The Senate Committee on Judiciary was called to order by Chairman Mark A. James, at 9:53 a.m., on Thursday, May 6, 1999, in Room 2149 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Mark A. James, Chairman

Senator Mike McGinness

Senator Maurice Washington

Senator Dina Titus

Senator Valerie Wiener

Senator Terry Care

COMMITTEE MEMBERS ABSENT:

Senator Jon C. Porter, Vice Chairman (Excused)

STAFF MEMBERS PRESENT:

Laura Adler, Committee Secretary

OTHERS PRESENT:

Jim J. Avance, Lobbyist, Cardivan Company, testified the bill addresses the fact that slot route operators and employees may enter up to five counties in one day when servicing slot machines. He said by law the operators are required to have a work permit in each county and some jurisdictions. He iterated he has two employees in Las Vegas that every other day make a loop as far north as Elko, which takes them into multiple counties. He said the employees’ travel schedules often take them into counties after hours, making it difficult to obtain work permits. He stated A.B. 593 would allow slot service people to have one permit issued in the primary county where the individual is housed, or the county in which the business office is located. Law enforcement in the various jurisdictions covering the service route would be kept informed of the scheduled route and who is working the service route. He said that with the prevalence of computers this method would eliminate duplication.

Senator Wiener wanted to know what impediments are presently encountered. Mr. Avance responded it is a time problem of compliance. He added that law enforcement in several jurisdictions stated they had no problem with the bill so long as they were kept informed.

Senator Care asked if the standard and application of those standards were uniform throughout the counties. Mr. Avance affirmed the standards are uniform, since the State Gaming Control Board (SGCB) sets them.

Senator McGinness asked for elaboration on the notification procedure. Mr. Avance clarified that each quarter the slot route businesses would send letters to law enforcement in each area indicating the names of employees who would be working in their area, including the approximate schedule, which would include the properties to be serviced.

Senator Wiener wanted to know what would happen to the work card permit when an individual ceases to be an employee. Mr. Avance opined it is the intent of the slot route businesses to equip their employees with a letter, as well as the work permit, for proper identification. He said upon termination it is standard procedure to take back all items supplied, including keys and permits.

There being no further testimony, Chairman James closed the hearing on A.B. 593, and opened the hearing on A.B. 646.

Dennis K. Neilander, Board Member, State Gaming Control Board, stated he was submitting proposed amendments to the bill at the SGCB’s request (Exhibit C). He noted the amendment included changing the annual slot tax due date from June 20 to June 30 to coincide with the quarterly tax; and clarify the annual manufacturers and distributors license fee is due on January 1. He stressed the real need for the amendment is to redefine the term "sports pool." He elucidated that in recent years there have been problems with wire rooms. He explained out-of-state illegal bookmakers whose books get out of balance from taking too much action on one side, utilize wire rooms in Nevada to lay off bets to balance their books. He emphasized the amended bill would help prosecutors overcome the wire room’s argument that they were not accepting wagers, only transferring the wagers.

Kimberly R. Maxson, Deputy Attorney General, Gaming Division, Office of the Attorney General, stated the SGCB is asking that the amendment be applied specifically to Nevada Revised Statutes (NRS) chapter 465.071, which encompasses the criminal liability associated with gaming. Additionally, this change would make illegal sports pools a Category B felony with 1-6 years in prison, and/or $10,000 fine. She emphasized in conjunction with everything else, it would also make contempt and conspiracy a crime. She pointed out they were also having problems using the term "business" with sports pools. Ms. Maxson elaborated that most of the sports pools operations were out of homes, people in transit commonly referred to as "messenger bettors," with enormous amounts of phone activity, enormous sums of cash, and very little documentation other than cryptic notepads with numbers. She stated that by clarifying the activities the bill would ensure that Nevada’s gaming operations maintain their solid and well-deserved reputation for promoting lawful activity and using clean money.

Mr. Neilander noted the amendment also addresses that 25 percent of any forfeiture money obtained would go to the General Fund for use to aid those people who are addicted to gambling. He iterated that the Department of Human Resources is currently conducting a survey to determine the needs and types of services for problem gamblers.

Robert D. Faiss, Lobbyist, Nevada Resort Association (NRA), said he was testifying on behalf of Bruce Aguilera, Chairman of the NRA legislative committee, who states, "The NRA endorses the [State] Gaming Control Board amendments to A.B. 646. The NRA believes a comprehensive gaming control system, enforced in a fair and balanced manner, enhances the viability of the gaming industry."

Richard A. Wright, Concerned Citizen, testifying in opposition to A.B. 646 stated he agrees with Mr. Aguilera’s statement, but believes that the bill does not accomplish those goals. He pointed out that the criminal conduct described in the bill is already criminalized as felonies under existing Nevada law. He averred illegal wagers are a felony under federal law U.S.C. (United States Code) Title 18 section 1955; and a violation of state law under NRS chapter 163. He asserted that messenger betting was criminalized in the 1997 Legislative Session. He maintained the bill is not to pursue layoffs for bookmakers or messenger bettors; it is to pursue bettors who engage in betting as a business with sports books in Nevada. He stressed the way he reads the bill, anybody who receives any money for betting is guilty of a Category B felony. He pointed out all money involved is subject to forfeiture; not to the state but to SGCB, which by law does not have to be considered in the state budget for that agency. He declared Nevada’s forfeiture laws put each agency in the business of forfeiture collections rather than enforcement; unlike the federal government which puts forfeiture money into the general fund, except for drug-related forfeitures. He voiced this bill would put forfeiture money into the SGCB rather than to the law enforcement agency that is the plaintiff. He pointed out section 1 of the amendment where it says, "except for a person acting within the scope of a license …;" noting there is no license to operate as a bettor or as a betting group. He declared there is no license because betting has always been lawful behavior. He then pointed to where it says, "whether for hire or not," means that whether a person is betting for hire, a hobby or in his spare time. This action is not even money driven. He continued, "either solely or in conjunction with others to engage in the business of …." He said the law books have about 1,000 definitions for "engage in the business of." One of those definitions in case law means to engage in the activity of. He stated in case law to distinguish the definitions, it is looked towards whether it is an avocation run for profit or gain. If it is, then it means to operate a business. But if it is not required to be for profit or gain, then it normally means to participate in the activity of. Looking at the definition this way criminalizes anyone who participates in the activity of accepting a wager on a sports event. He pointed out that activity is already criminalized; it is called bookmaking. He said the bill continues with "brokering, facilitating, moving, placing or transferring, on behalf of another person, any wager on a sporting event or race." He said these words could criminalize the person who is a handicapper; the newspaper who publishes the odds; and groups and individuals who bet on the side, as a hobby or as part of an office pool. Individuals who may place a bet for a friend or relative are also criminal. He noted that under the messenger-betting statute, NRS 465.093, which was enacted in 1997 making messenger betting a misdemeanor, it is illegal in Nevada for a person to place a wager on a sporting event or horse race anywhere other than at a licensed sports book in Nevada. He said the way the law reads now it violates the commerce clause, because a person could not bet in England or offshore or even on the Internet with their own lawful sports betting account from Nevada without committing a Nevada misdemeanor. He concluded by saying, the effect this amendment will have on forfeiture laws, means he could legitimately place a bet to a legal sports book and commit a misdemeanor; causing him to lose not only the computer he used to place the bet, but his bank account, and anything else associated with the activity.

Chairman James asked Mr. Wright if he was saying that NRS 465.093 covers someone who is doing illegal bookmaking and gets out of balance and lays off the extra money in Nevada. Mr. Wright acknowledged that was correct. He added that before NRS 465.093, NRS 463.160 covered lay offs making it illegal for the person out of state as well as for the person receiving the lay off in Nevada.

Senator Wiener ask if she gave money to a coworker to place in the office sports pool on her behalf, would she and the friend be in violation of the law. Mr. Wright affirmed that she would be depending on the definition of the phrase, "to engage in the business of." He said if the phrase were read to mean, "participate in the activity of…" then there would be a violation of the law. He added that if the wager were made by asking the friend over the telephone to place the bet, then she would be a messenger bettor and already in violation of the misdemeanor law. He said as it stands now, if the wager was made in person by you to the friend, and the friend then made it in person, then there is no violation of the messenger-betting law. However, if the wager was made by using some other form of communication; such as a beeper, a telephone or a computer, then a misdemeanor has been committed. He noted if the initial action described were committed under the proposed amendment, then that person would be guilty of a Category B felony.

Senator Care recalled a federal case referred to as the Computer Group Trial, and wondered if similar conduct prosecuted in that case would come under the conduct delineated in this amendment. Mr. Wright answered absolutely. He said they were betting groups engaged in the betting business; and they were all acquitted, because that was not bookmaking. He added that it would have been felonious under this proposed amendment to operate as a betting group.

Ms. Maxson rebutted that Senator Wiener’s scenario is not the same thing as being in the business of betting, nor would there be any kind of compensation or reward or percentage. That action would not make them liable under this amendment. She conveyed it is desired to increase the penalty for messenger betting to a felony, in order to send a strong message to other jurisdictions that Nevada takes messenger-betting activities seriously.

Mr. Neilander noted that forfeiture provisions are already provided for in chapter 465 of NRS, and the amendment would be creating a new section. He said that in preparing the budget the Legislature does consider forfeiture, even though it is outside the standard budget.

The committee expressed concern about forfeiture, and for innocent people who may inadvertently be included, because of the way the proposed amendment is now written.

Mr. Neilander agreed to address the ambiguities in the proposed amendment before it becomes part of the bill.

Chairman James closed the hearing on A.B. 646, and opened the hearing on A.B. 669.

Robert D. Faiss, Lobbyist, Nevada Resort Association, stated that sections 1, 2, 3, and 6 of the bill address the issue of gaming licensees from having a business relationship with persons denied a license or have had a license revoked. He said some unsuitable people have tried to enter into a business relationship with casinos by hiding behind a corporation. He said this bill will also put an equal burden on the unsuitable person, and requires the SGCB to maintain an updated list of unsuitable people. He pointed out that section 4 provides for a specific procedure and timetable for a motion to rehear a SGCB decision on a claim for tax refund.

Mr. Faiss referenced section 5 of the bill stating that over the years he can recall appearing at least five times on the 10 percent tax that applies only to receipts for admission, food, refreshments, and merchandise in a cabaret, nightclub, or casino showroom. In 1985 Caesar’s Palace and other casinos challenged the gaming audit agents in court (Exhibit D) when they tried to tax credit card service charges; the casinos prevailed. Mr. Faiss stated that once again the gaming audit agents are attempting to tax the service charge. He explained the issuing credit or debit card companies charge businesses a fee every time a customer uses a credit or debit card. The entertainment industry adds a service charge, which is an average of the high-low fee charged by the issuing card company to defray the expense to the entertainment business.

David R. Sisk, Vice President of Finance and Treasurer, Caesar’s Palace, explained that the issuing card company charges an interchange rate that the entertainment business identifies as a service charge, and passes that service charge amount through to the card company. He said the business does not get to keep the service charge to use for any other business-associated expenses. He illustrated the service charge is like a tax, the business is the collecting agent.

Senator Wiener inquired as to what kind of documentation is used to account for the service charges. Mr. Sisk responded the ticket amount is recorded and the service charge is recorded; and then the total box office receipts would show the gross amount, which would include the service charge. He said the credit card company would then debit the business’ bank account for the actual percent of service charges on the credit card deposit.

Mr. Faiss expounded that each time the issue of taxing service charges has been brought before this committee, it is because the tax was applied illegally; i.e., contrary to the intent of the statute.

Chairman James remarked that it would help the bill if the service charge were clearly spelled out, because as it is presently worded, it is ambiguous. Mr. Sisk stressed that the business is not retaining the service charge. He said the whole amount of the ticket and the service charge are paid to the credit card company. The credit card company takes out their service charges and only then does the business receive its money, which is the price of the ticket only.

Senator McGinness asked if the service charge money is readily identifiable on the books, and who audits the books. Mr. Sisk replied that the business receives settlements from the credit card companies on a daily basis, and it is very easy for SGCB audit people to see what is credited to the bank account as a credit card settlement.

Mr. Neilander maintained that the kind of debate held with the committee is the type of debate the SGCB audit people have had. He said it is simply an issue of trying to understand what taxes are to be collected.

Chairman James stated this matter should be reviewed by the taxation committee.

Mr. Neilander iterated that the SGCB is in support of the other issues contained in the bill.

Jeffrey R. Rodefer, Deputy Attorney General, Gaming Division, Office of the Attorney General, said he was prepared to testify about the tax portion of the bill only, and had no other comments.

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There being no further business, the meeting was adjourned at 10:46 a.m.

RESPECTFULLY SUBMITTED:

Laura Adler,

Committee Secretary

APPROVED BY:

Senator Mark A. James, Chairman

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