STATE OF IOWA BEFORE THE DEPARTMENT OF COMMERCE ALCOHOLIC BEVERAGES DIVISION
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1 STATE OF IOWA BEFORE THE DEPARTMENT OF COMMERCE ALCOHOLIC BEVERAGES DIVISION IN RE: DOCKET NO. D DIA NO. 11ABD082 Edwin Jante Post No Veterans of Foreign Wars d/b/a V.F.W. Lounge 315 Center Street PROPOSED DECISION Garner, Iowa Liquor License No. LC-4312 The Iowa Department of Public Safety (DPS) filed a Hearing Complaint against Edwin Jante Post No Veterans of Foreign Wars, d/b/a V.F.W. Lounge (licensee) on October 28, The Hearing Complaint alleged that on or about May 27, 2011, the licensee, or an agent or employee of the licensee, knowingly possessed or controlled an illegal gambling device, engaged in illegal gambling, and/or permitted illegal gambling to occur by conducting and/or possessing an illegal sports betting pool on the licensed premises. The hearing was held before Administrative Law Judge Margaret LaMarche on December 9, 2011 at 10:00 a.m. in a hearing room at the Iowa Department of Inspections and Appeals Administrative Hearings Division, Wallace State Office Building, in Des Moines, Iowa. The DPS was represented by Assistant Attorney General John Lundquist. The licensee was represented by its Quartermaster, Gary Heinen. THE RECORD The record includes the Hearing Complaint, the Notice of Hearing, DPS Exhibits 1-3, and the testimony of Matt Anderson and Gary Heinen. FINDINGS OF FACT Edwin Jante Post No Veterans of Foreign Wars, d/b/a V.F.W. Lounge holds Liquor License LC-4312 for the premises located at 315 Center Street in Garner, Iowa. Quartermaster Gary Heinen is listed as the contact person in the licensing
2 Page 2 records maintained by the Division. The V.F.W. Lounge has a social gambling license issued by the Department of Inspections and Appeals. (DPS Exhibits 1, 2) On May 27, 2011, Special Agent (S/A) Matt Anderson of the Department of Public Safety s Division of Criminal Investigation (DCI) went to V.F.W. Lounge to investigate an anonymous complaint that had been filed with the Department of Inspections and Appeals (DIA). The anonymous complainant reported that the V.F.W. Lounge had high dollar sports betting pools that did not comply with state law. (Testimony of Matt Anderson; DPS Exhibit 1) There was no bartender behind the bar when S/A Anderson first entered the V.F.W. Lounge, but four older men were playing cards. S/A Anderson observed two black three ring binders hanging on the wall next to the west entrance. One book was labeled NASCAR Driver Book and the other was labeled NASCAR Sign-Up Book. When S/A Anderson started to look through the books, one of the men playing cards called out for the bartender. The bartender, Toni Gonnerman, came out of a back room. S/A Anderson introduced himself, explained that he was investigating a gambling complaint, and asked about the NASCAR pool. Ms. Gonnerman told S/A Anderson that she had only worked there a few weeks and did not know much about the NASCAR pool. She called over Bruce Sankey, who is the Commander of VFW Post #5515, to answer Anderson s questions. (Testimony of Matt Anderson; DPS Exhibit 1) Bruce Sankey told S/A Anderson that Ruth (later identified by Gary Heinen as Ruth Hiley) was in charge of operating the pool. Patrons paid $25 to participate in the pool, and $5 of each entry fee went to Ruth for her time and effort in organizing the pool. Forty-three (43) patrons had entered the pool. Ruth was paid $215 for her time and the remaining $860 was the prize money. Mr. Sankey reported that he won first place the previous year, and he believed his winnings were $250. Money had also been paid out to the second, third, fourth, fifth, and sixth place winners. (Testimony of Matt Anderson; DPS Exhibit 1) Mr. Sankey further explained that the pool started on February 20, 2011 with the Daytona 500 race, and current point standings were posted on the board. S/A Anderson located five pieces of paper labeled 2011 NASCAR Standings, which were posted on the board next to the NASCAR notebooks. S/A Anderson explained to Mr. Sankey how the pool was illegal. Sports betting pools must be in the proper grid format with numbers on both the horizontal and the vertical axis. Participants may not be charged more than $5 per entry and the total
3 Page 3 amount of winnings may not exceed $500. No one may be paid to organize and run the pool because all money collected must go to the participants. Mr. Gonnerman told S/A Anderson that they had been doing the same pool for years and never knew it was illegal. (Testimony of Matt Anderson; DPS Exhibit 1) S/A Anderson seized the two notebooks and the five pages of standings from the board and provided Mr. Sankey a receipt for the items. S/A Anderson did not find any of the pool money on the premises. Based on the number of participants, participants would have contributed a total amount of $1075. (Testimony of Matt Anderson; DPS Exhibit 1, 1-9) Copies of the seized documents were submitted as evidence at hearing. The documents show that participants selected the drivers that they wanted for the individual races throughout the season. Each participant had their own sheet that listed the car number, driver name, make of the driver s car, and columns for first pick, second pick and third pick. The standings sheets provided the participant s place in the standings with respect to each race. (Testimony of Matt Anderson; DPS Exhibit 1) This was not the highest value pool that S/A Anderson had ever investigated, but it is among the highest. He previously investigated one pool that had a $1000 payout. It is the only pool that S/A Anderson has investigated where someone was paid to organize and conduct the pool. (Testimony of Matt Anderson) The licensee is a non-profit organization. Ruth Hiley collected all of the money and kept the scores. The V.F.W. Lounge never handled the money from the pool. Quartermaster Heinen denied that the V.F.W Lounge was conducting or benefiting from the NASCAR pool, although he admitted that the NASCAR notebooks and standings were kept on the licensed premises. However, members of the Edwin Jante Post No. 5515, including Quartermaster Heinen, did participate in the pool. (Testimony of Gary Heinen) CONCLUSIONS OF LAW Iowa Code section (2)(a) and (j) (2011) provide: 2. A person or club holding a liquor control license or retail wine or beer permit under this chapter, and the person's or club's agents or employees, shall not do any of the following:...
4 Page 4 a. Knowingly permit any gambling, except in accordance with chapter 99B, 99D, 99F, or 99G... on the premises covered by the license or permit.... j. Knowingly permit or engage in any criminal activity on the premises covered by the license or permit. (emphasis added) Possession of gambling devices is prohibited unless the use of the device is licensed pursuant to Iowa Code chapters 99B or 99G. A gambling device means a device used or adapted or designed to be used for gambling. Iowa Code section (2011). A sports betting pool constitutes a gambling device. Iowa Code section 99B.6(7)(2011) provides, in relevant part: The holder of a liquor control license or beer permit may conduct a sports betting pool if the game is publicly displayed and the rules of the game, including the cost per participant and the amount of the winning, is conspicuously displayed on or near the pool. No participant may wager more than five dollars and the maximum winnings to all participants in the pool shall not exceed five hundred dollars.all moneys wagered shall be awarded to the participants. For purposes of this subsection, pool means a game in which the participants select a square on a grid corresponding to numbers on two intersecting sides of the grid and winners are determined by whether the square selected corresponds to the numbers relating to an athletic event in the manner prescribed by the rules of the game. Prior to offering a sports betting pool to its customers, the holder of a liquor license or beer permit must be issued a social gambling license and prominently display the license on the premises. Iowa Code section 99B.6(1)(a), 99B.6(7)(2011); 481 IAC The licensee had a valid social gambling license on May 27, 2011 and was authorized to conduct sports betting pools, so long as they complied with Iowa Code chapter 99B. The preponderance of the evidence established that on May 27, 2011, the licensee knowingly possessed illegal gambling devices (i.e. the documents that constituted the noncompliant sports betting pool) and knowingly permitted
5 Page 5 illegal gambling (i.e. offering sports betting pools to the public), in violation of Iowa Code sections (2)(a), (j), 725.9, 725.7, 99B.6(1) and 99B.6(7). The NASCAR pool was being conducted on the licensed premises with the knowledge and participation of the Post s officers. The entry fee for the pool ($25) exceeded the $5 limit established in Iowa Code section 99B.6(7). The total winnings from the pool exceeded the $500 limit established in Iowa Code section 99B.6(7). Some of the money that was collected was not awarded to the pool participants. Twenty percent ($5) of each entry fee was paid to the person who operated the pool, in violation of Iowa Code section 99B.6(7). In addition, the format for the NASCAR sports betting pools did not conform to the requirements of Iowa Code section 99B.6(7) because it was not properly formatted as a grid with numbers on two intersecting lines. Quartermaster Heinen argued that the NASCAR pool was not a sports betting pool but rather was a sports league, similar to a bowling league or a pool league, because a lot of skill goes into picking the winning drivers. This argument was not persuasive. It is abundantly clear that a pool to select winners of NASCAR races is a sports betting pool. VFW Commander Bruce Sankey and Quartermaster Gary Heinen did not realize that the NASCAR pool failed to conform to Iowa Code section 99B.6(7). Nevertheless, in Sullivan v. Iowa Depart'l Hearing Board, 325 N.W.2d 923, 926 (Iowa App. 1982), the Iowa Court of Appeals construed Iowa Code section (2)(a) and held that the word "knowingly" in the subsection prohibiting licensees from knowingly permitting gambling on the licensed premises, modifies the word "permit" rather than "violate." The court noted that a person's knowledge of the law is generally presumed, particularly when the activity challenged is regularly conducted by the person in the course of business. Id. Liquor licensees are engaged in a highly regulated business and are expected to know the laws and regulations governing their operations prior to conducting business. The NASCAR sports betting pool was prominently posted on the premises, and the licensee had a social gambling license. The members of Edwin Jante Post No clearly knew that the NASCAR pool was being made available to patrons of the V.F.W. Lounge and that patrons were participating in the pool. The Department of Public Safety recommends a license suspension of days for this violation, which it asserts is consistent with the length of suspension imposed by the Division for similar gambling violations. The facts of this case
6 Page 6 are different from the usual sports betting pool violation because someone was actually paid to conduct the pool. This could certainly be viewed as an aggravating factor justifying the longer suspension of 30 days. In view of the fact that the Edwin Jante Post No is a non-profit organization, however, the license suspension should be limited to 21 days. ORDER IT IS THEREFORE ORDERED, pursuant to Iowa Code section , that for knowingly possessing illegal gambling devices and knowingly permitting illegal gambling on the licensed premises, Liquor License No. LC-4312 issued to Edwin Jante Post No Veterans of Foreign Wars, d/b/a V.F.W. Lounge, shall be suspended for a period of twenty-one (21) days. The suspension shall begin at 6:00 a.m. on Monday, March 5, 2012 and shall end at 6:00 a.m. on Monday, March 26, IT IS FURTHER ORDERED that no alcoholic liquor, wine, or beer may be sold, dispensed or consumed on the premises during the period of suspension. Pursuant to the administrative rules of the division, any adversely affected party may appeal a proposed decision to the Administrator of the Alcoholic Beverages Division within thirty (30) days after issuance of the proposed decision. In addition, the Administrator may initiate review of a proposed decision on the Administrator's own motion at any time within thirty (30) days following the issuance of a proposed decision. 185 IAC 10.27(1) and (2). Requests for review shall be sent to the Administrator of the Alcoholic Beverages Division, 1918 S.E. Hulsizer, Ankeny, IA Unless otherwise ordered, each appealing party may file exceptions and briefs within thirty (30) days of the notice of appeal or order for review. Within thirty (30) days thereafter, any party may file a responsive brief. The Administrator may shorten or extend the briefing period as appropriate. The Administrator may resolve the appeal on the briefs or provide an opportunity for oral argument. 185 IAC 10.27(6). The administrator may affirm, reverse or modify the proposed decision. A party who is adversely affected by the proposed decision shall not be deemed to have exhausted administrative remedies unless the adversely affected party files a request for review of the proposed decision within the time provided and
7 Page 7 the Administrator has reviewed the proposed decision and has affirmed, reversed, or modified the proposed decision. Dated this 9 th day of January, Margaret LaMarche Administrative Law Judge Department of Inspections and Appeals Division of Administrative Hearings 3rd Floor, Wallace State Office Building Des Moines, IA CC: See Attached Mailing List
8 Page 8
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