South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. Will D. Wheeler, Hot Spot Casino, Inc., et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Will D. Wheeler, Hot Spot Casino, Inc., P.I. Leasing and Management, Inc., Robert Hills, Oscar Tysinger, III, and Richard McComas, 1918 Highway 17 North Business, Surfside Beach, S.C.
 
DOCKET NUMBER:
97-ALJ-17-0418-CC

APPEARANCES:
Nicholas P. Sipe, Esquire, for the Petitioner

Douglas L. Hinds, Esquire, for Respondents
 

ORDERS:

FINAL ORDER AND DECISION

This matter comes before me upon Respondents' request for a contested case hearing after being cited by the South Carolina Department of Revenue for administrative violations of S.C. Code Ann. §§ 12-21-2804(A) of the Video Game Machines Act, and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) at, 1918 Highway 17 North Business, Surfside Beach, South Carolina. The primary issues for determination are whether the Respondents violated Regs. 117-190 by not having "at least one separate employee on the premises during business hours".

A contested case hearing in this matter was held in Columbia, South Carolina, on

October 31, 1997. Based upon the relevant and probative evidence and the applicable law, I find the retail operators, violated Regs. 117-190 and S.C. Code §§ 12-21-2804. Accordingly, the ninety-five machine licenses in the subject rooms are revoked and no Class III machines shall be operated in the subject rooms at the location for a period of six months. Respondents Hot Spot Casino, Inc., and P.I. Leasing and Management, Inc., are each ordered to pay a monetary penalty of $5,000, and Respondent Will D. Wheeler is ordered to pay a monetary penalty of $2,000, for a total fine of $12,000.

FINDINGS OF FACT

By a preponderance of the evidence, I find:

  1. On or about June 13, 1996, a video gaming business known as "Hot Spot Casino" operated at 1918 Highway 17 North Business, Surfside Beach, South Carolina, in a mall-type structure containing twenty video gaming rooms and a common area.
  2. On or about June 13, 1996, five Class III video game machines were located in each of the twenty game rooms at the subject location.
  3. On or about June 13, 1996, from approximately 11:00 a.m. to 12:30 p.m., DOR Revenue Officers David Dean and Nancy Carter made an inspection of the video gaming businesses at the subject location.
  4. After identifying themselves to an employee on duty, Revenue Officers Dean and Carter conducted the inspection of location, which included observing whether the rooms were open and whether any employees were present, going into each game room, checking for employees, listing the machine license numbers and machine owner identification information, reviewing business and retail tax licenses for each room, and taking photographs.
  5. The following Class III video game machine licenses were affixed to Class III video game machines located at the subject location:


(by room number and name, list license numbers and licensees for all rooms except #5)

machines located in the room at the subject location known as.

  1. The business retail licenses for nineteen of the rooms at Hot Spot Casino were in the name of Hot Spot Casino, Inc., d/b/a Hot Spot Casino, Inc. #s 1-19.
  2. Will D. Wheeler is the President of Hot Spot Casino, Inc.
  3. The business retail license for one of the rooms at Hot Spot Casino was in the name of P.I. Leasing and Mangament, Inc.
  4. Will D. Wheeler is the President of P.I. Leasing and Management, Inc.
  5. No evidence was offered to indiate that licensees Oscar W. Tysinger, III, Robert Hills, or Richard McComas had any management, control, or supervison authority over any of the game rooms or their employees.
  6. All of the twenty rooms containing Class III machines at the subject location were open for business during the times of the inspections.
  7. There were no indications that the subject rooms were closed at the time of the inspection.
  8. For each of the twenty game rooms, the door was open and no "closed" signs were present.
  9. In each of the twenty game rooms, machines were illuminated and operational.
  10. In at least eight of the game rooms, patrons were playing the video game machines during the inspection.
  11. At the time of inspection, five employees were on duty at the subject location.
  12. Of the five employees on duty, four were in the commons area at the time of inspection.
  13. At the time of inspection, no employees were physically within nineteen of the twenty game rooms.
  14. At the time of inspection, an employee was present on the premises of Game Room # 5 (as shown on Respondent's Ex. # 3 and identified on Petitioner's Ex. # 3 as "Hot Spot Casino, Inc. #4").
  15. At the conclusion of the inspection, Revenue Officer Dean completed a Regulatory Violation and Proposed Assessemnt Report citing the location with a violation of the single place or premises provision and left a copy with an employee.
  16. By letter dated June 18, 1997, DOR amended it intial violation report and issued it's Final Agency Determination to seek revocation of all class III licenses at the subject location and impose monetary fines of $5,000 upon each of the following persons: Will D. Wheeler, Hot Spot Casino, Inc., P.I. Leasing and Mangament, Inc., Rosemary Coin Machine Co., Inc., Robert Hills, Oscar Tysinger, III, and Richard McComas.
  17. A timely request for a contested case hearing was made and this matter was transmitted to the ALJD for a hearing.
  18. Notice of the time, date, and location of the contested case hearing was given to all parties.
  19. On and before June 13, 1996, Hot Spot Casino employees were assigned to specifc game rooms, but not required to always remain on the premises of the assigned game room during business hours.
  20. On and before June 13, 1996, the work activities of Hot Spot Casino employees were not limited to a particular game room.
  21. Prior to June 13, 1996, DOR revenue officers in the Myrtle Beach office had never issued any establishment a violation citation for failure to have an employee physically within a game room.
  22. Revenue Officer Dean had visited the subject location on previous occasions prior to June 13, 1996, for reasons other than video game machine inspection.
  23. Notice of the time, date, place and subject matter of the hearing was given to the Petitioner and Respondents.


CONCLUSIONS OF LAW

Based upon the above Findings of Fact, I conclude as a matter of law, the following:

  1. The Administrative Law Judge Division has jurisdiction to hear and decide this matter pursuant to the Administrative Procedures Act (APA), S.C. Code Ann. §§ 1-23-310 et seq. (1976 & Supp. 1996), S.C. Code § 12-4-30(D), and §§ 12-60-1310 through 12-60-1350 of the South Carolina Revenue Procedures Act (RPA).
  2. The Video Game Machines Act, S.C. Code Ann. §§ 12-21-2770, et seq. (Supp. 1996) became effective on July 1, 1993, to regulate the video game machines industry and to prevent large-scale casino-type gambling operations in the State of South Carolina. See Reyelt v. South Carolina Tax Comm'n, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993); see also 1994 Op. S.C. Att'y Gen. 21.
  3. Video Game Machines Act § 12-21-2804(A) prohibits a person from applying for, receiving, maintaining, or permitting to be used permits for the operation of more than five Class III machines at a single place or premises.
  4. Department of Revenue regulations clarify the meaning of "single place or premises" (for purposes of the Video Games Machines Act):

In determining whether each entity is in fact a single place or premises, the Department of Revenue will consider the following factors:

(1) Does each entity or business have a separate electric

utility meter?

(2) Does each entity or business have at least one separate employee on the premises during business hours?

(3) Does each entity or business have a separate local business license where required?

(4) Does each entity or business have a separate state sales tax license?

A positive answer to these four questions is required for each area to be considered a "single place or premise" for purposes of the Video Game Machines Act.

27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) (emphasis added).

  1. Respondents retail operators Hot Spot Casino, Inc., and P.I. Leasing and Management, Inc., failed to have "one separate employee" within each of the five subject rooms during business hours, in violation of R. 117-190.
  2. Respondents retail operators Hot Spot Casino, Inc., and P.I. Leasing and Management, Inc., violated S.C. Code Ann. § 12-21-2804 by operating Class III video machines in locations failing to meet all requirements of the "single place or premises" criteria set forth in Regulation 117-190.
  3. Under § 12-21-2804(A), a license on a Class III video poker machine must be revoked by virtue of its misuse under the Act, regardless if the actual violator is the retail operator, machine owner, or licensee.
  4. Section 12-21-2804(F) provides that only those persons directly involved in the management or operation of a location in violation of § 12-21-2804(A) are subject to monetary fines.
  5. Section 12-21-2804(F) (Supp. 1996) provides that a person who violates § 12-21-2804(A) is subject to a fine of up to $5,000.
  6. Because they were merely the licensees of the machines in question and exercised no control or management of the subject game rooms or their employees operated by the retailers, Oscar W. Tysinger, III, Robert Hills, or Richard McComas should not be assessed a monetary penalty for the failure to maintain a separate employee for each game room under the provisions of S.C. Code Ann. §§ 12-21-2804(A) and 12-21-2804(F).
  7. Section 12-21-2804(A) also provides that "[n]o license may be issued for a machine in an establishment in which a license has been revoked for a period of six months from the date of revocation."
  8. Within statutory limits, the amount of a fine is a matter of trial-court discretion. State v. Sheppard, 54 S.C. 178, 32 S.E. 146 (1899). An administrative law judge, as fact finder, has the prerogative "to impose an appropriate penalty based on the facts presented." Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 211, 407 S.E.2d 633, 634 (1991).
  9. The trier of fact must weigh and pass upon the credibility of evidence presented. See S.C. Cable Television Ass'n v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992).
  10. The trial judge is in the best position to weigh witnesses' demeanor and veracity and to evaluate their testimony. See McAlister v. Patterson, 278 S.C. 481, 299 S.E.2d 322 (1982); Peay v. Peay, 260 S.C. 108, 194 S.E.2d 392 (1973); Mann v. Walker, 285 S.C. 194, 328 S.E.2d (Ct. App. 1985); Marshall v. Marshall, 282 S.C. 534, 320 S.E.2d 44 (Ct. App. 1984).
  11. In the present case, a monetary penalty of $5,000 imposed upon each of the retail operators, Hot Spot Casino, Inc., and P.I. Leasing and Management, Inc., for violation of the "single place or premisses" provision is appropriate and reasonable.
  12. In the present case, a monetary penalty of $2,000 imposed upon Will D. Wheeler, for violation of the "single place or premisses" provision is appropriate and reasonable.
  13. Pursuant to ALJD Rule 29(B), any issues or motions raised at the hearing but not addressed in this Order are deemed denied.




ORDER

IT IS THEREFORE ORDERED that the following Class III video game machine licenses located in the following rooms at 1918 Highway 17 North Business, Surfside Beach, South Carolina, are revoked:

(insert license numbers and licensees for all rooms except #5)


IT IS FURTHER ORDERED that no Class III machines shall be operated in game rooms 1-4, and 6-20, at 1918 Highway 17 North Business, Surfside Beach, South Carolina, for a period of six (6) months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that Hot Spot Casino, Inc. hall pay a monetary fine to the Department of Revenue in the amount of Five Thousand Dollars ($5,000) no later than fifteen days from the date of this Order for violation of the "single place or premises" statute and regulation.

IT IS FURTHER ORDERED that P.I. Leasing and Managment, Inc. shall pay a monetary fine to the Department of Revenue in the amount of Five Thousand Dollars ($5,000) no later than fifteen days from the date of this Order for violation of the "single place or premises" statute and regulation.

IT IS FURTHER ORDERED that Will D. Wheeler shall pay a monetary fine to the Department of Revenue in the amount of Two Thousand Dollars ($2,000) no later than fifteen days from the date of this Order for violation of the "single place or premises" statute and regulation.

AND IT IS SO ORDERED.



_____________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

January 29, 1998

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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