ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This matter is before the Administrative Law Judge Division (Division) pursuant to S.C. Code Ann. §§
1-23-310 et seq. (Supp. 1999) and S.C. Code Ann. § 12-4-30(D) (Supp. 1999). The South Carolina
Department of Revenue (Department) alleges that the Respondents violated S.C. Code Ann. § 12-22-740 (Supp. 1999) by allowing Class III machines, which were not in operation on or before May 31,
1999, to be operated at a casino. The alleged violation occurred on August 12, 1999.
The Department seeks fines in the amount of $20,000.00: $10,000.00 against the location operator,
Maxine Norman Bush; $5,000.00 against machine owner James R. McDonald, III, d/b/a Coastal Video
Gaming; and $5,000.00 against machine owner James R. McDonald, Jr., d/b/a McDonald's
Amusements. The hearing on these matters was held before me on February 13, 2001, at the offices of
the Division in Columbia, South Carolina. At the hearing, the parties submitted stipulated facts, which
are incorporated herein below.
FINDINGS OF FACT
Having observed the witnesses and exhibits presented at the hearing and closely passed upon their
credibility, taking into consideration the burden of persuasion by the parties, I make the following
Findings of Fact by a preponderance of the evidence:
1. Notice of the time, date, place and subject matter of the hearing was given to the
Department and the Respondents.
2. I find that the Respondents violated S.C. Code Ann. § 12-22-740 (Supp. 2000) by operating a casino
in Rooms 5 and 6.
STIPULATIONS OF FACT
At the hearing on this matter, the parties entered the following written stipulations of fact into the
record:
1. On August 12, 1999, Maxine Norman Bush held the following South Carolina retail/sales tax
licenses for the video poker premises located at 122 Lakeshore Drive, Fairplay, South Carolina as noted
below:
D/B/A Retail/Sales Tax License No.
Room 5 037109538
Room 6 037109547
Room 8 037109565
Room 9 037109574
2. On August 12, 1999, James R. McDonald, Jr., held the following video poker licenses (acquired
pursuant to S.C. Code Ann. Section 12-21-2720(A)(3) (Supp. 1999), commonly referred to as "Class
III" machines and licenses) that were on video poker machines at each of the premises noted below at
122 Lakeshore Drive, Fairplay, South Carolina:
Machine License # Location
3019995 Room 6, 037109547
3019994 " "
3019993 " "
3019992 " "
3019991 " "
3020000 Room 9, 037109574 3019999 " "
3019998 " "
3019997 " "
3019996 " "
3. On August 12, 1999, James R. McDonald, III, held the following video poker licenses (acquired
pursuant to S.C. Code Ann. Section 12-21-2720(A)(3) (Supp. 1999), commonly referred to as "Class
III" machines and licenses) that were on video poker machines at each of the premises noted below at
122 Lakeshore Drive, Fairplay, South Carolina:
Machine License # Location
3161870 Room 5, 037109538
3161869 " "
3161868 " "
3161867 " "
3161866 " "
3161760 Room 8, 037109565 3161759 " "
3161758 " "
3161757 " "
3161756 " "
4. On August 12, 1999, the structure containing multiple premises with video poker machines located at
122 Lakeshore Drive, Fairplay, South Carolina, was a "casino" as that term is used in S.C. Code Ann.
Section 12-22-740 (Supp. 1999).
5. On May 17, 2000, The Honorable Ray N. Stevens, Administrative Law Judge, in
South Carolina Department of Revenue v. James R. McDonald, III, Docket No. 99-ALJ-17-0602-CC,
determined that the structure at 122 Lake Shore Drive, Fairplay, South Carolina was an illegal casino
and had operated as such on August 3, 1999.
6. On August 12, 1999, the casino at 122 Lake Shore Drive, Fairplay, South Carolina, contained the
video poker premises and retail licenses noted in "1," "2," and "3" above.
7. The casino did not initially open for business until after May 31, 1999.
8. There were no Class III video poker machines in operation in the casino, to include the locations
noted in "2" and "3" above, on or before May 31, 1999.
9. The casino and each premise within it, to include the rooms noted in "1," "2," and "3" above, did not
comply with the requirements of 27 S.C. Code Ann. Regs. 117-190 (Supp. 1999) on or before May 31,
1999.
10. On August 12, 1999, agents of the South Carolina Law Enforcement Division (SLED) conducted an
investigation of the casino located at 122 Lakeshore Drive, Fairplay, South Carolina.
11. Blue Ridge Electric Power Company records indicate the casino first received power on June 28,
1999.
12. The building permit for the casino was issued by Oconee County on June 14, 1999.
13. On August 12, at the time of the SLED agents' inspection, the rooms noted in
"1," "2," and "3" above, located in the casino were open for business, and the machines were available
for play.
14. H. 3834, 113th General Assembly Spec. Sess. (S.C. 1999), Section 12-22-740, was signed by the
Governor on July 2, 1999.
15. Respondents were notified by an Initial Letter of Violation and a Final Determination of the Section
12-22-740 violations that are the subject of this action.
16. Machines were placed in the casino on June 29, 1999.
17. Licenses were purchased in May 1999.
18. A contract for purchase of the casino was signed on April 8, 1999. The deed was dated April 16,
1999.
19. A sales order was entered into on April 19, 1999, for the manufactured building in the amount of
$107,625.00.
20. An electric service installation agreement was signed by James E. Norman and a representative of
Blue Ridge Electric Cooperative, Inc., on April 26, 1999.
21. The retail licenses noted in "1" and "2" [sic] were issued after May 31, 1999.
22. The video poker machines noted "2" and "3" above were placed in the locations on June 29, 1999.
CONCLUSIONS OF LAW
Based upon the above Findings of Fact and Stipulations of Fact, I conclude the following as a matter of
law:
1. S.C. Code Ann. §§ 1-23-310 and 1-23-600 (Supp. 1999) grant jurisdiction to the Administrative Law
Judge Division to hear contested cases under the Administrative Procedures Act. Jurisdiction over
Department of Revenue contested cases is specifically supplied by S.C. Code Ann. § 12-4-30(D) (Supp.
1999).
2. S.C. Code Ann. § 12-22-740 (Supp. 1999) prohibits casinos, as defined in the statute, unless the
casino meets certain conditions allowing it to be "grandfathered" in as an existing casino. Section 12-22-740 sets forth, in relevant part:
(A)(1) Except as provided in subsection (B), machines shall not be operated or continue to operate at
any casino. For purposes of this chapter, the term 'casino' shall mean both of the following:
(a) any two or more 'single place or premises', as that term was defined, applied, and interpreted in
Regulation 117-190 on or before May 31, 1999, that are located within a single structure; and
(b) beginning December 1, 1999, any two or more establishments located within one hundred feet of
each other that have establishment licenses issued to the same person or a person who has the same
principals.
* * *
(B)(1) A casino shall not operate or continue to operate except as provided in this subsection. No
casino shall continue to operate as a casino unless on May 31, 1999:
(a) machines were both licensed and in operation within each 'single place or premises' as that term was
defined, applied, and interpreted in Regulation 117-190 on or before May 31, 1999; and
(b) each single place or premises within the casino met the qualifications of Regulation 117-190 and a
certificate of occupancy, if otherwise required by law, has been issued for the structure within which
two or more single places or premises are located.
3. The structure at issue in this case contained two video poker rooms which collectively housed ten
machines. Therefore, this location meets the structural definition of a casino as defined in S.C. Code
Ann. § 12-22-740 (Supp. 1999). Furthermore, there were no Class III machines operating in the casino
on or before May 31, 1999. Pursuant to the parties' stipulated facts, the electricity was not turned on at
the location until June 28, 1999 and the video poker machines were not placed in the location until June
29, 1999. Therefore, under these circumstances, the casino did not meet the requirements of Section
12-22-740(B)(1). Consequently, the Respondents were operating ten machines at a casino on August
12, 1999, in violation of Section 12-22-740.
4. The Respondents argue that Section 12-22-740 is unconstitutional as retroactive land-use legislation
affecting vested property rights. The Administrative Law Judge Division, however, may not rule upon
the constitutionality of a statute. See Great Games, Inc. v. S.C. Dept. of Revenue, 339 S.C. 79, 529
S.E.2d 6 (2000). Therefore, this tribunal declines to address the Respondents' arguments concerning
the constitutionality of a statute.
5. The Respondents also argue that they had a vested property right because of their substantial
investment in the casino. Furthermore, the Respondents argue that the Department's actions are an
unconstitutional deprivation of property rights. However, an administrative enforcement action cannot
be dismissed on the basis that the action may result in an unconstitutional taking of property. Rather,
the appropriate redress for a takings claim is in a forum having jurisdiction to award monetary damages.
See Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).
6. The Administrative Law Judge Division has the authority to establish the imposition of a penalty for
a violation. Inherent in and fundamental to the quasi-judicial powers of an Administrative Law Judge,
as the trier of fact in contested cases under the Administrative Procedures Act, is the authority to decide
the appropriate sanction when such is disputed. Walker v. South Carolina ABC Comm'n, 305 S.C. 209,
407 S.E. 2d 633 (1991).
To that end, the Administrative Law Judge must consider relevant evidence presented in mitigation.
Mitigation is defined as a lessening to any extent, great or small. It may be anything between the limits
of complete remission on the one hand and a denial of any relief on the other. In a legal sense, it
necessarily implies the exercise of the judgment of the court as to what is proper under the facts of the
particular case. 58 C.J.S. Mitigation p. 834-835 (1948). A legitimate as well as a significant
consideration is whether the alleged mitigating factor demonstrates reasonable cause to reduce the
penalty. Kroger Co. v. Department of Revenue, 673 N.E. 2d 710 (Ill. 1996). However, in this case, the
Respondents did not present any mitigating evidence.
7. The Department seeks a total fine of $20,000.00 against the Respondents. The general penalty
provisions of S.C. Code Ann. § 12-54-43(H) (Supp. 1999) (effective for taxable year after 1998) applies
to this violation:
A person who must obtain a license or purchase stamps for identification purposes, and who fails to
obtain or display the license properly, or to affix the stamps properly, or to comply with statutory
provisions, is subject to a penalty of not less than fifty dollars nor more than five hundred dollars for
each failure.
(emphasis added.)
In the present case, since the Respondents failed to comply with the statutory provisions governing
casinos, I find that the imposition of a monetary penalty is proper. The Department is seeking fines
totaling $20,000.00 against the Respondents. However, because the Department previously fined the
Respondents for operating a casino on August 3, 1999 in Rooms 8 and 9 of this location, I find that a
reduced fine is warranted in this case as follows: $5,000.00 against Maxine Norman Bush; $2,500.00
against machine owner James R. McDonald, III, d/b/a Coastal Video Gaming; and $2,500.00 against
machine owner James R. McDonald, Jr., d/b/a McDonald's Amusements. See South Carolina
Department of Revenue v. Maxine Norman Bush, d/b/a Stormin' Norman's 2, and d/b/a Stormin'
Norman's 8, and d/b/a Stormin' Norman's 9, and James R. McDonald, III, d/b/a Coastal Video Gaming,
Docket No. 99-ALJ-17-0602-CC.
ORDER
Based upon the foregoing Findings of Fact, Stipulations of Fact, and Conclusions of Law,
IT IS HEREBY ORDERED that Respondent Maxine Norman Bush shall pay a fine to the Department
in the amount of $5,000.00; Respondent James R. McDonald, III, d/b/a Coastal Video Gaming, shall
pay a fine to the Department in the amount of $2,500.00; and Respondent James R. McDonald, Jr.,
d/b/a McDonald's Amusements, shall pay a fine to the Department in the amount of $2,500.00 for the
violations of S.C. Code Ann. § 12-22-740 (Supp. 1999).
AND IT IS SO ORDERED.
Ralph King Anderson, III
Administrative Law Judge
June 6, 2001
Columbia, South Carolina |
