Case Information
*1 [J-133-2016 and J-134-2016] Todd] IN THE SUPREME COURT OF PENNSYLVANIA EASTERN DISTRICT SUGARHOUSE HSP GAMING, L.P., : No. EM 2016 : Appeal from the Supplemental
Petitioner : Adjudication Pennsylvania : Gaming Control Board the matter of the Applications for the Category Slot v. : : Machine License the City First : Class, Philadelphia, dated June 23, PENNSYLVANIA GAMING CONTROL : 2016
BOARD,
: SUBMITTED: November 7, 2016 Respondent
STADIUM CASINO, LLC,
Intervenor MARKET EAST ASSOCIATES, LP, : No. EM 2016
Petitioner : Appeal from the Supplemental : Adjudication Pennsylvania : Gaming Control the matter of Applications for the Category Slot v. : : Machine License the City First : Class, Philadelphia, dated June 23, PENNSYLVANIA GAMING CONTROL : 2016
BOARD,
: SUBMITTED: November 7, Respondent
STADIUM CASINO, LLC,
Intervenor
CONCURRING OPINION JUSTICE BAER DECIDED: June join the majority opinion substantial part, but write separately distance myself from my colleagues' definition of "financial interest" for purposes of 1330 of the Pennsylvania Race Horse Development and Gaming Act ("Gaming Act"), which prohibits a "slot machine licensee, its affiliate, intermediary, subsidiary holding company" from "possess[ing] an ownership is greater than 33.3% of another slot machine licensee" or other related entities. 4 1330.1 14 entitled "Multiple slot machine license prohibition," provides full:
No slot machine licensee, its affiliate, intermediary, subsidiary holding company may possess ownership or financial interest that greater than 33.3% of another slot machine licensee or person eligible to apply for a Category [1] license, its affiliate, intermediary, subsidiary holding company. The board shall approve terms conditions of any divestiture under this section. Under no circumstances shall any such divestiture be approved the board if compensation for divested interest a person eligible apply for a Category license exceeds the greater the original cost of the interest, the book value of the interest independently assessed value interest one month prior effective date this part and, the case of a person eligible apply for Category [1] license, unless the person acquiring the divested interest is required continue conducting live racing at the location where live racing currently being conducted accordance with section (relating additional Category slot machine license requirements) be approved for a Category slot machine license. No such slot machine license applicant shall be issued slot machine license until applicant has completely divested its ownership financial interest that excess 33.3% another slot machine licensee or person eligible to apply for Category license, its affiliate, intermediary, subsidiary holding company.
Unlike the Majority Opinion, view "financial interest" broadly encompass ownership interests. See Maj. Op. at 35 n.31.
As the Majority and the parties have observed, "financial interest" is defined in Section 1330. The term, however, in Sections 1201 and 1512. While I agree that the definitions in Section 1201 and 1512 are limited to those specific sections, find guidance in definitions which substantially overlap with each other conform common understanding of the term "financial interest." 1201 provides various restrictions on those who may serve on Gaming Control Board, including limiting board member's "financial interest" in an applicant or licensed facility. It defines "financial interest" "[a]n ownership, property, leasehold other beneficial interest an entity." 4 § 1201(n).2 It further entitled "Pennsylvania Gaming Control established," provides relevant part:
(n) Definitions. - As used this section, the following words phrases shall have the meanings given them this subsection:
"Financial interest." An ownership, property, leasehold or other beneficial interest entity. The term shall not include interest which held or deemed to be held any following: (1) Securities that are held pension plan, profit-sharing plan, individual retirement account, tax-sheltered annuity, a plan established pursuant section 457 the Internal Revenue Code of 1986 (Public Law 99-514, U.S.C. et seq.), or any successor provision, deferred compensation plan whether qualified or not qualified under the Internal Revenue Code 1986, or any successor provision, other retirement plan that:
(i) not self -directed the individual; and (continued...)
explains that "ownership interest," for purposes term's inclusion financial interest, encompasses "[o]wning or holding, or being deemed hold, debt or equity securities or other ownership interest profit interest." Id. The subsection additionally excludes from the term "financial interest" three categories passive holdings, including pension plans and individual retirement accounts, Section tuition plans, and mutual funds which are not self -directed. Notably, the adopted this definition nearly verbatim its regulation relevant the Board's operations and organization. Pa. Code § 403a.1.
Similarly, Section limits certain government -affiliated individuals from having licensees certain related entities. The section defines "financial interest" very similar terms Section 1201's definition.3 As Section (... continued)
(ii) advised by independent investment adviser who has sole authority make investment decisions with respect to contributions made by the individual these plans. (2) A tuition account plan organized operated pursuant section 529 the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. 529) not self -directed by individual.
(3) A mutual fund where interest owned the mutual fund licensed entity does constitute controlling interest as this part.
"Ownership interest." Owning or holding, or being deemed to hold, debt equity securities other ownership interest or profit interest. 1512(b), entitled "Financial employment interests," defines "financial
interest" for purposes section follows:
"Financial interest." Owning or holding, or being deemed hold, debt equity securities other ownership interest (continued...) financial interest for purposes of includes "[o]wning or holding, or
being deemed to hold, debt equity securities or other ownership interest or profits (... continued)
profits interest. A shall not include any debt equity security, other ownership interest profits interest, which is held or deemed to be held any of the following:
(1) A blind trust over which the executive -level public employee, public official, party officer immediate family member thereof may not exercise any managerial control receive income during the tenure of office the period under subsection (a). The provisions of this paragraph shall apply only blind trusts established prior effective date of this paragraph.
(2) Securities that are held pension plan, profit-sharing plan, individual retirement account, tax-sheltered annuity, a plan established pursuant section 457 the Internal Revenue Code (Public Law 99-514, 26 U.S.C. et seq.) or any successor provision deferred compensation plan whether qualified or not qualified under the Internal Revenue Code 1986 or any successor provision other retirement plan that:
(i) not self -directed by the individual; and (ii) advised by independent investment adviser who has sole authority make investment decisions with respect contributions made by the individual these plans. (3) A tuition account plan organized operated pursuant section 529 the Internal Revenue Code of 1986 (Public Law 99-514, U.S.C. 529) not self -directed by individual.
(4) A mutual fund where interest owned the mutual fund licensed entity does constitute controlling interest this part.
interest," excludes the same three categories of passive holdings. In addition to exclusions allowed for Board Members, Section 1512 provides that the various government -affiliated individuals may also hold interest in assets held in a blind trust. The definition of financial interest in Section 1512 does specifically include Section 1201's incorporation of "property, leasehold other beneficial interest entity." Pa.C.S. § 1512 "Financial Interest" (1). Therefore, Section 1201's definition of "financial interest" arguably broader than Section 1512. Understandably, the Gaming Act is more restrictive regard the financial holdings of Gaming Control members under Section than the broader category of governmental -affiliated individuals governed by Section 1512.
While the General Assembly did not specifically apply either of these definitions Section 1330's prohibition against licensee or related entity holding financial interest greater than 33.3% another slot machine licensee related entity, I nonetheless find the definitions useful considering term's meaning regard Section particularly because definitions conform the "common and approved usage" of the term "financial interest" required by our rules of statutory construction. 1903(a). Under both definitions, "financial interest" includes ownership interest, which encompass the holding of debt equity securities profit interest. Likewise, the definitions exclude various passive holdings that are not subject direction individual.
To the extent that definitions Sections and 1512 differ, would adopt the more expansive definition for purposes 1330 to satisfy the stated legislative intent "to prevent possible monopolization establishing reasonable restrictions on the control multiple licensed gaming facilities this Commonwealth." 1102(5). Thus, while specified government -affiliated *7 individuals may hold interest in licensees in a blind trust under Section blind trusts should not be excluded from the term "financial interest" for a licensee other entity governed Section 1330 as the case with Gaming Control Board members under Section 1201. Additionally, the term under Section 1330 should also include "property, leasehold other beneficial interest in an entity" as included in Section 1201, but not specifically stated in 1512.
I respectfully reject the suggestion that "financial interest" does not include ownership interest. It beyond cavil that an owner casino has a financial interest the casino, regardless of how dictionary defines "financial." Moreover, the General Assembly has repeatedly defined financial interest the Gaming Act include ownership interest. In my view, the use of the disjunctive "or" the phrase "ownership financial interest" should be read require careful delineation interests as either ownership financial, which presents possibility that "interest" might not fall neatly into either category. Instead, the phrase "ownership financial interest" should be viewed as complete phrase, which includes ownership as one form broader category financial interests order implement the legislative intent to prevent monopolization. Additionally, I agree with the Board that ownership or financial interest must be quantifiable order for the Board determine if the 33.3 percent statutory threshold reached.
Viewing the term "ownership financial interest" broadly, concur with the Majority Opinion the term includes loans, which, based upon their structure significance, may provide the lender with interest or claim upon borrower relevant the General Assembly's intent "prevent possible monopolization." 1102. However, question Majority's reliance on the term "debt or equity securities" used 1311, as well as Sections and 1512, *8 encompass loans within the phrase "financial interest" when the term "debt securities" is commonly used reference bonds rather than loans generally. Additionally, I emphasize Market East's observation that the inclusion loans Section 1330's "ownership financial interest" would generally relate large commercial lenders so long as they are not "slot machine licensee, its affiliate, intermediary, subsidiary holding company." 1330.
While differ my view of "ownership financial interest," nevertheless join Majority Opinion's remand for reconsideration of Mr. Manoukian's interest in Stadium Casino L.L.C., including his interest Sterling Investors Trust.