1 1 SIXTH MEETING OF THE 2 THE GOVERNOR'S GAMBLING CONTROL ADVISORY COUNCIL 3 4 5 6 7 Thursday, August 19, 2004 Cross State Office Building, Rm. 211 8 Capital Complex Augusta, Maine 9 10 11 12 13 14 Council Members Present: 15 George Hale, Chairman Commissioner Michael Cantara 16 Jean Deighan Lt. Timothy Doyle Michael Peters Lt. Thomas Kelly 17 Peter Danton Laura Yustak Smith, AAG W. Lawrence Hall 18 19 20 21 22 Christine Fraga Thornton 23 Registered Diplomate Reporter THE REPORTING GROUP 24 177 Gray Road Falmouth, ME 04105-2514 25 2 1 (The Sixth Meeting of the Governor's Gambling 2 Control Advisory Council was called to order at 3 12:39 p.m. Chairman, George Hale, presiding.) 4 MR. HALE: All right. Good afternoon. We 5 welcome you to the Sixth Meeting of the Governor's 6 Gaming Control Advisory Council. We're still an 7 advisory council, still waiting for more legislative 8 action, more questions to be -- I guess we're past all 9 the questions. 10 I think we'll begin today in what is going to 11 be a very tight schedule and going to be a very 12 important meeting. Have each one of the commissioners 13 introduce themselves. Starting to my left. 14 MR. HALL: Larry Hall. 15 MR. DANTON: Peter Danton. 16 MR. PETERS: Michael Peters. 17 MS. DEIGHAN: Jean Deighan. 18 MR. HALE: And way out to my far right. 19 These are all commissioners here. 20 LT. KELLY: Lieutenant Tom Kelly. 21 MR. CANTARA: Commissioner Mike Cantara. 22 LT. DOYLE: Tim Doyle, State Police. 23 MS. SMITH: Laura Yustak Smith. I'm legal 24 counsel to the council. 25 MR. HALE: I'm glad we don't have any 3 1 sergeants, only lieutenants. We must be important if 2 we just get lieutenants. 3 MR. HALL: Hold it, George. 4 MR. HALE: Oh, you're a sergeant. I'm 5 sorry. 6 MR. HALL: Right. 7 MR. HALE: Right. Larry was a retired 8 sergeant with the State Police. 9 MR. HALL: Somebody has to keep an eye on 10 these fellows. 11 MR. HALE: Okay. 12 LT. DOYLE: It's the best rank in the State 13 Police. 14 MR. HALE: Is it really? 15 LT. DOYLE: Yes, it is. 16 MR. HALE: The same thing in the Army, too. 17 All right. We should be reviewing the 18 minutes of the June 24, July 15, July 29, meetings. 19 Have we all had an opportunity to review the minutes? 20 I did off the Internet. 21 MR. DANTON: You want a motion? 22 MR. HALE: Yes, indeed. 23 MR. DANTON: Peter Danton. I move we accept 24 the minutes of the previous meeting. 25 MR. PETERS: Second. 4 1 MR. HALL: Second. 2 MR. HALE: Moved and seconded. Any 3 discussion? 4 MS. DEIGHAN: Just the spelling of 5 Representative -- thank you. Just the spelling of 6 Representative Hotham's name on the July 29th meeting. 7 MR. CANTARA: For the purposes of the record, 8 it should be -- Michael Cantara. And again, I'll take 9 this opportunity, Mr. Chairman, to remind us all that, 10 so that our transcript is accurate and those listening 11 on the Internet follow carefully, we should be 12 identifying ourselves and using our microphones. 13 Again, Mike Cantara. 14 Representative Hotham's spelling is 15 H-O-T-H-A-M. 16 MR. DANTON: Hotham. 17 MR. HALE: With that change noted, moved and 18 seconded. All those in favor? 19 (All hands raised.) 20 MR. HALE: Thank you very much. You adopt 21 the minutes of the June 24th, July 15th, July 29th 22 meetings. 23 To begin today, I would like to call upon the 24 Commissioner of Public Safety, Michael Cantara, for 25 some opening remarks today. 5 1 MR. CANTARA: Thank you very much, 2 Mr. Chairman, Mr. Hale. Mike Cantara again. 3 I want to take a moment to formally introduce 4 to the council Lieutenant Tom Kelly. Lieutenant Kelly 5 was recently promoted by Colonel Poulin, and has sought 6 the assignment -- and I use those words deliberately -- 7 has sought the assignment to work with the gambling 8 board once duly constituted, and has already begun 9 immersing himself in the work that the council has been 10 engaged in and wanted to introduce Tom to you. And 11 perhaps with the chair's permission, call upon 12 Lieutenant Kelly to simply introduce himself to you. 13 LT. KELLY: Good afternoon. 14 MR. HALE: Good afternoon. 15 LT. KELLY: I'll begin, I've just been 16 promoted to the rank of lieutenant by Colonel Poulin, 17 and previously held a sergeant's position in the 18 records management services unit. And I've been on the 19 road, either on a line patrol or in commercial vehicle 20 enforcement or in very different aspects of the force. 21 And most recently, as a project manager in our 22 computerized record system. 23 MR. HALE: Well, we greet you, welcome you. 24 I'm not sure how the whole procedure goes, but 25 eventually, I'm sure we'll be dealing with you, and 6 1 I'm -- you actually volunteered for this? 2 LT. KELLY: Yes. 3 MR. HALE: All right. Well, we more or less 4 volunteered, too, I guess. All right. Thank you, 5 Lieutenant Kelly. It's nice to meet you. 6 I guess we also would like to have an update 7 on the hiring procedures, Mr. Cantara. 8 MR. CANTARA: Thank you, Mr. Chairman. We 9 have received, as mentioned I believe at our last 10 meeting, 35 applicants. That was whittled down to 11. 11 Of those 11, two withdrew their names for 12 consideration. They were offered other employment. 13 And so that brought the number of candidates to be 14 interviewed to nine. Those candidates are being 15 interviewed now, and we'll be keeping you apprised of 16 that process as it unfolds. 17 I also wanted to mention that the -- one of 18 the clerk typists, secretaries, if you will, positions, 19 that hiring process is under way. That will be 20 assistant to you and to the lieutenant, in a very near 21 future, once that person is actually hired. 22 And finally, I'd be remiss if the record 23 didn't reflect my personal, as well as the 24 administration's gratitude and congratulations for the 25 strong vote you received on Tuesday in Legal and 7 1 Veterans Affairs, and just wanted to let you know how 2 much that was appreciated, and glad that we took that 3 final step, and on to Wednesday. So thank you very 4 much. 5 MR. HALE: Thank you for your help and 6 support. 7 Lieutenant Doyle, you're not going anywhere, 8 are you? 9 LT. DOYLE: No, Mr. Chairman. I'm here 10 through September 30th. I'll be working with 11 Lieutenant Kelly to get him to speed. His function 12 will be overseeing the investigation for the 13 suitability of all the applicants and any gambling 14 related crimes which occur at the facility, and he'll 15 be working closely with the executive director in 16 helping with the other functions of the board as well. 17 But I'm here through September 30th for sure. 18 MR. HALE: Well, there are several of you 19 here, including the nice lady to my right that -- we 20 have chains around you and don't intend to let you go 21 any time soon. I don't know that the governor 22 understands this talk, but we're not going to let you 23 go any time soon, till we're ready. Okay. Thank you 24 very much. 25 If there's no other activity here, we have a 8 1 very important meeting today. I'll set a few ground 2 rules here. We're going to have presentations 3 regarding the central site monitoring system or 4 systems, as the case may be. We would like each 5 speaker to identify themselves, but go a little bit 6 further today. We'd like to know in your remarks, as 7 you begin, whether you're a potential applicant or a 8 potential bidder, just so that the board is absolutely 9 sure who you are and from what perspective you're 10 coming, which is only fair to us to know. And identify 11 yourself by your position with your company, the name 12 of your company and position with your company, perhaps 13 even how long you've been there, just so we have a real 14 feel for who you are and who we're dealing with. 15 Because contrary to popular belief, we don't know 16 everybody. And since the room is full today, it would 17 be helpful. 18 Does that cover that pretty well for you, 19 too? All right. And identify yourself principally by 20 name first so that she will have it on the record. 21 We're going to allow one hour for each 22 presentation. I would also tell you that included in 23 that one hour, though, you should reserve time for 24 questions from the board. All right? 25 So first off, by flip of the coin, Penn 9 1 National will appear first, and the representatives 2 from or a representative from Penn National will come 3 to the podium and will begin. 4 LT. DOYLE: Mr. Chairman. 5 MR. HALE: Yes. 6 LT. DOYLE: The record should reflect that 7 Penn National had provided some information about 8 monitoring systems and also they provided information 9 regarding our rules. Scientific Games had also 10 provided material at the last meeting, and those -- 11 copies of the material they provided are here for 12 today's meeting and available for anybody who wants a 13 copy. 14 MR. HALE: Appreciate that, Lieutenant 15 Doyle. Thank you. 16 Mr. Snyder, if you will turn your mike on, 17 identify yourself, and identify the rest of the 18 information, we'd appreciate it. 19 MR. SNYDER: Thank you, Mr. Chairman. 20 As most of you know, my name is Steve Snyder. 21 I'm the senior vice president of corporate development 22 for Penn National Gaming. 23 Penn National Gaming does hope and does 24 aspire to be an applicant for the gaming license in the 25 City of Bangor. We have operated this year, under a 10 1 conditional license, the race meet as owner of Bangor 2 Historic Track. 3 Before we get into the balance of what we'd 4 like to discuss today, I'd just like to take a moment 5 and take a step back, because I find today's session to 6 be extremely welcome. I think this is the session that 7 we, as the prospective applicant for a gaming license 8 in Bangor, have encouraged since the first meeting of 9 this commission. 10 The reason we find it refreshing is that, for 11 the first time, you have before you representatives of 12 almost every interest in the gaming industry, whether 13 they are slot machine manufacturers, whether they are 14 slot management system vendors, whether they are state 15 central system or lottery system vendors. And over and 16 above that, you also have a representative from a 17 gaming testing laboratory here, one who has the 18 preponderance of market share, who tests equipment, 19 machinery -- both slot machines and software and 20 systems -- that are used throughout the gaming 21 industry, throughout not only the United States, but 22 throughout the world. 23 That is something that we are very anxious to 24 see come to fruition in this forum today. So that you 25 as commission members, soon to be gambling control 11 1 board members, can educate yourselves, so that you can 2 draw from these resources and can get the information 3 that you need in order to draw knowledgeable 4 conclusions and to put in place effective regulations 5 and rules that are going to govern this industry in 6 Maine for the long term. Because, as we've said in the 7 past, we look forward to a very long term relationship 8 here in Maine, with our 50-year or, with extensions, 9 our 50-year lease with the City of Bangor for Bass 10 Park. 11 With those opening comments, I want to just 12 sort of set the stage a little bit for what our 13 understanding of today's conversation relates to. I 14 think we've tried to educate you in the past a little 15 bit about slot machines. We've had some nice dialogue 16 back and forth about ticket-in/ticket-out, cashless 17 technology, TITO. We've talked about how gaming 18 devices, slot machines, have evolved as an industry. 19 The one piece that, unfortunately, has been 20 read about, written about, commented upon ad infinitum, 21 both through the legislative process and in this 22 process has been the specific provisions of the Maine 23 statute which talk about control, and central control, 24 of the gaming devices at the Bangor Historic Racetrack. 25 To set that stage, I think it's important to 12 1 understand the architecture of what a slot machine 2 gaming facility is all about. I think the slot 3 machines are self-evident. We've had enough of a 4 conversation -- you know what slot machines do. What 5 we're here to talk about today is how those slot 6 machines interact, how those slot machines are 7 controlled, how those slot machines and the information 8 that is produced by those slot machines is managed at 9 various sources in the chain of owner-operator, gaming 10 regulator, external and internal audit and control 11 functions. 12 That being said, the first mechanism that 13 you're going to find in every slot machine facility in 14 the United States that you enter is what's known as a 15 slot management system. That slot management system is 16 what the operator, the owner of that gaming facility 17 uses to control the operations of their slot 18 machines -- in this case, 1500 machines -- that 19 communicate up through servers into that slot 20 management system that the owner-operator maintains, 21 administers, and manages. That system has all the 22 functionality that's been outlined in the Maine 23 statutes, turning on, turning off, an audit trail, 24 supporting ticket-in/ticket-out technology, interfaces 25 and protocols that are state of the art. That's at the 13 1 casino or the gaming property level. A slot management 2 system. 3 The confusion or the discussion or the 4 dialogue -- and I use all those words interchangeably 5 because I think it's been a bit of each one of those -- 6 starts above the property. It starts above the slot 7 management system, which is connected by a single wire 8 to each slot machine on that gaming operator's slot 9 floor. What exists in a number of jurisdictions and 10 your staff in the Department of Public Safety have 11 utilized the state of Delaware as sort of, for lack of 12 a better term, a prototype, is a separate, redundant, 13 additional system that resides outside of the 14 operator's facility, that each slot machine on that 15 operator's -- on that operator's floor communicates 16 with through a second wire, a second port. It has its 17 own board in that machine that communicates directly 18 with that second wire, that second system. That is, in 19 the case of Delaware, a Scientific Games central system 20 that monitors 6800 slot machines at three sites 21 throughout the state of Delaware. 22 You've got the architecture of the slot 23 management system at the property, at Dover Downs, 24 because we'll use that as an example. It's a slot 25 machine -- a harness racing facility with slot 14 1 machines. And above it resides a central system that 2 is put in place and operated by a third-party vendor. 3 So that each slot machine has two lines coming out of 4 it. Hence, the two-wire or two-line system that has 5 been the subject of a lot of the dialogue in the State 6 of Maine. 7 The next generation or another generation of 8 that same architecture, slot management system at the 9 slot machine operator floor, a central system at the 10 level of the state or regulator or third-party vendor, 11 the next evolution in that system has been implemented 12 in the state of Louisiana. And that next evolution of 13 the system is to take the information from the property 14 slot management system and pull it up at the state 15 level in what is in Louisiana known as their coin 16 system, which is produced by Utilistar. And get the 17 same information, provides the same functionality in 18 terms of turning on, turning off the machines, 19 third-party audit function, paper trail, that pulls 20 that information up from the property slot management 21 system into the state control system via -- what's most 22 important here -- that one wire coming out of the slot 23 machine to the slot management system up to the state 24 system. The state could, if they had chosen in 25 Louisiana, turn on and turn on off any individual 15 1 machine, a bank of machines, or each slot machine in 2 the facility. 3 So that's sort of the primer that I'm going 4 to use to set the stage for some of the experts, 5 because I'm not an expert. I've given you the lay 6 person's interpretation, the lay person's understanding 7 of what you're faced with, the dialogue that you've 8 had, the deliberations that have been held, and the 9 conclusions that you are quickly going to need to reach 10 in the RFP process. 11 What we've brought with us today and asked 12 them to attend -- they're here at our invitation, but 13 at their own cost -- is a representative of Bally 14 Gaming Systems. And Bally Gaming Systems manufactures 15 and sells those slot management systems that are in 16 place in all gaming properties, all casino properties 17 around the United States. 18 And in addition to a representative from 19 Bally Gaming Systems, at the slot management system 20 level, we also have been fortunate enough today to have 21 with us today a representative of Utilistar, which is 22 the company that has manufactured, developed, and sold 23 to the State of Louisiana that central system that has 24 been put in place via that same one-wire architecture 25 that we -- that I described. 16 1 So I'm going to call them up to the podium 2 individually, but would welcome a chance to answer any 3 questions before we get into that level of detail that 4 any of the council members may have. If there are no 5 questions -- 6 MR. DANTON: Could you repeat the name? You 7 said Star -- what was the first? I didn't quite get 8 it. 9 MR. SNYDER: Utilistar? 10 MR. DANTON: Peter Danton. I'm sorry. 11 MR. SNYDER: Certainly, Mr. Danton. 12 Utilistar is the company that -- 13 MR. DANTON: Say that again? 14 MR. SNYDER: Utilistar. 15 MR. DANTON: Utilistar. 16 MR. SNYDER: "U-T-I-L-I-S-T-A-R." 17 MR. DANTON: Okay. Thank you. 18 MR. SNYDER: And Bally Systems is some of the 19 information that we had provided in our earlier -- our 20 earlier pieces of information. Again, our objective 21 today is to get you an understanding so that you 22 understand what the issues are, you can ask questions 23 of the experts, because again, I volunteer myself as 24 not being an expert, and you can have your questions 25 answered before this board takes the next step, which 17 1 is to distribute an RFP. To get those questions asked 2 up front so that RFP can be formulated to meet the 3 objectives of Maine statute and to do it in a fashion 4 that this bored is comfortable with. 5 So, if there are no other questions, what I'm 6 going to do is ask Tom Reilly, who is the general 7 manager of Bally Systems to take a seat next to me, so 8 that we can go into what a slot management system is. 9 Thank you. 10 MR. HALE: Be sure you identify yourself for 11 the record, sir. 12 MR. REILLY: Good afternoon, ladies and 13 gentlemen. My name is Tom Reilly. I am the eastern 14 region vice president for Bally Systems, as well as the 15 general manager of the product group that is 16 represented, that Penn Gaming has talked to you about, 17 with regard to a representative slot management system. 18 I want to start by thanking you for this 19 opportunity to share some information with you today. 20 We are distributing to the folks in the room here a 21 copy of the presentation that I'm going to go through 22 page by page. The first eight pages are information 23 that I'm going to review with you. Again, just share 24 information based on our experience. The back two 25 pages are information that is going to be presented by 18 1 the representative from Utilistar. 2 I'm going to start by just giving you a very 3 brief background on Bally Systems, Bally Gaming 4 Systems, because I believe that is something you asked 5 for. And then I'd like to just get into an information 6 exchange, talk to you based on Bally's experience, talk 7 to you about our experience with a single-wire versus a 8 two-wire system. I'd like to just talk with you about 9 the alternatives that are available to you, from a 10 two-wire -- a single-wire, two-wire standpoint, some 11 options that are available to you from a central 12 monitoring standpoint. 13 And then I'll introduce Geoff Humphreys, who 14 will talk to you about the Louisiana model and the coin 15 system that was implemented in Louisiana a few years 16 ago. 17 If you'd turn to the second page of the 18 presentation. Very quickly, on Bally Systems, we have 19 a very proud and long history of being in the gaming 20 systems business for close to 30 years. We are the -- 21 have been in this business for about 30 years and are 22 very proud of the fact that we have many, many 23 customers throughout North America. About 60 percent 24 of the major casinos in North America are using a Bally 25 system to monitor their slot operations, about 300,000 19 1 slot machines are on line to one of our systems. And 2 we represent casinos of all different sizes, big, 3 small, race tracks, riverboats, Native American 4 properties, boardwalk properties, Nevada properties, 5 that type of thing. So we're very proud of our 6 presence in the market, and the diversity of the casino 7 establishments that are using our slot management 8 systems. 9 If you'd turn the page, please. Just wanted 10 to give you a quick snapshot of some of the racetrack 11 casinos that are using our systems. You probably 12 recognize most of those names. Delaware Park, Delta 13 Downs, Dover Downs, Louisiana Downs, and most recently, 14 in New York, we are providing the casino management and 15 player tracking technology at the four casino -- all 16 four of the race tracks that went live since the 17 beginning of the year. 18 Let me turn to the fourth page now, and 19 again, just to give you some -- our perspective on 20 single-wire environment and to kind of reiterate some 21 of the things that Steve had shared with you earlier. 22 You know, our view on a single-wire environment for a 23 casino-racino is basically -- it's an environment that 24 gives the gaming establishment the flexibility and the 25 alternative of choosing their own slot management, 20 1 slash, casino management system. 2 Obviously, in addition to the slot 3 monitoring, the casino would have the need to have a 4 lot of automated technologies, marketing capabilities, 5 accounting capabilities to run their operation. And 6 obviously, it is in their best interest to be able to 7 use these technologies to run their operation as 8 efficiently as possible. That's why we believe a 9 single-wire environment does not preclude the casino 10 operator from choosing that technology that best suits 11 their needs. 12 Also, with a single-wire environment -- and 13 these are environments that we have running, as I 14 mentioned, in many, many casinos throughout the 15 industry. Typically, in that kind of an environment, 16 through that single wire that Steve mentioned before, 17 all of the -- all the meters and all the accounting and 18 all the transactions and all of the data, because of 19 the fact that they are processed through this single 20 wire and because of the fact they go to this single 21 system, you are able to centralize, from the property 22 standpoint, all the accounting data that needs to be 23 compiled and referred to on a daily basis. 24 That includes not only the coin in or the 25 dollars into the game; also, any type of cashless 21 1 transactions, ticket-in/ticket-out, you know, 2 electronic transactions -- by having all that go 3 through a single wire and consolidated in a common 4 casino management system, obviously provides the 5 capability of doing consolidated accounting of all 6 those things in a single place. 7 Again, as Steve mentioned, there is this MPU 8 board, which is basically the computer that resides 9 inside of every slot machine has -- typically has two 10 ports on it. One -- the one port is the single wire, 11 the second port would be for either a two-wire 12 environment or for communications to other types of 13 applications or to other types of devices. 14 What we've seen in single-wire environments 15 such as Nevada, such as New Jersey, and some of the 16 other jurisdictions, that both the state and the casino 17 operator or the regulatory body and the casino operator 18 both share the same information that comes through that 19 single wire. They are -- and they both rely on the 20 information that's on the -- on the property level 21 system to do settlements at the end of the day, to 22 count the money, to divvy up -- whatever proceeds need 23 to be divvied up, they typically use the one system to 24 do that. 25 You know, we also use the terminology when 22 1 referring to a single-wire system as it being more of 2 an open system. Meaning, when there is only one system 3 that is used by not only the property but by the 4 regulatory agency, it minimizes the complexity because 5 you don't have to worry about any contingencies of one 6 system working in conjunction with the other. When you 7 enter into -- at least from our experience, and I will 8 reference, you know, the two race tracks that are using 9 our systems down in Delaware. When you enter into the 10 equation a two-wire environment and a separate system 11 into that environment, it creates some complexities for 12 things like ticket printing. 13 I'll give the example of Dover Downs. When 14 they -- because they are in a two-wire environment down 15 there, they were using a Bally system to do their slot 16 management, and they were using a third-party system to 17 do their central system monitoring, if you will. When 18 they went to move to a ticketing environment, to be 19 able to -- instead of going coin out for the patrons, 20 print tickets right at the slot machine which is very 21 common and very popular in the industry today, many of 22 the manufacturers, slot machine manufacturers and other 23 vendors who participate in being able to provide 24 ticketing technology, were either delayed or barred 25 from being able to participate in that because they use 23 1 that second wire and that second port to do their 2 ticket printing. 3 So, in Delaware, where one wire is used for 4 the slot management system and the other wire is used 5 to talk to the central system, they basically, on many 6 of their slot machines, had used up both ports and 7 therefore could not expand -- immediately expand into 8 ticketing or to other applications that may have a need 9 to use that second port. 10 So, when I say an open system makes it a lot 11 more flexible and it takes a lot of the complexity 12 away, that's just an example of what I was referring 13 to. 14 If you'll turn the page, please. Also, in a 15 single-wire environment, typically the racino or the 16 casino operator has responsibility for operation of all 17 the slot machines, where they basically do all the 18 accounting and all the operation and all the, you know, 19 fills and repair and surveillance and alerts on the 20 games. That's typically the casino's responsibility. 21 A single-wire environment, I should also mention to 22 you, gives you the capability of doing enabling and 23 disabling of games. In a single-wire environment, you 24 certainly have that capability either at a specific 25 game level, a bank of games, the entire floor, whatever 24 1 the casino or whoever the casino designates has that 2 capability. You certainly can vary on and vary off 3 games in a single-wire environments. 4 You also have the capability in a single-wire 5 environment of being able to monitor what's going on on 6 your slot floor for illegal door openings, you know, 7 empty hoppers, door ajar. Any kind of suspicious or 8 unnatural types of events that happen at the game 9 level, a single-wire environment certainly gives you 10 that capability of watching for that, detecting that 11 and notifying key individuals that that event has 12 actually happened. 13 I also mention there on that third bullet 14 that we actually have some of our customers who have 15 taken that alert that's triggered by the slot 16 management system and actually sent an automated alert 17 to a pager, a cell phone, an e-mail address saying, 18 hey, such and such a thing has happened at this asset 19 number, check it out. Camera interfaces, that type of 20 thing. So those capabilities all exist. 21 And then, of course, as I'm sure the folks in 22 this room are most interested in, there's certainly in 23 a single-wire environment you have unfettered access to 24 all the data. Any type of data, if you're a regulatory 25 agency, State of Maine, whatever, you certainly have 25 1 the capability to have the authorization to go in and 2 look at any data whatsoever in the slot management 3 system. 4 And I'd also like to point out the fact that, 5 in this unfettered environment, you have the capability 6 of looking at other types of information, you know, 7 other types of financial information, anything that's 8 on the casino management system, in a single-wire 9 environment, you do have that capability. 10 If I can now turn the page to -- one page on 11 our experience with two -- in a two-wire environment -- 12 and I've alluded to some of these bullet points 13 already. Obviously, these two wires and these two 14 networks that Steve and I have both referred to here, 15 whenever you have a separate network, you have a 16 separate database. Essentially, you have one computer 17 system running your central monitoring system, and you 18 have another computer system running your property 19 level system. So, just by definition, having a second 20 wire says you have a second network, and therefore, you 21 have two separate computer systems. 22 Obviously, when you have two separate 23 computer systems -- the third bullet here on this page. 24 When you have two separate computer systems, you have 25 two sets of requirements to operate both systems. In 26 1 this scenario in Maine, you would have the casino or 2 the racino operating the one network or the state or 3 someone designated or retained by the state would need 4 to operate that separate network because it is a 5 separate network. 6 Creates complexity. Again, just from 7 experience, creates complexity just by virtue of the 8 fact it is two different computer networks. 9 I've taken the liberty on the next chart of 10 kind of -- and please bear with me on this drawing -- 11 of kind of putting this graphically what I'm talking 12 about here. Left side would be how the single-wire 13 environment works versus the two-wire on the right. I 14 represent there a graphic of a slot machine with a 15 single on -- on the left side of the chart, with a 16 single wire coming out of that one port on the MPU 17 board, coming down into the property specific slot 18 management system and populating the data into a common 19 database that is shared by not only the racino, but 20 also shared by the state regulators as well. They're 21 looking at the same information. This is a database 22 that is -- the source of the data in this database is 23 from a common data stream on the single-wire network, 24 because it's coming through one wire. 25 Obviously, as you can probably guess, on the 27 1 two-wire environment here on the right, when you have 2 two wires talking to two different systems, two 3 different networks, you have two different databases 4 that you're looking at, and it's as simple as that. 5 So that brings us to what the -- you know, 6 obviously, what the alternatives that are available to 7 you and the alternatives that we have seen implemented 8 in different jurisdictions around North America. 9 Obviously, three options, as we all probably see them 10 today. Option one is slot management/casino management 11 system that is property specific. That same system is 12 shared by not only the racino operator, but by the 13 state as well. That single property-level system is 14 the source for all of the data, for all the auditing, 15 for all the accounting, for all the meter readings, and 16 revenue accounting at the end of the day. 17 Option number two, which the presenter who 18 follows me will be talking to you about is a variation, 19 the most recent variation of a single-wire environment, 20 which is basically the Louisiana model. We refer to 21 this as an open system that has a passive interface to 22 the property systems. You will hear the next presenter 23 talk about the number of properties and the number of 24 slot machines that are talking to the system. 25 Essentially, this system just monitors the data stream 28 1 that comes out of that single wire, out of that single 2 port, takes the exact same information that is coming 3 out of that information and going to the property slot 4 management system and, through a web interface, makes 5 that available to the state and to the folks at a 6 central location. Removes the complexity of having 7 that second network. Removes the complexity of having 8 a separate set of computers and that type of thing. 9 And of course, a third alternative that is 10 available to you is the central monitoring system, the 11 two-wire approach, property specific system, talking to 12 the one port and one wire on the slot machine, and a 13 central monitoring system talking to the second port. 14 Thank you very much. 15 MR. SNYDER: Are there any questions of Tom 16 before we ask the representative from Utilistar to come 17 up? 18 MR. HALE: If you can sit down for a second. 19 I invite you to sit down. Sometimes I think I'm 20 dealing at the Harness Race Commission, and I then just 21 say, Sit down. A little more abrupt there sometimes. 22 I would like to inquire of Mr. Cantara, 23 Mr. Doyle, if they have any questions at this point, 24 particularly you, Lieutenant Doyle, but either way. 25 LT. DOYLE: Just a couple. I think it might 29 1 be more appropriate to have questions at the end. 2 MR. HALE: Okay. 3 LT. DOYLE: But one question I have right now 4 is, who would take care of the system, the slot 5 monitoring system on the one-wire model at the racino? 6 MR. REILLY: That could be -- that could be 7 taken care of by the casino itself. It could be taken 8 care of by whoever is designated by the racino or by 9 the state. It could be maintained by a third party, 10 you know, a certified third party who could have 11 responsibility for auditing and managing the financial 12 data that is coming out of that system, to make sure 13 the data is -- you know, is reconciled at -- you know, 14 on a real-time basis. I should also mention that. 15 It's a real-time view of information on the floor. 16 LT. DOYLE: Okay. But it would require 17 employees, albeit of either the racino, the operator, 18 the state as a regulator or a third party contracted by 19 somebody, it would require employees. 20 MR. REILLY: It would require someone to 21 operate the system, yes. 22 LT. DOYLE: Okay. 23 MR. REILLY: As opposed to -- operating the 24 that one system as opposed to more than one system. 25 LT. DOYLE: Thank you. 30 1 MR. HALE: That's all contained within the 2 racino itself, not encrypted and sent to another 3 location, i.e. Augusta. 4 MR. REILLY: Are you referring to -- on my 5 previous page, are you referring to option one or 6 option two? The one with the Louisiana model? 7 LT. DOYLE: Well, under option one, that 8 would be within the facility. 9 MR. REILLY: Right. 10 LT. DOYLE: And that would require employees. 11 Most typically, in the New Jersey model you 12 mentioned -- 13 MR. REILLY: Right. 14 LT. DOYLE: -- or the Atlantic -- the Las 15 Vegas model, those are operator employees. 16 MR. REILLY: In both those models -- I'll use 17 New Jersey because, as you can probably tell, that's 18 where I'm from. In the New Jersey environment, yes, 19 certainly the casino employees use that information to 20 run the business, but they also have representatives 21 from the Division of Gaming Enforcement. Space is 22 provided for them in every casino, so that they are 23 there to make sure that the casino operator adheres to 24 the rules and regulations and the internal controls 25 that have been established, and they're also there to 31 1 make sure that policies and procedures are followed. 2 LT. DOYLE: Right. But that requires a lot 3 of human resource intervention on behalf of the 4 regulator to ensure that the information is accurate 5 and to verify the information. 6 And just one more point. In each of those 7 states that you've mentioned, they're gaming states 8 that have been in existence for a long time; states 9 that predate the so-called two-wire model. 10 MR. REILLY: Not necessarily. I could refer 11 to Indiana. I mean, they're on the same kind of a 12 model. I could refer to Mississippi. You know, the 13 jurisdictions that have come on more recently are -- 14 don't have a central system. I mean, you know, the 15 need -- the need to manage that, the number of 16 employees is really flexible. 17 MR. SNYDER: If I may, in response -- 18 MR. HALE: Identify yourself. 19 MR. SNYDER: I'm sorry. It's Steve Snyder 20 from Penn National. In response to Lt. Doyle's 21 question, there were two things there that I'd like to 22 address. One is on the question -- I think the implied 23 question of the integrity of the computer and the 24 system and the information that that system gathers. 25 And you're privileged today to have a 32 1 representative of GLI here, Gaming Labs, Inc. And I 2 think one of the things that you'll find as you 3 continue up the learning curve on what gaming and this 4 industry are all about, one of the things that you'll 5 find is that all of these systems are subject to 6 independent, third-party verification. Because they're 7 like any other computer, if you code it properly, it's 8 failsafe. And if you put in place the fire walls that 9 we've mentioned, it does become failsafe. 10 If you continue to monitor that, not 11 necessarily every item in a double-entry accounting 12 system, but the process itself, that's where you get 13 your comfort with respect to the integrity. Because 14 the system, itself, is verified by the lab that the 15 state would designate. So that the methodology for 16 gathering data is verified by an independent party and 17 is not tampered with -- is tamperproof by the operator. 18 The second question that Lieutenant Doyle was 19 addressing was the question of two-wire systems and 20 what's been the evolution of two-wire systems. The 21 evolution of two-wire systems has been in those states 22 that started with lotteries and extended to video 23 lotteries. It's Rhode Island. It's New Mexico. It's 24 Delaware. It's West Virginia. 25 The two-wire system really was a later 33 1 generation response to an extension of state lotteries. 2 Where the lottery had an infrastructure in place 3 selling tickets, and they came along and they put video 4 lottery terminals to sell video tickets, which in 5 effect became video slots, video reels, etc. And that 6 was developed that way to satisfy the state lottery 7 systems. And the second wire has been developed more 8 recently by the operators for the more sophisticated 9 player database, customer relationship marketing 10 mechanisms, and ticket-in/ticket-out. Some of the 11 later evolutions. 12 That's why Dover Downs and Delaware came 13 along with their slot level -- their property level 14 slot management system after the first wire or the 15 state system was put in place. And in fact, now, we're 16 hearing of sort of the industry evolving back to 17 one-wire solutions. 18 In fact, the state of West Virginia is right 19 now in the process of writing an RFP for a central 20 system, and their RFP is going to be two RFP's -- one 21 for a two-wire system, which replicates what they have; 22 and another for a one-wire system, because they 23 recognize that's where the industry, from a slot 24 manufacturer, slot operator, and a state regulator 25 standpoint, is migrating. 34 1 So, I think I covered both points that 2 Lieutenant Doyle raised, and welcome any other 3 questions. 4 MR. HALE: Mr. Cantara. 5 MR. CANTARA: The Louisiana system that you 6 briefly described, who is responsible for it? 7 MR. SNYDER: I could defer that to Geoff 8 Humphreys, who is the president of -- 9 MR. HUMPHREYS: Geoff Humphreys, with 10 Utilistar. 11 MR. HALE: You'd have to -- come up. You 12 could probably stand, but if you'd just come forward, 13 if it's a short answer, and identify yourself. 14 MR. HUMPHREYS: Hi, I'm Geoff Humphreys, the 15 founder and senior vice president of Utilistar. 16 The system is administered right now by an 17 individual at the state police. There is -- I mean, 18 I'm going to get into, you know, a little more 19 specifics about the system down the road, but the state 20 police have a system administer for that. 21 MR. CANTARA: Thank you. I'm sure I'll have 22 more questions when you present your information, but 23 thank you. 24 MR. HALE: Thank you very much. 25 Mr. Peters. 35 1 MR. PETERS: I, too, will have more 2 questions at the end of everyone's presentation, but 3 just one quick one. In the one-wire system that you 4 guys are talking about, in a hypothetical situation 5 where gambling, God forbid for some legislators, is 6 expanded to other parts of the state, does this 7 one-wire system do them all? 8 MR. REILLY: Yes. 9 MR. PETER: From the same location? 10 MR. REILLY: Yes, you could monitor 11 everything from the central location, monitor all the 12 activity at the -- 13 MR. PETERS: And the central location could 14 be -- doesn't have to be on-site. It could be anywhere 15 we want it to be? 16 MR. REILLY: It could be in this room. It 17 could be at the casino. It could be wherever it makes 18 the most operational sense or, you know, regulatory 19 sense for you to monitor. 20 MR. PETERS: Thank you. 21 MR. REILLY: And it does not -- and who 22 operates and maintains that system is not dictated by 23 the system. It is dictated by what makes operational 24 sense for you, for your jurisdiction. 25 MR. HALL: Larry Hall. Would you, as a 36 1 vendor, be able to draw off from that one-wire system 2 the information for marketing and things of that 3 nature? 4 MR. REILLY: From? 5 MR. HALL: The one-wire system. 6 MR. REILLY: What type of information? 7 MR. HALL: For marketing and things of that 8 nature. 9 MR. REILLY: Only if you're authorized to do 10 so. 11 MR. HALL: But it is capable of doing it. 12 MR. REILLY: The marketing information -- 13 marketing information is basically driven by, you know, 14 what the, you know, the history of the player activity 15 is. But the marketing information is fed by what's in 16 the slot monitoring system as well as, if you had table 17 games, by what their -- it's all comprehensive 18 information available to the casino. 19 MR. HALL: So the answer, I guess, is yes. 20 MR. REILLY: Marketing decisions are made as 21 a result of all the activity in the casino, yes. 22 MR. HALL: So really, what's the difference 23 between the two systems if it will do it all on the one 24 wire, except that you have another system coming into 25 it? 37 1 MR. SNYDER: If I can, Mr. Hall -- Steve 2 Snyder from Penn National. What was described in the 3 diagram is the one-wire system that feeds up to the 4 slot management system at the property level that 5 handles all the accounting and marketing information. 6 And then, and we'll hear this in a moment from 7 Mr. Humphreys, from that repository of information, it 8 feeds up to the state system in the coins methodology. 9 So that all of that information is available via the 10 one wire. 11 In the two-wire system, that information is 12 not available because there hasn't been a state central 13 control system that has pulled the marketing data to 14 date because of privacy concerns. State regulators 15 don't want to know who the customers are. State 16 regulators don't want to know what their frequency of 17 play is and how much they play. We, as an operator, 18 want to know that information and need to know that 19 information. And that's why Dover Downs and Delaware 20 Park and Harrington came along after the one-wire state 21 controlled system was put in place and put in place 22 their second wire or their two-wire system. 23 MR. HALL: Okay. 24 MR. HALE: Thank you. 25 Ms. Deighan. 38 1 MS. DEIGHAN: Thank you, Mr. Chairman. I 2 have a couple of questions. In the beginning, in 3 describing the single-wire environment, you said the 4 racino has the flexibility of choosing its own property 5 system. How compatible are the different kinds of 6 property systems that are used by different operators 7 in the event that we perhaps had a different operator 8 at a different part of the state? Is this going to be 9 like Apple and a Microsoft-based system or is there 10 more uniformity? So that we would not be in the 11 situation down the road with this state with, you know, 12 a Spanish speaking one here and a French one here and a 13 German one there, so to speak. 14 MR. REILLY: Right. Let's say you have three 15 different properties -- Tom Reilly with Bally Systems. 16 Three properties with three different systems, apples, 17 orange and bananas or whatever. And they may choose 18 three entirely different types of systems. In the 19 Louisiana model there are four, five -- 20 MR. HUMPHREYS: Six. 21 MR. REILLY: -- six different property 22 management systems running at all those different 23 properties down there, and they are all talking to one 24 common coin system -- one common coin system. The data 25 that comes across to the state and that the state looks 39 1 at is in a very -- regardless of which properties it's 2 coming from, it's in a logical, common, consistent 3 format, so that all the reporting is consistent 4 regardless of whose system it is they're talking to at 5 each of their properties. 6 What's common about all of these different 7 apples, oranges, bananas or whatever systems, is that 8 they manage everything through -- manage all those 9 operations through that single wire, and there is no 10 need in that coins environment for them to use a second 11 wire in order to get the information. The state is 12 literally getting the same data streams and the same 13 feed that the properties are getting. 14 MS. DEIGHAN: One more question. You 15 mentioned that the state could have unfettered access, 16 but of course the operator would also have unfettered 17 access. And what concern would the state have with 18 respect to possible tampering of the data, whereas in a 19 two-wire system they may have pure data? I just need 20 to have that dispelled if I'm incorrect. 21 MR. REILLY: With any computer system, access 22 to data is driven by authorizations -- with any 23 computer, regarding of one wire, two wire, whatever 24 system, they have to have access to that data. 25 In a casino environment, typically, the 40 1 access authority levels is dictated by the internal 2 control procedures or by policies that are dictated by 3 the state regulatory "bottle" -- body as to who has 4 "information" to what type of information. 5 So they can't -- they can't just get in the 6 system and manipulate data without having very, very 7 tight controls and security profiles to get in there. 8 There are also encryption -- encryptions that are built 9 into the one-wire systems. All the data is encrypted. 10 From the slot machine through every component in that 11 slot machine all the way up to the slot management 12 system, all the data that goes up and down that wire is 13 encrypted. 14 There's also what's called alterable media 15 checking, thanks to our friends in New Jersey, that 16 basically says that the components within the one-wire 17 system always are checking to make sure that the 18 version of software that are on every one of those 19 components has not been changed. There's a chip that's 20 actually built into the technology that says you can't 21 change this software unless it's the approved version. 22 So there's a lot of checks and balances that have been 23 built into the system from a technology standpoint. 24 MR. HALE: Mr. Danton. 25 MR. DANTON: Tom, I want to back up a little 41 1 bit here on -- you said that the personnel would be 2 needed on a single-wire system on site? 3 MR. REILLY: Well, on a single -- from a 4 racino standpoint, certainly the personnel that's going 5 to operate the system will have whatever access they 6 need to, to the data. 7 MR. DANTON: But would the state need any 8 personnel in there? 9 MR. REILLY: Very minimal. 10 MR. DANTON: Very minimal. 11 MR. REILLY: And I think Mr. Humphreys -- 12 MR. DANTON: So by minimal, what do you mean 13 by minimal? One, two, three, none? 14 MR. REILLY: I believe in the state of 15 Louisiana -- 16 MR. HUMPHREYS: Well, for the -- Geoff 17 Humphreys with Utilistar. For the -- there's basically 18 going to be two systems, and the three models that 19 Mr. Reilly explained to you, one where the racino 20 selected slot management system serves also as a 21 regulator system. There's a law interpretation that 22 has to decide whether that's possible or not. 23 Scenario number two is where -- a single-wire 24 system, also, but as that system feeds data to the 25 casino's database, it also feeds data to the 42 1 regulator's database or system. As far as the 2 implementation of the coin solution, the servers that 3 we have on-site sit in a closet and nobody pays a whole 4 lot of attention to them ever. You don't need a person 5 on-site for that. It then feeds that data back to the 6 location of the regulator's choice, where there is the 7 redundant data storage, etc., where in the Louisiana 8 implementation, there is one system administrator that 9 covers that. 10 MR. DANTON: Peter Danton again. My concern 11 is, if we're going to need personnel and the state has 12 to pay for them, that's my prime concern. And another 13 concern I have, I want to make sure that the security 14 and the integrity is there as far as the state and the 15 players and what have you. And that's why I -- I'd 16 like to know about the personnel, who is going to pay 17 for them? Are we going to pay for them? Is the -- the 18 racino is going to have their own people, I know, but 19 we'd like to have people there, too, with the 20 single-wire system, don't you think? Isn't that what's 21 done in other states? 22 MR. HUMPHREYS: Yes, sir. Geoff Humphreys 23 with Utilistar. Mr. Danton, for the most part, there 24 is no computer system that you can install that you can 25 just leave alone for ten years. They're -- all of -- 43 1 all of these solutions will have to have some sort of 2 administrative oversight monitoring. I mean, the 3 systems nowadays let people know via pagers and e-mails 4 and cell phones that they need attention, but you will 5 have to have someone assigned to that. 6 I would recommend -- I have -- I just 7 received a draft RFP. I would recommend that language 8 be put in the RFP that specifically addresses that 9 issue and options for the proposing vendors, proposing 10 a solution. 11 MR. DANTON: Peter Danton again. Now, we're 12 talking, for our racino, 1500 machines. What type of 13 personnel would we need to take and look and see that 14 it's done right or -- as far as the state is concerned? 15 How many would you say, Tom? 16 MR. REILLY: Well, I'll go back to Louisiana 17 again for the moment. There's 15, 18 -- 18 MR. HUMPHREYS: 18. 19 MR. REILLY: 18 casinos, 20,000 games running 20 on the coin system, and as Mr. Humphreys just said, 21 they have one system administrator running that system 22 from the Louisiana. In terms of, you know, maintaining 23 the system on an ongoing basis, auditing the system, 24 providing the data, being, you know, an unbiased third 25 party to monitor and manage the operations of the 44 1 system, certainly that is a -- that is a function that 2 can be provided by Bally, by Utilistar, by the state or 3 whoever -- the technology is designed such that, 4 really, it's a matter of the person who fulfills that 5 role or the persons who fulfill that role is totally 6 flexible. 7 Security, I think, was another thing that you 8 had asked a few moments ago. Very, very tight security 9 from the standpoint of fire walls, encryption, 10 passwords, that type of thing. It's pretty tightly 11 controlled. 12 MR. DANTON: Just one more question to Tom. 13 I understand all that. My prime concern is, if we as 14 the State of Maine have to have people to make sure 15 that all this is taking place, we will have to pay for 16 them. And I just want to know approximately how many 17 people you think that would take. One, two? Or if 18 you're open from 10 to 4:00 in the morning, or whatever 19 the hours are going to be, what would it take for 20 personnel? Hard to tell? 21 MR. REILLY: It's hard to tell. I mean, you 22 know, you have to understand your particular 23 requirements, but it certainly isn't dozens of people. 24 MR. DANTON: Okay. 25 MR. SNYDER: Just -- again, Steve Snyder from 45 1 Penn National. In response, Mr. Danton, to your 2 question, it would depend on, really, the level that 3 the state would like to accommodate. And you're going 4 to have it in the RFP that you -- that has been drafted 5 at least in its current version in the form of a 6 third-party vendor. And the question is whether or not 7 it's a third-party vendor, which it could be just for 8 this specific role, or whether it would be state 9 employees. And it could probably be as few as three or 10 four. And then third-party accountants that would do 11 the audit and the independent verification. But these 12 are all questions that, hopefully, will resolve 13 themselves over the next couple of days and weeks. 14 MR. DANTON: Thank you. 15 MR. HALE: Mr. Peters. 16 MR. PETERS: Yeah, I'd like to follow up 17 just a bit on Peter's thought, because I think it's a 18 good one. If my rudimentary, novice understanding of 19 this two-wire, one-wire stuff is that the two-wire 20 system the state receives data, say, here in Augusta, 21 and we don't care what the management system does. Is 22 that a fair statement? We don't really care what your 23 management system does. All we care to do is regulate 24 the system. So if we have a system in Augusta that has 25 two or three people, and that system is able to 46 1 regulate your racino and anyone else's racino that ever 2 opens up. And the mom and pop store that, say, 20 3 years from now gets licensed for a slot machine or 4 anything like that, that we don't have to hire on-site 5 people to do anything. Isn't that true? All we need 6 is those same three or four people in Augusta with no 7 on-site people on a regular basis. And what you're 8 saying is, regardless of the number, we need on-site 9 people for every racino that's developed. Isn't that 10 what you guys are saying? 11 MR. REILLY: No. 12 MR. PETERS: That's what you said. I mean, 13 that's what I need clarified. 14 MR. REILLY: Thank you for the opportunity to 15 clarify that. Again, depending on what your 16 requirements are, what Maine's requirements are, no -- 17 zero personnel, there is an approach for doing that; 18 and a third party; us, as vendors; auditing firm. You 19 know, who does it can be -- you know, can be entirely 20 flexible. In terms of where it's done, in the state of 21 Louisiana, 15 or 18 locations, it's done in one 22 location. Physically, where it is, that's all -- 23 that's also entirely flexible. You could literally 24 have someone sitting at a browser, web browser signing 25 onto the Internet and seeing the data from wherever you 47 1 specify. It's totally flexible. 2 The point about single-wire versus two-wire, 3 in either one of these scenarios, you're still going to 4 have to make these same decisions. How many people, if 5 any, do I want to have managing this system? What type 6 of security levels? It's the same in either scenario. 7 But I think you can probably deduce that what we've 8 been alluding to here, based on what we've seen in 9 Delaware and West Virginia and some of the others, 10 Louisiana, is that the more simple approach to the -- 11 the more simple the approach to providing the data to 12 the state, the better. The less complex it is, the 13 better. Because it enables -- as long as the state or 14 whoever the state designates or whoever we designate at 15 the -- in response to the RFP, whoever we designate, as 16 long as they're fulfilling the data gathering 17 requirements that the state needs to have, as long as 18 all those things are being addressed, why not make the 19 environment as least complex as possible, so that any 20 time a new manufacturer's slot machine is introduced, 21 or a new bill validator is introduced or some other 22 type of new ticket printing is introduced, instead of 23 having to test that and call our friend from GLI to 24 test that against not only the state central system and 25 the property management's system, when have you a less 48 1 complex single-wire environment, you're only having to 2 deal with that one wire network. 3 MR. PETERS: Thank you. 4 MR. SNYDER: If I can, Mr. Chairman, because 5 I'm sensitive to the time, we do have Geoff Humphreys 6 from Utilistar. And I'd like to have him take a couple 7 of minutes to step through this enhanced one-wire 8 system, which is Louisiana, while we've got the benefit 9 of having him present. 10 MR. HALE: I'm going to allow that very 11 quickly, too. I have a couple of issues here. Laura 12 Yustak Smith. 13 (Colloquy off the record.) 14 MR. HALE: All right. So she's going to 15 delay her questions so that you can testify now. So 16 identify yourself, again, for the record, and your 17 position, and what -- 18 MR. HUMPHREYS: Yes sir, Mr. Chairman. Thank 19 you very much. 20 MR. HALE: -- types of -- 21 MR. HUMPHREYS: My name is Geoff Humphreys. 22 I'm the founder and senior vice president of Utilistar 23 Process Automation in Baton Rouge, Louisiana. We did 24 implement the coin system. It is currently running at 25 18 sites, 15 of those are river boat casinos, three of 49 1 those are racinos in this respect -- although they 2 don't like that word in Louisiana; there's no table 3 games at them, so -- Anyways, there is one more 4 racetrack casino going to come on line or they call it 5 slots at the track, and one more river boat. So 6 they'll have a total of 20 with approximately 22 to 23 7 thousand machines at this point. 8 The system was really mandated to a certain 9 extent by the regulators in Louisiana to have this 10 passive interface. They tried to get and work with all 11 of the vendors of the various slot management systems 12 and gaming machines to turn over protocols so that we 13 could passively monitor those single wires without 14 rewiring the floors and putting additional site 15 controllers at each location. The expense would have 16 been exorbitant, and they thought that this would be a 17 good solution to that. And indeed, we designed that 18 interface. 19 They realized that the operators of those 20 casinos were the experts. They wanted them to continue 21 making dollars, because that, in turn, makes the state 22 more money. And they also knew that, involved in a 23 single- or dual-wire system, you have the slot machine, 24 you have two ports. You have an interface card that's 25 going to let that machine talk on now the network. 50 1 Then you have a controller for X numbers of machines, 2 generally it's 64 to 128 machines. All of that has to 3 be duplicated in a dual-wire system. 4 In Louisiana, they have the same benefits of 5 a dual-wire system without that extra expense and time 6 and effort -- both their time and their management 7 time. Because now they don't have -- the state of 8 Louisiana state police do not have to maintain those 9 controllers, those interface cards, and they don't have 10 that headache to deal with whatsoever. The end result 11 that a regulator wants out of a system like this is 12 they want to know that gaming is being held in a high 13 integrity manner. They want to know that they're 14 going to get their revenue. They want to know every 15 time a door is opened -- every time an illegal door is 16 opened. An illegal door means a door was opened at the 17 wrong time of day perhaps when they're not supposed to 18 be opened. They want to know what the numbers are, how 19 much coin was played, how much coin was won. 20 The single wire or dual wire both do that. 21 One of them is much more complex to implement. One of 22 them is less complex to implement. In Louisiana, their 23 net revenue is calculated in a much more complex manner 24 than what I envision here or what is in Delaware. It's 25 basically how much was played? How much was won? 51 1 What's the difference? Pay me my piece. That's easy 2 stuff. 3 What the system in Louisiana also offers, 4 that a dual-wire system does not, are those 5 back-of-the-house systems that take care of player 6 tracking, that take care of progressive information. 7 They take care of cashless, if that indeed becomes 8 legal. They also take care of ticketing. Now they may 9 not care about that as far as revenue is concerned, 10 however, this board will adopt regulation that is going 11 to define how that is supposed to work. 12 The one thing that that single-wire system 13 with the coins interface tied to the existing wire, so 14 to speak, is it nets the regulators with every piece of 15 information on every ticket that ever gets exchanged. 16 If a wagering account transfer exchange is performed, 17 this slot machine over here does not necessarily always 18 know and transfer the information related to that. 19 With the regulator system tied into the existing system 20 with that single wire, it's going to have the luxury of 21 also being able to tie into other pieces of information 22 on a slot floor that aren't normally attainable at 23 individual slot machine level. 24 So that's one of the things. And I'm going 25 to have to correct Tom. He said you can go on the 52 1 Internet and get data. That was a no, no. You 2 can't -- the intranet inside the state police, you can 3 do that, but that's a slight difference. There's 4 security issues there, as everyone knows. 5 Enabling, disabling games: The coin system 6 has the capability to, say, go out and disable the game 7 from the regulator's location. Louisiana has as many 8 different types of gaming as Las Vegas with one 9 exception, and that's sports betting. And actually, 10 they have one more, because there's no river boats in 11 Nevada. 12 But they have a separate system that is -- 13 could be considered this dual-wire system. It is a 14 system that is hard wired to the state computers, and 15 that is the video poker system. That is where you have 16 mom and pop bars, restaurants, and lounges, in 3,000 17 locations across the state with approximately 15,000 18 machines. You need a system with direct wiring for 19 that. Those are establishments that you need to check 20 all the time the signatures on the cards, every time 21 anything was interrupted. You're going to get that 22 information with your system here as well, but you also 23 need ability to have even automatic shut-down 24 capability where, if you can't connect with them, the 25 machines will shut down themselves. 53 1 That's a different environment than a racino 2 environment. Racino environment is run by corporate 3 citizens that have billion dollar market 4 capitalization. If they mess up in one jurisdiction, 5 their license is gone across the board. So it's a 6 different scenario, and the state police, they'll 7 recognize that and they treat them differently. There 8 are two separate systems there. Again, there's no 9 additional slot monitoring -- I mean, slot wiring 10 changes that are needed to implement the coin solution 11 on top of an existing slot monitoring system. 12 We have absolutely -- they choose any machine 13 they want, if GLI or your testing lab of choice decides 14 that a system has met its requirements, its accuracy as 15 far as accounting goes, its integrity as far as 16 security goes, and that game and those interface boards 17 and those controllers and those systems have met that, 18 why duplicate that? And so, they capitalized on it. 19 And I'll refer to that dual-wire system as a 20 classic. It actually did grow out of the video 21 monitoring -- video poker system. 22 Again, I realize time is short here. To 23 implement one of -- at a casino, for our solution is 24 about eight hours. I mean, we drive up with a server. 25 We place it on-site. The communication has a perpetual 54 1 communication to the site back to the location of the 2 regulators. Real-time data gets exchanged. And it's 3 nothing to implement. It costs very little to the 4 casino, to the state, and the time does not hold up any 5 progress. And I know that progress is important. 6 The operation staff. Again, the system is 7 also capable of what Mr. Danton, I believe, brought up 8 which was or maybe it was Mr. Peters, where you may 9 decide -- Maine may decide to go with gaming devices at 10 bars and restaurants and taverns. In a scenario like 11 that, we refer to that as a hybrid system. The same 12 system can do that, have perpetual connections to the 13 racetrack and either dial-up or perpetual connections 14 to each of the locations. 15 I guess I need to open it up for questions 16 now. 17 MR. HALE: Well, on the latter scenario, in 18 Maine, you'd call that a hell of a cat fight. 19 MR. HUMPHREYS: Oh. Yes, sir. 20 MR. HALE: A cat fight which I'm not 21 interested in at the moment. 22 I have just one comment. We're all trying 23 to -- you know, I sometimes wish that in these meetings 24 I'd bring my grandchildren with me who are a lot better 25 at video games. However, you know, I get lost in 55 1 "Gooies" and things like that, but I am catching up 2 rapidly. 3 The legislature wrote 1820, which I assume 4 Mr. Snyder has become extremely familiar with. I read 5 it at night sometimes rather than do other things. 6 We're looking for -- and you're going to hear this word 7 over and over again -- integrity. We're looking for 8 security for those people who are coming through that 9 door. And there are a lot of people who are going to 10 benefit from the profits, quote, unquote, that are 11 coming in, and I could list them all -- from the 12 horseman, and their purse up there and all the rest. 13 The state doesn't want to trust anyone else but 14 themselves. 15 Mr. Cantara borrowed Mr. Reagan's "trust, but 16 verify" phrase, but it works. Whatever system 17 ultimately is chosen must meet that criteria. There 18 can be no doubt. We're going to be as scrutinized as 19 any operation has ever been in the state. And those 20 people who are going to benefit from it are going to -- 21 and we must account for every single penny. So that's 22 why we're going down this road. 23 It does get technical. I've been through 24 this in my own industry a lot, and it evolves every 25 day. And we go single wire, two wire, and technology, 56 1 RNGs, all of the nomenclature we're going to be using. 2 So that's where we are coming from. That's the reason 3 that we are looking for that word "integrity" for the 4 public and for the state. 5 MR. HUMPHREYS: No argument there. I think 6 that there's not a person that would argue with that. 7 MR. HALE: And there are very few people, 8 and I understand it because I deal with this a lot in 9 my own business, that have the expertise that people 10 have who do it day-to-day. And so it becomes a rather 11 herculean task to work through some of these things. 12 So if we ask questions that perhaps seem silly or are 13 not out of line, I understand -- but I'm learning 14 quickly. I know a lot more about slot machines than my 15 wife ever thought I was going to know. I talk in my 16 sleep about them. 17 Mr. Snyder. 18 MR. SNYDER: Mr. Chairman, if I may, we have 19 certainly heard with redundancy the "trust, but 20 verify." I think you as a board need to also 21 understand that -- what was mentioned here briefly, 22 there is nothing that, as publicly traded company, Penn 23 National holds more valuable than its license to do 24 business. You in the State of Maine under LD 1820 will 25 be reviewing our license each year. And the integrity 57 1 of our operation will weigh heavily on that licensing 2 process annually. And you have no greater carrot, no 3 greater stick, I guess is really the appropriate term, 4 holding over our heads than the annual license -- yeah, 5 no greater baseball bat -- holding over our heads than 6 our license which you as a board with the help of the 7 Department of Public Safety will be reviewing annually. 8 So we share with you the concern that this 9 property, this facility at Bangor Historic Track in 10 Bangor is done right, it's done properly, it maintains 11 the integrity for the public who is using this 12 facility. And, as importantly, it maintains the 13 integrity for all those stake holders, from the State 14 of Maine right on down to the agricultural fairs and 15 the horsemen and breeders, who -- and scholarship 16 students who are beneficiaries of the revenue that this 17 property will produce. 18 All we ask, and we much appreciate your time 19 today, and we've gone over, is the opportunity to 20 inform you, to share with you so that you can 21 understand, if decisions are made to go down one path 22 or a path, what the implication of that may be. And 23 our sensitivities as an operator are going to be, what 24 can we do that's quickest, what can we do that's 25 easiest to implement to get a facility up, to get a 58 1 facility operating, so all those stake holders start to 2 benefit from the revenue of that facility. And as 3 importantly, what's most adaptable in the future? What 4 structure, what infrastructure, what technology will be 5 supported and supportable by the industry so that we 6 can keep this facility producing the maximum revenue 7 possible for all those stake holders? 8 So I thank you for your time. 9 MR. HALE: Thank you, Mr. Snyder. 10 I'm going to -- your mike was on. The reason 11 I asked -- your light is on. Did you want to ask a 12 question? 13 LT. DOYLE: I did, Mr. Chairman. I had one 14 follow-up question to something Mrs. Deighan had 15 mentioned earlier. 16 MR. HALE: Okay. 17 LT. DOYLE: She had asked the question that, 18 if there was a slot monitoring system in a facility in 19 Bangor and another operator or another system came on 20 line down the road, could all of this information be 21 interfaced? 22 And I just wanted to make sure that 23 everyone's clear. It's interfaced because of your 24 third-party solution. You have a software solution 25 that you've developed that would allow for the 59 1 interface. But if operator A and operator B were in 2 different parts of the state, their slot monitoring 3 systems would not talk to each other and provide all 4 the information to the state. That would require an 5 interface via solution that your company has developed. 6 MR. HUMPHREYS: Yes, that's correct. Geoff 7 Humphreys of Utilistar responding to that. Yes, we 8 would put yet another server at a new, perhaps, 9 racetrack. It would then, also, have its own perpetual 10 connection back to the central system. Right now, 11 we're doing that very same model in Louisiana. We put 12 only a server at each of the current 18 casinos. I 13 mean, server grade machine with redundancy and security 14 built into it as well. Encrypt the data, throw it back 15 to the central system. We're doing it with 18. You're 16 talking about two, and that's -- there will be loafing 17 systems. Yes. 18 MR. HALE: Commissioner Cantara. 19 MR. CANTARA: Michael Cantara. Clarify for 20 me what your company has done in Louisiana. Was that 21 building a new monitoring system from scratch or have 22 you retro-fitted an existing system? That hasn't been 23 clear to me. 24 MR. HUMPHREYS: Yes, sir. Geoff Humphreys 25 with Utilistar. That was a system built from ground up 60 1 specifically for gaming regulation. 2 MR. CANTARA: As a result of the state of 3 Louisiana's RFP process earlier this year? 4 MR. HUMPHREYS: No, sir. The RFP process 5 earlier this year -- and that's one of the things that 6 I also wanted to clarify. I'm glad you brought that 7 up. Geoff Humphreys again. 8 The RFP process going on this year is for the 9 video poker system, not the casino-racino system. That 10 one is in place, and it is actually getting an upgrade 11 specifically for ticketing information, as well as the 12 on slot or their perceiving that cashless gaming is 13 going to be coming soon as well. So it's going to 14 handle cashless, also. But the RFP coming out right 15 now in Louisiana is specifically for the video poker 16 system, which is the mom and pop, three machines in a 17 bar, and 50 machines in a truckstop casino. Very 18 different. That's a totally different type of system. 19 That's much like the South Dakota system. 20 MR. HALE: Thank you very much. We'd like to 21 ask -- 22 MR. HUMPHREYS: Thank you. 23 MR. HALE: And you may have to stay for a 24 moment, because I'm not sure where her questions are 25 being directed. Laura Yustak Smith, our counsel. 61 1 Go ahead. 2 MS. SMITH: I just have a couple of real 3 quick questions I wanted to clarify for myself and 4 perhaps the council. 5 Mr. Reilly, you said that approximately 60 6 percent -- you have a 60 percent market share. Are 7 your -- since you sell slot management systems, are 8 your customers regulators or the private operators? 9 MR. REILLY: Private operators. I have to 10 think about that. They're actually both. We -- it's 11 largely the operators, largely the casino operators. 12 We also service state regulatory agencies or testing 13 laboratories to provide them with our equipment and our 14 systems in order to be tested to fulfill -- to ensure 15 that they are meeting regulatory requirements. So we 16 largely are -- you know, the largest percent of our 17 revenue is driven by the operators, obviously, but we 18 do support the different regulatory agencies around the 19 country. 20 MS. SMITH: Okay. When you talked about the 21 complexity of the two-wire system, and you said that -- 22 and to give the example, you said that when this one 23 casino was moving from a coin to a ticket system, many 24 slot manufacturers were delayed or they could not 25 immediately expand because they were using this other 62 1 port for ticketing purposes. Do I have that right so 2 far? 3 MR. REILLY: Yes. 4 MS. SMITH: If Maine were to start with a 5 two-wire system and all of the slot manufacturers know 6 that coming in, they don't have that delay problem, do 7 they? 8 MR. REILLY: They don't have that delay 9 problem for the ticketing. If your example is 10 ticketing, on that ticketing application, no, they 11 don't. But if there is another -- and if there's 12 another application that's coming down the pike sooner 13 or later, some other type of technology that needs to 14 be installed inside of the slot machine and needs to 15 have -- be able to use another one of the ports on the 16 MPU board on the slot machine, if both of those ports 17 are taken up by one wire and two wire for the two 18 different systems, and it requires another available 19 port or ports, that's just one less port they're going 20 to be able to use if it's used by the other system. 21 It sounds simple, but you know, in Delaware 22 as, you know, the example I used before, they probably 23 were delayed a minimum of six months at one of the 24 properties down there from implementing ticketing 25 because some of the slot machine manufacturers who were 63 1 on their floor were required -- required to be able to 2 run their ticketing printers on that second port. And 3 the port wasn't there because it was a two-wire 4 environment. 5 MS. SMITH: Okay. The access, when you 6 talked about unfettered access, and just so everybody's 7 clear, that's not something that's automatic with the 8 system; that's something that's got to be designed by 9 statute and/or rule; correct? 10 MR. REILLY: It's -- 11 MS. SMITH: I mean, if an operator has a slot 12 management system, what access they're going to give 13 the state to that information is going to have to be 14 established somehow. 15 MR. REILLY: Yes. Someone has to determine 16 the level of access the state or whoever the state 17 designates needs to have access, but the technology 18 enables access to whatever data you want to get. 19 MS. SMITH: Right. I'm not talking about the 20 technology, but there's got to be a policy decision 21 somewhere about who has access to what. 22 MR. REILLY: Yes. That's correct. 23 MS. SMITH: And the system-based enabling/ 24 disabling, I think Mr. Humphreys had said that could be 25 done by the regulator. In the -- the slot management 64 1 systems that you provide to private operators, based on 2 what you know of these, is that done by the regulator 3 in those? 4 MR. REILLY: Less and less. Where it is 5 done -- I'll give you an example. It's done in an 6 environment where you have riverboats where they sail, 7 and they can only operate when the casinos are at sail, 8 so they need to turn the games off when they come into 9 port, that type of thing. 10 MS. SMITH: So, for the most part, is it the 11 operator that's turning the machines on and off? 12 MR. REILLY: In that particular environment, 13 yes. I'm sorry. Excuse me. 14 MS. SMITH: In the other environments. 15 MR. REILLY: In the riverboat environment, 16 I'm not sure if that was state, who turns -- I'm not 17 exactly sure who turns it off. But again, as you said 18 earlier, on your example of unfettered access -- 19 MS. SMITH: Sure. 20 MR. REILLY: How these things are done is 21 going to be more determined by what the policy is that 22 is mandated by the state than it is by -- the 23 capability exists. It's just a matter of determining 24 who does it. 25 MS. SMITH: Okay. It sounds like we've 65 1 got -- the operators want a system and are saying the 2 state can have access to it. If -- is it possible for 3 the state to have their system and grant the operators 4 perhaps read-only access to certain chunks of data, so 5 that they can get what they want out of a system? Is 6 that technologically possible, so that there's still 7 only one system? 8 MR. REILLY: I'd push that to Steve. You 9 know, being able to -- 10 MR. SNYDER: It's Steve Snyder from Penn 11 National again. In fact, Ms. Smith, that is a 12 suggestion that we've made in the past, that we would 13 procure a slot management system that we would dedicate 14 solely to the state, and it would be the state's system 15 administrator who would grant the appropriate access 16 for the marketing, the accounting, and the other 17 functional needs that we would have to operate the 18 facility. 19 Is it utilized in other jurisdictions? No. 20 But there are no other jurisdictions in the United 21 States that have but one facility that are currently up 22 and operating. So that is an approach that we've 23 suggested as a quick-to-implement, cost-effective 24 mechanism that could be utilized here in the State of 25 Maine. 66 1 MS. SMITH: Okay. Thank you. 2 MR. HALE: That system would require state 3 employees of which we are not budgeted for. 4 MR. SNYDER: It would either require state 5 employees or it would require the state contract with a 6 third-party vendor, an accounting firm or some other 7 third-party vendor to act as both system administrator 8 to turn on, turn off the machines, and also to monitor 9 the network. 10 MR. HALE: Thank you. 11 Lieutenant Doyle. 12 LT. DOYLE: Very brief question while Bally 13 is still represented. 14 MR. HALE: Yeah. Go ahead. 15 LT. DOYLE: Do you see any potential conflict 16 between being a slot machine manufacturer and a 17 system -- central system provider? In other words, 18 you're providing machines that your system's 19 monitoring. 20 MR. REILLY: We're, again, also, a publicly 21 traded company. We have high -- we have very high 22 standards. We're tightly scrutinized. It has not been 23 an issue. 24 MR. SNYDER: If I can, just from the 25 operator's standpoint, again, that's why we've 67 1 suggested in the past, and we're very encouraged to see 2 the last draft of the proposed regulations for Maine 3 reflect this. That's why the state would procure a 4 third-party lab or the services of a third-party lab to 5 verify the integrity of the slot machines whether it's 6 a Bally machine or an IGT machine, and the system, 7 whether it's a Bally system, a coin system, a Sci Game 8 system or an IGT system. It's those experts and it's 9 that level of expertise that we have encouraged to date 10 that you folks employ to answer exactly the concerns 11 that you, Lieutenant Doyle, have just voiced. That 12 those systems are and do maintain the appropriate level 13 of integrity for this industry. 14 LT. DOYLE: Okay. Thank you. 15 MR. HALE: All right. Thank you very much. 16 We have made actual pretty good progress, I think, here 17 today. 18 I am obliged to ask our court reporter, who 19 has the most difficult job of all in here, if you're 20 tired and need a 10-minute break. 21 (Colloquy off the record.) 22 MR. HALE: We're going to -- because of our 23 tight schedule, I am going to hold to a 10-minute break 24 with the one admonition that the members of the council 25 will not be discussing issues before the board for 68 1 obvious reasons. Thank you very much. Ten minutes. 2 We'll be back. 3 (The meeting recessed from 2:08 to 2:21 p.m.) 4 MR. HALE: Okay. Thank you very much. I 5 always -- the first half of the meeting I thought went 6 very well, and I think a lot of information came out. 7 Trying to digest it all. 8 But we're going to move to part two, and 9 we're going to invite Scientific Games to make their 10 presentation. And the same rules apply, we'd like to 11 have you describe yourself as applicant, potential 12 applicant, bidder, whoever, and what you do. And each 13 time, just repeat your name so that this lady here gets 14 it on the record. Thank you very much. You may begin. 15 MR. FEDERLE: Thank you, Chairman Hale and 16 members of the board, as well as Commissioner Cantara 17 and Lieutenant Doyle. My name is Tom Federle. And our 18 new lieutenant that's taking on the case. 19 My name's Tom Federle. I'm an attorney in 20 Augusta, grew up in Waterville. I became involved in 21 this issue as racinos began to be considered here in 22 Maine. I represent Scientific Games. To my left is 23 Brennen Lawrence, director of development for 24 Scientific Games. 25 We have in the audience several other 69 1 individuals from Scientific Games. We brought a number 2 of people because we appreciate that you, as a board, 3 are looking at this issue as being very important to 4 your whole charge as a board. And we certainly agree 5 with that. We think nothing less is at stake in this 6 issue than the entire integrity of this venture that 7 Maine has decided to go with. 8 Before you, you have a CD, and on that is a 9 video that you are going to see, we're going to play 10 today. It's very short. It's five minutes long. You 11 also have material that we handed out or we distributed 12 to the department on August 6th, as we understood the 13 requirement to be from your last meeting. 14 At the very outset, one thing I'd like to 15 discuss is, this is a somewhat odd dynamic for 16 Scientific Games, to find ourselves in what appears to 17 be opposition to Penn National Gaming. We do not 18 consider ourselves to be diametrically opposed to Penn 19 Gaming. In fact, in other jurisdictions, we work 20 alongside Penn Gaming. 21 A metaphor was used two days ago in front of 22 the Legal and Veterans Affairs Committee that the 23 system that we offer and will be offering in response 24 to an RFP and the system that Penn Gaming has been 25 talking about are apples and oranges. 70 1 Well, in fact, the two entities are apples 2 and oranges. Scientific Games is in the business of 3 providing central control systems to state regulators. 4 Penn Gaming is in the business of running racinos. And 5 I'd like to say for the record, they're very good at 6 it. The State of Maine is fortunate to have Penn 7 Gaming as the frontrunner to be the operator of a 8 racino in Maine. We think there's a lot that Penn can 9 offer to this board, especially around the business of 10 operating a racino. 11 In all candor and in no disrespect to Penn 12 Gaming, we think they have less to offer on this 13 important topic of, what should the state to do when it 14 comes to choosing a system to oversee, to control, to 15 regulate, to account for every penny that runs through 16 this racino operation? 17 Our history in Maine predates the racino. 18 Scientific Games, for nearly three decades, 19 approximately three decades, has been providing a 20 central site control system for the lottery. 21 Again, on Tuesday of this week, there was 22 discussion in front of the Legal and Veterans Affairs 23 Committee, where at least one of the representatives on 24 the committee seemed to understand that Scientific 25 Games in fact owns the lottery. Scientific Games, of 71 1 course, does not own the lottery. It does not own the 2 revenue that is generated by the lottery. We are 3 simply a contracted agent of the state, providing the 4 state with a control system, and providing the state 5 with the services that go along with that. 6 Again, we do intend to submit a proposal in 7 response to the RFP that we understand will be 8 forthcoming at the end of this month to work for you, 9 to be the control provider for the state. 10 Much of the technical discussion, and today 11 we've gotten into some of it, is going to be better 12 meted out, we believe, in that procurement process. 13 That is what the process is designed to do. 14 We suspect that all of the competitors for 15 providing a control system are going to submit 16 voluminous documents. It will be a big package with 17 all the technical detail. We understand that the state 18 will be reviewing that, vetting that, and will also be 19 using other experts to assist in that. All of your 20 technical questions, you're going to get a much fuller 21 view of later on than you got today from the first 22 presentation or that you'll get today from us. 23 I want to stress the reasons why I understand 24 that the Maine Legislature adopted a statute that does 25 require a central site control system and adopted a 72 1 statute that does mirror the Delaware statute. There 2 are about 15 reasons, and I think those same reasons 3 that led the legislature to its conclusion, despite 4 lobbying to the contrary, are compelling reasons why 5 this board ought to adopt the RFP that provides you 6 with central control that you can be confident about. 7 Number one is that our system -- when I speak 8 about our system, I'm talking about a central control 9 system. There are a number of other providers out 10 there other than Scientific Games who are in the 11 business of providing state regulators of racinos with 12 central control systems. So when I speak about our 13 system, unfortunately, we don't have the market 14 cornered, but I may use those terms interchangeably. 15 Our system is proven in an environment 16 similar to Maine's. It's presently operational. It's 17 in use. We can and we will demonstrate to you our 18 system operating presently for the state regulating 19 racinos. So, you'll get a firsthand look at precisely 20 what Maine is going to be doing late in '05, early in 21 '06, as soon as the racino operator is ready to begin. 22 You can lift up the hood. You can look at 23 the system. You can kick the tires. You can talk to 24 the regulators who are there, who have had the 25 experience with our system. You'll get a firsthand 73 1 impression of how our system works. We think that's 2 very valuable. 3 Our system is flexible. It has open 4 architecture. It uses industry standard protocols. It 5 allows for all types of games. There are no delays 6 when changing games. 7 The evolution of the technology and the 8 evolution of the industry has moved to a recognition 9 that there is a need for industry-wide protocols, so 10 that you avoid the situation where a manufacturer of a 11 given game that happens to now be the hottest game on 12 the slot world is using a system that doesn't 13 communicate with a control system. It's no longer the 14 case. We use open architecture. We don't use a 15 proprietary system that it cannot communicate. 16 Our system can be rapidly deployed. As I 17 mentioned earlier, we are already here in Maine. We 18 know this environment. We have the bricks and mortar. 19 We have -- we're ready to go. 20 Over the course of this summer, in your 21 meetings, we've learned of the likely timeline that 22 Penn Gaming has, and we certainly appreciate that Penn 23 Gaming has very good reasons for choosing when is the 24 appropriate time for it to open. What does it need to 25 do in Bangor before it's ready to open? And what they 74 1 have suggested is that looks like a late '05, early '06 2 timeline. We'll certainly be ready if we are the 3 provider chosen by that timeline. If they moved their 4 timeline up, we'd be ready for that. 5 There's been some discussion about an interim 6 racino operation where some slot machines are 7 operational. Penn Gaming has suggested they're not 8 interested in that. Again, we respect that. We think 9 that is really, more than anyone else's, the operator's 10 decision. It's certainly not our decision. There's 11 some argument that the people of Maine all stand to 12 benefit from the revenues gained and would like to see 13 these revenues generated earlier rather than later. We 14 think that's really the operator's call. 15 If the operator decided they did want an 16 interim system, we'd be there, and we'd be ready. We'd 17 be ready when they're ready. 18 Our system provides robust security. 19 Lieutenant Doyle or anyone else who is authorized would 20 be able to disengage a single machine or an entire 21 venue of machines immediately from a central site 22 system. 23 Our system provides real-time monitoring of 24 all slot machines. Our system would be owned by the 25 state, it would be housed by the state, be controlled 75 1 by the state. It would be truly independent of the 2 operator. This, again, is the way the Delaware system 3 works. 4 Penn Gaming has been urging this board to 5 consider alternatives to the Delaware-type model. 6 There is what I think is a profound irony in that 7 request. And here's what it is. Delaware is a huge 8 success story. Their racinos are extremely successful 9 financially, and it's been successful from a regulatory 10 standpoint. Perhaps the greatest beneficiary of that 11 success is the racino operator, itself. You've heard 12 from Don Johnson, the state regulator from Delaware, 13 speak about that. And he attributed the success 14 largely to the integrity of the independent system, the 15 central control system that's completely independent 16 from the operator. 17 Our system would provide the Department of 18 Public Safety, as well as this board, with all the 19 tools that are necessary to do its job with confidence, 20 to meet all of the requirements that are in the 21 statute. The statute tells us what you need, and we 22 can do all of that. 23 Our system insures that the operator and its 24 staff are denied access to any system that is capable 25 of programming slot machines. If I heard correctly in 76 1 the testimony earlier, there was a statement about, 2 well, the server can be in a closet in the racino. And 3 what I think I heard was nobody pays a whole lot of 4 attention to it. 5 As a future consumer of this entertainment 6 that's going to be provided by the racino, that doesn't 7 instill a lot of confidence in me. I don't want to 8 hear that. What I want to hear is that this system, 9 the computer system that is controlling and regulating 10 and monitoring and accounting for the profits and 11 revenue sharing is housed by the state, that the state 12 has control of it. 13 To answer a question that Assistant Attorney 14 General Smith asked, our system does what your question 15 asked. Our system would allow the information to come 16 to the state. The state could then allow information 17 to be shared with the racino operator to get their 18 player profile tracking, to get whatever information 19 they need. The key is, the state gets the data first. 20 The state controls the data. The state controls the 21 computer system that controls the data. 22 My computer can beat me in chess, but I still 23 submit I'm smarter than my computer is because I know 24 how to shut it off and how to turn it on. It can't do 25 that to me. If you get a system where you have 77 1 personnel involved who can get at the machine, it 2 doesn't matter how sophisticated the technology is, 3 people are clever, people are creative, people are 4 resourceful, and corruption can happen. You want a 5 system that's housed by the state. 6 Our system supports progressive slot 7 machines. It's allows for ticket-in/ticket-out 8 operations. That's just not an issue. That's easy for 9 us to provide. It would be positioned, because it 10 would be centrally located as the statute requires -- 11 contemplates anyway, it would be positioned for future 12 growth if the State of Maine moves in that direction. 13 None of us know what direction the State of Maine is 14 going to move on the issue of expansion of slot 15 machines. Maybe it's going to be in five years, maybe 16 it will be in 15 years, but by being centrally located, 17 we'd be well positioned to handle whatever that growth 18 might be. 19 Our system does account for every penny. 20 There are many, many stake holders that you as a board 21 are going to be hearing from. If they believe that 22 they are getting shortchanged and they understand that 23 the information that really determines whether they're 24 being shortchanged is not independent from the 25 operator, is not denied the operator, and is not housed 78 1 by the state, but by the operator, I think you're going 2 to have additional problems. There's going to be 3 credibility problems. There's going to be integrity 4 problems. 5 And again, I want to state again, if I'm 6 casting aspersions at any time, it's not at Penn 7 Gaming. We're not calling into question the integrity 8 of Penn Gaming. What we're calling into question is 9 the integrity of the system that they are proposing to 10 you. I think it's important that you understand that. 11 A little bit about your understanding of the 12 alternative that Penn is proposing. It essentially 13 relies on what we all now understand about the slot 14 accounting systems, which all casinos have -- I think 15 all racinos have -- that are internal systems that 16 provide player profile tracking information that's of 17 value to the operator. They are proposing to use that 18 system, to expand that system, to use it in a novel 19 way, to allow the state to regulate through their slot 20 accounting system. 21 I think the most important thing is that it 22 is not well proven. It is essentially untested. 23 If Louisiana is a test case, then I would 24 urge in response to a proposal that you visit 25 Louisiana, and you speak with the people in Louisiana. 79 1 I think you'll find that it doesn't provide the tools 2 that would be needed here in Maine, and that the 3 environment there is a completely different one. You 4 heard about riverboats and truck stops and everything 5 else. It's a very different environment. 6 Penn cannot -- Penn Gaming or Bally cannot 7 point to any other example or offer a demonstration of 8 such a system being owned and operated by the state 9 regulating slot machines. And that's what we 10 understand that you'll be looking for, is a system that 11 will be owned and operated by the state regulating 12 these slot machines. 13 Instead, it asks you essentially to envision 14 such a system. In its submission to you on July 29th 15 it said, here's a model that is owned by racinos, owned 16 by operators. Envision the state owning this system. 17 We could still house it. We could staff it, but 18 envision that you own it. 19 We don't think, on such an important issue, 20 you should imagine anything or try to envision 21 anything. We think you should get out in the field and 22 see what actually works. 23 Needless to say, you should give greater 24 weight to those who don't have a real stake in the 25 outcome of this. You've been ably assisted by the 80 1 Commissioner of the Department of Public Safety and by 2 Lieutenant Doyle. They've surveyed the country. 3 They've looked at other states' laws and regulations. 4 They've visited various facilities. They've spoken 5 with many other regulators. You ought to give great 6 weight to their insight, to their findings, to their 7 suggestions, to their recommendation. I think 8 deviating from those would be difficult to justify. 9 There would need to be an awfully compelling case to do 10 so. 11 You've also heard from Don Johnson, who's a 12 regulator in Delaware. He reviewed Maine's statute and 13 concluded that it was identical to Delaware's in all 14 material ways. He strongly recommended that this board 15 adopt a central site monitoring system like that system 16 adopted in Delaware. 17 We now have a short video to play for you, 18 which is another independent analysis. This one comes 19 from Greg Saunders, who is the chief information 20 officer and the deputy executive director of the New 21 Mexico Gaming Control Board. Mr. Saunders prepared 22 this video two years ago when the racino operators in 23 New Mexico were proposing a bill to get rid of the 24 central control system in New Mexico and to, in its 25 place, use a slot accounting system. Mr. Saunders 81 1 recorded this video for the legislature, and we've also 2 distributed to you letters from Mr. Saunders. Here we 3 go. 4 (Video played.) 5 MR. LAWRENCE: I'm Brennan Lawrence, as Tom 6 introduced me earlier, and I appreciate the opportunity 7 again today. Greg Saunders, obviously, is a regulator, 8 in the very situation you are in. He works for the 9 Gaming Control Board in New Mexico, which five years 10 ago, and as recently as two years ago, as Tom alluded 11 to, had a similar situation. 12 As you've heard from Don Johnson, and I know 13 the Department of Public Safety has gone out and done 14 an excellent job in talking to other regulators, we 15 felt it was important, and certainly as Scientific 16 Games made mention this to New Mexico Gaming Control 17 Board, they offered to participate and felt it was of 18 importance to them, because they've gone through the 19 same roads that you're traveling today. Unfortunately, 20 he could not be with us today, but felt it was of 21 importance to express his opinion, and so 22 coincidentally had done so via video two years ago, so 23 he had forwarded it on to us, and had indicated that in 24 the letter. He is more than welcome and invited you to 25 welcome him to the State of Maine to communicate this 82 1 information in person or by phone, as you've done with 2 other regulators, and he's certainly available to do 3 so. And I encourage you to follow up with him 4 directly. But we didn't want to speak on his behalf, 5 and I think his video directly conveyed the message and 6 the issues that we are here today discussing. 7 We have built in plenty of time because, as 8 you've heard earlier, there are many technical issues. 9 We thoroughly support the RFP process. Certainly, 10 whether it's I or our team of technical experts that 11 could come to the table provides probably little value, 12 because even at my degree of experience, it gets to the 13 point that you just can't comprehend what the technical 14 people are talking about. That's why you hired an 15 outside party. That's why you have an RFP process. 16 You have engaged the Department of Public Safety to 17 educate themselves. And there's other resources in the 18 room today. GLI is here, and certainly can speak 19 independently for some of the technical questions that 20 you've asked. 21 And so, at this time, we'd like to take the 22 rest of our available time to answer questions, and I 23 believe you've had an opportunity to read our formal 24 written response that we submitted to you earlier this 25 month. So, I'd like to take this opportunity, if this 83 1 there are questions, please feel free to ask. 2 MR. HALE: Well, thank you. One of the 3 things that I've heard, quote, unquote, from various 4 sources early on is that, in viewing the one-wire, 5 two-wire system, that your system is great, but 6 overkill as compared to the other system, that will 7 cost a lot of money and might impact on the amount of 8 money that the potential applicant might be willing to 9 put into the Bangor project. We've heard that 10 repeatedly. 11 Now I know the RFP is not out. We don't have 12 numbers, but could you in general terms address that? 13 MR. LAWRENCE: Sure. It's Brennen Lawrence 14 with Scientific Games. As the draft RFP which I looked 15 at last night indicated, it's based on the percent of 16 revenue. That's how it's currently structured. So our 17 response or anybody else's response will be bid based 18 on that percent of revenue. You may have heard from 19 the Delaware lottery, the cost for Scientific Games to 20 provide the system and the turn-key service which is 21 similar. You're well aware of their revenues. And 22 other models as in Rhode Island have the same 23 structure. A percent of revenue goes to the operator 24 of the system. That is the model that's widely 25 accepted and used. Your RFP indicates that's the model 84 1 you'd like us or other participants to provide. So you 2 know, certainly, one of the advantages Scientific Games 3 can offer -- and to my left is Darrel Frecker 4 (phonetic) from our facility here in Gardiner -- is 5 that we would use that facility and it would be a cost 6 savings to the state. Because we do have a secured 7 environment, and it's highly controlled, as would be 8 the facility that you would envision for the Department 9 of Public Safety to house a system if it was in another 10 facility other than a state owned facility. 11 So there are some economies that we do offer. 12 And certainly, other companies have the opportunity. 13 In the RFP you allowed them to provide the system 14 located outside the state if they choose to do so. So 15 I think the draft of the RFP is providing vendors 16 multiple ways to provide the most secure, 17 technologically enhanced system to provide no 18 limitations to the state or the operator and, as the 19 RFP calls for, the best price. 20 And so, you know, as we receive the final 21 version of the RFP, we'll be putting together our 22 detailed proposals, providing options for the state to 23 choose from, and keeping in mind that the state is 24 looking for the best price based on a percent of the 25 revenue. 85 1 MR. HALE: The number that is often used is 2 that Delaware puts $5 million a year in their system. 3 Was that -- is that -- it's costing $5 million a year. 4 It seems to me that that can't be compared to Maine. 5 We don't know what the potential is going to be. Well, 6 we've heard numbers. We have no idea what the reality 7 is. Delaware, obviously, with more machines, more 8 people, their wagering numbers will be higher. 9 MR. LAWRENCE: Again, Mr. Chairman, Brennen 10 Lawrence. I would say it's really an apple and tomato 11 comparison. Certainly, you're exactly right. The 12 number of facilities, the number of dollars that are 13 wagered, you know, that is based on several hundred 14 million dollars of revenue generated out of those 15 machines. And it's a sliding scale, obviously, your 16 percent versus the revenue. 17 In Delaware, since it is public record and 18 certainly the state lottery could share that with you, 19 our percentages has slid down, as certainly, you know, 20 revenues has increased. So we have structured a 21 contract to incorporate the fact that we anticipate 22 revenues to grow. And certainly, we're a publicly 23 traded company and you know, not a non for profit. But 24 in the same respect, we understand that your revenues 25 are growing, our profits are growing. We keep a check 86 1 and balance as well. 2 And I think that the model you would 3 anticipate is some adjustment over the term of the 4 contract. In Delaware, we have a long-term commitment. 5 I think the first contract here is only for five years, 6 so that could affect some of that variable. But to 7 give it context, I would say that, if it is in fact, 8 and I don't want to quote it, as you indicated $5 9 million, I would say that Maine would be significantly 10 less on an annualized basis, unless you're doing those 11 hundreds of millions of dollars in revenue. 12 I would say that one of the things that, you 13 know, once the RFP comes down, and it gives ample time 14 for providers, is for the state to provide potential 15 vendors projections on a one, three, and five year 16 basis, so it will assist all the vendors in being able 17 to give you the best, low cost proposal. 18 MR. HALE: Well, that's an important issue 19 because since it comes off the top, it affects 20 everybody down the line. 21 MR. LAWRENCE: Absolutely. 22 MR. HALE: All right. 23 MR. FEDERLE: Mr. Chair, let me point to a 24 nuanced -- 25 MR. LAWRENCE: Give your name. 87 1 MR. HALE: Name? 2 MR. FEDERLE: Sorry. It's Tom Federle. 3 That's true that it's a tax that comes off the top. 4 That tax goes to the general fund for the State of 5 Maine, which would then be used to pay for the 6 administration that's required under the statute, which 7 includes contracting out for central control systems. 8 If the state were to adopt a cheaper system as a cost 9 savings matter, there may be a good reason to do so 10 when you've seen RFPs. If the state were to do that, 11 there would not be a direct correlation of revenue 12 going to the racino. The money has still been captured 13 for the purpose of providing for this control system. 14 It would go into the general fund. 15 So there's a bit of a disconnect in the 16 argument that we've seen in newspapers and elsewhere, 17 that the cost of the system is -- directly impacts the 18 racino operator's ability to build a facility or its 19 bottom line. Because that figure has been established 20 in statute. It can't be changed by this board. So I 21 just wanted to make that point. Thank you. 22 MR. HALE: Thank you. 23 LT. DOYLE: Mr. Chairman. 24 MR. HALE: Mr. Doyle. 25 LT. DOYLE: I did want to make one point. 88 1 You did touch on this. This is Lieutenant Doyle. The 2 RFP is in draft form. We are soliciting comment from 3 all interested parties who have it for ideas to make 4 that RFP a better document. Our time frame is 5 narrowing, as everybody in the room knows. So I would 6 encourage people who have those comments to get them to 7 me in writing, so that we can, through this RFP 8 process, make that as good a document as we can. 9 MR. LAWRENCE: Lt. Doyle, if I could just 10 comment, I think, you know, that's an excellent step. 11 Other organizations have just recently done that, 12 submitted their draft RFPs for comment from vendors. I 13 think it allows yourselves and others who are procuring 14 systems the opportunity to get the information. 15 Certainly, the worse case scenario is you issue an RFP 16 and you may have missed a critical issue or you spend 17 more time answering questions which inevitably delays 18 the process. So, I did briefly read it last night, and 19 we will be forwarding you comments on it. But we 20 appreciate the opportunity to give feedback. 21 MR. CANTARA: Mr. Chairman, Lt. Kelly would 22 like to pose a question. 23 MR. HALE: Yes. Mr. Kelly. 24 LT. KELLY: Thank you. Lt. Tom Kelly. As I 25 understand it from what we heard this morning, the 89 1 one-wire, two-wire system, the one-wire system would 2 feed a central server at the physical site, and then 3 the two entities would feed or extract data from that 4 server; is that correct? And let me just finish. 5 MR. LAWRENCE: Sure. 6 LT. KELLY: Are you proposing that -- is your 7 system proposing the two-wire system or do you propose 8 moving that central site server to probably a 9 state-owned facility, and then we then, in turn, hand 10 off the data to the owner of the track or the owner of 11 the facility? We control that from another site other 12 than the centrally at the physical site. 13 MR. LAWRENCE: Lieutenant, let me address 14 that the best I can. I'm not familiar, until what was 15 described this morning, so -- our envision with the 16 system that we would provide -- it's Brennen Lawrence, 17 Scientific Games -- would be either a one-wire or a 18 two-wire solution, whatever is desired of the state. 19 We have -- it was mentioned earlier that 20 Scientific Games has the system in Delaware and the 21 state at the time chose the two-wire solution. 22 I would encourage the Department of Public 23 Safety to research on their own through Don Johnson the 24 reason that decision was made. It was prior to 25 Scientific Games taking ownership of that contract. 90 1 So, as I understand it, it was a decision between the 2 state and the operator over a cost factor. So, that 3 became the dominator for why they went to a two-wire 4 solution. The state of Delaware plans to continue 5 that. 6 We have a solution that would be a one-wire 7 solution. That one-wire solution would connect the 8 terminals to what we call a terminal controller. At 9 that point, we are able to continue the process of 10 sending the required connections and the necessary 11 tools for the state to have all the controls and the 12 meters of the financials to the state system. Being 13 able to export, if you would -- a very generic term; 14 there's much more technical information to be 15 provided -- export what is needed to feed the 16 marketing, slot accounting systems for player tracking 17 and so forth. In general terms, we use the industry 18 standards, a system -- the system interface. So, that 19 is something that is widely adopted through the Gaming 20 Standards Association. 21 Certainly, the capability was somewhat 22 described this morning. I don't recall the details of 23 it, but certainly our approach, it still resides as the 24 state's system. It's the state's wiring. We export 25 the necessary data to their marketing systems. 91 1 Certainly, in all the environments, there are 2 two systems. There are different needs of those 3 systems. And certainly, when we get down to one wire 4 versus two wire, you know, I think it's important to 5 recognize that all the new machines that are available 6 in the market today, as your draft proposes, asks for a 7 standard protocol, widely adopted protocol, the SASS 8 protocol. That is the most widely developed, and the 9 manufacturer's representative is here today from IGT, 10 who invented the protocol. The latest machines that 11 are available speak SASS and come with multiports, even 12 to the availability that is configured on the gaming 13 machine. 14 So technology has changed, and what's 15 available in the marketplace today, and I guess the 16 question is, you know, we would anticipate -- you know, 17 I have not seen any rules -- I have to acknowledge my 18 ignorance -- that you required new machines to be 19 installed in the marketplace. Those machines would 20 have multiple ports. 21 So, in essence, in Delaware, which is looking 22 to partake in a multi-state progressive game, their 23 intention in Delaware is to use a third wire. So there 24 will be three ports on a gaming machine. Certainly, 25 there are options there that we have expressed to the 92 1 state and other vendors have. They have chosen, and I 2 expressed earlier their decision to go to multi-ports 3 instead of a one-wire solution. 4 Our response is that we can offer whatever 5 option that I've just described. We feel that the 6 technology is available. The industry has worked 7 together to provide this technology through the 8 standards committee, and it affords the state and the 9 operator to maximize the cost savings of additional 10 wiring. That isn't true what we're talking about. I 11 don't think it's our intention that we're trying to 12 discount the need for a slot accounting or marketing 13 system from the operator. There's been desire and need 14 to have that. But certainly, there also has been 15 proven cases, more than a dozen jurisdictions in North 16 America that have put a control system in that is owned 17 and operated by the state to meet the specific 18 statutes. 19 And your statute here falls in line with such 20 states as Pennsylvania. That is the most recent piece 21 of legislation. It will be the largest implementation 22 of gaming machines, up to 61,000. And in their 23 legislation, it specifically identifies a control 24 system owned and operated by the state and a second 25 system for the operator, which would be their marketing 93 1 slot accounting system. So the good fortune for the 2 State of Pennsylvania and their future gaming board, it 3 has been clearly defined as a two-system state. 4 And that's probably the dilemma that you're 5 sitting here with is, do I have one system, two system, 6 one wire, two wire? It's like opening up a computer 7 box, and you can't find the directions. What I'm 8 encouraging you to realize is that there is probably a 9 need and should be in the state of Maine two systems. 10 If there's economies of scales and there's security, 11 integrity, in a one-wire solution from the state's 12 perspective that we can export data to feed their 13 system and a benefit to the operator, that cost 14 savings, low cost, then I encourage the state to look 15 at that. 16 But as you mentioned earlier, Mr. Chairman, 17 that what is -- the issue at hand is the security and 18 integrity of the games. And I think you're on the 19 right track in looking at that. Certainly, there's 20 technology that will be reviewed during the RFP process 21 and certainly, you know, GLI is here today, and they 22 can give their input if you choose so, to ask. 23 MR. HALE: Thank you very much. Any 24 questions? Mr. Hall. 25 MR. HALL: Larry Hall. I'd like to ask you 94 1 how many -- 2 MR. HALE: Turn your mike on, Mr. Hall. 3 MR. HALL: Larry Hall. I'd like to ask you 4 how many people it would take to operate the system 5 you're advocating -- 6 MR. LAWRENCE: Sure. 7 MR. HALL: -- for the state. 8 MR. LAWRENCE: For the state? 9 MR. HALL: Yes. 10 MR. LAWRENCE: The classic example I use, and 11 I know Lieutenant Doyle -- and Don Johnson was here 12 from the state of Delaware. The state employs through 13 the regulatory arm, which is the lottery in the state 14 of Delaware, three employees. And just in the last 15 year, they hired a third employee. So up in time until 16 about a year, year and a half ago, the state only had 17 two employees working under the arm of the video 18 lottery. 19 MR. HALL: Thank you. 20 MR. HALE: Mr. Peters. 21 MR. PETERS: Yeah. Excuse me. Although I am 22 sympathetic to the operator needing management tools, I 23 think in simple terms that we need regulation, and 24 that's what our charge is. Did you read Commissioner 25 Cantara's remarks at Legal and Vets? 95 1 MR. LAWRENCE: I didn't read -- this is 2 Brennen Lawrence. I didn't read word for word. I had 3 an interpretation. I was not here on Tuesday. 4 MR. PETERS: Do you think they substantially 5 comply with 1820, his interpretation? 6 MR. LAWRENCE: To my right is Tom Federle, 7 who was at that meeting, who might be the best to 8 interpret that. 9 MR. FEDERLE: And I have read them. I did 10 get a copy of them after hearing Commissioner Cantara's 11 remarks. And simple answer to that one, yes. 12 MR. PETERS: You do. 13 MR. FEDERLE: Yes. 14 MR. PETERS: You heard the presentation this 15 morning from the gentlemen that are advocating a 16 one-wire system, the Louisiana model. 17 MR. FEDERLE: Yes, I have. 18 MR. PETERS: Does that system comply with 19 Commissioner Cantara's interpretation of 1820 in your 20 opinion? 21 MR. LAWRENCE: In our opinion, I heard 22 several different models presented this morning. I 23 heard the Bally solution, and overlaid the Bally 24 solution, I heard another alternative server-type 25 solution, which I'm not that familiar with, quite 96 1 honestly. I think it would require, and the RFP 2 process allows you to thoroughly evaluate, does it 3 comply or not? 4 What we have spoken to this commission about 5 before and again today is systems that do comply, and 6 certainly I think that's what we can provide to you. 7 Again, there's a representative from GLI, who's the 8 independent gaming lab who might be better to answer 9 that question, and I could defer to them. 10 MR. PETERS: Is that him? 11 MR. LAWRENCE: He is here, yes. 12 MR. HALE: Okay. 13 MR. PETERS: Can we ask him? 14 MR. HALE: Yeah, if you can shut your mike 15 off for a second. 16 Okay. Yeah, I have allowed time here for an 17 opportunity, not on the agenda, but trying to be as 18 open as we can in a limited time. I'm going to blow 19 his name, but I do that all the time anyway, and I just 20 hide. Todd Elsasser? 21 MR. ELSASSER: That's correct. 22 MR. HALE: Did I get it right? 23 MR. ELSASSER: That's exactly correct. 24 MR. HALE: And that's amazing, because you 25 didn't have a number on your back. I usually require 97 1 people to have a number on their back. 2 He's the executive director of engineering 3 and testing for GLI. Gaming Laboratories International 4 is well known. I've allowed Todd a few minutes of our 5 time. He would like to introduce his company. 6 So, I think if you would come down, and you 7 would do that to the board, and then perhaps they can 8 ask you a couple of questions. By the way, he's from 9 New Jersey, and that seems to be a popular destination 10 today. 11 MR. ELSASSER: Yes, Todd Elsasser, Gaming 12 Laboratories. I have not prepared to speak here today. 13 I just came up to introduce myself and my company to 14 the board. And I wasn't -- so I don't have any slides. 15 I don't have any videotapes. I don't have 16 any correspondence from other regulators. 17 What I can say is Gaming Laboratories is the 18 preeminent test laboratory in the world. We are the 19 largest independent test laboratory. We were founded 20 when South Dakota lottery invented video lottery. They 21 did not want to go through the expense of starting up 22 their own test laboratory. They did not have the 23 technical expertise to do it, and as a result, Gaming 24 Laboratories was hired and founded to do that. 25 We have been testing video lottery systems 98 1 and gaming systems for 15 years now. We are 2 multinational. We are the largest laboratory in the 3 world. 4 I am the executive director of engineering 5 and testing. As such, all gaming testing comes under 6 my direct control. I started out doing video lottery. 7 I did gaming systems. And I can tell you everything 8 you've heard today is true. There is not an apple and 9 an orange. There is two sides to the apple. And 10 what's happening here is the track is looking at the 11 data that's out there and the information coming from 12 these machines in the way that they need to do their 13 job, that they have to have information that they can 14 manage the machines, they can manage the floor, they 15 can protect the revenue, the integrity, and everything 16 on the gaming system. 17 The board and the central system operators 18 are looking at the exact same thing from the other side 19 of the apple. So we're all looking at the same 20 information. The integrity of these systems that have 21 been described here today is a hundred percent. There 22 is no difference between what Bally has proposed or 23 what Sci Games has proposed as far as integrity. Both 24 systems are of the highest integrity. Both systems are 25 of the highest quality. Both have security as strict 99 1 or as loose as you want it. 2 Both of them have complete accountability of 3 the money. Again, looking at it from a different 4 perspective. From the board's standpoint, you want to 5 know how much money was in a machine today. The 6 casino, who's responsible for maintaining that and 7 tracking that money, wants to know how many one dollar 8 bills, how many five dollar bills, how many ten dollar 9 bills were in that individual machine, as well as the 10 total, because they're responsible for sweeping the 11 money from it, going in and counting it at the end of 12 the day. So they need not only the information you 13 need, but maybe a little bit more, or they're looking 14 at it from a different perspective. You don't 15 necessarily care how many five dollar bills are in an 16 individual machine. They do. 17 So you're both looking at the same data and 18 you're both analyzing it to your needs. The systems 19 have the ability to do that. Again, approaching them 20 from slightly different angles. 21 Something was mentioned here that the state 22 not trust anyone. Trust, but verify. You have been 23 put in a unique position where you can make some of 24 these decisions yourself. As was just mentioned, 25 Delaware and Oregon and a number of other states, the 100 1 legislature took that decision-making away from them. 2 And they said, no, you're going to do a system that's 3 going to do this, this, this, and this. And they 4 mandated exactly what it was. Here in Maine, they've 5 given you the ability to choose. So they kind of 6 pushed the decision-making down on you, and you guys 7 are sitting on the hot seat, trying to decide one wire, 8 two wire, this system, that system. 9 I'm here to tell you from an independent 10 standpoint, when you get down to it, the integrity is 11 there, the security is there, all of the information 12 you need is there. It all depends on how you want to 13 come up and get that information. 14 And the key word here is control. Who 15 controls the system? Is it going to be, as Sci Games 16 is talking about, something that's in the state's 17 headquarters, that the state, you know, watches and the 18 state is running and the state is mandating everything 19 that's done on it? Or is it with something more along 20 the track is talking about? The system is located at 21 the track, but you have the terminal right there. You 22 have complete access into it. You can control and do 23 anything you want through a remote terminal. 24 There's pros and cons from both. There's 25 cost savings and benefits on both. There is advantages 101 1 and disadvantages on both. It just depends on what 2 you, the board, are looking for. 3 And you will get the same integrity, the same 4 security, and the same validity of the system to the 5 playing public in either way. It's just which side of 6 the apple are you looking at, which way are you 7 attacking the problem, and where are you more 8 comfortable with? Do you want to physically run and 9 control, and take care of all the day-to-day things, or 10 hire an operator to do it for you, such as what 11 Delaware has done? Or do you want to do what Louisiana 12 has said? We've got the systems, we're getting all 13 this data anyway, why don't not just -- we'll let them 14 maintain all the day-to-day stuff. We'll monitor, 15 we'll watch, we'll oversee, and we'll regulate. It can 16 be done either way. 17 So I don't have any solutions for you. I 18 don't have any conclusions for you. What I'm telling 19 you is that you're seeing different sides of the same 20 argument, different sides of the same information here. 21 Mr. Peters, you made a statement earlier 22 about Delaware, as far as -- concern as far as running 23 the system and allowing the tracks to do whatever they 24 want with their systems. That's entirely 100 percent 25 true. Delaware put in a central system, and it was a 102 1 single-wire system at the time, and they told the 2 tracks, if you want player tracking, slot accounting, 3 ticket-in/ticket-out, go for it, put your own system 4 in. We don't care, but at the end of the day, it's our 5 system that counts. We sweep our money off of our 6 system, and if you have a discrepancy, you can talk to 7 us about it, but we're sweeping our money off of what 8 our system says. And that's the way that application 9 works. So you were correct in your thought process as 10 far as how Delaware -- 11 MR. PETERS: Well, again, with all this 12 confusion, mine included, that the board finds itself 13 in, we come to the bottom line that what we want to do 14 is interpret the statute according to the assistance 15 we've gotten from Commissioner Cantara, and I think his 16 interpretation was right on the money. We want to 17 regulate it precisely as Commissioner Cantara said. We 18 want to accomplish A. through G., I think it is, in 19 1820, which is the law that he related, but we want to 20 do it at the lowest cost, because that's, also, a 21 separate and important part of the statute. 22 So if we can accomplish everything in an 23 honest fashion with a lower cost system, then it is 24 important to us, I think, that -- to me, it is -- that 25 we develop an RFP that speaks to both systems, and lets 103 1 the chips fall where they may. But we do need people 2 to tell us forthrightly that either system will 3 facilitate in and out games, and they can keep changing 4 games; that either system will speak to -- will speak 5 to the chips or whatever it is they do; that the 6 architecture is whatever you call it. 7 So that's where we find ourselves, and I 8 don't know if the other people on the board agree with 9 me. That's where I find myself. It's a really simple 10 thing. I think we're going to do what our public 11 safety people and our staff have developed as an 12 interpretation of the statute, but we're going to do it 13 in the lowest cost-effective way that accomplishes that 14 goal. 15 So anything you can say that can help that, 16 because these guys are trying to sell a product, and 17 that's great, and I don't have a problem with that. Is 18 everything they're saying true about anybody's two-wire 19 system? Is anything that the fellow from Louisiana -- 20 where are you from? 21 MR. HUMPHREYS: Louisiana. 22 MR. PETERS: -- Louisiana is saying is true 23 only about his one-wire system? If we put out an RFP 24 that said as part of the requirements of that RFP, that 25 we go see a setup for each system, is everybody willing 104 1 to do that? Is that a fair thing to do? Because I 2 think that's where we're headed. 3 MR. LAWRENCE: Mr. Peters, I could respond 4 back to that. It's Brennen Lawrence, Scientific Games. 5 That's been a standard practice in many RFP 6 processes to either demonstrate the system in the 7 facility of the regulators requiring the bid, in the 8 vendor's facility, or in a facility of an environment 9 that is actually working. So we at Scientific Games 10 would welcome the opportunity to take you to a facility 11 to show you the system in a live environment if that's 12 a bid requirement of the RFP. And it's not -- it's a 13 pretty standard practice, not only in our business, but 14 in other gaming fields that Scientific Games is 15 involved in. 16 LT. DOYLE: At whose cost? 17 MR. LAWRENCE: That could be, the cost of 18 that -- Lieutenant Doyle asked the cost of that 19 expense. That could be derived back to the cost of the 20 vendor. Typically, the cost of the preparation of the 21 RFP is solely the responsibility of that vendor. You 22 know, could be the burden of the state. You know, 23 typically -- I'd have to go back, and I could give you 24 some examples, but not with me today, of who deferred 25 those costs. 105 1 MR. PETERS: Correct me if I'm wrong. I'm 2 not an attorney. But if we make it a part of the RFP, 3 and we require every single applicant to supply us with 4 expenses to do just that, if they wish to bid, are they 5 not obligated to do that? And is that not a conflict 6 at that point? 7 MR. LAWRENCE: It would be -- you're correct 8 in looking at it from that perspective. If we burden 9 the cost of that expense for you to travel to that 10 facility, we could provide the transportation, and you 11 could pay us for that transportation. And that's more 12 what I was referring to. There is a cost that you 13 would bear for that transportation. We've made 14 arrangements for transportation for people that have 15 been billed and invoiced to that state. 16 MR. FEDERLE: But not if you say otherwise, 17 Mr. Peters. If this board says, in finalizing its 18 RFP -- unless Attorney Smith wants to indicate 19 otherwise, because I haven't considered this precise 20 issue -- but if your RFP says, one of the things you 21 need to show us is how your system works, and somebody 22 applies and does not do so, I would submit that that 23 applicant hasn't qualified under your RFP. 24 MR. PETERS: Exactly. That's what I meant. 25 MR. LAWRENCE: The example I've used is in 106 1 the lottery world. We have provided transportation to 2 lotteries because we aren't in close proximity to one 3 of our customers. We do not have a site in Georgia, so 4 we've furnished transportation. And I'd have to go 5 back and look at the requirements of the RFP, and 6 that's what I'll forward on to Lieutenant Doyle. 7 MR. ELSASSER: Todd Elsasser from Gaming 8 Labs. If I might, Gaming Laboratories also has a 9 number of these systems in our facilities along with 10 both sides, we have the Bally system, for example, we 11 have the Scientific Game systems. We have other 12 systems that manufacturers aren't even here to present. 13 You are always welcome to come visit our facility and 14 see them from an independent standpoint, and that would 15 be in New Jersey. 16 MR. HALE: All right. That's wonderful. I 17 get to go out to Lakewood and see where the Hindenberg 18 came down? 19 MR. ELSASSER: That's correct. 20 MR. HALE: That's great. 21 I sometimes think I am the only non-lawyer in 22 the room. I get that feeling sometimes. Maybe -- I 23 don't think, Lieutenant Doyle -- 24 MS. DEIGHAN: You know better. 25 MR. HALE: Well, you're a lawyer. 107 1 Mr. Danton, are you a lawyer? 2 MR. DANTON: No. Thank God. 3 Peter Danton. You know, we're getting a 4 crash course here on -- call it finances, economics, or 5 what have you. Now I was a small businessman all of my 6 adult life, besides serving in government for a number 7 of years. Doesn't all this boil down to as to the 8 operator trying to get the best price possible, so his 9 bottom line will look the best possible, whether it's 10 one wire, two wire, two wire with one wire? Now, I 11 know you people can answer this. 12 MR. LAWRENCE: Mr. Danton, Brennen Lawrence. 13 I guess the question is, it's my understanding from the 14 draft RFP and the regulations, the state's purchasing 15 the system; correct? 16 MR. PETERS: It's a draft. It's not in iron 17 yet. 18 MR. LAWRENCE: So the state would be 19 procuring the system is the intention of the board. So 20 any savings, as we mentioned earlier, would go back to 21 the state. 22 MR. DANTON: Yes. 23 LT. DOYLE: You're correct. The first one 24 percent goes to the procurement of the system, and our 25 concern is not really that we're happy if there's extra 108 1 money in the general fund. We're concerned if there's 2 not enough money in that one percent to pay for it. 3 MR. LAWRENCE: Lt. Doyle, Brennen Lawrence 4 again. 5 I think that would be our concern, too, 6 because the state hasn't -- and I would encourage, as I 7 did earlier with the RFP process, send us the state's 8 projections, so we can affirm that, a., there is money. 9 There are costs to these systems. The structure that 10 you asked for in the draft, as Mr. Peters reminded me, 11 allows the state to maximize your dollars, and the fact 12 that we are now partnering, us or any other vendor, 13 partnering in the operation in the State of Maine. 14 So, you know, obviously, we have a large or 15 any vendor would have a capital investment and, as you 16 alluded to, the manpower investment. So I would think, 17 as the chairman asked earlier, would it be $5 million 18 and I said no. You know, for us to or any vendor to 19 look at what that cost is, the RFP process will get you 20 the answer you need. It may turn out that there 21 aren't enough dollars to go around, but it would be my 22 Monday quarterback of Sunday's game to say there are 23 enough dollars going around. And keeping in mind, as I 24 stressed earlier, the state's interest to have the best 25 solution that will provide the state the things that 109 1 they need and that can afford the operator the tools 2 they need. 3 So both parties here, and I commend you for 4 the effort to provide both parties the opportunity to 5 come together to work together. But at the end of the 6 day, the process that's going to be in place will 7 answer your ultimate question we're struggling for now. 8 Both systems, will they meet the RFP and will they be 9 the lowest cost solution? I think your answer will 10 come once that RFP is issued. 11 MR. DANTON: Mr. Chairman. 12 MR. HALE: Yes, Mr. Danton. 13 MR. DANTON: Peter Danton. First, I want to 14 say I had a judge and two lawyers in the family, and I 15 don't want them all being mad at me, so -- 16 But again, I want to just get down to the 17 bottom line, and I think my one concern is, you know, 18 the state is in the gambling business big time. We're 19 in it with the lottery, beano, bingo, seven harness 20 tracks, off-track betting parlors, two race tracks, 21 almost a casino, but now we do have a racino. So, my 22 concern is, if we're going to have all this gambling, I 23 want the state to benefit from it. And that's why I 24 ask these questions, what -- what is the state going to 25 realize, and how little money is it going to cost the 110 1 state as far as the operation of this racino is 2 concerned? Thank you. 3 MR. LAWRENCE: And Mr. Danton, the bottom 4 line of our response is, that RFP process will tell us 5 and all the vendors the necessary requirements and the 6 cost that we will incur to derive the best price for 7 the state. And I think you've set the process in 8 motion. The end of the month, the RFP will go out, and 9 you will have your answer shortly to follow. 10 MR. DANTON: Thank you. 11 MR. HALE: And that is true. And we should 12 never take our eye off the ball, that the legislature 13 gave us some marching orders, and I'm sure those 14 marching orders are going to be reflected in that RFP 15 that we're going to approve, hopefully, on the 30th. 16 And nothing is going to change that. Sometimes we have 17 to get to interpretation of what the legislature said, 18 and I'll let those who are talented do that. But the 19 ball is firmly in our court at the moment to come up 20 with an RFP that answers 1820, in word and in deed. 21 And that's why -- which you have had a great experience 22 with that, and Lawrence had extensive experience, and 23 we're all trying to go through it. But to me, that's 24 where we must always be focused and what the 25 legislature said we must do. 111 1 Am I correct, Mr. Cantara? 2 MR. CANTARA: Mike Cantara. I would concur 3 with everything you've said, Mr. Chairman. 4 MR. HALE: We have reserved time for -- if 5 there are no further questions, I have reserved as much 6 time as possible for public comment. And would accept 7 that if anyone -- I'd like to get a sense of how many 8 people are going to wish to make any public comment 9 today. One hand is up. Do we -- two hands are up, 10 three hands are back up again. All right. Mr. Cantara 11 keeps me to a schedule. 12 All right. We have certainly time to take 13 some testimony. The gentleman who raised his hand 14 first, if you'll come forward, I will ask you to 15 identify yourself and, for the record, tell us what 16 interest you may or may not have of a proprietary 17 interest in this. 18 MR. SPITZER: My name is Greg Spitzer. I'm a 19 sergeant from the Maine State Police retired. I was 20 the manager of licensing at the State Police, 21 representing both State Police and Department of Public 22 Safety. And that was between 1974 and 1985. 23 Between 1974 and 1980, we had video slot 24 machines here in Maine. They were licensed for 25 nonprofit organizations. By spring of 1979, we had 742 112 1 machines licensed on the streets. We did not have any 2 regulation or what we had was extremely poor. I see 3 where you're going today and applaud the idea of -- and 4 the key words are "integrity" and "regulation" without 5 a doubt. 6 We had monumental problems trying to oversee 7 and run that, which finally led to the repeal and the 8 proclamation by Governor Brennen on March 10 of 1980. 9 And the reason was that -- and I see great similarities 10 in LD 1820 today, and that's what brings me here. 11 And I just want to make a basic statement and 12 create perhaps a consciousness that you're doing the 13 right thing, you're on the right track, but there are 14 certain conflicts in the statute that I fear that, 15 what's there now as law, you may not be able to change 16 later on. We had the same problems in 1974 through 17 1980. 18 The machines are owned by the operators. I'm 19 trying to draw an analogy of what our problems were 20 then, and coupled with the fact that we didn't have 21 much teeth in the law, and so we did the best that we 22 could. And it got so difficult, come 1978 and 1979, 23 that we had to turn around. And through myself and my 24 staff obtain evidence, if you will, documentation from 25 the organizations. They were the key. And finally, in 113 1 about midsummer, we presented testimony behind closed 2 doors -- the lobbyists were kept outside -- for 3 extensive hours, and we had literally cases upon cases 4 of documentation of where money through the machines 5 were never found to be honestly equated to either the 6 report forms that we required -- it was very simple -- 7 but mostly the benefit never reached the nonprofit 8 organizations. And ultimately, it was my task to -- 9 and my boss at that time was Major Bill Brown. I'm 10 sorry. He's passed away now. Otherwise, I'm sure he'd 11 be here. 12 It was a very hard period, and it was a very 13 hard lesson learned. Some of the problems, again, I'll 14 mention. If the machines are owned by the operator, 15 and the operator is at all in collaboration or at all 16 in a close proximity to the machines that will be a 17 single or a double line, the regulatory -- the single 18 link, you started to get into an area that starts to 19 swing the pendulum in a negative environment. 20 Now you couple that with the fact that the 21 machine operators have literally sole access into the 22 machine with restraint on the state police getting into 23 the machines, to make sure that that word "integrity" 24 is maintained literally every second of the day. If 25 that's not there -- and I say this to Lieutenant Doyle 114 1 and Lieutenant Kelly -- and Commissioner, I know, 2 because we've talked -- that they are going to have to 3 be very astute on the regulatory machinery. They're 4 literally going to have to be computer experts under 5 today's standards. 6 The machines I dealt with were the previous 7 generation. Now that's 25 years old, but the 8 similarities are still here. I was in New Jersey, and 9 I was trying to gain meters into the machines so that 10 we could count. The conflict was we had -- the state 11 police had no access into the machine. That cannot 12 happen. You have to have a check and balance that is 13 vivid because, ladies and gentlemen, we're talking 14 about money. We're not talking about anything else. 15 We're talking about money. Where that money goes, 16 that's question number two. But we're talking about -- 17 and this is the foundation for the gaming that will 18 come in the future. 19 Some of the problems that I had in '78, '79, 20 were again, the law was -- we had nonprofit 21 organizations that were being created overnight for 22 licensing. Hello. And that was the criteria that 23 brought it -- and you can hear my testimony in front of 24 the Legal Affairs committee in '79. I mean, it was 25 vivid. It brought the repeal unanimously. I mean, the 115 1 report showed $2.4 million being brought in by 742 2 machines that were strictly on nonprofit premises that 3 final year. We could prove that they were making over 4 12 million, and that's what we could prove, and we 5 didn't have access into the machines. This was 6 testimony, this was interview that we got from the 7 directors of organizations that had financial 8 obligations to mortgages, to other entities to pay 9 bills. And so the information that -- and we had to 10 get that from those mom and pop organizations, and we 11 got it. 12 Again, I say without slightest hesitation, 13 you're on the right track. This is the foundation for 14 gaming. This is only the very genesis, beginning. You 15 will see legislation coming into the next session, 16 every session, for expansions. And so you have to have 17 that -- you have to have that control, you have to have 18 that accountability. 19 I will say that, in complete objectivity, and 20 I certainly don't know any of the vendor players here, 21 but I was part of a contingency that did go into the 22 lottery system to examine it with Scientific Games, and 23 I was basically enormously impressed. And again, with 24 my fundamental question was, if you have a line, is 25 there any way that line can be tapped? Is there any 116 1 way that a hard disk or a server can be changed? 2 We had a piece -- we had an LD in front of us 3 not long ago that said that -- proposal that said that 4 the pay-out was going to be 85 percent. Well, then in 5 a very short pen stroke, we had another piece of LD 6 that said it was going to pay out 90 percent. The 7 question to you is, can those boards be changed that 8 easily? Because what I read in 1820 is that the state 9 police will have access into those machines during the 10 working hours. That means the operators have 24/7 11 access. I begin to -- I have a horribly suspicious 12 mind, but I begin to see a problem. 13 Let me go on a little further. If you have 14 an operator that owns the machine, has access to the 15 machine, and has the ability to go in and take the 16 coinage, the revenue, on a daily basis, is there any -- 17 and this is for Doyle and Kelly -- is there any ability 18 to interrupt the integrity of the count? 19 These are questions I'm throwing out. I'm 20 not -- there are no accusations. We had a horrible 21 time because the vendors then had runners that came to 22 the organizations and cleaned out the machines, and the 23 bigger organizations certainly daily. And the larger 24 organizations had 20 machines. What we found is -- and 25 it was the largest VFW in Portland had a $3 million 117 1 mortgage and a 30-year plan to pay it. They paid it 2 off in less than two years. We would go to the -- we 3 would go to the nonprofits and do an audit as best we 4 could with what they had. And we found people waiting 5 at the door for them to open up at 8:00 in the morning, 6 and the VFW would put on a free lunch for them. 7 They're all seniors, as you can imagine. Nothing wrong 8 with that. Some of my observations. 9 You mentioned earlier about license. I have 10 to tell you this, if you haven't recognized it already. 11 But if a licensed -- if an applicant qualifies for a 12 license, that license will issue, period. If the 13 applicant, under 1820 -- look at the qualifications -- 14 if the applicant qualifies, that license will issue. 15 You can't hold it back because you'll have a lawsuit. 16 There is an enormous amount of information 17 here. I have a passion about it because I lived it, 18 and I had to close it. I want you to have as much 19 information as you need to understand where you are, 20 where you want to be in the months, weeks, years ahead. 21 With that, I wouldn't take up any more time. 22 I'm sure there are very important people here that want 23 to testify. If I can answer any questions, I'd be 24 happy to. 25 MR. HALE: I appreciate your comments. I'm 118 1 sorry I didn't recognize you because, once you 2 identified yourself, now I remember you quite well. 3 MR. SPITZER: Thank you. 4 MR. HALE: Mr. Danton. 5 MR. DANTON: Peter Danton. Sergeant, I 6 remember everything you just discussed. I was in the 7 Maine Senate at the time. Of course, we're in a whole 8 different ball game now as to what we were in those 9 years. I remember, like you said, a noncorporation, 10 club, a non -- a club could organize almost overnight 11 and have those quarter games going. Of course, the 12 whole thing didn't start off for nonprofits. It 13 started off, if you can remember, I think, with just to 14 be in the agricultural fairs. Am I right or wrong? 15 Didn't it start off that way? 16 MR. SPITZER: No. Yes, you're partly right. 17 I'm sorry. I apologize. What it started at is what we 18 call then the distributors are now vendors, as 19 synonymous terms. They simply went to some of the 20 largest jurisdictions with constituents, simply went to 21 leading legislators and started the ball rolling. We 22 at state police were on the sidelines, actually 23 standing outside looking in, with absolutely zero 24 understanding of the magnitude of what I call casino 25 style gambling, public gambling. We were able to make 119 1 some inroads and have some things that were -- actually 2 came from pure logic as far as impact and applications. 3 And I just -- I said to the vendors, I said 4 to the distributors, as I said, I implore you, please, 5 keep this up front, keep it out in the open, keep it 6 totally honest, and build on a solid reputation. This 7 will benefit you especially far more than me. It went 8 the other way. 9 MR. DANTON: Peter Danton again. Of course, 10 those years, Sergeant, the word I was looking for was 11 "nonprofit." You know, we went for the agricultural 12 fairs, but all these other clubs, whether it was Elks, 13 any other club, the Knights of Columbus, you name it, 14 they found that loophole where they were nonprofit, so 15 they were able to get the machines and run them. And 16 that's why you had that big problem. If we had passed 17 a law at that time, and I can remember it as if it was 18 yesterday, in the '70s, and said, nonprofit 19 organizations to have gambling only on bona fide 20 premises, you wouldn't have had that problem. But they 21 could set them up in barrooms and store fronts and, as 22 you well know, everywhere's else. 23 So -- but it didn't take long for us to vote 24 to repeal that, and that's why those quarter games went 25 out the window a long time ago. But I think that today 120 1 we find ourselves in a whole different situation, and 2 as you can see, we work very hard trying to do what's 3 right. And a lot of people were getting hurt with 4 those quarter games, because they started off as 5 quarter games, but people could bet almost anything 6 they wanted. And the people running the games would 7 take the bets, and a lot of people were getting hurt. 8 Thank you. 9 MR. SPITZER: Yes, sir. 10 MR. DANTON: But you refreshed my memory and 11 you brought me back a good 20 years anyway. Thank you. 12 MR. HALE: I appreciate your comments very 13 much. I do remember working with you at certain fairs 14 that I was involved in, and you did everything you 15 could. I remember it well. Thank you very much. 16 MR. SPITZER: Thank you. 17 MR. HALE: And your remarks were appreciated. 18 I do know that we have the city solicitor 19 from Bangor here today, Mr. Heitmann, who wishes to 20 make a public comment on behalf of the city. 21 MR. HEITMANN: Thank you, Mr. Chairman. 22 Norman Heitmann, City Solicitor, City of Bangor. 23 First, I'd like to congratulate you on the committee's 24 endorsement on Tuesday and compliment you on the -- 25 your remarks that you all made that day. I'm sure 121 1 you'll have equal success next Wednesday. At least we, 2 in Bangor, are counting on it anyway. 3 As I sat listening to this, it almost at 4 times sounded like a contest between the one wire and 5 the two wire, pick me, pick me, no, pick me, kind of a 6 thing. And I don't think that was -- while I found the 7 information very helpful, and I have tried on my own to 8 learn about both systems, I don't think that's why the 9 presentation was today, but more to simply educate this 10 board on what a one-wire system was and what a two-wire 11 system was. And I think the importance there is to 12 show, at least it appears to me, that both the one-wire 13 and the two-wire systems can meet the needs of the 14 state and the operator as well as meet the requirements 15 of the statute. And the reason I think that's 16 important is I think that's relevant to the RFP that 17 goes out. 18 I understand, and I haven't confirmed this, 19 but I understand that in West Virginia, for example, 20 the same consultant you have is advising West Virginia. 21 They're doing an RFP for a one-wire system and an RFP 22 for a two-wire system, presumably so they can compare 23 what they get in terms of proposals. And I would urge 24 that this committee do the same, whether it's separate 25 RFPs or in one which, in effect, allow one-wire 122 1 providers and two-wire providers to respond. 2 There has been some concern about the number 3 of people it might take to run the system, and 4 certainly, that's a legitimate concern, but it seems to 5 me, in both systems, that the concern is the same, and 6 in both systems it may be taken care of through the RFP 7 process by the successful vendor being in charge of 8 running things and, obviously, answering to the state. 9 So I don't think that should be the deciding factor in 10 whether it's a one-wire or a two-wire system. 11 The city does have some concerns about costs, 12 and not so much that we're looking out for Penn 13 National's bottom line, although, obviously, we'd like 14 anybody who does business in the city to be successful, 15 but because it can impact on the level of investment in 16 the city. Now the development agreement requires a $30 17 million investment, and it's clear from our discussions 18 with Penn National that it is going to be well in 19 excess of $30 million, which is very good news for the 20 city. To the extent it can even be higher, that would 21 be even better news for the city. And to the extent 22 that Penn National can keep their capital costs in 23 other areas to a reasonable minimum, that would benefit 24 the city. 25 That is relevant to us in the one-wire versus 123 1 two-wire discussion in a couple of respects. Number 2 one, what I'm hearing is in a two-wire system, there's 3 a certain amount of redundancy, which may, at the end 4 of the day, be a good thing. But at the beginning of 5 the day, what it tells me is it increases the cost to 6 Penn National because they're going to have to pay for 7 their own system for in-house. When I think of that 8 little diagram, they're going to have to pay for their 9 own little cylinder over here, even if through the 10 legislature the state's little cylinder is already 11 taken care of. And of course, they may have greater 12 costs of operation. 13 What I fully expect, if the Penn National 14 operation in Charlestown, West Virginia, is any 15 indication, is that the investment from Penn National 16 in the City of Bangor will continue over the years. 17 When I went to Charlestown, one of the questions I 18 asked was about the level of investment. And one of 19 the things I learned, that since they have been there, 20 which is 1997, they've invested $210 million. In fact, 21 they were adding on to their parking garage while I was 22 down there. So it wasn't all the up-front investment. 23 They've invested each year. 24 And I'd like to think -- certainly not on 25 that level, although that would be beyond my wildest 124 1 dreams, I'd like to think that Penn National will 2 continue to invest in the city each and every year. As 3 you may recall from the development agreement, we get 4 property tax from Penn National. So, obviously, the 5 more investment, the more value, the more property tax, 6 the better for the citizens of Bangor. 7 And as you might recall, the city also 8 receives a percentage of the slot revenues. More 9 revenue, more money to Bangor, and actually more money 10 to the state and all the other people that benefit from 11 the revenue. So the cost of operation is a concern to 12 us, as well as any impact on the revenue that the 13 one-wire or the two-wire system may have. 14 And what I heard is a major concern, and I'm 15 not suggesting that one system can't address this and 16 the other one can, but what I heard is the need for 17 flexibility. Flexibility both to handle new technology 18 and flexibility to handle new machines. 19 What I also learned in my tour is there are 20 people who apparently are quite fanatical about playing 21 slots and want all the newest and latest and greatest 22 slot machines. Not being a gambler, that mentality 23 escapes me, but apparently is out there. I understand 24 there are publications for real aficionados who 25 actually read on what kind of slot machines are out 125 1 there and will go to a facility and say, do you have 2 this in your facility and, if not, why not? 3 So, it's clear to me that customer demand 4 dictates a lot of the types of machines that the 5 operators will put in, and it's equally clear to me 6 that the type of system that we have must be able to 7 accommodate that. 8 If each can do that, that's fine. If one has 9 an edge over the other, I think that's worthy of 10 consideration. 11 I think that Mr. Elsasser, if I've pronounced 12 that right, finally narrowed down all the fruits and 13 vegetables we were talking about. And it turns out 14 that we were only talking about one, not apples and 15 bananas and tomatoes and oranges, but actually we're 16 talking about apples. He didn't say what kind of 17 apple, but I think that probably wasn't that important. 18 But the bottom line is, what I heard from 19 Mr. Elsasser, was both systems will do what you want to 20 do. If that's the case and he, obviously, has no stake 21 in this, then make sure that the RFP is written in such 22 a way that we can have people who produce both systems 23 respond, and then we can look at all the other factors 24 that you want to look at to see which system is the 25 right system. 126 1 Now, what Penn National will do is live with 2 whatever system you pick, whether it's a one or a two. 3 What the state will do is say, good job, we think you 4 picked the best system whether it's one or two if 5 you've looked at all the other factors. We may say, 6 geez, it would have been nice if this one was a little 7 cheaper or if this one could do that, but if you, when 8 you look at the big picture, you picked the right 9 system, then you did the right thing. 10 From the city's perspective, all we want to 11 make sure is that you're able to pick from everybody 12 that's out there that can do what needs to be done. 13 And I think, after today, what we've heard is that 14 includes virtually all providers of all systems, one 15 and two, and sort of the fellow in between, the hybrid 16 system, hybrid number one system from Louisiana. 17 So, that's what I have to say on behalf of 18 the city and our concerns, and gladly answer any 19 questions. 20 MR. HALE: I appreciate your comments as 21 always, Mr. Heitmann. 22 I think each board member -- certainly, 23 Mr. Danton has vast experience. Our role is that of 24 regulator purely and simply. I'm not trying to 25 advocate -- I happen to know a lot about Penn National 127 1 through the years through my work in other fields. I 2 know Mr. Danton has got experience with the lottery 3 commission, which is involved with Sci Games. And I 4 think everybody here is -- I think we're fortunate, to 5 be honest with you, the people who we're dealing with 6 here in this state. I took a look at that last night, 7 again spending some of my spare time reading. And 8 we're fortunate to have all of these people involved. 9 We couldn't -- we could have done a lot worse, and I 10 doubt that we could have done a lot better. But we're 11 regulators, and I don't want to miss the ball on that. 12 I would refer to Mr. Cantara's remarks in -- 13 before Legal and Vets the other day. And Mr. Hotham is 14 here today, which we're happy to have you back, again. 15 MR. HOTHAM: Thank you. 16 MR. HALE: You did address -- you were asked 17 a question about one wire, two wire, and whether we 18 wrote an RFP to get what we wanted, which I've had 19 rumors before in business, that people write their job 20 descriptions based on the person they want to hire. 21 I've never believed that, but I've heard that it's 22 happened. I think your response, and I don't want to 23 put words in your mouth, is we have absolutely opened 24 that up to the possibility that the Bangor City 25 Solicitor is suggesting. Am I correct? 128 1 MR. CANTARA: My response, if you recall 2 correctly, was what rules and what is contained in the 3 draft, and it's open for comment and refinement before 4 it's finalized, is that the functions described by 5 statute and what that function is meant to represent 6 for regulators is what rules. It's what it's supposed 7 to do, not one wire, two wires, that is of paramount 8 concern or the guiding light, if you will. What does 9 the statute say? What is the monitoring system 10 supposed to do? And if it gets us there, it can be 11 called a MacIntosh apple, it can be called granny 12 smith, but it doesn't matter, as long as it's a good 13 apple, without a worm. 14 MR. HALE: Quite well put. 15 (Colloquy off the record.) 16 MR. HALE: The question is, can we ask 17 questions to people who testified before? 18 Yeah, they're not under oath. Of course we 19 can, Ms. Deighan. Yes. 20 Jean Deighan would like to address questions 21 to someone. Go right ahead. 22 MS. DEIGHAN: Jean Deighan. Well, I don't 23 want to cut off Mr. Heitmann. 24 MR. HEITMANN: I'm finished with you if 25 you're finished with me. 129 1 MS. DEIGHAN: Very cheerfully today. 2 MR. HEITMANN: Thank you. 3 MR. DANTON: Mr. Chairman. 4 MR. HALE: Mr. Danton. Yes. 5 MR. DANTON: Peter Danton. You mentioned I'm 6 on the Liquor Lottery Commission. I'm the chairman. 7 We do have Scientific Games, but that in no way says 8 that, because we have Scientific Games -- I'm going to 9 look for what's best for the State of Maine, and I just 10 want to leave it at that. 11 MR. HALE: I didn't mean to infer that 12 otherwise, but I -- 13 MR. DANTON: No, I know you didn't, but I 14 just wanted to clear it up. 15 MR. HALE: I want to say that -- the reason, 16 my point was that I knew a lot about Penn National, you 17 knew a little bit about that, we know a lot about 18 every -- we're happy that everybody's here. Now, we'll 19 hope to send them all hope happy. Boy, that would be a 20 job, wouldn't it? 21 MS. DEIGHAN: Mr. Chairman, may I please? 22 Would it be all right if Todd -- 23 MR. HALE: Elsasser? 24 MS. DEIGHAN: -- Elsasser -- 25 MR. HALE: Number five. 130 1 MS. DEIGHAN: -- answered a few more 2 questions. 3 MR. ELSASSER: Yes. 4 MS. DEIGHAN: Thank you very much. You're a 5 computer scientist, it's sounds like to me. So I have 6 a few questions specifically that I hoped you could 7 help me with. One is this notion of flexibility that 8 we've been hearing about. It seems to me the greatest 9 problem has been the use of a second port for a 10 different reason. Sounds as though perhaps for a 11 Band-Aid for older machines to be able to keep up to 12 date with new technological demands. Is that really 13 what the big problem in flexibility has been? 14 MR. ELSASSER: Todd Elsasser from Gaming 15 Laboratories. Yeah, that was a problem in the past. 16 When Delaware first went out to bid, when Louisiana 17 first went out to bid, we were mid-'90s early '90s, and 18 the technology was of certain type. Ticket-in/ 19 ticket-out, for example, did not exist. The concept of 20 it didn't exist. So there was no need for additional 21 hardware, additional ports, additional functionality in 22 the terminals, so the manufacturers didn't necessarily 23 incorporate it in them. 24 As technology evolved, and this is where 25 flexibility comes into play, new themes, new ideas -- 131 1 it's funny. When video lottery first started 15 years 2 ago, a video lottery machine was a video ticket-out 3 terminal. That was it. And the slot machine was a 4 spinning reel, coin-out machine. If you go to 5 Delaware, and I know you've spoken to them, all of 6 their video lottery machines now are spinning reel, 7 coin-out machines. And all of the machines in Las 8 Vegas and, in fact, Borgata in Atlantic City just went 9 to no more coin-out and they're printing tickets. 10 So the industry has completely changed, 11 flip-flopped, and changed dramatically over the pass 15 12 years. And yes, there is something very much to be 13 said for flexibility and the ability to adapt for new 14 technology. You do not want to write rules, 15 regulations, standards, or bind yourself to an RFP or a 16 system of any type that is going to prohibit you from 17 being able to expand in the future. 18 The next new thing is going to probably be 19 cashless. Now, maybe you're never going to allow 20 credit card gaming in Maine, but maybe you are in ten 21 years. If you allow for the possibility for the 22 systems to grow, to change, to allow for these new 23 things, ten years from now, whoever may happen to be on 24 the board won't have to make a tough decision. It will 25 be there. It will be allowed. And they can 132 1 incorporate that. And I use that as an example. 2 So there is something definitely to be said 3 that you need a system of any type, one wire, two wire, 4 that will adapt. The older machines did not have two 5 ports. That is true. And in some cases, the 6 manufacturers -- some were slower than others to adopt 7 the second port. And yes, in some cases, it did go a 8 little bit slower than the casino operators would have 9 liked it to have been. Along with that, however, was 10 also regulatory concerns. In Delaware, for example, 11 the original rule was they controlled all of the cash 12 transactions. They had to actually change their 13 statutes, change their rules to allow for ticket-in/ 14 ticket-out. West Virginia, the same thing. It took 15 them longer to do the regulatory changeover than it 16 took the manufacturers to actually do the hardware 17 change. And in many cases, we were ready to approve 18 ticket-in/ticket-out systems for the racinos to use 19 months before the legislature was ready to allow us or 20 the gaming boards were ready to allow us. 21 MS. DEIGHAN: Maybe I could clarify just a 22 little bit, because there is one more little piece I 23 was looking to hear. You've heard testimony today 24 about one-wire systems, two-wire systems. Is there any 25 real difference in terms of flexibility? 133 1 MR. ELSASSER: When you boil it all down to 2 the simplest terms, probably not a whole lot. The 3 capability is there for both. A single wire -- a 4 single-wire system running a protocol that is 5 universally used or widely used will allow as many 6 manufacturers to hook into it as possible. It would 7 allow the newer games to go on. It will allow new 8 technology to hook into it, assuming that it's capable 9 of physically connecting to it. I mean, I don't know 10 what they're going to invent next week, but it will 11 allow for that. 12 The second wire system, if it requires a 13 second port or a third port, it may be slower, but we 14 don't know what that new technology is going to be 15 right now, so it may not require the third port. So 16 it's very difficult for me to say, you know, in 17 absolutes. 18 All I can say is that the gaming industry has 19 evolved. The systems have evolved on both sides to 20 support what the market is looking for. And in either 21 case, the integrity, the security, all of the 22 regulatory issues that you have to grapple with will be 23 addressed on either side. So it's not a matter of you 24 have to say, well, we'll get this system, but we lose 25 security, or we'll get this system, but we lose 134 1 accountability. You don't have to make those 2 tradeoffs. What you have to do is decide, who is going 3 to do what? Are you going to be the one pushing the 4 button or operating the system, or are you going to 5 hire somebody, or are you going to share with the 6 casino system and share the same data that they're 7 getting? 8 MS. DEIGHAN: Okay. I have a question 9 about that -- this is Jean Deighan. I apologize. I've 10 not been identifying myself. 11 As I saw the difference visually between the 12 two-wire and one-wire system, I saw the slot machine or 13 computer, if you will, down here, with two wires going 14 up, one going directly to the state and one going 15 directly to Penn for their purposes. That's the 16 two-wire system. Then I saw the one-wire system with 17 the machine, and then Penn with a system created by 18 Bally, another layer, or created by the U-company, 19 Utilistar, which would shoot off to us, the state, the 20 information we need in order to be able to properly 21 regulate under the one-wire system. 22 Is there a greater risk of data manipulation 23 with the one-wire system? 24 MR. ELSASSER: The one-wire system was 25 implemented in Louisiana, and it was implemented to 135 1 solve the problem that they had with 17 boats, 17 2 potential different systems, and it works very well for 3 them. You are getting the same information. There has 4 been no corruption of data. There has been no scandal. 5 There has been no implied of anyone or anything 6 manipulating the data or any way changing the data 7 before it gets to the state. So, again, from a 8 security and an integrity standpoint, there has been -- 9 on either side, you know, again on the video lottery 10 systems, such as Sci Games, there has never been a 11 problem with integrity of the data of someone getting 12 in and manipulating it. 13 Is it possible? It's built by man. Someone 14 could conceivably go in and do it. Internal controls, 15 security, regulations, state police involvement, all 16 are different elements that go to prevent someone from 17 being able to manipulate any system. And from what the 18 board is doing and from what I've read so far, you're 19 on the right track from doing all of that. So I don't 20 anticipate a problem with the type of system that's 21 being proposed here. They both have their advantages. 22 They both have their disadvantages. 23 When you go to RFP, you'll see them, and 24 you'll be able to sit down and say, oh, okay, and then 25 make an informed decision, which is the only thing 136 1 anybody can ask, that the board educate yourself. You 2 learn as much as you can from forums like this. When 3 you get the RFPs, you evaluate them. You look. You 4 ask questions. You go visit sites if you don't 5 understand or you feel you need more information. All 6 of these are positives. And I have to say, I'm very 7 happy to see that the board is doing this, to take the 8 time to do these type of forums. Not many regulators 9 do that. Not enough anyway. And this way you can make 10 an informed decision, which is in the best interest of 11 the citizens of Maine. 12 And unfortunately, only you can make that 13 decision. We can advise. They can recommend. They 14 can -- you know, the salesmen can come in and try to 15 sell. But ultimately, at the end of the day, it's your 16 decision as to what you think is best for you. And 17 that's where everyone else is coming from. Delaware 18 made their decision as to what was best for them. 19 Louisiana for them. Two different systems, same 20 outcome. 21 MS. DEIGHAN: Right. Thank you very much. 22 MR. HALL: George. Excuse me, Mr. Chairman. 23 MR. HALE: Yes. 24 MR. HALL: Larry Hall. I'd like to ask you, 25 there's been some discussion about the amount of 137 1 employees involved in the one-wire and the two-wire. 2 Why is there a difference, number one, between the two 3 systems, and what's the least amount of employees 4 actually involved? Because this all comes down to the 5 dollars that it's going to cost the state. Thank you. 6 MR. ELSASSER: I learned today that Delaware 7 just hired a third. I thought they only had two, but 8 that's correct, they had two employees for the longest 9 time taking the system. Reason being, they contracted 10 out with AWI, now Sci Games, to run and maintain the 11 system, and they had a separate state police contingent 12 to handle the licensing and background and security 13 issues that come along with that process. So they 14 were able to do it with using that system and a minimal 15 number of people. 16 Louisiana, they have a larger state police 17 contingent, because they also have 17 sites. They're 18 spread out all over the place. They're riverboats; 19 they move. So they have that, but they were able to do 20 it with one or two people. One person? 21 MR. HUMPHREYS: One with the newest system 22 recently. 23 MR. ELSASSER: So the number of people you 24 need to hire in either case is minimal. It's not that 25 you're going to have to hire a staff of 50 or 75 or a 138 1 hundred people to monitor the system. You can contract 2 someone to do that. You can contract out a lot of 3 these services yourselves, so that you don't have to 4 hire additional state employees. You will, however, 5 need some. You can't do it with none. You've got to 6 hire somebody. 7 MR. HALE: Thank you. A couple of questions 8 here. I have two. The first one, before I get to your 9 business, is one of the things I'm most interested in 10 is that the operator have great flexibility. I've read 11 and heard a little bit about people wanting to change 12 machines, and then they won't match up, and there's all 13 kind of problems. Correct me if I'm wrong, because I 14 have no great expertise in gambling, although I've run 15 perimutuel for a long time. That's a little bit 16 different. We anticipate the people riding the horses 17 to be honest, but I'm a Pollyanna. 18 When you have 1500 machines, you have 1500 19 computers operating. Everything is by RNG. You spit 20 numbers out, put their ticket in, ticket out, quarters 21 in, quarters out, dollars in, dollars out, you're not 22 playing a mainframe computer. You're playing that 23 machine at that instant you push the button, pull the 24 handle, whatever else. They'll change the music, 25 they'll change the pictures, dancing girls one time, 139 1 got bells and whistles -- no dancing girls, I 2 understand, but we're going to qualify -- we're going 3 to prohibit some of that. But so, basically, what 4 we're looking at, do you refresh the music, you refresh 5 the pictures, the machine's essentially all the very 6 same machine except in those states that allow some of 7 the mechanical reels; is that correct? 8 MR. ELSASSER: For the most part, yes. The 9 big difference up until very recently was the protocol, 10 the communication language they use to talk to the 11 central system. And it's only in recent, probably the 12 last year even, where there's been one common protocol. 13 And that that's actually -- it's called SASS. It was 14 developed by IGT, and for years it was the casino 15 gaming protocol, and the video lottery systems had 16 their own individual ones. 17 It's only been very recently that IGT has 18 licensed SASS to the video lottery manufacturers, so 19 that companies like Sci Games and even Utilistar 20 benefited from that, because that's how they access 21 their information using the SASS protocol. 22 Now that we've got one protocol, what it 23 allows is the flexibility for the manufacturers to 24 build a machine, put it out in a racino environment, 25 put it out in a video lottery environment, or put it 140 1 out in a casino environment. They can all talk to 2 three different type systems. They can be monitored or 3 controlled, depending on how the regulator wants to do 4 so, and it allows the flexibility that the track was 5 talking about. 6 So, in the past, up until very recently, 7 there was a definite problem where video lottery states 8 were a year, two years, maybe even three years behind 9 in getting new games on the floor because of this 10 protocol. Now that that's gone, now that that's 11 changed, that problem has been removed to a large 12 extent, and they are able to much quicker get product 13 to markets. 14 MR. HALE: We can put to rest -- put to bed, 15 because I was concerned about this -- Penn National 16 comes in and invests their money, they want to change 17 their floor plan. I know they give us an initial floor 18 plan, but they want to move those machines around, they 19 want high traffic areas, all of these various things, 20 something new develops on the market, they apply to get 21 the machine in. It's approved. We know about the 22 E-proms, we know about the chips, all of that. One 23 wire, two wire, they're not going to be restricted. 24 They're going to be able to operate their business. 25 MR. ELSASSER: There should be no reason why. 141 1 And again, it's depends on whose central system you 2 buy. 3 MR. HALE: Right. 4 MR. ELSASSER: There are varieties of 5 different ones. You've only heard from a relative few. 6 Hopefully, when the RFP process comes out, there will 7 be additional bidders, and they may come up with 8 something new that you haven't had discussed here 9 today. But you will get that information. And yeah, 10 there should not be a major fundamental change or 11 fundamental difference in that. 12 And it is very positive that the operator of 13 the casino be able to adapt quickly because -- IGT is 14 here. They will tell you. On a given year, they'll 15 put out 100, 200 different themes of games. Only one 16 or two may be big winners. Those are the ones that 17 everybody wants, and those are the ones you want to be 18 able to quickly put in your market. And the life 19 expectancy of those machines is dropping, so you want 20 to be able to change them quickly and maximize 21 revenues. And that's what everyone is looking for. 22 Keep the security. Keep the integrity. Make 23 sure that there's no problem, no question about the 24 validity of the game, but allow the operator to do what 25 he does best, allow the regulator to do what they do 142 1 best, and give the playing public the most choice. 2 MS. DEIGHAN: Right. 3 MR. PETERS: Very well put. 4 MR. HALE: Thank you. I won't ask you about 5 whether you play or not. 6 MR. ELSASSER: I'm not allowed to. 7 MR. HALE: Neither am I. So I know we're 8 all set. So I don't know the difference between a 9 loose slot or a tight slot, but I'll ask Mr. Snyder 10 someday if there's a real reality to that. 11 The question is, the state of Maine, am I 12 correct, Mr. Doyle, that we are not going to have a 13 testing lab; is that correct? 14 LT. DOYLE: That's correct. 15 MR. HALE: So what I'm asking, I guess Todd 16 here is -- now that we're on a first-name basis -- is 17 it your intent that you're going to make some 18 application to the state through our process to become 19 the testing lab for the state? 20 ME. ELSASSER: Yes, sir. 21 MR. HALE: Okay. I know you said you are 22 the biggest, and I have no doubt that you came from 23 scratch to where you are. There may be some other 24 competitors. Will there be an RFP out for this, too? 25 LT. DOYLE: Maybe Todd can speak to this. I 143 1 am not aware of any other competitors. They 2 essentially, as I understand it, are about 99 percent 3 of the market. 4 MR. ELSASSER: That is correct. We are the 5 largest independent company in the world. As such, 6 there are some companies that have come out of 7 Australia that have opened up satellite offices in Las 8 Vegas. Everybody goes to Las Vegas. And so, yes, we 9 do have competition. We are not world-wide exclusive. 10 But as far as American-based companies, you know, 11 from -- we started in New Jersey. We are the largest. 12 And as far as doing the bulk of the work in 13 the states, we do all of it, aside from those states 14 pretty much that do themselves. Nevada has their own 15 testing, although we assist. New Jersey has their own 16 testing, although we're licensed to do it as well. 17 Mississippi does their own testing, although we are 18 doing some of it. So we're involved everywhere. 19 MR. HALE: So if the state does a contract 20 with you, you would certify the machine is what it's 21 supposed to be as to pay-out, etc.? 22 MR. ELSASSER: Whatever -- we work off the 23 regulations that you adopt. So you come up with the 24 standards, you come up with the regulations, and I've 25 seen drafts. And yes, I would like to be able to 144 1 comment on some of them if that's allowed. 2 LT. DOYLE: As long as you can do it by 3 tomorrow. 4 MR. ELSASSER: I'll have my staff go through 5 them and, you know, any comments that we may have on 6 them. We test to what you say the machines have to do. 7 If you say 98 percent maximum, it's 98 percent maximum. 8 If you say there are -- you know, it's got to be random 9 to whatever criteria, that's the criteria that we test 10 to. 11 When it comes to communications, whichever 12 system you pick, whichever -- one-wire, two-wire, 13 whatever application it is, we will test to certify 14 that the machines communicate fully with that protocol 15 and to that system. So, again, we are neutral as far 16 as that's concerned. We work for you, for the state to 17 make sure that whatever you get is exactly what you're 18 looking for, and that includes with the system 19 as well. 20 LT. DOYLE: Mr. Chairman. 21 MR. HALE: Yes, Lieutenant. 22 LT. DOYLE: Two things. I believe GLI would 23 be, under our law, considered a gambling services 24 vendor, so they would apply for a license in that 25 fashion. And secondly, and Laura can jump in if I'm 145 1 wrong about that, but secondly, both for GLI, and 2 anybody else that would like to submit comments, if 3 they can do that by submitting them to me, preferably 4 by tomorrow, that would be nice. And I understand it 5 may take a little more time than that. But time is of 6 an essence, so we encourage anybody that's listening to 7 submit any comments they want based on the rules, the 8 RFP, or anything else we're doing. It's been a very 9 public, open process, very intentionally. 10 MR. HALE: In material that was made 11 available to us by Penn National Gaming, which has a 12 great deal of experience, they talk about certain 13 criteria for calculating, and I'd urge you to read 14 that. And make sure that -- in that large handout that 15 came from Penn National, you did address that. Certain 16 aspects of testing to a probability, which we don't 17 have to get into now, but I'd urge you to read it. 18 When you got to algorithms and things like that, you 19 lost me, but I understand. 20 MR. PETERS: That piece of paper I passed 21 you, I don't know -- 22 LT. DOYLE: Mr. Chairman, two things as a 23 matter of housekeeping. One, there was a submission by 24 IGT on operations of video lottery terminals in the 25 United States. That was given to us, I believe, a 146 1 month or so ago. We did provide it to the council. I 2 did not provide it widely at the meeting, and I will 3 make copies of that for our next public meeting so that 4 that would be available. And I apologize for that. 5 And secondly, Mr. Peters, had passed me a 6 note. A rule change. At one of our meetings, we asked 7 you to vote on several things including what to do with 8 credit slips that expire. And I wanted to inform the 9 board, I did at our subcommittee meeting the other day, 10 based on Laura's advice in reviewing the law, it seems 11 as though that has to be treated as gross slot machine 12 revenue. And based on that, it has to be distributed 13 based on the formula in the law. 14 I didn't want the board or Mr. Heitmann to 15 think I was trying to slide one by when I wrote it back 16 into the rules, that that money will be distributed 17 based on the gross slot machine revenue. I just wanted 18 to make everyone aware of that. 19 MR. HALE: That was the question of what 20 happened if somebody doesn't cash a ticket, where does 21 the money go? It's going to be distributed by formula, 22 rather than to -- 23 MR. DOYLE: Right. 24 MR. CANTARA: Mr. Chairman, and just so the 25 record is clear, Mike Cantara. What that is and, 147 1 really again, is looking to the statute, legislative 2 intent, in how the legislature decided based largely on 3 initiative question in November of how money is to flow 4 from this enterprise. So, I mention that it may be 5 obvious, but that is the basis for that direction. 6 MR. HALE: Thank you. I've recognized 7 everyone that I am aware of that wanted to make public 8 comment. If there is no further public comment, the 9 next meeting of the full council somehow perhaps is 10 coming up on the 30th of the month. That's between 11 12:30 and 5:30 here. There are other things going on 12 that day. 13 Yes. Mr. Cantara. 14 MR. CANTARA: Mr. Cantara. I was in contact 15 with Andy Cashman, who I think you all met earlier this 16 week. Mr. Cashman has offered, and I think it's an 17 offer we should take him up on. He is a dedimus 18 justice, and he's prepared to meet with you all before 19 12:30, and I would nail down that time. I'm going to 20 suggest, for planning purposes, 11 a.m. 21 MR. HALL: What date? 22 MR. HALE: That's on the 30th, when you're 23 interviewing the candidate; right? You're going to be 24 early that day anyway; is that correct? 25 MR. CANTARA: But make arrangements for him 148 1 to be available at 11, swear everyone in, have all the 2 paperwork necessary that needs to be transmitting the 3 paperwork to the Secretary of State. So that, in 4 reality, when you all sit on August 30th, in this room 5 at 12:30, you'll be sitting as the Gambling Control 6 Board, duly constituted, duly empowered, but at the 7 same rate of pay. 8 MR. PETERS: We get all the money? 9 MR. HALE: Well, I can tell you right now, 10 you lost my vote on your bonus. 11 MR. CANTARA: I think -- Mike Cantara. I 12 think a question was asked, where would we meet 13 Mr. Cashman? At this juncture, I'm not sure if we'll 14 do that here or at the DPS, but I will make sure you 15 know well in advance. 16 Oh, and also on another matter for the 17 swearing-in day -- I mean, the Senate vote. Pardon me. 18 I've asked about the expectation of your presence, and 19 I understand for some of you, given business, work, and 20 family obligations, that may be a real issue. I 21 haven't gotten a clear indication on that yet, other 22 than "it's always nice," but "nice" isn't necessary. 23 And so, I will get you as soon as I hear on that as 24 soon as I can. And I don't mean to keep anyone on pins 25 and needles, but I just want to let you know that. 149 1 MR. HALL: Larry Hall here. Mike, you 2 mentioned something about a change of the 26th. Is 3 that going to impact on the time on the 30th? 4 MR. CANTARA: Yes. And that's something that 5 we can take up at a later time, Mr. Hall. But you do 6 bring a question that I do want to emphasize. Meeting 7 on the 30th of August is going to be very important, 8 because on the 30th, I would expect that application 9 forms to have been finalized and be set for your 10 approval. If you, as a duly constituted board approve 11 those application forms, you will be ahead of schedule, 12 so that you can meet the statutory deadline of being 13 positioned to make final determinations of applications 14 presented to the board for slot machine operators, slot 15 machine distributors, and other functions under LD 16 1820. And so, I can't stress enough the importance for 17 the August 30th meeting. And also on that day we would 18 begin the public, and under the lawfully, legislatively 19 blessed board, that rule-making process. 20 MR. HALE: Thank you. 21 Ms. Smith. 22 MS. SMITH: I'll only keep you another 23 minute. I know everyone wants to run off. Just so you 24 know, the rules that you have now, the version that you 25 have now, I'm going through those again and picking up 150 1 things that weren't picked up by the contractor yet and 2 making some of the changes. I'm inserting new 3 citations or corrected citations. So what you have now 4 is not the final. I'm only changing technical stuff. 5 And I'm trying to make them consistent to some extent 6 with the application forms, to the extent that I can at 7 this point. 8 I do want to point you to the advertising 9 rule. That's changed substantially from the initial 10 draft that you got. And I think we've dealt with any 11 constitutional issues, the way it's drafted currently. 12 But it does contain some findings that you as a board 13 would have to make, so do pay attention to that rule as 14 you go through them. 15 MR. CANTARA: I will add, there will be -- 16 Mr. Chairman. Mike Cantara. There will -- because of 17 the requirements, and it's the right thing to do, of 18 Maine law of the Administrative Procedures Act, 19 additional opportunity for public comment on the rules 20 that you will be taking up on the 30th. 21 But would reiterate to anyone listening that 22 comments on the draft that, as they exist now, would be 23 welcomed and helpful. 24 MR. HALE: With that, we thank the court 25 reporter for her diligence here today, and thank you 151 1 all for attending. It was very informative to the 2 board, and we will see you not long from now. 3 And if you'd like to come back to Augusta for 4 the harness race meetings, I'd like to have you for 5 those, too. I'd just have to change my hat. 6 (The meeting concluded at 4:18 p.m.) 7 8 9 * * * 10 11 12 CERTIFICATE 13 I certify that the foregoing is a correct 14 transcript to the best of my ability from the record of 15 proceedings in the above-entitled matter. 16 17 18 ________________________________ ___________________ Christine Fraga Thornton, RDR Date 19 Freelance Court Reporter 20 21 22 23 24 25