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. Brian Nesbitt and Kevin Watson, Partnership, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Brian Nesbitt and Kevin Watson, Partnership, H. Hugh Andrews, II, d/b/a Andrews Amusement Co., H. Hugh Andrews, III, d/b/a Drews Amusement
 
DOCKET NUMBER:
97-ALJ-17-0446-CC

APPEARANCES:
Carol I. McMahan, Esquire, for the Petitioner

James M. Griffin, 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) and 12-21-2802 (Supp. 1996) of the Video Game Machines Act, and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) at 5405 Socastee Boulevard, Myrtle 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" and § 12-21-2802 by failing to display the required penalty signs.

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

November 18, 1997. Based upon the relevant and probative evidence and the applicable law, I find the retail operator, the partnership of Brian Nesbitt and Kevin Watson, violated Regs. 117-190 and S.C. Code §§ 12-21-2804, as well as § 12-21-2802. Accordingly, the twenty-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. Brian Nesbitt and Kevin Watson are ordered to pay a monetary penalty of $5,000 for violation of the "single place or premises" provision. Brian Nesbitt and Kevin Watson are also assessed a $250 penalty for each of the twenty-one violations for failure to post the required penalty signs, amounting to $5,250. No fine is imposed against Respondents H. Hugh Andrews, II or H. Hugh Andrews, III.

FINDINGS OF FACT

By a preponderance of the evidence, I find:

  1. On or about November 22, 1996, a video gaming business known as "Fortune Games" operated at 5405 Socastee Boulevard, Myrtle Beach, South Carolina, in a mall-type structure containing five video gaming rooms and a common area.
  2. The partnership of Brian Nesbitt and Kevin Watson owns and operates Fortune Games.
  3. The business retail licenses for all five rooms at Fortune Games are in the name of Brian Nesbitt.
  4. Five "Pot of Gold" Class III video game machines were located in four of the game rooms at the subject location. The fifth room contained a five-station blackjack machine.
  5. The twenty "Pot of Gold" machines are licensed to and owned by H. Hugh Andrews, III, d/b/a Drews Amusement.
  6. The five-station blackjack machine located in one of the rooms is licensed to and owned by H. Hugh Andrews, II, d/b/a Andrews Amusement.
  7. Neither H. Hugh Andrews, II, or H. Hugh Andrews, III, had any management authority or control of the location or its employees.
  8. On or about November 22, 1996, SLED Agent Pamela Williamson made two inspections of the video gaming businesses at 5405 Socastee Boulevard, Myrtle Beach, South Carolina.
  9. During both inspections a neon "open" sign was present outside the subject location.
  10. Williamson's first inspection was at approximately 10:25 a.m. on November 22, 1996, in an undercover capacity. She played Class III video games at the location and did not identify herself to any employees.
  11. Williamson returned to Fortune Games later that afternoon for another inspection and identified herself to an employee on duty.
  12. After identifying herself to the employee on duty, Agent Williamson conducted her inspection of location, which included going into each game room, listing the machine license numbers and machine owner identification information, checking for posted penalty signs, observing whether the rooms were open and whether any employees were present, reviewing business and retail tax licenses for each room, and taking photographs.
  13. The following Class III video game machine licenses were affixed to Class III video game machines located in the room at the subject location known as "Fortunes Amusements A": 041147, 041148, 041149, 041150, and 041151.
  14. The following Class III video game machine licenses were affixed to Class III video game machines located in the room at the subject location known as "Fortunes Amusements B": 036262, 036263, 036264, 036265, and 036269.
  15. The following Class III video game machine licenses were affixed to Class III video game machines located in the room at the subject location known as "Fortunes Amusements C": 036266, 036267, 036268, 040682, and 041362.
  16. The following Class III video game machine licenses were affixed to Class III video game machines located in the room at the subject location known as "Fortunes Amusements D": 041855, 041857, 041856, 041858, and 041859.
  17. The following Class III video game machine licenses were affixed to Class III video game machines located in the room at the subject location known as "Fortunes Amusements E": 041226, 041227, 041228, 041230, and 041327.
  18. All of the five rooms containing Class III machines at 5405 Socastee Boulevard were open for business during the times of the inspections.
  19. At the time of both inspections, all Class III video game machines within Fortune Amusements A, B, C, D, and E were on and operating.
  20. All doors leading from the common area to rooms containing Class III video game machines within the subject location were left opened at the time of both inspections.
  21. There were no indications that the subject rooms were closed at the time of either inspection.
  22. Ropes used to close off rooms not in operation were not in place at the doorways of any of the subject rooms at the time of either inspection on November 22, 1996.
  23. No employees were present in any the five open rooms at the time of either inspection.
  24. During the morning inspection, at least one customer was playing a Class III video game at the subject location.
  25. During both inspections, one female employee was located at the payout counter in the common area of the subject location.
  26. Both inspections occurred at a normal time for the daily business operations.
  27. No penalty signs were displayed on, near, or above any Class III video game machine located within any of the five game rooms at the subject location.
  28. Judicial notice is taken of the Order of Fifth Circuit Judge Costa M. Pleicones in the case of Andrews Amusement Co. v. DOR, Civil Action No. 95-CP-40-3618, Filed January 22, 1996, enjoining DOR from counting each station on multi-player station machines licensed by Andrews Amusement Company prior to July 1, 1995 as a separate machine when determining the maximum number of machines allowed to be operated at a single place or premise under S.C. Code § 12-21-2804(A).
  29. The licenses for the five-station blackjack machine located at Fortune Games on November 22, 1996, were issued by DOR prior to July 1, 1995.
  30. 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. Respondent partnership of Brian Nesbitt and Kevin Watson failed to have "one separate employee" within each of the five subject rooms, in violation of R. 117-190.
  2. Respondent partnership of Brian Nesbitt and Kevin Watson 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 H. Hugh Andrews, II and H. Hugh Andrews, III 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, the Andrews 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. S.C. Code Ann. § 12-21-2802 (Supp. 1996) states:

Each machine licensed under this article (Video Game Machines Act) or Article 19 must have a prominently displayed sign citing the penalties provided by Sections 12-21-2790, 12-21-2792, and 12-21-2794 on the wall above the machine or affixed prominently to the machine. The commission shall make these signs available free of charge.

  1. For each of the twenty "Pot-of-Gold" Class III video game machines located and operated at Fortune Games, the retail operators were required to have a separate penalty sig posted, pursuant to S.C. Code Ann. § 12-21-2802 (Supp. 1996).
  2. Pursuant to the Order of Fifth Circuit Judge Costa M. Pleicones in the case of Andrews Amusement Co. v. DOR, Civil Action No. 95-CP-40-3618, Filed January 22, 1996, the multi-player station machine licensed by Andrews Amusement Company prior to July 1, 1995, must be treated as a separate machine for penalty sign requirement purposes. Accordingly, although the five-station machine licensed by Andrews Amusement Co. had five separate machine licenses, in the present case, it is required to have but one penalty sign posted.
  3. The Respondent partnership of Brian Nesbitt and Kevin Watson violated S.C. Code Ann. § 12-21-2802 (Supp. 1996) by failing to have a prominently displayed sign citing penalties for each of the twenty-one Class III video game machines located in Game Rooms A, B, C, D, and E.
The Video Games Machines Act does not provide a specific penalty for a violation of § 12-21-2802; however, the penalty provisions of Title 12, Chapter 54 relating to license and taxes generally are applicable. See S.C. Revenue Ruling 97-2.

S.C. Code Ann. §12-54-40(b)(3) (Supp. 1996) provides:

A person who is liable to obtain a license or purchase stamps for identification purposes, who fails to obtain or display the license properly, or who fails to affix the stamps properly, or fails 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. For failure to obtain or display a license as prescribed in Sections 12-21-2720 and 12-21-2730, the penalty is fifty dollars for each failure to comply.

Pursuant to Section 12-54-40(b)(3), a penalty may be assessed against a retail license holder which fails to comply with statutory requirements associated with the retail license.

As the retail operators of a Class III video game machine, Respondents Brian Nesbitt and Kevin Watson, were required by S.C. Code Ann. § 12-21-2720(A)(3) of the Video Game Machines Act to obtain a retail license under Chapter 36 of Title 12, for the retail business location.

Under Section 12-54-40(b)(3), the penalty range is $50 to $500 for each violation.

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).

  1. 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).
  2. 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).
  3. In the present case, a monetary penalty of $5,000 imposed upon the retail operators Brian Nesbitt and Kevin Watson for violation of the "single place or premisses" provision is appropriate and reasonable.
  4. In the present case, a monetary penalty in the amount of $250 per machine, for a total of Five Thousand Two Hundred Fifty Dollars ($5,250) imposed upon the retail operators Brian Nesbitt and Kevin Watson for violation of the requirement to have posted penalty signs as required by statute and regulation for the twenty "Pot of Gold" machines and the one multi-player blackjack machine located at the subject location is appropriate and reasonable.
  5. 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 5405 Socastee Boulevard, Myrtle Beach, South Carolina, are revoked: "Fortunes Amusements A"(041147, 041148, 041149, 041150, and 041151); "Fortunes Amusements B" (036262, 036263, 036264, 036265, and 036269); "Fortunes Amusements C" (036266, 036267, 036268, 040682, and 041362); "Fortunes Amusements D" (041855, 041857, 041856, 041858, and 041859); and, "Fortunes Amusements E" (041226, 041227, 041228, 041230, and 041327).

IT IS FURTHER ORDERED that no Class III machines shall be operated in the five subject rooms at the location at 5405 Socastee Boulevard, Myrtle Beach, South Carolina, for a period of six (6) months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that the partnership of Brian Nesbitt and Kevin Watson shall pay a monetary fine to the Department of Revenue in the amount of Five Thousand Dollars ($5,000) for violation of the "single place or premises" statute and regulation.

IT IS FURTHER ORDERED that the partnership of Brian Nesbitt and Kevin Watson shall pay a monetary fine to the Department of Revenue for failing to have posted penalty signs as required by statute and regulation for the twenty "Pot of Gold" machines and the one multi-player blackjack machine located at the subject location, in the amount of $250 per machine, for a total of Five Thousand Two Hundred Fifty Dollars ($5,250).

IT IS FURTHER ORDERED that Brian Nesbitt and Kevin Watson shall pay the above monetary penalties, totaling $10,250, to DOR no later than fifteen days from the date of this Order.

AND IT IS SO ORDERED.



_____________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

December 31, 1997

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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