State complaints on card games spur legal fight

By DARA KAM
THE NEWS SERVICE OF FLORIDA

THE CAPITAL, TALLAHASSEE, May 31, 2016.......... Gambling regulators and a pari-mutuel operator at odds over the legality of popular card games, first authorized by the state more than four years ago, pitched their cases to an administrative law judge on Tuesday.

The issue involves "designated-player card games," also known as "player-banked card games," which include a hybrid of three-card poker and resemble casino-style card games but are played among gamblers instead of against the house.

State regulators contend that the card games themselves are legal, but the way they are being operated is too much like "banked" games, which are illegal anywhere in Florida except for the Seminole Tribe's casinos.

Pari-mutuel operators insist that regulators years ago signed off on the games --- which are wildly popular with players --- but took a more critical view of them after Gov. Rick Scott and the Seminoles signed a proposed $3 billion gambling deal in December. Operators, who are paid by "designated" players a percentage of the amount bet on the games, accuse regulators of changing the rules just months after training their own employees in how the games should be played.

State regulators last year filed complaints against seven pari-mutuels over the games, but Tuesday's hearing involved only Jacksonville Kennel Club, Inc., also known as bestbet Jacksonville. Jacksonville is viewed as a "test" case regarding the legality of the games, according to documents filed in the case.

According to regulators, the designated players --- who have a "break room" at the Jacksonville facility and never touch the cards --- are actually employees of unlicensed, third-party companies, something not envisioned when the state first approved the games.

"They text. They talk. They don't play the games at all. Sometimes the designated player will get up and leave in the middle of a hand and be replaced by another designated player," Department of Business and Professional Regulation lawyer William Hall said during opening arguments Tuesday.

Some pari-mutuels require players to put up $50,000 in order to serve as the designated player, indicated by a "button" on the card table. And some require five times that amount in order to pass the "button" to another player, Hall said Tuesday.

The designated player companies are "basically running a business in the card room," Hall told Administrative Law Judge Suzanne Van Wyk, likening the "button" used to identify the designated player at the Jacksonville facility as "a glorified paperweight" used "to hold the cards down."

"Our theory is that they have established a bank" in which the designated player is "really not a player," Hall said.

"It's just someone sitting by chips so that the dealer can pay out of them. If that's not a bank, I don't know what is," he said.

The Jacksonville facility stands to lose $10 million next year if the games go away, according to documents filed in the case. The facility requires a buy-in of $30,000 for designated players to serve as the "bank" in the games, according to the facility's vice-president of poker operations, Deborah Giardina, who testified Tuesday.

John Lockwood, a lawyer representing the Jacksonville facility, argued Tuesday that nothing about the way the games are played has changed in the four years since regulators first approved them.

The law allowing the games has been on the books since 1996, according to Lockwood.

"The division has over and over again approved facilities to do this conduct," he said. "I'm not saying they can't change their minds. They could. But they have to go through rule-making. … They're simply trying to circumvent the rulemaking process to establish this new policy."

The same day that Scott and tribal leaders signed a proposed deal, known as a "compact," in December, regulators fanned out across the state to observe the games in more than half-a-dozen facilities, according to testimony Tuesday. The complaints were filed five days later. The proposed compact ultimately was not approved by the Legislature.

Investigators were given "templates" of the complaints, according to Charles Taylor, an investigator with the Division of Pari-mutuel Wagering.

Under questioning by Lockwood, Taylor acknowledged the games were approved by the agency. Asked why he reported that Jacksonville was in violation of the law, Taylor said, "That's what I was instructed to do."

Lockwood blamed the complaints in part on the compact.

"Why are we here? I think a lot of this has to do with the governor and the Seminole tribe's attempt to get a gaming compact," Lockwood said. "The division knew exactly what was going on this whole time. … They have investigators there on a weekly basis. … It was a very big deal to the industry. It was a very big deal to the division. And everyone knew what was going on."

A five-year agreement between the state and the Seminoles that gave them the exclusive rights to operate "banked" card games, such as blackjack, expired last summer. The tribe and the state are fighting over the games in federal court. The tribe alleges, in part, that the designated-player games now underway in pari-mutuels throughout the state are a breach of the agreement.