1 1 BEFORE THE 2 TEXAS RACING COMMISSION 3 AUSTIN, TEXAS 4 5 6 7 COMMISSION MEETING 8 9 10 11 12 13 14 BE IT REMEMBERED that the above entitled 15 matter came on for hearing on the 9th day of May, 2002, 16 beginning at 10:00 A.M. at Room No. 5, Multi-Disciplinary 17 Building, Raymond Stotzer Parkway, College Station, Brazos 18 County, Texas, and the following proceedings were reported 19 by SHERRI SANTMAN FISHER, Certified Shorthand Reporter for 20 the State of Texas. 21 22 23 24 25 FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 2 1 APPEARANCES 2 3 Commissioners: TERRI LACY 4 DAVID C. GARZA 5 MIKE RUTHERFORD 6 COMER COTTRELL 7 TREVA BOYD 8 R. DYKE ROGERS 9 COLLEEN McHUGH 10 JIMMY ARCHER 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 3 1 CHAIRPERSON LACY: The meeting is called to 2 order. 3 Ms. Giberson -- Ms. Cook, could you call the 4 roll, please? 5 MS. COOK: Ms. Boyd? 6 COMMISSIONER BOYD: Present. 7 MS. COOK: Mr. Cottrell? 8 COMMISSIONER COTTRELL: Present. 9 MS. COOK: Mr. Garza? 10 COMMISSIONER GARZA: Here. 11 MS. COOK: Ms. McHugh? 12 MS. McHUGH: Here. 13 MS. COOK: Mr. Rogers? 14 VICE-CHAIRMAN ROGERS: Here. 15 MS. COOK: Mr. Rutherford? 16 COMMISSIONER RUTHERFORD: Here. 17 MS. COOK: Mr. Archer? 18 MR. ARCHER: Here. 19 MS. COOK: Ms. Lacy? 20 CHAIRPERSON LACY: Here. 21 A quorum being present, we'll begin the 22 meeting. 23 Mr. Cottrell, we'd like to welcome you. We're 24 glad you're here. 25 Dr. Adams, did you want to make a few opening FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 4 1 remarks? 2 MR. ADAMS: Well, I'd be happy to. Welcome to 3 Texas A&M University, the College of Veterinary Medicine. 4 I'm Richard Adams. I'm the dean of the college. I know 5 you'll be touring the diagnostic lab with Dr. Lelve Gayle, 6 the director of the diagnostic lab; but he gave me the honor 7 of welcoming all of you to Texas A&M for your first meeting 8 here. 9 We're delighted to have you here and hope that 10 you'll get a chance to look at the diagnostic lab. And I 11 also wanted to offer the opportunity afterwards, if any of 12 you would like to see the veterinary medical teaching 13 hospital, the new equine pavilion that we've just opened 14 just a couple of weeks ago here at the college, we'd be 15 happy to arrange that as well. 16 We have an exceptional equine program here at 17 the college that sees -- tracks about 4,000 horses here in 18 hospitalized patients each year and another several thousand 19 out in the field. So what you all do is very important to 20 us and we hope what we do is important to you, and so we're 21 delighted to have you here. And if anything comes up during 22 the day that we can be of service, please don't hesitate to 23 give me a call. Welcome. 24 CHAIRPERSON LACY: Thank you. 25 We'll move to proceedings on rulemaking, FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 5 1 consideration of and action on the following rules, 2 adoptions, and these are at Tab 1, Section 307.7, amendment; 3 309.313, amendment; 309.351, amendment; 319.301, amendment; 4 and 323.201, amendment. 5 Ms. Kennison, if you'd give us an explanation, 6 please. 7 MS. KENNISON: Commissioners, these amendments 8 were published in the Texas Register on March 8th, 2002. 9 Section 307.7, this amendment would add a deadline to 10 request a hearing in order to contest an ejection or an 11 exclusion. 20 days was selected to be consistent with the 12 Racing Act. 13 Section 309.351, this amendment would 14 establish a deadline for associations to file their executed 15 kennel contracts with the Commission. Valley Racetrack has 16 indicated that this deadline would not fit its schedule. 17 Staff informed Valley that further changes in this rule 18 would be recommended in the future and its suggestion would 19 then be incorporated at that time. It was agreed that this 20 would be the most expedient approach to this. 21 Section 319.301, this amendment would 22 explicitly state that a negative result in a drug test for 23 race animals and the executive secretary's clearance is a 24 precondition to any entitlement to purses. 25 Section 323.201, this amendment is to reflect FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 6 1 the current procedure, which no longer requires the 2 disclosure of arrests. The citation has also been changed 3 to correct it to the proper traffic citation. 4 Staff recommends these amendments be adopted. 5 CHAIRPERSON LACY: Any questions for 6 Ms. Kennison? 7 Mr. McIntosh, did you want to comment? 8 MR. McINTOSH: Yes, ma'am. My name is Charlie 9 McIntosh, director of operations for Valley Race Park. 10 In reviewing the 309.351, Section (b), the 11 requirement for the January 31st submission of the 12 contracts, obviously it would apply to year-round operating 13 facilities. I suggested some language for the seasonally 14 operated greyhound tracks, which obviously we're the only 15 one. That would allow us to submit those 30 days prior to 16 commencement of our live racing. And we typically open the 17 last couple of days of November, so it would be sometime 18 late October. 19 CHAIRPERSON LACY: Any questions for 20 Mr. McIntosh? 21 When the Commissioners are ready, I'd 22 entertain a motion to adopt these amendments without changes 23 to the published text. 24 COMMISSIONER GARZA: I want to clarify on 25 351. As I understand it, the staff is not opposed to the FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 7 1 recommendation that's being made by Valley Race Park. It's 2 just you'd rather get this approved and then come back at 3 the next meeting. 4 MS. KENNISON: That's correct, Commissioner. 5 We anticipate some further changes to this rule, and at that 6 time we would also incorporate the changes suggested by 7 Valley. 8 COMMISSIONER GARZA: To accommodate the 9 problem that they have? 10 MS. KENNISON: Yes, sir. 11 COMMISSIONER GARZA: So that would come up for 12 most likely the next meeting that would be scheduled? 13 MS. KENNISON: That's correct. 14 COMMISSIONER COTTRELL: I move for adoption. 15 CHAIRPERSON LACY: Mr. Cottrell has moved for 16 adoption. 17 Is there a second? 18 COMMISSIONER BOYD: Second. 19 CHAIRPERSON LACY: Ms. Boyd has seconded. 20 Any discussion? 21 All those in favor signify by saying aye. 22 COMMISSIONERS: Aye. 23 CHAIRPERSON LACY: Any opposed? 24 The motion passes unanimously. 25 We'll now move to proposals at Tab 2, Section FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 8 1 313.5 and Section 321.124. 2 Ms. Kennison? 3 MS. KENNISON: Section 313.5, complaints 4 against officials, this is a duplicative provision that's no 5 longer necessary. Complaints against officials is now 6 located in Chapter 23, so therefore this rule can be 7 repealed. 8 Section 321.124, this new rule was created to 9 allow more flexibility when technical changes or changes in 10 the totalisator environments occur. The rule would allow 11 for a waiver of certain requirements under certain 12 prescribed circumstances. 13 Staff recommends that these amendments be 14 published in the Texas Register. 15 CHAIRPERSON LACY: Any questions for 16 Ms. Kennison? 17 Any discussion? 18 I'd entertain a motion to publish these 19 proposals in the Texas Register. 20 MS. McHUGH: So moved. 21 COMMISSIONER COTTRELL: Second. 22 CHAIRPERSON LACY: Ms. McHugh has moved. 23 Mr. Cottrell has seconded. 24 Any discussion? 25 All those in favor signify by saying aye. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 9 1 COMMISSIONERS: Aye. 2 CHAIRPERSON LACY: All opposed? 3 The motion passes unanimously. 4 We'll now move to petitions for rulemaking; 5 and at Tab 3, Commissioners, is a petition by the Texas 6 Horsemen's Partnership for an amendment to Section 309.298. 7 Mr. Azopardi, would you like to comment? 8 MR. AZOPARDI: Good morning, Commissioners. 9 My name is Tommy Azopardi. I'm the executive director of 10 the Texas Horsemen's Partnership. 11 Let me see if I can get this on. Excuse me if 12 I'm a little nervous. The last time I was in this room, I 13 didn't do so well on a test I had; so that's why I'm sitting 14 in the back row. 15 CHAIRPERSON LACY: I'm going to let you go 16 ahead and comment on both 309.298 and 313.409. 17 MR. AZOPARDI: Thank you. 18 We are making these petitions today in a role 19 of representing our members and in our role as the 20 horsemen's bookkeeper. Section 309.298 deals with the 21 distribution of funds paid into a race. Specifically the 22 funds that we're addressing are the ones that are paid in by 23 our horsemen through the form of nomination payments, 24 sustaining payments, and entry payments. 25 We would like to add the underlined language FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 10 1 that clarifies that no such expenses may be deducted or 2 incurred by an association, specifically meaning the 3 racetrack. 4 This rule, or Subsection (4), gives the 5 implication that the racetrack might be able to deduct 6 expenses for advertising, administration, and such; and we 7 feel like those racetracks were chartered to conduct live 8 racing and promote live racing and don't feel like they 9 should be deducting money from the horsemen's fees for doing 10 such. 11 I spoke with each and every racetrack in the 12 state. There are letters in your packet showing support 13 from Retama and from Sam Houston. I've also had 14 confirmation of support from Corey Johnsen at Lone Star Park 15 who's here today if you would like to ask. I also spoke 16 with Howard Phillips of Manor Downs. Howard assured me that 17 they would support this rule. He called me last night and 18 said he couldn't make the meeting today but that he was 19 still in support of this rule. And also there's support 20 from Gillespie County Fair Association on this. 21 This rule specifically will not affect the 22 breed registries. The breed registries are in a different 23 situation where they do advertise and promote stakes races 24 for accredited bred races and this will not affect them. It 25 will allow them to continue their current practice. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 11 1 The proposed amendment that we have for 2 Section 313.409 deals with our duty as the horsemen's 3 bookkeeper. The current rules allow for a jockey to -- the 4 current rules specifically say the jockey earns his fee when 5 he crosses the scales at the conclusion of a race. There's 6 an implication that -- or an expectation of the jockey that 7 he can get his fees immediately, although the post-race 8 tests have not been sent off, much less cleared. 9 What the Texas Horsemen's Partnership is 10 asking you today is to give us the flexibility or the 11 discretion to hold payment to that jockey on any race where 12 his fee is over $5,000. 13 We have a unique situation from time to time 14 that arises where, for one reason or another, the track has 15 a big race day with large purses; jockeys come in from other 16 jurisdictions and ride. If a jockey comes in from another 17 jurisdiction, wins a race and is entitled to payment, would 18 like his check before he leaves and we give that to him, the 19 post-race test comes back and the Commission redistributes 20 the money, we've got to go locate the jockey, secure those 21 funds, and redistribute them. And so we're asking to limit 22 our exposure on those instances to anything under $5,000. 23 And I've talked with the jockeys' 24 representative, Mr. John Beech, who is with the Jockeys' 25 Guild. Mr. Beech understands our liability and our exposure FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 12 1 here and said he would support this rule. 2 That is, in essence, the petitions that we're 3 making and I will stand ready to answer any questions. 4 COMMISSIONER RUTHERFORD: Tommy? 5 MR. AZOPARDI: Yes, sir. 6 COMMISSIONER RUTHERFORD: Why would you make 7 it as high as $5,000? 8 MR. AZOPARDI: That was -- there was certainly 9 some thought to just limiting it to all fees when they come 10 back and anything above that would be arbitrary, 11 Commissioner, and so we just picked that number as something 12 that we could feel comfortable with. 13 COMMISSIONER RUTHERFORD: Because the owner 14 wouldn't get his money. 15 MR. AZOPARDI: That's correct. The owner 16 doesn't get his. 17 COMMISSIONER RUTHERFORD: So the owner would 18 have to pay the jockey -- two jockeys. 19 MR. AZOPARDI: We would be responsible for 20 getting that money and putting it back in his account. And 21 we have done that from time to time. When the Commission 22 redistributes the purse, we go in, Mr. Rutherford, and put 23 the money back in the owner's account and go to the jockey 24 and get the money. 25 COMMISSIONER RUTHERFORD: I would think you FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 13 1 would want it more uniform and the jockeys be treated the 2 same way as the owners. 3 MR. AZOPARDI: I would -- I would certainly be 4 willing to do that. I don't know how acceptable that would 5 be with the riders that we have in the state. There's an 6 expectancy of them getting their fees, you know, at the end 7 of the week when they ride and they depend on that cash 8 flow. So it was a situation where we picked a number that 9 we felt like would be something that we could get unanimous 10 support on. 11 CHAIRPERSON LACY: Mr. Palmer, did you want to 12 add anything? 13 MR. PALMER: No, I have nothing further on 14 this. 15 CHAIRPERSON LACY: Okay. Thank you. 16 Any other questions for Mr. Azopardi? 17 Thank you. 18 It's my understanding that the staff is not 19 opposed to this. 20 Any other questions? 21 I'd entertain a motion to publish the 22 amendments to Section 309.298 and 313.409 in the Texas 23 Register. 24 VICE-CHAIRMAN ROGERS: So move. 25 CHAIRPERSON LACY: Commissioner Rogers has FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 14 1 moved. 2 Do I hear a second? 3 COMMISSIONER BOYD: Second. 4 CHAIRPERSON LACY: Ms. Boyd has seconded. 5 All those in favor signify by saying -- 6 COMMISSIONER RUTHERFORD: Are we going to have 7 any -- 8 CHAIRPERSON LACY: I'm sorry. Discussion? 9 COMMISSIONER RUTHERFORD: I don't think the 10 jockeys -- the owners are paying all the bills. I don't 11 think the jockeys ought to get paid before the owners. I 12 think it would be more uniform, too. 13 CHAIRPERSON LACY: Commissioner Rutherford, I 14 think some of us are having a hard time hearing you, if you 15 could use your microphone. 16 COMMISSIONER RUTHERFORD: Working now? 17 CHAIRPERSON LACY: Yeah. 18 COMMISSIONER RUTHERFORD: I don't think -- I 19 think it ought to be uniform. And I don't think the 20 owners -- they pay all the bills. I don't think they should 21 not get their money -- the jockeys ought to get it at the 22 same time on an added stakes race. On regular races, 23 they're different because they have a set fee on those. 24 CHAIRPERSON LACY: Gentlemen, Commissioners, 25 any other comments? FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 15 1 COMMISSIONER BOYD: Can I ask Mr. Azopardi 2 another question? 3 CHAIRPERSON LACY: Yes. Commissioner Boyd -- 4 thank you. 5 COMMISSIONER BOYD: Have you had much of a 6 problem in this happening? I mean, how big has the problem 7 been? 8 MR. AZOPARDI: We've been very lucky, 9 Ms. Boyd. 10 COMMISSIONER BOYD: You've been lucky? 11 MR. AZOPARDI: Been lucky. We have not had a 12 problem. When we have had to redistribute purses in the 13 past and we've had to go get the jockey, in each and every 14 case we've been able to get that money back. We just had a 15 situation that we realized that at any time we could have a 16 potential exposure of 60,000 or more in certain races and we 17 just wanted to make sure that we have that. 18 COMMISSIONER BOYD: Was there ever a case 19 where an owner was -- the money was kept from an owner -- 20 MR. AZOPARDI: No. 21 COMMISSIONER BOYD: -- in lieu of you getting 22 back your money? 23 MR. AZOPARDI: No. We have always -- as a 24 fiduciary of that account, we've always stood ready to put 25 the money back in an owner's account if a race came back as FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 16 1 positive and then was redistributed. 2 COMMISSIONER BOYD: So you're assuming more of 3 the liability than the owners would. 4 MR. AZOPARDI: That is correct. 5 COMMISSIONER BOYD: Then I don't have a 6 problem with it if they're assuming the liability more. 7 MR. AZOPARDI: I will say, Commissioner 8 Rutherford makes a good point and we would not be opposed if 9 the petition was changed to say, you know, stakes races. We 10 just, as I said, picked a number that we felt we could be 11 comfortable with. 12 CHAIRPERSON LACY: Any other discussion? 13 All those in favor signify by saying aye. 14 COMMISSIONERS: Aye. 15 CHAIRPERSON LACY: All those opposed? 16 COMMISSIONER RUTHERFORD: Nay. 17 CHAIRPERSON LACY: The motion passes with one 18 nay. 19 Thank you, sir. 20 MR. AZOPARDI: Thank you. 21 CHAIRPERSON LACY: Petition by the Texas 22 Thoroughbred Association for an amendment to Section 23 303.92. 24 Mr. Palmer? 25 MR. PALMER: May it please the Commission, my FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 17 1 name is Eugene Palmer. I'm a lawyer from Austin, Texas, 2 representing the Texas Thoroughbred Association. 3 Can you hear me now? My name is Eugene 4 Palmer, representing the Texas Thoroughbred Association. 5 The first proposed amendment that we have is 6 based upon an audit by the Texas Racing Commission of the 7 books and practices of the Texas Thoroughbred Association. 8 And one of the recommendations of the audit was that the 9 procedures be tightened up in terms of when purses would 10 actually be expended after receiving funds on 11 cross-species. 12 And in that instance we have proposed an 13 amendment here, Paragraph (4), which provides that those 14 monies will be devoted to purses within a reasonable time, 15 not to exceed 18 months. And we believe that this will be 16 more than adequate to allow us to handle those matters. 17 Ordinarily they're handled within 12 months. 18 The next part of the rule pertains to awards 19 that are unclaimed by persons that are entitled to them. 20 Quite often there is a large number of people who simply, 21 for one reason or another, do not claim their awards. The 22 Texas Thoroughbred Association has a procedure of publishing 23 these in the magazine and also, in more recent times, in 24 implementing it further by telephone calls and follow-ups 25 and every possible attempt to locate these people. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 18 1 Nonetheless, some of it still remains unclaimed. 2 The Texas Racing Act provides that if these 3 funds remain there, they shall be retained by the breed 4 registry. I take that to mean that at some point those 5 funds would be transferred into the general funds of the 6 registry similar to an escheat situation. 7 However, our board and our executive director 8 do not believe we should handle it like an escheat and that 9 what should be done is what is provided in this proposed 10 amendment; and that is that after the period of publication 11 that the transfer to the general fund would be effected at 12 the end of the next fiscal year and that any time after that 13 if a person came forward with suitable proof that they were 14 entitled to these funds, they would be paid back out of the 15 general fund. 16 And those are the two amendments that are 17 incorporated in this one proposal. 18 CHAIRPERSON LACY: Any questions for 19 Mr. Palmer? 20 It's my understanding that staff is not 21 opposed to these proposals. 22 Any questions for Mr. Burleson? 23 I'll entertain a motion to publish the 24 amendments to Section 303.92 of the rules in the Texas 25 Register. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 19 1 MS. McHUGH: So moved. 2 COMMISSIONER COTTRELL: Second. 3 CHAIRPERSON LACY: Colleen McHugh has moved. 4 Mr. Cottrell has seconded. 5 Any discussion? 6 All those in favor signify by saying aye. 7 COMMISSIONERS: Aye. 8 CHAIRPERSON LACY: All those opposed? 9 The motion passes unanimously. 10 Ms. Flowerday, it's my understanding that 11 we're going to take up the Lone Star Park issues all at 12 once? 13 MS. FLOWERDAY: That's correct. 14 CHAIRPERSON LACY: Then we'll move on to 15 proceedings on racetracks. 16 MR. PALMER: Excuse me, ma'am. We have one 17 more proposal. 18 CHAIRPERSON LACY: Did I miss one? I'm 19 sorry. Mr. Palmer, please go ahead. 20 MR. PALMER: The second proposal that is 21 before you is simply an attempt to conform the existing 22 rules to the amendments to the statute that were passed 23 during the last session of the legislature. The significant 24 part of these amendments related to the so-called breed-back 25 rule and we conformed the rules here to what was provided in FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 20 1 the statutory amendments. 2 Similarly, the statute provided that there 3 would be a special award for an accredited Texas-bred that 4 runs in open company as distinguished from a restricted 5 race. In this instance we have added that to the rules so 6 that it implements the statute. 7 And certainly I'd be willing to accept any 8 comments, criticism, help, whatever, that Ms. Kennison might 9 give me on these. 10 CHAIRPERSON LACY: Any questions for 11 Mr. Palmer? 12 COMMISSIONER RUTHERFORD: Mr. Palmer, I have 13 one question. Is there a limit on how long a -- how much a 14 stallion has to be in Texas, how long a term during the 15 year? How long does he have to be there? 16 MR. PALMER: I don't believe that there is a 17 limit in there. I'll defer to Ms. Ruyle who is -- 18 administers the program. 19 MS. RUYLE: Mr. Rutherford, to be an 20 accredited Texas stallion, you must pay a onetime lifetime 21 fee. That is good forever. If the stallion leaves the 22 state for any length of time, his accreditation is suspended 23 for that time period. Once he returns to the state, he 24 resumes his status as an accredited Texas-bred stallion. 25 However, stallion owner awards are paid on the FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 21 1 basis of an annual administrative fee paid by the stallion 2 owner for that year's breeding season. Again, if the 3 stallion leaves the state during the breeding season, awards 4 are only paid on foals conceived in Texas during that 5 particular year. 6 COMMISSIONER RUTHERFORD: The reason for my 7 question, we're going to start seeing a lot of probably some 8 stallions go to the southern hemisphere; and of course, 9 they're taking care of that. 10 MR. PALMER: I think so. 11 COMMISSIONER RUTHERFORD: Yes. 12 CHAIRPERSON LACY: Any other questions? 13 Ms. Kennison, did you want to comment? 14 MS. KENNISON: No, Ms. Lacy. I think 15 Mr. Palmer has laid it out. 16 CHAIRPERSON LACY: Then I would entertain a 17 motion to publish this in the Texas Register? 18 MS. KENNISON: That's correct. You've already 19 voted on the rule. Mr. Palmer just wanted to lay out the 20 other section. 21 CHAIRPERSON LACY: Okay. 22 MS. KENNISON: It's already been appropriately 23 voted on. 24 CHAIRPERSON LACY: Thank you, Ms. Kennison. 25 Now we'll move to proceedings on racetracks, FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 22 1 requests by Lone Star Park at Grand Prairie on a variety of 2 issues. 3 And, Mr. Kaminski, are you going to speak to 4 us? 5 MR. KAMINSKI: Yes. 6 CHAIRPERSON LACY: Thank you. 7 MR. KAMINSKI: Good morning. My name is Bob 8 Kaminski with Lone Star Park. 9 What we are here to do today is to get some 10 clarification from the Commission on interpretation of the 11 Racing Act involving what will be the ultimate transfer of 12 the license from Lone Star Park to Magna Entertainment 13 Corporation as a result of the announced sale of Lone Star 14 Park to Magna. 15 We have three guests here today that are from 16 Magna and we'd like to just take an opportunity to quickly 17 introduce. We have Jim McAlpine, who is president and CEO 18 of Magna Entertainment Corporation. We also have Ed Hannah, 19 who is vice-president and general counsel for Magna. Both 20 of them flew in from Canada. And then Scott Daruty, who is 21 U.S. general counsel based out of Santa Anita in 22 California. 23 CHAIRPERSON LACY: Thank you all for being 24 here. 25 MR. KAMINSKI: What this specifically speaks FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 23 1 to is the ultimate transfer of a license upon approval by 2 the Commission of Magna Entertainment to hold a license in 3 the State of Texas, to make sure that the clarification of 4 this issue doesn't involve approving Magna Entertainment 5 Corporation to hold a license in Texas. This is just giving 6 us some direction as to how the license will ultimately be 7 moved to their ownership once the sale is complete. 8 My understanding is that the background 9 information and the background checks the DPS is beginning 10 on the public company and the decision-makers, the 11 principals of that public company, has begun. That's in 12 process and that will take some time and that will be a 13 meeting sometime in the future. What this meeting is is 14 just as I stated, to give us some direction, interpretation 15 ultimately on how the license moves. 16 Tom Adler with Jenkens & Gilchrist is here. 17 I'm going to ask Tom to come down, if he would. I think in 18 your packages you can see the explanation that Tom has 19 presented for what we are suggesting is the manner in which 20 the license would be ultimately transferred. 21 And so what we are asking you -- I'll let Tom 22 walk through that in a second, but what we're asking the 23 Commission to do today is to approve the assignment of our 24 license to a wholly-owned subsidiary of Lone Star Park. 25 We'll be moving it from our partnership where the license is FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 24 1 currently held into a limited liability corporation that's a 2 hundred percent owned by Lone Star Park. So we're basically 3 assigning the license to ourself. 4 And once that has happened and it's in an 5 entity different than our partnership, once the transaction 6 is completed and Magna has completed its background checks 7 and information and ultimately is approved to own a license, 8 then they will acquire that entity and that's how the 9 license will end up in their hands. 10 If -- Tom, if you want to walk -- would the 11 Commissioners like Tom to walk through his memo? 12 CHAIRPERSON LACY: Yes, please. 13 MR. ADLER: I'm Tom Adler with Jenkens & 14 Gilchrist, representing Lone Star Park. 15 As Bob described, this would be a preliminary 16 step in the sale of Lone Star to Magna, a transaction that's 17 already been announced. The proposal is to transfer to -- 18 that's a bad word -- to assign the license to a wholly-owned 19 subsidiary. We've created this limited liability company 20 which is a hundred percent owned, managed, and controlled by 21 Lone Star, has no assets at this point, would only be used 22 in conjunction with the sale to Magna. 23 There are basically three ways to buy a 24 company and probably a lot of variations; but essentially 25 you can buy stocks, buy assets, or merge. The Racing Act FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 25 1 and the racing rules both contemplate an approval process 2 for a sale -- for a transfer of ownership or control of a 3 racetrack. So the alternatives of buying stock or buying 4 partnership interests or of merging would be allowed with 5 the Commission's approval and with the requisite background 6 checks. 7 There doesn't seem to us to be any logical 8 reason why a sale of assets should be treated any 9 differently; and based on that reasoning, we believe that 10 the assignment of our license to the new company, the new 11 subsidiary, is -- depending on how you want to word it, it's 12 not a transfer at all because, as Bob said, we're 13 transferring it to ourselves; and as my summary pointed out, 14 among other things, for Internal Revenue Service purposes, 15 Federal tax purposes, the new entity would be disregarded 16 and Lone Star would continue to be treated as the owner of 17 whatever assets it may have transferred to a wholly-owned 18 limited liability company. 19 We looked at the legislative history and there 20 is none on this particular provision. I'm talking about 21 6.12(a) of the Texas Racing Act which says a racetrack 22 license is not transferable, period. We researched it both 23 in the written records and the audio tapes of the committee 24 hearings and floor debates and there was nothing there. 25 My best understanding just from discussing FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 26 1 with people the reasons for that is that it was a concern 2 about preventing the transfer of a license without the 3 requisite background checks and Racing Commission 4 application process and the approvals. 5 That isn't going to happen here. This will 6 only be a transfer to this wholly-owned company. Anything 7 further would be -- the transaction with Magna would be 8 subject to Commission approval, DPS background check, all of 9 which is in progress now. So what we're asking for today we 10 think is, in substance, no transfer at all or certainly not 11 the kind that anybody would have been concerned about in the 12 early days when the Racing Act was adopted and the -- under 13 the rules of the Racing Commission. 14 To turn it around another way, I think if this 15 limited liability company came to the Commission and asked 16 for a license, it would be pretty much ignored. The 17 Commission would look directly through to the parent and 18 say, "We want background information on Lone Star and its 19 owners and its managers." 20 So I really think nobody would consider this a 21 substantive difference at this stage. There's no change in 22 beneficial ownership, no change in management; and all the 23 follow-up part of the transaction, as we've explained, is 24 already in the process of going through the DPS and the 25 Racing Commission checking. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 27 1 Any other -- any questions on that? I don't 2 know if that's too quick a summary or too short a summary; 3 but we've given this a lot of thought and structured the 4 transaction the way we have for a variety of business 5 reasons, some driven by Magna, some driven by Lone Star; and 6 now we're just trying to find the procedurally correct way 7 to complete the transaction. 8 MS. McHUGH: Chairman Lacy? 9 CHAIRPERSON LACY: Commissioner McHugh? 10 MS. McHUGH: I'd like to know the staff's 11 analysis. 12 MS. FLOWERDAY: I'm going to just try to speak 13 loud rather than try to pass that down. 14 Staff has not done any independent research. 15 We are not tax lawyers and we didn't think that was a good 16 use of our time and resources. We did meet with 17 representatives of Lone Star before any of this paperwork 18 that's in your packet got filed. 19 I've read through what Mr. Adler has 20 submitted, and it seems logical to me. It seems 21 reasonable. And I think because the Commission has the 22 ability to -- and you have the primary responsibility to 23 interpret your own statute and because this is a reasonable 24 interpretation, staff is not troubled by the concept of 25 assigning the license to a wholly-owned subsidiary. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 28 1 The bottom line is that the Commission will 2 have the ultimate approval. The purposes of the Racing Act 3 are being satisfied and will be satisfied because of the 4 thorough background check that DPS will have to do before 5 any kind of new ownership or operator will be able to take 6 control. 7 MS. McHUGH: As I think probably -- if I can 8 speak for the rest of the Commission, I think we're most 9 comfortable relying on the opinion of our general counsel, 10 which, of course, includes you, Paula. Is it your 11 recommendation then, as staff, that we follow the 12 recommendation that has just been set out for us? 13 MS. FLOWERDAY: Yes. 14 COMMISSIONER COTTRELL: Would this be put in 15 the form of a specific motion? 16 CHAIRPERSON LACY: Yes, we'll make a motion. 17 COMMISSIONER COTTRELL: You see three items, 18 A, B, and C, listed; and I don't think C is at all possible, 19 but A and B would be. And I think that one of the 20 objectives of the Commission, being new, in my own 21 interpretation, would be to help make transitions and such 22 possible, but to the benefit of the State and for the 23 benefit of the industry. 24 CHAIRPERSON LACY: Right. 25 COMMISSIONER COTTRELL: So I believe that FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 29 1 this -- to do B would still make it possible for them to act 2 but enable us to have a final say. 3 CHAIRPERSON LACY: And, Commissioner, when you 4 say "to do B," you mean to approve the assignment. 5 COMMISSIONER COTTRELL: Yes. 6 CHAIRPERSON LACY: Thank you. 7 MR. ADLER: If I could clarify, as 8 Commissioner Cottrell has indicated, we're asking for the 9 approval of the assignment of the license to this new 10 wholly-owned subsidiary and that's all today. Any 11 transaction with Magna is subject to further approval 12 later. 13 Secondly, if that is approved, which rests on 14 your interpretation of 6.12(a), then the two rule proposals 15 that we have in here on the agenda and Alternative C, as you 16 referred to, Commissioner, would be withdrawn. You wouldn't 17 consider those. 18 CHAIRPERSON LACY: Any other questions for the 19 Lone Star representatives? 20 COMMISSIONER GARZA: I just want to make 21 sure. I don't have any problems with what you all are 22 suggesting. But internally, has the staff double-checked to 23 make sure that the stockholders, partners, whatever they 24 are, in Lone Star Race Park, Limited, and the member 25 managers of the limited liability company are one and the FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 30 1 same? 2 MS. FLOWERDAY: Yes. 3 COMMISSIONER GARZA: I mean, as I understand 4 it, they're changing -- you're assigning the license to this 5 limited liability company that you created. The only thing 6 I think we need to make sure as a Commission is that the 7 shareholders or partners, whoever you have in the existing 8 licensee, are going to be exactly the same that are going to 9 be in your new limited liability company. 10 The limited liability company, as I 11 understand, is going to have member managers; and those 12 individuals have to be the same as the other one. Otherwise 13 I think you're getting into a transfer type situation. And 14 what I need is a comfort level that says that someone is 15 double-checking to make sure that the folks in the new 16 company are the same ones that are in the existing 17 licensee. 18 Is that going to take place or does it take 19 place? 20 MS. FLOWERDAY: I will make sure that it takes 21 place. 22 MR. ADLER: In the first place, we're not 23 going to use that company except in conjunction with the 24 sale; so the overall transaction will have been subject to 25 Commission approval before we actually do anything with that FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 31 1 entity. 2 Secondly, it's a member-managed LLC and its 3 100 percent owner and sole member is Lone Star Race Park, 4 Limited, the current license holder; so it's exactly 5 identical to the current license holder in all respects. 6 COMMISSIONER GARZA: With that understanding 7 and that confirmation, I have no problem with this. 8 CHAIRPERSON LACY: And we'll be sure we put 9 that in the motion. 10 Any other questions? 11 Thank you both very much. 12 MR. ADLER: Thank you. 13 CHAIRPERSON LACY: Did anyone else want to 14 testify? 15 Commissioners, anyone else want to comment? 16 It seems to me that we have two potential 17 motions: One, to approve the assignment of a Class 1 18 license to Lone Star Race Park Holdings, LLC, which would be 19 a subsidiary wholly owned by Lone Star Race Park, Limited. 20 Have I correctly stated that? 21 The other would be a motion to open an 22 application period for a Class 1 racetrack license in the 23 Dallas-Tarrant County area. The second motion would be made 24 by someone who felt that Section 6.12(a) prohibited the 25 assignment of the license. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 32 1 So I would entertain one of those motions. 2 COMMISSIONER COTTRELL: Ms. Chairman, I would 3 make the first motion for approval of the assignment. 4 CHAIRPERSON LACY: Commissioner Cottrell has 5 moved that we approve the assignment of the Class 1 license 6 to Lone Star Race Park Holdings, LLC, as I stated earlier. 7 Do I hear a second? 8 COMMISSIONER RUTHERFORD: Second. 9 CHAIRPERSON LACY: Commissioner Rutherford has 10 seconded. 11 Discussion? 12 Ms. Cook, if you'd call the roll. 13 MS. COOK: Ms. Boyd? 14 COMMISSIONER BOYD: Aye. 15 MS. COOK: Mr. Cottrell? 16 COMMISSIONER COTTRELL: Aye. 17 MS. COOK: Mr. Garza? 18 COMMISSIONER GARZA: Aye. 19 MS. COOK: Ms. McHugh? 20 MS. McHUGH: Aye. 21 MS. COOK: Mr. Rogers? 22 VICE-CHAIRMAN ROGERS: Aye. 23 MS. COOK: Mr. Rutherford? 24 COMMISSIONER RUTHERFORD: Aye. 25 MS. COOK: Mr. Archer? FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 33 1 MR. ARCHER: Aye. 2 MS. COOK: Ms. Lacy? 3 CHAIRPERSON LACY: Aye. 4 The motion passes unanimously. 5 Thank you, gentlemen. 6 We'll now move to a change in allocation by 7 the Texas Greyhound Association of greyhound purse money for 8 the year 2002. 9 I don't think I have a card from a 10 representative. Was anyone wanting to speak on the change 11 in allocation? 12 Ms. Kennison, would you be able to address 13 this for us? 14 MS. FLOWERDAY: Ms. Lacy, with your 15 permission, I'll address this issue. 16 CHAIRPERSON LACY: Okay. 17 MS. FLOWERDAY: This was put on the agenda at 18 the request of the Texas Greyhound Association. As you 19 recall, they are responsible for allocating purse money that 20 flows to them out of cross-species simulcasting. They 21 allocate it for purses among the three greyhound 22 racetracks. 23 Last December they adopted a formula -- they 24 presented to you, pursuant to a new rule that you adopted, a 25 formula for allocating that purse money among the three FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 34 1 greyhound racetracks. They have requested to modify that 2 allocation for the remainder of 2002. 3 I think -- actually I think what they are 4 intending to do is have two different allocations, one when 5 Valley Greyhound Park -- Valley Race Park is running live 6 and one when Valley Race Park is simulcasting only. 7 And I will defer to the representatives over 8 there now to describe the actual allocation. 9 CHAIRPERSON LACY: Thank you, Ms. Flowerday. 10 Mr. Bork? 11 MR. BORK: Good morning. My name is Bob 12 Bork. I'm with Valley Race Park. 13 I think Ms. Flowerday described it pretty 14 accurately. When the allocation was first put into place 15 last December, it showed the Valley Race Park as receiving a 16 hundred percent of the -- their share of the escrowed funds 17 during the period of time when we were not racing. 18 Our live season ended on April 7th. We sat 19 down, had some negotiations with the greyhound association. 20 Mr. Frey is here. And we came to an agreement that for the 21 period from June 15th to the day before we started racing 22 live again, to equally distribute the money around the 23 state, that Valley Race Park would only receive one-third of 24 their allocated share during that period of time. 25 Sometime later in the year, probably in FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 35 1 November or December, whenever there's a Commission meeting, 2 we will readdress the year 2003. 3 CHAIRPERSON LACY: Any questions for 4 Mr. Bork? 5 Thank you, sir. 6 MR. FREY: Yes. Good morning, Commissioners. 7 My name is Jim Frey, the -- with the Texas Greyhound 8 Association. 9 I concur basically with what Bob has said. 10 And we worked on this and both parties have compromised on 11 this. Maybe we're not completely happy, but that might mean 12 that it's a fair proposal. So we concur and ask you to 13 consider this proposal and for approving this proposal at 14 this time. 15 Thank you. 16 CHAIRPERSON LACY: Thank you. 17 Any questions, Commissioners? 18 COMMISSIONER GARZA: I have a question. Let 19 me see if I understand this correctly for the record. When 20 Valley Race Park reopens in November, whenever your dates 21 are going to be, will Valley Race Park then revert to the 22 full share that they'll receive? 23 MR. BORK: Their hundred percent share during 24 the live season, that's correct. 25 COMMISSIONER GARZA: And it will be getting a FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 36 1 third of its full share when it's not running. 2 MR. BORK: From June 15th until the day before 3 we open. 4 COMMISSIONER GARZA: And all the parties 5 understand that when Valley Race Park reopens again for live 6 racing, you will get your full share and not just a third of 7 it. 8 MR. BORK: That's correct. 9 COMMISSIONER GARZA: With that understanding, 10 okay. 11 MS. FLOWERDAY: Mr. Garza, if you'll notice, I 12 had asked the general managers of all three of the greyhound 13 tracks to verify in writing that they -- 14 COMMISSIONER GARZA: We wanted to make sure 15 that they understood that's what was taking place. 16 CHAIRPERSON LACY: Thank you, Ms. Flowerday. 17 Thank you, gentlemen. 18 Do I hear any other questions or discussion? 19 I'd entertain a motion to approve the 20 allocation of greyhound purse money for year 2002 as set 21 forth under Tab 6. 22 COMMISSIONER BOYD: I so move. 23 VICE-CHAIRMAN ROGERS: Second. 24 CHAIRPERSON LACY: Ms. Boyd has moved. 25 Commissioner Rogers has seconded. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 37 1 Any discussion? 2 All those in favor signify by saying aye. 3 COMMISSIONERS: Aye. 4 CHAIRPERSON LACY: All those opposed? 5 The motion passes unanimously. 6 We'll move to a report on racetrack 7 inspections. 8 Ms. Flowerday? 9 MS. FLOWERDAY: Commissioners, the report on 10 the racetrack inspections is in your notebook behind Tab 7, 11 I believe it is. 12 I will point out that the very first item with 13 respect to Manor was resolved last week, so it was after the 14 agenda packet went out but it has been resolved at this 15 point. 16 CHAIRPERSON LACY: Any questions for 17 Ms. Flowerday? 18 We'll move to proceedings on occupational 19 licensees, consideration of and action on the following 20 matter: The proposal for decision, exceptions, and replies 21 to exceptions in SOAH No. 476-02-0384. 22 Ms. Kennison, I'll recognize you for a 23 summary. 24 Commissioner Boyd. I'm sorry. 25 COMMISSIONER BOYD: Before we move on, I'd FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 38 1 like to ask Ms. Flowerday, if possible, about the number of 2 unsatisfactory items with Lone Star. We've got six there. 3 MS. FLOWERDAY: That's on the pari-mutuel 4 audit? 5 COMMISSIONER BOYD: Uh-huh. 6 MS. FLOWERDAY: I'm going to defer to Sammy 7 Jackson if that's okay. The way our inspection program 8 works, each division does their own inspection, so he's 9 going to be better able to describe the specifics. 10 COMMISSIONER BOYD: I'm sorry I was a little 11 late. 12 CHAIRPERSON LACY: That's fine, Commissioner 13 Boyd. 14 Mr. Jackson? 15 MR. JACKSON: All of the items have been taken 16 care of. We've just not been able to get up to Lone Star 17 Park to do the final review of the inspection. 18 COMMISSIONER BOYD: But we're confident 19 they've all been taken care of. 20 MR. JACKSON: Yes. 21 COMMISSIONER BOYD: Thank you. 22 CHAIRPERSON LACY: Thank you. 23 Ms. Kennison? 24 MS. KENNISON: Commissioners, staff filed an 25 exception to this proposal for decision. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 39 1 In Conclusion of Law No. 8, the ALJ, or 2 administrative law judge, found that the appellant had 3 violated Section 311.215 of the rules. However, the ALJ 4 makes a recommendation that the punishment be assessed at 5 six months. Apparently the ALJ interpreted the Commission's 6 penalty guidelines to mean that a person may only receive a 7 one-year suspension if the object is actually found in the 8 possession of the person. 9 The evidence presented to the stewards was 10 through videotapes and still pictures which showed an 11 electrical device in appellant's hand at the winner's 12 circle. The stewards based their ruling on photos, videos, 13 appellant's actions during the race, as well as the horse's 14 response in the race, all of which were consistent with the 15 use of an electrical device. Having found a prohibited 16 device was used, the stewards then imposed a one-year 17 suspension and a 5,000-dollar fine. 18 Aside from a Class 1 medication violation, use 19 of an electrical device is the most serious violation of the 20 Commission's rules. Use of such an electrical device may 21 cause injury to the participants, to the animals, and it 22 also commits a fraud upon the betting public. 23 As you may be aware, State agencies are 24 permitted to interpret its own policies as long as they are 25 reasonable. The Court has given great deference to such an FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 40 1 interpretation. It's clearly reasonable for the stewards to 2 assess a one-year suspension in this case for a violation 3 for an electrical device even if the case was decided by a 4 totality of the circumstances. 5 The ALJ's recommendation found that -- found 6 at Conclusion No. 9 that -- excuse me. An ALJ 7 recommendation found in Conclusion No. 9 is not a conclusion 8 of law at all. It's merely a suggestion for a lesser 9 sanction. Case law generally supports the idea that the 10 determination of an appropriate sanction is a decision that 11 belongs to the agency, not the ALJ. 12 Therefore, if you agree that the stewards 13 properly applied the penalty guidelines in this case, staff 14 would respectfully request that Conclusion of Law No. 9 be 15 modified to read "Stewards' Ruling Sam Houston Race Park 16 2610 be upheld in its entirety". Then staff would request 17 the adoption of the modified proposal for decision. 18 I believe counsel is here representing the 19 appellant. 20 CHAIRPERSON LACY: And, gentlemen, and 21 everyone else who's testified and didn't fill out a card, 22 I'm going to need for you all to do that before you leave. 23 Thank you. 24 If you could introduce yourselves, please. 25 MR. HOLLEN: My name is Ted Hollen. I'm FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 41 1 representing Mr. Johnny Hamilton who is the license holder 2 standing back here to my left. 3 It's our position -- number one, 4 Mr. Hamilton's position is still he didn't possess an 5 electrical device. The electrical -- the testimony in this 6 case was -- and it's in the record -- someone unknown, 7 undisclosed, called. An anonymous call said that 8 Mr. Hamilton was riding with an electrical device. Tapes 9 were reviewed and an object was viewed according to the 10 stewards and the tapes that we all saw at the hearing 11 again -- an object was identified that they believe could be 12 an electrical device in his hands, holding the reins, while 13 seated in the winner's circle. 14 He was penalized by the stewards thereafter. 15 They determined that must be an electrical device. No 16 electrical device was ever actually found. He was fined 17 $5,000, which he had to pay to appeal. He has been 18 suspended now for over seven months. 19 We have appealed this matter to an 20 administrative law judge, which your rules provide. The 21 administrative law judge heard the case, reviewed the 22 penalty guidelines, and has made a recommendation to you, 23 that recommendation being, okay, uphold the stewards' ruling 24 because the evidence is not so overwhelming and contrary to 25 the stewards' ruling that she can disturb it. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 42 1 But she has interpreted your guidelines 2 regarding electrical -- possession of electrical devices to 3 mean that you must be found in possession. As she said in 4 her ruling, the stewards seem to have included the word 5 "observed" or substituted the word "observed" in the -- for 6 the word "possessed" in the guidelines. The guidelines say 7 if a person is found in possession, the period of suspension 8 will be one year. Otherwise it's six months. And her 9 recommendation to you, which we're urging at this point that 10 you adopt, is that he have a suspension of six months. It's 11 actually already seven months and, I believe, 14 days. 12 If we were dissatisfied with whatever result 13 came out today, it would make no difference. He's going to 14 be suspended the full year. And it's really, under this 15 type of evidence, a problem. It's not just a problem for 16 this rider but for everybody on the backside. 17 If there's a set of guidelines and they know 18 what they're dealing with, then they can deal with it. And 19 they know -- it might be argued, yes, but this will send a 20 message; this will send a message, don't ride with an 21 electrical device. The message is out there already. 22 Everybody knows that. 23 What the message may also be is that this 24 finding and this method of punishing a person is not a 25 method that would be recognized in any other tribunal. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 43 1 You've got a person who makes an anonymous call, not 2 identified, not even as you would in -- and I don't practice 3 a lot of criminal law at all; but I believe that in criminal 4 law, if you're going to have an informant, the person has to 5 be reliable, somebody they relied on in the past, et cetera, 6 not just an anonymous phone call. 7 Then they go from that step to, okay, let's 8 view the tapes. Now we've viewed the tapes. We believe 9 what we see in his hand may be an electrical device. 10 If that sort of standard of punishment and 11 regulation becomes consistent, you're going to -- you've got 12 a lot of people that may or may not want to work on the 13 backside. And I think that this man has been punished 14 enough. That's why we have administrative law judges. 15 That's why they make their recommendations to you. And it 16 would appear to me that it would be kind of useless to have 17 that procedure and then not follow it. 18 Thank you. 19 CHAIRPERSON LACY: Thank you. 20 Any questions? 21 COMMISSIONER GARZA: I have questions for 22 staff. 23 CHAIRPERSON LACY: Mr. Garza -- I mean, 24 Commissioner Garza, go ahead, please. 25 COMMISSIONER GARZA: Are these guidelines that FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 44 1 they're referring to -- these are our Racing Commission 2 guidelines? 3 MS. KENNISON: Yes. 4 COMMISSIONER GARZA: Where they talk about the 5 word "possession," do we have anything else besides the 6 guideline itself? I mean, is there any definition section 7 that defines what possession is or anything else we can look 8 at besides just this particular guideline? 9 MS. KENNISON: The guidelines do not define 10 the word "possession". 11 COMMISSIONER GARZA: Are there any kind of 12 interpretations that have come up before or any past 13 opinions so that we'd have guidance that anybody can recall 14 offhand? 15 MS. KENNISON: This is the first incident. 16 COMMISSIONER GARZA: I'm sort of torn on this 17 thing as I read through it. There's a lot of issues that 18 were raised here that never entered my mind, this whole 19 concept of are they an expert, are they not an expert, does 20 this apply, does this not apply. 21 One sense of me says go with the stewards' 22 rulings. The other sense of me says the administrative law 23 judge has seen all this and must have struggled with the 24 decision and decided that maybe six months is the way to go 25 because there were some factual issues that weren't as clear FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 45 1 as they should have been. That's where I'm sort of torn 2 right now. 3 MS. KENNISON: Commissioner, the only, I 4 guess, unusual part of this is that the actual device was 5 not recovered. It was only seen. And then the question is, 6 well, what is found in possession? Does it mean literally 7 found in the pocket or in the hand? Or does it mean that 8 someone has been found to be? 9 COMMISSIONER GARZA: Well, let me give you 10 a -- this may not be a good example. But you get an 11 anonymous call that says that someone saw a seed that they 12 thought was marijuana in someone's locker and then they go 13 and look and they don't find the seed but they think it 14 smells like it and then they go and have their hearing. 15 There's a lot of facts here that were put 16 together -- you know, they didn't find it. Can anybody 17 describe for me how big or how small this device is supposed 18 to be? Fairly small, I assume, right? 19 MS. KENNISON: About that size, small enough 20 to fit inside a palm. 21 COMMISSIONER GARZA: They describe a 22 description of going through all these efforts to try to 23 hide it and I thought to myself, you know, why couldn't a 24 person just drop it along the track as they're going down 25 because, as I understood what took place, is this would have FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 46 1 been used when the horse was in the -- coming out of the 2 gate and made the horse veer to the right. 3 MS. KENNISON: That's correct. 4 COMMISSIONER GARZA: I guess I'm sort of torn 5 factually to what extent -- I mean, the whole concept of 6 what the opinion says about the substantial rule, this rule, 7 experts, no experts. And I sort of sensed in the judge's 8 recommendation some sort of fairness of, you know, taking 9 all this into consideration, and I think we ought to do 10 something like that. 11 COMMISSIONER RUTHERFORD: I'd like to ask a 12 question of staff. If our stewards were observing, why 13 didn't they take it away from him? Why would they have to 14 wait for a phone call? 15 MS. KENNISON: What happened apparently is it 16 was observed on -- when you can watch the actual race -- 17 COMMISSIONER RUTHERFORD: Well, it says in 18 here that he observed he thought he was holding something on 19 there, that he personally observed it. Why didn't they do 20 something about it then? 21 MS. KENNISON: No. Apparently it was not seen 22 right at that time. It wasn't until the tapes were reviewed 23 that it was seen. 24 COMMISSIONER COTTRELL: Have there been any 25 other infractions by this party? The record. How is his FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 47 1 record? 2 COMMISSIONER RUTHERFORD: Specifically with a 3 buzzer. 4 MR. HOLLEN: Not with an electrical device. 5 He was just telling me that careless riding one time or 6 twice, maybe a whip infraction, and that's all that's out 7 there. 8 MS. KENNISON: Commissioners, the stewards 9 didn't consider any prior violations in this matter. 10 COMMISSIONER BOYD: Madam Chairman, may I ask 11 a question? 12 CHAIRPERSON LACY: Commissioner Boyd. 13 COMMISSIONER BOYD: Ms. Kennison, was the 14 videotape played at the hearing? 15 MS. KENNISON: Yes. There were actually two 16 videotapes played, one from the placing judge and also the 17 one from -- the other one, the head-on shot. We also had a 18 slow motion tape and there were also still photos. 19 CHAIRPERSON LACY: Any other discussion or 20 questions? 21 Thank you, gentlemen. 22 MR. HOLLEN: Do you mind if I hand you -- 23 CHAIRPERSON LACY: Thank you. That would be 24 great. 25 Commissioners, again, we have three options: FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 48 1 One, to adopt the proposal for decision, to decline to adopt 2 the proposal for decision and remand it for further 3 proceedings, or to modify the proposal for decision. 4 VICE-CHAIRMAN ROGERS: Is this the 5 administrative law judge's proposal for decision? 6 CHAIRPERSON LACY: Yes. 7 VICE-CHAIRMAN ROGERS: Okay. 8 COMMISSIONER GARZA: I move that we adopt the 9 administrative law judge's proposal. 10 CHAIRPERSON LACY: Could you say that just a 11 little bit louder? 12 COMMISSIONER GARZA: I move that we adopt the 13 administrative law judge's proposal for decision. 14 CHAIRPERSON LACY: Commissioner Garza has 15 moved that we adopt the proposal for decision. 16 Do I hear a second? 17 COMMISSIONER RUTHERFORD: Second. 18 CHAIRPERSON LACY: Commissioner Rutherford has 19 seconded. 20 Any discussion? 21 All those in favor signify by saying aye. 22 COMMISSIONERS: Aye. 23 CHAIRPERSON LACY: All those opposed? 24 The motion passes unanimously. 25 Ms. Kennison, if you'll draft an order FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 49 1 consistent with that vote. 2 Ms. Kennison, if you would address approval of 3 schedule for rule review. 4 And, Commissioners, that's found at Tab 9. 5 MS. KENNISON: Commissioners, State law 6 requires that State agencies review and determine if there's 7 a reason for each rule to continue to exist every four years 8 from the rule's effective date. This plan submitted at Tab 9 9 would accomplish that goal. Staff respectfully requests 10 that the Commission approve this plan. 11 CHAIRPERSON LACY: Any questions for 12 Ms. Kennison? 13 I'd entertain a motion to approve the schedule 14 for rule review. 15 MS. McHUGH: So moved. 16 CHAIRPERSON LACY: Commissioner McHugh has so 17 moved. 18 Do I hear a second? 19 COMMISSIONER BOYD: Second. 20 CHAIRPERSON LACY: Commissioner Boyd has 21 seconded. 22 Any discussion? 23 All those in favor signify by saying aye. 24 COMMISSIONERS: Aye. 25 CHAIRPERSON LACY: All those opposed? FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 50 1 The motion passes unanimously. 2 Ms. Flowerday, if you would give us an 3 overview of the strategic plan. 4 MS. FLOWERDAY: Commissioners, this was not 5 included in the bound portion of your notebook. It was 6 submitted separately. And this is the draft of the 7 Commission's strategic plan. 8 This is a document that the Commission submits 9 to the Governor, the Legislative Budget Board, and just 10 generally publishes once every two years. Our deadline this 11 year is June the 17th; and since this is the last meeting 12 before that deadline, the staff presented you a draft for 13 your consideration and approval. 14 I will tell you that there are some appendices 15 that were not included in the draft that we submitted to 16 you. Those appendices that are required are things like the 17 organizational chart, definitions for the various 18 performance measures, a report on the survey of 19 organizational excellence, things that are just kind of 20 after-the-fact reporting that are really more appropriate 21 for the staff to present and prepare anyway. 22 The staff's request -- after I finish 23 describing this a little bit more, the staff's request will 24 be for you to approve this draft and delegate the final 25 approval authority -- technical approval authority for the FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 51 1 final document to the Chair. 2 This is a part of the statewide 3 performance-based budgeting system. We have goals and 4 strategies that are pretty much in a line with what our 5 various regulatory programs are. We have a strategy for 6 veterinary program. We have a strategy for pari-mutuel 7 racing -- excuse me, for pari-mutuel wagering, a strategy 8 for occupational licensing, that sort of thing. And when we 9 request our appropriations, they are tied to the various 10 strategies and we report on our performance through those 11 performance measures. 12 Most of this document is not changed from the 13 prior version. That is because under the instructions that 14 the Governor's office issued for the preparation of the 15 strategic plan, they said that if we wanted to make any 16 changes to any goals or strategies or performance measures, 17 we had to request permission to make those changes. 18 Staff made -- I made an executive decision not 19 to request any changes. We've requested changes in the past 20 and it's always been denied. And we've lived with our 21 performance measures this long. We decided that we could 22 live with them some more. 23 So really the only original piece of work in 24 this draft is the external-internal assessment, which is 25 based on meetings that I had with staff around the state and FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 52 1 with our managers, basically which describes the environment 2 in which the agency does their job. And it includes 3 references to our staff. It includes references to the 4 types of racetracks we have and some of the trends and 5 obstacles that are facing us as we move forward in trying to 6 accomplish our regulatory mission. 7 I will be happy to answer any questions that 8 you may have. But as I mentioned earlier, the staff's 9 request is that you approve this draft and delegate final 10 approval of the finished version of the document to the 11 Chair. 12 CHAIRPERSON LACY: Any questions for 13 Ms. Flowerday? 14 COMMISSIONER COTTRELL: I move that -- 15 CHAIRPERSON LACY: Commissioner Boyd, did you 16 have a question? 17 COMMISSIONER BOYD: No. I was just going to 18 extend my appreciation to Ms. Flowerday for all that she's 19 done in putting this together and continuously fighting the 20 battle with the legislature and the fact that we don't seem 21 to get some of the help that we wish we had. But I 22 appreciate all the efforts of our staff. Thank you. 23 CHAIRPERSON LACY: Thank you. 24 Mr. Cottrell, did you want to make a motion? 25 COMMISSIONER COTTRELL: I move that the action FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 53 1 be taken. 2 CHAIRPERSON LACY: To approve the plan and 3 delegate the final approval to the Chair? 4 COMMISSIONER COTTRELL: Yes. 5 CHAIRPERSON LACY: We have a motion. 6 Do I hear a second? 7 COMMISSIONER GARZA: Second. 8 COMMISSIONER BOYD: Second. 9 CHAIRPERSON LACY: Commissioner Boyd has 10 seconded. 11 Any discussion? 12 All those in favor signify by saying aye. 13 COMMISSIONERS: Aye. 14 CHAIRPERSON LACY: All those opposed? 15 The motion passes unanimously. 16 Mr. Craig, if you would give us a financial 17 update. 18 MR. CRAIG: Madam Chair, Commissioners, for 19 the record, my name is Tim Craig. I'm the chief financial 20 officer for the Racing Commission. My purpose today is to 21 update you on our budget status for the first seven months 22 of this fiscal year 2002. 23 Under Tab 10 you'll see the graph representing 24 each month of the fiscal year that have elapsed so far. The 25 difference between budget and expenditures for those first FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 54 1 seven months are $25,000. Basically we're running very 2 close, as you can see, on our salaries. 58.3 percent of the 3 year has elapsed and we've spent right at 58.3 percent of 4 our salary budget. So basically, you know, we're okay. 5 We're running at 99.4 percent of our budget if this 6 continues for the year. 7 As far as our full-time equivalent employee 8 cap that we need to maintain, we're under that by .9 FTE's. 9 And our out-of-state travel expenditures, we're still under 10 that by $4800, but I expect that we will spend the whole 11 $5400 after some travel takes place in the next few months. 12 I'd be happy to answer any questions that any 13 of you may have. 14 CHAIRPERSON LACY: Any questions? 15 Thank you, Mr. Craig. 16 MR. CRAIG: You're welcome. 17 CHAIRPERSON LACY: Ms. Flowerday, would you 18 give us a short update on how things are progressing in 19 Amarillo? 20 MS. FLOWERDAY: Saddle Brook Park submitted 21 their construction drawings to the staff, and we had some 22 dialogue with Mr. Alexander regarding those plans. He made 23 some changes that we had requested specifically relating to 24 providing office space for our pari-mutuel auditor. 25 He also submitted some documentation regarding FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 55 1 some financing that he is working on getting in place, and I 2 guess it was about 10 days ago that I sent him a letter 3 approving his construction drawings. So that cleared the 4 way for him to begin his construction. 5 CHAIRPERSON LACY: Thank you. 6 Any other old business? 7 New business? 8 Commissioners, I'd like to go ahead and try 9 and set dates for the next four meetings to ensure that we 10 have all six meetings during this year because we're a 11 little bit behind. So if I could get you to look at your 12 schedules. And the first meeting would be either the week 13 of June 17th or June 24th. Anybody have any problems? 14 Okay. Let's look at the week of the 24th. And I'm tied up 15 the 27th. Does June 26th look okay to everybody? Okay. 16 Let's set aside June 26th for the next meeting. 17 Then let's go to the weeks of August 12th or 18 19th. Does anyone know that they have a conflict on those 19 dates? August 14th? And obviously, if we have to, we'll 20 adjust these later meetings. I just want to try to get 21 something on the books. 22 Let's go to the weeks of October 7th or 14th. 23 Anyone aware of a conflict? 24 COMMISSIONER GARZA: I can't the 7th. I'm 25 going to be in trial. Do the 14th better. FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 56 1 CHAIRPERSON LACY: The week of the 14th is 2 better? 3 COMMISSIONER GARZA: Yeah. 4 CHAIRPERSON LACY: Okay. October 16th. 5 And then the week of December 2nd. 6 COMMISSIONER GARZA: I'm scheduled for trial 7 that week anyway. 8 CHAIRPERSON LACY: Is it better for you if we 9 meet earlier or later? 10 COMMISSIONER GARZA: Neither one. 11 CHAIRPERSON LACY: Okay. We'll do the 5th, 12 hoping that you settle. 13 COMMISSIONER GARZA: I don't think so. 14 CHAIRPERSON LACY: Okay. So December 5th. 15 Any other new business? 16 All right. The meeting is adjourned at 17 11:10. Anyone who would like to join us on our tour would 18 be very welcome. 19 (Proceedings concluded at 11:08 a.m.) 20 21 22 23 24 25 FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373 57 1 STATE OF TEXAS ) 2 COUNTY OF TRAVIS ) 3 I, SHERRI SANTMAN FISHER, a Certified 4 Shorthand Reporter in and for the State of Texas, do hereby 5 certify that the above-captioned matter came on for hearing 6 before the TEXAS RACING COMMISSION as hereinbefore set out. 7 I FURTHER CERTIFY that the proceedings of said 8 hearing were reported by me, accurately reduced to 9 typewriting under my supervision and control and, after 10 being so reduced, were filed with the TEXAS RACING 11 COMMISSION. 12 GIVEN UNDER MY OFFICIAL HAND OF OFFICE at 13 Austin, Texas, this 13th day of May, 2002. 14 15 16 17 ____________________________ 18 SHERRI SANTMAN FISHER Certification No. 2336 19 Expiration Date: 12/31/03 20 #02-2368 21 22 23 24 25 FISHER REPORTING P. O. BOX 142485 AUSTIN, TEXAS 78714-2485 (512) 477-1373