ORDERS:
ORDER AND DECISION
This matter comes before me for a hearing pursuant to S.C. Code Ann. §§ 1-23-310, etseq.
(Supp. 1994) and S.C. Code Ann. § 12-4-30 (Supp. 1994) on the citation issued by the
Department of Revenue and Taxation ("Department") against Roadrunners Softball Association
("Roadrunners"), and the past and present promoters of Roadrunners, Derrell Lee and Ronald E.
Reynolds. Prior to the hearing of this matter, Respondent Derrell Lee was dismissed as a party to
this action, by the consent of all parties, because Derrell Lee was not the promoter of
Roadrunners during the period of September of 1993 to June of 1994, the time of the alleged
violations.
The Department cited the Respondents with: (A) eight (8) violations of S.C. Code Ann. §
12-21-3480(C) (Supp. 1994) alleging that Respondents failed to deposit all funds derived from
the conduct of bingo, less the amount awarded as prizes, into its bingo checking or savings
account; (B) one (1) violation of S.C. Code Ann. § 12-21-3490(C) and (H) (Supp. 1994) alleging
that Respondents commingled funds derived from the conduct of bingo with other funds of the
licensed organization which were deposited in the bingo account; (C) ten (10) violations of S.C.
Code Ann. § 12-21-3420(12) (Supp. 1994) alleging that Respondents failed to return a minimum
of 60% of gross proceeds taken in by the house during a calendar quarter, and at least 50% taken
in during a single session in the form of prizes during ten sessions; and (D) ninety-four (94)
violations of S.C. Code Ann. § 12-21-3340(A) (8) (Supp. 1994) alleging that Respondents failed
to supply the Department with the name, address, and social security number of all persons who
worked at the proposed bingo games and received compensation for the work.
The Department assessed penalties of $1000 for each of the eight (8) alleged violations of S.C.
Code Ann. § 12-21-3480(C) (failure to deposit all funds derived from the conduct of bingo, less
the amount awarded out as prizes); $500 for the alleged violation of S.C. Code Ann. §
12-21-3490(C) and (H) (commingling of funds); $1000 for each of the ten (10) alleged violations
of S.C. Code Ann. § 12-21-3420(12) (failure to meet the minimum payout) and revocation of
Respondents' bingo license and promoter's license; and $100 for each of the ninety-four (94)
alleged violations of S.C. Code Ann. § 12-21-3340(A)(8) (failure to provide employee
information to the Department). The total penalties assessed by the Department are $27,900 and
revocation of Respondents' bingo license and promoter's license. Respondents deny and contest
the alleged violations, which necessitates this hearing before the Administrative Law Judge
Division.
After timely notice to the parties, a hearing was conducted at the Administrative Law Judge
Division Hearing Room, Columbia, South Carolina. Based upon the testimony and evidence
presented, this tribunal concludes that the Respondents violated S.C. Code Ann. §§
12-21-3480(C), 12-21-3490 (C) and (H), 12-21-3420(12), and 12-21-3340(A) (8).
FINDINGS OF FACT
Having carefully considered all testimony, exhibits, and arguments presented at the hearing of this
matter, and taking into account the credibility and accuracy of the evidence, I make the following
Findings of Fact by a preponderance of the evidence:
1. Respondent, Roadrunners, holds a Class AA Bingo License (#000035) to conduct bingo
sessions at 2729 East Palmetto Street, Florence, South Carolina which was issued by the
Department. Petitioner's Exhibit #1.
2. Respondent, Roadrunners, is a non-profit charitable organization which was incorporated in
South Carolina for the purpose of social development of young women through participation in
amateur sporting events.
3. Respondent, Ronald E. Reynolds, held a promoter's license for Roadrunners Softball
Association from September 8, 1993 to September 7, 1994. Reynolds acted as the promoter for
Roadrunners at every session of bingo held between the relevant dates of September 1993
through June 1994. Reynolds turned in his promoter's license to the Department on September 5,
1994, at which time Derrell Lee made application and was granted a promoter's license for
Roadrunners. Petitioner's Exhibit #2; Respondents' Exhibit #1.
4. An audit of the financial records of Roadrunners was conducted by the Department in June
1994 for the period of September 1993 to June 1994. As a result of the audit, the Department
cited Respondents with: (A) eight (8) violations of S.C. Code Ann. § 12-21-3480(C) alleging that
Respondents failed to deposit all funds derived from the conduct of bingo, less the amount
awarded as cash prizes, into its bingo checking or savings account; (B) one (1) violation of S.C.
Code Ann. § 12-21-3490(C) and (H) alleging that Respondents commingled funds derived from
the conduct of bingo with other funds of the licensed organization which were deposited in the
bingo account; (C) ten (10) violations of S.C. Code Ann. § 12-21-3420(12) alleging that
Respondents failed to return a minimum of 60% of gross proceeds taken in by the house during a
calendar quarter, and at least 50% taken in during a single session in the form of prizes during ten
sessions; and (D) ninety-four (94) violations of S.C. Code Ann. § 12-21-3340(A) (8) alleging that
Respondents failed to supply the Department with the name, address, and social security number
of all persons who worked at the proposed bingo games and received compensation for the work.
Petitioner's Exhibit #14.
5. The Department assessed penalties of $1000 for each of the eight (8) alleged violations of S.C.
Code Ann. § 12-21-3480(C) (failure to deposit all funds from the conduct of bingo, less the
amount awarded as cash prizes); $500 for the alleged violation of S.C. Code Ann. §
12-21-3490(C) and (H) (commingling of funds derived from the conduct of bingo with other
funds of the licensed organization); $1000 for each of the thirteen (13) alleged violations of S.C.
Code Ann. § 12-21-3420(12) (failure to meet the minimum payout) and revocation of
Respondents' bingo license and promoter's license; and $100 for each of the ninety-four (94)
alleged violations of S.C. Code Ann. § 12-21-3340(A)(8) (failure to provide employee
information to the Department). By letter dated August 28, 1994 (one day prior to the hearing of
this matter) and at the hearing of this matter, the Department agreed not to proceed on three of
the thirteen alleged violations of S.C. Code Ann. § 12-21-3420(12). Therefore, total penalties
assessed by the Department are $27,900 and revocation of Respondents' bingo license and
promoter's license. Respondents' Exhibit #1; Petitioner's Exhibit #14.
6. In April of 1994, Alan Cox, an auditor with the Department, interviewed employees of
Roadrunners and spoke with Gwen Reynolds and Derrell Lee. He found that from September of
1993 to April 1994, Respondents paid bus coordinators, who provided transportation for players
to come to the bingo sessions, cash from funds derived from the conduct of bingo (collected from
bingo card sales and entrance fees), which had not been deposited in a bingo checking or savings
account.
a. Alan Cox testified that he monitored the Bingo games in June of 1994, and observed that
all players of bingo paid a set amount for the programs of bingo cards. That is, players
who rode buses to the bingo games and players who did not ride buses to the bingo games
paid the same entrance fees and bingo card prices. Players who rode on the buses to
Respondents' bingo sessions did not pay a separate fee for bus transportation.
b. Bus coordinators were paid in cash from monies collected from bingo card sales and
entrance fees, as evidenced by handwritten receipts given to the bus and van coordinators
by Respondents. Petitioner's Exhibit #8.
c. Roadrunners' accountant, Irene Sanjana, testified that she has prepared employee payroll
since September 1993; and, that from September 1993 to April 1994, the bus coordinators
were paid by cash from funds derived from the conduct of bingo by Roadrunners, which had
not been deposited into the bingo account.
d. In April 1994, Respondents were informed by the Department that all monies derived
from the conduct of bingo (collected from bingo card sales and entrance fees) were to be
deposited in a bingo checking or savings account. From that point, bus coordinators were
paid for services rendered on the same day by check. The checks were usually endorsed by
the coordinators and cashed by Respondents; and, the checks were later deposited into
Respondents' bingo checking account.
7. Respondent, Roadrunners, established a bingo account at South Carolina National Bank,
account #100445352. Petitioner's Exhibit #1.
a. Funds loaned to Roadrunners by T & M Management were deposited into Roadrunners'
bingo account on October 23, 1993, which is reflected by the financial record of
Roadrunners, i.e., the auditor's schedule of bank deposits for Roadrunners. Petitioner's
Exhibit #9.
b. On November 9, 1993, Roadrunners wrote a check (# 4068) to T & M Management
from its bingo checking account for $32,116, which states it was for "repayment of loan on
October 25, 1993." This check was signed by Gwen Reynolds, an employee of
Roadrunners, as referenced by Petitioner's Exhibit #10. See also Petitioner's Exhibit #9.
c. Respondents' witness, Irene Sanjana, testified that money not derived from the conduct of
bingo was placed into Roadrunners' bingo account to pay taxes owed to the Department.
8. The Department's audit of Roadrunners' financial records, concerning the funds derived from
bingo which were awarded to players as prizes, revealed the following facts. SeePetitioner's
Exhibits # 5 and #6; Respondents' Exhibit #15.
a. At the bingo session held in September 1993, Respondents collected $303,035 from
bingo card sales and entrance fees. Respondents returned $138,976 to the players of bingo,
which is a 45.86% return of gross proceeds for the month of September and a 45.86%
quarterly return of gross proceeds for the third quarter, which ended with September.
b. At the bingo session held in October 1993, Respondents collected $276,751 from bingo
card sales and entrance fees. Respondents returned $179,987 to the players of bingo, which
is a 65.04% return of gross proceeds for the month of October.
c. At the bingo session held in November 1993, Respondents collected $437,347 from
bingo card sales and entrance fees. Respondents returned $193,976 to the players of bingo,
which is a 44.35% return of gross proceeds for the month of November.
d. At the bingo session held in December 1993, Respondents collected $384,500 from bingo
card sales and entrance fees. Respondents returned $201,980 to the players of bingo,
which is a 52.53% return of gross proceeds for the month of December. Respondents'
return to the players in the form of prizes for the fourth quarter, which includes the months
of October, November, and December, is 52.43% of gross proceeds.
e. At the bingo session held in January 1994, Respondents collected $299,439 from bingo
card sales and entrance fees. Respondents returned $145,982 to the players of bingo, which
is a 48.75% return of gross proceeds for the month of January.
f. At the bingo session held in February 1994, Respondents collected $352,805 from bingo
card sales and entrance fees. Respondents returned $147,978 to the players of bingo, which
is a 41.94% return of gross proceeds for the month of February.
g. At the bingo session held in March 1994, Respondents collected $327,998 from bingo
card sales and entrance fees. Respondents returned $159,982 to the players of bingo, which
is a 48.78% return of gross proceeds for the month of March. Respondents' return to the
players in the form of prizes for the first quarter, which includes the return for the months of
January, February, and March, is 46.31% of gross proceeds.
h. At the bingo session held in April 1994, Respondents collected $440,142 from bingo card
sales and entrance fees. Respondents returned $223,972 to the players of bingo, which is a
50.89% return of gross proceeds for the month of April.
i. At the bingo session held in May 1994, Respondents collected $396,053 from bingo card
sales and entrance fees. Respondents returned $198,982 to the players of bingo, which is a
50.24% return of gross proceeds for the month of May.
j. At the bingo session held in June 1994, Respondents collected $358,259 from bingo card
sales and entrance fees. Respondents returned $177,982 to the players of bingo, which is a
49.68% return of gross proceeds for the month of June. Respondents' return to the players
for the second quarter, which includes the months of April, May, and June, is 50.31% return
of the gross proceeds taken in for the quarter.
9. Respondents assert that bus transportation expenses should be deducted from gross proceeds
prior to computing the 60% and 50% statutory payout requirements.
10. The Department included sales tax in the calculation of whether there had been a 60% return
of gross proceeds taken in by the house during a calendar quarter, and a 50% return of gross
proceeds taken in during a single session. However, by letter dated August 28, 1995 (one day
prior to the hearing of this matter) and testimony presented at the hearing of this matter, the
Department conceded that it was wrong in including sales tax in the payout computation. The
penalties were adjusted accordingly. Respondents' Exhibit #1.
11. Both parties agree that sales taxes and bingo taxes should be excluded in the computation of
the 60% return of gross proceeds taken in by the house during a calendar quarter, or the 50%
return of gross proceeds taken in during a single session.
12. The Department's records indicate that employee information was submitted with
Roadrunners' original application of September 8, 1993 for a Class AA Bingo License, however,
no updates were made until May of 1994. Petitioner's Exhibits #1, #3, #7, #9, and #12.
a. Employee information submitted to the Department in September 1993 and May 1994,
payroll records submitted to the Department, and the financial records of Roadrunners
submitted into the record by the Petitioner indicate that names, addresses, social security
numbers, duties, and criminal background information had not been submitted to the
Department, in writing, within thirty (30) days, for 94 persons who worked at Roadrunners'
bingo sessions and received compensation for their work, during the months of September
1993 to June 1994. Petitioner's Exhibits #1, #3, #7, #9, and #12.
b. Department records indicate that no updates of employee information were submitted to
the Department until May 3, 1994. There was no documentary evidence presented by
Respondents to contradict the evidence presented by the Department.
13. Respondent, Roadrunners, does not have any outstanding tax liabilities.
CONCLUSIONS OF LAW AND DISCUSSION
Based on the foregoing Findings of Fact, I conclude, as a matter of law, the following:
Pursuant to S.C. Code Ann. §§ 1-23-310 et seq. (Supp. 1994) and S.C. Code Ann. § 12-4-30
(Supp. 1994), the South Carolina Administrative Law Judge Division has jurisdiction over this
matter.
A. Violations
1. Respondents are cited with violating S.C. Code Ann. § 12-21-3480(C) (Supp. 1994). This
provision, relating to depositing proceeds, provides:
The representative member of the nonprofit organization shall deposit the funds into the
bingo checking or savings account as described in Section 12-21-3490.
S.C. Code Ann. § 12-21-3490 provides for the mandatory establishment and maintenance of a
regular checking account by an organization licensed to conduct bingo. This section requires that
the account be designated the "bingo account."
As it specifically relates to the alleged violation, S.C. Code Ann. § 12-21-3490(C) (Supp. 1994)
provides in pertinent part:
. . . All funds derived from the conduct of bingo, less the amount awarded as cash prizes,
must be deposited in the bingo account. . . . (emphasis added).
It is clear from the record that during the period of September 1993 to April 1993, on the
occasions alleged, Respondents directly paid bus coordinators at the end of the session with cash
monies from funds derived from the conduct of bingo. These monies [payments] were not first
deposited into the bingo checking account. S.C. Code Ann. § 12-21-3490(C) (Supp. 1994)
clearly provides that only cash awards may be paid directly from funds derived from the conduct
of bingo without first being deposited into the bingo account.
2. Respondents are cited with violating S.C. Code Ann. § 12-21-3490(C) and (H) Supp. 1994).
S.C. Code Ann. § 12-21-3490(C) and (H) (Supp. 1994) provide, in pertinent part: ". . . No other
funds may be deposited in the bingo account." ". . . Gross proceeds derived from the conduct of
bingo must not be commingled with other funds of the licensed organization." (emphasis added).
In October of 1993, Respondents deposited loan money from T & M Management into its bingo
account established at South Carolina National Bank. Respondents contend that since the loan
money was used to pay taxes owed to the Department, such action is not violative of the law.
This tribunal disagrees. It is clear from S.C. Code Ann. §12-21-3490(C) and (H) (Supp. 1994)
that no other funds of the organization should be commingled with funds derived from the
conduct of bingo.
3. Respondents are cited with violating S.C. Code Ann. § 12-21-3420(12) (Supp. 1994). This
provision, relating to the minimum payout in the form of prizes to the players of bingo, provides:
A minimum of sixty percent of the gross proceeds taken in by the house during a calendar
quarter, but no less than fifty percent taken in by the house during a single session must be
returned to the players in the form of prizes. (emphasis added).
It is clear from a reading of this provision that Respondents are required to return a minimum of
60% of gross proceeds taken in during a quarter to the players in the form of prizes. Further,
Respondents are required to return at least 50% of gross proceeds taken in per session to players
in the form of prizes.
Crucial to the application of S.C. Code Ann. § 12-21-3420(12) (Supp. 1994) is an understanding
of the meaning of gross proceeds. ". . . Gross proceeds means the total amountreceived from the
sale of bingo cards and entrance fees charged at the locations in which bingo is conducted."
(emphasis added).
Thus, it is clear that Respondents must return, per quarter, at least 60% of monies collected from
the sale of bingo cards and from entrance fees charged to the players in the form of prizes. The
same is true for the 50% minimum, per session, prize return. On the occasions Respondents were
cited for violating the law, Respondents first subtracted from gross proceeds monies it paid to bus
coordinators for transporting players to its games, and then calculated the 60% and 50%
requirements based on the remaining subtotal. This is in clear contravention of the law. The
definition of gross proceeds leaves no doubt as to what it consists of and where such monies are
derived. The law does not allow for the adjustment of the total payout in prizes required so as to
account for expenses incurred in conducting bingo. Respondents assert that it could not "stay in
business" if it were not allowed to compute the 60% and 50% payout without first deducting
transportation costs from gross proceeds. If this logic were taken to its fullest conclusion,
Respondents should be allowed to deduct utility costs, printing costs, employee payroll, rental or
mortgage expenses, or any other costs associated with conducting its operation.
The law does not afford such an interpretation as asserted by Respondents. Further, the fallacy of
such an argument is the contention that its organization is a business. It is obviously not a
business, but is a nonprofit organization subject to the rules and regulations prescribed by the
Bingo Act. "The exemption for charitable bingo operators in the general prohibition of gambling
has been taken far beyond its intended purpose of giving South Carolina charities a means for
additional revenue. Certainly, the operation of bingo should not be the primary purpose for the
existence of the exempted groups in South Carolina." Army Navy Bingo, Garrison v. Plowden,
281 S.C. 226, 314 S.E.2d 339 (1984).
4. Respondents are cited with violating S.C. Code Ann. § 12-21-3340(A)(8) (Supp. 1994). This
provision, relating to the license to conduct bingo, provides:
To conduct bingo, an applicant nonprofit organization shallfile with the commission a
written application in a form prescribed by the commission, executed and notarized which
must include:
. . .
(8) the name, address, and social security number of each person who will work at the
proposed bingo games and receive compensation for the work, the nature of the work to be
performed, and a statement as to whether or not the person has been convicted of a felony,
gambling offense, criminal fraud, or a crime that has a sentence of two or more years; . . .
(emphasis added).
The clear intent of this provision is that the organization file, in its initial application, the required
employee information with the Department even before the prospective employee begins work, as
indicated by the operative phase "each person who will work." However, subitem (D) of this
section requires that the organization notify the Department in writing of any changes in the
information supplied on the application. Accordingly, Respondents are required to notify the
Department within thirty (30) days, in writing, of any new employees. This provision does not
provide an exception to the filing requirement when it involves transient employees or employees
who only work on a limited basis, but requires the filing of such information for any "employee
who will work . . . and receive compensation for the work." S.C. Code Ann. § 12-21-3340(A)(8)
(Supp. 1994).
The record reveals that updated employee information was forwarded to the Department on May
3, 1994, as such records are a part of its files. The evidence establishes that Roadrunners did not
file the updated employee information within the statutory prescribed time period.
B. Determination on Penalties
The Department acted within its authority in imposing a $1000 fine for each violation committed
by Respondents. S.C. Code Ann. § 12-21-3550 (Supp. 1994), authorizing penalties for the
violation of the Bingo Act, provides in relevant part: "A violation of the provisions of this article
is subject to a penalty of twenty dollars to one thousand dollars at the discretion of the
commission [department]. . . ." S.C. Code Ann. § 12-21-3550 (Supp. 1994) (emphasis added).
Further, Respondents are jointly and severally liable for such fines. S.C. Code Ann. § 12-21-3380
(Supp. 1994) provides:
The promoter and the nonprofit organization are jointly and severally liable for all taxes,
penalties, interest, and fines imposed by this article and Chapter 54 of Title 12. However,
the promoter at all times is liable primarily. (emphasis added).
The Department also seeks to revoke Respondents' licenses pursuant to S.C. Code Ann. §
12-54-90(A) (Supp. 1994). S.C. Code Ann. §§ 12-21-3550 and 12-54-90(A) may be construed
harmoniously. S.C. Code Ann. § 12-21-3380 (Supp. 1994), as referenced above, clearly
indicates that Respondents are subject to penalties that may be imposed under Chapter 54 of Title
12. Revocation of a bingo license and a promoter's license is proper under S.C. Code Ann. §
12-54-90(A) (Supp. 1994). This sub-section, in pertinent part, reads as follows: "When a person
fails, neglects, violates, or refuses to comply with a provision of law or regulation administered by
the commission [Department], the commission [Department], in its discretion, may revoke one or
more licenses held by the taxpayer. . . ." (emphasis added). The Bingo Act is administered by the
Department. Upon finding a violation of the Act, it inherently follows that the Department is
authorized to "revoke one or more licenses" held by the licensees/taxpayers. Further, S.C. Code
Ann. § 12-21-3470 (Supp. 1994) provides "a person . . . whose promoter's license has been
revoked by the commission is not permitted to manage or conduct a game or assist in any manner
with the bingo operation" (emphasis added). It is further evident from a reading of this section
that the General Assembly intended and expected the revocation of bingo licenses in appropriate
circumstances. Also, it should be noted that Judge Anderson has previously ruled that S.C. Code
Ann. § 12-54-90(A) (Supp. 1994) provides for the revocation of bingo licenses. See South
Carolina Dep't of Revenue v. Army Navy Garrison #2179, and Ibrahim J. Abdin, Promoter,
95-ALJ-17-0219-CC.
1. Monetary Fines
This tribunal finds that Respondents are subject to a penalty of $1000.00 for each of the eight (8)
violations of S.C. Code Ann. § 12-21-3480(C), failing to deposit gross proceeds, less the amount
paid out as prizes, into its bingo account ($8,000 total); a $500 penalty for a violation of S.C.
Code Ann. § 12-21-3490(C) and (H), commingling funds derived from the conduct of bingo with
other funds; a $1000.00 penalty for each of the ten (10) violations of S.C. Code 12-21-3420(12),
failing to return to players in the form of prizes, at least 60% of gross proceeds taken in during a
calendar quarter, and not less than 50% taken in during a single session; and a $100 penalty for
each of the ninety-four (94) violations of S.C. Code Ann. § 12-21-3340 (A)(8), failing to
supplying updated employee information within the thirty (30) day time frame. Respondents are
liable for a total fine of $27, 900 for the above-referenced violations.
2. Revocation
The Department also seeks the revocation of Respondents' bingo license and promoter's license
for the violation of S.C. Code Ann. § 12-21-3420(12), failing to return the requisite percentage of
gross proceeds to players as prizes. Clearly, as set out above, the Department has authority to
revoke Respondents' licenses for any violation of the Bingo Act, pursuant to S.C. Code Ann.
§12-54-90(A). The exercise of this discretion is triggered upon a violation. Respondents'
argument that the license in question should not be revoked because the Department did not
follow its own internal guidelines, is without merit. The guidelines were formulated to assist
Department employees in performing audits and inspection. There was no evidence proffered to
establish that the Department abused its discretion in seeking to revoke Respondents' licenses.
ORDER
IT IS THEREFORE ORDERED that Respondents pay a fine of $27,900 (total) to the
Department of Revenue and Taxation for violating the laws regulating the conduct of bingo
games, as set forth above.
IT IS THEREFORE ORDERED that the Department of Revenue and Taxation revoke the
bingo license of Roadrunners and the promoter's license of Ronald E. Reynolds for violating the
laws regulating the conduct of bingo games.
IT IS FURTHER ORDERED that any motions or issues raised in the proceedings, but not
addressed in this Order are deemed denied pursuant to ALJD Rule 29(B).
IT IS FURTHER ORDERED that post-hearing briefs submitted by the parties shall be stricken
from the record. These briefs were requested by this tribunal and therefore no prejudice should be
suffered by the parties as a result of this motion. The briefs are being stricken from the record as
certain evidentiary questions have been raised by the Department concerning
Respondents' brief. Because of time constraints, this tribunal, sua sponte, strikes the briefs rather
than engage in a motion hearing to resolve these evidentiary questions. This tribunal has not
relied upon either brief in issuing this Order.
AND IT IS SO ORDERED.
_____________________________________
JOHN D. GEATHERS
Administrative Law Judge
Edgar A. Brown Building
1205 Pendleton Street
Columbia, South Carolina 29201
October 19, 1995
Columbia, South Carolina |