TALLAHASSEE, Fla. – A top gambling regulator Tuesday blamed a lower-level state employee for a decision involving controversial "designated-player" card games, which are at the heart of a federal lawsuit that could determine whether the Seminole Tribe can continue to offer blackjack at tribal casinos.
But the state worker's sworn deposition in an unrelated legal case involving the designated-player games contradicts the testimony of Department of Business and Professional Regulation Deputy Secretary Jonathan Zachem.
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The Seminoles and their lawyers, in a trial that started Monday in federal court in Tallahassee, accuse state gambling regulators of violating a 2010 deal that gave the tribe "exclusive" rights to operate banked card games, such as blackjack. The case involves questions about regulators' decisions to allow designated-player games at cardrooms operated by pari-mutuels.
Daytona Beach Kennel Club is one of more than two dozen pari-mutuels offering the card games, which are wildly popular with players, and have eclipsed poker games such as Texas Hold 'Em. One of the issues in the case involves a requirement by the Daytona Beach pari-mutuel that entities wanting to act as designated players in the games had to buy in with a minimum of $100,000.
Zachem, who formerly served as director of the department's Division of Pari-Mutuel Wagering, told U.S. District Judge Robert Hinkle that Lisa Helms, an auditor with the division, signed off on Daytona's $100,000 buy-in without any input from higher-ups. He said he would have rejected it because it violated state law.
"It was surprising to me," Zachem said. "I don't know that we could have allowed it to go through."
Under Florida law, a "banking game" is defined as one "in which the house is a participant in the game, taking on players, paying winners, and collecting from losers or in which the cardroom establishes a bank against which participants play."
Pari-mutuel cardrooms are allowed to conduct games in which players compete only against each other. The Seminoles allege that player-designated games, with requirements such as the minimum $100,000 buy-in, were actually banked card games and violated terms of the tribe's 2010 gambling deal with the state.
Documents reviewed by Helms showed that the Daytona Beach Kennel Club required a minimum $100,000 buy-in.
"Right down the hallway is our legal department," Zachem told Hinkle. "She never asked any questions … to see if this was something she should do."
Zachem said he did not normally like to put someone "close to the bus," eliciting a caustic response from Hinkle.
"I think you threw her directly into it," the judge said.
But in a May deposition in the unrelated case, Helms told lawyers for Jacksonville Kennel Club, Inc., that she sought advice from someone else within the division before signing off on the $100,000 requirement.
That unidentified person gave Helms permission to approve the internal controls, Helms said in sworn testimony.
"I didn't accept anything without higher --- the director or the legal department," Helms said, speaking generally about her process for approval for the internal controls.
When approached after testimony ended Tuesday afternoon, Zachem said he could not respond to questions while the trial was ongoing. Closing arguments are expected Wednesday.
The designated-player card games are a critical element of the dispute between the state and the Seminoles, who are trying to convince Hinkle to allow them to continue to offer banked card games after an agreement between the tribe and the state regarding the games expired last summer.
The case centers on the Seminoles' "exclusive" right to operate banked card games at five of the tribe's seven casinos, part of a broader, 20-year deal, called a compact, signed with the state in 2010. A five-year portion of the agreement dealing with banked card games expired in July 2015, but the Seminoles have continued to offer the games.
The tribe accuses the state of failing to negotiate in "good faith" on a new agreement. Its case is centered on two types of games --- designated-player games and slot machines that simulate blackjack --- authorized by state gambling regulators at pari-mutuel facilities.
But the state wants a federal judge to order the Seminoles to stop operating the banked card games. It insists that blackjack-like games at pari-mutuels are, in fact, slot machines, and that the designated-player games authorized by the state do not violate the compact, even if the manner in which they are played at some cardrooms might.
Under the 2010 agreement, the Seminoles agreed to pay the state $1 billion over five years in exchange for the exclusive rights to offer the banked card games. If the judge rules in the tribe's favor, the Seminoles could be able to continue to operate the games, without any revenue-sharing obligation to the state.
Pari-mutuels started offering the designated-player games in 2011, and regulators adopted a rule governing the games in 2014.
Less than a year after the rule went into effect, regulators attempted to modify it.
Zachem said the changes were prompted by "rumors" that the cardrooms were operating the games in a way that might have violated state law.
Zachem called the questionable card games a "recent phenomenon."
"It wasn't until recently that it became clear that the games were at least in a gray area," he said.
But numerous documents in an administrative complaint involving a proposed repeal of the rule governing the games show that that cardrooms have operated the games essentially in the same way for years, and in fact prompted the 2014 rule.
Regulators in January and February filed complaints against more than two dozen cardroom operators, alleging that the way the games were being conducted violated a legal prohibition against banked games. Those complaints and a move late last year by gambling regulators to repeal the rule touched off legal battles in state administrative courts.
Investigations into the designated-player games were launched two months after the Seminoles filed their federal lawsuit last October.
Under questioning by the Seminoles' lawyer, Barry Richard, Zachem conceded that the tribe's lawsuit may have played a role in the administrative complaints.
"I'm sure there was (a discussion) at some level," Zachem said.