The Issue The issues to be resolved in this proceeding concern whether the Emergency Rule 53ER99-48, Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority, whether it was promulgated pursuant to a true emergency and whether certain agency statements contained in letters promulgated by the agency constitute an unadopted rule, in purported violation of Section 120.54(1)(a), Florida Statutes.
Findings Of Fact The Petitioner is a corporation incorporated in the Commonwealth of Virginia as a "not-for-profit" corporation. It is registered to do business in the State of Florida. NALP is an association of six member companies. It became organized following the passage of a change to the Internal Revenue Service (IRS) tax code enacted on October 21, 1998. That provision, I.R.C. Section 451(h), the so called "transitional rule" provided that if state lotteries offered to "cash-out" previous prize winners on a limited basis, then the tax payer would not be subject to the so called "constructive receipt doctrine." NALP's members purchase large lottery payment streams in every state that has a lottery, including Florida. The winners assign their right to the annual payments in return for a lesser amount than their payments would total over, in Florida, the twenty-year time span for pay-outs, in return for receiving the immediate cash lump-sum. In Florida this is accomplished pursuant to Section 24.1153, Florida Statutes (1999). One of NALP's main purposes is to protect the interests of its member companies through monitoring and participating in the formulation of federal legislation as well in rulemaking before various state agencies including the Florida department, as well as to provide educational materials and functions for members and for the various state lottery agencies. Each of the member companies owns at least one Florida Lottery prize and in the aggregate they own dozens of Florida large lottery prize payment streams worth over fifty million dollars. The Respondent is the Florida Department of The Lottery (Respondent or Department). It is a state agency authorized under Chapter 24, Florida Statutes, to organize, regulate and administer the operation of the state lottery and to properly account for, deposit in trust and invest lottery ticket sale proceeds and to pay related prizes from funds received from ticket sales and through investments of such lottery department revenues, all pursuant to Chapter 24, Florida Statutes, and related rules. Petitioner's Standing: The Petitioner has standing to pursue its challenge to the rule and agency statements in this case. Each of its members owns Florida lottery prizes. That is, by operation of assignment under Section 24.1153, Florida Statutes, they have assumed the interests of the actual lottery prize winners who have assigned their prizes to the members of NALP by assignment agreements enacted pursuant to the terms of this statute. The prize winners (winning ticket holders) received discounted amounts, lump-sum settlements, in lieu of prizes paid in equal annual installments over twenty years. Therefore, each of the companies who are members of NALP and hold assignment rights to the lottery prizes, are eligible for the lottery's one-time, cash-out opportunity under the subject Emergency Rule 53ER99-48, Florida Administrative Code. The Emergency Rule applies by its own terms to the Petitioner's members, as they are assignees of the prizes involved. Through the Emergency Rule as well, the Department, in effect, is competing for the same clientele, that is, past lottery prize winners who won the lottery during the relevant time period, and the same cash flow from the prize winners' annual payments as are all of the Petitioner's members by virtue of the above-referenced assignment statute. The only real difference is that the Department, by the terms of the rule, does not have to comply with the extensive "Consumer Protection" provisions of the statute which include court proceedings, explicit disclosures of purchase price and discount rate and the ultimate mandate of court orders on proposed assignments, all of which is required by Section 24.1153, Florida Statutes, of private assignment companies. In short, the Petitioner has established a sufficient substantial interest "injury and fact" which occurs within the zone of interest carved out by the lottery prize payment, revenue investment and trust fund management scheme established by Chapter 24, Florida Statutes. Emergency Rule 53ER99-48 and Agency statements Purported To be Rules. Prior to October of 1998, all large lottery prize winners could receive their prize only in equal annual installments over a period of twenty years. They were not given the choice of an immediate lump-sum, cash settlement. This was because, under the federal tax law prevailing at the time, the ability to make a choice of receiving a lump-sum prize award or payments over time automatically triggered the "constructive receipt doctrine" which thereupon allowed the Internal Revenue Service (IRS) to assume the taxpayer had constructive receipt over the entire prize money and therefore, owed income tax on the entire prize in one year. However, assignments of prize payment streams to private investment companies for a cash lump-sum settlement in return were allowed through the aegis of state circuit court orders without violating the constructive receipt doctrine. Section 24.1153, Florida Statutes (1999), was enacted to provide for such assignments to third-party, private investment companies with court approval. On October 21, 1998, Congress passed an amendment to Section 451(h) of the I.R.C., henceforth called the "transitional rule." This amendment provided that if state lotteries offered, on a limited basis, to "cash-out" past prize winners, the taxpayer would not be subject to the constructive receipt doctrine for IRS tax purposes. This federal tax exception provision is only effective for a limited period of time, however, from July 1, 1999 through December 31, 2000. This change in the federal tax law does not itself authorize the Department to do anything, rather it only changes the tax consequences to individual tax payers who are lottery winners. When change in the tax code allowing state lotteries to cash-out past winners became known, Mr. Shapiro, General Counsel for a NALP member company, met with attorneys for the Florida Department in 1998 to discuss the Florida Lottery's intentions following passage of Section 451(h) (the amendment in question). In November of 1998, the Department began its examination of the federal transition rule in order to determine whether it would adopt a rule regarding cash-outs of past prize winners. There is no federal or state requirement that the Department adopt such a rule. There is no testimony of any need created by changing market conditions to adopt such a rule. The NALP sent information regarding the transition rule including memoranda and legal analysis to all the state lotteries in January of 1999. Many months elapsed during which time the Department was apparently contemplating whether or not to adopt a rule accommodating the above-referenced federal tax law change. On September 13 and September 28, 1999, letters were issued by the Department which offered a cash-out option and announced a methodology available to all previous large lottery prize winners as an alternative to the normal twenty-year, equal annual installment method of payment of prizes. These letters were sent to all eligible winners and predated the issuance of the Emergency Rule adopted by the Department and under consideration in this case. Even though the Emergency Rule was adopted after the mailing of the letters, the Department still takes the position that it relied on the letters as supplemental to the terms of the offers contained in the Emergency Rule itself. Thereafter, and almost one year after it first considered adopting a rule to accommodate the advent of the federal transitional rule, and almost a month after the first cash-out option letter went to previous lottery winners, the Department, on October 8, 1999, published its Emergency Rule 53ER99-48, entitled "Florida Lottery Prize Payment Option Election." That rule provides in pertinent part as follows: From October 1, 1999 through November 30, 1999, the Florida Lottery is providing a one-time opportunity for eligible prize winners to elect to voluntarily cash out their remaining annual installment payments and receive a single lump-sum cash payment. In order to be eligible for this opportunity, the prize winner must have won a Florida Lottery prize before October 22, 1998, which is payable over a period of at least ten years, and the prize winner must not have assigned the prize to another person or entity pursuant to Section 24.1153, Florida Statutes (1999). * * * All prize winners who elect to cash out will be paid in one lump-sum cash payment and the payment shall be calculated as follows: For all prizes, other than WIN FOR LIFE prizes, the lump-sum payment amount will be the accreted value of the Lottery's investment (original cost plus accrued interest) as determined on a date certain (the "trade date"), unless the market value of the investment is less than the accreted value determined on the trade date. In that case, the market value of the investment will be paid. If a prize winner elects to cash out, the Lottery's investment will be liquidated. . . . According to department witnesses, the delays in adopting the subject Emergency Rule were attributable to changes in the executive administration of the state due to the 1998 election of the Governor and concomitant changes in the person of the Secretary of the Lottery as well as changes in the prize payment process for new lottery winners (as opposed to past lottery winners), embodied in Rule 53-28.007, Florida Administrative Code (not here under challenge). The Department conceded that it did not make the promulgation of the Emergency Rule its highest priority and took almost a year, from October 21, 1998 to October 8, 1999, for adoption of the rule even as an Emergency Rule. No market conditions were described in the evidence which would have prevented the adoption of a regular rule proposed in the normal fashion rather than an Emergency Rule. No evidence propounded by the Department explains why regular rulemaking would not have been practicable in this matter and in dealing with the subject matter of the Emergency Rule. No reason stated by the Department at hearing will support a factual finding of any emergency existing which required the promulgation of the prize payment option election as an Emergency Rule rather than in a regularly proposed and enacted rule proposed in accordance with Section 120.53, Florida Statutes. In fact, the Internal Revenue Code transition rule option which gave rise to the purported Emergency Rule is valid through December 31, 2000, almost thirteen months after actual promulgation of the Emergency Rule. Any urgency perceived by the Department at this point was not shown to be anything other than a sense of urgency in the perceived need to adopt the past prize winner cash pay-out "Emergency Rule" caused by the Department's own delay since October 21, 1998, in promulgating a rule on the subject, emergency or otherwise. While this delay might be for legitimate, understandable reasons, the fact remains that the delay was the Departments' own responsibility and does not militate in favor of a finding that there is any emergency necessitating the adoption of an emergency rule because of changes in market conditions or for other reasons. Once a large lottery drawing produces a winner or winners and a monetary prize, the Department transfers the prize funds to the State Board of Administration (SBA) for investment pursuant to Section 24.120(2), Florida Statutes, and in accordance with a Trust Agreement executed between the Department and the SBA. The Department and the SBA hold those past funds in trust pursuant to Section 24.120(2), Florida Statutes, for the benefit of that Lottery prize winner so that the winner will be assured of receiving the prize payments in equal amounts over a twenty-year period. Under the statutorily required payments system, when a prize is awarded, the Department and the SBA calculate the amount of money needed to purchase U.S. Treasury Securities (Treasury Strips) which will generate enough funds to meet the prize payment requirements for each year of the pay-out period. The investment is then done in a manner designed to preserve capital and to ensure the integrity of the lottery disbursement system by eliminating risk of payment of funds when due and to produce annual sums of money over the required term of investments. Once the prize monies are in the Section 24.120(2), Florida Statutes, trust fund, the prize is deemed awarded and paid by the Department. Thereafter, the annual payments to the lottery winner are a matter of privity between that winner and the trust fund. Section 24.120(2), Florida Statutes, was enacted at a time when only annual payments were statutorily authorized. Section 24.120, Florida Statutes, has not been amended since new lottery winners (post October 1998) were given the choice of annual payments or a lump-sum payment pursuant to Rule 53-28.007, Florida Administrative Code. Moreover, money for those lump-sum prize payments pursuant to that rule do not get deposited into the Section 24.120(2), Florida Statutes, trust fund, but are always deposited in the trust fund called the Administrative Trust Fund pursuant to Section 24.120(1), Florida Statutes. They are not deposited in the Section 24.120(2), Florida Statutes, trust because that trust was designed by the Legislature to provide investment instruments securing only equal annual installment prize payments. The Emergency Rule 53ER99-48 does not actually effectuate payment of a prize. Rather, it has the effect of changing Lottery prizes already first awarded and already transferred to the Section 24.120(2), Florida Statutes, trust fund. Winners of large Lottery prizes prior to October 1998, were entitled to equal annual prize payments over a twenty-year period. The Department's Emergency Rule has the effect of changing that prize to allow a single cash payment of the funds produced from the sale of the investment held and designed by the Legislature to fund only the annual prize payments. The Department thereby would instruct the SBA to liquidate the "Treasury Strips" held in trust for the benefit of the Lottery prize winner and designed to secure payment of equal annual installments to the prize winner over twenty-years, in order to fund the lump-sum payment provided for under the Emergency Rule at issue. The Emergency Rule allows the Department to sell the trust investment which supports the twenty-year pay-out of a prize, on a "trade date" before the required term of the investments lapses. The "trade date", while it might presumably be the date of sale of the trust investment which supported installment payments of the prize in question, is not clearly defined in the rule as to what the trade date is or how it is determined. The Department would then pay the prize winner the lesser of the "market value" or the "accreted value." This lump- sum amount is not the same as the total amount of the installments the prize winner would be entitled to over the entire twenty-year period calculated as the winner's entitlement when the prize is initially awarded. The lump-sum also does not represent the liquidated value of the investment held in trust for the winner. If the accreted value is less than the market value on the trade date then the lottery winner would only get the accreted value and the Department would get the balance, presumably the difference between accreted value and market value. Thus, through this Emergency Rule the Department proposes to sell the investments before the required term lapses and potentially pay the winner only a portion of that money, thus retaining additional proceeds for the Lottery. The Emergency Rule does not specify how the Department would determine what the winner's share would be under the lump-sum arrangement, nor how much the Department would keep after payment of the lump-sum amount when the supporting investments in the trust are liquidated for a given prize winner. In this connection the Emergency Rule does not clearly define certain critical terms necessary for a lay person to be able to understand the cash-out offer from the Department. The terms include "accreted value", "original cost" and "accrued interest." Accreted value is described as being the difference in the sum of the original cost of the investment and the accrued interest earned thereon. How one determines "original cost" and "accrued interest" is not specified in the rule, however. While financial experts might easily determine how to define those terms and determine the relevant sums attributable to them, the rule is vague in these particulars in terms of adequately defining how these critical terms relate to the amount a lottery prize winner could expect from a lump-sum pay-out and in providing such a prize winner a clear understanding of how the lump-sum is calculated. Thus the rule has not been shown to be engendered by a true emergency and, in the particulars referenced last above, it is vague. Agency statements Defined As A Rule: On September 13 and 28, 1999, the Department issued letters to previous lottery prize winners setting forth the terms and conditions concerning the formulae and method in which the pricing, timing and other terms and conditions of cash pay-outs would be determined. Those letters pre-dated the promulgation of the subject Emergency Rule. Several of the Petitioner's member companies received the cash-out offer letters similar to those attached to the Petitioner's petition. The letter stated, in pertinent part: If you elect to cash out, however, you will receive a single, smaller lump-sum payment. This amount will be the accreted value of the Lottery's investment (original cost plus accrued interest) as determined on a date certain (the "trade date"), unless the market value of the investment is less than the accreted value determined on the trade date. In that case, you will receive the market value of the investment. . . . The Department's letters thus contain a formula for determining the amount of the cash-out offer. That formula is not disclosed or contained in the Emergency Rule, even though it purports to apply to all previous lottery winners eligible under the rule. Be that as it may, the Respondent has asserted in its Proposed Final Order that the Petitioner's challenge to the letters as agency statements amounting to a rule is now moot with the enactment of the subject Emergency Rule. This appears to amount to a recession by the Department from reliance on the statements and content of those letters in defining and implementing its cash pay-out program for previous Lottery winners. Nevertheless, in the context of resolving all issues raised by the Petitioner, the question of those letters having the quality of an unpromulgated rule will be addressed below. The Department has cited Sections 24.105(10)(j), 24.115(1) and 24.109(1), Florida Statutes, as the source of its rule-making authority. Section 24.105(10)(j), Florida Statutes, provides the Department with authority to adopt rules concerning the manner of payment of prizes to holders of winning tickets and such other matters necessary or desirable for the efficient or economical operation of the lottery or for the convenience of the public. See also Section 24.105(10)(e), Florida Statutes. Section 24.105(10)(j), Florida Statutes, however, does not specifically authorize cash pay-outs to previous lottery winners already determined to be eligible to receive payment as holders of winning tickets and who have already received awards of payments in equal annual installments pursuant to Section 24.120(2), Florida Statutes. Section 24.115(1), Florida Statutes, authorizes the Department to adopt rules "to effect payment of . . . prizes." However, the payment of prizes to the relevant past winners was effected when the Department made its initial one-year payment to the pertinent prize winners and then paid the remaining cash represented by the winning tickets to the SBA in the trust established by the Legislature for the lottery winners, for investment in securities supportive of equal annual installment payments to the winners pursuant to the trust arrangement established in Section 24.120(2), Florida Statutes. Section 24.109(1), Florida Statutes, while it authorizes the Department to adopt emergency rules in general when such emergency rulemaking power " . . . is necessary for the preservation of the rights and welfare of the people in order to provide additional funds to benefit the public . . . " does not specifically authorize any particular emergency rule subject matter, including cash pay-outs to prior Lottery winners already determined eligible to receive prize payments in equal annual installments pursuant to Section 24.120(2), Florida Statutes. The Department, pursuant to Section 24.104(2), Florida Statutes, and Section 24.121(2), Florida Statutes, has a mandate "to maximize revenues consistent with the dignity of the state and the welfare of its citizens" in order to provide, among other things, improvement of the Educational Enhancement Trust Fund each year. The Department has not shown any specific authority to adopt a rule which changes a prize previously awarded, even though it might create new revenues as a result of the difference between lump-sum awarded to a past winner and the accreted value of the investment supportive of the prize, or the market value as the case may be. There is no specific authority to have such funds previously invested to support annual installment payments of prize money being diverted from the trust fund set up by the Legislature by Section 24.120(2), Florida Statutes, instead of, for instance, the "Administrative Trust Fund," constituted under Section 24.120(1), Florida Statutes. These findings in conjunction with the reasons given in the Conclusions of Law below show that the Department exceeded its rulemaking authority in enacting the Emergency Rule and the agency statements at issue. Enlargement Modification or Contravention of the Implemented Law: Section 24.120(2), Florida Statutes (1999), provides for a payment of prizes on a deferred basis and for the safe investment of the prize monies set aside in the trust fund under that section for payment of deferred prize payments. That section also provides for production of equal annual sums of money over the required term of the investment (twenty years). The Emergency Rule and the agency statements at issue depart from the terms of the trust relationship set up by the Legislature through Section 24.120(2), Florida Statutes, by changing the prize awarded to allow the early liquidation of prize monies invested on behalf of the prize winners in the trust fund constituted under that section. Such a change in the prize awarded and manner of award is not authorized by the terms of that statute. The Emergency Rule and agency statements thus enlarge, modify and contravene Section 24.120(2), Florida Statutes, by departing from the terms of the trust created by the Florida Legislature designed to ensure a safe investment of lottery monies so as to produce annual prize payments over twenty years. The Emergency Rule, by allowing a liquidation of trust investments before the statutorily required term and by allowing the trustee of the Section 24.120(2), Florida Statutes, trust (the Department) to intentionally profit from liquidation of the trust investments and concomitant change in the prize awarded departs from the conditions of the Section 24.120(2), Florida Statutes, trust, and the purposes for which it was established. In the enactment of this rule, the Department stands in the position of a trustee varying the terms of a trust in terms of the benefits to be afforded the beneficiary of that trust and the method of calculation and payment. While the beneficiary (the prize winner) in the trust analogy might agree with that course of action, the settlor has not assented to variance from the terms of the trust arrangement. The Florida Legislature is in a position analogous to the settlor of the trust created pursuant to Section 24.120(2), Florida Statutes. Since that law, implemented purportedly by the Emergency Rule and agency statements, does not itself provide authority for the change in the award of prizes and methods of paying prizes embodied in the rule and in the agency statements, it would appear that the settlor, the Legislature, must first assent to the new arrangement (ipso facto by an amendment to the statute). Moreover, it should be pointed out that the new arrangement contemplated by the Emergency Rule would be accomplished without any disclosure to a lottery winner of the discount rate or dollar amount that the state would retain, in the sense that the terms in the rule of "trade date," "market value," "original cost" plus accrued interest or "accreted value" are not adequately defined on the face of the rule. They are thus amenable to varying interpretations, leading potentially to ad hoc policy decisions by the agency or necessitating further illumination by the agency through an additional rule enactment, thus rendering the rule, in the sense of the employment of these terms and any disclosure to the lottery winner, vague. There are various "consumer protection" standards set forth in Section 24.1153, Florida Statutes (1999), which are directed to the third-party assignment arrangement whereby lottery winners may assign their right to the annual installment payments of their prizes to third-party entities and thus obtain from those entities a discounted, lump-sum payment of a prize. Those standards or restrictions include oversight by a circuit court and include the necessity of approval of the assignments and lump-sum payments through third-party entities by an appropriate circuit court order. They also include a provision allowing the prize winner a three-day cancellation period opportunity. The Emergency Rule and agency statements at issue in this case modify, contravene or depart from the provisions of that law because the Department in the so-called emergency cash pay-out provision in the subject rule is not required to adhere to the "consumer protection restrictions" mandated by Section 24.1153, Florida Statutes (1999). Although the end result of what the Department proposes by the Emergency Rule achieves a lump-sum, cash payment to the lottery winner, unlike the arrangement to be set up by the Emergency Rule, the "cash-out" assignment arrangement authorized by Section 24.1152, Florida Statutes, was mandated by the Legislature. The Emergency Rule is potentially arbitrary and capricious (meaning not adequately supported by facts or enacted without adequate support as to reason or rationale) 1/ The impetus for the Emergency Rule, as found above was a change in the Internal Revenue Code concerning the "constructive receipt doctrine". The relevant I.R.C. provision Section 451(h), contains the "qualified prize option" test. The Emergency Rule purports to meet that test but does not. A qualified prize option must contain three things: (1) A clear statement that it is only an offer; (2) A statement of the offer methodology; and (3) A disclosure of the discount rate that makes equivalent the present value of the prize previously awarded and the Department's new offer (lump-sum pay-out). The Emergency Rule does not adequately disclose the methodology of the offer since critical terms enabling a lay prize winner to understand the offer are not clearly defined, as referenced in the Findings of Fact above. The Emergency Rule does not require, on its face, any disclosure of the discount or amount of the prize valued as of an identified date. In its Executive Summary regarding its decision to adopt the Emergency Rule, the Department stated that it would meet the requirements of Section 451(h), by providing full and clear disclosure "as described in the Federal Tax Conference Report on Section 451(h)." The rule has the potential of being arbitrary and capricious in its operation since it does not in fact meet the qualified prize option test in the I.R.C. provision by clearly disclosing the discount rate or the methodology used in arriving at the offer, even though it purports to disclose those matters. Agency statements As Rules: The agency statements, the letters mailed to each prior prize winner contain financial information specific to each individual prize winner but they also contain general formulae to be applied by the Department to all eligible winners in cashing out prizes under the Emergency Rule. Thus the letters expand the cash-out procedure by providing cash-out formulae and other critical conditions beyond those which are stated and disclosed in the rule itself. This is necessary information for the prize winners to make decisions on accepting the Department offers but was not adopted as a rule and is not contained in the Emergency Rule. It is meant by the Department to apply to the entire universe of eligible prior prize winners.
The Issue Whether the full amount of the lottery prize winnings (remaining after deduction of federal tax withholding) that Petitioner claimed (on behalf of herself and 13 other members of her "Lotto pool") should be used to offset the debt Petitioner owes the Department of Education, Office of Student Financial Assistance.
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, including the factual stipulations of the parties,2 the following findings of fact are made: Petitioner is in default on three student loans that OSFA, as guarantor, purchased (upon Petitioner's default) from the lender on December 27, 2001, and continues to hold. As of September 10, 2003, Petitioner owed OSFA $12,503.79 on these defaulted loans. In May of 2003, Petitioner participated in a "Lotto pool" with 13 other individuals. Pool members agreed to contribute equally to the purchase of Florida lottery tickets and to share equally in any winnings. Petitioner was assigned the task of purchasing the tickets on behalf of the pool. One of the tickets Petitioner purchased was a winner (having five of the six selected numbers). The amount of the prize, after making an appropriate deduction for federal income tax withholding, was $3,262.00. On behalf of the pool, Petitioner submitted the winning ticket, with her name on it, to the Florida Department of the Lottery to claim the prize. At the request of the Florida Department of the Lottery, she completed an Internal Revenue Service (IRS) Form 5754. On the form, among other things, she identified the others in the pool with whom she intended to share the proceeds of the prize. On May 27, 2003, Olga Roca, a Program Specialist with OSFA, sent the following letter to the Florida Department of the Lottery: I hereby certify that the above referenced person [Petitioner] has an outstanding defaulted student[] loan. Under terms of § 24.115, F.S, I am requesting that lottery prize money won by that person be transmitted to the Florida Department of Education to be credited toward that debt. The balance due including interest accrued as of 6/11/03 totals $12,389.88. By letter dated June 2, 2003, the Florida Department of the Lottery advised Petitioner that, "[p]ursuant to Section 24.115(4), Florida Statutes, [it had] disbursed [her] winnings according to [Ms. Roca's May 27, 2003, letter]." A month later, on July 2, 2003, OSFA sent Petitioner a letter informing her that it "plan[ned] to apply the total amount of [her] $3,262.00 prize to [her] unpaid claim."3 It is this proposed agency action which is the subject of the instant controversy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that OSFA take the action proposed in its July 2, 2003, letter to Petitioner. DONE AND ENTERED this 13th day of October, 2003, in Tallahassee, Leon County, Florida. S STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of October, 2003.
The Issue Whether Respondent, Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering (“Division”), relied on an unadopted rule when it renewed a license to operate slot machines to Intervenor Calder Race Course, Inc. (“Calder”) for the 2017-2018 fiscal year, and whether Petitioner, Florida Horsemen’s Benevolent and Protective Association, Inc. (“Petitioner” or “FHBPA”), has standing to bring the instant action.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, including the parties’ Joint Pre-hearing Stipulation, the following Findings of Fact are made: The FHBPA is a Florida not-for-profit corporation representing licensed horse trainers and horse owners in Florida. The FHBPA’s stated purpose is to advance and promote the sport of thoroughbred horse racing and the thoroughbred horse racing industry in the state of Florida, and to assist its members in all matters that affect their interests in the racing industry. The Division is the state agency responsible for implementing and enforcing Florida’s pari-mutuel laws, including the licensing and regulation of all pari-mutuel activities conducted in the state. The Division’s regulatory duties include the adoption of “reasonable rules for the control, supervision, and direction of all applicants, permittees, and licensees and for the holding, conducting, and operating of all racetracks, race meets, and races held in this state.” § 550.0251(3), Fla. Stat. The Division is also responsible for the administration and regulation of slot machine gaming in Florida. § 551.103, Fla. Stat. Calder is the holder of a thoroughbred horse racing pari-mutuel permit and a slot machine license in Miami-Dade County, Florida. Calder is one of eight Florida pari-mutuel facilities authorized to operate slot machines and has continuously held a slot machine license since 2009. Gambling is generally prohibited under Florida law. See chapter 849, Florida Statutes, establishing criminal penalties for many forms of gambling.1/ However, certain types of pari-mutuel activities, including wagering on horse racing, have been authorized. In recent years, the Legislature has expanded the gambling activities that may occur at the facilities of licensed pari-mutuel permit holders by authorizing the operation of slot machines at pari-mutuel facilities. Article X, section 23 of the Florida Constitution, adopted in 2004, allows the governing bodies of Miami-Dade and Broward Counties to hold a county-wide referendum “on whether to authorize slot machines within existing, licensed parimutuel facilities (thoroughbred and harness racing, greyhound racing, and jai-alai) that have conducted live racing or games in that county during each of the last two calendar years before the effective date of this amendment.” Article X, section 23 also requires the Legislature to adopt implementing legislation. Chapter 551, Florida Statutes, originally enacted in 2005, is the implementing legislation for Article X, section 23. Section 551.104(10)(a)1. requires slot machine licensees, who are also thoroughbred racing permit holders to enter into a “binding written agreement” with the FHBPA governing the payment of purses on live thoroughbred races conducted at the licensee’s pari-mutuel facility, and to file that agreement with the Division. The statute provides that the agreement may direct the payment of purses “from revenues generated by any wagering or gaming the applicant is authorized to conduct under Florida law.” Calder has filed with the Division a binding written agreement with the FHBPA governing the payment of purses on live thoroughbred races conducted at Calder’s pari-mutuel facility. The agreement provides for direct payment of purses from revenues generated from Calder’s pari-mutuel wagering activities and Calder’s slot machine gaming activities.2/ Calder operated its first live thoroughbred horse racing meet on May 6, 1971, at the current location of the pari- mutuel facility. The facility’s legal description is unchanged since Calder’s initial racing permit was issued in 1969. A race meet has been conducted at the Calder pari- mutuel facility every year from 1971 through 2017. Since at least 1992, Calder has been operating live pari-mutuel activities on the racetrack apron, in front of the grandstand. In July 2009, Calder filed for and obtained a slot machine license, pursuant to the provisions of Article X, Section 23, and sections 551.101 and 551.102(4). Section 550.105(1) provides that a slot machine license is effective for one year after issuance and must be renewed annually. Calder has renewed its slot machine license every year since 2009. At the time Calder sought its initial slot machine license, and just prior to constructing its slot machine facility, Calder’s pari-mutuel facility included: a large main dirt race track, and a smaller turf course; a paddock area, including a patron viewing area of the paddock, and a walking ring in the paddock area; 1,850 stables and a barn area (the backside); a detention barn; state veterinary offices; a totalizator board; a winner’s circle; outdoor pari-mutuel wagering areas; a large grandstand building built in 1971 which housed: a grandstand seating area, which had a capacity in excess of 10,000 seats; several restaurants and lounges; pari-mutuel wagering betting areas; freestanding pari-mutuel machines; stewards’ offices; state offices; a money room; restrooms; and elevators to access the various floors of the building; outdoor concessions (tiki huts), outdoor patron seating, and an outdoor pari-mutuel wagering area to accommodate patrons who sat outside the grandstand building; and parking lots, sidewalks to connect to the various areas, and other physical components associated with the conduct of live thoroughbred racing. All of the above-mentioned areas combined to support the live pari-mutuel wagering activities conducted by Calder and together constituted Calder’s pari-mutuel facility as defined in section 550.002(23). Calder’s designated slot machine gaming area was built in a separate building, hereinafter referred to as the “Casino,” located within the boundaries of Calder’s facility. The Casino opened for business in 2010. Calder built a covered sidewalk between the grandstand and the Casino to facilitate the movement of patrons between the two parts of the property. While the indoor grandstand was a dedicated location for patrons to watch the races and place bets, patrons were also able to watch the races and place bets outside on the racetrack apron, in front of the grandstand. As noted above, Florida law currently authorizes eight licensed pari-mutuel facilities to operate slot machine gaming facilities. These facilities consist of two thoroughbred permit holders (Calder Race Course and Gulfstream Park); one harness horse track permit holder (Pompano Park); one quarter horse permit holder (Hialeah Race Track); two dog track permit holders (Hollywood and Flagler dog tracks); and two jai alai permit holders (Dania and Miami Jai Alai). Section 551.114(4), Florida Statutes, provides: Designated slot machine gaming areas may be located within the current live gaming facility or in an existing building that must be contiguous and connected to the live gaming facility. If a designated slot machine gaming area is to be located in a building that is to be constructed, that new building must be contiguous and connected to the live gaming facility. Calder is the only one of the eight slot machine licensees that chose to locate its slot machine facility in a separate, newly constructed building. All seven of the other licensees operate their slot machine facilities within the same buildings as their previously existing pari-mutuel facilities. When it issued Calder’s initial slot machine license, the Division determined that Calder’s newly built Casino was in compliance with the statute’s requirement that it be “contiguous and connected” to the existing pari-mutuel facility. This determination was not challenged by the FHBPA or any other entity. The Casino has remained in the same location on the Calder property since it opened in 2010. Calder’s grandstand was built in 1971 and was approximately 420,000 square feet, seven stories tall, and seated approximately 15,575 people. Calder’s live thoroughbred racing attendance and revenues began to decline in 2004 and continued to drop throughout the next decade. By 2013, attendance at Calder for thoroughbred racing had dropped to a total of 118,000 patron visits, or an average of 439 patrons per day. This contrasts with 2004, when total attendance was 841,000, for an average daily attendance of 3,351. Horsemen’s purses similarly declined, from $26,707,755 in 2004 to $7,751,215 in 2013. In an effort to cut costs, Calder began closing off floors of its grandstand in 2008. By the 2013 and 2014 seasons, only about half the grandstand remained in use. Calder’s grandstand building did not have a traditional central air conditioning system; rather, it had cooling towers at either end of the building. The design of the air conditioning system was such that it continued to cool all seven floors even when some had been closed off from use. Therefore, the only savings Calder could realize from closing off floors was in labor costs. Calder’s air conditioning costs for the grandstand were around $55,000 per month. Calder was also required by law to maintain elevator service to all floors, at a maintenance cost of about $140,000 per year. These costs were incurred whether or not the track was conducting a race meet. A further blow to Calder’s thoroughbred racing fortunes came when Gulfstream Park decided to race year-round, thereby coming into direct competition with Calder’s winter race meet. By 2013, Calder was losing more than $5 million per year on its pari-mutuel activities. In 2014, Calder decided to cut its losses by demolishing the grandstand building. Calder did not request permission from the Division to tear down the grandstand. However, Division personnel visited Calder regularly and were well aware of Calder’s plans. No one from the Division advised Calder that tearing down the grandstand would create a slot machine compliance issue. Also in 2014, Calder entered into a contract with Gulfstream Park to outsource the operation of its race meets. Since July 1, 2014, Gulfstream Park and its racing personnel have conducted Calder’s full schedule of live racing at the Calder facility. Gulfstream Park’s first season of operating the Calder race meet began in October 2014. Gulfstream Park initially intended to operate the race meet from the racetrack apron, thereby foregoing a lease on Calder’s still-standing grandstand. However, due to the short time between execution of the lease and commencement of the race meet, Gulfstream Park was forced to lease the first floor of the grandstand to run the meet and part of the seventh floor to house the race officials. The 2014 race meet was the last time that patrons placed bets in the Calder grandstand building. In 2015, Calder’s race meet was conducted exclusively on the apron. In addition to the outdoor areas Calder has historically maintained on the apron, a tent was erected to house the wagering machines, video screens, and seating for patrons. The grandstand was being prepared for demolition and was not used during the 2015 Calder race meet. Demolition of the grandstand began in 2015 and was completed in 2016. At present, Calder’s live viewing locations include areas in front of where the former grandstand building stood, as well as to the east of the former grandstand area. These areas still contain outdoor seating and tiki huts where patrons can get food and drinks, view the race track, and wager on live racing events. The distance a patron must travel from the Casino to the pari-mutuel wagering area is roughly the same as it was when the grandstand building existed. The difference is that prior to closure of the grandstand, patrons could exit the Casino, walk a short distance on the covered walkway, and then enter the air-conditioned grandstand building, through which they could proceed the hundred yards or so to the wagering area. Now, patrons wishing to go from the Casino to the outdoor pari-mutuel wagering area must take a walkway that proceeds around the fenced-off footprint of the old grandstand building. For a portion of the path, the walkway is not covered. The Casino remains where it was in 2010. The wagering area on the racetrack apron has not moved. The only change in the Calder facility is the demolition of the grandstand building. Calder’s plan is to convert the former grandstand area into a greenspace. The entire property remains under the control of Calder. Nothing obstructs passage between the Casino and any other portion of the Calder property. Since Calder opened the Casino in 2010, the Division has renewed its slot machine license annually, without objection from any third party, through the renewal for the fiscal year commencing July 1, 2016. Even the instant case is not a direct challenge to Calder’s 2017-2018 license renewal. Commencing on October 5, 2016, the FHBPA began writing to various Division personnel complaining that the demolition of the grandstand caused the Calder Casino to no longer be “contiguous and connected to a live gaming facility” as required by section 551.114(4), and requesting the Division to commence enforcement action against Calder. In October 2016, the Division’s Office of Investigations conducted an inspection of Calder and did not find any violation related to section 551.114(4). Finding no violations during its inspection, the Office of Investigations saw no need to make a written report and did not initiate a formal investigation. Calder applied for its 2017-2018 slot machine license renewal on May 9, 2017. On June 20, 2017, the FHBPA served the Division with a 30-day notice of its intention to file an unadopted rule challenge against the Division “for its willful failure to enforce the requirements of [section 551.114(4)] by continuing to allow [Calder], as a Division licensee, to maintain its license while it clearly operates its Slots Building in violation of said statute.” On July 9, 2017, the Division renewed Calder’s slot machine license for the license year commencing July 1, 2017, without any further analysis as to whether the Casino was in compliance with section 551.114(4). The FHBPA contends that it has standing to challenge the Division’s purported unadopted rule because a substantial number of its members would be substantially affected by the Division’s regulatory actions. The FHBPA notes that it is specifically named in the statutes at issue in this proceeding and is itself substantially affected by agency decisions regarding Calder’s compliance with regulatory statutes because the FHBPA receives a percentage of the total horse racing purse pools awarded at Calder. The Legislature has enacted specific conditions to be met by applicants for slot machine licenses to ensure the promotion of horse racing in Florida. The FHBPA concludes that compliance with the relevant statutes, which is intended to promote horse racing in the state, directly affects it and its members. The Petition states that the necessary effect of compliance with section 551.114(4) is to expose slot machine players to the live thoroughbred racing being conducted elsewhere on the premises. This exposure necessarily increases the chance of patrons wagering on horseracing, thereby increasing the monies being directed to the purse pool for the benefit of FHBPA members. The Petition alleges that the current configuration at Calder’s premises fails to expose the slot machine patrons to the horseracing being conducted and decreases the chances those patrons will wager on horseracing. In contrast, the Division observes that this proceeding relates to a slot machine license and neither the FHBPA nor its members are licensed or regulated under chapter 551, nor do they promote or participate in the slot machine industry. The Division concedes the FHBPA’s interest in Calder’s thoroughbred horseracing activities under chapter 550, and the slot machine revenues the FHBPA receives to supplement racing purses pursuant to chapter 551. However, the Division points out that if the FHBPA receives the relief it seeks, the prospective effect would be to deprive its members of the revenues they derive from Calder’s slot machine operations. The Division suggests that the FHBPA lacks standing because its asserted scope of interest and activity--the maximization of purses to be paid out to its members--is irreconcilably adverse to the relief its requests in this proceeding. In the Petition, the FHBPA asserted that its interest in the agency statement is lost revenues. The alleged lack of “contiguity and connectedness” will fail to expose the slot machine patrons to the horseracing being conducted elsewhere on the Calder premises, thereby decreasing the chance that these slot machine players will wager on horseracing. The FHBPA did not directly address the loss of slot machine revenues its members would suffer if Calder’s slot machine license were not renewed. The FHBPA’s chief concern is that slot machine wagering was originally approved only as an adjunct to existing, licensed pari-mutuel facilities, with the promise that slot machine revenues would support and enhance Florida’s horseracing, greyhound racing, and jai alai industries. Now, at least at Calder, the tail is wagging the dog: casino revenues far outstrip live thoroughbred racing revenues. Calder is actively disinvesting in its thoroughbred racing business, outsourcing its operation to Gulfstream and tearing down its grandstand. Maureen Adams, Calder’s president and general manager, candidly testified that Calder would get out of the live horseracing business altogether if the Legislature would “decouple” the slot machine operations from the pari-mutuel operations. It is found that the FHBPA has articulated a sufficient interest to establish standing to bring this unadopted rule challenge as part of its effort to preserve what it contends is the purpose of the constitutional amendment and implementing legislation establishing slot machine operations in Miami-Dade and Broward Counties: the promotion of and economic support for the pari-mutuel gaming industry, including thoroughbred horseracing. The FHBPA’s asserted interest in this proceeding is consistent with the organization’s stated purpose. As to whether the Division’s action constituted an unadopted rule, the Petition alleged: The Division's approval and issuance of a renewed slot machine gaming license to Calder reflects and implements a statement of agency policy interpreting the "connected and contiguous" requirement of Fla. Stat. 551.114 so as to allow the issuance of slot machine gaming license to permitholders whose designated slot machine gaming area is contained at a location that is a distance from and physically apart from the area where a live gaming facility is located. This new policy, which has not been promulgated as a rule, is a statement of general applicability because it announces an inclusive interpretation of the term "connected and contiguous" that will serve as the basis for other pari-mutuel wagering permitholders to operate a slot machine gaming facility. The evidence presented at the hearing established that the operation of slot machines is limited to the eight pari- mutuel facilities in Broward and Miami-Dade Counties that were in existence at the time of and had conducted live racing or games in the two calendar years prior to the adoption of Article X, Section 23. Absent a further constitutional amendment, the class of slot machine licensees cannot expand beyond these eight pari-mutuel facilities. Even if it were conceded that the Division’s statement is one of general applicability, its potential application would be limited to these eight entities. Section 550.114(4) provides three options for the location of “designated slot machine gaming areas.”3/ First, the slot machine gaming area may be located “within the current live gaming facility.” Second, the slot machine gaming area may be placed “in an existing building that must be contiguous and connected to the live gaming facility.” Third, the slot machine gaming area may be located in a newly constructed building, provided that new building is contiguous and connected to the live gaming facility. The evidence presented at the hearing established that seven of the eight eligible pari-mutuel facilities chose option one for their slot machine gaming areas; that is, they located the slot machine gaming area within their current live gaming facilities. No one chose option two. Only Calder chose option three and constructed a new building to house its slot machine gaming area. As matters stood at the time of the hearing, Calder was the only licensee that could possibly be affected by a Division interpretation of the “contiguous and connected” requirement of the statute. Unless another pari-mutuel facility in the future undertakes to construct a new building for its slot machine gaming area or to move its slot machine gaming area to a different existing building, the alleged unadopted rule is applicable only to Calder. The evidence indicated that the Division did not give much thought to the question whether demolishing the grandstand could affect Calder’s slot machine licensure until the FHBPA began complaining about it. The Division then considered the FHBPA’s objections and concluded that Calder’s slot machine license should be renewed.4/ The Division’s reasoning was essentially that the Casino had not moved, the racetrack had not moved, and no impediment had been placed between them. The demolition of the grandstand had the effect of forcing patrons to take a slightly different path between the Casino and the pari-mutuel facility, and to walk part of the way in the elements rather than briefly under a covered walkway and then through an enclosed air conditioned grandstand. The Casino has never been physically attached to the pari-mutuel facility; it has always been linked by a sidewalk. The demolition of the grandstand did nothing to change the position of the Casino in relation to the pari-mutuel facility. Both facilities are on the Calder property and are still linked by a sidewalk. The loss of the grandstand only made the passage from the Casino to the racetrack less comfortable for those who prefer air conditioning to a walk outdoors. The Division concluded that the Casino is now as “contiguous and connected” to Calder’s pari-mutuel facility as it ever was. The FHBPA contends that the absence of an air conditioned grandstand building is critical. Because section 551.114(4) states that a designated slot machine gaming area may be located within the current live gaming facility, the Legislature “is necessarily stating that a ‘live gaming facility’ is a structure that is able to house the operation of a slot machine gaming area.” If an area cannot house a slot machine gaming area, then it cannot be a “live gaming facility” within the terms of the statute. The FHBPA next points to the testimony of Casey Smith, the Division’s Chief of Slot Operations, who stated that a tent on the apron of a racetrack would not be a viable option for a slot machine operation because “slot machines would be sensitive to temperature, humidity, stuff like that, so you know, doing anything long term in a tent like that probably is not something that’s going to work.” Mr. Smith also noted the necessity of security and a surveillance system. The FHBPA argues that Mr. Smith’s testimony, read together with the “live gaming facility” language of section 551.114(4), “make it clear that a ‘live gaming facility’ must necessarily be an air conditioned structure with enclosed walls, a roof and electricity that is capable of having a surveillance system installed.” In the case of Calder, the “live gaming facility” must be an air conditioned structure with enclosed walls and a roof that allows the public to view and wager on thoroughbred horseraces being conducted “live and in plain view.” The FHBPA contends that to interpret “live gaming facility” to mean anything less than an air conditioned structure with enclosed walls and a roof would render the first part of section 551.114(4) “meaningless.” The FHBPA’s argument would have some force if the first part of section 551.114(4) stood alone, i.e., if a pari- mutuel licensee’s only option were to place the slot machine gaming area within the current live gaming facility. As noted above, however, the plain language of the statute gives a licensee two other options: to place the slot machine gaming area in an existing building that is contiguous and connected to the live gaming facility, or to construct a new building that is contiguous and connected to the live gaming facility. The FHBPA’s contention is that the statute requires a live gaming facility to be fully capable of housing slot machines, even where the slot machines are in fact housed elsewhere. The language of section 551.114(4) does not support this reading.5/ It is found that the Division’s action in approving the renewal of Calder’s slot machine license was based on facts specific to Calder, applied only to Calder, and constituted an order, not an unadopted rule. “Contiguous and connected” is an undefined term in the statute. Without belaboring the dictionary definitions of these common words, the undersigned finds that the Division was entitled to some exercise of discretion in applying the term “contiguous and connected” to the unique facts on the ground at Calder, without going through the process of adopting a rule that would apply only to Calder. Because the Division’s issuance of a slot machine license renewal to Calder was not an unadopted rule, there is no need to further address the correctness of the Division’s interpretation of “contiguous and continuous.”
Findings Of Fact On November 28, 1994, a hearing officer of the Seventeenth Judicial Circuit, Circuit Court for Broward County, Florida (Seventeenth Judicial Circuit) conducted an evidentiary hearing on a petition to determine child support filed against Thomas Boganski (Petitioner). By Report dated November 28, 1994, the hearing officer determined, among other things, that Petitioner was liable for a past public assistance obligation in the amount of $8,871, representing monies received by his children from October 1991 through November 1994 and that payments on the child support obligation would be payable through the court. By Order dated December 12, 1994, a circuit judge of the Seventeenth Judicial Circuit ratified and approved the hearing officer's Report; thereby, establishing a child support debt, payable through the court. On June 26, 1995, a hearing officer of the Seventeenth Judicial Circuit conducted an evidentiary hearing on a motion for contempt filed against Petitioner for nonpayment of the child support obligation. By Report dated June 26, 1995, the hearing officer determined, among other things, that Petitioner had a past public assistance obligation and arrears totaling $10,551 as of June 14, 1995. By Order dated July 14, 1995, a circuit judge of the Seventeenth Judicial Circuit ratified and approved the hearing officer's Report. On January 9, 1995, Petitioner presented to the Department of the Lottery (Respondent Lottery) a claim for payment of a lottery ticket which he had purchased. The lottery ticket had a prize value of $2,500. On June 9, 1995, the Department of Revenue (Respondent Revenue) certified to Respondent Lottery that, as of that date, Petitioner had a court- ordered past public assistance debt of $9,500. The $2,500 prize winnings was transmitted to the Department of Banking and Finance, Office of the Comptroller (Respondent Banking and Finance) by Respondent Lottery. Respondent Banking and Finance did not disburse the $2,500 to Petitioner but retained the entire amount. By letter dated May 9, 1995, Respondent Banking and Finance notified Petitioner that the $2,500 prize winnings had been transmitted to it by Respondent Lottery. Furthermore, Respondent Banking and Finance notified Petitioner that the entire $2,500 was going to be applied to his unpaid past public assistance obligation of $9,500.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Banking and Finance, Office of the Comptroller enter a final order providing for payment to the Department of Revenue the lottery prize winnings of $2,500 claimed by Thomas Boganski. DONE AND ENTERED this 27th day of November, 1995, in Tallahassee, Leon County, Florida. ERROL H. POWELL Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of November, 1995. APPENDIX Respondents' joint proposed findings of fact 1 - 6 have been adopted in substance in this recommended order. COPIES FURNISHED: Thomas Boganski 1519 North 57th Terrace Hollywood, Florida 33021 Stephen S. Godwin Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32399-0350 Chriss Walker, Esquire Child Support Enforcement Department of Revenue P.O. Box 8030 Tallahassee, Florida 32314-8030 Louisa Warren, Esquire Department of the Lottery 250 Marriott Drive Tallahassee, Florida 32399 The Honorable Robert F. Milligan Comptroller State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350
The Issue Whether the State of Florida, through its agencies, collected the money owed it by the Petitioner prior to receipt of a letter from her doctor certifying her disability.
Findings Of Fact On or about June 21, 1990, the Petitioner, Therese L. Hodge, applied for a student loan to pursue educational courses at Career City College in Gainesville, Florida. The loan applied for was a Stafford Loan, a student loan administered by the Department of Education (DOE) through the Office of Student Financial Assistance (OSFA). Under the Stafford Loan program, DOE through OSFA, serves as the guarantee agent performing its responsibilities in accordance with regulations promulgated by the United States Department of Education (USDOE). The essential elements and operation of the loan program are that a participating bank or financial institution agrees to make a loan to a student on the condition that the DOE will issue a written guarantee that it will repay the loan to the lender if the student defaults on the loan. When DOE repays a defaulted loan to the lender, DOE acquires the promissory note and the right to collect from the student. DOE is required by USDOE to pursue collection in order to receive reimbursement from USDOE of the amount paid to the lender. On or about July 7, 1990, OSFA issued its guarantee of a student loan to the Petitioner, and Florida Federal loaned her $1,213.00. While enrolled in her first term at college, the Petitioner suffered a stroke. The Petitioner was observed at the hearing and it was apparent that she had some moderate limitations on her ability to communicate, comprehend, and remember. Petitioner lives on Social Security disability income. Her brother- in-law, who had accompanied her to the hearing, assisted in presentation of Petitioner's case without objection from the Respondents. After the Petitioner defaulted on her student loan, the Petitioner won $5,000 in a Florida lottery game. The Petitioner made demand for payment of the prize money. The Department of Lottery checks winnings of more than $600 to determine if the winner owes any money to the State. In the course of its comparison, the Department of Lottery determined that the Petitioner owed the State money on the defaulted student loan. The Department of Lottery confirmed the indebtedness with the Department of Education, and it was determined that the Petitioner owed $1,231.98 including interest on the defaulted student loan. On January 9, 1993, the Department of Lottery forwarded the $5,000 to the Office of the Comptroller, and notified the Petitioner of her right to request a formal hearing to controvert the Department's collection of the indebtedness. On January 12, 1993, the Petitioner called the Department of Lottery and advised the Department that she was disabled. The Department forwarded to the Petitioner medical forms on January 20, 1993. Subsequently, the Petitioner's physician certified to the state that she was totally and permanently disabled. Documents introduced at hearing show that the Petitioner advised the lending bank on June 17, 1991 that she was disabled due to a stroke and unable to work. The bank sent the Petitioner medical forms in order for her to have her disability certified. The Petitioner did not return the forms due to her financial inability to obtain the required physical. After the Department of Education had repaid the student loan and had turned the matter over to a collection agency, the Petitioner advised the collection agency that she was disabled and the collection agency sent her medical certification forms which she did not have completed due to her financial inability. After she had won the lottery, the Petitioner had the medical certification forms which were forwarded to her by the Department of Education completed by a physician and these were returned to the State after the end of January, 1993 certifying that the Petitioner was totally and permanently disabled.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of the Comptroller return to the Petitioner the amount $1,231.98. DONE AND ENTERED this 16th day of June, 1993, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of June, 1993. APPENDIX TO RECOMMENDED ORDER CASE NO. 93-1218 The Petitioner's sister wrote a letter in the Petitioner's behalf which was read and considered, and is treated as a final argument. The Department of Education filed a proposed order which was read and considered. The following proposed findings were adopted, or rejected for the reason stated: Respondent's (DOE) Proposed Findings: Recommended Order: Paragraph 1-6 Adopted Paragraph 7 Irrelevant Paragraph 8 Adopted Paragraph 9 The Department was on notice of the Petitioner's disability. Total and permanent disability is a medical determination based upon medical certification. The lender was on notice of Petitioner's disability on June 17, 1991. The purpose of the bank sending Petitioner the medical forms was to confirm the medical determination. Paragraph 10-15 Adopted COPIES FURNISHED: Therese L. Hodge and 5855 West Wood Lawn Street Post Office Box 36 Dunnellon, FL 34433 Ocklawaha, FL 32179 Charles S. Ruberg, Esquire Department of Education 325 West Gaines Street Tallahassee, FL 32399-0400 Louisa Warren, Esquire Department of Lottery 250 Marriott Drive Tallahassee, FL 32301 Leslie A. Meek, Esquire Office of the Comptroller The Capitol, Room 1302 Tallahassee, FL 32399-0350 Gerald Lewis, Comptroller Department of Banking and Finance Tha Capitol Tallahassee, FL 32399-0350
The Issue The central issue in this case is whether the sum of $1,318.00 should be permanently withheld from Petitioner's lottery winning.
Findings Of Fact The Petitioner, Virginia Ann Dassaw, was formerly known as Virginia Ann Davis. In 1979, Petitioner was charged with a criminal violation of Section 409.325, Florida Statutes, welfare fraud. The information alleged Petitioner had received food stamps which she was not entitled to because financial assistance was not available to her. On May 29, 1979, Petitioner appeared before the court and entered a guilty plea to the charge. As a result of the negotiated plea, Petitioner received two years of unsupervised probation and adjudication was withheld. Petitioner received $1,318.00 in overpayments from the Department of Health and Rehabilitative Services for the period March, 1977 through June, 1978. Such overpayments, monthly assistance payments, were from aid to families with dependent children; benefits Petitioner was not entitled to receive. Petitioner did not believe she was required to repay the overpayment amount since the criminal court did not require restitution as part of the conditions of her probation in connection with the food stamp welfare fraud. Petitioner did not, however, aver that she had repaid the obligation at issue nor did she dispute that she had received an overpayment. She felt that the criminal proceeding had been sufficient to satisfy the question. The order granting probation and fixing terms thereof did not, however, excuse Petitioner from the amount claimed in the instant case. On or about February 26, 1996, Petitioner became a lottery prize winner in the amount of $2,500.00. In conjunction with its claim for the overpayment described above, the Department of Health and Rehabilitative Services notified the Department of the Lottery of its claim for reimbursement from Petitioner's winnings in the amount of $1,318.00. The Department of the Lottery transmitted the winning amount to the Office of the Comptroller. The winning amount, less the claim filed by the Department of Health and Rehabilitative Services, was issued to Petitioner by expense warrant number 4-17 700 616 on March 12, 1996, in the amount of $1,182.00. Petitioner timely contested the amount claimed by the Department of Health and Rehabilitative Services.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That the Department of Banking and Finance, Office of the Comptroller, issue a final order finding the Department correctly reduced Petitioner's lottery prize winning by $1,318.00 and dismissing Petitioner's challenge to the amount disbursed. DONE AND ENTERED this 25th day of October, 1996, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 25th day of October, 1996. APPENDIX Rulings on the proposed findings of fact submitted by Petitioner: None submitted. Rulings on the proposed findings of fact submitted by the Respondent, Department of Health and Rehabilitative Services: 1. Paragraphs 1 through 6 are accepted. COPIES FURNISHED: Virginia Ann Dassaw 10075 Southwest 170th Terrace Perrine, Florida 33157 Andre L. Williams Assistant District Legal Counsel Department of Health and Rehabilitative Services 401 Northwest Second Avenue, N-1014 Miami, Florida 33128 Josephine A. Schultz Chief Counsel Office of the Comptroller Department of Banking and Finance The Fletcher Building, Suite 526 101 East Gaines Street Tallahassee, Florida 32399-0350 Louisa Warren, Esquire Department of the Lottery 250 Marriott Drive Tallahassee, Florida 32399 Robert F. Milligan Office of the Comptroller Department of Banking and Finance The Capitol, Plaza level Tallahassee, Florida 32399-0350 Harry Cooper General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-00350
The Issue Whether Respondent was ejected and permanently excluded from a facility as stated in the Administrative Complaint, and, if so, what sanction should be imposed.
Findings Of Fact Petitioner is the state agency charged with regulating pari-mutuel wagering, slot machines, and cardroom operations pursuant to chapters 550, 551, and section 849.086, Florida Statutes. At all times material to this case, Respondent was a patron of Isle Casino. At all times material to this case, Isle Casino was a facility operated by a permit holder authorized to conduct pari- mutuel wagering and to operate slot machines and a cardroom in the State of Florida. Respondent offered no tangible evidence suggesting that he was not excluded from Isle Casino. Respondent's date of birth is February 3, 1983. John Joseph Keenan is the director of compliance and safety for Isle Casino. He has been with Isle Casino for more than ten years. He began as a compliance officer, became compliance manager in 2012, and then director of compliance and safety in 2014. On March 9, 2019, several people at a poker table noticed "something was going on" with Mr. Rios and reported it to the poker supervisor. At this time, poker management and security reviewed surveillance video to determine if the allegations were true. The allegations against Mr. Rios were that he was doing something suspicious with the cards used at the table. During inspection of the deck that was used, Isle Casino noticed markings on the cards. Review of the surveillance video showed Mr. Rios shielding the cards with his hands and performing an action with his thumb. A close inspection of the cards in play at the single deck poker game shows that slits were made for the high cards in the deck, i.e., aces, kings, queens, jacks and tens. The marks were made with Mr. Rios's thumbnail. He etched a line in high cards in the poker deck and spaced the lines so the progression from ace to ten was visible by the placing of the slits downward along the edge of the cards so marked. This was done so he was able to determine who had the high cards at the poker table to get an advantage in the game. The markings, which were made on the cards, gave Mr. Rios a competitive advantage because he would know who had the high cards at the table. He could essentially see in the hands of the other card players whether his likelihood of winning the hand was increased. Mr. Rios sat directly to the left of the poker dealer, in what is known as "Seat 1." He would be able to see all the cards going out to the players, and was the first player to receive his cards. Mr. Keenan testified that Jason Cluck was the director of surveillance at the time of the complaint against Mr. Rios. In an email on March 11, 2019, Mr. Cluck sent Isle Casino's investigative report to Petitioner's investigator, William Smith. Mr. Keenan testified that he was copied on the email. Mr. Keenan also testified that photographs were attached to the email from Mr. Cluck to Mr. Smith on March 11, 2019. The ten photographs, admitted into evidence in this matter as Exhibit 3, show as follows: Photograph 1 shows a full deck of cards; Photograph 2 shows where the cards were marked, with arrows pointed down at the cards; Photograph 3 shows a marking on the ace of diamonds; Photograph 4 shows cards in the upright position where markings were made at the top right corner; Photograph 5 shows another single card with markings on the side; Photograph 6 shows high cards, a king and a queen, with markings; Photograph 7 shows a marking on the bottom left corner of a card; Photograph 8 shows marking on two cards, on the top left corner; and Photographs 9 and 10 are surveillance stills showing Mr. Rios at the poker table. Mr. Keenan testified that the photographs and video stills are true and correct representations of what occurred on March 9, 2019. Based on the incident reports, video, and photographs with the marks, Isle Casino concluded that Mr. Rios was attempting to manipulate the game. Accordingly, Isle Casino gave Mr. Rios an ejection from the casino. Mr. Keenan testified that Mr. Rios had a "Players Club" card with Isle Casino, which is how he was identified as the individual making markings on the cards. The "Players Club" card is swiped whenever an individual plays at a table and, in this instance, has information that identified Mr. Rios by name. On March 12, 2019, Mr. Rios was permanently excluded from Isle Casino. Mr. Keenan testified that he is familiar with the Notice of Exclusion issued to Mr. Rios in this matter. An individual who has been issued a permanent exclusion from Isle Casino is not permitted future entry into the facility. If caught in the facility, he could be deemed a trespasser. Once a player has been excluded, the individual's "Players Club" account would be inactivated and would provide Isle Casino with an alert if the individual attempted to use the account. Mr. Rios left the casino before the exclusion form could be presented to him. The subject of the exclusion does not have to be present when the exclusion is handed down. On cross-examination by Respondent, Mr. Keenan testified that the cards had been inspected and contained no impermissible markings prior to Mr. Rios playing. Mr. Rios sat down, made gestures with his hands, and made indents on the cards. Players at the table notified Isle Casino personnel to investigate, and they determined that Mr. Rios made the indentations on the card, which resulted in the conclusion to eject him and permanently exclude him from the casino. Mr. Smith testified that he has worked at the Division for seven years as an investigator. He was the author of the document that was entered into evidence as the "Office of Investigation, Investigative Report," dated March 12, 2019. The report concluded that Mr. Rios has been excluded from Isle Casino, which made him a candidate for exclusion from all pari-mutuel facilities in the State of Florida. When Mr. Smith was made aware of Mr. Rios's actions, he immediately went to the Isle Casino to investigate. He personally inspected the indented cards and viewed the video surveillance of the incident. When viewing the DVD of Mr. Rios's actions, Mr. Smith observed Mr. Rios marking the upper left part of the cards, turning the cards around in order to also mark the bottom right part of the cards. Mr. Smith testified that the marks he personally saw on the card matched the actions that he saw Mr. Rios commit on the video. Based upon his personal observation of the video surveillance, his review of the still photographs from the video surveillance, the observations described to him by additional personnel at Isle Casino, and his personal inspection of the marked playing cards, Mr. Smith agreed that Respondent engaged in cheating, which led to his being banned from Isle Casino. He expressed the Division's interest in ensuring that individuals banned from one pari-mutuel facility for cheating not be permitted to take his or her craft to other pari-mutuel facilities in Florida. His conclusion that Mr. Rios should be banned from all Florida pari-mutuel facilities was based on his validation of the action taken by Isle Casino following their investigation of the allegations brought to their attention by Respondent's fellow players. Mr. Rios first testified that he thought he was playing cards at the Hard Rock Casino on the date of the incident at Isle Casino. When confronted with the photographs of him standing before the Isle Casino cashier, however, he admitted to playing cards there on the date in question. He said the photos of the cards in a player's hand showing the indentations along the upper left and lower right corners were not of his making, although the surveillance video proves otherwise. Mr. Rios denied cheating in any way and testified he did not see any cards that had been marked as described by Mr. Keenan and Mr. Smith. He stated that he believed the cards had not been inspected prior to the game and that any marks on the cards were probably there when the cards were put into play at his game. He brought no witnesses or evidence to support his contention. Mr. Rios testified that he was not familiar with the procedure involved in excluding patrons from a pari-mutuel facility.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Division of Pari-Mutuel Wagering issue a final order permanently excluding Dachiell Rios from all pari-mutuel facilities in the State of Florida. DONE AND ENTERED this 18th day of September, 2019, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of September, 2019. COPIES FURNISHED: Jason Walter Holman, Esquire Division of Pari-Mutuel Wagering Department of Business and Professional Regulation 2601 Blair Stone Road Tallahassee, Florida 32399 (eServed) Dachiell Rios 250 Northwest 55th Court Miami, Florida 33126 Halsey Beshears, Secretary Department of Business and Professional Regulation 2601 Blair Stone Road Tallahassee, Florida 32399-2202 (eServed) Ray Treadwell, General Counsel Office of the General Counsel Department of Business and Professional Regulation 2601 Blair Stone Road Tallahassee, Florida 32399-2202 (eServed) Louis Trombetta, Director Division of Pari-Mutuel Wagering Department of Business and Professional Regulation 2601 Blair Stone Road Tallahassee, Florida 32399-2202 (eServed)
