2 gaming bodies probed for API bias, use of $57M fund

CA Attorney General Xavier Becerra
Rob Bonta

SACRAMENTO—State auditors are investigating the Bureau of Gambling Control (BGC) and California Gambling Control Commission (CGCC), for alleged discrimination against Asian Pacific Islander (API) businesses and employees and, for possible misuse of the $57 million surplus gaming control funds (GCF) under their control.

The investigation is part of a wide ranging audit approved by the Joint Legislative Audit Commission in response to a request filed by Assemblyman Rob Bonta (18th District) and David Chiu (17th District), to look into extensive backlogs in the approval and renewal of licenses and games to the detriment of the cardroom industry.

It is the first time in 20 years that the operations of the BGC will come under close scrutiny by the state auditor. The board is directly under the CA Attorney General Xavier Becerra.

Bonta told a recent hearing of the audit committee both the Commission and the Board needed to be audited in order to:

  • Assess whether all applicants for licenses are treated the same despite their race, national origin or, gender,
  • Ensure that API applicants are not treated disparately,
  • Stop Board resources from being wasted in fruitless prosecutions,
  • Determine whether the fees paid to the Fund should be reduced or refunded,
  • Whether the Fund is being used for any improper purposes, such as employees performing non-BGC tasks and,
  • Review the process for reviewing gambling establishments and other licensee’s backgrounds. Determine whether they are performing efficient and effective background reviews, providing basic due process and, meeting equal protection requirements.

Under the law, a gaming license review should take no more than 180 days. However, in numerous cases, the review process has taken over four to eight years.

Bonta said during the hearing that the Board has not reduced its backlog of unresolved cases in a significant manner even with an expanded staff, a higher budget and, a huge Fund surplus of almost $57 million that is growing by $3-5 million yearly.

The backlog remains high despite the fact that the number of cardrooms supervised by the Board has gone down to 74 less than half its size in 1997.

BGC Director Stephanie Shimazu admitted the backlog but she claimed the Board has made significant gains in resolving the problem.

Not so, according to Bonta.

“In 2013, approximately 20 employees transferred from the Commission to the Board to assist in the backlog. In 2015-2016, the Legislature augmented the BGC to allow an additional 12 positions in response to the significant backlog. When these 12 positions were added, there were more than 2,221 cases in the backlog. The BGC represented that with the added positions they would be able to resolve the backlog in three years. The backlog still stands at 1,991 cases.”

The Commission’s website shows that since 2012 it has denied or revoked 100 employee licenses. In comparison, the state of Nevada which has thousands more applicants has only eight denials in the same period.

Posted decisions on the Commission’s website further shows that most of the applicants sent to an administrative hearing for further review come from a minority background andthat nearly 40 percent are of API background.  Based on this data, it appears that applicants and licensees with an API background seem to be the focus of unnecessary investigations which are having a disparate impact.

The Bureau, he said, routinely asks applicants to disclose information that is neither recent nor relevant to their applications for licensing. The Board also asks follow-up questions in a piecemeal fashion in order to keep the investigations in a state of perpetual inquiry rather than the required speedy resolution.

Bonta and Chiu filed the audit request in reply to concerns raised by casino owners and their representatives who also expressed fear of retaliation from the regulators. Aside from Lucky Chances Casino, five other API owned and operated cardrooms API have experienced similar discriminatory practices.

“There is widespread belief that decisions are being made upon biased information and, policies are being enforced in an uneven manner which is unfair to the applicant, the gaming industry and the legislative bodies that have entrusted regulators with the responsibility of regulating the gaming industry.

Shimazu dismissed as unfounded Bonta’s and Chiu’s claims that applicants and licensees from certain racial backgrounds and national origins specifically the API community, are treated differently.

“I can assure you the attorney general and I personally would not tolerate such actions,” she said during the committee hearing last August 8.

But lawyers for Rene Medina, owners and employees of Fortune Players Group (FPG), a third party propositional players service company, said on the record comments by the Board and events showed bias and a pattern of retaliatory conduct against Medina and businesses owned by his relatives.

For instance, owners and employees of Fortune Players which is owned by Medina’s youngest son and two of Medina’s relatives, complained of the illegal raid carried out by DoJ agents at its Daly City office, and the unreasonable delay in the renewal of their licenses even though they have been in operation for eight years

“The Board wants my bank statements all the way back 35 years from banks some of which have already closed. They also asked for receipts of my personal jewelry that I bought over 25 years ago,” one FPG employee said.

Lucky Chances lawyer Jacqueline Vu said there are comments made on the record by the Bureau that insinuated that the casino was involved in money laundering because Medina owns a Lucky Money, a money remittance company that caters to the Filipino community who send money back to the Philippines. Lucky Money is licensed to operate in 40 states in the US and is regularly audited by state regulators and the IRS. It is a member of FINCEN (Financial Crimes and Enforcement Network) of the Department of the Treasury.

She said Lucky Chances has been treated unfairly and this is just a small example of the bias the casino has experienced from the Bureau and the Commission.

Likewise, inappropriate comments were made regarding Medina, his family’s national origin and name, their language and background during hearings involving the casino and the Medina family, said one lawyer familiar with the discussions.

Lucky Chances was founded in 1998 by Medina who has since sold the casino to his sons Rommel and Ruell, more than 10 years ago.

Brian Gearinger, who represents Medina said during the Audit Committee hearing that the common thread in the cases against Medina and FPG, was a “systemic bias” against the Filipino immigrant and members of his family.

The Bureau was wasting public funds in the pursuit of discriminatory policies against Medina and his relatives. The Commission’s prosecution of matters that are later determined to be meritless and overboard is costly and may be an improper use of Fund resources, Gearinger said.

For instance, the Bureau had to pay almost $225,000 to FPG and $50,000 each to two of its employees who sued DoJ agents because of the illegal raid and for false imprisonment when it raided FPG offices in 2015.

In 2017, Gearinger filed and won a civil rights lawsuit on behalf of Medina against Becerra in his official capacity as state attorney general and, the Bureau for violating his first amendment rights after the Commission prohibited Medina from talking to any employees of Lucky Chances and, employees talking to Medina including topics not related to gambling.

The Bureau’s problems are not limited to licensing applications.

The Bureau’s Game Unit has not issued any decisions on games since February 2016 and, the Commission may not be setting hearings for the applicants within a reasonable time. “The chronic delays have significant, quantifiable impact on those involved in the cardroom industry,” Bonta and Chiu declared in their request for the audit.

Bonta and Chiu said BGC employees were doing non-gaming work for other agencies in the DoJ, which is a possible misuse of the Fund. The fund is not a tax and is intended “exclusively” for the Board and the Commission to regulate the 74 active cardrooms in California.

“BGC employees that are paid with funds from the GCF cannot be moved to other entities with the DoJ. An audit is required to determine if there is misuse of the GCF occurring,” said Bonta.

State auditor Elaine Howle said the audit could last six months.