Racing v. Ariz. Dep't of Gaming

• Decision Date: 06 April 2011
• Docket Number: 1 CA-CV 08-0723
• Parties: TP RACING, L.L.L.P. dba TURF PARADISE RACE TRACK; and JEREMY ELLIS SIMMS, Plaintiffs/Appellants, v. ARIZONA DEPARTMENT OF GAMING; PAUL BULLIS, Director,Defendants/Appellees.
• Court: Arizona Court of Appeals

TP RACING, L.L.L.P. dba TURF PARADISE RACE TRACK; and JEREMY ELLIS SIMMS, Plaintiffs/Appellants,

v.ARIZONA DEPARTMENT OF GAMING; PAUL BULLIS, Director, Defendants/Appellees.

1 CA-CV 08-0723

COURT OF APPEALS STATE OF ARIZONA DIVISION ONE DEPARTMENT C

Dated: April 6, 2011

NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24

MEMORANDUM DECISION

(Not for Publication-Rule 28, Arizona Rules of Civil Appellate Procedure)

Appeal from the Superior Court in Maricopa County

Cause No. LC2007-000256-001 DT

The Honorable Paul J. McMurdie, Judge

AFFIRMED

Jennings, Strouss & Salmon, P.L.C.

By David B. Earl

Gerald W. Alston

Attorneys for Plaintiffs/Appellants

Phoenix

Terry Goddard, Attorney General

By Charles A. Grube, Assistant Attorney General

Attorneys for Defendants/Appellees

Phoenix

KESSLER, Judge

¶1 Appellants TP Racing, L.L.L.P. ("TP Racing"), and Jeremy Ellis Simms ("Simms") appeal the superior court's order affirming the decision by the Arizona Department of Gaming ("Gaming") to denyAppellants certification as a supplier of gaming services to Indian tribes in Arizona. For the reasons that follow, we affirm.

BACKGROUND

¶2 Simms is the controlling principal of TP Racing, which has been licensed by the Arizona Department of Racing ("Racing") since 2000 to conduct horse racing and teletracking at Turf Paradise Racetrack in Phoenix. On May 1, 2000, TP Racing and Simms applied for certification from Gaming to provide off-track betting services to Arizona tribal casinos. Gaming retained Ronald Asher ("Asher"), a former FBI agent and head of the Nevada Gaming Control Board's enforcement division, to render an independent opinion as to Simms' suitability for gaming certification. Asher reviewed information from previous investigations into Simms' suitability, including 110 exhibits, and conducted his own investigation. He prepared a fifty-three page report outlining and justifying his conclusion that Simms is unsuitable for certification as a gaming services provider under sections 5(f)(5), (6), (10) and (12) of the Arizona Tribal-State Gaming Compact ("Compact"). Asher later testified at the administrative hearing in this case, and his report was entered into evidence.

¶3 After Asher's investigation, Gaming notified Simms by letter dated July 19, 2006 of its intent to deny certification due to concerns about Simms' "suitability."¹ Gaming's concerns werebased generally on Simms' "history of inappropriate and corrupt dealings with state officials in California, his dishonest business activities, his questionable personal associations, and the false statements he has made to... [Gaming] and... [Racing] during their licensing and certification processes."

¶4 Simms appealed and requested a hearing, which was subsequently held at the Office of Administrative Hearings. The administrative law judge ("ALJ") found three examples of Simms' participation in corrupt dealings with former California State Senator Alan Robbins ("Robbins") and former California Coastal Commissioner Mark Nathanson ("Nathanson") in the late 1980's.² The first instance involved Simms paying Nathanson, at Robbins' suggestion, $10,000.00 for Nathanson's assistance in achieving a favorable result for Simms in a consumer fraud investigationconducted by the California Attorney General into Simms' Datsun auto dealership. On the memo line of the check to Nathanson, Simms wrote "Consulant [sic] Laurel Way" referring to Simms' residential address although Simms admitted the check was not for any consulting services, but rather, was paid in connection with the favorable result Nathanson obtained regarding the consumer fraud investigation. Second, the ALJ found Simms loaned Nathanson $100,000.00 to assist in getting approval from the Coastal Commission for construction of a lap pool at Simms' residence and to defeat a commercial real estate development that would be a potential competitor of Simms. When Simms was granted immunity in a federal criminal investigation into Nathanson and Robbins, Simms admitted to the grand jury in 1992 that the $100,000.00 payment was a bribe. Finally, the ALJ found Simms participated in the extortion of Jack Naiman ("Naiman"), a California real estate developer, for the payment of $250,000.00 to Nathanson--at Robbins' request--for assistance in defeating the construction of a project that would threaten the value of another development in which Naiman was involved.³

¶5 The ALJ also found Simms engaged in two dishonest business dealings involving Robbins during the same time period.The first regarded Simms using Robbins' influence in an unsuccessful attempt to obtain an Acura dealership through American Honda Motor Company. When a group formed by Robbins without Simms did obtain a dealership, Robbins insisted one of the members pay Simms $150,000.00 for a covenant not to compete. Simms and Robbins also purchased a car for a Honda lobbyist in gratitude for the work he had performed on their behalf. The other instance involved a legal action by Simms' and Robbins' partnership against a seller of real property. To support their litigation strategy, Simms and Robbins asked Naiman, who was not involved in the transaction at issue, to testify that he was willing and able to lend them $400,000.00.⁴

¶6 In addition to the troubling associations with Robbins and Nathanson, the ALJ further found Simms had long-term personal and financial relationships with Las Vegas casino-owner Allen Glick ("Glick"), whose Nevada gaming license was permanently revoked based on his involvement in skimming profits at his casinos, andPatrick Valenzuela ("Valenzuela"), a well-known jockey who at one point lived with Simms and had been disciplined for drug violations. Regarding Simms' relationship with Glick, the ALJ found that, over a nine-month period, Simms loaned Glick an average of $250,000.00 nine times, and each time the loan was quickly repaid and invested in treasury bills that were then cashed before maturity. The ALJ and Gaming found that Simms had never explained the purpose of these loans and his relationship with Glick continued as of the year 2000. The ALJ noted that the evidence "established that this was a very questionable business practice that poses a threat to the State, the Tribes, the public and the gaming industry...." With respect to Valenzuela, the ALJ found Simms loaned him money on several occasions, which was questionable because Valenzuela was a known drug addict. Naiman had also stated that Simms had "bragged that he had had certain horse races fixed" while Valenzuela was residing with Simms.

¶7 The ALJ also received expert testimony on how Simms' background would impact his suitability for participation in Indian Gaming. For example, Nelson Rose, a law professor specializing in gaming law, reviewed Asher's report and testified that, based on Simms' associations with Glick and Robbins, no state would give Simms a license for "anything to do with casino gambling." He further testified that, given Simms' position at TP Racing and control of the off-track betting signal, Simms could adverselyaffect the gaming industry. Asher testified that Simms, because of his admitted bribery and "certain kinds of associations" would "be a threat simply through influence in the contract in the business process as well as being on the floor of the casino." Asher also stated Simms' past history could be detrimental to gaming in Arizona, and he specifically testified: "The State is charged to protect the state and the integrity of tribal gaming.... I don't know how you do that and certify a person with Mr. Simms' checkered past."⁵

¶8 On March 9, 2007, the ALJ issued her decision recommending Simms' appeal be denied. On March 21, 2007, Gaming accepted the ALJ's recommendation in its entirety and ordered Simms' application for certification be denied.⁶ Simms sought judicial review in superior court pursuant to Arizona Revised Statutes ("A.R.S.") section 41-1092.08(H) (2004). On August 14, 2008, the superior court affirmed Gaming's decision. Simms appealed, and we have jurisdiction pursuant to A.R.S. § 12-2101(B) (2003).

DISCUSSION

¶9 Simms argues that Gaming's decision should be reversed because: (1) There was insufficient evidence to support that decision as it related to a threat to gaming activities; (2) Gaming did not balance his prior conduct with his record while approved by Racing; and (3) He was denied due process. To understand his arguments, we must discuss the requirements for gaming certification and the facts supporting the denial of his application.

I. The Compact

¶10 The Compact between the State and various Indian tribes regulates the licensing of entities that provide Class III gaming services to tribal casinos.⁷ See http: //www.gm.state.az.us/ compacts.htm; A.R.S. § 5-601.02 (Supp. 2009). The stated purpose of the Compact is

to provide a regulatory framework for the operation of certain Class III Gaming which is intended to (a) ensure the fair and honest operation of such Gaming Activities; (b) maintain the integrity of all activities conducted in regard to such Gaming Activities; and (c) protect the public health, welfare and safety[.]

¶11 Gaming executes the State's responsibilities under the Compact, including the certification of gaming services providers "to ensure that unsuitable individuals or companies are notinvolved in Indian gaming...." A.R.S. § 5-602(A), (C) (2002). To fulfill this responsibility, Gaming is charged with investigative duties. A.R.S. § 5-602(D). Section 5(f) of the Compact sets forth specific grounds for denial of certification, including when an applicant (i) makes a misrepresentation of or fails to disclose a material fact to Gaming ("§ 5(f)(5) Factor"); (ii) fails to prove by clear and convincing evidence that he, she or it is qualified ("§ 5(f)(6) Factor"); (iii) has pursued...