The Issue The issues for disposition in this case are whether proposed rules 61D-11.001(17) and 61D-11.002(5), Florida Administrative Code, which consist of the repeal of said rules, constitute an invalid exercise of delegated legislative authority as defined in section 120.52(8), Florida Statutes; and whether the Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering’s (Respondent), failure to prepare a statement of estimated regulatory costs constituted a material failure to follow the applicable rulemaking procedures or requirements set forth in chapter 120.
Findings Of Fact Respondent is the state agency charged with regulating pari-mutuel wagering pursuant to chapter 550, Florida Statutes, and cardrooms pursuant to section 849.086, Florida Statutes. Each Petitioner currently holds a permit and license under chapter 550 to conduct pari-mutuel wagering and a license under section 849.086 to conduct cardroom operations. Petitioners offer designated player games at their respective cardrooms. The rules proposed for repeal, rules 61D-11.001(17) and 61D-11.002(5), relate to the play of designated player games. Rule 61D-11.001(17) provides that “‘[d]esignated player’ means the player identified by the button as the player in the dealer position.” Rule 61D-11.002(5) provides that: Card games that utilize a designated player that covers other players’ potential wagers shall be governed by the cardroom operator’s house rules. The house rules shall: Establish uniform requirements to be a designated player; Ensure that the dealer button rotates around the table in a clockwise fashion on a hand to hand basis to provide each player desiring to be the designated player an equal opportunity to participate as the designated player; and Not require the designated player to cover all potential wagers. Both rules were adopted on July 21, 2014. Both rules list sections 550.0251(12), and 849.086(4) and (11) as rulemaking authority, and section 849.086 as the law implemented. Designated Player Games A designated player game is a subset of traditional poker games in which a designated player plays his or her hand against each other player at the table, instead of all players competing against each other. The term “designated player game” is used synonymously with “player banked games.”3/ However, a designated player is not a cardroom operator. In traditional “pool” poker games, each player bets into a central pool, with the winning hand(s) among all of the players collecting from the pool of bets, minus the cardroom rake. In designated player games, each player at the table makes an individual bet, and compares their hand against the designated player’s hand. If the player’s hand is better than the designated player’s hand, then the designated player pays the player from the designated player’s stack of chips. If the designated player’s hand is better than the player’s hand, then the designated player collects the player’s wager. At an eight- seat table, it is as though there are seven separate “player versus designated player” games. Designated player games were first played at the Ebro (Washington County Kennel Club) cardroom in 2011. The game, known as “double hand poker,” was demonstrated to Respondent, and subsequently approved for play. Though the internal control that describes the rules of game play was not offered in evidence, a preponderance of the evidence demonstrates that the game used a designated player. After Respondent’s approval of Ebro’s double hand poker, Respondent entered an order rescinding its approval due to concerns that the use of a designated player resulted in the establishment of a banking game. That decision was challenged, and subsequently withdrawn, with the result being that “Ebro may immediately resume play of Double Hand Poker as approved by the division.” In 2012, the Palm Beach Kennel Club cardroom began offering “tree card poker” with a designated player. Although tree card poker had been approved by Respondent, the designated player element had not. Thus, since the game was not being played in accordance with the approved internal control, it was unauthorized. Respondent investigated the playing of tree card poker at Palm Beach Kennel Club. A video demonstration was provided that showed two hands of tree card poker being played with a designated player. The video depicted a single designated player playing his hand against each other player at the table, and paying or collecting wagers based on each individual hand. After having reviewed the demonstration video, Respondent ultimately determined that the use of a designated player did not violate the prohibition against banking games as defined. The Adoption of the Designated Player Rules As requests for approval of internal controls for games using designated players became more common, Respondent determined that it should adopt a rule to establish the parameters under which designated player games would be authorized. On December 16, 2013, after having taken public comment at a series of rulemaking workshops, Respondent published proposed rule 61D-11.002(5) which provided as follows: 61D-11.002 Cardroom Games. * * * Card games that utilize a designated player that covers other players’ wagers shall: Allow for only one designated player during any single hand; Not require the designated player to cover all wagers that could be made by the other players in the game; Not allow other players to cover wagers to achieve winnings that the designated player could have won had he or she covered the same wagers; Not allow or require a player to buy in for a different amount than any other player in the game in order to participate as the designated player; and Rotate a button or other object to designate which player is the designated player. The button or other object shall rotate clockwise around the table to give each player the opportunity to participate as the designated player. On February 14, 2014, a challenge to the proposed rule was filed that objected to restrictions on the manner in which designated player games could be conducted. The rule challenge hearing was continued, and the case placed in abeyance pending negotiations between the parties. On March 14, 2014, Respondent filed a Notice of Change to the proposed rule 61D-11.002, which added the following provisions to proposed rule 61D-11.002: The designated player shall: Cover the table minimum for each participating player; and Pay each player an amount above the table minimum equal to their pro rata share of the pot in the event the designated player cannot cover all wagers. A public hearing on the changes to the proposed rule was held on May 8, 2014. As to the designated player provisions of the proposed rule, Respondent received the following comment: [I]f we could modify this . . . taking the existing paragraph 5 and come up with three new criteria, one being uniform requirements for a designated player included within the house rules; allowing for the dealer button to rotate on a hand-by-hand basis for qualified designated players; also, not requiring the designated player to cover all potential wagers, but nonetheless allowing the house rules to set a designated minimum buy-in amount or just a chip count. I think if we had those particular parameters, we would allow the preservation of this game to continue in its current fashion . . . . And . . . we’re going to avoid [] any argument that the department has somehow created a banked card game, because the biggest thing here is that we’re not requiring that the designated player meet all the theoretical payouts of the game. On May 19, 2014, written comments were submitted on behalf of several pari-mutuel facilities. Those comments included proposed language that is identical to the rule that was ultimately adopted, and included the following: Multiple jurisdictions have determined a key element to banked card games is the house requiring all wagers be covered. We propose this language to distinguish between lawful games and impermissible banked games. On June 9, 2014, Respondent filed a Notice of Change that adopted the industry’s proposed language, and changed proposed rule 61D-11.002 to its present form. On June 13, 2014, the challenge to proposed rule 61D-11.002(5) was voluntarily dismissed, and the case was closed. On July 21, 2014, rule 61D-11.002(5) became effective. There can be little doubt that Respondent understood that it was, by its adoption of rule 61D-11.002(5), recognizing player banked games in which a designated player plays his or her hand against each other player at the table. The rule is substantial evidence that, as of the date of adoption, Respondent had determined that designated player games did not violate the prohibition against “banking games” as that term is defined in section 849.086. Internal Controls Over the course of several years, beginning generally in 2011 and extending well into 2015, Respondent was presented with internal controls from cardrooms around the state for playing designated player games. Internal controls are required before a particular game may be offered, and describe the rules of the game and the wagering requirements. The internal controls submitted by the Jacksonville Kennel Club; the Daytona Beach Kennel Club; the West Flagler Associates/Magic City Poker Room; and the Naples/Ft. Myers Greyhound Track Cardroom, described games in which designated players played their hand against those of the other players at the table, and paid and collected wagers from the designated player’s chip stack based on the rank of the designated player’s hand against the individual players. The games described did not involve pooled wagers, and clearly described player banked games. Respondent approved the internal controls for each of the four facilities. The process of approving internal controls occasionally included the submission of video demonstrations of the games described in the internal controls for which approval was being sought. Approval of internal controls was never done without the review and assent of Respondent’s legal department or the division director. With regard to the rules of the designated player games that underwent review and approval by Respondent, “all of them are about the same, few differences.” From 2011 through mid-2015, Respondent approved internal controls for playing one-card poker, two-card poker, three-card poker, Florida Hold ‘Em, and Pai Gow poker using designated players at numerous cardroom facilities. A preponderance of the evidence establishes that Respondent was aware of the fact that, for at least several facilities, “eligible” designated players were required to meet minimum financial criteria, which ranged from a minimum of $20,000 in chips, up to $100,000 in chips. In the case of the Daytona Beach Kennel Club cardroom, internal controls called for a designated player to submit an application, agree to a background check, and submit a deposit of $100,000. Respondent approved those internal controls. DBPR Training In August 2015, Mr. Taylor was invited by the Bestbet cardroom in Jacksonville4/ to participate in a training session it was offering for its employees. Mr. Taylor is an investigator for Respondent, and visited the pari-mutuel facilities at least once per week. Mr. Taylor was invited by the facility to get an overview of how the cardroom games that had been approved by Respondent, including designated player games, were played. The games that were the subject of the training were substantially similar to those depicted in the April 2012 training video, and those he had observed during his weekly inspections. The designated player games for which training was provided had been approved by Respondent. In September 2015, training in designated player games was provided at Respondent’s Tallahassee offices to several of its employees. Mr. Taylor perceived the training “as an overview to give us an idea of what we are going to see.” Neither Mr. Taylor nor any other participant in the training offered any suggestion that the training was being provided in anticipation of a shift in Respondent’s practice of approving the internal controls for designated player games. Current Rulemaking On September 23, 2014, Respondent published a Notice of Development of Rulemaking. The notice cited 15 of the 30 subsections of chapter 61D-11 as being the subject areas affected by the notice, and provided that “[t]he purpose and effect of the proposed rulemaking will be to address issues discovered in the implementation and practical application of cardroom rules adopted on July 21, 2014.” There is nothing in the notice to suggest that Respondent had modified its position on designated player games, and its continued approval of institutional controls approving such games is strong evidence that it had not. On August 4, 2015, Respondent published a Notice of Meeting/Workshop Hearing for a rule workshop to be held on August 18, 2015. The Notice listed each rule in chapter 61D-11 as the “general subject matter to be considered,” including those related to games of dominos. Respondent asserted that it had “posted a version of amended cardroom rules that included the [repeal of rule 61D-11.005] on its website,” though such was not published, nor did Respondent provide a record citation in support of its assertion. On October 29, 2015, Respondent published its proposed amendments to chapter 61D-11. Rule 61D-11.001(17), which defines the term “designated player” as “the player identified by the button as the player in the dealer position,” was proposed for repeal. Rule 61D-11.002(5), as set forth above, which had established the standards for designated player games, was proposed for repeal. Rule 61D-11.005 was proposed for amendment to add subsection (9), which provided that “[p]layer banked games, established by the house, are prohibited.” On December 2, 2015, the Division held a public hearing on the proposed amendments. During the public hearing, Mr. Zachem made it clear that the intent of the proposed amendments was to change the Division’s long-standing and consistently applied construction of section 849.086 as allowing designated player games to one of prohibiting designated player games, and in that regard stated that: The rules pertaining to designated player games are now going to be correlated with the statute that is the prohibition against designated player games. The statute does not allow designated player games. There has to be a specific authorization for a type of game in statute, and there is none in 849.086 pertaining to designated player games . . . . When some of these definitions in other areas were created, I don’t think that the concept of what these games could even become was fathomed by the division. Given the process by which internal controls for designated player games were approved by Respondent, including written descriptions and video demonstrations of play, the suggestion that Respondent could not “fathom” the effect of its rules and decisions is not accepted. On December 11, 2015, Petitioners individually filed petitions challenging the validity of the proposed rules. The cases were consolidated and ultimately placed into abeyance pending efforts to resolve the issues in dispute. Agency Action Concurrent with Rulemaking After the December 2015 public hearing, and prior to the adoption of any amendments to chapter 61D-11, Respondent filed a series of administrative complaints against cardrooms offering designated player games. Those administrative complaints were very broadly worded, and reflected Respondent’s newly-developed position that designated player games constituted “a banking game or a game not specifically authorized by Section 849.086, Florida Statutes.” In that regard, Mr. Zachem testified that a cardroom could have been operating in full compliance with its Respondent-approved internal controls and still have been the subject of an administrative complaint.5/ The position of Respondent was made clear by Mr. Zachem’s statement that if a cardroom has an approved designated player game “where a banker is using their table, their dealer, their facility they [the cardroom] are establishing a bank.”6/ Thus, there can be little doubt that Respondent now construes section 849.086 to mean that player banked games constitute prohibited “banking games” because, by allowing the player banked game in its facility, the cardroom “establishes” a bank against which participants play. After the December public hearing, Ms. Helms was instructed that she was to no longer approve internal controls if they included provisions regarding designated players. That blanket instruction came with no conditions. Since that instruction, the internal controls for at least one facility have been disapproved, despite their being “about the same” as internal controls that had been previously approved for other facilities. Ms. Helms testified that after the December 2015 rule hearing, “things kind of turned around” with regard to Respondent’s position on designated player games. She then rethought her selection of words, stating instead that “things changed.” Given the totality of the evidence in this case, Ms. Helms’ statement that the position of Respondent towards designated player games “turned around” is the more accurate descriptor. Notice of Change On January 15, 2016, the Division published a Notice of Change/Withdrawal of proposed rules. Through the issuance of this notice, the Division withdrew proposed rule 61D-11.005(9). The proposed repeal of rules 61D-11.001(17) and 61D-11.002(5) remained unchanged. Since that notice of change, the preponderance of the evidence demonstrates that Respondent has stopped approving internal controls that propose the offering of designated player games, and has continued to take action against facilities that offer designated player games. Respondent’s statements and actions, including those made in the course of this proceeding, demonstrate that Respondent intends the repeal of rules 61D-11.001(17) and 61D-11.002(5), to effectuate the prohibition of designated player games despite the withdrawal of proposed rule 61D-11.005(9). Lower Cost Regulatory Alternative When it proposed the subject amendments to rule 61D-11 on October 29, 2014, Respondent had not prepared a statement of estimated regulatory costs. Rather, the notice of proposed rule provided that: The agency has determined that this rule will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the agency. The agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: the economic review conducted by the agency. Any person who wishes to provide information regarding the statement of estimated regulatory costs, or to provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice. On November 19, 2015, in conjunction with the rulemaking process described above, a number of licensed cardroom operators, including some of the Petitioners, timely submitted a good faith proposal for a lower cost regulatory alternative (“LCRA”) to the proposed amendments to chapter 61D-11 that would have the effect of prohibiting designated player games, citing not only the creation of rule 61D-11.005(9), but the repeal of rule 61D-11.002(5). A preponderance of the evidence demonstrates that the LCRA indicated that the rule was likely to directly or indirectly increase regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. The LCRA, as described in the letter of transmittal, also concluded that regulatory costs could be reduced by not adopting the proposed rule amendments, thus maintaining Respondent’s previous long-standing interpretation of section 849.086, and thereby accomplishing the statutory objectives. Respondent employed no statisticians or economists, and there was no evidence to suggest that any such persons were retained to review the LCRA. Though Mr. Zachem did not “claim to be an expert in statistics,” he felt qualified to conclude that the LCRA was “a bit of a challenging representation.” Thus, Respondent simply concluded, with no explanation or support, that “the numbers that we received were unreliable.” Respondent did not prepare a statement of estimated regulatory costs or otherwise respond to the LCRA. Respondent argues that its abandonment of proposed rule 61D-11.005(9), which was the more explicit expression of its intent to prohibit designated player games, made the LCRA inapplicable to the rule as it was proposed for amendment after the January 15, 2016, notice of change. That argument is undercut by the fact that Respondent did not amend its statement of estimated regulatory costs as a result of the change in the proposed rule. Moreover, the evidence is overwhelming that Respondent, by its decision to disapprove internal controls that included designated player games, and its enforcement actions taken against cardrooms offering designated player games, specifically intended the amendments repealing the designated player standards to have the effect of prohibiting designated player games. Thus, despite the elimination of the specific prohibition on designated player games, there was no substantive effect of the change. Therefore, the LCRA remained an accurate expression of Petitioners’ estimated regulatory costs of the proposed rule. Ultimate Findings Respondent has taken the position that the repeal of rule 61D-11.005(9) was undertaken “[f]or clarity with the industry.” That position is simply untenable. Rather, Respondent has taken an activity that it previously found to be legal and authorized and, by repealing the rule and simply being silent on its effect, determined that activity to be prohibited. By so doing, Respondent has left it to “the industry” to decipher the meaning and effect of a statute that is, quite obviously, ambiguous and in need of the interpretive guidance that has been and should be provided by rule. The evidence is conclusive that, by its repeal of rule 61D-11.002(5), Respondent simply changed its mind as to whether playing with a designated player constituted the establishment of a prohibited banking game.7/ It previously determined that such games were lawful under the terms of section 849.086; it has now determined they are not. Though there is substantial evidence to suggest that the reason for the change was related to the renegotiation of the Seminole Compact, the reason is not important. What is important is that Respondent has taken divergent views of the statute in a manner that has substantially affected the interests of Petitioners. For Respondent to suggest that its repeal of the rules is a clarification, a simplification, or a reflection of the unambiguous terms of the statute, and that Petitioners should just tailor their actions to the statute without any interpretive guidance from Respondent, works contrary to the role of government to provide meaningful and understandable standards for the regulation of business in Florida. Respondent cannot, with little more than a wave and well-wishes, expect regulated businesses to expose themselves to liability through their actions under a statute that is open to more than one interpretation, when the agency itself has found it problematic to decipher the statute under which it exercises its regulatory authority.
The Issue Whether Florida Administrative Code Rules 61D-11.001(8) and (13), 61D-11.002(1), 61D-11.005(2) and (9), and 61D- 11.027(1)(b), (1)(e), (2)(a) and (2)(b), are invalid exercises of delegated legislative authority pursuant to Subsection 120.52(8), Florida Statutes (2004).
Findings Of Fact Stipulated Facts Petitioner, Calder Race Course, Inc., a Florida Corporation, is a pari-mutuel permitholder permitted and licensed by the Division of Pari-Mutuel Wagering (Division) pursuant to Chapter 550 and Section 849.086, Florida Statutes. Petitioner, Dania Jai Alai, a division of The Aragon Group, a Florida Corporation, is a pari-mutuel permitholder permitted and licensed by the Division pursuant to Chapter 550, and Section 849.086, Florida Statutes. As cardroom operators, Florida Administrative Code Chapter 61D-11 governs the activities of Petitioners in the operation of their respective cardrooms, pursuant to their cardroom licenses at their pari-mutuel facilities. The challenged rules have the effect of directly regulating the operation of Petitioners' cardrooms. Petitioners are substantially affected by the challenged rules and have standing to bring this rule challenge. A tournament is a series of games. Multi-table tournaments eliminate players until there are only enough remaining players to play at one table before the tournament concludes. Tournaments which consist of nine players at a single table, often referred to as mini-tournaments, are commonly used by Florida Native-American cardrooms as a form of poker tournament play. Pari-mutuel pools, operated by pari-mutuel permitholders and the rules regulating pari-mutuel wagering, currently allow jackpots. Facts based upon the evidence of record History of the Rules The Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering, is the state agency responsible for administering Section 849.086, Florida Statutes, and regulating the operation of cardrooms in the state. In 1996, the Florida Legislature created Section 849.086, Florida Statutes, authorizing cardrooms to be located at licensed pari-mutuel facilities. § 20, Chap. 96-364, Laws of Florida. In response to this legislation, Florida Administrative Code Chapter 61D-11 was adopted, governing the operation of cardrooms at pari-mutuel facilities. Section 849.086, Florida Statutes, was amended in 2003 by Section 4, Chapter 2003-295, Laws of Florida. Of particular significance to this case, the 2003 amendments eliminated a $10.00 limit on winnings and imposed a $2.00 bet limitation, with a maximum of three raises per round of betting. In response to this legislation, the Division began the process of amending Florida Administrative Code Chapter 61D-11. During this rule amendment process, the Joint Administrative Procedures Committee (JAPC) sent two letters to the Division expressing concerns with respect to provisions of the proposed rules regarding the Division's approval of authorized games and lack of criteria for such approval, a requirement for submission of a form, the Division's authority to approve a series of games (tournaments), and the Division's authority to prohibit jackpots. As part of the rule adoption process, the Division responded to these letters and informed JAPC that the Division was filing a Notice of Change regarding certain adjustments to the proposed rules. As part of the rule adoption process, the Division also conducted a rule development workshop on September 16, 2003, and a public hearing on January 7, 2004. The amendments were adopted May 9, 2004. Some of these rules amendments are the subject matter of the instant proceeding. Concerns of the Division Royal Logan is the chief operations officer for the Division. He has held that position for a total of approximately ten years. He was a member of a committee established in the Division as part of the process of amending Florida Administrative Code Chapter 61D-11 as a result of the 2003 amendments. According to Mr. Logan, the committee was concerned with several issues including compliance with the legislative intent of strict regulation of gambling, the Division's manpower in regulating cardrooms, and tax reporting concerns relating to auditing. More specifically, the Division was concerned that jackpots and re-buys have the potential of violating the $2.00 bet and raise limitations, the potential opportunity for collusion in single-game tournaments, and pose difficulties for accurate tax reporting. The Division does not have a group of employees specifically devoted to cardrooms. The Division has employees designated as chief inspectors at racetracks. The chief inspector has many duties including monitoring cardrooms to ensure compliance with statutes and rules. Monitoring cardroom compliance comprises no more than 10 to 12 percent of their time, as that person is the primary licensing official at the site. Not all racetracks have chief inspectors. The Game of Poker Poker is a card game using a single deck of 52 cards. Poker consists of a ranking system. The person holding the highest-ranking hand at the end of the game wins the pot. The traditional ranking system consists of the highest-ranking hand to the lowest. Hoyle’s Modern Encyclopedia of Card Games, by Walter B. Gibson, April 1974 Edition, contains an accurate description of the traditional ranking system in poker. Stanley Sludikoff is an expert in the game of poker, the rules of the game, and how poker is played in the United States. Mr. Sludikoff considers Hoyle's not to be the most authoritative book on the game of poker and that it applies primarily to home games as opposed to games played in gamerooms. Hoyle's does not address the subjects of tournaments or jackpots. Because Hoyle's contains an accurate description of the traditional ranking system in poker, the undersigned is not persuaded that the reference to Hoyle's in Florida Administrative Code Rule 61D-11.002(1) is inappropriate or arbitrary. In Mr. Sludikoff's opinion, tournaments are appealing because there is a low fixed risk with the potential for higher gain. They allow participants to build up to a higher limit game and potentially win entry into larger tournaments, such as the World Series of Poker. Single table tournaments are common in the United States in both large and small properties. Multi-table tournaments eliminate players until there are only enough remaining players to play at one table before the tournament concludes. Regular (non- tournament) games are played at single tables. According to Mr. Logan, the Division determined that the entry fee for a tournament should be calculated based upon the $2.00, three-raise limitation. The Division determined that "re-buys" are not consistent with the wagering limitations of Section 849.086, Florida Statutes. In Mr. Sludikoff's opinion, when the rules of the tournament allow, a re-buy is available to all players during a specified period of time. The rules are set by the cardroom operators, and each player in a tournament is aware of the ability to re-buy, how much the re-buys cost, and when it may be exercised. Re-buys are not the same thing as re-entering a tournament because participants are not permitted to re-buy unless he or she is a participant in the tournament at the time such re-buy is made available. A participant is not out of a tournament unless he or she is out of chips and there is no re-buy available to such participant. Allowing players to re-buy additional chips is a common practice in poker tournaments. Re-buys are easily recorded as a type of revenue received, thereby not presenting an accounting or auditing problem. Mr. Sludikoff's opinion in this regard persuades the undersigned that the agency's rationale regarding the entry fee and re-buy limitations are not supported by the necessary facts and are arbitrary. Most cardrooms in the United States have jackpots. Florida's statutory limitation of a $2.00 bet and raise limitation is a restrictive form of wagering. Under this limitation, the most that a participant can bet is $8.00 in any round. "Pari-mutuel" is a French term meaning wagering among ourselves, in that the participants are not wagering against the "house." Section 849.086, Florida Statutes, characterizes games authorized pursuant to that section to be "pari-mutuel style" games. Playing a game in a non-banking manner means that the "house", the cardroom operator, does not participate in the game at all and that the game participants are not playing against the house.
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)
The Issue The issue is whether Respondent accessed two slot machines without logging the purposes for opening the machines, in violation of Florida Administrative Code rule 61D-14.023(2), as in effect in March and April 2010.
Findings Of Fact At all material times, Respondent has been employed as a licensed slot machine technician with Isle of Capri. A slot machine technician maintains and repairs slot machines. Respondent holds a slot machine professional individual occupational license, bearing license number 7463121-1051. As relevant to this case, a locked main door provides access to the main compartment of the slot machine. Inside the main compartment of the slot machine is the MEAL book for logging all openings of the main compartment. Within the main compartment also is a locked logic compartment, which contains the computer chip that controls the operations of the slot machine. The logic compartment is also secured by a special tape that is broken whenever someone accesses the logic compartment. Within the main compartment also are a coin hopper, which holds coins that are available for payouts, as well as a locked drop box or billbox, which holds coins and bills that are collected periodically by the drop team. Although it is not entirely clear, a belly door apparently permits access to the drop box or billbox without going through the main compartment. Several times weekly, a drop team enters each slot machine, through the belly door, to empty the drop box or billbox. On March 28, 2010, and April 2, 2010, Respondent entered the main compartments of two slot machines in connection with his employment. The MEAL book for each machine was available inside the machine to log the activity. On these occasions, Respondent did not enter the logic compartments of these two slot machines. On each of these occasions, Respondent logged the times in and out of each slot machine, but failed to log the purpose for his entering each machine. For the March 28 activity, 24 other entries are shown on the same page of the MEAL book, and all 24 report the times in and out and the reasons why the persons entered the machines. For the April 2 activity, five other entries are shown on the same page of the MEAL book, and all five report the times in and out and the reasons why the persons entered the machines. Isle of Capri determined that Respondent's failure to log reasons for entering the slot machines on March 28 and April 2 violated Isle of Capri policies. The resulting "performance document" notes that Isle of Capri had previously counseled Respondent for similar failures to make the required entries in MEAL books. The "performance document" states that Isle of Capri will retrain Respondent, but a repeat of this conduct may result in termination. As required by the performance document, to reflect understanding of the issues discussed in the document, Respondent signed the document, but did so "under protest." On November 6, 2009, Petitioner sent Respondent a "warning letter." The letter explains that, on October 20, 2009, Respondent failed to complete the MEAL book with the time in and out of a specific slot machine. The letter states that this conduct violates rule 61D-14.024, which requires a log of logic compartment door openings and closings so as to include the time and reason for the opening. The letter warns that any future violations of slot machine laws or rules could result in an administrative fine or suspension or revocation of Respondent's slot machine occupational license. On February 5, 2010, Petitioner sent Respondent a "warning letter." The letter explains that, on November 26, 2009, Respondent failed to complete the MEAL book with the time in and out of a specific slot machine. The letter states that this conduct violates rule 61D-14.023(2). The letter warns that any future violations of slot machine laws or rules could result in an administrative fine or suspension or revocation of Respondent's slot machine occupational license. Respondent offered multiple defenses, including entrapment (never explained) and unfairness (the drop team is not required to log their openings of the belly door). The lone relevant defense was that Respondent had entered the main compartment, not the logic compartment, as Count I charged. It was apparent to the Administrative Law Judge, however, that Respondent recognized this to have been a pleading error by Petitioner, and Respondent was not prejudiced by the Administrative Law Judge's allowing Petitioner to amend the Administrative Complaint to substitute "main compartment" for "logic compartment." Two important mitigating factors apply. As testified by the Isle of Capri general manager, electronic monitoring of all entries into the slot machine has rendered the rule obsolete. Likely for this reason, the current version of rule 61D-14.023 no longer contains the requirement set forth in former rule 61D-14.023(2). On the other hand, nothing in the record suggests that Respondent relied on the proposed changes to rule 61D-14.012 when he failed to record the reasons for entering the main compartment on two occasions in the spring of 2010. After observing Respondent testify, the Administrative Law Judge finds that Respondent tends to view himself as the final arbiter of the rules that govern licensed slot machine technicians. Respondent's obstinacy, recent past problems in documenting the servicing of secured areas of slot machines, and commission of two violations (although in a single count) militate in favor of a fine that will refocus Respondent's attention on the critical, well-defined role that he plays within a sensitive, carefully regulated industry.
Recommendation It is RECOMMENDED that the Division of Pari-Mutuel Wagering enter a final order dismissing Count II of the Administrative Complaint, finding Respondent guilty of Count I of the Administrative Complaint, and imposing an administrative fine of $1000. DONE AND ENTERED this 9th day of November, 2011, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE 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 9th day of November, 2011. COPIES FURNISHED: Neil E. Waigand, Jr. 906 North Riverside Drive, Apartment 8 Pompano Beach, Florida 33062-4623 David Perry, Esquire Department of Business and Professional Regulation 1940 North Monroe Street, Suite 40 Tallahassee, Florida 32399-2202 Milton Champion, Director Department of Business and Professional Regulation Pari-Mutuel Wagering 1940 North Monroe Street Tallahassee, Florida 32399-2202 Layne Smith, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street, Suite 40 Tallahassee, Florida 32399-2202
Findings Of Fact The 1996 session of the legislature enacted Chapter 96-364, Laws of Florida, 1996, which created, effective January 1, 1997, Section 849.086, Florida Statutes. Section 849.086, Florida Statutes, authorizes pari-mutuel permitholders which meet certain conditions to operate cardrooms on those days when live racing is conducted at their respective pari-mutuel facilities. Section 849.086(1), Florida Statutes, sets forth the legislative intent with regard to cardroom facilities and reads as follows: Legislative Intent.--It is the intent of the Legislature to provide additional entertain- ment choices for the residents of and visitors to the state, promote tourism in the state, and provide additional state revenues through the authorization of the playing of certain games in the state at facilities known as cardrooms which are to be located at licensed pari-mutuel facilities. To ensure the public confidence in the integrity of authorized cardroom operations, this act is designed to strictly regulate the facilities, persons, and procedures related to cardroom operations. Furthermore, the Legislature finds that authorized games as herein defined are considered to be pari- mutuel style games and not casino gaming because the participants play against each other instead of against the house. Respondent is the agency granted regulatory authority with regard to cardroom operation pursuant to a grant of rulemaking power set forth in Section 849.086(4)(a)-(f), Florida Statutes as created by Section 20 of Chapter 96-364, Laws of Florida, 1996. Section 849.086(4)(a)-(f), Florida Statutes, reads as follows: Authority of Division. - The Division of Pari-mutuel Wagering of the Department of Business and Professional Regulation shall administer this section and regulate the operation of cardrooms under this section and the rules adopted pursuant thereto, and is hereby authorized to: Adopt rules, including, but not limited to: the issuance of cardroom and employee licenses for cardroom operations; the operation of a cardroom; recordkeeping and reporting requirements; and the collection of all fees and taxes imposed by this section. Conduct investigations and monitor the operation of cardrooms and the playing of authorized games therein. Review the books, accounts, and records of any current or former cardroom operator. Suspend or revoke any license or permit, after hearing, for any violation of the provisions of this section or the administrative rules adopted pursuant thereto. Take testimony, issue summons and subpoenas for any witness, and issue subpoenas duces tecum in connection with any matter within its jurisdiction. Monitor and ensure the proper collec- tion of taxes and fees imposed by this section. Permitholder internal controls are mandated to ensure no compromise of state funds. To that end, a roaming division auditor will monitor and verify the cash flow and accounting of cardroom revenue for any given operating day. Respondent is also provided additional rulemaking authority with regard to cardrooms through Section 21 of Chapter 96-364, Laws of Florida, 1996, which amended and added subsections (12) and (13) to Section 550.0251, Florida Statutes. Those subsections read as follows: The division shall have full authority and power to make, adopt, amend, or repeal rules relating to cardroom operations, to enforce and to carry out the provisions of s. 849.086, and to regulate the authorized cardroom activities in the state. The division is authorized to adopt emergency rules prior to January 1, 1997, to implement the provisions of s. 849.086. * * * The division shall have the authority to suspend a permitholder's permit or license, if such permitholder is operating a cardroom facility and such permitholder's cardroom license has been suspended or revoked pursuant to s. 849.086. The Term "Pot" Proposed rule 61D-11.001(l2) provides: 'Pot' means the total amount wagered in a hand or round of cards which shall not exceed $10.00 in chips or tokens. Respondent asserts that statutory authority for this rule is Section 849.085(2)(a) and Section 849.086(8)(b), Florida Statutes, which read respectively as follows: 'Penny-ante game' means a game or series of games of poker, pinochie, bridge, rummy, canasta, hearts, dominoes, or mah-jongg in which the winnings of any player in a single round, hand or game do not exceed $10 in value. * * * The winnings of any player in a single round hand or game may not exceed $10 in value. The fee charged by the cardroom for participation in the game shall not be included in the calculation of the limita- tion on the pot size provided in this paragraph. The cardroom act does not set forth a definition of the term "pot", nor does Section 849.085(2)(a), Florida Statutes, contain a pot limit. The statutory language is unambiguous: The "winnings of any player in a single round, hand, or game may not exceed $10 in value." The limitation on winnings is further referenced in the language of Section 849.086(8)(b), Florida Statutes, excluding "the calculation of the limitation on the pot size" from the $10 winnings limitation by any player. Respondent acknowledges that its construction of Section 849.086(8)(b), and Section 849.085(2)(a), Florida Statutes, requires that the term "any player" be construed to mean "all players", contrary to the clear statutory wording. This same agency construction, applied to Section 849.086(8)(b), Florida Statutes, renders meaningless the term "the calculation of" the limitation on pot size which term exists because pot size will vary, i.e. when multiple winner card games are played. The impropriety of Respondent's definition of the term pot to include an improper limit of $10 in terms of amounts wagered is demonstrated by the game of Hi-Lo Seven Card Stud, a form of poker set forth in Hoyle's Modern Encyclopedia Of Cardgames in which there are two separate and distinct winners, the high winner and the low winner. These two separate and distinct winners each may win $10 or less, though the total pot size limit calculated in accordance with the rules of such game may equal but not exceed $20. Respondent's proposed rule 61D-11.002(2), which is unchallenged, authorizes cardgames to be played in a manner set out in Hoyle's Modern Encyclopedia of Cardgames. Cardroom operators are also authorized by the cardroom act to charge a "rake" which is defined as a set fee or percentage of the pot assessed by the cardroom operator for providing the services of the dealer, table, or location for playing the authorized game. Section 849.086(2)(k), Florida Statutes. Where the cardroom operator charges a rake as a percentage of the pot, the amount wagered in a game such as Seven Card Stud may exceed $10, as demonstrated by Petitioners' Exhibit 1 in which such a game was conducted with the cardroom operator charging a rake as a percentage of the pot. The amount wagered inclusive of the rake may exceed $10, but the pot available for the winner at the end of the game after deduction of the rake is $10. As established by testimony of Petitioners' expert at the final hearing and Petitioner's exhibit 1, dealers are trained to specifically control the pot size through such practices as the placement of bets by players in front of their cards. Bets are moved into the pot only by the dealers. The stacking of chips in easily observable and countable $l stacks and in rows of 5 assists the dealer who stops bets where, if all remaining players bet, the $10 per player winnings limit would be exceeded. This precludes a situation from arising in which chips not accounted for as rake or as winnings within the $10 "winnings of any player" limitation are in the pot at anytime during the game. Section 849.086(8)(a), Florida Statutes, provides that the calculation of the limitation on pot size is dependent on the "winnings of any player in a single round, hand or game" not exceeding $10. Respondent's definition of the term "pot" in proposed rule 61D- 11.001(12) as an absolute maximum amount of $l0 based on wagers, rather than a limitation on the winnings of card games with multiple winners, or winnings of any player in a single round, hand, or game, exclusive of the percentage rake that may be charged, is found to be without statutory authority and is arbitrary and capricious. The Terms "Game", "Hand", and "Round" Proposed rule 61D-11.001(6) provides: 'Game' means a card game which results in a winner who achieves a desired result required to win a pot not to exceed $10.00 in chips or tokens. Proposed rule 61D-11.001(7) provides: 'Hand' means a single game of cards, one deal of cards to each player based on the rules of the game, resulting in a winner of a pot not to exceed $10.00 in chips or tokens. Proposed rule 61D-11.001(14) provides: 'Round' means a cycle of bets made by the players following the deal of the cards and resulting in a player winning the pot which shall not exceed $10 in chips or tokens. Respondent includes the same $10 pot limitation in the challenged definition of the term "game" found in proposed rule 61D-11.001(6);"hand" found in proposed rule 61D-11.001(7); and "round" found in proposed rule 61D- 11.001(14). Upon the same findings noted above relative to the definition of "pot", such rules are found to be in excess of Respondent's statutory authority and are arbitrary and capricious. Additionally, Section 849.086(8)(a), Florida Statutes, has defined authorized games to mean those games "authorized by s. 849.085(2)(a)". In turn, Section 849.085(2)(a), Florida Statutes, includes non-card games within the definition of authorized games, i.e. dominoes and mah-jongg. Consequently, Respondent's limitation of the term "game" to only cardgames is found to be in excess of the statutory authorization and is arbitrary and capricious. The term "round" means the cycle of bets in a single game and there may be several cycles of bets in a single game, a fact conceded by Respondent. This was demonstrated by Petitioners' Exhibit 1 in the playing of Seven Card Stud - one winner. While the winner of such game received $10, the winnings were based on several cycles of bets conducted over the course of the single game. Respondent has artificially restricted the term "round" to a cycle of bets following the deal of the cards with such single cycle resulting in a player winning a pot of $10 or less. Respondent's rule definition in proposed rule 61D-11.001(14) limits statutorily authorized activity, exceeds the Respondent's statutory authority and is arbitrary and capricious. The Term "Jackpot" Proposed rule 61D-11.001(10)(b) defines the term "jackpot" to mean: Any amount wagered in a round, hand, or game in excess of $10 in value paid out to a player or players once a desired result is achieved; Any amount wagered in a round, hand, or game in excess of $10 in value which is accumulated and paid out to a player or players once a desired result is achieved; or Any prize or cash award in excess of $10 in value paid out to a player or players once a desired result is achieved. A "jackpot" in the context of cardrooms occurs when the house deducts from each hand played a certain amount which is accumulated over many hands and is placed in a separate jackpot fund and paid out when there is a defined occurrence such as a player achieving a royal flush. The definition of jackpot in 61D-11.001(10)(a) is in substance and effect the same definition as the term "pot" found in proposed rule 61D- 11.001(12). This definition would preclude the playing of the authorized game Hi-Lo Seven Card Stud in which the winnings of two separate and distinct players are $10 but in excess of $10 in the aggregate. Proposed rule 61D-11.001(10)(a) is found, on the basis of the same findings set forth relative to Respondent's definition of "pot" in proposed rule 61D-11.001(12), to exceed Respondent's statutory authority and to be arbitrary and capricious. The definition of jackpot set forth in proposed rule 61D-11.001(10)(b) would preclude the playing of the authorized game of Hi-Lo Seven Card Stud where the amount wagered is accumulated over several betting cycles prior to the winners being declared with the amount awarded to each winning player being $10 or less but with the aggregate amount awarded to all players exceeding $10 in value. Upon the same findings set forth relative to the Division's definition of the term "pot", proposed rule 61D-11.001(10)(b) is found to exceed Respondent's statutory authority and is arbitrary and capricious. Likewise, the definition of jackpot set forth in proposed rule 61D- 11.001(10)(c) is reasonably susceptible to an interpretation that would preclude the playing of the authorized game of Hi-Lo Seven Card Stud in which there are two separate and distinct winners of $10 or less but with winnings of more than $10 in the aggregate. Again, upon the same findings set forth relative to Respondent's definition of the term "pot", proposed rule 61D-11.001(10)(c) is in excess of statutory authority and is arbitrary and capricious. The Term "Tournament" Proposed rule 61D-11.001(l7) provides: 'Tournament' means any competition involving more than one round, hand, or game where the winner of the competition or the runners-up receive any prize or cash award in excess of $10 in value. The cardroom statute, Section 849.086(2)(a), Florida Statutes, defines "authorized games" as those games authorized by Section 849.085(2)(a), Florida Statutes. In turn, Section 849.085(2)(a), Florida Statutes, provides: 'Penny-ante game' means a game or series of games of poker in which the winnings of any player in a single round, hand or game do not exceed $10 in value. Section 849.085(2)(a), Florida Statutes, does not require that the winnings of the player be paid at the conclusion of each single round, hand, or game nor does it require that the player have "won" such single round, hand or game. Further, Section 849.085(2)(a), Florida Statutes, imposes no limit on pot size. The statute does, however, only authorize those winnings which do not exceed $10 in value. Petitioners' expert testified at final hearing to the circumstance of a group of players that pay an entry fee, receive tournament chips, play a specific number of hands of cards and at the end of the designated number of hands the winner or winners who hold the most chips will receive funds which total an amount in excess of $10 but do not exceed $10 per hand played throughout the tournament. The proposed rule and Section 849.085(2)(a), Florida Statutes, clearly permit only $10 payments to game winners. Under the scenario to which Petitioner's expert testified, payments are made at the conclusion of the tournament, in amounts which exceed that authorized by the cardroom statute. Consequently, it is found that such results provide no basis to determine that Respondent's proposed rule 61D-11.001(17), defining the term tournament, is invalid. Prohibitions Proposed rule 61D-11.005(9) provides: Tournaments and jackpots are prohibited. Proposed rule 61D-11.005(9) is found to be in excess of Respondent's statutory authority and arbitrary and capricious only in regard to the prohibition of jackpots. This finding is made on the basis of those findings noted above relating to invalidity of the definition of "Jackpot" in proposed rule 61D-11.001(10). Proposed rule 61D-11.005(10) provides: An accumulation of $10 values based upon the actual number or an average number of rounds, hands, or games played during a competition where the winner of the competition and the runners up receive the accumulated amount, a portion thereof, or the prize representing the accumulated amount or a portion thereof is prohibited. On the basis of findings noted above relative to proposed rule 61D- 11.001(17), which defines the term "tournament", proposed rule 61D-11.005(10), is not in excess of Respondent's statutory authority and is not arbitrary and capricious. Proposed rule 61D-11.005(11) provides: No amount wagered by a player, ante, or participation fee collected by the house shall be accumulated into a pool for purposes of paying out the accumulated amount once a desired result is achieved by a patron or patrons. On the basis of findings previously set forth relating to proposed rule 61D-11.001(10), the definition of "jackpot" and in particular subsection (10)(b), the prohibition of proposed rule 61D-11.005(11) that no amount wagered may be accumulated even within a single hand or game, is in excess of Respondent's statutory authority and is arbitrary and capricious. Ordinance Requirement Proposed rule 61D-11.007 provides in pertinent part: A licensed pari-mutuel permitholder desiring to operate a cardroom must submit to the Division proof that the county commission of the county which the permit- holder intends to operate the cardroom has passed an ordinance approving cardroom operations. The proof of the passage of a county ordinance shall consist of a copy of the certified ordinance as filed with the Secretary of State. The effective date of the ordinance shall be upon filing with the Secretary of State or later if so prescribed. If a cardroom ordinance is repealed or amended, the effective date of the repeal or amendment shall be upon filing with the Secretary of State or later if so prescribed. If the cardroom ordinance is repealed, cardroom operation shall be ceased upon the effective date of repeal. * * * (8) An applicant for an annual cardroom license shall complete a cardroom license application, BPR Form 16-002 . . . BPR Form 16-002 is entitled Permitholder Application for Annual License to Operate a Cardroom. Question 10 of this form provides, "If this is your initial cardroom operator license application, enclose a copy of the certified ordinance as filed with the Secretary of State." Respondent contends that its authority to promulgate this rule is derived from the provisions of Section 849.086(16), Florida Statutes, which provides: County Commission Approval -- The Division of Pari-Mutuel Wagering shall not issue any license under this section except upon proof in such form as the Division may prescribe that a majority of the county commissioners in the county where the applicant for such license desires to conduct cardroom gaming has voted to approve such activity within the county. Respondent acknowledges that Section 849.086(16), Florida Statutes, does not expressly require the adoption of an ordinance by a county commission. Respondent's position is that the phrase "except upon proof in such form as the Division may prescribe" provides the unlimited power or authority to require the local government approval to be in a form Respondent may desire, here the adoption of an ordinance. This is as opposed to the statutory language which requires the applicant to report the means of local approval in a manner (form) acceptable to Respondent. In the analogous statutes governing municipalities, the factual distinction between a resolution and an ordinance is set forth in Section 166.041(1)(a) and (b), Florida Statutes: 'Ordinance' means an official legislative action of a governing body, which action is a regulation of a general and permanent nature and enforceable as a local law. * * * 'Resolution' means an expression of a governing body concerning matters of administration, an expression of a temporary character, or a provision for the disposition of a particular item of the administrative business of the governing body. Section 849.086(16), Florida Statutes, requires only that a majority of the county commissioners in the county where the applicant proposes to conduct cardroom activity vote to approve that activity within the county. Neither Section 849.086(16), Florida Statutes, nor any other provision of the cardroom act authorize a county commission to exercise any regulatory jurisdiction or control enforceable as a local law over the operation of cardrooms. This authority instead is vested in Respondent. Consequently, as a matter of law, Respondent's authority to designate the form which approval may take is not a grant of authority to dictate the means of passage of substantive legislation by a county commission and the proposed rule's attempt to do so through the requirement of ordinance passage exceeds Respondent's authority. Section 125.01(1)(t), Florida Statutes, provides: The legislative and governing body of a county shall have the power to carry on county government. To the extent not inconsistent with general or special law, this power includes, but is not restricted to, the power to: * * * (t) Adopt ordinances and resolutions necessary for the exercise of its powers and prescribe fines and penalties for the violation of ordinances in accordance with law. The adoption of a resolution approving cardrooms by a county commission is not, as a matter of law, inconsistent with the provisions of Section 849.086(16), Florida Statutes. Dade County adopted a resolution, by unanimous vote of all the county commissioners, approving the conduct of cardrooms and all activities authorized by Section 849.086, Florida Statutes, within the County. A certified copy of this resolution was received in evidence at the final hearing. Respondent's representative acknowledged that there is no better proof of the adoption of such a resolution then a certified copy of the resolution. There is, as a matter of law, no element of proof of the approval required by Section 849.086(16), Florida Statutes, that is not reflected in the Dade County resolution approving cardrooms. Proposed rule 61D-11.007(1), (2) and that portion of (8) and of BPR Form 16-002 which seek to impose the ordinance requirement are in excess of Respondent's statutory authority and are arbitrary and capricious. Cardroom Business Occupational License Proposed rule 61D-11.008(2) provides: A corporation, general or limited partnership, sole proprietorship, business trust, joint venture, or unincorporated association, or other business entity may not be issued or hold a cardroom business occupational license in this state if any one of the persons or entities specified in paragraph (a) has been determined by the Division not to be of good moral character, to have filed a false report to any govern- ment agency, pari-mutuel wagering or gaming commission or authority, or has been convicted of any offense specified in paragraph (b). 1. The cardroom business occupational license; An employee of the licensee; The sole proprietor operating under the license; A corporate officer or director of the licensee; A general partner of the licensee; A trustee of the licensee; A member of an unincorporated association of the licensee; A joint venturer of the licensee; The owner of more than 5 percent of any equity interest in the licensee, whether as a common shareholder, general or limited partner, voting trustee, or trust beneficiary; or An owner of any interest in the licensee, including any immediate family member of the owner, or holder of any debt, mortgage, contract, or concession from the licensee, who by virtue thereof is able to control the business of the licensee. 1. A felony or misdemeanor involving forgery, larceny, extortion, or conspiracy to defraud, in this state or any other state or under the laws of the United States. 2. A felony or misdemeanor set forth in s. 550.105, Florida Statutes. Proposed rule 61D-11.008(2) is, as Respondent's Director has acknowledged, an almost verbatim copy of Section 550.1815(1), Florida Statutes, which authorizes Respondent to determine whether applicants for a pari-mutuel wagering permit are of good moral character. Pursuant to Section 849.0866(5), Florida Statutes, only the holder of such a pari-mutuel wagering permit may be licensed to operate a cardroom. It is found, as a mixed question of law and fact, that Respondent is authorized to seek good moral character information as part of the application process. Specifically, Section 849.086(6)(f), Florida Statutes, incorporates the provisions of Section 550.105(9), Florida Statutes, as follows: (f) The division shall promulgate rules regarding cardroom occupational licenses. The provisions specified in s. 550.105(3),(4),(5),(6),(7) and (9) relating to licensure shall beapplicable to cardroom occupational licenses. Section 550.105(9), Florida Statutes, provides that Respondent may seek ". . . any information [Respondent] determines is necessary to establish the identity of the applicant or to establish that the applicant is of good moral character." Proposed rule 61D-11.008(2) is not in excess of Respondent's statutory authority, does not vest unbridled discretion in Respondent and is not arbitrary and capricious. Similarly, it is found as a matter of law and fact that proposed rule 61D-11.008(5) which requires an FDLE fingerprint processing and criminal records check fee "for each person or entity as specified in paragraph (2)(a)" of the rule is supported by Section 849.086(6)(f), Florida Statutes, which incorporates the provisions of Section 550.105(9), Florida Statutes, and is not in excess of the Division's statutory authority, does not vest unbridled discretion in Respondent and is not arbitrary and capricious. Proposed rule 61D-11.008(7) requires that: An applicant for an annual cardroom business occupational license shall complete a card- room business occupational license application, BPR Form 16-004, and submit the $250.00 fee for an annual cardroom business occupational license. Proposed rule 61D-11.008(7) is supported by provisions of Section 849.086(4), and (6), Florida Statutes, which incorporates the provisions of Section 550.105(9), Florida Statutes, and is not in excess of the Division's statutory authority, does not vest unbridled discretion in Respondent and is not arbitrary and capricious. Cardroom Employee Occupational License Proposed rule 61D-11.009(2) provides: All applicants for a . . . cardroom employee occupational license, shall complete a card- room employee occupational application BPR Form 16-005. . . BPR Form 16-005 consists of two forms, the Cardroom Employee Occupational License Application and the Request for Release of Information and Authorization to Release information forms. BPR Form 16-005, the Cardroom Employee Occupational License Application in question 14 requires that the applicant provide a complete listing of all addresses where the applicant has resided during the last five years under penalty that the application may be denied or the license revoked based upon any misstatements or omissions in the application. As previously noted, Section 550.105(9), Florida Statutes, adopted by Section 849.086(6)(f), Florida Statutes, authorizes Respondent to require an applicant to provide Respondent with any information deemed necessary by Respondent "to establish the identity of the applicant or to establish that the applicant is of good moral character." Despite Petitioners' concerns that cardroom employee occupational license applicants are expected to be highly transient and that such individuals should not be required to execute the proposed rule's release of information form, proposed rule 61D-11.009(2) and the subject BPR Form 16-005 is supported by Respondent's authority in Section 550.105(9), Florida Statutes, as adopted by Section 849.086(6)(f), Florida Statutes, and is not in excess of statutory authority or arbitrary and capricious. Electronic Surveillance Proposed rule 61D-11.012(5) provides: Cardroom operators shall install electronic surveillance equipment to record all gaming activity. The surveillance equipment must provide a cover ratio of one camera per four tables and to record all activity in the cardroom bank and cage and count area. Surveillance cameras and monitors shall be able to record and observe in color or black and white. Cameras must have the capability to zoom in on specific card table(s) and record card table activity. Tapes shall be labeled in chrono- logical order by date and time. Tapes of surveillance records shall be maintained for a period of no less than 14 days. Tapes shall be kept for a longer period of time if requested by the Division or any law enforcement agency. As established by testimony of Terry Fortino, Petitioners' expert in poker cardroom management and operations, many cardrooms, similar to the low stakes games operations contemplated by the cardroom act, do not have cameras on the tables for the reasons that the poker players, dealers and floor managers police the game and the house's money is not at risk. Respondent has made no cost benefit analysis regarding electronic surveillance requirements of the proposed rule. Respondent's representative at the final hearing has never viewed or had demonstrated a surveillance tape that complies with the one camera per four table ratio. Under such an arrangement, people's backs will always be to the camera and at best there will only be limited coverage lacking in detail. While the cameras must have the capabilities to zoom in on a specific card table, the proposed rule is silent as to how such zoom capability would be activated. The pan and tilt feature that enables the camera to zoom in on a table is manually operated. Unless somebody is physically present to monitor a video screen and to operate the pan and tilt controls, the zoom feature is effectively meaningless. The proposed rule's requirement of surveillance by one camera for every four tables is stated to be for the the purpose of obtaining evidence should Respondent desire to take licensing action against a dealer or cardroom operator. Notably, no electronic surveillance has ever been required in the pari-mutuel industry yet Respondent has routinely taken licensing action absent video tapes. Pursuant to Section 849.086(4)(e), Florida Statutes, Respondent is empowered to take testimony, issue subpoenas and subpoenas duces tecum in connection with any matter within its jurisdiction. Section 849.086(4)(f), Florida Statutes, specifically authorizes Respondent to: Monitor and ensure the proper collection of taxes and fees imposed by this section. Permitholder internal controls are mandated to ensure no compromise of state funds. To that end, a roaming division auditor will monitor and verify the cash flow and accounting of cardroom revenue for any given operating day. Section 849.086, Florida Statutes, contains no requirement that electronic surveillance, or any other form of ongoing monitoring of the activities of cardroom players, be provided by a cardroom operator. Daniel Riley, Petitioners' expert in electronic surveillance equipment in the gaming industry, while noting that less expensive fixed camera electronic surveillance of the bank, count area and cages in cardrooms could prove beneficial, projected the cost of providing only the electronic surveillance equipment required by Respondent's proposed rule at $15,320 for four tables and $27,820 for 20 tables. Steven Hlas, Petitioner's expert in pari-mutuel facility management and operation, testified that the cost of providing the proposed rule's required surveillance equipment together with the necessary construction costs, electrical and cable installations and personnel approximated $3,200 per cardroom table seating eight players and that Petitioner Derby Lane's expected cost with 25 cardroom tables was approximately $80,000. The provisions of proposed rule 61D-11.012(5) exceed Respondent's statutory authority, are arbitrary and capricious and impose regulatory costs on the regulated entities which can be reduced or eliminated by the adoption of less costly alternatives that substantially accomplish the statutory objectives, i.e. Respondent's implementation of its statutorily prescribed auditing function by "a roaming division auditor" to "monitor and verify the cash flow" of cardroom revenue. Admissions and Player Count Proposed rule 61D-11.017(4) reads as follows: Each cardroom operator shall file with the Division admission information on BPR form 16-007. Any cardroom operator that wishes to charge admission fees shall notify the Division in writing at least 2 working days prior to the effective date of such change via facsimile. Proposed rule 61D-11.018(2) reads as follows: Every licensed cardroom operator shall file BPR Forms . . . 16-009. . . with the Division by the fifth day of each calendar month for the preceding calendar month's cardroom activity. Taxes are collected with regard to cardroom wagering in two ways. Ten percent of the cardroom operation's monthly gross income, and fifteen percent (or 10 cents, whichever is greater) of the admission charge for entrance to the cardroom, if any. Section 849.086(13)(a) and (b), Florida Statutes. Respondent is required to monitor and ensure the proper collection of taxes and fees. Section 849.086(4)(f), Florida Statutes. Respondent is also called upon by the legislature to generate tax revenue projections for the Revenue Estimating Conference and to supply information to public officials, the industry and the general public regarding the pari-mutuel industry. Further, Respondent will be developing a statistical model to permit it to determine if the correct amount of taxes are being paid to the State, as well as developing essential tax revenue projections. Under the proposed rules, Respondent requires cardroom operators to report statistics regarding the number of persons admitted to the cardroom at each facility, and the number of persons participating in the cardroom games at each facility. Reporting of the number of persons admitted to the cardroom facility is required, regardless of whether a cardroom operator is charging separate admissions fees for the cardroom portion of the pari-mutuel facility, in order to verify and corroborate the cardroom operator's figures regarding the number of people actually gambling. Unlike pari-mutuel racing wagering which operates with a "Totalizator" tracking every individual wager, there is no method of recording individual wagers in the cardroom. Proposed rule 61D-11.017(4) and its requirement of a filing of BPR Form 16-007 is not in excess of Respondent's statutory authority, is not arbitrary and capricious and does not appear to impose excessive regulatory costs on the regulated entity. Proposed rule 61D-11.018(2) requires a cardroom operator to file BPR Form 16-009. This form in turn requires the cardroom operator to report not just the collection of fees or rakes but also the actual number of players to have played at each table during the period of time in which the fees or rakes were collected. Requirements of proposed rule 61D-11.018(2) and BPR Form 16-009 are not in excess of Respondent's statutory authority, are not arbitrary and capricious and do not appear to impose regulatory costs on the regulated entity which could be eliminated by less costly alternatives that substantially accomplish the statutory objective. Stipulated Facts Petitioners have standing to challenge the proposed rules at issue in this proceeding.
