1 BEFORE THE MISSOURI GAMING COMMISSION

STATE OF MISSOURI

4 BE IT REMEMBERED, that the above-entitled

5 matter came on for meeting at the Maryland Heights

6 City Hall, 212 Millwell Drive, Maryland Heights,

7 Missouri, on the 27th day of February 2002, commencing

8 at the hour of 9:00 in the morning of that day, said

9 meeting having been called by members of the Missouri

10 Gaming Commission pursuant to the issuance of due

11 notice to all parties in interest, and the following

12 is a transcript of the records of proceedings had

13 during the course of said meeting.

15 A P P E A R A N C E S

16 Mr. Robert Smith -- Chairman

17 Ms. Lynne Nikolaisen -- Commissioner

18 Dr. Muriel Battle -- Commissioner

19 Mr. Kevin Mullally -- Executive Director

20 Ms. Angela Franks -- Administrative Assistant

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Concannon & Jaeger St. Louis, Missouri (314)421-1000

1 CHAIRMAN SMITH: I guess we'll call the

2 meeting to order. Would you please call the roll,

3 Angie?

4 MS. ANGIE FRANKS: Sure. Commissioner Smith?

5 CHAIRMAN SMITH: Present.

6 MS. FRANKS: Commissioner Nikolaisen?

7 COMMISSIONER NIKOLAISEN: Present.

8 MS. FRANKS: Commissioner Battle?

9 COMMISSIONER BATTLE: Present.

10 MS. FRANKS: Commissioner Adorjan?

11 CHAIRMAN SMITH: All right. We have a

12 quorum. The next order of business is the

13 consideration of the minutes of December 6, 2001.

14 Have we had a chance to review that? Does anybody

15 have any changes or suggestions?

16 COMMISSIONER NIKOLAISEN: I move for

17 approval.

18 COMMISSIONER BATTLE: I second.

19 CHAIRMAN SMITH: Moved and seconded for

20 the minutes of the December 6, 2001 meeting to be

21 approved. Call roll.

22 MS. FRANKS: Commissioner Smith?

23 CHAIRMAN SMITH: In favor.

24 MS. FRANKS: Commissioner Nikolaisen?

25 COMMISSIONER NIKOLAISEN: Favor.

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1 MS. FRANKS: Commissioner Battle?

2 COMMISSIONER BATTLE: In favor.

3 MS. FRANKS: By your vote you've adopted

4 the minutes of the December 6, 2001 meeting.

5 CHAIRMAN SMITH: Okay. The next order of

6 business is consideration of Hearing Officer

7 recommendation on Players, Resolution No. 02-011.

8 MR. KEVIN MULLALLY: Yes. Mr. Chairman,

9 Hearing Officer Thad McCanse will make the

10 presentation. The materials are under Tab B in your

11 books.

12 MR. THAD MCCANSE: Good morning, Mr. Chairman

13 and members of the Commission. I spent some time on

14 this case because of the rule of either collateral

15 damage or unintended consequences.

16 This case involved a question of whether

17 the Commission is authorized under its rules to assess

18 interest on the underpayment of taxes, that is, the

19 admission tax, the two-dollar per person fee.

20 The question is the power of the

21 Commission to adopt a rule that provided for the

22 assessment of interest on that particular tax.

23 There are two statutes involved. One of

24 them is 313.820 and the other is 313.822. 822

25 provides for the 20 percent gross receipts tax and

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1 it's clear in that statute that the Commission has

2 authority to assess interest, because they adopted

3 sections of the sales tax statutes to enable the

4 Commission to enforce the payment of this tax.

5 But there's no similar provision in

6 Section 820, and so I considered the briefs of the

7 parties and did a little additional research and

8 decided that, unless there was a specific statutory

9 authority or unless there was a clearly implied

10 statutory authority or contract, then the power to

11 assess interest is a matter for the legislature and

12 not for a state agency.

13 I do want to point out there are two

14 cases that the parties or Players relied on

15 specifically. One of them was Bridge Data and the

16 other one was Barber & Sons Tobacco.

17 Bridge Data was a decision by Judge

18 Blackmar whom, I believe, is known to at least some of

19 the members of the Commission.

20 Unfortunately, in the later decision the

21 Supreme Court -- that decision was overruled in part.

22 CHAIRMAN SMITH: Why is that unfortunate,

23 Mr. McCanse?

24 MR. MCCANSE: Well, it was unfortunate

25 for the position of Players in a sense. However, the

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1 general proposition stated by Judge Blackmar was left

2 intact. What was overruled was his attempt to rewrite

3 the sales tax statutes on the basis that they were

4 kind of antiquated.

5 And a later Supreme Court said that he

6 didn't really think -- they didn't think that he ought

7 to be able to do that.

8 But I think that the basic proposition

9 that taxing is a matter for the legislature and

10 not for a state agency and that the provision for

11 interest as a matter of taxing remained intact.

12 The main case, however, is Barber & Sons

13 Tobacco Company, which held flatly that the -- I think

14 in that case it was the city -- did not have authority

15 to assess interest without a clear legislative

16 provision to do so. That dealt with interest on a

17 tax.

18 And it so happened in that case that the

19 state legislature did amend the statute to allow the

20 payment of interest.

21 So I concluded that the position of

22 Players was accurate -- was correct and was in keeping

23 with both of the laws that I had researched and that

24 the parties had researched and that, therefore, the

25 Commission is not allowed to assess interest on an

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1 underpayment of admission fee taxes, not the gross

2 receipts, not the 20 percent, but just the admission

3 fee taxes.

4 I'd be glad to entertain any questions,

5 provided that they're entertaining.

6 CHAIRMAN SMITH: We can't promise that.

7 I have a couple of questions. One is I understand

8 that Players has abandoned the tax reassessment

9 question, and that's out of the picture, that they had

10 the right to have a reassessment hearing?

11 MR. MCCANSE: No. They abandoned the

12 penalty part of it.

13 CHAIRMAN SMITH: Yes.

14 MR. MCCANSE: So there was an assessment

15 of the penalty. And I think the Commission clearly,

16 under the statutes, has authority to levy an

17 appropriate penalty.

18 CHAIRMAN SMITH: So that's not the

19 forest?

20 MR. MCCANSE: That's not the forest. And

21 I think the amount involved is $2200 or so. But as I

22 say, it's what has happened in the past and what could

23 happen in the future that's before the Commission.

24 CHAIRMAN SMITH: And have they also

25 abandoned the issue as to whether it was or was not

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1 willful neglect? That's not in the picture?

2 MR. MCCANSE: No. That only applies, I

3 think, to the penalty.

4 CHAIRMAN SMITH: Okay. Anybody else have

5 any questions of Mr. McCanse? If not, I guess, is the

6 attorney for Players here? I want to give both

7 attorneys a chance to state their positions.

8 MR. TOM RYNARD: Well, I'm here. I wasn't

9 expecting to speak. I'm Tom Rynard, Mr. Chairman, and

10 I represented Players in this case. I will be happy

11 to answer any questions that you have.

12 I think I can explain a little bit about

13 the penalty again. Players, you know, abandoned, if

14 you want to use that term, the penalty that was to be

15 assessed really on the basis -- and I think we set it

16 out in our brief. It was because Harrah's had taken

17 over Players. All the employees were gone, and it was

18 just going to be too hard to come in and prove the

19 case.

20 I don't think there -- and we

21 specifically said there was no admission that the

22 conduct was willful or willful neglect in terms of --

23 CHAIRMAN SMITH: It comes down to one

24 issue --

25 MR. RYNARD: Right.

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1 CHAIRMAN SMITH: -- as to the interest?

2 MR. RYNARD: The interest issue was

3 solely a legal issue. Everyone agreed on the facts.

4 It was just a question as to whether the Commission

5 had the statutory authority to impose interest on the

6 admission fees.

7 CHAIRMAN SMITH: Just a couple of

8 questions. One is -- this isn't a question, but the

9 Commission Rule 11 CSR 45-11.120 does authorize the

10 assessment of interest and penalty for failure to pay

11 a timely tax or not to pay it correctly; isn't that

12 right?

13 MR. RYNARD: It does.

14 CHAIRMAN SMITH: And the issue is really

15 whether the Commission has the power to adopt a rule

16 and put out the statutory basis; is that correct?

17 MR. RYNARD: That's correct. And that

18 was the Barber Tobacco Company case.

19 CHAIRMAN SMITH: And I guess the argument

20 is that since -- I guess 313.822 does have language

21 that taxes shall be imposed by this section and shall

22 be returned in accordance with Commission rules and

23 regulations.

24 And then Section 313.820 does apply to

25 admission fees but doesn't contain the language that

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1 taxes shall be returned in accordance with Commission

2 rules and regulations. Isn't that --

3 MR. RYNARD: Well, no. Actually, the

4 argument as far as the statutory authority goes is

5 that -- although, that would support it as well -- is

6 that Section 320 includes a statement that it adopts

7 the provisions in the general revenue laws for

8 administering the taxes, which, if you go and look at

9 those sections -- one of those sections is the section

10 that imposes interest on taxes.

11 So by adopting that, as far as the gross

12 gaming tax is concerned, you can have interest on the

13 gross revenue tax -- I mean, the gross gaming tax, but

14 you need, again, authority in order to adopt a similar

15 type provision for the admissions fee.

16 CHAIRMAN SMITH: Well, what about -- I

17 noticed 313, which is our enabling statute. 313.805

18 basically says that the Commission shall have, quote,

19 jurisdiction over and supervise all gaming operations.

20 The Commission shall have the following power and

21 shall promulgate such rules and regulations to

22 implement the statutes.

23 And then one of the things in Section 19

24 says take any other action as deemed reasonable or

25 appropriate to enforce Sections 313.800 to 313.850 of

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1 the Commission's rules.

2 So those sections that we're talking

3 about -- the rules that we're talking about in the

4 quote, doesn't that really in effect say that the

5 Commission should have authority to take what steps

6 they deem necessary in order to enforce these statutes

7 and rules?

8 MR. RYNARD: Well, I think that statute

9 may give the Commission authority to impose a penalty

10 for underpayment, but I don't think it gives it the

11 authority to impose interest.

12 Again, going back to the Barber Tobacco

13 case -- the Barber & Sons Tobacco, I think what it

14 says very clearly is the decision whether interest

15 shall be imposed or not is a legislative decision, one

16 that only the legislature can make and that being a

17 legislative decision it would be, I guess, a violation

18 of the separation doctrine in order for the Commission

19 to impose interest.

20 CHAIRMAN SMITH: It looks to me like -- I

21 understand your position, but it looks to me like

22 there is another position, that we have the authority

23 to take what action is necessary to enforce our rules

24 and regulations. It has been given to us by statute

25 and maybe the argument could be well-made that because

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1 of that we have the authority to assess both the

2 penalties and interest.

3 MR. RYNARD: Well --

4 CHAIRMAN SMITH: I mean, that's a --

5 MR. RYNARD: I would --

6 CHAIRMAN SMITH: -- different viewpoint.

7 MR. RYNARD: -- respectfully disagree

8 with that. I mean, I think the cases are very clear,

9 both Barber & Sons Tobacco and Bridge Data, as far as

10 you're quoting they can do that.

11 I mean, the Bridge Data case, there it

12 said the administrative agency can't do it. And I

13 think in Bridge Data, if I remember correctly -- and,

14 again, I wasn't prepared to speak here. But as I

15 recall, in that case it was very similar where they

16 had a very broad-based grant of authority to do what

17 was ever necessary to administer those particular