NEW MEXICO GAMING CONTROL BOARD One-Day Regular Board Meeting September 22, 2010 MINUTES

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1 NEW MEXICO GAMING CONTROL BOARD One-Day Regular Board Meeting September 22, 2010 MINUTES The Board of Directors of the New Mexico Gaming Control Board (Board) conducted a one-day Regular Board meeting at Gaming Control Board Headquarters, 4900 Alameda Blvd. NE. Chairman David Norvell called the meeting to order at approximately 9:00 a.m., Wednesday, September 22, Due notice was published in accordance with the Gaming Control Act and the New Mexico Gaming Control Board Open Meetings Resolution and Chairman David Norvell declared a quorum. Present were: Commissioner Marc Prelo, Commissioner Marty Cope, Chairman David Norvell, Commissioner Demesia Padilla and Commissioner James Peterson. Executive Director John Monforte and General Counsel Frank Baca were also in attendance. Approval of Agenda Chairman Norvell asked Mr. Monforte if there were any changes to the agenda. Mr. Monforte noted that there no changes to the agenda. Chairman Norvell entertained a motion to approve the agenda as presented. M. Cope. Second: D. Padilla. Vote: 5-0. All voted to approve the agenda as presented: M. Prelo, M. Cope, D. Norvell, D. Padilla and J. Peterson. Chairman Norvell: The agenda is approved.

2 2 1 Closed Executive Session. Chairman Norvell entertained a motion to go into closed executive session until 1:30 p.m., for the purpose of discussing tribal matters, licensing matters, issuance of finding of suitability on key and affiliated persons, pending administrative and enforcement matters, pending and threatened litigation and limited personnel matters as enumerated in detail on the agenda. (Closed pursuant to section (H), NMSA 1978): M. Prelo. Second: D. Padilla. Vote: 5-0. A roll call vote was taken and all voted to go into closed executive session: M. Prelo, M. Cope, D. Norvell, D. Padilla and J. Peterson. 2 On Wednesday, September 22, 2010 at approximately 1:30 p.m., Chairman Norvell entertained a motion to go back into open session. D. Padilla. Second: M. Prelo. Vote: 5-0. A roll call vote was taken and all voted to go into open session: M. Prelo, M. Cope, D. Norvell, D. Padilla and J. Peterson. Chairman Norvell certified the only matters that were discussed in closed executive session were tribal matters, licensing matters, issuance of finding of suitability on key and affiliated persons, pending administrative and enforcement matters, pending and threatened litigation and limited personnel matters as enumerated in detail on the agenda. 3 Board Chairman Announcements a. October Board meeting is scheduled for Wednesday, October 27, 2010 in Albuquerque, NM b. November Board meeting is scheduled for Wednesday, November 17, 2010 in Albuquerque, NM c. December Board meeting is scheduled for Wednesday, December 15, 2010 in Albuquerque, NM

3 3 4 Licensing Renewals of Gaming Licenses for 2010 with no conditions a. American Legion Post #117 (Clovis, NM) b. B.P.O. Elks #1172 (Tucumcari, NM) c. Fraternal Order of Eagles #4017 (Socorro, NM) with one condition: d. Loyal Order of Moose #2050 (T or C., NM) Has one condition that was placed and this was a condition in previous license renewals as well. That condition reads: The Respondent shall permanently bar Ronald R. Alleman and Daryl L. Conley from any involvement in any gaming activity conducted by Respondent, specifically including but not limited to any involvement with or access to any proceeds from gaming of any kind of nature whatsoever. Commissioner Padilla moved to grant the renewal of the licenses for those stated by Director Monforte without conditions and renew the gaming license for Loyal Order of Moose #2050 with the one condition as described by Mr. Monforte. Second: M. Cope. There was no discussion and there was no one present in the audience to address the Board on these applications. Vote: 5-0. All voted in favor of the motion to approve the renewals: M. Prelo, M. Cope, D. Norvell, D. Padilla and J. Peterson. Chairman Norvell: The motion is agreed to and the applications are approved. Miscellaneous Matters: a. Request for Waiver of Findings of Suitability for Institutional Investor; Fidelity Investments for Shuffle Master, Inc.

4 4 Commissioner Padilla moved to grant the request for waiver for findings of suitability for institutional investor; Fidelity Investments for Shuffle Master, Inc. Second: M. Prelo. There was no discussion and there was no one present in the audience to address the Board on this issue. Vote: 5-0. All voted in favor to approve the motion: M. Prelo, M. Cope, D. Norvell, D. Padilla and J. Peterson. Chairman Norvell: The motion is agreed to and the request for waiver is approved. b. Request for consideration of 50% acquisition of Electroncek, d.d. from Aristocrat Leisure Cyprus, LTD by Electroncek B.V. Commissioner Cope moved to approve the 50% acquisition of Electroncek, d.d. from Aristocrat. Second: J. Peterson. There was no discussion and there was no one present in the audience to address the Board on this issue. Vote: 5-0. All voted to approve the motion: M. Prelo, M. Cope, D. Norvell, D. Padilla and J. Peterson. Chairman Norvell: The motion is agreed to and the acquisition is approved. 5 Issuance of Findings of Suitability on Key and Affiliated Persons New Applications with no conditions a. Patricia Spina Assistant Gaming Manager American Legion Post #118 (Rio Rancho, NM) b. Dr. Ian Blackburne Independent Director Aristocrat Technology (Las Vegas, NV) c. Stephen Morro Independent Director Aristocrat Technology (Las Vegas, NV) d. Gilbert Gallegos Assistant Gaming Manager B.P.O. Elks #408 (Las Vegas, NM) e. Stefano Bortoli Chief Financial Officer Lottomatica f. Marco Sala Chief Executive Officer Lottomatica g. Marissa Olney Controller SunRay Gaming of NM (Sunland Park, NM) h. Eusebio Esparza Assistant Gaming Manager Veterans of Foreign Wars #1793 (Raton, NM) i. David Boehm Director of Security and Surveillance Zia Park (Hobbs, NM)

5 5 Renewal Key Persons with no conditions a. Kathyrine Montoya Assistant Gaming Manager American Legion Post #13 (Albuquerque, NM) b. Barbara Digby Gaming Manager American Legion Post #90 (Los Alamos, NM) c. Leland Lehman Gaming Accountant American Legion Post #90 (Los Alamos, NM) d. Nora Curtiss Gaming Manager American Legion Post #118 (Rio Rancho, NM) e. Richard Curtiss Assistant Gaming Manager American Legion Post #118 (Rio Rancho, NM) f. Kenneth Bossingham Chief Operating Officer and Manager Atronic Americas, LLC (Las Vegas, NV) g. Arthur Gonzales Gaming Manager B.P.O. Elks #408 (Las Vegas, NM) h. Anna Mathews Assistant Gaming Manager B.P.O. Elks #1558 (Carlsbad, NM) i. Lisa Garthwaite Gaming Manager B.P.O. Elks #1717 (Artesia, NM) j. Robert Batley Assistant Gaming Manager B.P.O. Elks #1747 (Farmington, NM) k. Benjamin Woodruff Assistant Gaming Manager Loyal Order of Moose #2016 (Alamogordo, NM) l. Kathleen Miles-Stroud Assistant Gaming Manager Loyal Order of Moose #2050 (T or C., NM) m. Roy George Security Director Ruidoso Downs Racing (Ruidoso, NM) Title Changes a. Andrea Baca Gaming Accountant American Legion Post #100 (Albuquerque, NM) b. Robert Jaramillo Assistant Gaming Manager American Legion Post #100 (Albuquerque, NM) c. David Stevens Assistant Gaming Manager American Legion Post #100 (Albuquerque, NM) Commissioner Padilla moved to accept the findings of suitability for the new applicants, the renewal of the key persons and the title changes as stated by Mr. Monforte. Second: M. Cope. There was no discussion and there was no one present in the audience to address the Board on these applications. Vote: 5-0. All voted in favor of the motion to approve the findings of suitability: M. Prelo, M. Cope, D. Norvell, D. Padilla and J. Peterson.

6 6 Chairman Norvell: The motion is agreed to and all of the applications are approved. 6 Policy & Rulemaking a. Consideration of approval of Racetrack Minimum Internal Controls Tom Fair, Audit & Compliance Division Director: I distributed to all the Board Members this morning a memo dated September 21 to myself from Craig Telle in our organization. It outlines the sections that we discussed with the racetracks yesterday and made changes based on their feedback. For instance, as an example on the first page our original position was, I think, two occurrences of $50 or more in 60 days we ve changed that to 3 occurrences of $100 or more. Chairman Norvell: Do the tracks have copies of that? Tom: I sent them out to everyone who was here yesterday by last night. Tom: I think that we are in general agreement on all of the things where we have written new language for the Board. I think the only issues at hand, remain the last three pages of the memo I handed out today, starting with items that were not changed. Chairman Norvell: Do the tracks agree that those items which provide new language in the handout are acceptable to the tracks or does anyone have any objection to it? Tom: The remaining issues I think that the Board needs to rule on are these items that were not changed: The first one being the Requirement of Locking Cabinets or Safes inside Vault: Our current MIC the ones that have been approved by the Board, previously, and are in effect basically require that these safes or cabinets located in the vault be lockable and that the currency be locked in there when the room is unattended. Our proposed MIC basically requires the same thing we have not made a significant

7 7 change, in my opinion, of what the requirements are. Our position on this particular item is that the racetracks, a number of the racetracks, don t actually have a metal vault, like you see in a bank, there are some of them secured with wooden doors, so we feel given the relative security of the different locations, having these locked cabinets inside the vault makes a lot of sense to us. Commissioner Cope: Tom, how many don t have a certified vault with a vault door? Tom: Craig, can you answer that one? Craig Telle: I think there is only one. Tom: My view of this is we have different organizations that have different configurations, different types of locks or doors on their main bank or their vault and my view would be that those who object to this particular requirement come with a variance request and demonstrate to the Board that they do have the security they need to be able to waive the requirement of the locked cabinets inside the safe. Chairman Norvell: Would anyone from the tracks like to speak of this issue? Rick Baugh Zia Park: We ll agree with Mr. Fair s statement, we at Zia Park don t have a vault, however we have man traps with maglocks under surveillance, you can t enter them and also they re within concrete walls. Chairman Norvell: Any other comments? OK. Tom: The next one has to do with the requirement of having a security guard present during Kiosk access. This is a situation where I think some of the licensees felt they wanted to have more flexibility in terms of having someone who isn t a security officer maybe someone else in the casino be kind of the second person when they open the machines. We considered this yesterday, the staff met yesterday afternoon with Mr. Monforte and some of these cassettes can hold over $100,000, $120,000 and we feel having a security office accompany that money through the casino and stand while that is being done is the appropriate person to be carrying out that function. Chairman Norvell: Does anyone have anything to add to this? Byron Campbell: Just wanted to add one thing that security officers in our facility are unarmed officers, they don t have anymore value than anybody else in protecting $100,000, they re under surveillance anyway. We are insured.

8 8 Chairman Norvell: Anyone else? Tom: #3 is Section 6.1 F Prohibition of Accounting personnel entering the Vault or Cage. The current MICS are not quite as clear as we would like them to be this is one of the reasons we made the changes that we made. When we first brought this to the racetracks at the first public meeting our position was no accounting people in the cage. After having some discussions with them we did move on that position and what we said is accounting people can be in the cage provided they are accompanied by a security guard and that we the Board are notified in advance of them going into the cage and this is to insure the kind of segregation of duties that we need between people who make accounting entries and people who have access to cash. Chairman Norvell: Any response from the tracks? Tom: #4 Staffing of the Surveillance Room, once again our original position on this was that you had to have two operators in the room at all times observing the floor. After meeting with the licensees we felt they made a good case that that was a little bit too much to ask, so what we did is we said, one in the room but you have to have a qualified person to relieve that individual. In working on the MIC and doing research in other jurisdictions also every jurisdiction I looked at has a prohibition on surveillance people working anywhere else on the property or anywhere else in the casino and the issue we have here is the licensee feel that this would require them to have an extra person per shift to cover those breaks and so on and they would like to substitute someone else for that position. We just are hard pressed to figure out who else could do that and still work at the casino. Our position on this one has not changed. Commissioner Cope: So you re saying they re going to have to hire someone extra? Director Monforte: I think in part, generally the majority of the tracks already have the two individuals in there at all times. We would be willing as we stated with Ruidoso and other individuals, that a security officer in certain instances could be able to meet that. There would not be a proposed change to the language per say but an understanding that a security officer that does not, for example, is not involved in drop and count, that there are certain security officers and duties that they would be allowed to go in there. Also understand that in those instances the time that they would be in that is very short, it s basically a bathroom break here, maybe a time when the individual in the surveillance room goes down gets their lunch brings it back, those type of things so there are limited times and I hope and thought we had reached basically a consensus that the current language would be allowable but obviously that may be open to discussion from the racetracks.

9 9 Chairman Norvell: Tracks have any comments on this issue? Byron Campbell: You re talking about racetrack casinos, 600 slot machines limited hours, no table games, no anything. We don t have mega bucks, no big jackpots we don t even have ATM s in our casinos. My point is the risk at a racetrack casino is very very minimal. So if you re comparing us against any other entity it really should be compared to somebody similar. Tom: For instance, Delaware slots only at racetracks are very similar to us. They require one surveillance operator for every 500 machines on the floor, so 600 machines would require 2. Byron Campbell: I m just saying what else do they have? Tom: They don t have table games. Byron Campbell: I m saying two entities in the whole United States compared to thousands or hundreds at least of major operations throughout the country and even in this State, if you try to compare what Sandia offers or Isleta can offer in gaming to what racetracks, we don t have much to offer, its low limit, no high jackpots, no table games nothing, its just slot machines and not very many of them have minimum hours of operation, 116 hours. I guess my concern is what is the over regulation concern here. We re concerned because it just seems like its overkill. Director Monforte: If I could respond in general when we looked at other industries we compared apples to apples and we also compared apples to oranges and whatever fruits are available in the gaming industry out there. What we found or what we could not find were industries that would allow less than what we ve proposed. We understand that New Mexico is different than other jurisdictions but it is not uncommon that you have casinos out there have 500, 200, 250 gaming machines, that s not uncommon in today s gaming environment. I think that the standard that was proposed, one it s not really fundamentally different then what we had previously in language. Second, it is right there in industry standards when we looked at other jurisdictions and even other jurisdictions with similar type of gaming machines, etc. The third that I would indicate there are a lot of other examples in these MICS, one thing that in our approach to the Board is this, we discussed the ones that we were in dispute with the racetracks not the great majority that we basically either made a change to meet their standards, there are several examples from when we started this process to where we are now. We were at 98 points of contention to where now we may get like two or three items of contention but there are several other examples that we did reduce staff participation. We were very cognizant throughout this process of the balance between regulatory need and

10 10 business desire. We looked through that filter when we looked at these minimum internal control standards. In this specific instance this is one of the ones that there was much more dispute about. The standard that we have is not comparatively different than what we had previously, its right in there in the center with industry standards and to be honest when we had seen some of the options that people did stick into surveillance that if we had found that out in any other form other than the minimum internal control standards we probably would have cited and put a huge fine on that. Having a cage manager in surveillance is just not acceptable in any standard, or in any industry no matter of gaming machines or types of games that are available. I think with added or just taking a security officer is a reasonable control and it doesn t put an undue burden on any of the racetracks. Byron Campbell: Can I counter that a little bit, having a security officer is a greater risk, a much greater risk to the security of the company. You re not talking about key licensed employee s cage manager and slot manager you are, there s a big big difference, unless you re going to say we have to key license those people. Byron Campbell: I worked in Nevada for many years and I ll just tell you I worked in surveillance many many times. I was the one that was called to make a determination whether something was going wrong and I think that s critical. If there s anybody that can tell somebody what s going on in a slot operation it is the slot man or the cages, the cage manager. If you just take anybody else you don t have the knowledge the experience you don t have the understanding what all the issues are that are involved. When I was in Nevada management was always in surveillance, we were always out there, it was just part of the business because we were the most qualified people to do it. Commissioner Peterson: Weren t you using an example that s a little inconsistent with your description of the casinos around here earlier. You made a point of maybe 200 machines or something, there s no big deal in how you re using Nevada as an example of the importance of the surveillance. Byron Campbell: I worked at the Sands, we had a thousand hotel rooms and 4 or 5 restaurants and that s the way it was there. Commissioner Peterson: But you need the same qualifications that you re citing for Nevada for the type of thing we re talking about. Byron Campbell: No I m just saying if you ve got an issue with slots there are slot directors, the most qualified person in the world to be in surveillance observing what s going on or in cage, could be the cage manager their the closest people to the issue, they re the ones who understand what s going on better than anybody else including surveillance.

11 11 Tom: With respect to the cage manager this is an individual who handles cash, whose job is under surveillance. I think putting an individual like that in the surveillance room where they can identify the location of every camera in the place, understand what gets recorded and what doesn t and when I think to have cash handling people in that position is a very very dangerous thing. Byron Campbell: There is one more item that we re leaving out of this discussion we have a State central system. When we sold this to the legislature and the governor one of those conditions said this is going to help ensure that you have the integrity compliance and honesty of the racetracks. All of these other properties we re talking about except for maybe Delaware they don t have a central system, we have that if I look at just the places I have them from all over the country, if I just go to Sandia 2009 slot machines, 37 nonpoker table games, 15 poker, 220 hotel rooms, with no central system. You can do that with Isleta, Rt. 66 they re all comparable, if you go outside the tribes Atlantic City 5,200 slot machines there is no central system, on and on, no state central system. My point is if these rules are so necessary for racetracks, limited gaming why do we have the central system? Comparing us with the tribes why do we have to be on the central system and they don t. Tom: With respect to your comment on the central system, I don t think the central monitoring system is going to identify if someone is stealing cash from the cage which is something that surveillance is going to be watching so to say that the central monitoring system is something that s going to preclude all that. Byron Campbell: I m just saying the whole idea of this continuous over regulating of the racetracks is really is not apples to apples its apples to elephants is what you re pushing on us a regulatory burden and we don t deserve and we can t afford anymore. We ve got statutes that make us do things, we ve got rules that make us do things, minimum internal controls, we have all kinds of checks and balances, I ve got 250 cameras in my casino recording 24 hours a day and keeping it for 30 days, we have all kinds of ways to go back and find and chase down crooks and bad guys and shortages and variances that s what all that stuff does. I m just saying we re fully insured for everything. I m just trying to ask you what is the major concern, the risk that makes this pressing need to over-regulate 600 slot machine casinos that are limited every other form there is in gaming and not bother with all the rest. Bruce Rimbo, Ruidoso Downs: I noticed Mr. Monforte said earlier our casino manger was up and met with you guys, I think yesterday and said all these were fine but you did mention that Ruidoso would be able to use a security guard or whatever and we would do that in a form of a variance. I m just getting clarification.

12 12 Tom: That s what I would suggest. Chairman Norvell: Anyone else? Byron Campbell: I m not in any way implying that we will not cooperate; you know we will, we re just stating our frustration. I think it s important for the Board and the public to understand the monstrous differences we re talking about and so we will fully comply with whatever you guys decide and we will do it without screaming and yelling, we ll do that now. Commissioner Padilla: Even though these MICS are in place anyplace that you see that it is too cumbersome and you have a different way of doing it and it still comes out with the same end results, you always have the option to request a variance. I think that in the past we have been very open to variances and willing to work with the different racinos. Tom: I would just like to note a few of things that we have done to try to reduce staffing and reduce the cost at the racetracks that are experiencing this part of this exercise. Jackpot payout procedures we reduced the number of staff that need to sign off on jackpot payouts of certain values and that will eliminate the need for extra people to do that. We have reduced the drop team size requirements, We have reduced the count team size requirement, And those are both reductions from our previous MICS that we produced. We have taken out the requirement that meters be read because that is a very labored intensive thing and we understood that there were conditional controls in place. In terms of waivers that we ve granted we most recently granted waivers to a couple of racetracks to scan tito tickets so that they don t have to incur all the cost associated with storing those tickets for five years as paper documents. I say this just to make a point to the Board that we are not insensitive to these issues, we are not insensitive to the cost issues and we have in fact listened and made changes where we thought that was reasonable and could save the tracks some money. Director Monforte: I just wanted to do a thank you, there were several individuals in our staff that were involved in the racetrack minimum internal controls committee: Vicki Duran, Donovan Lieurance, Clyde Romero, Craig Telle and a special thanks to Craig cause he did a lot of the detail work and the drafting of

13 13 memos, etc. Demesia Padilla sat on many of those meetings, Greg Saunders, Nadine Quintana and Frank Baca and a special thanks to Tom Fair for taking ownership of this project. It has truly been an odyssey of teamwork intention between the racetracks and us and that s the way it worked. I also wanted to thank the employees from the racetracks that attended a lot of these meetings, Linda Robb, M. J. Wheeler, Brad Boehm, Chris Balaban, Terry Maines, those front line individuals that utilize this stuff on a day to day basis. We recognize that as regulators we re not necessarily the experts that we get a time pictured view of it and that there are individuals that work in those environments everyday, I wanted to definitely thank those individual as well as everybody else here that participated. It is going to take us about 60 days to change the rule A that will have to get in place before this is enforced. We will be sending out a letter and hopefully that would then be of 60 days for the racetracks to draft their procedures and send it to our offices for approval. We will send out an electronic version because we understand that about 90% of this may just be is what we send you is what you send us. We will also identify those specific standards that read something along the lines of the gaming operator shall develop procedures that so that gives you some point of where you need to put in specific drafts. Once we get those back we will have to review them and approve them again that is on the assumption that something gets approved today. That will be the process that we will look at and if there s any details with that we can go over them in-between now and around the November timeframe. Tom: I appreciate the Board s time in giving two working sessions to this topic and hearing us this afternoon. Are there any questions? Chairman Norvell: Mr. Monforte, if there is no objection to what has been presented with the potential exception of the four items which appear on the last three pages of the handout, of those four it didn t seem that there was objection because of the potential variance option on the 1 st, 2 nd or the 3 rd and it seemed that the 4 th one was the only one that there was any significant objection to. If I am correct on that we could vote on the 4 th item individually and the other ones as a whole one. Does anyone oppose that? If that is acceptable the Chair will entertain a motion to approve the MICS as presented with the three additions that were discussed today and on a separate motion we ll consider the other function. Commissioner Cope moved to accept the MICS as presented with the exception of item #4. Second: D. Padilla. There was no discussion. Vote: 5-0. All voted in favor of the motion: M. Prelo, M. Cope, D. Norvell, D. Padilla and J. Peterson.

14 14 Chairman Norvell: The motion is agreed to and all of the potential changes to the racetrack MICS except item #4 are approved. Commissioner Cope: I have a question, if there is money missing, something happens there does the State lose money or does the track lose money or where does that come in then? Tom: Generally speaking I would say if the track loses money they ve lost the money. Commissioner Cope: In other words its on them to watch their money. Tom: It is their risk, yes. Commissioner Cope: So why wouldn t it be up them, its their money and they re not wanting anybody in there that s going to be able to so I think they would be the ones to appoint a key person in there to watch it. Tom: On a variance basis we could do that favorable if they came to us and said its not a security person. As long as it s a person that we believe is not going to be compromised with respect to their segregation of duties and I think that could be accomplished. Commissioner Cope: But why would they put anybody in there that s going to be compromising? Commissioner Padilla moved to leave the language on item #4 that staff recommended for the MICS and give the racetracks an opportunity to provide a request for a variance. Second: J. Peterson. There was no further discussion. Vote: 3 yes, 1 no, 1 abstain. A roll call vote was taken: M. Prelo, D. Norvell and D. Padilla voted yes. M. Cope voted no and J. Peterson abstained.

15 15 Chairman Norvell: 3 yes, 1 no, 1 abstain, motion is carried. 7 Public Comments. Bruce Rimbo Ruidoso Downs: Its nice to be back for this meeting and my purpose here is for one to tell you that election came out well for us on the local gross receipts tax election yesterday, 53% voted in favor so that is going to help our racetrack for the next 5 years and we re grateful to the legislature for giving us that opportunity and mostly to the citizens of Lincoln County for approving it. I also wanted to introduce Jean Stoddard who will be our acting general manager for a period of time, she is a key licensee and then also Shawn Hubbard is with me who is our assistant manager and Shawn has submitted his paperwork to you and so we re going to be moving forward and I will be assisting in the background, but you all know how to find me if you ever need me. They ll do a great job. 8 Adjournment. There being no other business to come before the Board, Chairman David Norvell entertained a motion to adjourn. M. Cope. Second: D. Padilla. Vote: 5-0. All voted in favor of the motion: M. Prelo, M. Cope, D. Norvell, D. Padilla and J. Peterson. /s/david L. Norvell, Esq Chairman Date Approved: