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. James McDonald, Jr., d/b/a McDonald Amusement

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
James McDonald, Jr., d/b/a McDonald Amusement, and Jeff Martini, d/b/a Riverboat Games, at 92 #5 Highway 17 South, North Myrtle Beach, S.C.
 
DOCKET NUMBER:
98-ALJ-17-0092-CC

APPEARANCES:
Carol I. McMahan, Esquire, for Petitioner

Richard A. Harpootlian, Esquire, for Respondents
 

ORDERS:

FINAL ORDER AND DECISION

STATEMENT OF THE CASE

This matter is before the Administrative Law Judge Division pursuant to S.C. Code Ann. § 12-60-460 (Supp. 1997) and S.C. Code Ann. §§ 1-23-310 et seq. (Rev. 1986 and Supp. 1997), upon Respondents' request for a contested case hearing. Petitioner South Carolina Department of Revenue ("DOR") seeks revocation of ten Class III video poker machine licenses and a $5,000 penalty against each Respondent for two alleged violations of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). The sole issue for determination is whether the Respondents failed to have at least one separate employee on each of the premises during business hours.

After notice was sent to the parties, a hearing was conducted on May 11, 1998 in Conway, South Carolina. Based upon the evidence presented and the applicable law, I find that Respondents committed one violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). With regard to the other alleged violation, Petitioner failed to meet the burden of proof, and the citation for that violation is hereby dismissed. Pursuant to ALJD Rule 29(C) (1998), any issues or motions raised at the hearing but not addressed in this Order are deemed denied.

DISCUSSION

Riverboat Games, located at 92 #5 Highway 17 South, North Myrtle Beach, South Carolina, is a video gaming business in a mall-type structure containing four video gaming rooms and a common area. On January 21, 1997, SLED agents Rhett Holden, Jr. and S.A. Weaver conducted an undercover inspection of Riverboat Games. Agent Holden testified that when he and agent Weaver arrived at the location, Units B and C were open and there were no employees in either room. Although agent Holden's checklist indicated that all four rooms were closed, Holden explained that he did not prepare the Preliminary Findings Report until after leaving the location and returning a few hours later, at which time all rooms were closed.

Agent Holden's testimony, based on notes from the inspection, clearly established the absence of an employee in Unit C and the resulting violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). His testimony regarding Unit B, however, was unclear and insufficient in light of contradictory testimony given by the manger of Riverboat Games. Therefore, I find that DOR failed to carry its burden of proving a violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) in Unit B.

FINDINGS OF FACT

Based on the evidence presented, I make the following findings of fact, taking into consideration the burden on the parties to establish their respective cases, and taking into account the credibility of the witnesses:

1. Notice of the date, time and place of the hearing was given to all parties.

2. Riverboat Games, located at 92 #5 Highway 17 South, North Myrtle Beach, South Carolina, is a video gaming business in a mall-type structure containing four video gaming rooms and a common area.

3. The licensed retail operator of game rooms B and C at Riverboat Games is Jeff Martini.

4. The owner of licensed machines in rooms B and C at Riverboat Games is McDonald Amusement.

5. James R. McDonald, Jr. is the owner of McDonald Amusement.

6. On January 21, 1997, SLED agents Rhett Holden, Jr. and S.A. Weaver conducted an undercover inspection of Riverboat Games.

7. The two agents entered the location and went into Unit C where a five station black jack machine was located. The machine was operable and there was no indication that the room was closed. Weaver began to play the machine. The men met Mr. Witherspoon, manager of the location, and after a brief conversation, Witherspoon lead Holden to Unit B to play a "Caribbean Stud Poker" machine.

8. Holden did not like the machine and was shown another machine ("Shamrock 7") which he also played. Weaver continued to play the black jack machine in Unit C without an employee present.

9. Holden's field notes, taken contemporaneously with the inspection, reveal that Weaver played ten dollars, Holden played five dollars, and no attendant was in the black jack room.

10. The following video game machine licenses were affixed to machines located in Unit C: 3807941, 3807942, 3807943, 3807944, and 3807945.

11. No employees or owners were located in Unit C at the time Weaver played the machine. Another employee was present in the building.

12. Upon completion of the inspection, agents Holden and Weaver left the location.

14. The agents returned to the location a few hours later and completed separate Preliminary Findings Reports for Unit B and Unit C.

15. The Preliminary Findings Reports cited Respondents with violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). In addition, one report cited a violation of S.C. Code Ann. § 12-21-2748. This alleged violation was not an issue in this matter.

16. On August 21, 1997, DOR issued a Final Agency Determination revoking licenses for the ten machines in rooms operating without an employee present and assessed a $5,000 penalty against each Respondent for violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

17. Respondents timely requested a contested case hearing before the Administrative Law Judge Division.

18. Respondent James McDonald, Jr. has violated S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) and has been fined on one prior occasion in Case Number 97-ALJ-17-0767-CC (Date of Violation: August 5, 1997).

CONCLUSIONS OF LAW

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

1. The Administrative Law Judge Division has subject matter jurisdiction of this case pursuant to S.C. Code Ann. §§ 1-23-310 et seq. (Rev. 1986 and Supp. 1997) and S.C. Code Ann. § 12-60-460 (Supp. 1997).

2. Generally, the burden of proof is on the party asserting the affirmative in an adjudicatory administrative proceeding. 2 Am.Jur.2d Administrative Law § 360 (1994). The government is the proponent of an order seeking sanctions against a private party. Id. Therefore, DOR had the burden of proving by the preponderance of the evidence that Respondents violated S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). Id.; see also Anonymous v. State Bd. of Med. Examiners, Op. No. 24754 (S.C.Sup.Ct. filed January 26, 1998)(Davis Adv.Sh. No. 5 at 11)(The standard of proof in administrative proceedings is a preponderance of the evidence, absent an allegation of fraud, or a statute or court rule requiring a higher standard).

3. 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). The trial judge who observes a witness is in the best position to judge the witness's demeanor and veracity and evaluate his testimony. See, e.g., McAlister v. Patterson, 278 S.C. 481, 299 S.E.2d 322 (1982).

4. Under the Video Game Machines Act ("the Act"), no person shall apply for, receive, maintain, or permit to be used, licenses for the operation of more than five Class III machines at a single place or premises. S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

5. The purpose of the Act is 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 94 Op. S.C. Att'y Gen. 21 (1994).

6. Under the Act, DOR has the authority to promulgate regulations pertaining to video poker machines and persons licensed by DOR. S.C. Code Ann. § 12-21-2798 (Supp. 1997).

7. Pursuant to this statutory authority, DOR promulgated 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) to clarify the phrase "single place or premises" contained in section 12-21-2804(A), and the General Assembly approved this regulation. Cf. McNickel's, Inc., v. South Carolina Dep't of Revenue, Op. No. 24819 (S.C. Sup. Ct. Filed July 20, 1998, (Davis Adv. Sh. No. __ at 31).

8. Regulations authorized by the Legislature have the force of law. Norton v. Opening Break, 313 S.C. 508. 443 S.E.2d 406 (Ct. App. 1994), aff'd 319 S.C. 469, 462 S.E.2d 861 (1995).

9. Regulation 117-190 provides in relevant part:

A "single place" or "premises" means a structure surrounded by exterior walls or fire walls consistent with the requirements of the applicable building code (or where no building code is applicable, a one hour rated firewall), provided such exterior walls and fire walls may not have any windows, doors or other openings leading to another area where video game machines are located.

If a structure surrounded by exterior walls has two or more areas where video game machines are located, each surrounded by exterior walls or fire walls as defined and required above, the Department must review all the facts and circumstances to determine if each area in reality constitutes a single place or premise for video game machines.

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.

(emphasis added).

10. In a mall-type setting such as Riverboat Games, an employee working in a common area or anywhere else outside the game rooms is not considered to be "on the premises" of the game room. See South Carolina Dep't of Revenue & Taxation v. Mickey Stacks, 95-ALJ-17-0742-CC (March 8, 1996), aff'd Court of Common Pleas, Richland County, Civil Action No. 96-CP-40-0889 (March 21, 1997).

11. S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) expressly authorizes DOR to enforce the provisions of this section and also provides that the penalty for exceeding the maximum number of video game machines permitted in a single place or premises requires the revocation of the licenses of machines located in the establishment.

12. Failure to meet any of the requirements of the "single place or premises" criteria set forth in 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) is grounds for revocation of each machine license in the establishment pursuant to S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). Additionally, section 12-21-2804(A) provides that no machine license may be issued for, nor a machine operated at, an establishment in which a license has been revoked for a period of six months from the date of revocation.

13. A person who violates S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) is subject to a fine of up to $5,000.

14. As the finder of fact, it is the administrative law judge's prerogative "to impose the appropriate penalty based on the facts presented." Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633, 634 (1991).

15. Weaver played the black jack machine without an employee present. Holden's notes clearly reveal that no attendant was in the black jack room and thus, Respondent, Jeff Martini, was in violation of S.C. Code Ann. 12-21-2804(A) (Supp. 1997) by failing to have at least one employee in the gaming room during business hours.

16. The testimony regarding Unit B, although confusing, was that Witherspoon was with Holden when he was shown the stud poker machine and when he was shown the Shamrock 7 machine. No violation is warranted for Unit B. DOR failed to carry its burden of proving a violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) in Unit B.

17. Because Respondent Jeff Martini had direct control over the employees at the location, I find that imposition of a $2,500 fine is reasonable under the circumstances.

18. Based on Respondent James McDonald, Jr.'s prior violation, I find that imposition of a $2,500 fine is reasonable under the circumstances.

ORDER

IT IS THEREFORE ORDERED that the following five Class III video game machine licenses located in Unit C at 92 #5 Highway 17 South, North Myrtle Beach, South Carolina are hereby revoked (3807941, 3807942, 3807943, 3807944, and 3807945):

IT IS FURTHER ORDERED that no Class III video game machines may be operated in Unit C at Riverboat Games for a period of six months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that each Respondent shall pay a penalty of $2,500 to the South Carolina Department of Revenue for violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

IT IS FURTHER ORDERED that the citation for violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) issued for Unit B at the same location is hereby dismissed with prejudice.

AND IT IS SO ORDERED.



__________________________________

ALISON RENEE LEE

Administrative Law Judge

July 21, 1998

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

Copyright © 2022 South Carolina Administrative Law Court