- result in the commission 8 voting to publish for public comment the Magnuson rule or 9 the rule that Ms. Magnuson -- amendment that Ms. Magnuson 10 has proposed that I've worked on. 11 That's where we are. I have with me today 12 a couple of other individuals who can give personal 13 prophetic testimony about the dire straits of bingo. And 14 no one wants to really be a prophet, but we've been 15 telling the advisory committee, and y'all know that -- 16 we've been telling everyone who would listen, bingo is 17 dying. And if we're going to continue to study it, it's 18 like rearranging the deck chairs on the Titanic right at 19 the time that we've hit the iceberg. 20 The gentleman from Houston is going to 21 tell you about halls that are -- you know, half the 22 charities are now on administrative hold. They can't -- 23 they can't stay in business. They're well-run halls. 24 There's not enough money. One of the problems that they 25 have concluded is the innovative pull-tabs will turn some WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 123 1 of that around, turn it all around. We don't know. We 2 certainly don't know if we don't try. 3 I will be happy to answer any questions. 4 MR. NEINAST: Any questions? 5 MR. FENOGLIO: Thank you. 6 MR. NEINAST: Thank you, Steve. 7 Anyone else like to address this issue 8 of... 9 MR. HEINLEIN: My name is David Heinlein 10 with Jetta Management. And I don't want to be that 11 prophet of doom, but last month when I was over here, I 12 told you that some of our charities were definitely in 13 trouble and getting into dire straits. And I could see 14 that through the month of March -- while we've had a good 15 first quarter, we can see it going down. And then as we 16 move into this next quarter, it's gotten a little bit 17 worse. And of the 42 charities that we have, we now have 18 eight of them in administrative hold, and one has 19 surrendered their license in the last 30 days. So it's 20 not something that's going in the right direction. 21 We are definitely hurting. It's serious. 22 And we had said a month ago that if we don't have some 23 things happen to give us a shot in the arm - as 24 Ms. Magnuson said some of these products would do - we 25 don't believe that a lot of these halls will be around by WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 124 1 the time new legislation could be passed to effect some 2 changes a year from now. 3 So we're hoping that something could 4 happen with this instant bingo that's being proposed 5 today that would cause an immediate change, that would 6 give us a product that we can begin to use right away. 7 We do believe that the only answer for 8 some quick things to happen will be some new products. 9 We see the lottery with new products all the time. I 10 don't get to watch TV very much, but I told Mr. Clowe 11 that I had watched TV last night just to catch the news 12 real quick, and I noticed there's a lot of different 13 products on the screen for the lottery. Used to there 14 was only one game. Now there's a bunch of drawings every 15 night. 16 Well, we need that in bingo. We need to 17 have something new that we can present to the customer to 18 improve the excitement and to give them some new things 19 to look at. And if we don't do it, we're going to 20 continue the downward spiral that we've been in, and 21 we're going to continue to see numbers like these. 22 You know a bean counter has always got to 23 produce something financial. And as I did last time, I 24 gave you some choice about donation, because for my 25 charities, the only thing that really matters is how much WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 125 1 they're able to distribute, how much they can put into 2 their general fund and they can use for the purposes that 3 they have been intended for, such as the charity that I 4 had testimony from this last time who has literally been 5 able to begin a charitable organization because of the 6 money he's got out of bingo. And he now services 35 to 7 40 boys on a daily basis in a boxing association where 8 he's taking them off the street and keeping them out of 9 prison. So it's a wonderful charity that is seeing their 10 distribution go down, and hopefully he'll be able to stay 11 around because I don't want to lose him. 12 But I've just put some numbers together 13 to -- these are a repeat of some of the things I've given 14 you before. From 1997 to the year 2001, we see our 15 distribution as going down. But if this product could be 16 approved rather quickly, I think there's still time to 17 save the year 2002. 18 I'm being told by some of the distributors 19 in other states and places where they have tried this 20 instant bingo that we're talking about today that we 21 should be able to see a 25 percent increase in net 22 revenue. 23 Well, I'm not going quite that far, but I 24 did say, Well, it wouldn't be unreasonable to believe 25 that we could improve our instant bingo sales by at least WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 126 1 15 percent. So I said, What would that do to the numbers 2 that we're now looking at in bingo? 3 And so I projected for the year 2002 no 4 change in revenue for either regular bingo or electronic 5 but just a change in instant bingo. And by my 6 calculations, we could probably increase our net revenue 7 by $3.8 million. And I'm hoping that a major part of 8 that could go into distribution for charities, because 9 that's where we want it. 10 At first blush, the only thing I can see 11 an increase in cost to increase that revenue is just the 12 cost of the seal tabs or the event cards or whatever the 13 product is. And so if we just deduct that product cost 14 from this $3.8 million increase, we should be able to 15 give the charities $3.4 million extra this year, which 16 would just keep us from going down any more. It wouldn't 17 bring us back up to where we were in 1998, which is where 18 we want to go as soon as possible if we're going to stay 19 in bingo. But it would certainly keep us from sliding 20 down another seven or eight percent this year like we did 21 the last two years. So I believe it imperative that we 22 do something. And it's been said already today to 23 propose something. 24 Now, I've looked at both of the proposals, 25 and, of course, I really like the tone of the staff WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 127 1 proposal because I see all of these different 2 opportunities to get new products out there in the 3 marketplace. I think, "Man, there it is. They've really 4 hit on something." 5 But then I hear from Ms. Magnuson all 6 these other things. I'm, "Well, wait a minute. But they 7 don't really fit the Enabling Act, and so they're not 8 going to work for an immediate cure." 9 So I would have to agree with what I think 10 has already been said, and that is that we push forward 11 with the rule that we already have in a format that could 12 be quickly looked at and approved, get it on the board, 13 get it to where we have these new products available but 14 not stop working on these others at the same time and 15 start putting them in a place to get them in a -- and if 16 some of them have to have legislative action, then let's 17 work on those with the Sunset Review Commission. 18 We'll put them over in that arena so that 19 maybe we can process that in a new legislative act this 20 next year. But we could do something immediately to get 21 us to next year so that next year we would still be alive 22 to get the new legislation, which might include a lot of 23 other products besides just the instant bingo. 24 And that's all I have. 25 MR. NEINAST: Any questions of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 128 1 Mr. Heinlein? 2 Thank you. 3 Anyone else like to address this issue? 4 Yes, ma'am. 5 MS. McFALLS: Hello. I'm Jackie McFalls. 6 I'm from Auxiliary 44 in Mesquite. Well, actually, in 7 Dallas. And I would just like to thank you for your 8 consideration for instant bingo because this is really 9 something that's really needed. And something can always 10 be improved on like -- well, I'm a housewife and look how 11 the Handiwipes and the Swipes and all that have improved 12 the house cleaning. You just mop and throw it away. So 13 surely to goodness all these minds can come up with 14 something that will help instant bingo. 15 Thank you. 16 MR. NEINAST: Thank you, Ms. McFalls. 17 Anyone else care to address the... 18 MR. MOORE: Good afternoon. My name is 19 Dan Moore. I own Moore Supplies out of Houston, a 20 licensed distributor in Texas. 21 I support Mary's rule changes that she 22 presented to the staff. As a distributor, you're asked 23 all the time to bring new products to the charities to 24 help them out. I can tell you right now in here that I 25 do that, and these products are no longer helping the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 129 1 charities. You can only make so many pull-tabs so many 2 different ways. The rule change that Mary is bringing 3 forward would allow these other games that should promote 4 more tab sales. 5 Speaking with distributors out of 6 Louisiana, they have told us that it usually adds 100 to 7 $200 per session. And this is hearsay, but I'm going to 8 go check it out. And I really feel that if we can add 9 $200 a session for a charity that plays three times a 10 week, that's $30,000 a year. I don't know too many 11 charities that are going to turn that kind of money down. 12 We're not asking for sweeping changes in 13 this industry. We're asking for that $30,000 right now. 14 And I can tell you it's kind of ironic that we're told to 15 celebrate the 20-year anniversary of bingo in this state, 16 and I think there's a lot of charities behind me right 17 now that are wondering if they'll be around for the 21st 18 anniversary. So the urgency for the staff is to get this 19 done. And I know that any help we can give, we would 20 love to. So we just ask your help here. 21 Thank you. 22 MR. SANDERSON: Can I ask you one 23 question? 24 MR. MOORE: Sure. 25 MR. SANDERSON: You said that Louisiana WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 130 1 said their increased sales was $200 or increased profit 2 was $200? 3 MR. MOORE: Increased profit on tab sales. 4 MR. RINEHART: Okay. 5 MR. MOORE: And that's -- you know, I just 6 talked to friends that are in the distributing end there, 7 and they honestly believe that it saved many charities 8 over there. And I think we are in the same position 9 right now that -- we're coming in at the summer months 10 now. Things were okay the first quarter, but I can tell 11 you right now the charities know what's coming. And it's 12 going to string through September. And if we can get 13 this stuff by July, I'll tell you what, it would be a big 14 help. So I appreciate you letting me talk. 15 MR. NEINAST: Thank you, Mr. Moore. 16 Any other questions of Mr. Moore? 17 Anyone else care to address... 18 MS. FOGLEMAN: Good afternoon. My name is 19 Marguerite Fogleman, and I am with AMVETS, Post 52, 20 Ladies Auxiliary in Dallas. 21 And, Ms. Magnuson, I would like to say 22 that I'm totally impressed with your draft. I have only 23 had time to scan it because I got it since I've been 24 here. But it took a lot of time and effort and research, 25 and we appreciate that. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 131 1 There are several items -- I would like to 2 go on record as saying that I am for any new games that 3 are within the law that the bingo operators can do to 4 raise money for charity. And I think the new 5 pull-tabs -- I think that that would be good. 6 And I liked Jackie's -- saying like the 7 handiwipes and these kinds of things. You know, it 8 tweaks our interest. New things just get our attention. 9 And if we had some new pull-tabs, some new games that the 10 bingo operators could do to raise money for charity, I 11 think that it would help. 12 Even the lottery commission is forever 13 changing their rules. And they put in extra numbers to 14 make the pots larger, and they do these things to get us 15 to spend our money for the lotto tickets. So why 16 shouldn't we have things within bingo that would get the 17 interest of people, try something new? 18 And it would evolve into what I notice 19 Number 6 is, is revenue enhancement. And that's what 20 we're after, is trying to enhance our revenue. 21 And I thank you. 22 MR. NEINAST: Thank you, Ms. Fogleman. 23 Any questions of Ms. Fogleman? 24 Yes, sir. 25 MR. HELTON: Good afternoon. I'm David WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 132 1 Helton from Conroe. I'm an operator for the Vietnam 2 Veterans Chapter 734 in Montgomery County out of Conroe, 3 Texas. 4 And I'd just like to say on the pull-tabs, 5 they're -- they've been a life saver for us. Many times 6 we couldn't make it without having something extra to 7 see, and they pull us out of the hole. I sell pull-tabs 8 for a living on the floor myself, and it's really a -- 9 it's what keeps us going. 10 We couldn't just make it on the door 11 entries because we don't have that many people most of 12 the time. And a lot of times the pull-tabs pull us up. 13 And I really appreciate Ms. Magnuson for what she said 14 and what she's done. It's going to really work, I 15 believe. 16 Thank you. 17 MR. NEINAST: Any questions of Mr. Helton? 18 Okay. Thank you, Mr. Helton. 19 Would anyone else like to comment on this 20 proposal? 21 MR. GARRISON: Gene Garrison, Daytime 22 Bingo and B'nai B'rith, Midland. 23 I would just like to add my appeal for the 24 urgency of the action, and I also think that taking the 25 seal off would allow us the opportunity to look at many WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 133 1 different types of pull-tabs that are available in the 2 country that we don't now get to see because the 3 manufacturers, they have to manufacture for the rest of 4 the country. Then they have to stop and manufacture 5 pull-tabs for Texas. 6 And I feel like that would just give us 7 the opportunity to look at some different and hopefully 8 more appealing pull-tabs. And that is the critical area 9 of our business now, and that's what keeps our 10 organizations alive. But I think the critical thing is 11 now, is do it now. 12 Thank you. 13 MR. NEINAST: Thank you, Mr. Garrison. 14 Anyone else? 15 Chairman Clowe -- I mean, we have one more 16 who would like to -- good. Come ahead. 17 MR. CORNWELL: Ladies and gentlemen, 18 Chairman, my name is Knowles Cornwell. I'm a principal 19 in K&B Sales/Goodtime Bingo. I'm a principal in Best Bet 20 Bingo, Inc. Goodtime Bingo or K&B Sales is licensed in 21 the State of Texas as a distributor. It's licensed in 22 the State of -- as Best Bet Bingo in the State of 23 Missouri, Illinois, Kansas and Iowa. 24 I'd like to first address the seal issue. 25 Other states don't seem to have a problem even putting WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 134 1 the Texas seal on their -- because the seal is not really 2 an important security issue, Phil, up there. It's a 3 serial number that they pretty much go by. And I don't 4 think that -- it gives us greater flexibility of 5 returning merchandise, doing a better job for our 6 customers. It gives the manufacturers a simpler 7 approach. I don't know if it's going to save any money, 8 but it should save some monies for the charities coming 9 down. 10 But it does give us access, like Gene just 11 got through -- it's going to get us access to more 12 tickets. It should. 13 Second issue is that I have nicknamed, 14 Mary, the bill the 949 Amendment to our rule for 15 pull-tabs. That's 949 charities. That's over half the 16 charities playing bingo today. We are in support of 17 getting Mary's bill -- Mary's amendments on the TLC 18 agenda for publishing so it can go the 30-days rule and 19 we can have this thing effective for June. 20 In the June rules and in 949 rules, Phil, 21 it gives the lottery commission 30 days to approve or let 22 the -- let the ticket go on. That means that these 23 charities -- if we can get that done, if we can follow 24 what Mr. Fenoglio has laid out, if we can get that done, 25 we can give some relief. It's not soon enough, but WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 135 1 hopefully by the first of July, right in middle of the 2 doldrums. 3 It means all the distributors, all the 4 manufacturers are going to have to be ready to go to work 5 with these charities to educate them on all the different 6 tabs that are being proposed here. It's a big job, but 7 we've got to get it done. It's that important because 8 we're not going to have as many charities. We're not 9 going to have as many charities if we don't do something 10 now. I want to urge the committee to adopt the Amendment 11 949 to the tab rules. 12 And let me also say something. I -- Phil, 13 I saw the staff draft. Great ideas. And those ideas 14 need to be followed up right behind 949. There's some 15 good ideas, great things. 16 I brought with me -- and I don't have it 17 for publication. And you guys got to understand that 18 when traveling to these other states -- and I'm going to 19 give you one example. In the State of Ohio, okay -- and 20 I don't want to use Minnesota, but in the State of Ohio, 21 85 percent of the gross receipts in bingo are generated 22 by tabs. Bingo is a sideline. They make their money off 23 the tabs. 24 If we got to anywhere close to that, Phil, 25 in this state, that would mean we would have $100 million WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 136 1 of gross receipts per quarter in additional tabs. That 2 means that over the whole year the state would -- in 3 prize fees would get $14 million. That's more than 4 double what we're getting. It's -- it's -- we've got to 5 do that for the taxpayers. We've got to do it for the 6 charities. We've got to do it for the lottery 7 commission. 8 I just want to run down some old numbers, 9 though, so that we're clear that we are way behind the 10 eight ball in the way we play games in this state. I'm 11 looking at the per capita amount of money that is spent 12 on an average on bingo in other states or bingo-like 13 games. 14 Texas today on -- we had these numbers. 15 We spent $606 million on bingo. We've got $20 million -- 16 20 million people in the population. It gives us an 17 average, then, of $30 per capita. Okay? Spend per 18 capita is what I'm going to talk about today. They call 19 it wagers, but -- and I'm going to give you another 20 example. 21 I'm going to just go to New Hampshire, 22 which is also a seal state. Their spend is $69. I'm 23 going to go to Washington State, which in a lot of cases 24 the lottery commission -- the bingo division looks to for 25 a lot of guidelines and rules. Washington State's per WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 137 1 capita spent is $148. Texas is 30. 2 I got North Dakota. And who -- you know, 3 I guess there's nothing else to do up there, but their -- 4 spent $402 per capita. And, of course, Nebraska is 162. 5 Minnesota is 308. Kentucky is $142. 6 Guys, we just -- we've got to get after 7 our own rules. We've got to get after our own industry. 8 I go to these states and come back here and come -- and 9 I've hit every stump trying to get something new 10 developed and I've been told no everywhere I go. 11 But, guys, let's get 949. Let's get these 12 rules today. I'm asking for a motion that y'all would 13 recommend that 949 be approved by the Texas Lottery 14 Commission. I'm asking that we all make sure that we 15 make every effort we can to be at the lottery commission, 16 to be in support of 949. 17 Then let's ask Phil -- Phil, you started a 18 great job on all those rules. Paddlewheel tickets are 19 great. Tri-wheel tickets are great. We can run a lot of 20 different games. We can have a lot of fun. And let's 21 get rid of the seal, too, because it really -- we can 22 call any manufacturer tomorrow with a serial number, and 23 we'll know exactly who it was shipped to and where. 24 But thank you for your time. I appreciate 25 it. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 138 1 MR. NEINAST: Any questions of 2 Mr. Cornwell? 3 Thank you. 4 Yes, sir. 5 MR. CLOWE: Anybody else? 6 I didn't want to preempt anyone -- 7 MR. NEINAST: No. Wait. We have one 8 more. 9 MR. CLOWE: Yeah. 10 MR. ARNOLD: My name is Phil Arnold from 11 Houston, Texas representing several charities in that 12 area. I've been involved in bingo, as many of you know, 13 since 1986. 14 I want to thank the -- Mr. Atkins and the 15 staff for some wonderful ideas presented in that draft. 16 Those are very exciting from the point of view of the 17 charity. There's no question about it. Those games that 18 are mentioned there -- I think there are 11 of them -- 19 would be so helpful to have. I look forward to seeing 20 those develop as time goes by. 21 Our problem, though, as you've all heard 22 already, is time is going by too quickly in the sense 23 that charities are running out of money because bingo is 24 down for many reasons, which we've discussed in the 25 various meetings preceding this one over the last couple WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 139 1 of months. 2 We have talked about the importance of the 3 seal cards and the event tickets. And I appreciate very 4 much the work that Mary and others have done here on this 5 draft I think we're affectionately calling 949. I like 6 the fact that it zeroes in on three or four items, 7 different types of tabs; that we make an immediate impact 8 and an immediate difference in charity fund-raising. 9 As I told you last time, charities are 10 hurting. Charities are beginning to close down their 11 bingo. But, you know, there's a bleeding process that 12 takes place. There are death throes that take place 13 before a charity quits. What are those death throes? 14 Well, for example, in Houston now, before 15 a hall is going to go out of business, they'll do 16 anything it can do just to get another breath of air. 17 That means, for example, reducing their prices hoping, 18 just hoping against hope to pull in an extra 50 people by 19 becoming the cheapest hall. 20 So instead of getting a reasonable amount 21 of money for their product, maybe they cut their prizes 22 in half, just hoping, as a last death throe act, to pull 23 a few people in who wouldn't be at that hall, perhaps, 24 maybe from another hall. So a chain reaction sets up. 25 And another hall, which is affected now by WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 140 1 the death throes of that hall, has to lower its prices. 2 And then that starts a domino effect that moves across 3 the city or the county. 4 That's where we are now. It's not just 5 simply a couple of halls going on administrative hold -- 6 or charities, rather, or a charity just plain quitting. 7 There's a whole blood bath that goes on. I hate to say 8 it, but that's what it is, death throes. Charities are 9 struggling for survival. That then affects distributors, 10 manufacturers and the state winner's fees. The whole 11 thing becomes a terrible chain reaction. And then that 12 leads to hard feelings and anger and charges and lawsuits 13 against charity against this charity. 14 The whole thing is beginning now to bubble 15 up. And it's going to get very ugly as these death 16 throes begin for charities because of how bad bingo is 17 doing. But we can and we all know we can make a 18 difference in this rule that's being proposed, is 19 rewriting the rule, not a big legislative change, not 20 having to go with a brand-new bill about progressive 21 bingo or this or that but simply taking some very basic 22 wording involved in the rules that we've all been playing 23 by, looking at those rules and seeing what can be done. 24 And I think 949 is done in a manner that will save many, 25 many charities. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 141 1 It's really sad to me personally when I 2 look at the people I work with in charities, have been 3 doing it for, as I said, you know, 15, 16 years -- 4 looking at these people now who are having now to spend 5 so much time helping with the bingo and worrying about it 6 and wrestling with it. And their energy that they have 7 to do the charity work, to teach a class, to teach a 8 music class, to visit people in the hospital -- many 9 different types of charity people that I know, their 10 energies are being depleted just hoping that bingo is 11 going to work. And as they think about that, they plan 12 that; they go to meetings; they spend their time trying 13 to make bingo work. And I can see the energy that they 14 have to give to charities is being depleted now by simply 15 trying to survive. And that hurts to see that happen. 16 As people get older and one year goes by, 17 two years goes by, five years later they could have been 18 doing so much if only we had made a few changes earlier. 19 We have a chance to do that now. 20 I think someone mentioned that the Titanic 21 is sinking. Bingo is like the ship Titanic, and it is 22 right now undergoing a severe collision with an iceberg. 23 But if you remember the story of the Titanic, what was 24 off there on the horizon? Do you remember there was 25 another ship? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 142 1 Some of you may remember its name. I 2 can't recall the name of that other ship. There was 3 another ship on the horizon, and they took a light, one 4 of those signal lights in those days, and they flashed 5 S-O-S, S-O-S. 6 That other ship sat out there. And on 7 that ship I'm sure, I'm sure there were attorneys, and 8 I'm sure -- I'm just sure there were a number of 9 government people, I'm sure there were passengers, and 10 they sat on that ship and they looked out across the 11 horizon seeing that light flashing and they said, That 12 looks like an S-O-S signal out there from that good ship 13 Titanic. I wonder what they need. I wonder what's 14 wrong. 15 And some would say, Well, there's probably 16 nothing really wrong. They're kind of probably 17 exaggerating. They don't really mean S-O-S like it's an 18 emergency that has to be solved tonight. There couldn't 19 be an iceberg out there. 20 Even if there were an iceberg, the good 21 ship bingo is so big it won't go under. And if it does, 22 it's only going to affect a little bit of them. They 23 have life boats. 24 All these discussions began on that other 25 ship out there. Those discussions began. And finally WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 143 1 they said, Well, you know, we could just go over there 2 and make some changes. We could throw them some 3 lifesavers, you know, that would sort of keep tabs on 4 their problem and kind of reel them in and we could save 5 a few of them. All we have to do is -- but then someone 6 said, You know, I have to check the law books on this 7 one. I don't think we can deviate the pattern of our 8 ship. It would be against regulations. We're going to 9 have to go maybe call up Congress and get legislative 10 approval before we can go save the Titanic before it 11 sinks. 12 And what happened? Well, we know what 13 happened on that particular time. The others -- the ship 14 of salvation just went off and left them there because 15 they couldn't really decide what to do. They couldn't 16 make the decision. 17 We needed the captain to come down and 18 take the helm of that ship and say, Yeah, there may be 19 some technicalities here, and maybe there are some things 20 like paddlewheels that just require a complete rewriting 21 of legislation, and that would have to go to the 22 legislators. 23 But, look, there are a few things we can 24 do. We can make some differences. We can make some 25 changes in the rules that we have been following by WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 144 1 looking at them and seeing how they can be rewritten and 2 adjusted much as all of you have participated in. 3 So we are that ship, and we are sending 4 out an SOS to you. And there is an iceberg. I think 5 what Mary has done and all of you have participated in is 6 the right action that we need at this time. And we do 7 need this by June. We need it very desperately. 8 All I can do is stand up here again for 9 the third time before we go under and say SOS. I'm 10 looking on the horizon. And I know you're for us, and I 11 know you will help us. And this 949 is a way of doing 12 it. And we need it soon. 13 MR. NEINAST: Okay. Thank you, 14 Mr. Arnold. 15 Any questions? 16 Thank you. 17 Is there anyone else who would like to 18 address this issue? 19 I believe, Chairman Clowe, you wanted 20 to... 21 MR. CLOWE: Tom Clowe, chairman of the 22 Texas Lottery Commission. 23 I wanted to applaud Ms. Magnuson's 24 efforts. I think for a relatively new member of the 25 Bingo Advisory Committee to come forward and produce a WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 145 1 product like this is wonderful. Thank you very much. 2 And Ms. Taylor continuing to ask about the 3 rule and all the other members being involved in it and 4 those who have come forward here today to speak about it, 5 this is what we wanted to see, what I wanted to see in 6 talking about the work of the Bingo Advisory Committee 7 and having it more proactive and having members of the 8 industry come forward with ideas that would be beneficial 9 to the industry and help in a broad sense. 10 Phil, I did not hear you say what the 11 staff position is on this. I was wondering if you would 12 state that on the record. Are you prepared to do that at 13 this time? 14 MR. SANDERSON: We've looked at Mary's 15 bill -- or, I'm sorry, her rule. And, of course, we've 16 compared it with ours, and we've gone through and noted 17 some of the differences. 18 There are some areas that I think we would 19 probably still need to get with Mary on and maybe 20 discuss. If we can get it through the legal review 21 process in time to be posted on the agenda, you know, 22 that would be a possibility. 23 I do know that Billy wanted to get the 24 working groups together to try to iron these out and have 25 people from the industry participate, along with the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 146 1 mediator. 2 And I -- you know, like I said, the draft 3 that I read from Mary's compared to ours, there are some 4 differences. And we're still -- you know, I still think 5 we want the approval process of some sort, maybe not 6 quite as detailed as what's in there now, but I think 7 there is still some -- we're researching some other areas 8 on approval and we're still researching some areas of the 9 seal being on the ticket. 10 MR. CLOWE: Well, then I think I heard you 11 say that the staff is in favor of positive changes and 12 just wants to make sure they're done a correct way. Is 13 that right? 14 MR. SANDERSON: Yes, sir. The staff 15 believes that there does need to be some increased 16 attempt in trying to get Pull-Tab sales. Mary keeps 17 mentioning Minnesota. Their Pull-Tab sales are in excess 18 of a billion dollars a year. They sell them everywhere. 19 And I think what kind of put the rule 20 itself on the back burner, so to speak, was we tried to 21 get legislation passed to allow pull-tabs sales in 22 locations other than a bingo occasion. And that bill 23 never -- I don't think it even got out of committee. 24 MR. CLOWE: Yeah. Right. 25 MR. SANDERSON: So, you know, we've been WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 147 1 trying to get Pull-Tab sales expanded for the last year 2 and a half. 3 One thing, the chart that Mr. Heinlein 4 provided, it doesn't go -- if you go back a couple more 5 years, in 1994, the Pull-Tab sales were $141 million. 6 And then they dropped in '95 to 139 million and then in 7 '96 to 121 million. And then from then you see the 8 decline from '97 on. 9 In 1997, the legislature, when they put 10 Pull-Tab definitions in the Bingo Enabling Act, that's 11 when they started allowing the symbols to be put on 12 tickets. And if the first tickets were approved in '98, 13 then you can see the drop-off to '99 was not quite as 14 drastic. So, you know, it did have some effect, but it 15 still didn't save the Pull-Tab industry in Texas. 16 Some other areas that we're looking at is 17 how it affects other agencies, state and federal. I 18 don't think pull-tabs were originally part of bingo when 19 bingo was authorized back in 1981. And if I'm not 20 mistaken, it may have been '84 or '85 -- somebody that's 21 been here longer than I could probably answer that -- 22 when the pull-tabs started to be sold at bingo occasions. 23 And I do remember when I started with -- 24 working with bingo in 1990, there was several lawsuits 25 with the IRS about unrelated business income tax. And so WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 148 1 there are -- you know, not that we regulate any IRS, you 2 know, rules, but we wanted -- you know, we feel it our 3 duty to make the charities aware if there are IRS 4 implications in any actions that we take just to make 5 them aware of it so that they don't come back or get hit 6 with a $30,000 tax bill, because some of the charities, 7 you know, were hurting from that. 8 So we are, you know, reviewing and, you 9 know, we're all for the expanding of Pull-Tab sales. 10 MR. CLOWE: And I think that's an 11 important thing for you to have said, that although 12 Ms. Magnuson's focus is on the expansion and the 13 development of that aspect of this, there are those 14 considerations that the staff has to look at. And then 15 when it's brought to the commission and the commission 16 deals with it, if they vote to publish it for public 17 comment, it needs to go out with a rule that will stand 18 these tests that Phil has indicated have to be applied to 19 it. 20 And it can be a tax issue or it can be a 21 legality issue. It can be something that lawsuits, you 22 know, can be brought over. And I think the commission 23 would like to feel when it considers rules that those 24 issues, as far as is possible in a practical sense, have 25 been looked at and dealt with. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 149 1 And, Steve, I remember your letter. I 2 discussed it with the general counsel, but I can't 3 remember my response. Do you remember it? 4 MR. FENOGLIO: You haven't responded yet. 5 MR. CLOWE: Maybe I haven't seen it. I 6 think -- I was hoping you could help me with that. 7 MR. FENOGLIO: I'll be happy to write it 8 for you. 9 MR. CLOWE: I think my response was let's 10 go forward. And I've been open to putting issues out in 11 the public as much as possible unless there's a reason 12 not to do so relative to not being prepared. 13 I would like to say that I think the sense 14 of urgency is well made in this discussion. And again, 15 this is the forum where these kinds of things should be 16 expressed and this kind of work should take place. 17 So I would like to say, Phil, as -- 18 speaking as one commissioner, I would like to see 19 everything done that can possibly be done to work out 20 what is a compromise between these two drafts and to get 21 the general counsel in on this and see if we can have a 22 proposed rule making that can be docketed on the 23 commission's April 26th meeting. That's got to be -- 24 that agenda has got to be published. 25 And that doesn't in any way preempt what WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 150 1 your vote's going to be on this issue. You all may make 2 some changes. I'm trying to respond to Mr. Fenoglio's 3 letter and tell you where I am on this because I think 4 that's important. 5 I think a commissioner should be an 6 advocate of things that he's asked the industry to do. 7 And I asked him to do this kind of thing at the meeting 8 you had before. But we've got to do it in a proper way. 9 And I hope -- you know, mediation sounds 10 like that's going to take a long time. And if there's a 11 way to get around that and get Ms. Magnuson's efforts and 12 your staff's efforts and the legal aspect through the 13 general counsel's office together and then get it 14 published, it's a short time frame. 15 Today is the 10th. We've got to publish 16 those agendas I think ten days before in the secretary of 17 state's office. And that's pretty quick. So you all 18 have got a short time frame. So I'll just ask you to do 19 the best you can. 20 And then you've got to be aware of what 21 this council -- this committee votes to do in their 22 action. But I'd like to say that I certainly hope we can 23 move this process along and maybe stay away from that 24 mediation thing. That sounds like that's going to take a 25 long time. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 151 1 MR. SANDERSON: Chairman, we'll work on it 2 with due diligence and hopefully have something that we 3 can be confident that can be put on the agenda when it's 4 posted on the 16th. 5 MR. CLOWE: And, you know, once it's 6 published by the commission, if the commissioners would 7 vote to publish it for public comment, that gives you an 8 opportunity to come forward and have your say at an 9 appropriate time. There can be a public hearing on this, 10 and you can make comments to the commission staff at that 11 time. And then the rule can be modified. 12 It's not set in concrete when it's 13 published for comment. That's the reason for comments. 14 If there is substantial comment and it changes the rule 15 substantially, then they may have to be republished. But 16 it is a process that I find you don't get to the 17 conclusion of unless you begin at the start and get it 18 underway. And I'd like to see it started, if that's what 19 you all vote to do, as soon as possible. 20 Thank you, Mr. Chairman. 21 MR. NEINAST: Chairman Clowe -- did you 22 have a question, Mary? 23 MS. MAGNUSON: I just want to thank you -- 24 MR. NEINAST: Sure. 25 MS. MAGNUSON: -- for your kind comment. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 152 1 I don't have a question. I just want to state that the 2 draft that I prepared, you know, I submitted to 3 Ms. Kiplin on the 21st of March. And I just want to say 4 there's many able people who can work on that, but I 5 personally can make myself available to come back down 6 here between now and the 26th or between now and the 7 16th, whenever the agenda has to go out, and sit down and 8 spend a day or an afternoon hammering out a compromise. 9 MR. CLOWE: That's great. 10 MS. MAGNUSON: And I would be perfectly 11 willing to do that, and I'm pretty much at your disposal 12 in terms of timing and any time you want to have me back. 13 And I can work with these other folks as well. We 14 hopefully could get it done rather quickly. 15 MR. CLOWE: Well, that's a great thing for 16 you to offer to do, and I hope whatever the decision of 17 this group is, as we take whatever course of action is 18 called for, that you can do that and the staff will call 19 on you. And that's very nice of you, and thank you. 20 Appreciate it. 21 MR. NEINAST: Any further comments? 22 The chair will then entertain a motion 23 that the -- let's call it the Mary Magnuson rule -- be 24 submitted to the Texas Lottery Commission for approval 25 and that it be placed on the lottery commission agenda WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 153 1 for its meeting on April the 26th. 2 That may be beyond our authority, but 3 I assume -- 4 MS. TAYLOR: I make that motion. 5 MR. NEINAST: Is there a second? 6 MR. SANDERSON: Second. 7 MS. BRACKETT: Mixed. 8 MR. NEINAST: Further discussion? 9 All in favor of the motion that the Mary 10 Magnuson rule be forwarded to the lottery commission for 11 approval and publication, aye. 12 SPEAKERS: Aye. 13 MR. NEINAST: Opposed? 14 Motion carried. 15 I'd like to comment in that regard to 16 Chairman Clowe. I think, Chairman Clowe, that this, as 17 is, could -- if no other action were taken, could be 18 approved and put out for comment and let the comments 19 come in then. And I would ask -- I see Billy has come in 20 and Phil -- in reviewing this, take a real long, hard 21 look at their proposed rule. They seem to be awfully 22 cumbersome to me, and I think they can really be possibly 23 reduced in number and content. But the draft here that 24 they have submitted seems to me to be -- 25 MR. CLOWE: I'm going to make this comment WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 154 1 because I know it drives the recorder nuts when somebody 2 says something from the sidelines. 3 I hope Billy will get information from 4 Phil as opposed to you not getting information from your 5 group when they voted for you to do something. I think 6 he's defending his position by showing up. So he'll hear 7 about this discussion. 8 MS. TAYLOR: I would like to make one more 9 comment, too. 10 I've been griping about the rule for a 11 long time, and I am really glad that we finally did get a 12 rule from the staff and the legal department. And I 13 truly appreciate that, and I love all the exciting tabs 14 that are outlined in here. 15 But, like some of the other people on 16 here, I am worried about some of the things that might 17 hold the process up by this. But, I mean, I don't want 18 to look like I'm ungrateful that we finally have this 19 because I'm not. I mean, I'm really -- I'm really glad. 20 I'm glad to see it. And it's awesome that y'all put this 21 much time into it. And this has been so much easier, 22 seven pages instead of 15, that it just looks like this 23 is something that you get through with in a lot closer 24 time period. 25 Working with a group and having a group WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 155 1 come together for discussion I think is an awesome idea 2 for future items that we're talking about, especially 3 things that could have such a big impact on the industry. 4 But at this point to have a group meeting, which I would 5 love to see for a lot of different things that are being 6 held here, is going to delay the process. 7 Because I'm involved with a lot of 8 organizations that are in that lifeboat right now -- and 9 it's got a pretty big hole in it -- I understand the 10 impact that this could have on it and the impact it could 11 have if we don't do something pretty darn quickly to 12 bring some extra income into that bingo hall. 13 And luckily my hall -- and there's a lot 14 of halls. In fact, all three halls in Corpus. It's 15 not -- I don't think it's not that there's been new 16 people come into the halls; it's that people are board 17 with bingo. We're not -- we're not putting any new 18 players in the hall. Of course, we could if we had a 19 little bit of advertising for bingo, but since we can't 20 do that right now, this is something that could excite 21 people. 22 And these extra ones that you have in 23 here, all of the ones with the wheels and everything, I 24 think that could put a lot of excitement in. And I would 25 sure love to see the lottery commission go forward with WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 156 1 these extra kind of instant bingo in here that you've 2 outlined because they do sound really exciting and I 3 think that would put a lot more excitement in our hall. 4 But for short term for now so that we can 5 stop the blood, that's why I voted with it, the other 6 one. 7 MR. NEINAST: Any other comments on this 8 issue? 9 The chair calls a ten-minute recess. 10 We're past the time to give our court reporter a little 11 R&R. We'll reconvene at 3:00 o'clock. 12 (Recess) 13 MR. NEINAST: It is 3:00 o'clock. I'd 14 like to call the Bingo Advisory Committee back into 15 session. 16 We will now take up Item Number 6 on the 17 agenda, which is consideration of and possible discussion 18 and/or action on opportunities for revenue enhancement 19 for bingo. 20 And, Suzanne, that's your item. 21 MS. TAYLOR: What -- let's see. Excuse me 22 just a minute. 23 MR. NEINAST: That's mine. 24 (Discussion off the record) 25 MR. NEINAST: Suzanne, you're on. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 157 1 MS. TAYLOR: What am I on, sir? 2 I missed -- 3 MR. NEINAST: Number 6. Consideration of 4 and possible discussion and/or action on opportunities 5 for revenue enhancement for bingo. 6 MS. TAYLOR: This was at the last meeting 7 that we had. Steve Fenoglio and several other people 8 that had come up and spoke to committee members about 9 other possible revenue enhancements that we could do in 10 the bingo halls to further help the nonprofits to 11 generate additional income. 12 So we had said that this was an item that 13 we would like to bring up at the meetings and hopefully 14 the continuing meetings. And it's not something we're 15 going to draw up because, obviously, by nonmovement or 16 non-doing anything with bingo is one of the problems that 17 we're having with bingo. 18 Bingo is boring. I mean, people are tired 19 of the same old games, so we need to continually be 20 looking for ways to enhance bingo and to make more profit 21 and to make bingo more interesting. So it needs to be an 22 item that we continually consider and that we don't drop. 23 If the tab bingo is through, which I'm 24 hoping and praying that it will because I know how 25 important it is not only for the halls in Corpus Christi WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 158 1 but for all the halls, we can't stop there. 2 You know, a year from now, two years from 3 now, five years from now, we'll be back here saying the 4 same thing. Bingo is going downhill. We don't -- we 5 don't know what we're going to do, but tabs isn't doing 6 the job anymore. 7 Tabs are definitely I think going to 8 impact the halls and create lots of halls and people in 9 the bingo business which keeps them in the business of 10 working within their community, helping other 11 organizations and helping a lot of people that would not 12 receive the help or the funding without bingo, creating 13 revenue for these charities. 14 But what else are we going to do? We 15 can't stop there. We've got to continue on and look for 16 new and innovative things to do in bingo. So that's why 17 this is on here. 18 And I know Mr. Fenoglio wants to speak 19 about this item, so I will give him the floor at this 20 time. 21 MR. NEINAST: Steve, the ball is in your 22 court. 23 MR. FENOGLIO: I'm looking for my list of 24 revenue enhancements. If you'll give me just a moment, 25 Mr. Chairman. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 159 1 This is an issue that I started out with. 2 And I think, for the most part, you have approved all the 3 list of revenue enhancements the last meeting we had. 4 The first issue deals with eliminate the 5 lottery commission seal on pull-tabs. And y'all have now 6 taken that vote. 7 Expanding the definition of pull-tabs, 8 which is contained within the 946 rule or whatever you 9 want to call it, to include seal cards, event cards, 10 progressive pull-tabs. 11 And Mr. Sanderson and I haven't had a 12 chance to talk about this. To fully implement a 13 progressive Pull-Tab, you'll have to change the 14 definition -- I'm sorry, the limitation, the prize 15 limitation on bingo. 16 As I understand the way other states play 17 progressive pull-tabs, you've got a limit of $750 and 18 $2500. 19 MR. TAWIL: Pull tabs are excluded from 20 the $2500 limit. 21 MR. FENOGLIO: Well, they're not excluded 22 from the 750. You're right. They are excluded from the 23 2500 but not the 750. 24 So as I understand it from visiting with 25 some of the manufacturer representatives, they sometimes WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 160 1 have games that far exceed the 750 price. 2 So, I mean, you can -- you can start the 3 process of a progressive Pull-Tab, but I don't think you 4 can fully implement that the way other states do. 5 The other issue on a list of revenue 6 enhancements was the elimination of the tax on five 7 dollars or less Pull-Tab winnings. That issue has been 8 voted on favorably by the Bingo Advisory Committee I 9 believe back in February of 2001. But that requires a 10 legislative change. 11 Streamline the approval process for 12 pull-tabs was the next issue. And the proposed rule 13 would do that. It gives a 30-day period to approve or to 14 disapprove. 15 And then streamline the approval process 16 of electronic card minding devices, the example that I 17 have used in the last handout was the commission had 18 taken 32 weeks and counting to approve a revision to a 19 card minding device change. That approval occurred last 20 week, and, actually, I think it was about 36 weeks from 21 the time it was submitted till the time the ultimate 22 approval occurred. 23 My sense is that's happening quicker now 24 since the approval of those is now being controlled by 25 the bingo division. As you probably know, before it was WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 161 1 being handled by the security division. And, you know, 2 that was a -- I don't think that was the way it should 3 have been set up from the beginning because if we're 4 going to stand here and point out what we think are 5 shortcomings in the staffs, then they ought to have the 6 tools to be responsible for that. And up until last -- I 7 guess early fall, that wasn't the process. 8 But there still is -- it still takes an 9 inordinate amount of time, at least from the view of my 10 clients, to get a change in the electronics approved. 11 And we believe that just as -- if you can quickly get an 12 approval on a Pull-Tab, if you can get innovative product 13 out into the marketplace, that can have a direct 14 favorable impact to the charities. 15 I will be happy to answer any questions. 16 MS. TAYLOR: I have a question. 17 Do you have any additional ideas for 18 revenue enhancement? 19 We've talked about the Pull-Tab. I 20 mean -- and hopefully that will be taken care of in the 21 Mary rule. And some of the other things we voted on 22 and -- have legislative changes. But do your charities 23 have any ideas of revenue enhancements that might be 24 implemented or implemented with the legislative change 25 other than these four items? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 162 1 MR. FENOGLIO: No, not at this time. 2 Thank you. 3 MR. NEINAST: Steve, following on 4 Suzanne's question, the -- of those five items, the last 5 one including, you might say, two -- five or six items, 6 the only one on which action has not been taken by this 7 committee is the eliminate $750 cap on progressive 8 pull-tabs. Is that correct? 9 We've taken action as you've -- I think 10 we've already acted and recommended action on each of 11 those. Do you see further action needed on any of these? 12 MR. FENOGLIO: I don't know that y'all 13 have directly discussed the approval process for 14 electronic card minding device. And not -- and I'm not 15 talking about the device once it's brought to the market 16 because I think that can take a longer period of time for 17 staff. But when it's -- it's an improvement. I don't 18 know that y'all have ever discussed that specific issue 19 at a BAC meeting. I don't recall it. 20 But other than that, yes, Mr. Chairman. 21 MS. MAGNUSON: Can I make one comment? 22 MR. NEINAST: Yes. 23 MS. MAGNUSON: Along those lines, I just 24 want to throw something out for public inception, I 25 guess. There is a gaming laboratory called Gaming WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 163 1 Laboratories International, also known as GLI. They have 2 offices pretty much all over the world. They -- they're 3 out of New Jersey originally and specifically do a lot of 4 slot machine testing for most of the jurisdictions around 5 the country. 6 I bring this up because just recently they 7 have decided to get into the business of testing 8 electronic bingo devices. And one of the things that I 9 guess we could throw out here for further investigation 10 is whether or not it might make sense for these devices 11 to be tested at GLI as opposed to in-house at the lottery 12 and simply have GLI certify to the lottery commission 13 that the device meets the standards that have been 14 established by Texas law or Texas rule. 15 They are familiar with the devices. 16 They're very good. They're a very reputable agency. And 17 this electronic bingo stuff is just a new area that they 18 decided to get into within the last month. 19 MR. TAWIL: Mary, we had this -- we had 20 this come up about two years ago. Is that right, Phil? 21 MR. SANDERSON: Yes. 22 MR. TAWIL: We were wondering whether you 23 would go out of the state and you're not allowed and you 24 decided to keep it internally in the state on testing -- 25 THE REPORTER: I can't hear you very well. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 164 1 I'm sorry. Say the last part again. 2 MR. TAWIL: I was thinking that the UI -- 3 it's like UL Laboratories up in New Jersey that would do 4 the certification. Didn't we have -- do you remember 5 that, Phil? We had this issue, this very thing, whether 6 we should remove the testing and approval of equipment 7 and -- 8 MR. SANDERSON: I don't recall -- I don't 9 recall it at a BAC meeting, no. 10 MR. NEINAST: I don't recall it either. 11 But, Mary, would you like to make that in 12 the form of a motion using -- 13 MR. TAWIL: I think this -- I mean, it's a 14 good idea, but I recall Billy making the comment -- 15 MR. SANDERSON: I know we're researching 16 the use of GLI or some other vendor that does that type 17 of testing. It's one of the things that we're looking 18 at. 19 MS. MAGNUSON: I just wanted to throw it 20 out as an option. It might make things -- it might 21 relieve some of the burden on the staff and might make it 22 a little quicker because these guys can process this 23 stuff. 24 MR. TAWIL: Plus the manufacturer pays for 25 it. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 165 1 MS. MAGNUSON: And the manufacturer -- 2 MR. TAWIL: Yeah, that's right. They're 3 supposed to -- 4 MR. NEINAST: Well, we're looking for ways 5 to speed the process and -- 6 MR. TAWIL: Oh, this is real fast. 7 MR. NEINAST: -- that may be one. 8 So would someone like to make a motion 9 that that procedure be recommended to the bingo division? 10 MS. MAGNUSON: I'll make that motion. 11 MR. NEINAST: Okay. 12 MS. BRACKETT: I'll second it. 13 MR. NEINAST: Is there further discussion? 14 Any comment from the audience? 15 MR. TAWIL: Do y'all want to discuss this 16 as an agenda item or do you want to move on it right now? 17 MR. NEINAST: We're moving on it right now 18 because it comes under the agenda item -- 19 MR. TAWIL: Okay. 20 MR. NEINAST: -- of improving revenue -- 21 MR. TAWIL: I'm all in favor. 22 MR. NEINAST: Okay. Being no further 23 discussion, call the question. All in favor of 24 recommending that the bingo advisory division -- bingo 25 division that the electronic card minding device's WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 166 1 approval be done through the -- what's the name -- 2 MS. MAGNUSON: It's Gaming Laboratories 3 International, GLI. 4 MR. TAWIL: Actually, it's more than that. 5 It's more than just a gaming device. All manufacturer -- 6 all manufactured and service items, I guess. 7 MS. MAGNUSON: Electronic, I guess. They 8 do not do -- 9 MR. TAWIL: Help me, Phil. What do we do 10 about systems like ours? I don't know if GLI would test 11 that or not. 12 I guess we can just limit it to electronic 13 card minding devices. Is that what y'all want to do? 14 I don't have any problem with it either. 15 MS. TAYLOR: I would say anything they're 16 willing to test, let them test. 17 MS. BRACKETT: I agree. 18 MR. NEINAST: So -- 19 MR. TAWIL: Actually on that other, Phil, 20 we would still need the auditors and -- yeah. I don't 21 think it would fit because we would still need the audit 22 people to look at the database and things of that nature. 23 So it wouldn't fit into the GLI. 24 MR. SANDERSON: On the SSP? 25 MR. TAWIL: Yes. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 167 1 MR. SANDERSON: That's probably correct. 2 MR. CLOWE: Chairman, real quick. They do 3 a pretty good job of testing blowers and all that kind of 4 stuff. Let's do limit this. GLI does a great job on 5 card minding devices. They have just started doing that 6 for a number of states, Missouri being one of them that 7 just got approval. They do a great job on card minding. 8 I don't know if they've ever been into a blower and flash 9 boards. And those are expensive equipment in this state. 10 They are qualifying equipment. 11 So let's let them -- if you don't mind 12 limiting it to card minders, I think it would probably be 13 a good thing. 14 MS. MAGNUSON: That's a good point. 15 MS. TAYLOR: Okay. Then I'll amend that 16 motion to card minding devices. 17 MR. NEINAST: Okay. Would you restate 18 it -- 19 MS. TAYLOR: I'm sure that you would like 20 to restate it for me. 21 MR. NEINAST: Could our court reporter 22 read that function back? 23 (Off the record) 24 MS. TAYLOR: Okay. I'll make the motion 25 that the BAC recommend to the staff that, if possible, to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 168 1 allow GLI to do the testing of the electronic card 2 minding devices. 3 Does that cover it? 4 MS. BRACKETT: I'll second that. 5 MR. NEINAST: Okay. Would you -- the 6 Gaming Lottery -- Laboratory. What is the "I" part? 7 MS. MAGNUSON: International. 8 MR. NEINAST: Laboratory International. 9 Okay. 10 Okay. Call the question on the motion 11 that this committee recommend to the staff that they use 12 the GLI for approval of card minding devices. Call the 13 question. All in favor? 14 SPEAKERS: Aye. 15 MR. NEINAST: Opposed, same side. 16 Motion carried. 17 Any further items to be considered under 18 opportunities for revenue enhancement? 19 If not, we'll pass to Item Number 7. 20 Consideration of and possible discussion and/or action on 21 charitable distributions. 22 That was also an item suggested at the 23 last meeting, and we put it on the agenda. I'm not sure 24 what is intended there. Does anyone have any ideas on 25 this item? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 169 1 MS. TAYLOR: I think the reason that this 2 happens to be on the agenda is because of some of the 3 misunderstandings charitable organizations have had when 4 making their distributions. Some of the things that have 5 been allowed as a charitable -- through the charitable 6 distribution, such as the American flags that were 7 purchased out of state from the state organization and 8 items like that. 9 And I had talked to Kim at one point and 10 said if the charities had a better understanding of 11 exactly what was and was not allowed, that we'd have a 12 lot less problems in the audit with the general account 13 having to reimburse the bingo account for disallowed 14 expenditures. So if we knew what the charitable 15 distribution -- what was or wasn't a workable usage of 16 the money is -- I believe that's why this is on here. 17 MR. NEINAST: Let the record reflect that 18 Mary Magnuson has left the meeting, but we still have a 19 quorum. 20 Yes, sir. 21 MR. WEBB: My name is Don Webb, and I'm 22 with the Improved Order of Redmen, which is a fraternal 23 organization, and also with AMVETS, American Veterans. 24 One of the items on this was -- it was 25 brought up that we gave to a national like Alzheimer's -- WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 170 1 I'll just use Alzheimer's as a particular item, a 2 charity. I mean, we give money to them. It goes out of 3 state. But it wasn't clear. It was just -- it was kind 4 of like disapproved because when it goes out of state, 5 they say that's not approved. You know, that Texas 6 doesn't do that. But they don't follow through -- didn't 7 follow through that the money that -- was coming back 8 into the State of Texas. 9 In other words, for the 19th -- for 2000, 10 we give out 29,600-and-something dollars to the 11 Alzheimer's Association which went to the national thing. 12 And this year we just gave 4,000, which shows how much 13 bingo is really off. 14 But in consideration, we have -- there's 15 an estimate of 265,000 Texans alone here in the state 16 that have Alzheimer's. And what we did -- they put back 17 to the State of Texas through the University of Houston, 18 Dallas, San Antone, the different states -- they put back 19 into Texas $1.5 million back into this state for which -- 20 what we gave to them. And this came from Texas and other 21 things. And it -- we just don't -- we didn't understand 22 why we couldn't -- well, it's not why we couldn't do it 23 but why should we give to a charity like that and then it 24 not be followed through saying that it's coming back into 25 Texas. Why couldn't it be approved? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 171 1 That's our main problem -- I mean, that's 2 our main question about it. And, you know, it's just -- 3 can you, you know -- and I've been on enough -- you know, 4 you -- well, I've talked to Kim about it. 5 And so we need to find out what our 6 limitations are, what we need to do and why it's not a 7 national -- why it's not a national charity when the same 8 thing happens with Red Cross, so forth and so on. 9 MR. NEINAST: Can you address that? 10 MR. SANDERSON: Mr. Webb, I can attempt to 11 address that. 12 First, I don't know if this is the forum 13 to actually go one and one with a particular audit that 14 took place. Okay? 15 MR. WEBB: Okay. 16 MR. SANDERSON: Secondly, I'll address it 17 generally. And what I would understand would be that if 18 we do have some organizations that are national 19 organizations and we get documentation from them that -- 20 of the money they received from Texas, this is what they 21 send back to Texas. And so that's one of the avenues -- 22 you know, if you donate to National Alzheimer's 23 Foundation, if they are willing to submit a letter on 24 their letterhead back to you that, you know, in the year 25 2000, this is what we sent back to Texas. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 172 1 MR. WEBB: Okay. So that's what -- that's 2 what we should do for each charitable group that we send 3 to that's out of state? 4 MR. SANDERSON: That's what I would 5 recommend, yes. 6 MR. WEBB: To get a letter back from them 7 or are they willing to do that? 8 MR. SANDERSON: I'm sure most of them are, 9 yes. 10 MR. WEBB: Okay. And another thing we 11 wanted to do is talk about the convention expenses for 12 the veterans group and the fraternal organizations like 13 if we have a meeting in Waco and they want all of our 14 charity -- I mean, all of our charters to send persons to 15 Waco for that or send them to Tyler, say, different 16 places for a meeting. 17 Okay. We conduct a meeting that is 18 beneficial to the lottery commission, also IRS because we 19 invite the IRS down, we invite the lottery commission 20 down, but still they're saying that's not allowable. We 21 need to change either the rule because that's -- the only 22 place we have to get that money from is from our general 23 funds. 24 MR. SANDERSON: Well, there is a rule 25 being drafted that's going to clarify, hopefully, as much WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 173 1 as possible charitable distributions or the use of 2 charitable proceeds. I don't have that draft in front of 3 me, so I can't tell you exactly what it's going to say. 4 MR. WEBB: Oh, okay. So there is a draft 5 on the way. 6 MR. SANDERSON: There is a draft on the 7 way. The only thing that we have to work with in laying 8 out this rule is what the constitutional amendment says, 9 that all proceeds must be for the charitable purpose of 10 the organization. 11 And the definition of what the use of 12 proceeds are, I believe it's Section 2001.454 -- or 451 13 that talks about the use of proceeds. And it talks about 14 charitable, benevolent, scholarship, educational, 15 supporting public structures, religious activities, 16 volunteer fire department activities and so forth. And 17 that's -- 18 MR. WEBB: But there are new rules that -- 19 you are -- there's a new draft coming out that's -- 20 MR. SANDERSON: Yes, there is. 21 MR. WEBB: That's all I have. 22 Thank you. 23 MR. NEINAST: Would anyone else care to 24 address this? 25 MR. FENOGLIO: I would. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 174 1 My name is Stephen Fenoglio, and you have 2 a list of who I represent. 3 This has been an ongoing dialogue we've 4 had. Actually -- and this was an issue that Steve 5 Bresnen wanted to speak on. And as I said earlier, he 6 cannot be here. 7 The convention expense for VFW 8 organizations that I represent -- I also represent some 9 Vietnam veteran organizations and AMVETS organizations 10 and some American Legion posts -- is an important issue. 11 And we've sat down with Mr. Sanderson on this issue back 12 in March at a Redmen convention. And the staff is 13 undergoing, as I understand it, a review. 14 The problem arises when a veteran post 15 makes a distribution from its bingo account to the 16 general fund and the general fund monies are mixed with 17 other funds. And as a part of that, the post decides to 18 send one or more representatives to either a regional 19 veterans organization meeting, a state convention for out 20 of state. And you have the issue can those proceeds be 21 utilized for that purpose. 22 Number one, this isn't an issue of the tax 23 deductibility under the Internal Revenue Code because 24 that -- those issues have already been approved in many 25 cases with veterans organizations and, as we know, the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 175 1 bingo division isn't the IRS. 2 But the issue arises first with the 3 constitutional amendment that -- which was passed that 4 states that all proceeds from the games are spent in 5 Texas for charitable purposes of the organization. 6 When you look at the definition of -- in 7 the case of a veterans organization is a nonprofit 8 organization whose members are veterans or dependents and 9 that is chartered by the U.S. Congress. And VFW, 10 American Legion, AMVETS and Vietnam Veterans, they're all 11 chartered by the U.S. Congress by fiat or act of the 12 U.S. Congress. 13 The provision is 454 of the Bingo Enabling 14 Act that says that the charity, the license authorized 15 organization, shall devote to a charitable purpose its 16 net proceeds of bingo and the rental of any premises. 17 So if a VFW post is also acting as a 18 commercial lessor for itself as well as for others, then 19 it has to use both the bingo revenues and the rental 20 revenues for a charitable purpose. 21 And then the statute goes on to say that 22 the net proceeds are dedicated to a charitable purpose 23 only if directed to a cause that, number one, benefits an 24 indefinite number of needy individuals in the state by -- 25 among -- for veterans organizations either (d), assisting WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 176 1 them in establishing themselves in life as worthy and 2 useful citizens -- and if you've ever been to a veterans 3 organization, they talk about motherhood and flying the 4 flag and what it takes to be a good citizen. Those 5 aren't necessarily popular things to talk about in our 6 pop culture, but that's what all the veterans 7 organizations believe in. 8 And the last one is the increasing or 9 comprehension of and devotion of principles of which this 10 nation was founded and enhancing their loyalty to their 11 government. 12 If you've ever been to a veterans post, 13 they talk about that. They talk about that at their 14 regional conventions. They talk about that at their 15 state conventions. They talk about that in their 16 national conventions. And, yet, occasionally we've had 17 an audit where some of those expenses are being 18 challenged in an audit. 19 And this is an issue that, Phil, we'd like 20 to have -- we want some direction. 21 I hear from organizations that five years 22 ago they had their general fund audited and their bingo 23 account and the convention expenses were approved. And 24 this year they were audited, and all of a sudden, the 25 same type of convention expenses that had been -- that WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 177 1 had, in a previous audit, been approved are now 2 challenged or the auditor says no. 3 And I don't want to talk about a specific 4 case because we have some cases that are not -- 5 technically they're not a contested case yet because we 6 haven't even had a notice provision yet. But we've 7 had -- an auditor has determined that this is an expense 8 that should be disallowed. We're in the process of 9 either negotiating or we're going to tee it up. But -- 10 and go to a contested case hearing. 11 But, I mean, it's just the overall issue 12 that five years ago that was okay and today it's not. 13 And the law hasn't changed. The constitutional amendment 14 certainly hasn't changed. But there's been a growing 15 body of audit review, perhaps, from the commission. And 16 maybe there's been a subtle shift or an outright shift. 17 We don't know. 18 And it seems to me that the best way to 19 handle that is to put it in black and white so everyone 20 knows what the rules of the road are. So we salute the 21 staff for bringing that. We may disagree on some of the 22 expenses that y'all are going to try to put into black 23 and white that can be either allowed or disallowed, but 24 at least everyone would know what the rules of the road 25 are and not be subjected to, well, five years ago it was WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 178 1 okay, and today it's not. And that's this issue that 2 you're looking at. And the donations to recognized 3 national charities. 4 We had an issue come up with the American 5 Red Cross several years ago. And you're the first -- the 6 first time I've ever heard that is what you just said, 7 Phil. Well, if you can get a national -- a letter from 8 the national organization, then that may suffice for us. 9 If you sent 3,000 to the national 10 organization or 30,000 but the national organization 11 turned around and sent 100,000 back to the state, well, 12 then we may be able to say that, "Well, okay. Those 13 proceeds in fact were spent in the state," I guess is 14 what you're saying. And that's helpful to know. 15 And then the other thing that's been 16 somewhat problematic is -- in some of the audits -- and I 17 guess the rule is going to clarify it -- is the auditor 18 is somewhat reluctant to detail and -- to go into great 19 detail on why they are disallowing certain expenses. And 20 I guess with the rule that wouldn't be a problem. The 21 auditor would point to a rule and say that's either why 22 I've (a) -- I've (a) disallowed this expense and allowed 23 this other expense or vice versa. 24 So we salute you for doing that. And I 25 know we've had some discussion recently about negotiated WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 179 1 rule making and the like, and that may be one. I don't 2 know where y'all are in this -- drafting that rule to 3 bring it forward, but that may be one that would lend 4 itself to a negotiated rule making. 5 And I'll be happy to answer any questions. 6 I know the hour is late. 7 MR. NEINAST: Any questions of -- 8 MR. SANDERSON: I don't think the rule is 9 ready for the April 26th meeting. 10 MR. FENOGLIO: And we're not asking for 11 it, Phil, and I want to make that clear. And Mr. Atkins 12 had asked me before, Well, Steve, you know, you tell us 13 you want this negotiated rule making, and then you're, 14 you know, kind of changing years on us or changing the 15 procedure for the pull-tab. 16 And I've tried to make that clear that -- 17 because the charities are drowning. 18 This is an important issue, the charitable 19 distribution issue, but it can be held off. I'm not 20 asking that it be brought up to the 26th, but we'd like 21 to have the process on that one started relatively soon. 22 MR. SANDERSON: I know we're working on 23 it. I do know there's been at least one draft and maybe 24 two. And once again, we'd like to research not only what 25 our state allows. We talk to other states about, you WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 180 1 know, their charitable activities also and how they have 2 organizations document their use of funds. And it's one 3 of the things that we just kind of like to get everybody 4 on the same playing field. 5 As far as the convention expenses, I know 6 at one time -- and as far as -- there may be a portion of 7 those convention expenses that can be a bingo expense, 8 not necessarily a charitable use of funds. It's just 9 like it's a bingo expense to send somebody from Waco to 10 Austin to attend a hearing. It's a bingo related 11 activity. 12 MR. FENOGLIO: I see. 13 MR. SANDERSON: So, I mean, there may 14 be -- if they're going to a convention where there's a 15 bingo seminar or discussion of bingo activities or 16 whatever, then that could be a bingo related expense, 17 which would not necessarily be the same as a charitable 18 distribution. 19 MR. FENOGLIO: And you raise an excellent 20 point. As you know, most of the organizations at one 21 time or another will discuss bingo because all of them 22 are conducting bingo -- or many of them are conducting 23 bingo. 24 Okay. Appreciate that. Thank you. 25 MR. NEINAST: Thank you, Steve. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 181 1 I believe someone else wanted to address 2 this item. 3 MR. YOUNG: Robert Young, AMVETS, Post 77. 4 I couldn't agree any more with what the 5 statement says. A lot of times -- and I'm going to speak 6 on the same thing, the convention expenses that have been 7 disallowed. 8 This, in our veterans organization, is the 9 life blood of our charities. Not only being the 10 commander of Post 77, I'm on the board of trustees for 11 the Department of -- AMVETS Department of Texas and have 12 served on that board since 19 -- I believe it's '92. And 13 I could sit here and feed you with horror stories of what 14 we were -- use an example. Let me give you one. 15 Used to, we funded the ROTC, which -- the 16 state championship meet in Mesquite, Texas. And we 17 had -- I think it was 125 high schools that participated 18 in that. And these are -- you know, and it was tough. 19 Because of funds and stuff, we had to drop -- we first 20 started it out as solely AMVETS, and it was there for 21 quite a while. 22 And, you know, when you start talking 23 about educational achievements and loyalty to government 24 and you see these cadets in the way that -- the drills 25 and stuff, it was the pride of my life because, you know, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 182 1 these are the people that's going to be protecting us one 2 of these days. And it was hard for us to sit there and 3 determine that we just didn't have the money to do that. 4 Now, this was a decision that was made at 5 a convention. A lot of people look at the veterans 6 organizations -- and I guess we stand out because we wear 7 our hats and stuff. And it may not be like some other 8 conventions. And I'm not going to stand before you and 9 say there isn't some partying going on because I feel 10 like veterans have got something to celebrate because 11 they're still alive, you know. 12 So there is -- there is that aspect, but 13 there is a lot of real business that is done and needed. 14 Not only conventions. There are committee meetings that 15 are directly related. I can think of one here in the 16 past. I think the PAL's Program over here in -- and 17 don't ask me what PAL stands -- some kind of police -- I 18 couldn't remember exactly what it was. I was jotting 19 this down a while ago. 20 But let's please help the -- I think kids 21 that are on drugs and stuff. And they came before us at 22 one of our conventions here I think three years ago and 23 asked if we could have a medal, you know, to give to 24 different kids. 25 Now, I'm not completely knowledgeable of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 183 1 actually how it was presented and whatever. So we 2 designed, made it, paid for it and got it out there. And 3 that was -- you know, that was the -- I don't know if 4 that's Police Association League or something like that. 5 But anyway, it's PAL's, where they help kids. 6 And, you know, these are some of the 7 decisions we made, our Special Olympics, Boy Scouts and, 8 as I said, ROTC, which we do not have the state 9 championship anymore. And I don't know if I said this a 10 while ago, but we started out, it was just AMVETS. The 11 schools in the State of Texas adopted it as their state 12 championship, which we were proud of that. But we had to 13 quit that. I believe it was three years ago. And don't 14 quote me exactly on that. It might have been four. 15 But anyway, then on the board of trustees 16 for AMVETS, which -- and, you know, we look at the 17 expenses and make recommendations back to the convention 18 floor. And there are some tough decisions being made at 19 this time. We don't -- you know, we set goals and try to 20 meet those goals. And without bingo, we would be in bad 21 shape. 22 Also, the majority of our people are 23 veterans -- well, they all are veterans, but they are 24 people that are on fixed incomes. And if this money was 25 disallowed to try to offset some of their expenses -- WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 184 1 and, you know, we would like for any expenses -- that 2 they just wouldn't be able to participate. And without 3 participation, we would not exist very long. You would 4 be virtually putting us in a bad situation. There would 5 only be a few people that could actually afford to go. 6 Yes, there are other -- I know that there 7 are other posts and stuff that are -- that don't pay -- 8 play bingo and they have other ways of gathering 9 contributions and stuff like that. But this money is 10 needed, and I was just astounded when I found out it had 11 been disallowed; that there's no way some of the people 12 that I work with -- and we're all volunteers -- that can 13 afford to go to three or four meetings a year. And 14 that's basically what we're looking at. 15 We have a -- we have a state convention, 16 and we have three SECs, which is a state executive 17 council. And in my post, that is needed. And I know of 18 numerous ones. And I'll hope when you look at this you 19 understand that this money -- because this is where we 20 set our goals, our programs, decide what charities we are 21 supporting outside of just veterans programs, programs in 22 the communities, assistance at the VA hospital, such as 23 wheelchairs and stuff and we help out the people, also 24 with the different cemeteries and stuff that we do on 25 patriotic holidays, I guess you could say. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 185 1 So, you know, I think sometimes that 2 veterans get a bad wrap when they see the convention. 3 They think they're just there partying. Like I said, I'm 4 not going to tell you there's not some partying going on, 5 but there is a heck of a lot of good business and there's 6 a lot of good deeds that come out of those meetings and 7 those conventions. 8 And that's basically what I had to say. 9 But I truly, truly feel very strongly that by taking that 10 away from us would evolve into our organizations and our 11 charities being smaller as a result -- or as a direct 12 result of not being able to participate. 13 MR. NEINAST: Thank you, Mr. Young. 14 Anyone have a question for Mr. Young? 15 MR. YOUNG: Thank you for your time. 16 MR. NEINAST: Anyone else care to address 17 this? 18 MR. HUTCHINGS: Charles Hutchings, AMVETS, 19 Post 52. 20 Let me give you a little background and 21 then I'll get into why. I've been a member of the AMVETS 22 in Texas for slightly over 25 years. I have been the 23 state commander for the department of Texas. I have been 24 the fifth district national commander. I, at this time, 25 am serving as the president of the service foundation for WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 186 1 AMVETS Department of Texas. So I have quite a background 2 of doing with the veterans and being with them in their 3 causes. That goes from the VA hospitals in Dallas to the 4 cemeteries, our national veterans cemeteries, of which 5 AMVETS is the one -- we put a carillon in the one in 6 Houston. We've updated that carillon in the last few 7 years. We just put a carillon in the cemetery in Dallas 8 that's just been designated for that area. So, you know, 9 we are out there on a continuous deal. 10 We do have several organizations in this 11 state that play bingo. When bingo came into being, I 12 suspect veterans organizations are probably the largest 13 number of charities that popped up right off playing 14 bingo. 15 The Bingo Enabling Act that was alluded to 16 earlier on the 2001454, in the increasing their 17 comprehension of and devotion to the principles on which 18 this nation was founded and enhancing their loyalty to 19 their government, I believe that is a continuing effort 20 in all veterans organizations. 21 I'm a member of the American Legion. I'm 22 a member of the VFW. All of them continuously strive for 23 that purpose. If there's any group in this country who 24 fits that, it is the American veterans. Not just AMVETS, 25 it's all of them. For they continuously strive for the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 187 1 country that most of them and -- well, most have fought 2 for, in one way or another, in many foreign lands. 3 And with that, I do believe that that 4 right there covers the fact that -- you know, of these 5 expenses for conventions and travel to and from and for 6 the expenses of people who go to these things and do 7 exactly as that says, devotion to the principles in which 8 this nation was founded. 9 Thank you. 10 MR. NEINAST: Thank you. 11 Anyone else care to address the -- I think 12 that this item does not require a motion of any type or 13 action. It's more of an information vote for the members 14 of the committee and for the bingo division unless 15 someone sees it differently. Anyone? 16 Okay. If not, pass to Item Number 8, 17 consideration of and possible discussion and/or action on 18 amendments to 16 TAC 402.467 (sic), Bingo Advisory 19 Committee. 20 During the last break I placed in front of 21 you a draft change to that rule. The basis is that the 22 next item we'll take up will be recommending to the 23 lottery commission a slate for the next Bingo Advisory 24 Committee. And that has to be dealt with every year. We 25 have to get nominations from each of those categories. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 188 1 The lottery commission has to consider them, make 2 appointments. 3 I believe it's kind of inefficient in many 4 ways. This proposal would change that rule on members 5 being appointed for only one year and have to be 6 reappointed every year. There would be three major 7 changes to that rule. 8 First of all, the appointment of a member 9 would be for a three-year term. Secondly, that no member 10 may serve more than two consecutive terms. In other 11 words, no one can serve for six years -- no more than six 12 years consecutively and that it would also set up a 13 system where -- of rotation where one-third of the 14 committee would be appointed every year setting up. 15 And if you look at the last three 16 paragraphs there that -- I just flipped a coin as to 17 which ones to put in for one year, which for two years 18 and which for three years. Nothing magic about it. You 19 can change that in any way you like, but the proposal is 20 to amend Rule 402.567 to make the Bingo Advisory 21 Committee more stable with appointments for three years 22 and with staggered terms. 23 Discussion? 24 MR. TAWIL: I would like to make a 25 suggestion. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 189 1 I think it's an excellent idea. I have 2 talked to my colleagues about the idea of the way it is 3 now. We have a slate. You start out the first -- you 4 got four meetings in the year. The first one, you get 5 acquainted. The second one, you talk about what's going 6 on. The third one, you propose a rule or something. The 7 fourth one, they say good-bye to you. We start all over 8 again, and they say, We're ineffective. 9 That's one of the reasons. So this is an 10 excellent idea. 11 However, Mr. Chairman, I would like to add 12 to your list here if you don't mind -- 13 MR. NEINAST: Sure. 14 MR. TAWIL: -- and that would be that 15 after the new committee is selected, those members who 16 wish to chair shall present their credentials and the 17 platform and the reason as to why they should be elected 18 as the chairman of this committee, and the body of the 19 new BAC that is appointed shall select a chairman from 20 that group. 21 MR. NEINAST: Let me check -- 22 MR. TAWIL: I may be wrong. Is that 23 something the commission has to do? 24 MR. NEINAST: I want to check -- no. I 25 want to check the statute real quick. I'm not sure. It WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 190 1 may be that the statute might require that the -- 2 MR. TAWIL: Commissioners? 3 MR. NEINAST: Just that last part where 4 you say the advisory committee shall select the chairman. 5 The statute may require that it be done by the committee. 6 Let me check that here quickly. 7 MR. SANDERSON: I don't see it in there. 8 MR. NEINAST: Okay. It's not a 9 requirement. So your amendment would be, again -- or 10 addition, because it's not a formal motion -- 11 MR. TAWIL: An addition to your proposal. 12 Just an addition to your proposal -- 13 MR. NEINAST: Okay. 14 MR. TAWIL: -- that the chairman of the 15 committee shall be elected by the BAC. And this should 16 occur after the new committee is selected. And those 17 members who wish to chair shall present their 18 credentials, platform and reasons as to why they should 19 be elected to the BAC for them to be elected as the 20 chair. 21 MR. NEINAST: Well, no problem. Why would 22 you -- is it necessary to add the letter? Why can't we 23 just say that the chairman will be selected by the -- 24 MR. TAWIL: BAC? 25 MR. NEINAST: Sure. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 191 1 MR. TAWIL: You're a lawyer. See, you 2 know better about language than I do. I guess the -- 3 help me with that. Would they have -- how would they do 4 this? Would they lobby the members? How would we do 5 this? 6 UNIDENTIFIED SPEAKER: Hang a bunch of 7 hundred dollar bills -- 8 MR. NEINAST: What do you mean how 9 would -- 10 MR. TAWIL: How would -- the body comes 11 together. The nine members come together. How do we 12 decide who chairs -- to get a chairman elected? 13 MR. NEINAST: The same way they select the 14 speaker of the house. 15 MR. TAWIL: Okay. 16 MR. NEINAST: The member who gets out and 17 gets the most support. 18 MR. TAWIL: Okay. I see that. I think 19 Robert -- that's -- 20 MR. NEINAST: It's supposed to just be an 21 informal procedure, but I don't see locking it into a 22 rule. 23 MR. TAWIL: Yes. 24 MR. NEINAST: Okay. Any further 25 discussion of -- WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 192 1 MS. TAYLOR: Is the ultimate goal here -- 2 the first year, what you're proposing is that we pick 3 people who are going to -- and from then on it's two-year 4 terms automatically? 5 MR. NEINAST: No. This is just something 6 to set up the rotation. 7 MS. TAYLOR: Okay. 8 MR. NEINAST: So -- 9 MS. TAYLOR: And once the rotation is set 10 up -- 11 MR. NEINAST: Yeah. Yeah. And once 12 that -- the second year, they would have to select -- the 13 first year after it was in effect, those three members go 14 off. And they could be -- each of them could be 15 considered for reappointment for another three-year term. 16 At the end of two years, those members go off. And 17 whoever their replacements are come on for three years. 18 And it's a three-year term. Those three go off, but they 19 come back on for three-year terms. So that will set up a 20 consistent rotation. 21 MS. TAYLOR: So ultimately the idea is it 22 would be three-year terms -- 23 MR. NEINAST: Yeah. 24 MS. TAYLOR: -- once the rotation is 25 completed? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 193 1 MR. NEINAST: Then the three who are 2 appointed the first time for one-year terms, they may be 3 appointed at the end of that -- for a three-year term. 4 That starts their three-year term. 5 Any further discussion? 6 Chair will entertain a motion that this 7 proposal be -- 8 MR. RINEHART: I'll make the motion and -- 9 along with Saleem's amendments to the motion. 10 MR. NEINAST: Yeah. Well, that is now 11 part of the motion because this was -- it has what is 12 before you plus the addition of chairman to be -- 13 UNIDENTIFIED SPEAKER: I want to make a 14 motion that that bill -- 15 MR. NEINAST: -- elected by the committee. 16 Yes. 17 MR. RINEHART: -- your motion to accept. 18 MR. NEINAST: Is there a second? 19 MR. CASTILLO: Second. 20 MR. NEINAST: Further discussion? 21 Call the question. All in favor, aye. 22 SPEAKERS: Aye. 23 MR. NEINAST: Opposed, same sign. 24 Motion carried. 25 Now we move back up to Item Number 3, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 194 1 which is consideration and -- report, possible discussion 2 and/or action on nomination to the Bingo Advisory 3 Committee. 4 Saleem, you're chairman of the 5 subcommittee and... 6 MR. TAWIL: Thank you, Mr. Chairman. 7 There were three members of the 8 subcommittee, Virginia, Suzanne and myself, and we were 9 charged with the responsibility to recommend a slate to 10 the full committee. And hopefully after I make my 11 presentation we would expect whatever changes or a vote. 12 But let me proceed with giving you the background. 13 What I would like to do here is tell 14 you -- I would like to read all the names of the people 15 that we were asked to consider. And what we did consider 16 was the geographical region of where these individuals 17 were from, the general demographics like population areas 18 and so on so that we try to get general representation, 19 broad representation, if they had any industry support. 20 Also, we looked at the individuals as to their 21 effectiveness, their involvement in the industry, their 22 length of involvement, their sincerity and commitment to 23 getting the job done. 24 And this was not very easy. We didn't get 25 it resolved until we were at our lunch break. But I'm WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 195 1 happy to report that the three members of the 2 subcommittee reached a consensus. 3 In the first group for the general public, 4 there was a Ms. Angela Crummett, William Holden, James 5 Overstreet, Gilberto Torres. Ricky Truman, Caroline 6 Vasquez and Stella Vasquez. 7 And I might add when members of the 8 subcommittee or at least some of the members of the 9 subcommittee called to talk to some of these people, some 10 of them had no idea they were being considered for 11 something like this. So I want you to know that this 12 went from the frivolous to the very serious. 13 And the subcommittee's recommendation to 14 the full committee is that Mr. William Holden of Granger, 15 Texas be considered for that position. 16 For the second position, which is a 17 commercial lessor position, there were four individuals 18 to be considered -- five individuals to be considered: 19 Mr. Scott Ingerman of San Antonio, Mario Manio, Wesley 20 Newton, Mr. Bud Speed and Suzanne Taylor. 21 The committee's recommendations were 22 Mr. Scott Ingerman of San Antonio and Suzanne Taylor of 23 Corpus Christi. 24 For the conductor's position, which are 25 three positions, there were Mr. Relius Certain, John WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 196 1 Daniel, Tom Dupree, Neil Fox, Oscar Gonzalez, Henry 2 Grieb, Patricia Griffis, Carol Harcrow, Sheldon Holub, 3 Charles Kittell, Glenda Krueger, Clint Leone, Alberto 4 Luera, Etta Mudd, Pete Pavlovsky, Robert Rinehart, Larry 5 Whittington, Larry Young, Virginia Brackett and Janice 6 Woods. 7 Now, for these -- for all of these names, 8 the selection was for three. And the three selected 9 were -- for your consideration on the slate are Larry 10 Whittington from Dallas, Pete Pavlovsky from Rosenberg 11 and Ms. Virginia Brackett from Lubbock. 12 For the position of 13 distributor/manufacturer -- and this is the one that we 14 had the greatest amount of trouble with. However, we're 15 happy to say that we reached a consensus. 16 There were three nominees: Mr. Ken 17 Griffith, Daniel Moore and Edward Troxel. Mr. Daniel 18 Moore of Houston was selected. 19 For the conductor/lessor, there was Myrtle 20 Fowlkes, Marilyn Matthews, Letha Nixon, Eva May Watts and 21 Mr. Ronnie Hunter. The subcommittee's recommendation is 22 Ms. Marilyn Matthews of Odessa. 23 For the last position, it was just myself, 24 and I nominated my -- no. There was no others. 25 So the nine members of the -- the nine WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 197 1 names proposed here I would yield to the chairman to take 2 it from here to decide on whether we have a motion for 3 the adoption of this or discussion or whatever. But this 4 is the nine slate that we propose as a subcommittee. 5 MS. TAYLOR: If I could add something 6 before the chairman says anything on this particular 7 thing. 8 One of the items is -- that we're also 9 looking for was the actual nomination form. We had four 10 of these. Three out of the four people at the very end, 11 Lexford Speed, Janice Woods and Ronnie Hunter, that we 12 did not have a nomination form from. So we really did 13 not -- were not able to include them in the 14 consideration. 15 We did have one from Virginia to Saleem 16 and myself and put it -- sent it into the lottery 17 commission. But Rolanda is telling me at this time that 18 she does not think that any of those four people are 19 going to be considered by the commissioners. 20 So before -- I would like us -- I think 21 that before we do this we need to make an alternate that 22 if Virginia is not considered -- if the commissioners are 23 not going to consider that that we need to perhaps have 24 an alternate named in there as the conductor. 25 MR. TAWIL: The chairman asked us to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 198 1 consider at the last meeting -- 2 MR. NEINAST: I hope the lottery 3 commission would consider it because it came up total 4 confusion. And I had the same problem before that 5 they -- the members were not advised in advance that they 6 needed to have a nomination. And again, it was 7 considered by many of these that they were automatically 8 considered. 9 And so I'll talk with the lottery 10 commission about that, but I certainly think that they 11 should be considered. And everyone else who was at that 12 meeting that day who asked that they be considered were 13 put on the list. So no one can say, "Well, I didn't get 14 mine in and I wasn't considered." 15 They were, if they said they were 16 interested. I know that two of them were former members 17 of the committee, and they were considered. 18 So I'll discuss that with the commission. 19 Did you have a comment? 20 Okay. Is there a motion that the 21 subcommittee on nominations be -- report be approved? 22 MR. TAWIL: I make a motion that the 23 subcommittee's recommendation be approved to be carried 24 by the chairman to the commission for a recommendation. 25 MR. NEINAST: Is there a second? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 199 1 MR. CASTILLO: I second. 2 MR. NEINAST: Any further discussion? 3 All in favor, aye. 4 SPEAKERS: Aye. 5 MR. NEINAST: Opposed, same sign. 6 Motion carried. 7 And that brings us down to the next to the 8 last item. 9 Ms. Court -- do you think you can last a 10 few more minutes? 11 THE REPORTER: Sure. 12 MR. NEINAST: Number 9 is consideration of 13 and possible action -- okay, let the record show that 14 David has left -- on future Bingo Advisory Committee 15 meeting dates and/or items to be considered for future 16 meetings. 17 The schedule we had set up before is that 18 we would meet on the second Wednesday of every February, 19 May, July and October as a minimum. But the setting out 20 is a special -- so we would have advance notice. 21 Of course, we called this meeting as a 22 special meeting. Depending upon whether there are some 23 pressing items to be considered, you may want to consider 24 skipping the May meeting and going to July. 25 So I think maybe the first item should be WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 200 1 see what items we have to be considered at the next 2 meeting. 3 MR. TAWIL: Are we supposed to have -- 4 when does the BAC elements of membership be resolved and 5 completed? At this meeting on the 26th? 6 MR. NEINAST: I hope so. 7 MR. TAWIL: Okay. So we'll have a whole 8 new slate when we meet, God willing, if everything goes 9 okay? 10 MR. NEINAST: I hope so, yes. 11 MR. TAWIL: So you want agenda items for 12 that meeting? 13 MS. TAYLOR: I would imagine that your 14 letter to the -- 15 MR. TAWIL: Sunset. 16 MS. TAYLOR: -- Sunset review committee 17 would be one of the items at our next meeting, would it 18 not? 19 MR. NEINAST: Well, I won't be here. 20 But... 21 MS. BRACKETT: In May you will not be 22 here? 23 MR. NEINAST: Well, the question is let's 24 see what the -- if we have some pressing items. If 25 there's nothing that's really pressing, you might want to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 201 1 delay it till July rather than have a meeting one month 2 from now. 3 The question is are there enough items 4 or -- pressing items to have a meeting in May? 5 MR. TAWIL: I think if we can convene with 6 the new committee in May it would speed us along in 7 getting the introductions and that process out of the way 8 so we would be -- because the end of this year is the new 9 legislative session. 10 MS. TAYLOR: I agree with that. 11 MR. NEINAST: Okay. So the next meeting 12 will be the second Wednesday in May. 13 Somebody have a calendar? 14 MR. SANDERSON: May 8th. 15 MR. FENOGLIO: May 8th. 16 MR. NEINAST: Okay. Items for the agenda? 17 MS. TAYLOR: The instant bingo rule. 18 MR. SANDERSON: May I ask why? 19 MR. NEINAST: I'm sorry? 20 MR. SANDERSON: The reason I ask is 21 because -- and Steve probably can help me on this. If it 22 is before the commission -- 23 MS. TAYLOR: Oh, we can't discuss it. 24 MR. SANDERSON: -- and they post it -- 25 MR. TAWIL: Yes, that's true. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 202 1 MR. SANDERSON: -- then you've got public 2 comment activities. And I don't know if that would -- if 3 anybody discussed the rule in this meeting if that would 4 be considered comment. I don't know. 5 MR. FENOGLIO: Well, I'll take a stab at 6 it. 7 This is Steve Fenoglio. 8 This -- it's not the commission. This is 9 an advisory committee. So I don't think that -- if y'all 10 posted it for consideration and you received comment, 11 that's not the comment that needs to be made for a rule 12 making purpose. It's a comment, but you need to -- under 13 the rule making provisions of the Administrative 14 Procedure Act, there is a named person that parties may 15 make comment to. And typically, that's Kim Kiplin. 16 MR. SANDERSON: And that's -- I want to 17 make sure that you have it on the agenda and it's posted 18 on the Web site so people don't come to that meeting 19 thinking -- 20 MR. FENOGLIO: No. And -- 21 MR. SANDERSON: -- they can make a 22 comment. 23 MR. FENOGLIO: Yeah. 24 MS. TAYLOR: Maybe instead it could be an 25 update on what's happening with the rule, whether there WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 203 1 is a rule or not a rule or... 2 MR. NEINAST: That would -- 3 MR. SANDERSON: Maybe the status of the 4 rule. 5 MS. TAYLOR: Yeah, I like that. Status. 6 MR. NEINAST: Okay. 7 MR. TAWIL: I'd like to also add an item 8 on there. Subcommittee assignments of the BAC. 9 MR. NEINAST: Okay. 10 MR. TAWIL: And I guess electing the 11 chair. Would that just be a natural thing? 12 MR. NEINAST: I would assume that at this 13 point -- I think that the -- 14 MR. TAWIL: They may reappoint you. 15 MR. NEINAST: I think the commission 16 will -- I'm not on the list. And I think the commission 17 will probably appoint the chair since that's the -- that 18 is the procedure as it is in the rule right now. 19 MR. TAWIL: Oh, it's in the rule? 20 MR. NEINAST: The rule says specifically 21 that the -- 22 MR. TAWIL: Okay. 23 MR. NEINAST: -- that the committee will 24 appoint the chair and the vice chair and secretary. 25 MR. TAWIL: The change you're talking WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 204 1 about -- 2 MR. NEINAST: So this would be a change if 3 the rule would come in. 4 MR. TAWIL: That's perfect. 5 MR. NEINAST: Okay. Any other items? 6 Well, as normal, usual, if you have any 7 additional items you think of, send it to Billy or 8 Rolanda as an agenda item. And they would like to have 9 those before May the 1st so they can get the lock before 10 that so they will have a chance to get the agenda printed 11 and the backup information out to new members. 12 If there is no further business -- 13 MR. TAWIL: Well, one thing I want to add 14 on there, do we want to talk -- is there a time line -- 15 Phil, you might know. On the Sunset commission, when are 16 we going to have to get our letter to them or whatever? 17 If there's no urgency -- 18 MR. SANDERSON: I don't recall an exact 19 time line. She did mention some of the -- they're in the 20 process of drafting a report. So public comments will be 21 sometime I believe in May or June. 22 MR. FENOGLIO: Their deadline will be 23 something -- now and June. You may want to include that 24 update or status on Sunset. There may not be much to 25 give, but -- WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 205 1 MR. TAWIL: The Sunset -- the comments 2 from the BAC to the Sunset review committee by the chair. 3 MR. NEINAST: Any other items? 4 If not, the Chair will entertain a motion 5 to adjourn. 6 MS. TAYLOR: I make that motion. 7 MR. NEINAST: Second. 8 MS. BRACKETT: I'll second it. 9 MR. NEINAST: All in favor, aye. 10 SPEAKERS: Aye. 11 MR. NEINAST: Well, this is my Swan song. 12 I just want to tell all of you thank you for your service 13 and I appreciate your support and consideration. It's 14 been a pleasure working with you. 15 16 17 18 19 20 21 22 23 24 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 206 1 ERRATA SHEET 2 PAGE/LINE CHANGE: 3 _____________________________________________________ 4 _____________________________________________________ 5 _____________________________________________________ 6 _____________________________________________________ 7 _____________________________________________________ 8 _____________________________________________________ 9 _____________________________________________________ 10 _____________________________________________________ 11 _____________________________________________________ 12 _____________________________________________________ 13 _____________________________________________________ 14 _____________________________________________________ 15 _____________________________________________________ 16 _____________________________________________________ 17 _____________________________________________________ 18 _____________________________________________________ 19 _____________________________________________________ 20 _____________________________________________________ 21 _____________________________________________________ 22 _____________________________________________________ 23 I, , have read the 24 foregoing transcript and hereby affix my signature that 25 same is true and correct, except as noted above. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 207 1 REPORTER'S CERTIFICATE 2 3 STATE OF TEXAS ) 4 ) 5 COUNTY OF TRAVIS ) 6 7 I, CYNTHIA B. RAMSAY, Certified Court 8 Reporter for the State of Texas, do hereby certify that 9 the above-captioned matter came on for hearing before the 10 BINGO ADVISORY COMMITTEE; that I did, in shorthand, 11 report said proceedings, and that the above and foregoing 12 typewritten pages contain a full, true and correct 13 computer-aided transcription of my shorthand notes taken 14 on said occasion. 15 WITNESS MY HAND this the 23rd day of 16 April, 2002. 17 18 19 _________________________________ CYNTHIA B. RAMSAY, CSR NO. 4132 20 Certified Court Reporter For the State of Texas 21 Expiration Date: 12-31-03 22 Wright, Watson & Associates 1609 Shoal Creek Boulevard, Suite 202 23 Austin, Texas 78701 (512) 474-4363 24 JOB NO. 020410CBR 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363