1 1 VIRGINIA: 2 3 4 5 VIRGINIA RACING COMMISSION 6 May 20, 2009 7 Horsemen's Building 8 Colonial Downs 9 10700 Horsemen's Road 10 New Kent, Virginia 11 Commencing at 9:30 a.m. 12 13 In Re: Regular Monthly Meeting 14 15 16 17 18 19 20 21 22 23 24 CRANE-SNEAD & ASSOCIATES, INC. 4914 Fitzhugh Avenue - Suite 203 25 Henrico, Virginia 23230 Tel. No. (804) 355-4335 2 1 APPEARANCES: 2 COMMISSION MEMBERS: 3 Peter C. Burnett, Chairman; 4 Mark T. Brown, Vice-Chairman; 5 William H. (Trip) Ferguson; 6 I. Clifton Miller; 7 David C. Reynolds. 8 9 COMMISSION STAFF: 10 Victor I. Harrison, Executive Secretary; 11 Kimberly M. Carter, Office Administrator; 12 David Lermond, Jr., Director of Parimutuels; 13 Joseph M. Roney, Director of Operations & Enforcement; 14 15 16 ATTORNEY GENERAL'S OFFICE: 17 Frank S. Ferguson, Esquire, Deputy Attorney General; 18 Amy K. Dilworth, Esquire, Assistant Attorney General. 19 20 21 22 23 24 25 CRANE-SNEAD & ASSOCIATES, INC. 3 1 2 I N D E X 3 4 PAGE 5 Approval of minutes of April 15, 2009 meeting 4 6 Commissioners' Comments 5 7 Committee Reports 6 8 Executive Secretary's Report 8 9 Public Participation 53 10 Set Next Meeting - June 17, 2009 58 11 Adjournment 60 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CRANE-SNEAD & ASSOCIATES, INC. 4 1 May 20, 2009 2 3 NOTE: The following meeting was 4 called to order at 11:52 a.m., viz: 5 6 CHAIRMAN BURNETT: Item one on our 7 agenda for our regular meeting is the approval of 8 minutes of our regular meeting on April 15, 2009. 9 Gentlemen, have you had an 10 opportunity to review those minutes? Any changes or 11 corrections? 12 13 NOTE: (No response.) 14 15 COMMISSIONER MILLER: I didn't see 16 any, but I'm sure there must be something in there; it 17 was so long. 18 CHAIRMAN BURNETT: Very long and 19 thorough. What do you think, our Executive Director? 20 COMMISSIONER MILLER: I would move 21 it be approved, unless someone else has found 22 something I didn't find. 23 CHAIRMAN BURNETT: Do we have a 24 second? 25 COMMISSIONER TRIP FERGUSON: CRANE-SNEAD & ASSOCIATES, INC. 5 1 Second. 2 CHAIRMAN BURNETT: Mr. Ferguson 3 seconds. 4 All in favor indicate by saying 5 aye. 6 NOTE: (Aye.) 7 8 CHAIRMAN BURNETT: Aye. The 9 motion carries. 10 Next we come to the Commissioners' 11 comments. Any comments, gentlemen? 12 13 NOTE: (No response.) 14 15 CHAIRMAN BURNETT: I would say a 16 couple of things. This is an exciting time of year 17 for horse racing. We are fortunate to have had this, 18 I would call it filly/colt, but it's filly/gelding 19 contest between Mine that Bird and Rachel Alexandra. 20 It is -- I wonder what the attendance at Pimlico would 21 have been, but for that particular contest. I find it 22 hard to believe that banning alcohol in the infield or 23 bringing alcohol into the infield would cause a 24 30 percent drop in attendance at that event. But, all 25 that said, as beautiful as the grounds here look and CRANE-SNEAD & ASSOCIATES, INC. 6 1 with a little bit of weather like this, and that 2 unbelievably beautiful turf course that we have behind 3 us, I'm hoping that we'll have at least as good 4 attendance, if not better, this year at this meet than 5 we've had in years past. 6 I think we're poised for a good 7 meet. I assume that Todd has done a great job -- 8 Tyler has done a great job of getting horses here. 9 There is a lot of them on the backstretch right now. 10 And, driving down through and having a look, the 11 landscaping is beautiful, the barns are all neat and 12 tidy, and it's a place that any horseman would be 13 proud to come, in my opinion. 14 Unless there are other comments, 15 let's move on to committee reports. 16 MS. DILWORTH: Mr. Chairman? 17 CHAIRMAN BURNETT: Yes, please. 18 MS. DILWORTH: Did you want to 19 mention Billy Passmore? 20 CHAIRMAN BURNETT: I did want to 21 mention Bill Passmore. Thank you for reminding me. 22 For those that don't know, our 23 long-time steward and long-time jockey, in fact, if my 24 memory serves me, he rode a horse or two for me many 25 year ago in Maryland, passed away this past week. CRANE-SNEAD & ASSOCIATES, INC. 7 1 COMMISSIONER BROWN: I'm sorry to 2 hear that. 3 CHAIRMAN BURNETT: And, all of us 4 send condolences to his wife. I know he'll be missed 5 in steward stand, and we have taken some measures to 6 replace him as quickly as we can. I would, perhaps, 7 ask the Commission to resolve to send our condolences 8 to his family, and our expression of our enormous 9 appreciation for his contribution to this program. 10 I'm told that he was a steward at 11 every single one of our thoroughbred meets from day 12 one. He certainly was a joy to have around and a 13 wonderful man who gave his life to racing. 14 COMMISSIONER TRIP FERGUSON: Can 15 we plant a tree in his honor or anything like that? 16 CHAIRMAN BURNETT: I think that's 17 a terrific idea. 18 MR. PETRAMALO: We'd be happy to 19 do it. 20 COMMISSIONER TRIP FERGUSON: If it 21 is any expense -- 22 CHAIRMAN BURNETT: If someone will 23 come up with a plan, I'm sure you've got many 24 Commissioners here who would contribute to that, and I 25 think it's a wonderful way for him to be remembered. CRANE-SNEAD & ASSOCIATES, INC. 8 1 All in favor of that resolution? 2 3 NOTE: (Aye.) 4 5 CHAIRMAN BURNETT: Aye. 6 Passed unanimously. Thank you, 7 Amy. 8 Vic? Vic has the Secretary's 9 report. 10 MR. HARRISON: The first thing I 11 am going to do is ask you to approve Stuart Slagle as 12 the placing judge. There is change from the last 13 month. You approved the racing officials, and we 14 just -- not that we thought we had to do it, but we 15 thought it might have been the right thing just to 16 throw it out there. His qualifications, he's 17 obviously a qualified individual and Tyler submitted 18 this to us for your approval, and I recommend that you 19 approve it. 20 COMMISSIONER MILLER: So move. 21 COMMISSIONER TRIP FERGUSON: 22 Second. 23 CHAIRMAN BURNETT: All in favor 24 indicate by saying aye. 25 CRANE-SNEAD & ASSOCIATES, INC. 9 1 NOTE: (Aye.) 2 3 CHAIRMAN BURNETT: Aye. 4 Mr. Slagle is approved. 5 Before we go on to your next item, 6 can you tell us, Vic, how we're dealing with the loss 7 of Mr. Passmore? 8 MR. HARRISON: Mr. Passmore, we 9 have decided to make a contribution, this is what we 10 planned earlier, to a charity specified by the 11 Passmore family in the name of the Racing Commission. 12 THE WITNESS: Mr. Chairman, I 13 think the question was -- Actually, last year Bill 14 Passmore was not a steward here at Colonial Downs. 15 Because of his ailing health, last year was the first 16 year that he was not here. 17 CHAIRMAN BURNETT: Thank you. 18 THE WITNESS: So, he was not in 19 our plans for this current year. 20 MR. HARRISON: All right. 21 CHAIRMAN BURNETT: All right. 22 Thank you. You anticipated my question. I went brain 23 dead on his experience. Thank you. 24 All right. Wagering format, Item 25 B? CRANE-SNEAD & ASSOCIATES, INC. 10 1 MR. HARRISON: Yes. I would ask 2 you to approve the wagering format as submitted by 3 Jeff Wingrove, Director of Simulcasting. I'm sorry. 4 And some changes, this year 5 there'll be a 50 cent Trifecta/50 cent Pick 3s and 6 Pick 4s, and I totally support that. I love the idea 7 of even fractional wagering, but that's an extension 8 of this. So, I recommend your approval of this, the 9 wagering format for this racing year. 10 CHAIRMAN BURNETT: All in favor 11 indicate or do we have a motion, first? 12 COMMISSIONER MILLER: I move. 13 CHAIRMAN BURNETT: It's been 14 moved. Chair seconds. 15 All in favor indicate by saying 16 aye. 17 18 NOTE: (Aye.) 19 20 CHAIRMAN BURNETT: Quick question 21 on that, on the issue of the wagering format. I 22 noticed in the Preakness they had the "Super High 23 Five," is that what they called it? Is there a reason 24 that we're not putting something similar to that on 25 for 25 cents or 50 cents? It seems like these betters CRANE-SNEAD & ASSOCIATES, INC. 11 1 like to do the exotic more than anything these days. 2 COMMISSIONER TRIP FERGUSON: It's 3 a lot of money. 4 CHAIRMAN BURNETT: It paid a ton. 5 MR. WINGROVE: We have been down 6 that avenue. We are considering it. 7 CHAIRMAN BURNETT: Great. 8 MR. WINGROVE: And it probably 9 will come along next year. We have to make sure that 10 it's okay with the track committee and Churchill Downs 11 to use their wagering. 12 CHAIRMAN BURNETT: Understood. 13 Okay. Thank you. 14 MR. WINGROVE: Oh, excuse me. 15 Jeff Wingrove, Director of Simulcast Initiatives. 16 COMMISSIONER TRIP FERGUSON: Is 17 that the same odds as winning the big lottery? 18 MR. HARRISON: It does place a 19 little more work on the shoulders of the steward, 20 because they now have to go down to the fifth place 21 horse and really be sure, you know, when it's close 22 for fifth. So it's not just first, second, third, or 23 fourth at the super ticket, now you're going to have a 24 fifth position. I'm sure it won't stop there. It's 25 going to be like razor blades. They came out with two CRANE-SNEAD & ASSOCIATES, INC. 12 1 blades and then three blades, four blades. What's 2 next? Anyway. 3 Okay. I would ask that you 4 approve the simulcast guest site as submitted by 5 Colonial Downs, also Jeff Wingrove. And, I have one 6 exception here. I'm going to ask that we hold 7 approval on global wagering systems. We still have to 8 do a little more background investigating there. So, 9 what you have in front of you is pretty much the same 10 group of tracks that were guests in the prior year, 11 and I would ask that you approve that. 12 I do have one procedural comment, 13 is that when we complete our review of global wagering 14 systems, and there may be two or three others that 15 will come on board, and we'd like to see them come on 16 board, rather than wait until the next meeting to get 17 your approval and then to start those guest sites, I 18 don't want to lose those first two weeks of handle 19 that might be derived from these additional sites, so 20 I just, procedurally, I just need a little guidance 21 here. Can we, if the sites are submitted to us and we 22 approve them, can we allow them to participate in the 23 betting? 24 CHAIRMAN BURNETT: Subject to our 25 Counsel's approval, I would move that we authorize our CRANE-SNEAD & ASSOCIATES, INC. 13 1 Executive Director to approve additional guest sites, 2 on the condition that they satisfy our background 3 checks. 4 COMMISSIONER MILLER: I'll second 5 that. 6 CHAIRMAN BURNETT: Moved and 7 second. All in favor indicate by saying aye. 8 9 NOTE: (Aye.) 10 11 CHAIRMAN BURNETT: Aye. 12 COMMISSIONER MILLER: Also I need 13 a motion to approve these that he has already listed. 14 CHAIRMAN BURNETT: Yes, that would 15 be a good idea. 16 COMMISSIONER MILLER: With the 17 exception of global wagering system link to bet, which 18 can be added later by the executive director at his 19 discretion. 20 CHAIRMAN BURNETT: Second. All in 21 favor indicate by saying aye. 22 23 NOTE: (Aye.) 24 25 CHAIRMAN BURNETT: All right. CRANE-SNEAD & ASSOCIATES, INC. 14 1 Thank you, Commissioner Miller. 2 MR. PETRAMALO: Comments at this 3 time? 4 CHAIRMAN BURNETT: Please. Mr. 5 Petramalo? 6 MR. PETRAMALO: The VHBPA will not 7 consent to export of the signal to Rosecroft Raceway. 8 CHAIRMAN BURNETT: Okay. Any 9 others? 10 MR. PETRAMALO: No. At this time, 11 no. The reason being Rosecroft had a revenue-sharing 12 agreement with the Maryland Jockey Club, the owner of 13 the flat tracks, and the Maryland Thoroughbred 14 Horsemen's Association, which it has now breached and 15 walked away from. 16 CHAIRMAN BURNETT: Brothers in 17 arms; is that a fair way of putting it? 18 MR. PETRAMALO: Brothers and 19 sisters. 20 CHAIRMAN BURNETT: Brothers and 21 sisters in arms. Thank you. 22 COMMISSIONER BROWN: Have they 23 stopped all simulcast systems? 24 MR. PETRAMALO: I think so, yes. 25 MR. HARRISON: That doesn't cause CRANE-SNEAD & ASSOCIATES, INC. 15 1 me any heartburn, because Rosecroft, as we know, is 2 the owner of the OTB at Colonial Beach. I'm not 3 really pro Rosecroft. 4 MR. PETRAMALO: I didn't realize 5 that. 6 MR. STEWART: It's actually the 7 Maryland Jockey Club. 8 MR. HARRISON: It is? 9 CHAIRMAN BURNETT: So you don't 10 get to cut out Colonial Beach. 11 MR. HARRISON: Correct. 12 CHAIRMAN BURNETT: All right. 13 Item D, discussion of the Racing Summit/Working Group 14 meetings. 15 MR. HARRISON: Yeah. The racing 16 summit. I put together an outline of some Virginia 17 specific and national issues. Basically I did adopt 18 some of the issues that are near and dear to my heart. 19 The key item here is the Page 3, which is where I've 20 asked for input from everybody here in this room and 21 will disseminate it to anyone that's interested. You 22 put down your name, the segment and the industry that 23 you work in, the date, and then you put down your 24 priorities and your comments, and you get it back to 25 me by FAX or by e-mail, scanning, whatever you want to CRANE-SNEAD & ASSOCIATES, INC. 16 1 do, give it to me in person, and we'll organize a 2 first meeting sometime in early June. 3 And we'd like to do it at the 4 racetrack some Saturday morning, that's what we 5 prefer, and that will be the first of our working 6 groups towards -- eventually towards holding, 7 organizing, and running the Racing Summit, the 8 Virginia Racing Summit. 9 I take no pride of ownership in 10 the first two pages of this. It's there just as an 11 outline. It's not complete by any means. It needs 12 your edits. It needs many deletions. It needs your 13 additions. So, I welcome your contributions here. I 14 require it, actually. One administrative item here. 15 On that Page 3, there is a typo. Our FAX number is 16 7418, not whatever is in there. I'll fix that and 17 re-e-mail it out to you, but -- that's it. That's 18 just a point of fact. But, it would really be nice to 19 start receiving some of these back from you-all. 20 CHAIRMAN BURNETT: And, let me 21 emphasize the point that Vic has been making. I think 22 all of us want this Summit to accomplish something. 23 And, we recognize that if we tried to address every 24 one of these issues in a summit, it could go on for 25 days and weeks. And I think it's the responsibility CRANE-SNEAD & ASSOCIATES, INC. 17 1 of all of us to figure out what are the most important 2 issues that we need to tackle first. It doesn't have 3 to be our only summit. We could have subsidiary 4 summits, if you will, later on. 5 But I think what would be most 6 helpful in the comments back are those issues that are 7 threshold issues for the future of Virginia racing. 8 Those issues that we need to address to try and free 9 ourselves from fighting over the same size pie, is 10 what it amounts to. And I think Jim has articulated 11 this very well in several prior meetings, and I'd 12 invite Horsemen or Jim to add anything to my comments 13 to try and move us forward. Have I covered that 14 adequately? 15 MR. WEINBERG: Candidly, I mean I 16 think I agree with you. To me, there is one big issue 17 in the room; and that is how do we make the pie 18 bigger. 19 CHAIRMAN BURNETT: Yes. 20 MR. WEINBERG: How do we use the 21 tools that we have to expand the opportunities to 22 increase handling and what tools that we don't have 23 are we willing to commit financial, political, and 24 other resources to, to advance jointly, collectively, 25 everyone in the room, because, you know, there's CRANE-SNEAD & ASSOCIATES, INC. 18 1 disarray in Maryland and now there's a small, minute 2 window of opportunity that if we're going to do 3 something, we better do it now and identify what 4 exactly it's going to be and what it means for our 5 identity as a racing state. 6 CHAIRMAN BURNETT: I would frankly 7 like to see us more on the bigger issues as Jim has 8 described them than getting mired down in many small 9 issues here, important as they may be, and as much -- 10 as much as we spend lots of time arguing over small 11 issues -- that's been our history at times -- it 12 really could derail us from the bigger and more 13 important picture. 14 So, I hope all will keep that in 15 mind as we try and figure out just how much we really 16 can tackle. And, I would ask one thing that's not 17 here, is if you know of some sage type that might 18 contribute some time and some perspective that we 19 don't have ourselves in this room that might help us, 20 who knows where a great idea comes from. And, I think 21 we should be open to any new ideas that can be 22 articulated and are worthy of our thinking about, we 23 should try and play them out and see how they might 24 help us. So, if there are people out there that have 25 some new ideas that you're aware of that could join CRANE-SNEAD & ASSOCIATES, INC. 19 1 us, that would be helpful. 2 MR. HARRISON: Okay. Thank you. 3 The issue of gray slot machines, Internet cafés. We 4 wrote up a memo, Dave Lermond and Joe Roney and 5 myself, and we sent it off to the AG's office, and, 6 Amy, do you have some comments on that? 7 MS. DILWORTH: I would just make 8 the comment that the Commission is now aware of a 9 number of jurisdictions around the State in which 10 these so-called gray slot machines are being offered 11 to public consumers. Places like truck stops and 12 so-called Internet cafés, where customers can come in 13 and play various games on that are being run by 14 programs on these computers. And, depending on facts 15 that are not clear to us, these, one or more of these 16 games may be, may constitute illegal gambling under 17 the Virginia Code. 18 There is at least one jurisdiction 19 that I understand is going forward with the 20 prosecution of one of these locations, and doing so 21 under the authority of the local Commonwealth's 22 Attorney's Office, which is the proper vehicle for 23 addressing this situation in that the local 24 Commonwealth's Attorneys possess the exclusive 25 jurisdiction to investigate and prosecute what they CRANE-SNEAD & ASSOCIATES, INC. 20 1 deem to be illegal gambling in the State. 2 So, we'll be very interested to 3 see, to start seeing results of some of these 4 investigations and certainly of the prosecutions so 5 that they will, hopefully, divest some guidance as to 6 whether illegal gambling activity is, in fact, taking 7 place. But again, I would reiterate that this 8 Commission does not have the authority to prosecute 9 such activity. 10 MR. HARRISON: All right. Peter, 11 the -- 12 MS. DILWORTH: I just want to make 13 you aware of that. 14 MR. HARRISON: -- one thing I want 15 to take away, I hope comes from this is just by 16 shedding some light that this is occurring here in 17 Virginia may soften the view of those anti-slot, 18 anti-gaming folks out there that go, oh, no, when the 19 issue comes up through the right and proper channels, 20 then say, oh, no, we can't have this in the State. 21 Well, it's already kind of happening here, isn't it? 22 I think that's not an illogical outcome of this kind 23 of discussion and that's all. This is what I would 24 hope would happen. 25 CHAIRMAN BURNETT: Well, my CRANE-SNEAD & ASSOCIATES, INC. 21 1 comment on that is that that interpretation is one. 2 It may be that some say it's time to rid ourselves 3 entirely of the scourge of gambling, legal or 4 otherwise. There may be some that use that as an 5 opportunity or platform to jump off and say 6 see-what-happens type of thing. 7 But, I think, one, we don't want 8 to put ourselves in the position of wasting resources 9 and being a policeman where we're not authorized to be 10 one. But, on the other hand, I think that perhaps as 11 part of this summit, we ought to examine what the 12 political ramifications are of our commenting or 13 recognizing or publishing or not publishing this kind 14 of activity, and be very careful that our conduct in 15 relation to it, whether we say anything or don't say 16 anything, doesn't harm our charge going forward. That 17 we do what we can to protect and promote legitimate 18 and proper horse racing and parimutuel wagering. We 19 just take this into account in a way that protects our 20 charge and our mission. 21 All right. 22 MR. PETRAMALO: Can I ask a 23 question? 24 CHAIRMAN BURNETT: Please. 25 MR. PETRAMALO: Dave, I saw your CRANE-SNEAD & ASSOCIATES, INC. 22 1 note on this Internet cafe' thing. Can you explain 2 how that works? I'm not quite sure I understand what 3 the patrons were doing. 4 MR. LERMOND: Well, it was just a 5 store located in a strip mall with a couple of 6 paintings on the wall and about 40 computer desks with 7 computers and monitors. 8 MR. PETRAMALO: Flat screen 9 monitors? 10 MR. LERMOND: Flat screen 11 monitors. Most were, I think they were touch screens. 12 MR. PETRAMALO: Right. 13 MR. LERMOND: And what you saw was 14 everyone looked like they just had a picture of a slot 15 machine in front of them, the reels are going and they 16 are hitting the button. The catch is you're supposed 17 to be buying Internet time. And I asked the women, I 18 said, does anybody ever go on the Internet? And, she 19 said, ah, once in a while. I asked them if they were 20 regulated. They said, yeah, I think somebody in North 21 Carolina does that. I said, oh, okay. 22 MR. PETRAMALO: So, how does the 23 financial transaction take place? 24 MR. LERMOND: Well, they require 25 that you pay with cash and you have to cash out. You CRANE-SNEAD & ASSOCIATES, INC. 23 1 can't leave a balance there. I guess that's 2 because -- 3 MR. PETRAMALO: So I come in with 4 $20 and buy so much time on the Internet or on this 5 game. And, then, at the end of my 20 -- well, at the 6 end of an hour, I say, well, gee, I'm up $45. They 7 give me the $45. 8 MR. LERMOND: Exactly. 9 CHAIRMAN BURNETT: Pat, identify 10 yourself for the record, please. 11 MR. KELLEHER: Pat Kelleher, I'm 12 the Director of Security for Colonial Downs. 13 I've played in a whole lot of 14 them. We've been -- 15 CHAIRMAN BURNETT: In North 16 Carolina, of course. 17 MR. KELLEHER: No, sir. I've been 18 in numerous of these and, yeah, you can keep your 19 money on account. I've got the card in my wallet. 20 I'm afraid one place is going to get hit and I need to 21 get my money back. But they have -- we have gone 22 in -- I've been in discussions with some of the 23 jurisdictions, and they're acting. But, again, I 24 think, like Ms. Dilworth said, it's the Commonwealth's 25 Attorney's Office. Some of them, they've, in fact, CRANE-SNEAD & ASSOCIATES, INC. 24 1 started to pursue these. 2 But, you go in, and they're all 3 the same -- they're all the same company. Everyone in 4 Hampton, Portsmouth, Petersburg, in all of these 5 areas, it's the same, and you can pick from 15 6 different slot games. And, at the end, you can keep 7 it. They even have kiosks where you can add more 8 money to your card and play. And they -- you can keep 9 it, and they're paying you out. You can cash out, get 10 your money, and there were several people hit very big 11 in Hampton there. 12 CHAIRMAN BURNETT: Pat, is the 13 difference -- the only difference between that and 14 going to Charlestown is that at Charlestown the money 15 comes tinkling out of the bottom of the machine? 16 MR. KELLEHER: Basically, yes. 17 Yes. That's -- and I don't think, in a lot of those 18 places, they get vouchers now. They don't even -- 19 CHAIRMAN BURNETT: They do it both 20 ways, yes. The fans like non-vouchers I'm told. They 21 like the jingle-jingle and all of that, so. 22 MR. KELLEHER: Like you go to a 23 window of these places and you give them back your 24 card, they run it, it tells you how much you have. 25 CHAIRMAN BURNETT: Have you got CRANE-SNEAD & ASSOCIATES, INC. 25 1 your card in the machine while you're playing it? 2 MR. KELLEHER: All you do is the 3 swipe card. You don't put it in the machine the rest 4 of the time. It shows on the screen how many -- how 5 much you have, and you continue to play five, five or 6 ten or twenty tokens, as they refer to them, and it 7 adds up. Or, if you lose it, you just move on, just 8 like you were in -- 9 MS. BOUZEK: They pay you, you're 10 buying points, and you use these points to try to win 11 money. So you're converting points to money. So if 12 you, you know, we all went in with fictitious names. 13 They don't check IDs or anything, you know, and gave 14 them the $20. And, he got $5 for bringing me in as a 15 friend of his. And this $20 turned into 2,000 points. 16 And, I asked them the same 17 question. I said, well, if this is on the Internet, 18 how come I can't do it at home? They said, oh, you 19 have to buy this special software; you can't do it at 20 home. So I said, oh, you know, can we buy a beer? 21 Well, no, that's not legal. We can't sell it, but 22 we're going to start giving it away. So, to me, the 23 ABC is not involved, and that's who would be raising 24 red flags with these people. 25 But, at the end of the day, you CRANE-SNEAD & ASSOCIATES, INC. 26 1 know, I think I had $1.60 to cash out. I went over to 2 the machine, I stuck this green card in, and it gave 3 me my $1.60 and off we went. 4 CHAIRMAN BURNETT: Would you 5 identify yourself? 6 MS. BOUZEK: I'm sorry. Jenna 7 Bouzek, B-O-U-Z-E-K, Vice-President of Operations for 8 Colonial Downs. 9 COMMISSIONER REYNOLDS: How many 10 of these stores would you say that there are? 11 MS. BOUZEK: They're everywhere. 12 MR. KELLEHER: They're everywhere. 13 It hasn't opened, but we were contacted down the strip 14 center from Indian River they were -- somebody was 15 opening one. Now, whether all of the activity is in 16 Hampton and they're in Portsmouth stopped that person, 17 but they were opening one at the other end of the 18 shopping center. But I've been in 12 or 13, and they 19 were all over. And, it just so happens -- I look -- 20 you look across the street in a couple of places. 21 They don't advertise. They don't put -- it's word of 22 mouth is what the one gentleman is -- we sat down and 23 talked for a long time. It's word of mouth. 24 MS. BOUZEK: The first one that 25 got shut down is right across the street from the CRANE-SNEAD & ASSOCIATES, INC. 27 1 Martinsville OTB, right across the street from us. 2 CHAIRMAN BURNETT: You mentioned 3 ABC. I take it that there is no alcohol served in 4 any of these places? 5 MS. BOUZEK: Sir, the one down in 6 Prince George said that they are going to start giving 7 it away, and I have not gone back. 8 CHAIRMAN BURNETT: My point is no 9 one has got a license such that they would have an ABC 10 inspector coming into their business? 11 MS. BOUZEK: No. That's how 12 they're flying under the radar. 13 CHAIRMAN BURNETT: So their only 14 regulatory intrusion, so to speak, would be from a 15 police officer coming in and having his wits about him 16 or her wits about her, or some business licensing type 17 person in the jurisdiction where they have drawn a 18 license? 19 MR. KELLEHER: The licensing that 20 they apply for is basically a -- most of them are 21 saying, you can come in and FAX or copy things, and 22 that's their little advertisements, and you walk in 23 and there's nothing but, as David said, screens all 24 around. The one in Hampton had 40, and they were all 25 filled up with 15 people waiting to get on them, and CRANE-SNEAD & ASSOCIATES, INC. 28 1 that was at 2:00 on a Friday afternoon. 2 MR. LERMOND: And we were in 3 Vinton, that's the one that we went to and I think 4 that's the guy at Martinsville that got shut down. It 5 just moved them an hour up the road to Vinton. It was 6 Noon on a Thursday and there were 35 to 40 terminals 7 where people were just going at full speed. 8 COMMISSIONER TRIP FERGUSON: How 9 many of those could we fit in this room? 10 MR. LERMOND: The difference 11 between that and Charlestown is that Charlestown, the 12 slots are regulated and here they're not. So the 13 consumer is really taking a chance as whether he's 14 getting a fair take out or not, along with some other 15 things. 16 CHAIRMAN BURNETT: Taking a lot of 17 chances, yes. 18 All right. Have we beaten that 19 subject to death adequately? 20 MR. HARRISON: Yes. Thank you. 21 CHAIRMAN BURNETT: We next move on 22 to stakeholders and the first item is the VHBPA 23 Benevolence Fund Budget. And, is it fair, Frank, to 24 characterize this really as a joint budget? 25 MR. PETRAMALO: Yes. CRANE-SNEAD & ASSOCIATES, INC. 29 1 CHAIRMAN BURNETT: It's VHHA and 2 the VHBPA? 3 MR. PETRAMALO: Yes. The budgets 4 that you should have before you -- the budgets that 5 you should have before you is revised from the one you 6 had last month, in the following respect. One, it's 7 submitted as a joint budget on behalf of the 8 Thoroughbred and Standardbred Associations. And you 9 should have highlighted in the middle column changes 10 in the amounts. And, these changes resulted from my 11 discussions with Dr. Charlie Dunnavant and Iain 12 Woolnough about added features that the harness 13 horsemen wanted. 14 For example, with regard to food 15 during the harness meet, we will continue with the 16 kitchen subsidy and make meal tickets available to the 17 folks working during harness meets. With regard to 18 transportation, the Harness Association also wants a 19 shuttle van similar to the one we have. We both 20 agreed that we needed more in the budget for 21 mattresses and covers and things of that sort. 22 And the Harness Association also 23 wanted to implement a scholarship program so the 24 number has been up to 15,000, and I believe the 25 landscaping budget we cut by about 15,000 to take care CRANE-SNEAD & ASSOCIATES, INC. 30 1 of the other adjustments. 2 Also, what is not reflected in the 3 budget before you is the following. I would ask that 4 you strike from the budget the sum of 21,600 for the 5 training income. 6 CHAIRMAN BURNETT: Any questions 7 of Mr. Petramalo? I'm sorry. I didn't mean to cut 8 you off. 9 MR. PETRAMALO: No, that's it. 10 That's it. 11 CHAIRMAN BURNETT: Any questions? 12 COMMISSIONER MILLER: Strike the 13 training ambulance. 14 MR. PETRAMALO: Correct. 15 CHAIRMAN BURNETT: Is it fair to 16 say we still plan to have a training ambulance, it 17 just won't come out of this budget? 18 MR. PETRAMALO: Oh, yes. Yes, 19 that's correct. 20 CHAIRMAN BURNETT: My question is, 21 I'm still troubled by the jockey injury insurance 22 coming out of this pool of money. What I don't know 23 is where it was paid in the past. Where did it come 24 from in the past? 25 MR. PETRAMALO: In the past, the CRANE-SNEAD & ASSOCIATES, INC. 31 1 premium for a million dollars was around 75,000. In 2 the past, the track has contributed 50,000, and we 3 have contributed 25,000. Going forward, for this year 4 only, we are proposing to pay the full $75,000 5 premium; 25,000 coming from our funds, and 25,000, 6 excuse me, 50,000 coming from the Benevolence Fund. 7 CHAIRMAN BURNETT: All right. Any 8 questions? 9 10 NOTE: (No response.) 11 12 CHAIRMAN BURNETT: I'm just -- I'm 13 still, fellow Commissioners, struggling with the 14 jockey insurance money coming from this. I see it as 15 a cost of doing business, and I look at the 30 or 16 $35 million that is retained from the handle overall 17 in the business, and all the different things it pays 18 for. And then we have this little 180 or $200,000 for 19 benevolent, and much like the training ambulance, I 20 see the jockey injury insurance as being more in that 21 category. 22 The injured jockeys benefit I look 23 at as being somebody that doesn't get covered by this 24 insurance, and it's a safety net of some sort; that 25 is, the proceeds from the golf tournament helps CRANE-SNEAD & ASSOCIATES, INC. 32 1 jockeys who are already injured and need some help. I 2 would like to see us have -- I will say, after our 3 last meeting, I received more communication about this 4 subject than I have received as a Commissioner on any 5 subject since I started being a Commissioner, and it 6 was 100 percent in favor of giving more to the people 7 that live and work on the back side and not 8 covering -- and the two items that were picked out 9 were the training ambulance and the jockey insurance 10 and other comments were made about putting more money 11 into the kitchen and the cleanliness of the kitchen, 12 the cleanliness of the bathrooms, and it continues to 13 be an issue that's raised. I'm not passing judgment 14 on one side or the other of what the bathrooms look 15 like. 16 You'd certainly never know that 17 there was any problem with any part of that back side 18 when you drive down through there today; it's just 19 beautiful at the moment. And, likewise, with the 20 kitchen. Any complaints about the kitchen, when I 21 look through the window -- it's closed at the 22 moment -- you'd never know that any of the complaints 23 that are being, that I received would be so, but I've 24 also been in the kitchen when some of those 25 complaints, from what my observations were, were so. CRANE-SNEAD & ASSOCIATES, INC. 33 1 But, that's it. I think, I just am troubled about 2 including jockey insurance in there, and I am 3 reluctant to support this. 4 Any other comments from anybody 5 before we vote on this? 6 MR. PETRAMALO: May I? 7 CHAIRMAN BURNETT: Including, 8 Frank, yeah, if you'd please jump in. 9 MR. PETRAMALO: Well, let me make 10 one thing clear here. The only reason that we 11 proposed that, in light of the past history of sharing 12 the costs with the track was to help the horsemen who 13 come here. And, by that I mean the owners, the 14 trainers and particularly the grooms and exercise 15 riders who all benefit from the Benevolence Fund. 16 And, it was as a result of the Commission requiring us 17 to pay $115,000 to Colonial Downs to run 40 days. So, 18 we had the choice. You take the $115,000 out of the 19 purse account, which basically is the reward or the 20 return that an owner gets for spending $25,000 per 21 horse to race at Colonial Downs. It's -- you've got 22 an awful lot of expense chasing a very little reward. 23 So, the issue is, do we take the 24 money out of there, which benefits everybody, because 25 the owner pays the trainer, the trainer pays the CRANE-SNEAD & ASSOCIATES, INC. 34 1 groom, etc., do we take the money out of there or do 2 we look for a one-time solution to this $115,000 3 problem by using some of the Benevolence Fund money, 4 $50,000, to pay what Colonial would normally pay for 5 its share of the premium? There's no doubt that it's 6 a benevolent purpose and there's no doubt, as far as 7 we're concerned, that Colonial ought to share. But we 8 find ourselves, this year, in a very unique situation. 9 And, on a one-time basis, we said, 10 okay, we will pick up from the Benevolence Fund, your 11 share of the jockey insurance. And that's why we did 12 it. We don't want to set any precedent nor do we 13 propose doing it in the future. We were put in 14 between the rock and the hard place here, and that's 15 the solution that we came up with. 16 CHAIRMAN BURNETT: Please. 17 COMMISSIONER BROWN: Frank, where 18 does the other 25,000 come from? 19 MR. PETRAMALO: That comes from 20 us. 21 COMMISSIONER BROWN: That comes 22 from you, the thoroughbred -- 23 MR. PETRAMALO: We raised the gate 24 fee, which, up until two years ago, was $10 a start to 25 $15 a start, which is, by the way, the same as CRANE-SNEAD & ASSOCIATES, INC. 35 1 Maryland, etc. And that extra money, that extra $5 is 2 what funded the 25,000 that we came up with as our 3 share of the jockey premium. 4 COMMISSIONER BROWN: One other 5 question. 6 MR. PETRAMALO: Yes. 7 COMMISSIONER BROWN: Shuttle van, 8 $9,000, it says both meets. Now, where is the 9 standardbreds, where are they going to be shipping 10 from? 11 MR. PETRAMALO: We're talking 12 about the -- 13 CHAIRMAN BURNETT: Taking them to 14 the store. 15 MR. PETRAMALO: -- taking the 16 grooms and the exercise riders to Virginia Beach to 17 the Wal-Mart, etc. 18 COMMISSIONER BROWN: All right. 19 I've got you. I thought you were shipping horses. 20 MR. PETRAMALO: No. No-no. 21 CHAIRMAN BURNETT: To run them 22 back and forth to these Internet cafés? 23 SPECTATOR: No. We take them down 24 to Carolina. 25 CHAIRMAN BURNETT: They're CRANE-SNEAD & ASSOCIATES, INC. 36 1 regulated down there. 2 SPECTATOR: That's right. 3 MR. HARRISON: Peter? 4 CHAIRMAN BURNETT: Yes, sir. 5 MR. HARRISON: On the harness 6 side, is there an equivalent driver's insurance, and 7 how is that currently addressed? 8 MR. STEWART: There is a driver's 9 insurance and the track pays it. 10 MR. HARRISON: The track pays it? 11 MR. STEWART: Uh-huh. 12 MR. HARRISON: But this budget is 13 supported by the Harness Group? 14 MS. SMITH: Yes, it is. And, -- 15 CHAIRMAN BURNETT: You need to 16 identify yourself for the Court Reporter, please. 17 MS. SMITH: I'm Katherine Smith -- 18 CHAIRMAN BURNETT: Thank you. 19 MS. SMITH: -- from VHHA. It is. 20 We felt in this situation that the thoroughbred 21 brothers in arms were over logged. We have the 22 advantage in the harnesses of being able to race every 23 week. Our horses, therefore, have more opportunities 24 than the thoroughbred horses do over the same period 25 of time. We have supported their requests for longer CRANE-SNEAD & ASSOCIATES, INC. 37 1 meets because of that situation. Their inability to 2 get a deal for those request days that they initially 3 asked for, we felt, in this instance, in this single 4 and only instance, that we would, in fact, help them 5 out by contributing to this. But, again, not as a 6 precedent-setting event of any kind and certainly 7 don't expect to see this kind of request again. 8 But, I think in the interests of 9 brothers in arms, the board felt that it would be 10 appropriate just this once, notwithstanding individual 11 feelings. 12 CHAIRMAN BURNETT: Do we have a 13 motion from any Commissioner? 14 COMMISSIONER REYNOLDS: Approve 15 the budget. 16 CHAIRMAN BURNETT: Motion to 17 approve the budge. 18 COMMISSIONER REYNOLDS: Yes. 19 CHAIRMAN BURNETT: We have a 20 motion to approve the budget from Mr. Reynolds. Do we 21 have a second? 22 COMMISSIONER BROWN: I'll second 23 it. 24 CHAIRMAN BURNETT: Motion has been 25 approved and seconded. All in favor indicate by CRANE-SNEAD & ASSOCIATES, INC. 38 1 saying aye. 2 3 NOTE: (Aye.) 4 5 CHAIRMAN BURNETT: Chair votes 6 nay. It passes four to one. The budget is approved. 7 Mr. Petramalo, gap purse funding, 8 please. 9 MR. PETRAMALO: As a second 10 condition to the awarding of 40 days, the first 11 condition being the payment of 115,000, the other 12 direction from the Racing Commission was that the 13 VHBPA fund the gap to the extent of two and a half 14 million dollars. And we have -- we are going to do 15 that, and you should have in your package a signed 16 commitment letter from the Virginia Commerce Bank, 17 which is headquartered in Arlington. The bank is 18 making an unsecured loan of two and a half million 19 dollars to the VHBPA, and the loan repayment will, of 20 course, be from the SWF income, as well as other 21 wagering income, that comes during the 12-month 22 period. 23 And it's repayment is guaranteed 24 by two of our board members, David Ross and Randy 25 Rouse. I'm working with the bank's lawyer now to CRANE-SNEAD & ASSOCIATES, INC. 39 1 finalize all of the documents. We expect that the 2 loan will close on or about June 1st. 3 Now, that said, in the past, with 4 gap funding, which has been provided by Jacobs 5 Entertainment, the money actually hasn't been needed 6 until early or mid July. When I say "needed," it 7 doesn't, hasn't been transferred into the purse 8 account until then. And, we would expect that that 9 would be the same procedure we'd follow this year. 10 When the money is needed, we'd draw down the necessary 11 amount from the, from our credit line. And, then, 12 after the meet, we begin paying it back. And, if the 13 past is any guide, usually the gap funding loan is 14 paid off by the end of the calendar year, and that's 15 what we would expect to happen this year. 16 CHAIRMAN BURNETT: I have a 17 question. 18 MR. PETRAMALO: Yes, sir. 19 CHAIRMAN BURNETT: As I read this 20 commitment, and I should probably disclose that 21 Virginia Commence Bank is the principal bank that I 22 use for my investments, and I have had a fairly 23 long-standing relationship with them, for what that's 24 worth. 25 You -- it appears that this loan CRANE-SNEAD & ASSOCIATES, INC. 40 1 was to close on or about May 15th. I take it that 2 the provisions of -- 3 MR. PETRAMALO: No, June 1st. 4 It's always been June 1st. 5 CHAIRMAN BURNETT: I'm sorry. 6 MR. PETRAMALO: May 15th was 7 when they wanted the signed commitment letter. 8 CHAIRMAN BURNETT: Yes. My point 9 is that you're awaiting closing the loan until you 10 have the approval of the Commission; is that right? 11 MR. PETRAMALO: No. 12 CHAIRMAN BURNETT: You're just 13 telling us about it today? 14 MR. PETRAMALO: Yes. 15 CHAIRMAN BURNETT: Thank you. 16 MR. PETRAMALO: Quite honestly. 17 CHAIRMAN BURNETT: All right. 18 That's fine. There's nothing wrong with that. We 19 like you being able to act on your own; that's good. 20 MR. PETRAMALO: May 15th was the 21 bank's requested date that we give them an executed 22 commitment letter, and we did that. 23 CHAIRMAN BURNETT: Okay. 24 MR. PETRAMALO: Subsequent to that 25 I have been in contact with the bank's lawyer and CRANE-SNEAD & ASSOCIATES, INC. 41 1 we're working on the closing papers. 2 CHAIRMAN BURNETT: All right. 3 Close May 15th as opposed to the close of business. 4 MR. PETRAMALO: Correct. Yes. 5 CHAIRMAN BURNETT: Sorry. Any 6 other comments, Mr. Weinberg? 7 MR. WEINBERG: I would just like 8 to make an observation so that everyone is aware of 9 the risks involved so that, hopefully, those risks 10 don't come about. But, if they do, we will have 11 raised, Colonial Downs will have raised its hand and 12 remarked that this year is different. Yes, there have 13 been years when the funds are not put into the purse 14 account until they are absolutely needed. But that is 15 by a licensee over which this Commission has a great 16 deal of authority. That is not the case this year. 17 There has been at least one year 18 when Colonial Downs was required to prefund the 19 account, and put the money in prior to the 20 commencement of racing here. There are -- you have 21 seen the commitment letter. The commitment letter is 22 a typical, usual commitment letter, has the usual outs 23 for the bank, including material adverse change in the 24 financial condition of the HBPA or any of the 25 guarantors. In usual and typical economic times, one CRANE-SNEAD & ASSOCIATES, INC. 42 1 would not give that much thought, except we don't find 2 ourselves in that economic environment. 3 Unfortunately, it is not uncommon 4 for the stock market to drop a couple hundred points 5 in a day, and it would not be out of the realm of 6 reasonableness for a bank to then become concerned 7 about the financial viability of some of its 8 guarantors. 9 So, there are two ways, two 10 obvious ways to address that risk. There probably are 11 many more. One is to require the prefunding of the 12 account to draw down the line before a racing 13 commences. We have raised that with the HBPA. We 14 understand that comes out of an expense of paying 15 interest on funds that you are not actually using. 16 But it does provide the certainty that the funds will 17 be there. And, to the extent they're not there, we 18 know it before racing commences, rather than go to 19 draw down the funds, they not be there during the 20 middle of a meet and everyone in the room has a black 21 eye for some drastic actions that they would have to 22 take. 23 The other is to ask the 24 deep-pocket providers to provide some assurance that 25 if the bank doesn't fund, they do fund. And that they CRANE-SNEAD & ASSOCIATES, INC. 43 1 have some accountability to someone in this room to 2 make sure that happens. Obviously, the HBPA 3 understands that right now the burden is on their 4 shoulders. But, again, this is an unusual year. 5 Colonial Downs doesn't have any control over the 6 funding for this at the moment. But, it has all the 7 responsibility for making sure that the funds are 8 there if this happens. We all face a crisis if those 9 funds aren't there. 10 CHAIRMAN BURNETT: Help me, if you 11 would, on the legal obligations to pay these purse 12 amounts. In the event that this source disappeared 13 halfway through the meet, it, as a matter of law in 14 Virginia, is the track required to pay the purses or 15 is it a matter of reputation if they don't as opposed 16 to legal obligation? 17 MR. WEINBERG: I will do the legal 18 and you can do the practical. 19 CHAIRMAN BURNETT: I think I know 20 the practical -- 21 MR. WEINBERG: Okay. Well, I 22 mean, -- 23 CHAIRMAN BURNETT: -- in terms of 24 what happens -- nobody comes back. 25 MR. WEINBERG: This Commission has CRANE-SNEAD & ASSOCIATES, INC. 44 1 authorized or now ordered 40 days of horse racing. 2 And, we have prepared a whole paradigm around 40 days 3 and how we finance that. So at the middle of the meet 4 if financing disappears for the last 15 days of the 5 meet, there's no money to award, Colonial Downs now 6 finds itself between the proverbial rock and a hard 7 place. It either says, we're not going to run those 8 15 days and we bear the consequence of dealing with 9 the Commission for violating its order, or we run 10 those races for pennies, because we don't have the 11 money to pay the purses, which probably no one will 12 show up. I mean, it is a litany of bad, of poor 13 choices. 14 CHAIRMAN BURNETT: Agree. I just 15 wondered whether you have an obligation to come in 16 behind with the funding if theirs doesn't show up. 17 You just can cut off the meet and then deal with us if 18 that's the case; that's one of your options? 19 MR. WEINBERG: That's one of our 20 options. 21 CHAIRMAN BURNETT: All right. 22 Okay. 23 MR. WEINBERG: But, no, I mean, I 24 think we were trying to make today perfectly clear. 25 We have told you all along, we will provide all the CRANE-SNEAD & ASSOCIATES, INC. 45 1 purse funding generated from wagering, account 2 wagering, SWS, and the live meet, according to the 3 contracts that we are bound by, but no more. And we 4 will race 40 days for that amount, if that's what 5 happens, but we shouldn't do it. It would be very 6 bad. 7 CHAIRMAN BURNETT: Understood. 8 MR. STEWART: And the practical 9 answer, you would be -- the money -- at the point at 10 which you cannot draw down the funds, the balance in 11 the purse account will be very, very small. So it's 12 not as if you can take what you already have and then 13 stretch it out. I mean, the money is already gone. 14 And it doesn't have to be that way. You know, we 15 don't have to run this risk, is the point that 16 Mr. Weinberg and I are making. 17 CHAIRMAN BURNETT: Has this 18 controversy, which appears to me to center around 19 basically about 30 to 60 days' worth of interest on a 20 couple million dollars, is that what we're talking 21 about? How much is that? Is it 50 or $60,000, 22 $80,000. 23 MR. PETRAMALO: No, no, no, it's 24 less than that. 25 CHAIRMAN BURNETT: Well, that CRANE-SNEAD & ASSOCIATES, INC. 46 1 would be annualized. I'm sorry, is it 5,000 a month, 2 something like that? 3 MR. PETRAMALO: When Jim and Iain 4 made me aware of their concerns, I went to the bank 5 and the bank said, we're happy to put the money into 6 the purse account on June 1st. Understand, however, 7 we're going to start charging interest on June 1st. 8 CHAIRMAN BURNETT: That's what I 9 meant. 10 MR. PETRAMALO: So, rough 11 ballpark, we're paying four-and-a-half percent 12 interest, so you're looking at 8 -- I'm doing it in my 13 head -- 8 to $10,000 in interest that we would not 14 normally pay. So, my response to Colonial Downs was, 15 if you're concerned and you, quote, want some 16 insurance, it will cost you 8 or $10,000. We will get 17 the money, but you pay for the interest for that one 18 month. That was not acceptable. 19 CHAIRMAN BURNETT: I don't know if 20 this will be helpful or not, but I recall that when we 21 had a similar gap funding issue before I came on the 22 Commission, we had another horseman who came up with a 23 bunch of money or a guarantee, I forget which, and the 24 money was put in John Hanna's bank, whichever it one 25 it was he was working for at the time. He was working CRANE-SNEAD & ASSOCIATES, INC. 47 1 for the same place but the name kept changing. Was 2 that money paid up in advance or does anybody remember 3 how that, what the mechanics of that arrangement were? 4 MR. PETRAMALO: I think, if I'm 5 not mistaken, it was -- well, I know, it is 6 $1 million, and I think it was paid directly into the 7 purse account. I'm not positive. It was probably six 8 or eight years ago. 9 MR. WEINBERG: I think the 10 distinction there was the million dollars, whether it 11 was cash or securities, was at the bank. 12 CHAIRMAN BURNETT: Right. This is 13 what I'm recalling. 14 COMMISSIONER TRIP FERGUSON: The 15 only question I think here is we've seen the 16 signators. Are they bound by this letter of credit or 17 whatever it is to perform? 18 MR. PETRAMALO: Well, they're 19 bound to guarantee the loan, sure. 20 COMMISSIONER TRIP FERGUSON: Then 21 that's -- 22 CHAIRMAN BURNETT: Have they 23 executed a guaranty? 24 MR. WEINBERG: But, with all due 25 respect, that protects the bank. If the bank funds CRANE-SNEAD & ASSOCIATES, INC. 48 1 and HBPA doesn't repay, they pay. The bank never 2 funds because it declares material adverse 3 consequence, we're not going to fund the loan, they're 4 not on the hook. 5 COMMISSIONER TRIP FERGUSON: Who 6 is? 7 MR. WEINBERG: The guarantors. 8 COMMISSIONER TRIP FERGUSON: If 9 the bank doesn't fund. 10 MR. WEINBERG: That's the risk. 11 COMMISSIONER TRIP FERGUSON: Okay. 12 So, the gap is between you and the bank, not the bank 13 and the signators? 14 MR. WEINBERG: That's right. 15 COMMISSIONER TRIP FERGUSON: Okay. 16 CHAIRMAN BURNETT: Can I narrow 17 the financial gap with an idea? Maybe you've already 18 explored this; I'm sure. What if you drew the money 19 and put it in an interest-bearing account. 20 COMMISSIONER TRIP FERGUSON: A CD. 21 CHAIRMAN BURNETT: So that it's at 22 the bank, it's liquid, it's in the control of HBPA, 23 they're collecting interest on it, aren't they going 24 to be able to collect, like, a point and a half or 25 something, like, two points so that now we're down to CRANE-SNEAD & ASSOCIATES, INC. 49 1 5-$6,000. 2 MR. PETRAMALO: I doubt it. At 3 today's interest rates -- we're paying four-and-a-half 4 percent. The likelihood that we would be able to 5 invest it for a short period of time and get anywhere 6 near a half a point, I think, would be amazing. 7 CHAIRMAN BURNETT: Even in those 8 amounts? 9 MR. PETRAMALO: I would think so. 10 I'm not a banker, but that's -- I would find it very, 11 very unusual. But, on behalf of the Virginia Commerce 12 Bank, it's, to the extent Jim is concerned about its 13 failing or going into receivership or whatever, it's 14 the fourth largest bank in the Commonwealth, and it 15 has assets of $2.65 billion, so two and a half million 16 dollars is chump change. 17 COMMISSIONER TRIP FERGUSON: So, 18 is there a loan commitment letter to Colonial Downs 19 from the bank? 20 MR. PETRAMALO: No, it's a loan 21 commitment letter from the VHBPA. 22 COMMISSIONER TRIP FERGUSON: Okay. 23 So you have a loan commitment letter to Colonial 24 Downs. In other words, how do you breach this? 25 MR. PETRAMALO: Well, it's our CRANE-SNEAD & ASSOCIATES, INC. 50 1 obligation to take two and a half million dollars from 2 wherever we get it and put it into the purse account 3 to cover the gap. 4 COMMISSIONER TRIP FERGUSON: 5 What's more risk, my wondering whether Virginia 6 Commerce Bank is going to go broke or Randy Rouse 7 going broke or more risk going over here and putting 8 10 bucks on a pony? 9 MR. PETRAMALO: Ten bucks on a 10 pony is by far the greater risk. 11 COMMISSIONER TRIP FERGUSON: I 12 think the risk -- I think the risk -- Looking at these 13 signators, I don't know one of them, but I know the 14 other one because he's from my hometown. I don't have 15 a problem with the bank or the signators. So where is 16 the gap between you and the bank, and if the bank has 17 these assets and has the bank taken any Tarp funds or 18 anything like that? 19 MR. PETRAMALO: I don't know. 20 MR. WEINBERG: To be clear, I'm 21 not worried about the viability of the bank. I'm 22 worried about the bank's commitment to fund if 23 something catastrophic happens in the economy. 24 COMMISSIONER TRIP FERGUSON: So, 25 would a letter from the bank do that? CRANE-SNEAD & ASSOCIATES, INC. 51 1 MR. PETRAMALO: Well, we have a 2 commitment letter and we're going to be signing the 3 loan documents. 4 MR. WEINBERG: What I'm trying to 5 convey is that if the bank, for whatever reason, 6 elects not to fund under its loan documents 7 legitimately, given the outs that are customary in 8 every loan document, that you have a commitment from 9 your deep pockets, whether it be Randy Rouse or the 10 other gentleman, that they will come forward and fund. 11 I mean, that, to me, was the premise of where we begin 12 this discussion. 13 COMMISSIONER TRIP FERGUSON: To 14 me, if Randy Rouse says he's going to do something, 15 he's going to do it. It's just -- I will take his 16 word over most anybody's word that I know. 17 MR. WEINBERG: Maybe I'm not 18 being clear. As long as he commits to fund the bridge 19 account, that would be fine. 20 MR. STEWART: All he's committed 21 to do is to guarantee the loan. If the bank doesn't 22 act, he has no further commitment. 23 COMMISSIONER TRIP FERGUSON: I 24 know. Okay. But how big a risk is it? 25 COMMISSIONER MILLER: In the CRANE-SNEAD & ASSOCIATES, INC. 52 1 interest of moving things along. You're on the 2 record. You have adequately covered yourself. No 3 other alternative has been suggested for the gap 4 funding. I think Frank has worked hard on this. What 5 he has put together is the only alternative we have. 6 No one has offered anything else. We don't have to 7 move to accept it, but I would just state for the 8 record that I think that Jim has adequately covered 9 his client's butt in case of a catastrophic event 10 happening in the future. I think Frank has done the 11 best he can to meet the challenge of the gap funding 12 problem. So, I would move we move on. 13 COMMISSIONER TRIP FERGUSON: 14 Second. 15 CHAIRMAN BURNETT: All right. It 16 looks like we're moving on. 17 I might just add, if you want to 18 call it good news, I think that both sides, all sides, 19 suffer a disaster of huge proportions if this doesn't 20 work. It's not a situation where it's, gee, too bad 21 for Colonial, but the Horsemen come out unscathed. 22 And, everybody feels like they're obviously going to 23 take the greatest goring and all the rest. 24 But I think I will second 25 Mr. Ferguson's comments about Mr. Rouse. The stock CRANE-SNEAD & ASSOCIATES, INC. 53 1 market can go to zero, and Mr. Rouse isn't going to 2 change what he's going to do, and that's just the way 3 it is. He happens to be the largest private 4 landholder in Loudoun County, Virginia, and he's not 5 involved much in the stock market, and I don't think 6 it matters. I think if he made a commitment, he would 7 back the commitment. As a horseman, and we don't have 8 to vote on it, but I'm pretty confident everybody is 9 going to be all right. 10 MR. WEINBERG: And, I don't want 11 to walk away that I'm impugning and suggesting 12 anything to the contrary. 13 CHAIRMAN BURNETT: I understand. 14 I understand. 15 MR. WEINBERG: I'm highlighting 16 the legal connections -- 17 CHAIRMAN BURNETT: The mechanics. 18 MR. WEINBERG: -- are different. 19 CHAIRMAN BURNETT: Yes. Point 20 noted, as Commissioner Miller has said. 21 Public participation. Would any 22 member of the public like to address -- I'm sorry, did 23 I miss something? 24 MR. WEINBERG: We've got one more. 25 CHAIRMAN BURNETT: Oops, sorry. CRANE-SNEAD & ASSOCIATES, INC. 54 1 EBet, yes. I'm sorry. I checked it off and moved on. 2 MR. WEINBERG: As I believe the 3 Commission Staff is familiar with and as reflected in 4 the Staff report, Colonial Downs eBet horseplay would 5 like to change its vendor from racing channel to eBet 6 to provide back office services effective June 1. 7 We have an agreement with eBet. 8 We have submitted it to the Commission for approval, 9 and that's what we're here today to ask for is 10 approval of that contract and the permitting of eBet 11 as a vendor. 12 COMMISSIONER MILLER: I move that 13 we approve it subject to the conditions set forth by 14 Mr. Lermond with respect to condition number 3 or the 15 condition set forth in Paragraph 3 of his report. 16 CHAIRMAN BURNETT: The chair 17 seconds. Any discussion? 18 All in favor indicate by saying 19 aye. 20 21 NOTE: (Aye.) 22 23 CHAIRMAN BURNETT: Aye. It's 24 approved. 25 Now public participation. Would CRANE-SNEAD & ASSOCIATES, INC. 55 1 anybody like to speak -- I'm sorry. We have two hands 2 going up. 3 Jim, go ahead. 4 MR. WEINBERG: Mine is just a 5 housekeeping question as point of education. 6 Drawing back to the informal 7 fact-finding conference. I take it the Commission's 8 decision is under advisement waiting issuance of an 9 order. Is the Commission going to then subsequently 10 approve that order or has it got lost? I was waiting 11 for your pronouncement of what the decision was and 12 hence wasn't paying attention as adequately to all the 13 words. 14 CHAIRMAN BURNETT: Well, and I'm 15 not sure that what words came out of my mouth are 16 consistent with the Commission's obligations in a 17 matter like this. But, it is our intention that the 18 order and accompanying opinion be the approval of the 19 order, if you will. I mean, it seems to me cyclical, 20 but we want it to be dispositive so that anybody's 21 clock on appeal can start to run from the date of the 22 order being signed and released. 23 MR. WEINBERG: Okay. I have to 24 confess my ignorance of the Administrative Procedures 25 Act of when an agency goes into executive session, I CRANE-SNEAD & ASSOCIATES, INC. 56 1 know when you come out you need to read the resolution 2 you read, that we've considered this, and that's all 3 we've talked about. But I think in public, you need 4 to announce your decision. I don't think you could 5 have reached your decision in executive session to 6 say -- because there's no vote on the record that this 7 is our decision. 8 I ask that question. I don't 9 know. 10 CHAIRMAN BURNETT: You're looking 11 in the correct direction. 12 MR. FRANK FERGUSON: A couple of 13 things. One, I don't -- the decision won't be made 14 until the order is signed. So that there has been no 15 decision made at this point. 16 The second thing is, they were 17 acting in a judicial capacity in taking the judicial 18 deliberations, if you will, which I believe -- have a 19 separate category, if you will, under normal vote 20 taking and things like that, I believe, in 21 Administrative Process Act. 22 There is no requirement that any 23 action be taken when they come out. When any 24 executive session comes into open session, but nothing 25 that happened in executive session will be effective CRANE-SNEAD & ASSOCIATES, INC. 57 1 unless and until there is a vote taken or there is an 2 announcement of a judicial decision made. 3 MR. WEINBERG: Okay. So the 4 announcement of the judicial decision is the 5 equivalent of what would customarily have been a vote 6 in a non-judiciary setting? 7 MR. FRANK FERGUSON: Right. I 8 think that's a fair way to describe it, yes. 9 CHAIRMAN BURNETT: And, to be 10 clear with all the Commissioners here, that is our 11 intention on the record that our order be the 12 equivalent of a vote taken in public, despite our 13 deliberations and discussion having taken place in 14 executive session or in closed meeting and continuing 15 until an order is entered. 16 MR. WEINBERG: Okay. I appreciate 17 it. I just wanted to make sure I understood the Ts 18 and I's. 19 CHAIRMAN BURNETT: Great. Thank 20 you. 21 Yes, sir? 22 MR. RONEY: Mr. Chairman? 23 CHAIRMAN BURNETT: Would you 24 identify yourself? 25 MR. RONEY: John Roney, Director CRANE-SNEAD & ASSOCIATES, INC. 58 1 of Security Enforcement for the Racing Commission. 2 In reference to Billy Passmore, 3 there is going to be a memorial service on June 10th 4 at St. Luke's Catholic Church in Laurel, and Stuart G. 5 Chock and myself plan on going up on Wednesday to 6 represent the Commission. If anybody else is 7 interested in going up, we're going to leave from here 8 probably around 7:30. 9 CHAIRMAN BURNETT: What time is 10 the service? 11 MR. RONEY: 10:30. 12 CHAIRMAN BURNETT: 10:30. Thank 13 you. 14 Does anybody else wish to address 15 the Commission? 16 17 NOTE: (No response.) 18 19 CHAIRMAN BURNETT: Our next 20 meeting is tentatively scheduled for June 17th. Any 21 problem with that date? 22 COMMISSIONER MILLER: We have one 23 more item. 24 CHAIRMAN BURNETT: Did I go by 25 another one? CRANE-SNEAD & ASSOCIATES, INC. 59 1 COMMISSIONER MILLER: No, you 2 haven't gotten to it, yet. 3 CHAIRMAN BURNETT: Oh, good. No, 4 I'm just saying does anybody have a problem with 5 June 17th as our next meeting? 6 7 NOTE: (No response.) 8 9 CHAIRMAN BURNETT: All right. 10 And, we have one more item Mr. Miller would like to 11 discuss. 12 COMMISSIONER MILLER: No, I don't 13 want to discuss it. I just want to make sure we 14 approve it or not approve it, but that we've looked at 15 it. 16 CHAIRMAN BURNETT: The handle 17 analysis. 18 COMMISSIONER MILLER: Everybody 19 happy with it? 20 CHAIRMAN BURNETT: No. But, it is 21 what it is. 22 COMMISSIONER MILLER: It's not in 23 keeping with all of the country. I think most of them 24 look around 17 percent. 25 MR. LERMOND: Fifteen at the top. CRANE-SNEAD & ASSOCIATES, INC. 60 1 The top is total. 2 COMMISSIONER MILLER: Okay. 3 CHAIRMAN BURNETT: All right. We 4 are adjourned. Thank you all. 5 6 7 NOTE: At this point, the hearing 8 was adjourned for the day at 12:54 p.m. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CRANE-SNEAD & ASSOCIATES, INC. 61 1 2 3 4 CERTIFICATE OF COURT REPORTER 5 6 I, PATRICIA PRICE WHITE, hereby certify that 7 I was the Court Reporter in the foregoing meeting on 8 the 20th day of May, 2009. 9 I further certify that the foregoing 10 transcript is a true and accurate record of the 11 hearing herein. 12 Given under my hand this 22nd day of May, 13 2009. 14 15 16 17 PATRICIA PRICE WHITE, RPR, CCR 18 19 20 21 22 23 24 25 CRANE-SNEAD & ASSOCIATES, INC.