Is there a systemic bias against API cardroom operators?

Last July 2, 2018, Assembly members Rob Bonta and David Chu requested the Joint Legislative Audit Committee (JLAC) to approve an audit of the Bureau of Gambling Control (Bureau) and the California Gambling Control Commission (Commission) regarding the revenues, expenditures and use of the Gambling Control Fund (GCF) and the units of State government that receive their financial support from the GCF.

Assembly members Bonta and Chu noted on their request that, “There has not been an audit of the Bureau and Commission to look at whether they are operating efficiently to achieve their statutory missions.”

They said that the purpose of the audit is: “To determine the reasons for the persistent backlog of applications for licensing, game approval, accusations and hearings is needed to determine what can be done to assure that the Bureau and Commission are meeting their statutorily mandated missions and timelines.”

They emphasized that the audit “should review whether all applicants are being treated in a fair and consistent manner despite the applicant’s race, ethnic background, or gender.”

They also noted that it does not appear that the State Auditor has reviewed the GCF and that a review may be overdue in several years.  With the GCF surplus growing every year since its inception, the fund stood at $56,501,000 in 2018.  It’s projected to grow to $59,000,000 in 2019.

And lastly, they said that the audit “should determine whether the Commission and the Bureau are operating effectively and efficiently and complying with statutory requirements related to the GCF.”  At a minimum, the audit should address at least 10 areas of concern, including the following:

  1. Determine whether the Commission and Bureau are operating effectively and efficiently and complying with statutory requirements related to GCF;
  2. Determine the extent to which a backlog exists in application for licensing at gambling establishments;
  3. Determine whether GCF funds are being used for any improper purposes, such as employees performing non-GCF appropriate tasks;
  4. Assess whether the Commission and Bureau are acting fairly and consistently in providing timely hearings, due process, and equal protection to all licenses and applicants;
  5. Assess whether all applicants are treated the same despite their race, national origin or, gender;
  6. Ensure that Asian Pacific Islander applicants are not treated disparately.

On August 8, 2018, the JLAC held a hearing to go over the audit request.  Bonta spoke before the JLAC outlining the purpose and reasons of the audit request, which were outlined in their July 2, 2018 letter to JLAC.

Bonta said, “The chronic delays have significant, quantifiable impact on those involved in the cardroom industry.  An audit of how the CGCC and BGC is being administered is therefore warranted.”


Bonta expressed concern about the growing backlog in processing new licensing applications.  He said, “Backlog may also be due to CGCC [Commission] and BGC [Bureau] exceeding their statutory boundaries, investigating matters beyond the scope of their missions, and wasting resources on fruitless prosecutions.”

One of those who complained about the long processing time and approval of gaming license applications was the Fortune Players’ Group (FPG), a Bay area-based “third-party propositional player.”  FPG originally applied for a gaming license in 2010 but the Bureau hasn’t approved it yet.  By law, a gaming license review should take no more than 180 days.  But in reality, the Bureau’s review process has taken more than four years in numerous cases.  In the case of FPG, it’s been waiting for more than eight long years.  The Bureau, however, had issued a temporary license that must be renewed every year subject to restrictions.

During the public comments part of the JLAC hearing, Atty. Brian Gerringer, who represents FPG on licensing issues said that on October 15, 2015, six armed special agents of the Bureau carried out an unannounced raid in the FPG office without a search warrant.  The agents found two female employees in the office.  They confiscated their cell phones and detained them in a small room.  The agents then rummaged the office and took the computers and documents found in the office.

Consequently, FPG sued the State of California in Federal court for violating its Fourth Amendment rights, which prohibit illegal search and seizure.  The State of California settled the lawsuit and paid $225,000 to FPG and $50,000 each to the two employees.

Systemic bias

Gerringer said that the common thread is a systemic bias against API cardroom operators.  He urged the JLAC to exercise its authority to demand an explanation as to why the Commission and Bureau are wasting public funds in the pursuit of discriminatory policy against API cardroom operators.

The next presenter was a co-owner of FPG.  She said that she had passed the background checks but the Bureau has not approved her license application without giving her any reason.

The next presenter was an employee of FPG.  She said she felt that she was being harassed because the Bureau kept on denying her license.  They asked her to produce bank statements as far back as 35 years ago.  They also asked her for receipts of jewelry she bought 25 years ago.  But she has only been working for FPG for the past eight years!

The last presenter was another employee of FPG.  She was one of the two employees who were detained in a small room when agents of the Bureau raided the FPG office on October 15, 2015.  She said that the way the agents interrogated her was a horrible experience.

JLAC’s recommendation

After all the public comments were presented, JLAC Chair Assembly Member Al Muratsuchi said: “I appreciate Mr. Bonta and your request for audit.  These are serious allegations being made and so it warrants the State Auditor as an independent reviewer to review what is going on.  Especially, according to Mr. Bonta, this is the first audit of the Commission and the Bureau in the entire history of the agency.  And so, I think, perhaps, it could be beneficial to the general public as well as the Legislature to have independent review of the Commission and the Bureau.  And so for that reason I will be recommending support for the audit request.”

There was a motion and it was seconded to approve the audit of the California Gambling Control Commission and Department of Justice-Gambling Control Fund.    .  The roll call followed and they voted.  The Chair’s recommendation was passed unanimously.  The audit request will now go to the State Auditor to begin the audit.
Indeed, the JLAC hearing has manifested that API cardroom operators and “third-party propositional players” have suffered injustice, unfairness, and discrimination in their applications for gaming licenses, which begs the question:  Is there a systemic bias against the API cardroom operators and third-party players?