BILL NUMBER: SB 952 CHAPTERED 10/14/01 CHAPTER 945 FILED WITH SECRETARY OF STATE OCTOBER 14, 2001 APPROVED BY GOVERNOR OCTOBER 14, 2001 PASSED THE SENATE SEPTEMBER 6, 2001 PASSED THE ASSEMBLY SEPTEMBER 5, 2001 AMENDED IN ASSEMBLY SEPTEMBER 4, 2001 AMENDED IN ASSEMBLY JUNE 26, 2001 AMENDED IN ASSEMBLY JUNE 20, 2001 AMENDED IN SENATE MARCH 27, 2001 INTRODUCED BY Committee on Governmental Organization (Senators Perata (Chair), Chesbro, Dunn, Johannessen, Johnson, Karnette, Machado, Morrow, O'Connell, Soto, and Vincent) FEBRUARY 23, 2001 An act to amend Sections 19805, 19823A, 19827, 19841A, 19851.5, 19853.5, 19910, 19910.5A, and 19950.3 of, to add Sections 19818A and 19823.5 to, and to repeal Sections 19818, 19830, and 19834 of, the Business and Professions Code, relating to gambling. LEGISLATIVE COUNSEL'S DIGEST SB 952, Committee on Governmental Organization. Gambling. (1) Existing law establishes the California Gambling Control Commission and grants it specified powers. This bill would expand the commission's authority to include the authority to issue subpoenas to compel attendance of witnesses and production of documents at commission meetings. (2) Existing law defines a "work permit" for the purposes of the Gambling Control Act as a specified type of permit issued by the Division of Gambling Control or by a city, county, or city and county. Existing law defines a "banking game" or "banked game" as one in which the house takes on all comers, pays all winners, and collects from all losers. Existing law also lists types of games that are not banked or banking games. This bill would change the act's definition of "work permit" to a specified type of permit issued by the commission or by a city, county, or city and county. This bill would also remove provisions defining a "banking game" or "banked game." (3) Under existing law, in order to be employed by a gambling enterprise or to serve as an independent agent of a gambling enterprise, a person must apply for a work permit with the division and must have his or her application granted by the commission. Under existing law, an application for a work permit for use in a jurisdiction where a locally issued work permit is not required is made to the division. This bill would allow the commission to issue temporary work permits. In addition, this bill would provide that an application for a work permit for use in a jurisdiction where a locally issued work permit is not required shall be made to the commission. (4) Existing law authorizes the division to recommend to the commission denial of an application for a license, permit, or finding of suitability. Under existing law, the commission must consider certain recommendations for denials of licenses at commission meetings at which specified procedural rules are observed. This bill would allow the commission to refer cases involving recommendations for the denial of a license, permit, or finding of suitability to an administrative law judge for proceedings conducted pursuant to the Administrative Procedure Act. (5) Existing law states the Legislature's finding that the division should investigate gambling enterprise employees and, if appropriate, approve those persons for employment in a gambling enterprise. This bill would state the Legislature's finding that the division should investigate gambling enterprise employees and, if appropriate, recommend their approval as gambling enterprise employees to the commission. (6) Existing law provides that communications or documents relating to an applicant, licensee, or registrant under the Gambling Control Act are privileged if agents and employees of the division or the California Gambling Control Board reveal those communications or documents in the course of discharging their duties, complying with laws, regulations, and subpoenas, and assisting in investigations. Under existing law, if a document or publication relating to an applicant, licensee, or registrant is revealed by an agent or employee for the purpose of assisting in an investigation, no statement or publication of a document shall impose liability for defamation or constitute a ground for recovery in a civil action. Existing law also prohibits the division and the board, and their employees and agents, from revealing information, documents, or communications provided by an applicant or licensee that are privileged under the Evidence Code without the prior written consent of the applicant or licensee or pursuant to a lawful court order after notice of the proceedings has been given to the applicant or licensee. Existing law allows the board to appoint counsel for the board or request representation by the Attorney General. This bill would extend the above provisions to the commission and its agents and employees and would delete references to the board. This bill would eliminate the board's authority to appoint counsel or request representation by the Attorney General. This bill would allow the commission to appoint 8 attorneys. This bill would also provide that when employees or agents of the division or commission reveal communications or publications in any form in the course of discharging their duties, complying with laws, regulations, and subpoenas, and, in good faith, providing assistance in investigations, those communications and publications are privileged and shall not form a basis for imposing liability for defamation or constitute a ground for recovery in any civil action. In addition, this bill would prohibit the division and the commission, and their employees and agents, from revealing information, documents, or communications provided by any person that are privileged under any provision of law without the prior written consent of the holder of the privilege or pursuant to a lawful court order after notice of the proceedings has been given to the holder of the privilege. (7) Under existing law, the act establishes a 2-phased framework for the state regulation of gambling in California. Existing law provides that during the first phase, the division has the authority to issue regulations for the purpose of carrying out the act. Existing law provides that during the 2nd phase, the commission has the authority to issue regulations for the purposes of carrying out the act. Existing law provides that the 2nd phase commenced on January 1, 1999, although under existing law, the division retains its phase-one powers until the Governor signs an Executive order declaring that the commission is prepared to assume its duties and responsibilities, as required by the act. This bill would repeal provisions of existing law giving the division the authority to issue regulations for the administration and enforcement of the act. (8) Existing law provides that if the owner of a gambling enterprise is not a person, the owner is not eligible for a gambling license unless specified persons involved in the enterprise obtain a gambling license. Existing law exempts from the group of persons who must obtain a gambling license under this provision landlords, even if those landlords receive a percentage share of the revenue earned by the owner from gambling activities. This bill would remove the exemption for landlords who receive a percentage share of the revenue earned by the owner from gambling activities from the aforementioned provision. (9) Existing law provides that a license shall not be denied to a gambling establishment solely because it is not open to the public provided that certain conditions are met. This bill would delete references to the Division of Gambling Control with respect to issuance and denial of a license. (10) Existing law requires persons applying for gambling licenses to submit fingerprints to the division on forms provided by the division. This bill would allow applicants to submit fingerprints to the division using "live scan" or other prevailing, accepted technology. (11) Existing law gives the commission the authority to issue work permits to employees and independent agents of gambling enterprises. This bill would specify that work permits issued by the commission shall be valid for 2 years and that the commission will issue regulations regarding the issuance and renewal of work permits. (12) Existing law provides that neither the division nor the commission shall issue a license to certain gambling clubs, as specified. This bill would change these provisions to refer only to the commission. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 19805 of the Business and Professions Code is amended to read: 19805. As used in this chapter, the following definitions shall apply: (a) "Affiliate" means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a specified person. (b) "Applicant" means any person who has applied for, or is about to apply for, a state gambling license, a key employee license, a registration, a finding of suitability, a work permit, a manufacturer' s or distributor's license, or an approval of any act or transaction for which the approval or authorization of the commission or division is required or permitted under this chapter. "Banking game" or "banked game" does not include a controlled game if the published rules of the game feature a player-dealer position and provide that this position must be continuously and systematically rotated amongst each of the participants during the play of the game, ensure that the player-dealer is able to win or lose only a fixed and limited wager during the play of the game, and preclude the house, another entity, a player, or an observer from maintaining or operating as a bank during the course of the game. For purposes of this section it is not the intent of the Legislature to mandate acceptance of the deal by every player if the division finds that the rules of the game render the maintenance of or operation of a bank impossible by other means. The house shall not occupy the player-dealer position. (d) "Board" means the California Gambling Control Board. (e) "Commission" means the California Gambling Control Commission. (f) "Controlled gambling" means to deal, operate, carry on, conduct, maintain, or expose for play any controlled game. (g) "Controlled game" means any controlled game, as defined by subdivision (e) of Section 337j of the Penal Code. (h) "Director," when used in connection with a corporation, means any director of a corporation or any person performing similar functions with respect to any organization. In any other case, "director" means the Director of the Division of Gambling Control. (i) "Division" means the Division of Gambling Control in the Department of Justice. (j) "Finding of suitability" means a finding that a person meets the qualification criteria described in subdivisions (a) and (b) of Section 19848, and that the person would not be disqualified from holding a state gambling license on any of the grounds specified in subdivision (a) of Section 19850. (k) "Game" and "gambling game" means any controlled game. (l) "Gambling" means to deal, operate, carry on, conduct, maintain, or expose for play any controlled game. (m) "Gambling enterprise employee" means any natural person employed in the operation of a gambling enterprise, including, without limitation, dealers, floormen, security employees, countroom personnel, cage personnel, collection personnel, surveillance personnel, data processing personnel, appropriate maintenance personnel, waiters and waitresses, and secretaries, or any other natural person whose employment duties require or authorize access to restricted gambling establishment areas. (n) "Gambling establishment," "establishment," or "licensed premises" means one or more rooms where any controlled gambling or activity directly related thereto occurs. (o) "Gambling license" or "state gambling license" means any license issued by the state that authorizes the person named therein to conduct a gambling operation. (p) "Gambling operation" means exposing for play one or more controlled games that are dealt, operated, carried on, conducted, or maintained for commercial gain. (q) "Gross revenue" means the total of all compensation received for conducting any controlled game, and includes interest received in payment for credit extended by an owner licensee to a patron for purposes of gambling, except as provided by regulation. (r) "House" means the gambling establishment, and any owner, shareholder, partner, key employee, or landlord thereof. (s) "Independent agent," except as provided by regulation, means any person who does either of the following: (1) Collects debt evidenced by a credit instrument. (2) Contracts with an owner licensee, or an affiliate thereof, to provide services consisting of arranging transportation or lodging for guests at a gambling establishment. (t) "Institutional investor" means any retirement fund administered by a public agency for the exclusive benefit of federal, state, or local public employees, any investment company registered under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), any collective investment trust organized by banks under Part Nine of the Rules of the Comptroller of the Currency, any closed-end investment trust, any chartered or licensed life insurance company or property and casualty insurance company, any banking and other chartered or licensed lending institution, any investment advisor registered under the Investment Advisors Act of 1940 (15 U.S.C. Sec. 80b-1 et seq.) acting in that capacity, and other persons as the board may determine for reasons consistent with the policies of this chapter. (u) "Key employee" means any natural person employed in the operation of a gambling enterprise in a supervisory capacity or empowered to make discretionary decisions that regulate gambling operations, including, without limitation, pit bosses, shift bosses, credit executives, cashier operations supervisors, gambling operation managers and assistant managers, managers or supervisors of security employees, or any other natural person designated as a key employee by the division for reasons consistent with the policies of this chapter. (v) "Key employee license" means a state license authorizing the holder to be associated with a gambling enterprise as a key employee. (w) "Licensed gambling establishment" means the gambling premises encompassed by a state gambling license. (x) "Limited partnership" means a partnership formed by two or more persons having as members one or more general partners and one or more limited partners. (y) "Limited partnership interest" means the right of a general or limited partner to any of the following: (1) To receive from a limited partnership any of the following: (A) A share of the revenue. (B) Any other compensation by way of income. (C) A return of any or all of his or her contribution to capital of the limited partnership. (2) To exercise any of the rights provided under state law. (z) "Owner licensee" means an owner of a gambling enterprise who holds a state gambling license. (aa) "Person," unless otherwise indicated, includes a natural person, corporation, partnership, limited partnership, trust, joint venture, association, or any other business organization. (ab) "Player" means a patron of a gambling establishment who participates in a controlled game. (ac) "Player-dealer" and "controlled game featuring a player-dealer position" refer to a position in a controlled game, as defined by the approved rules for that game, in which seated player participants are afforded the temporary opportunity to wager against multiple players at the same table, provided that this position is rotated amongst the other seated players in the game. (ad) "Publicly traded racing association" means a corporation licensed to conduct horse racing and simulcast wagering pursuant to Chapter 4 (commencing with Section 19400) whose stock is publicly traded. (ae) "Qualified racing association" means a corporation licensed to conduct horse racing and simulcast wagering pursuant to Chapter 4 (commencing with Section 19400) that is a wholly owned subsidiary of a corporation whose stock is publicly traded. (af) "Work permit" means any card, certificate, or permit issued by the commission, or by a county, city, or city and county, whether denominated as a work permit, registration card, or otherwise, authorizing the holder to be employed as a gambling enterprise employee or to serve as an independent agent. A document issued by any governmental authority for any employment other than gambling is not a valid work permit for the purposes of this chapter. SEC. 2. Section 19818 of the Business and Professions Code is repealed. SEC. 3. Section 19818A is added to the Business and Professions Code, to read: 19818A. The commission may employ not more than eight attorneys. Nothing herein shall be deemed to exempt the commission from the operation of Section 11040, 11042, or 11043 of the Government Code. SEC. 4. Section 19823A of the Business and Professions Code is amended to read: 19823A. (a) The commission shall have all powers necessary and proper to enable it fully and effectually to carry out the policies and purposes of this chapter, including, without limitation, the power to do all of the following: (1) Require any person to apply for a license or approval as specified in this chapter. (2) For any cause deemed reasonable by the commission, deny any application for a license, permit, or approval provided for in this chapter, limit, condition, or restrict any license, permit, or approval, or impose any fine upon any person licensed or approved. (3) Approve or disapprove transactions, events, and processes as provided in this chapter. (4) Take actions deemed to be reasonable to ensure that no ineligible, unqualified, disqualified, or unsuitable persons are associated with controlled gambling activities. (5) Take actions deemed to be reasonable to ensure that gambling activities take place only in suitable locations. (6) Grant temporary licenses, work permits, or approvals on appropriate terms and conditions. (7) Institute a civil action in any superior court against any person subject to this chapter to restrain a violation of this chapter. An action brought against a person pursuant to this section does not preclude a criminal action or administrative proceeding against that person by the Attorney General or any district attorney or city attorney. (8) Issue subpoenas to compel attendance of witnesses and production of documents and other material things at a meeting or hearing of the commission or its committees, including advisory committees. (b) This section shall become operative on the occurrence of one of the events specified in Section 66 of the act that added this section to the Business and Professions Code. SEC. 5. Section 19823.5 is added to the Business and Professions Code, to read: 19823.5. The commission may require that any matter that the commission is authorized or required to consider in a hearing or meeting of an adjudicative nature regarding the denial, suspension, or revocation of a license, permit, or a finding of suitability, be heard and determined in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code. SEC. 6. Section 19827 of the Business and Professions Code is amended to read: 19827. (a) Without limiting any privilege that is otherwise available under law, any communication or publication from, or concerning, an applicant, licensee, or registrant, in oral, written, or any other form, is absolutely privileged and so shall not form a basis for imposing liability for defamation or constitute a ground for recovery in any civil action, under any of the following circumstances: (1) It was made or published by an agent or employee of the division or commission in the proper discharge of official duties or in the course of any proceeding under this chapter. (2) It was required to be made or published to the division or commission, or any of their agents or employees, by law, regulation, or subpoena of the division or the commission. (3) It was, in good faith, made or published to the division or the commission for the purpose of causing, assisting, or aiding an investigation conducted pursuant to this chapter. (b) If any document or communication provided to the division or the commission contains any information that is privileged pursuant to Division 8 (commencing with Section 900) of the Evidence Code, or any other provision of law, that privilege is not waived or lost because the document or communication is disclosed to the division or the commission or to any of their agents or employees. (c) The division, the commission, and their agents and employees shall not release or disclose any information, documents, or communications provided by an applicant, licensee, or other person, that are privileged pursuant to Division 8 (commencing with Section 900) of the Evidence Code, or any other provision of law, without the prior written consent of the holder of the privilege, or pursuant to lawful court order after timely notice of the proceedings has been given to the holder of the privilege. An application to a court for an order requiring the division or the commission to release any information declared by law to be confidential shall be made only upon motion made in writing on not less than 10 business days' notice to the division or the commission, and to all persons who may be affected by the entry of the order. SEC. 7. Section 19830 of the Business and Professions Code is repealed. SEC. 8. Section 19834 of the Business and Professions Code is repealed. SEC. 9. Section 19841A of the Business and Professions Code is amended to read: 19841A. (a) An owner of a gambling enterprise that is not a natural person shall not be eligible for a state gambling license unless each of the following persons individually applies for and obtains a state gambling license: (1) If the owner is a corporation, then each officer, director, and shareholder, other than a holding or intermediary company, of the owner. The foregoing does not apply to an owner that is either a publicly traded racing association or a qualified racing association. (2) If the owner is a publicly traded racing association, then each officer, director, and owner, other than an institutional investor, of five percent or more of the outstanding shares of the publicly traded corporation. (3) If the owner is a qualified racing association, then each officer, director, and shareholder, other than an institutional investor, of the subsidiary corporation and any owner, other than an institutional investor, of five percent or more of the outstanding shares of the publicly traded corporation. (4) If the owner is a partnership, then every general and limited partner of, and every trustee or person, other than a holding or intermediary company, having or acquiring a direct or beneficial interest in, that partnership owner. (5) If the owner is a trust, then the trustee and, in the discretion of the commission, any beneficiary and the trustor of the trust. (6) If the owner is a business organization other than a corporation, partnership, or trust, then all those persons as the commission may require, consistent with this chapter. (7) Each person who receives, or is to receive, any percentage share of the revenue earned by the owner from gambling activities. (8) Every employee, agent, guardian, personal representative, lender, or holder of indebtedness of the owner who, in the judgment of the commission, has the power to exercise a significant influence over the gambling operation. (b) This section shall become operative on the occurrence of one of the events specified in Section 66 of the act that added this section to the Business and Professions Code. SEC. 9.5. Section 19851.5 of the Business and Professions Code is amended to read: 19851.5. Notwithstanding subdivision (i) of Section 19801, the commission shall not deny a license to a gambling establishment solely because it is not open to the public, provided that all of the following are true: (a) the gambling establishment is situated in a local jurisdiction that has an ordinance allowing only private clubs, and the gambling establishment was in operation as a private club under that ordinance on December 31, 1997, and met all applicable state and local gaming registration requirements; (b) the gambling establishment consists of no more than five gaming tables; (c) videotaped recordings of the entrance to the gambling room or rooms and all tables situated therein are made during all hours of operation by means of closed circuit television cameras, and these tapes are retained for a period of 30 days and are made available for review by the division or commission upon request; and (d) the gambling establishment is open to members of the private club and their spouses in accordance with membership criteria in effect as of December 31, 1997. A gambling establishment meeting these criteria, in addition to the other requirements of this chapter, may be licensed to operate as a private club gambling establishment until November 30, 2003, or until the ownership or operation of the gambling establishment changes from the ownership or operation as of January 1, 1998, whichever occurs first. Operation of the gambling establishments after this date shall only be permitted if the local jurisdiction approves an ordinance, pursuant to Sections 19950.1 and 19950.2, authorizing the operation of gambling establishments that are open to the public. The commission shall adopt regulations implementing this section. Prior to the commission's issuance of a license to a private club, the division shall ensure that the ownership of the gambling establishment has remained constant since January 1, 1998, and the operation of the gambling establishment has not been leased to any third party. SEC. 10. Section 19853.5 of the Business and Professions Code is amended to read: 19853.5. The division shall furnish to the applicant supplemental forms, which the applicant shall complete and file with the division. These supplemental forms shall require, but shall not be limited to requiring, complete information and details with respect to the applicant's personal history, habits, character, criminal record, business activities, financial affairs, and business associates, covering at least a 10-year period immediately preceding the date of filing of the application. Each applicant shall submit two sets of fingerprints, using "live scan" or other prevailing, accepted technology, or on forms provided by the division. The division may submit one fingerprint card to the United States Federal Bureau of Investigation. SEC. 11. Section 19910 of the Business and Professions Code is amended to read: 19910. The Legislature finds that to protect and promote the health, safety, good order, and general welfare of the inhabitants of this state, and to carry out the policy declared by this chapter, it is necessary that the division ascertain and keep itself informed of the identity, prior activities, and present location of all gambling enterprise employees and independent agents in the State of California, and when appropriate to do so, recommend to the commission for approval persons for employment in gambling establishments as provided in this article. SEC. 12. Section 19910.5A of the Business and Professions Code is amended to read: 19910.5A. (a) (1) A person shall not be employed as a gambling enterprise employee, or serve as an independent agent, except as provided in paragraph (2), unless he or she is the holder of one of the following: (A) A valid work permit issued in accordance with the applicable ordinance or regulations of the county, city, or city and county in which his or her duties are performed. (B) A work permit issued by the commission pursuant to regulations adopted by the commission for the issuance and renewal of work permits. A work permit issued by the commission shall be valid for two years. (2) An independent agent is not required to hold a work permit if he or she is not a resident of this state and has registered with the division in accordance with regulations. (b) A work permit shall not be issued by any city, county, or city and county to any person who would be disqualified from holding a state gambling license for the reasons specified in paragraphs (1) to (7), inclusive, of subdivision (a) of Section 19850. (c) The division may object to the issuance of a work permit by a city, county, or city and county for any cause deemed reasonable by the division, and if the division objects to issuance of a work permit, the work permit shall be denied. (1) The commission shall adopt regulations specifying particular grounds for objection to issuance of, or refusal to issue, a work permit. (2) The ordinance of any city, county, or city and county relating to issuance of work permits shall permit the division to object to the issuance of any permit. (3) Any person whose application for a work permit has been denied because of an objection by the division may apply to the commission for an evidentiary hearing in accordance with regulations. (d) Application for a work permit for use in any jurisdiction where a locally issued work permit is not required by the licensing authority of a city, county, or city and county shall be made to the commission, and may be granted or denied for any cause deemed reasonable by the commission. If the commission denies the application, it shall include in its notice of denial a statement of facts upon which it relied in denying the application. Upon receipt of an application for a work permit, the commission may issue a temporary work permit for a period not to exceed 120 days, pending completion of the background investigation by the division and official action by the commission with respect to the work permit application. (e) An order of the commission denying an application for a work permit, including an order declining to issue a work permit following review pursuant to paragraph (3) of subdivision (c), may be reviewed in accordance with subdivision (e) of Section 19858. (f) This section shall become operative on the occurrence of one of the events specified in Section 66 of the act that added this section to the Business and Professions Code. SEC. 13. Section 19950.3 of the Business and Professions Code is amended to read: 19950.3. (a) In addition to any other limitations on the expansion of gambling imposed by Section 19950.2 or any provision of this chapter, the commission shall not issue a gambling license for a gambling establishment that was not licensed to operate on December 31, 1999, unless an application to operate that establishment was on file with the division prior to September 1, 2000. (b) This section shall remain in effect only until January 1, 2007, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2007, deletes or extends that date.