Com. v. Kratsas

• Citation: 564 Pa. 36,764 A.2d 20
• Parties: COMMONWEALTH of Pennsylvania, Appellant, v. John KRATSAS, Appellee. Commonwealth of Pennsylvania, Appellant, v. George M. Kratsas, Appellee. Commonwealth of Pennsylvania, Appellant, v. Amusement Supply Company, Appellee.
• Decision Date: 08 January 2001
• Court: United States State Supreme Court of Pennsylvania

764 A.2d 20

564 Pa. 36

COMMONWEALTH of Pennsylvania, Appellant, v. John KRATSAS, Appellee.

Commonwealth of Pennsylvania, Appellant, v. George M. Kratsas, Appellee.

Commonwealth of Pennsylvania, Appellant, v. Amusement Supply Company, Appellee.

Supreme Court of Pennsylvania.

Argued March 6, 2000.

Decided January 8, 2001.

Stephen A. Zappala, Jr., Pittsburgh, Jennifer Digiovanni, Philadelphia, for Com.

James A. Wymard, Pittsburgh, for John Kratsas.

Anthony Mark Mariani, Pittsburgh, for George M. Kratsas.

David B. Wasson, Lower Burrell, for Amusement Supply Co.

Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO, NEWMAN and SAYLOR, JJ.

OPINION

SAYLOR, Justice.

The trial court barred the Commonwealth from prosecuting Appellees for dealing in gambling devices and related offenses, although they are alleged to have distributed video poker machines and other devices modified to permit gambling in violation of an express statutory prohibition. Finding, inter alia, that local governmental officials in Western Pennsylvania tolerated gambling activities, the court concluded that the prosecution would be fundamentally unfair and would violate principles of due process under the United States and Pennsylvania constitutions, and the Superior Court affirmed this holding. We reverse.

Appellees, John and George Kratsas, are proprietors of Amusement Supply Company, a third-generation, family-owned business that leases game and vending machines to establishments throughout Allegheny County. Among the devices supplied are video poker and video slot machines, which are commonly placed in taverns, private clubs, service stations, and grocery and convenience stores. In January of 1991, the Pennsylvania State Police, Bureau of Liquor Control Enforcement ("BLCE"), began investigating allegations of illegal gambling activities in Allegheny County. During the investigation, Appellees were identified as suppliers of particular electronic game machines that had been used for gambling. Specifically, it was alleged that video poker and slot machines were equipped by either Appellees or the machine's distributors with a "knock-off" feature, permitting the removal of credits or games accumulated by a player and thereby allowing the owner of the establishment to pay a dollar value per credit, typically 25 cents.¹ In addition, the machines purportedly contained accounting devices (meters) that recorded the credits, enabling Appellees and the establishment owners to divide the profits. Such devices are significant in determining whether a particular machine is a gambling device. See generally Commonwealth v. Twelve Dodge City Poker Machines, 517 Pa. 363, 367, 537 A.2d 812, 814 (1988)

(addressing the effect of clearing and recording features upon the determination of whether a machine is a gambling device per se).

On December 14, 1993, BLCE officers executed a search warrant at the office of Appellee, Amusement Supply Company, seizing records and video devices equipped with knock-off mechanisms and internal meters. Search warrants were subsequently executed at eleven establishments in which Appellees had placed video poker and slot machines, and during these searches, machines were seized, inspected, and found to contain knock-off devices and meters. Based upon the information gathered from the investigation and the searches, Appellees were charged with three counts of corrupt organizations, eight counts of gambling devices, criminal conspiracy and dealing in the proceeds of unlawful activities. Charges were not lodged against the manufacturers or distributors of the gaming machines, nor were any charges filed against the proprietors of the establishments from which the machines had been seized.

Prior to trial, Appellees filed an omnibus pre-trial motion, seeking, inter alia, dismissal of the prosecution as violative of fundamental fairness and, correspondingly, the due process clauses of the United States and Pennsylvania constitutions. Although Appellees' motion did not further refine the underlying legal theory supporting the requested relief, they emphasized allegations that gambling is pervasive in Pennsylvania; local officials and law enforcement officers issued amusement device licenses or permits to Appellees and others authorizing the use of video poker and slot machines with knowledge that such devices were used for gambling; and the fees to license video poker and slot machines were higher than those required for other game machines, because the devices were used for gambling. Predicated upon these factual averments, throughout their motion Appellees put forward the assertion that "it is the public policy of Pennsylvania that gambling is legal and/or de facto legal" as a basis for dismissal.

The trial court conducted a lengthy series of pre-trial hearings on the motion from July of 1995 through September of 1996, during which both Appellees and the Commonwealth presented extensive testimony and other evidence concerning the practice, procedure, and knowledge of local officials relating to the licensing of video poker and slot machines. In particular, Appellees presented evidence that 10,000 video poker and slot machines existed within various establishments throughout Allegheny County, including ninety-nine percent of all private clubs, and that such machines were delivered openly, visibly displayed and played, and, more important, openly used for gambling.² Municipal officials license these machines, and, in some instances, police departments affix permits or licenses on the machines themselves. Moreover, Appellees offered testimony that local officials are aware that gambling occurs on the machines; higher licensing or permit fees are charged for the video poker and slot machines; these devices generate significant revenue for the municipalities; and local officials "turn a blind eye" toward gambling. In addition, Appellee, George Kratsas, testified that officials within the communities indicated that there was nothing wrong with using such machines for gambling, and that based upon these conversations and the practice of licensing video poker and slot machines, he believed that gambling on the machines was legal.

In response, the Commonwealth challenged the propriety of the pre-trial motion to dismiss, arguing that the due process issue required factual findings that would be more appropriately rendered by a jury. On the substantive points, the Commonwealth offered evidence that: most gambling prosecutions are initiated at the state level; it is difficult to enforce the gambling laws because some of the machines are legal, at least as manufactured; the machines seized in this case contained knock-off devices and meters, which rendered such devices illegal per se; and while local officials issued licenses, they did not authorize gambling. The Commonwealth also presented testimony that many of the video poker and slot machines contained warnings that the devices were for amusement only, and, similarly, the local ordinances and the amusement device permits did not authorize gambling. Furthermore, the Commonwealth offered the text of local ordinances indicating the official policy to follow state law, as well as testimony from local officials stating that they refused to license devices that contained clearing and recording features and that they were unaware that video poker and slot machines were used for gambling. Finally, the Commonwealth elicited from George Kratsas that no state official had ever advised him that gambling was legal. Following the hearings, Appellees submitted proposed findings of fact and conclusions of law, and the Commonwealth filed a brief in opposition.

In ruling on Appellees' motion, initially the trial court determined that challenges to a prosecution on due process grounds are properly made to a court as opposed to a jury, since the United States Supreme Court has explained that such claims may prevent the government from proceeding with a prosecution. See generally United States v. Pennsylvania Indus. Chem. Corp., 411 U.S. 655, 674, 93 S.Ct. 1804, 1817, 36 L.Ed.2d 567 (1973)

[hereinafter "PICCO"]. In relation to the merits of the motion, the trial court adopted, in full, Appellees' proposed findings of fact and conclusions of law, including but not limited to the findings that the deployment of illegally modified video poker and slot machines was prevalent, open and notorious throughout Allegheny County; local officials issued licenses or permits for such machines with knowledge that these devices were used for gambling; the fees for the licenses were higher when the device was a video poker or slot machine precisely because of the gambling function; the municipalities gained substantial revenue through such licensure; and, because of the licensing practices of the municipalities, the lack of enforcement of the gambling statute, and conversations with public officials, Appellees believed that their conduct was legal. In the application of due process principles to these findings, the trial court invoked a doctrine predicated upon reliance on misrepresentations of law by government officials, sometimes referred to in the decisional law and commentary as the "official statement mistake of law doctrine," and "entrapment by estoppel."³ In this regard, the trial court analogized the case to a trilogy of United States Supreme Court cases, Raley v. Ohio, 360 U.S. 423, 79 S.Ct. 1257, 3 L.Ed.2d 1344 (1959),

Cox v. Louisiana, 379 U.S. 559, 85 S.Ct. 476, 13 L.Ed.2d 487 (1965), and PICCO,

411 U.S. at 655, 93 S.Ct. at 1804, which, universally, are recognized as laying the groundwork for the doctrine. The trial court stated:

Just like the defendants in Raley, Cox [and] PICCO ..., the defendants in this case were affirmatively led to believe that they were acting within the prescriptions of the law in engaging in the conduct at issue in this case. Because the licensing process was mandatory

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