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. St. Andrews-Irmo Sertoma Club, d/b/a Dabber's Bingo, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
St. Andrews-Irmo Sertoma Club, d/b/a Dabber's Bingo, and Roy M. Stevens
 
DOCKET NUMBER:
98-ALJ-17-0428-CC

APPEARANCES:
Geoffrey R. Bonham, Esquire, for Petitioner

S. Jahue Moore, Esquire, for Respondent
 

ORDERS:

FINAL ORDER AND DECISION

STATEMENT OF THE CASE


This matter is before the South Carolina Administrative Law Judge Division pursuant to S.C. Code Ann. § 1-23-310 et seq. (Supp. 1996) and S.C. Code Ann. § 12-4-30 (Supp. 1994) upon Respondent's request for a contested case hearing. Petitioner South Carolina Department of Revenue ("DOR") seeks penalties totaling $15,900 against Respondent Roy Stevens ("Stevens") for alleged violations of S.C. Code Ann. § 12-21-3500(A) (Supp. 1997), for not submitting a quarterly report for the first quarter of 1994; S.C. Code Ann. § 12-21-3490(C) (Supp. 1997), for not depositing all funds derived from the conduct of bingo into a special bingo account; and S.C. Code Ann. § 12-21-3490(D) (Supp. 1997), for not noting on the face of each check drawn on the bingo account the nature of the payment. DOR's citations for these violations resulted from an audit of Respondents' bingo operation performed in 1995.

After notice to the parties, a hearing was conducted on October 28, 1998. Based on the evidence presented, I find Respondents violated the enumerated statutes. The appropriate penalty is a $2900 fine. Any issues raised in the proceedings or hearing of this case but not addressed in this Order are deemed denied pursuant to ALJD Rule 29(C).

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 by a preponderance of the evidence, and taking into account the credibility of the witnesses:

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

Respondent Dabber's Bingo is a bingo operation in the Lexington County area run by the St. Andrews-Irmo Sertoma Club.

Respondent Roy M. Stevens was a bingo promoter whose responsibilities included observing the operation, managing problems and ensuring that bills were paid.

In July, 1995, DOR audited Respondents for the period covering November 1, 1993 to March 31, 1995.

On July 19, 1995, DOR issued a preliminary Report of Field Audit, citing Respondents for various violations of the Bingo Act of 1996, and advising them of their response options.

DOR records indicated that Respondents failed to submit a quarterly report for the first quarter of 1994.

Stevens maintained that the report for that period was forwarded to DOR. Although he produced a copy of a quarterly report for that period during the audit, he was not able to do so immediately.

The quarterly report file copy was not complete and was neither signed nor notarized. Stevens provided no evidence that the original was mailed to DOR.

According to Stevens, he never notarized any quarterly report filed with DOR. Instead, he simply signed the form and believed that satisfied the statutory requirement that the report be filed under oath. Further, DOR never informed him that it had not received the quarterly report for the first quarter of 1994.

During the audit, DOR identified 104 instances when the money deposited into the bingo account at the end of the day was less than the expected deposit amount.

The expected deposit amount, as determined by DOR, is the gross receipts from the conduct of bingo minus the total cash prizes to players for that same day.

Any deposit discrepancies of $20.00 or less were not pursued by DOR.

Shortages in the deposits are common for Dabber's Bingo because of the speed required for runners to make change for customers on the bingo floor.

Respondents ultimately were cited for only nine (9) instances when all funds were not deposited into the bingo account.

The shortages for the audit period totaled $1,102.00, a small percentage of the 2.2 million dollar gross volume of business for the audit period.

The auditor questioned Respondents' failure to note the nature of the payment on the face of checks written on the bingo account.

Stevens was not aware of this requirement.

During the audit, Stevens provided the auditors the necessary backup documentation to show the payments were for legitimate business expenses.

DOR cited Stevens for 140 violations for failure to note the nature of the payment on the face of the check.

The nature of the payment should have been obvious on most of the checks because the checks were payable to utility companies. However, no notation was placed on the check.

DOR also cited Stevens for six violations for failure to report prize winners. These violations were not pursued by DOR.

Based upon DOR's bingo violation penalty guidelines, the total penalties assessed against Stevens were $15,900.

On August 7, 1995, Respondent Stevens answered DOR's final determination in a letter in which he disagreed with the violations and the fines imposed.

DISCUSSION

Quarterly Report Violation

As a result of the 1995 audit, DOR cited Respondents for not submitting a quarterly report for the first quarter of 1994. Stevens rebuts that he did mail the quarterly report to DOR. After some time delay, Stevens produced a copy of the report during the audit. He further argues that this is the only quarterly report DOR has not received and he was never informed by DOR that it had not received the report until this audit. It was noted that the copy produced and entered into evidence is not complete as it omits significant information relating to the proceeds from bingo. The copy of the quarterly report Stevens produced was neither signed nor notarized. Stevens stated he made the copy prior to signing the document. He also testified that he has never notarized a quarterly report and DOR never addressed this detail with him in the past. Respondents do not have any evidence, other than Stevens' testimony, that the report was signed, mailed and filed with DOR as required. An addressee's testimony that he never received a letter is some evidence that it was never posted. Keller v. Provident Life & Accident Ins. Co., 49 S.E.2d 577, 213 S.C. 339 (1948). The burden is on Stevens to produce evidence indicating that the report was mailed to the Department. See Glenn v. Western Union Telegraph Co., 65 S.E. 1024, 84 S.C. 155 (1909). No such evidence was presented.

S.C. Code Ann. § 12-21-3500(A) (Supp. 1997) states, "[e]ach licensee conducting bingo games shall submit quarterly to the commission a report under oath...." According to DOR, "under oath" means notarized. In support of this interpretation, the quarterly report standard form contains a line for signature by notary public next to the preparer's signature line. A notary public is a public officer whose function is to administer oaths. Black's Law Dictionary 1060 (6th ed. 1990). The Department's interpretation of "under oath" as meaning notarized, is reasonable and should be afforded great deference. Because there are no compelling reasons to deviate from the Department's interpretation, "under oath" is determined to mean that the quarterly reports are to be notarized and signed before filing. Even if the original document was filed by Stevens with DOR, it did not satisfy the requirements of the statute. He claims he has never notarized a quarterly report prior to its filing.

All Funds not Deposited

DOR auditors reviewed daily sessions sheets and determined that all funds derived from the conduct of bingo were not deposited into the bingo account on many occasions. The Audit Report listed 104 violations of S.C. Code Ann. § 12-21-3490(C)(Supp. 1997). However, DOR only cited Respondents only for discrepancies involving an amount exceeding $20.00. Respondents' were cited for nine violations of S.C. Code Ann. § 12-21-3490(C)(Supp. 1997). Stevens responded that overages and shortages are common in the normal course of business. According to him, the variance for the seventeen month audit was $1,200 and the gross revenues for that period were over two million dollars. Stevens believes that such a small variance compared to the gross revenues is an indication that the business is operated properly and with appropriate measures to prevent problems.

S.C. Code Ann. § 12-21-3490(C)(Supp. 1997) 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." Stevens' explanations for the shortages were possible theft, or error made by the runners due to the haste in which they make change during the games. While these explanations are viable for small amounts of cash, they do not adequately explain larger shortages. DOR apparently allowed for some variance by only citing Stevens for variances exceeding $20.00. The nine violations of S.C. Code Ann. § 12-21-3490(C)(Supp. 1997) cited by DOR are reasonable.

Nature of Payment not on face of check

Finally, DOR auditors identified 196 checks in violation of S.C. Code Ann. § 12-21-3490(D)(Supp. 1997). The checks did not have a notation on their face that indicated the nature of the payments. Stevens plead ignorance to this part of the code. He stressed that a majority of the checks were made out to local utilities, suppliers of bingo paper, and the South Carolina Tax Commission, and that these facts alone should adequately inform DOR about the nature of the payments. Stevens states on numerous occasion he asked DOR to review the record keeping to make sure he was complying with statutes and regulations, but the request was never granted. DOR counters that the notation requirement is clearly set forth in the statute.

S.C. Code Ann. § 12-21-3490(D)(Supp. 1997) states, "There also must be noted on the face of the check or withdrawal slip the nature of the payment made." Depending upon the nature of the language under review, an agency's view may or may not be entitled to deference. The issue in interpreting a statute is what did the legislature intend. Laird v. Nationwide Ins. Co., 243 S.C. 388, 134 S.E.2d 206 (1964). The legislative intent in passing laws such as the Bingo Act and the Video Game Machines Act was to limit the use of these activities to prevent excessive gambling and fraud within the businesses. See Reyelt v. S.C. Tax Comm'n, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993). The requirement in S.C. Code Ann. § 12-21-3490(D) to note the nature of the payment on the face of the check is to prevent misuses of funds from the bingo account. Stevens claims that no violation exists when the nature of the payment should be obvious from the payee, such as checks to South Carolina Electric and Gas (SCE & G) and South Carolina Tax Commission. In DOR's Final Determination, it states that payments to SCE & G for example could have been for payment of individual household utility bills. Stevens provided the auditor with receipts or check stubs for all checks listed as violations, showing that the payments were business related. DOR advised in its Final Determination that it does not interpret S.C. Code Ann. § 12-21-3490(D) to allow the licensee to provide additional paperwork during the audit to the auditors, thus requiring them to track down each payment or compare checks with other records. The legislature wanted to avoid this needless expenditure of the State's resources hence the requirement of the exact nature of the payment on the face of the check itself. However, DOR concedes that it is not in anyone's best interest to pursue penalties for the eleven checks made out to SCE & G or the twenty-one checks to South Carolina Tax Commission.

If DOR concedes on SCE & G and the South Carolina Tax Commission, it cannot uphold violations on checks paid to Southern Bell, City of West Columbia, U.S. Postmaster or any of the businesses listed in the expense column of the quarterly report, such as Kilroy Office Supply and Palmetto Paper. Continuity and fairness prescribe that checks of the same nature should be regarded in the same manner. Although, Stevens' pleading of ignorance of the law is not an excuse [Oxford Finance Companies v. Burgess, 303 S.C. 534, 402 S.E.2d 480 (1991)], DOR cannot choose at whim which checks will constitute a violation. The number of checks involved during the audit period are quite numerous. While failure to note the nature of the payment is a minor violation pursuant to the guidelines, the length of time and the number of checks are so numerous that a fine for a major violation is imposed. The audit period is considered one violation and thus a fine of $1,000 is imposed for this offense.

CONCLUSIONS OF LAW

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

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

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. Anonymous v. State Board of Medical Examiners, 329 S.C. 371, 496 S.E.2d 17 (1998).

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 their testimony. See, e.g., McAlister v. Patterson, 278 S.C. 481, 299 S.E.2d 322 (1982).

S.C. Code Ann. § 12-21-3380 (Supp. 1997) advises that the promoter and the sponsor organization are jointly and severally liable for this amount, with the promoter being primarily liable "at all times".

S.C. Code Ann. § 12-21-3500(A) (Supp. 1997) states, "[e]ach licensee conducting bingo games shall submit quarterly to the commission a report under oath..."

The Department's interpretation of "under oath" as meaning notarized, is reasonable and should be afforded great deference.

The quarterly report copy presented by Stevens to the auditors did not meet the statutory requirements of being filed under oath.

The applicable Bingo Violation Penalty Guidelines categorize not filing a quarterly report as a major audit violation. The applicable penalty is $1,000 per violation.

Respondent Stevens violated S.C. Code Ann. § 12-21-3500(A) by not filing a signed, notarized quarterly report with DOR for the first quarter of 1994, and a fine of $1,000 is assessed.

S.C. Code Ann. § 12-21-3490(C)(Supp. 1997) 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."

DOR cited Stevens for nine violations of not depositing all funds into the Bingo account when the total shortage was more than $20.00.

The applicable Bingo Violation Penalty Guidelines categorize not depositing all funds into the Bingo account as an intermediate violation. The applicable penalty is $100 per violation.

Respondent Stevens violated S.C. Code Ann. § 12-21-3490(C) by not depositing all funds into the Bingo account on nine occasions. The total fine is $900.

S.C. Code Ann. § 12-21-3490(D)(Supp. 1997) states, "There also must be noted on the face of the check or withdrawal slip the nature of the payment made."

DOR initially cited Respondents with 196 violations of Section 12-21-3490(D) and reduced it to 172. Because several of the checks were written to utility companies and other checks were written for expenses associated with the bingo operation as shown on the quarterly return, the violation of Section 12-21-349(D) is treated as one audit period.

While the Bingo Violation Penalty Guidelines categorize this violation as a minor violation, the repeated occurrence and the lack of clear knowledge by Respondents warrant a deviation and imposition of the fine imposed for a major violation, $1,000.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, is hereby

ORDERED, that Respondents have violated the provisions of S.C. Code Ann. §§ 12-21-3380, 12-21-3500, and 12-21-3490, and are fined $2,900 payable to the South Carolina Department of Revenue.

AND IT IS SO ORDERED.





______________________________

ALISON RENEE LEE

Administrative Law Judge

February 4, 1999

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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