Lake Elsinore Casino Proposed Decision

BEFORE THE
CALIFORNIA GAMBLING CONTROL COMMISSION

STATE OF CALIFORNIA
In the Matter of the Third Amended

Statement of Issues Regarding: Case No. BGC-HQ2017-00001SL
SAHARA DUNES CASINO, LP, OAH No. 2017070210

Provisional License Number GEOW-
002466; the sole owner of, and doing
business as, LAKE ELSINORE HOTEL
AND CASINO;
Partners of Sahara Dunes Casino, LP:

Ted Kingston,
Joseph Kingston, and
Sahara Dunes Management, Inc.
Shareholders of Sahara Dunes

Management, Inc.:
Ted Kingston, and
Joseph Kingston,
Respondent.
PROPOSED DECISION
Theresa M. Brehl, Administrative Law Judge, Office of Administrative Hearings,

State of California, heard this matter on March 5 and 6, 2019, in San Diego, California.
William P. Torngren and James G. Waian, Deputy Attorneys General, Office of the
Attorney General, State of California, represented complainant Stephanie Shimazu, Director,
Bureau of Gambling Control, Department of Justice, State of California.
Stephen L. Schreiner, Attorney at Law, Solomon Ward Seidenwurm & Smith LLP,
represented respondent Sahara Dunes Casino, LP, the sole owner of, and doing business as,
Lake Elsinore Hotel and Casino (Casino). Mr. Schreiner also represented JTI Management,
Inc., formerly known as Sahara Dunes Management, Inc., Casino's general partner, and Ted
and Joseph Kingston, Casino's limited partners and JTI Management, Inc.'s shareholders.
The record was held open until May 10, 2019, to allow complainant to submit the
jurisdictional documents, which were not included in the parties' joint set of exhibits;
respondent to submit a written request that certain exhibits containing confidential
information be placed under seal and/or be redacted; and the parties to file closing argument
briefs. The following items were timely completed by the parties:
• Complainant submitted the jurisdictional documents, which were marked

collectively as Exhibit A and admitted solely for jurisdictional purposes.
• Respondent submitted a Request for Protective Order Sealing Confidential

Records regarding certain exhibits that contained confidential information
pertaining to respondent, its owners, and/or third parties, along with redacted
versions of those exhibits. The redacted information was not relevant to the
resolution of this case, and complainant did not object to the use of the redacted
versions of those exhibits. Therefore, the redacted versions of exhibits that
contained confidential information pertaining to respondent, its owners, and/or
third parties were admitted as evidence in place of the unredacted versions, such
that it was not necessary to issue a protective order or place any exhibits under
seal.'
• The parties timely submitted simultaneous closing argument briefs and

simultaneous reply briefs. The briefs were marked for identification and received
as argument.
On May 10, 2019, the record was closed, and the matter was submitted.
SUMMARY
Since applying for a state gambling establishment license in approximately 1999,

Casino has continuously operated a 22-table cardroom under a provisional license, which has
been renewed annually. Casino is a limited partnership, with a corporate general partner,
Sahara Dunes Management, Inc., now known as JTI, Management, Inc. (Management, Inc.).2
The handling of the redacted and unredacted versions of the exhibits was addressed
in an Order Regarding: (1) Request for Protective Order Placing Documents Under Seal, and
(2) Submission of Redacted Versions of Certain Exhibits, dated May 10, 2019.
2 In 2018, Sahara Dunes Management, Inc. changed its name to "JTI Management,
Inc." It had used the name "JTI, Inc." on tax returns beginning in 2013, without notifying
the bureau or the California Secretary of State. The evidence and arguments regarding
Casino's general partner's name change, including how and when the bureau learned about
the name change, are addressed further below. In the meantime, for ease of reference,
Casino's corporate general partner is referred to as "Management, Inc."
2
Management, Inc. owns a 5 percent interest in Casino, and Casino currently has two limited
partners, Joseph Kingston and Ted Kingston, who each hold 47.5 percent interests in the
Casino. Ted and Joseph Kingston each own 50 percent of the shares of Management, Inc.
As a result, Ted and Joseph Kingston each own equal 50 percent interests in Casino.
In 2008, the bureau recommended that Casino's license application be denied, and in
2009, the Commission referred the matter to an administrative hearing. However, the bureau
never filed a statement of issues, and the matter did not proceed to hearing. In 2015, the
bureau decided it needed updated information regarding Casino's application, and it asked
the Commission for permission to request such information from Casino and its owners. On
February 25, 2016, the Commission retracted its earlier referral of the matter to an
administrative hearing and directed the bureau to "update the background investigation
reports" regarding Casino and its owners. The bureau then instructed Casino and its owners
to submit new applications for licensure as well as updated supplemental background
investigation information forms and other documentation necessary for the bureau to conduct
a background investigation of Casino and its owners.
In order to obtain a state gambling license, all owners of a gambling establishment

must submit state gambling license applications and supplemental background investigation
information forms to the bureau to facilitate background investigations of the gambling
establishment and all its owners. This case concerns whether Casino's gambling
establishment license application should be denied based on allegations that, in response to
the bureau's 2016 requests, Casino's general partner, Management, Inc., and one of Casino's
limited partners, Joseph Kingston, failed or refused to submit applications and supplemental
background investigation information.' Complainant contended that because applications
and supplemental background investigation information forms were not submitted by Joseph
Kingston or Management, Inc., the bureau could not conduct the background investigations
necessary to determine whether to recommend approval of a state gambling license
application. Complainant thus sought an order denying Casino's license application and
cancelling the provisional license under which it has been operating. Complainant's Third
Amended Statement of Issues also sought prosecution and enforcement cost recovery, but
complainant did not submit any evidence regarding any costs incurred.
Casino contended Management, Inc. submitted an application in 2016, but it did not
dispute that Joseph Kingston failed to submit an application or supplemental background
investigation information in 2016. Casino asserted that by 2016 Joseph Kingston was
physically and mentally unable to go through the application process again, and that instead
Additional grounds were raised when the bureau recommended that Casino's
application be denied in 2016 and in earlier versions of complainant's statement of issues.
However, the amended operative pleading only sought denial based a single cause for denial
which alleged that Management, Inc. and Joseph Kingston failed to submit applications and
other information. Thus, evaluation regarding whether cause exists to deny Casino's license
must necessarily track the specific allegations contained in the single cause for denial the
Third Amended Statement of Issues. (See Gov. Code section 11504, subd. (a).)
3
of submitting another application in 2016, Joseph Kingston wanted to transfer his entire
interest on Casino to his cousin, Chad Benson, who had worked as Casino's Chief
Operations Officer since 2015. However, the bureau took the position that Joseph Kingston
could not obtain Commission approval to transfer his interest to Mr. Benson unless Joseph
Kingston submitted an application package and was "fully licensed."
Casino asserted that either laches or equitable estoppel should operate to bar the
Commission from denying Casino's application because the bureau delayed completing its
investigation of Casino's 1999 application until 2008 and then failed to initiate and proceed
with an administrative hearing as instructed by the Commission in 2009. But, respondent
failed to show that Casino, which had been allowed to operate under a provisional license
since 1999, suffered prejudice under the circumstances of this case as a result of the bureau's
lengthy delays and prior inaction.
Based on the evidence presented, cause exists to deny Casino's license application
because, in response to the bureau's 2016 requests, Joseph Kingston failed to submit an
application or any supplemental background investigation information and Management,
Inc., although it submitted an application,' failed to submit the supplemental background
investigation information necessary to complete its application package. Nevertheless, the
denial shall be stayed to allow Joseph Kingston to seek approval of a transfer of his interest
to Mr. Benson, to allow Mr. Benson to apply for licensure, and to allow Management, Inc. to
resubmit a complete application package, with forms that are fully and properly completed.
Should Joseph Kingston and his transferee, Mr. Benson, or Management, Inc. fail to submit
the necessary documentation within the timeframes set forth in this decision, the stay of the
denial shall be lifted, and Casino's application shall be denied. Complainant failed to prove
by a preponderance of the evidence that cause exists to cancel Casino's provisional license.
Additionally, because complainant did not submit any evidence of its prosecution costs,
Casino is not required to pay any costs.
FACTUAL FINDINGS
Jurisdictional Background and Allegations of the Third Amended Statement of Issues
THE BUREAU'S 2016 DENIAL RECOMMENDATION5
1. On September 23, 2016, the bureau issued its Application for State Gambling
License Background Investigation Report, Level III, which recommended that the
As is discussed further below, when Ted Kingston, as Management, Inc.'s president,

completed Management, Inc.'s application, he did not follow the written instructions on the
application form. As a result, he provided his individual information along with
Management, Inc.'s corporate information on the same application form.
5 The history related to Casino's previous application is discussed further below.
4
Commission deny Casino's application for licensure. Under the "Summary" heading, the
bureau's report stated as follows (boldened emphasis in original):
On April 25, 2016, the Bureau of Gambling Control (Bureau)

received an Application for State Gambling License
(Application) for Ted Kingston as a limited partner and Sahara
Dunes Casino, LP as 100 percent owner of Lake Elsinore Hotel
and Casino. On May 18, 2016, the Bureau also received an
Application for Ted Kingston as a Shareholder of Sahara Dunes
Management, Inc. To date, the Bureau has not received
Applications for the remaining owners, Sahara Dunes
Management, Inc. and Joseph Kingston, despite numerous
requests. . . .6
Below is a summary of significant findings, all of which will be

discussed in more detail in the "Grounds for Denial" section of
this report:
• Joseph Kingston has an ownership interest in Lake Elsinore

Hotel and Casino as a partner of Sahara Dunes Casino, LP.
Since Joseph Kingston has informed the Bureau that he will
not comply with requests to submit an Application and
supporting documentation, the entire partnership and all
members are ineligible for a State Gambling License, based
on Business and Professions Code section 19852,
subdivision (d).
• Joseph Kingston himself should be denied as an owner

based on Business and Professions Code section 19859,
subdivisions (a) and (b), which mandates license denial for
any applicant who fails to clearly establish eligibility and
qualifications for a State Gambling License, or for failure of
the applicant to provide information and documentation
requested by the Bureau.
[lf] • • • El]
Based upon the findings of this investigation, the Bureau
recommends that the California Gambling Control
Commission (Commission) deny the licensure of Ted
6 Additional grounds for denial were included in the report which did not concern the
application process and were not the subject of this proceeding.
5
Kingston; Joseph Kingston; Sahara Dunes Management;
Inc.; and Sahara Dunes Casino, LP.
The September 23, 2016, report did not recommend revocation or cancellation of
Casino's provisional license.
On November 9, 2016, Casino's attorney sent a letter to the Commission voicing

Casino's disagreement with the bureau's investigation report and denial recommendation. In
that letter, Casino and its owners asked the Commission to refer the matter to an
administrative law judge for an evidentiary hearing.
THE COMMISSION'S REFERRAL OF THE MATTER TO AN EVIDENTIARY HEARING
2. At its November 17, 2016, meeting, the Commission voted to refer the matter
of Casino's suitability for a State Gambling License to an evidentiary hearing before an
administrative law judge at the Office of Administrative Hearings in accordance with the
provisions of the Administrative Procedure Act.
3. According to the minutes of the Commission's November 17, 2016, meeting,

one of the commission members asked why an emergency order and accusation had not been
filed against Casino in light of some of the other information contained in the bureau's
report. The minutes summarized the bureau's response as follows:
Assistant Bureau Chief Yolanda Morrow responded that they

look at each case individually and the Bureau recently went out
for the first time to bring the cardroom into compliance. At the
time, the Bureau felt that it didn't rise to a level concerning
enough to issue an emergency order to close the cardroom. The
Bureau will continue to monitor the cardroom.
Because this is a provisional license the Bureau issues these

administratively. Therefore, the Bureau will inform the
Commission and staff of the conditions, once they are placed on
the provisional license.
THE PLEADINGS SUBMITTED IN THIS ADMINISTRATIVE PROCEEDING
4. On May 11, 2017, complainant's predecessor, Wayne J. Quint, Jr., who was
then the bureau's Director, filed the initial Statement of Issues, in his official capacity. The
initial Statement of Issues and other jurisdictional documents were served on Casino on
March 17, 2017. On March 25, 2017, Casino timely submitted a Notice of Defense.
5. On December 20, 2017, complainant's predecessor, Nathan DaValle, who was

then the bureau's Acting Director, filed the First Amended Statement of Issues, in his official
capacity. On August 6, 2018, complainant Stephanie Shimazu filed the Second Amended
6
Statement of Issues in her official capacity, and on August 20, 2018, she filed the Third
Amended Statement of Issues, which is the operative pleading in this matter.
6. The Third Amended Statement of Issues contained a single cause for denial,
titled, "First Independent Cause for Denial of Application," pursuant to Business and
Professions Code sections 19856, subdivision (c), 19857, subdivisions (a) and (b), and
19859, subdivisions (a) and (b), which alleged the following in paragraph 24:
Respondent cannot be issued a license because, despite repeated

requests by the Bureau since late 2015, Joseph Kingston has
failed or refused to submit an application either as a partner in
Respondent or as a shareholder of Sahara Dunes Management,
Inc. Joseph Kingston's failures or refusals make him unsuitable
and/or disqualified for licensure as a partner of Respondent and
as a shareholder of Sahara Dunes Management, Inc.
Additionally, despite the Bureau' [sic] requests, Sahara Dunes
Management, Inc. has failed or refused to submit an application
as Respondent's general partner. Sahara Dunes Management,
Inc.'s failures and refusals make it unsuitable and/or disqualified
for licensure as a partner of Respondent. Consequently,
Respondent is not eligible for licensure.
Paragraph 22 of the Third Amended Statement of Issues also alleged (on page 7, lines
10 to 14):
Additionally, Respondent's management and operation of the

Casino under the auspices of its provisional license must comply
with the requirements of the Act, and the regulations
promulgated thereunder. Failure to do so renders Respondent
unqualified for licensure and makes Respondent's provisional
license subject to cancellation. (Bus. & Prof. Code, §§ 1957,
subd. (b), 19920 & 19922.)
The Third Amended Statement of Issues sought an order denying Casino's

application for a state gambling license, cancelling Casino's provisional license,' and
requiring Casino to reimburse the reasonable prosecution costs incurred by the bureau.
Hearing Stipulation, Exhibits, and Witnesses
7. The parties submitted a Hearing Stipulation which set forth the many
undisputed facts relevant to Casino's background, operation, ownership, registration, and
Complainant's failure to file an accusation to pursue cancellation of Casino's

provisional license, as required by Government Code section 11503 to pursue suspension or
revocation of a license, is discussed in the Legal Conclusions section of this decision.
7
application history. The parties also stipulated to the admission of a joint set of 62 exhibits,
which included affidavits and declarations of several witnesses and the Hearing Stipulation.
It should be noted that while this matter concerned Casino's and its owners' applications for
state gambling licensure, most of the voluminous supporting documentation that had been
supplied to the bureau as part of the application process was not submitted as evidence, as
the parties had determined such documentation was not necessary for resolution of the issues
in the present matter.
COMPLAINANT'S WITNESSES
8. The following bureau employees testified at the hearing:
• Staff Service Manager Dawn Ward. Ms. Ward has worked for the bureau for
over six years, and her duties as Staff Services Manager have included
supervising six analysts and overseeing background investigations and the
preparation of reports related to such investigations. Ms. Ward worked for
another agency, the Bureau of Firearms, from September 2016 through December
2016, after which she returned to work for the bureau. Although Ms. Ward was
aware of the previous 1999 application and the bureau's 2008 denial
recommendation, she did not participate in the prior background investigation
and denial recommendation, which predated her employment with the bureau.
• Senior Manager II Frances Asuncion. Ms. Asuncion has worked for the bureau
for 18 years, as a manager for the last 13 years and as a senior manager for the
last 4 years. Ms. Asuncion's responsibilities as Senior Manager II have included
overseeing background investigations of individuals applying for ownership and
key employee licenses. She was Ms. Ward's direct supervisor. Ms. Asuncion
began working for the bureau in 2000, and she oversaw the investigation that led
to the bureau's previous 2008 denial recommendation. She also oversaw the
2016 investigation, although she was on a medical leave from mid-July 2016,
until early October 2016. Ms. Asuncion executed a declaration, dated July 28,
2018, which was received as evidence and was consistent with her hearing
testimony.
• Assistant Director Yolanda Morrow. Ms. Morrow has worked for the bureau for
a little over 10 years and has held her current position since 2015.8 As Assistant
Director, Ms. Morrow was responsible for overseeing the bureau's licensing
division and was Ms. Asuncion's direct supervisor.
Ms. Ward, Ms. Asuncion, and Ms. Morrow testified about the bureau's 2015 and
2016 requests for information from Casino and its owners, the information that was received
8When she was first promoted in 2015, her title was "Assistant Chief." Since then
the "Chief's" title changed to "Director" and her title changed to "Assistant Director."
8
during 2016, and the bureau's September 2016 recommendation that Casino's application be
denied.
Complainant also submitted Declarations of bureau employees Investigative Auditor

Ron Ahn and Senior Legal Analyst Monica Gable, which were admitted, without objection,
as part of the joint set of exhibits. Those declarations provided the following information:
• Ron Ahn. In his declaration, Mr. Ahn testified about his review of records during
2017 that indicated that an entity called "JTI, Inc." may have an interest in Casino
and his communications with Ted Kingston and Mr. Benson about "JTI, Inc."
According to Mr. Ahn, both Ted Kingston and Mr. Benson advised him that "JTI,
Inc." was the same as "Sahara Dunes Management, Inc."
• Monica Gable. Ms. Gable conducted a Secretary of State search regarding the
name "JTI, Inc." after the bureau learned Management, Inc. had filed tax returns
using that name. In her declaration, she explained that, according to the Secretary
of State's records, "JTI, Inc." was registered in 1972 and its sole director was a
person in Santa Monica who did not appear to be affiliated with Casino. Ms.
Gable further testified in her declaration that a Certificate of Amendment was
filed with the Secretary of State on February 18, 2018, changing Management,
Inc.'s corporate name from "Sahara Dunes Management, Inc." to "JTI,
Management, Inc."9
CASINO'S WITNESSES
9. Casino called the following witnesses:
• Elijah Zuniga. Mr. Zuniga holds himself out as an expert in gambling operations,
navigating the regulatory process with respect to gambling, and assisting
individuals and companies in the sale and purchase of gambling establishments.
He previously worked in law enforcement for 16 years, including two years as a
special agent for the Division of Gambling Control in the 2000 to 2002
timeframe. In that position, he oversaw the cardroom industry and investigated
illegal gambling. Mr. Zuniga has been Casino's consultant since 2007, and he
was one of its designated agents during 2015 and 2016. As a designated agent,
Mr. Zuniga communicated with the bureau and the Commission on behalf of
Casino. Mr. Zuniga testified about his involvement with Casino and its owners'
applications, including his communications with the bureau and the Commission
9 Casino's explanation regarding the name change is discussed further below.
9
about Casino and its owners. Mr. Zuniga testified that he did not review any of
the applications Ted Kingston submitted to the bureau.'°
• Ted Kingston. Ted Kingston is Casino's general manager, one of Casino's

limited partners, one of Management, Inc.'s shareholders, and its president.
According to Ted Kingston, he relied heavily on Mr. Zuniga's advice and
services with respect to compliance with gambling laws and for help with the
license applications.
• Chad Benson. Mr. Benson is Ted Kingston's half-brother, Joseph Kingston's

cousin, the Casino's Chief Operations Officer, and the person to whom Joseph
Kingston planned to transfer all his interest in Casino. By the time of the hearing,
Mr. Benson held an Interim Personal Portable Key Employee License," which
the Commission first issued on April 28, 2016.
Casino also submitted the Affidavits of Lyle Kingston, Joseph Kingston, and Joseph
Kingston's doctor, Darren Jenkins, M.D. These affidavits were admitted, without objection,
as part of the joint set of exhibits. These declarations provided the following information:
• Kyle Kingston. In his affidavit, Kyle Kingston stated that he is a Certified Public
Accountant licensed in the State of Utah, and he performed a valuation of the fair
market value of Casino as of December 2015, which valuation is discussed
further below.
• Darren Jenkins, M.D. According to Dr. Jenkins's affidavit, Joseph Kingston's

medical conditions impaired his "memory, mental alertness, and decision-making
capabilities," and Dr. Jenkins recommended, based on his "expert medical
1° As is explained further below, Ted Kingston submitted the applications and

supplemental investigation background information forms that are at issue.
11 Business and Professions Code section 19805, subdivision (x), defines a "key
employee" as "any natural person employed in the operation of a gambling enterprise in a
supervisory capacity or empowered to make discretionary decisions that regulate gambling
operations, including, without limitation, pit bosses, shift bosses, credit executives, cashier
operations supervisors, gambling operation managers and assistant managers, managers or
supervisors of security employees, or any other natural person designated as a key employee
by the department for reasons consistent with the policies of this chapter." Subdivision (y)
defines a "key employee license" as "a state license authorizing the holder to be employed as
a key employee."
10
opinion," that Joseph Kingston "discontinue any involvement in the ownership,
management, and operation of Casino."'
• Joseph Kingston. Joseph Kingston's affidavit discussed his medical conditions

and expressed that due to his declining health, he wanted to transfer his entire
interest in Casino to Mr. Benson. Mr. Kingston's affidavit also stated that he had
"never actively participated in the Casino's management or operations." Joseph
Kingston's affidavit stated that he prepared transfer documentation and Mr.
Benson submitted a gambling establishment application. However, that portion
of Joseph Kingston's affidavit testimony was inconsistent with Mr. Benson's
hearing testimony that Mr. Benson prepared the transfer documentation.
The Bureau's Responsibility to Conduct a Background Investigation of Gambling

Establishment Applicants
10. The bureau's role in the gambling license application process involves
completing a thorough investigation and providing its findings and recommendations to the
Commission. The Commission then decides whether to grant the application. The
submission of a completed application to the bureau, as the investigative body for the
Commission, starts the licensing process and triggers the bureau's obligation to begin a
background investigation of the applicant. Submission of a completed supplemental
background investigation information form is also required for the bureau's investigation.
As part of an application, the applicant grants the bureau authority to check various
government databases, such as Department of Motor Vehicles' records and criminal history
records, during its investigation. The bureau also gathers additional documentation from the
applicants, who are expected to make full and complete disclosures to the bureau.
Any individual or entity with an ownership interest in a gambling establishment is

required to submit an application. If a partnership owns a gambling establishment seeking
licensure, then all its partners, including general and limited partners, need to submit
applications and be approved for licensure. Likewise, if a corporation is a partner, the
corporation, along with its shareholders, officers, and directors must also submit
applications.
11. Ms. Asuncion explained that if the "intake" section receives an "incomplete
application," they "usually will notify the applicant that they received an incomplete
application." Mr. Zuniga similarly testified that, in his experience, "if an application or the
documentation request is incomplete, they'll ask or they'll say, 'Hey, you forgot this, send it
in.'"
12 Dr. Jenkins also sent a letter to the Commission, dated June 27, 2017, which stated
his opinion that due to Joseph Kington's medical condition, he should discontinue his
involvement in the management and operation of the Casino.
11
12. Ms. Ward and Ms. Asuncion both testified that if Joseph Kingston wanted to
transfer his interest in Casino to Mr. Benson, the bureau would need to receive the
transaction documents, a gambling license application for Joseph Kingston, and a gambling
license application for Mr. Benson. According to Ms. Asuncion, Joseph Kingston, as the
proposed transferor, and Mr. Benson, as the proposed transferee, would both need "to fill out
application" and "supplemental information" forms and be found "suitable before the
transfer could occur." Ms. Ward explained that the transaction documents were necessary so
the bureau "could know who all the parties were, to know the source of funds and verify the
source of funds, as well as to make sure that the transaction is in compliance with the
Gambling Control Act." Ms. Asuncion explained that the transaction documents were
necessary "so that we can understand the document, first of all; make sure that everybody in
the transaction applied for a license. We will send them to our legal office for review and
analysis." After proposed transfer documents have been received and reviewed, the bureau
would then submit a report to the Commission with a recommendation regarding the
proposed transfer, and the Commission would decide whether to approve the transfer. On
cross-examination, Ms. Asuncion also stated that if an applicant was not physically or
mentally capable of being licensed, the bureau "would refer that to the commission and let
them decide as we did in this case." She also explained that in instances when a licensee had
died, the Commission had "put the ownership interest in an estate, or the parties will put it
into an estate, until someone from the estate can be licensed or found suitable."
13. Ms. Ward, Ms. Asuncion, and Ms. Morrow all testified that they did not do
anything, nor were they aware of anyone else at the bureau doing anything, to prevent or
discourage Casino, Management, Inc., Ted Kingston, Joseph Kingston, and/or Chad Benson
from submitting applications, supplemental background information, and/or transactional
documents to the bureau. They also confirmed that they had no reason to doubt Joseph
Kingston's claims regarding his health.
Background Information Regarding Casino's History and Operations
14. Casino currently holds a provisional State Gambling License to operate a 22-
table cardroom, located in Lake Elsinore, California. In addition to the cardroom, Casino's
facility includes a restaurant, a California Horse Racing Board-approved mini-satellite
wagering facility, and a 100-room hotel. Casino is a limited partnership that was originally
foillied in 1978 by persons who no longer hold any interest in Casino. Casino was then
registered under the Gaming Registration Act, which governed gambling establishments at
that time. In 1993, members of the Kingston family, including Ted and Joseph Kingston,
purchased the Casino, after the Office of Gambling Registration, the bureau's predecessor,
approved the Kingston family members' applications for registration, approved the proposed
purchase, and issued registrations to operate. Since 2005, cousins Ted and Joseph Kingston
have held equal ownership interests in Casino and its general partner Management, Inc. 13
13Before 2005, other Kingston family members held ownership interests in the
Casino. How Ted and Joseph Kingston ended up as the only remaining family members with
ownership interests in Casino is not relevant to the decision in this case.
• 12
15. Casino currently has one general partner, Management, Inc., and two limited
partners, Ted and Joseph Kingston. Management, Inc. holds a five percent interest in the
partnership, and Ted and Joseph Kingston each hold 47.5 percent interests in the partnership.
The shareholders of the corporate general partner, Management, Inc., are Ted and Joseph
Kingston, with each owning 50 percent of the corporation's shares. Ted Kingston has been
involved with the day to day operations of Casino as general manager, and Joseph Kingston
has lived in Utah and has never been involved with the business's operations.
16. The Gambling Control Act (the Act) was enacted in 1997 (Bus. & Prof. Code,
§ 19800 et seq.) and required all gambling establishments to obtain state gambling licenses.
Previously registered gambling establishments, including Casino; were granted provisional
licenses while their license applications were pending. In approximately 1999, Casino and
its then owners, including Ted and Joseph Kingston, applied for state gambling licenses as
required by the Act. A provisional license was then issued to Casino, allowing it to continue
to operate while the license applications were pending. From 1999 to the present, Casino has
requested and been granted continuous annual renewals of the provisional license. By the
time of this hearing, Casino was the only gambling establishment left in the state that still
held a provisional license. The current provisional license will expire on December 31,
2019, unless it is replaced with a state gambling license or renewed.
17. According to Ted Kingston's uncontroverted testimony, neither he nor Casino

has ever had any problems with the City of Lake Elsinore. Casino provides its own public
safety department, which is "nice" for the city, and Casino has received positive feedback
from the city and local law enforcement. The mayor has commented that Casino is a good
business for the city, and Casino has worked closely with the city council. Other than the
bureau's 2008 and 2016 recommendations to deny Casino's application, the Commission has
not taken any definitive actions to revoke Casino's provisional license.
The Bureau's 2008 Denial Recommendation and the Commission's Referral to an

Evidentiary Hearing
18. On or about September 11, 2008, the bureau recommended that the
Commission deny Casino's and its then owners' applications for licensure based on alleged
failures to disclose required information, failures to maintain adequate records, use of
inappropriate accounting methods, failures to notify the Commission of transfers of
ownership interests, and continued employment of a key employee with a felony conviction.
At its June 11, 2009, meeting, as noted above, the Commission referred the issue of Casino's
and its owners' suitability for licensure to an evidentiary hearing to be held pursuant to
Business and Professions Code section 19825. In order to proceed with the evidentiary
hearing, the bureau needed to file a statement of issues. However, the bureau did not file a
statement of issues, and no hearing on that referral ever took place. No explanation was
provided during this hearing regarding why the bureau did not initiate the evidentiary hearing
as directed by the Commission in 2009.
13
The Bureau's September 2015 Request for Information14
19. Between 2009 and September 2015, the bureau did not request any additional
documents or other information related to Casino's and its owners' application for licensure.
In 2015, the bureau determined that it needed to undertake a new background investigation.
Ms. Asuncion explained that the "bureau made a decision that we needed to take a fresh look
at the Kingstons to determine if they were presently suitable for licensure, because the other
ones were old, and we wanted to see today if we would make a different recommendation or
same recommendation." On September 30, 2015, Ms. Asuncion sent a letter to Keith Sharp,
who was then one of Casino's designated agents,' stating that the bureau was updating its
background investigations regarding Casino, Management, Inc., Joseph Kingston, and Ted
Kingston. The letter requested that Casino provide the following five categories of
documents by October 14, 2015:
1. Applications for State Gambling License (BGC-030) for

Sahara Dunes Casino, LP.; Sahara Dunes Management, Inc.;
Joseph Kingston; Ted Kingston
2. Individual Supplemental Background Investigation

Information (BCG-015A) form [sic] for Joseph Kingston and
Ted Kingston

Information (BCG-015B) forms and background deposits for
Sahara Dunes Casino, L.P. and Sarah [sic] Dunes Management,
Inc.
4. Any transactional documents for the purchase of the

cardroom interest,
5. A list of all contracts and agreements between the cardroom

and any outside parties.
The second page of the September 30, 2015, letter included standard language
regarding an applicant's burden to establish eligibility for licensure, which was part of the
bureau's "template." That language, which appeared in other letters sent to Casino and its
designated agents, stated:
14 According to the bureau's witnesses, all the bureau's 2015 and 2016 requests for
information were made on behalf of the "Chief," who is now known as the "Director."
1' At the time, Casino had two designated agents, including Elijah Zuniga, who
testified at this hearing. Mr. Sharp did not testify or provide a written affidavit or
declaration.
14
Please note that under Business and Professions Code section
19856, the burden of proving qualifications for licensure rests
with the applicant. Also, under Business and Professions Code
section 19859, subdivisions (a) and (b), a license application
may be denied for failure of the applicant to clearly establish
eligibility and qualification, and/or provide required
information, documentation, and assurances, or failure to reveal
any fact material to qualification, or the supplying of
information that is untrue or misleading as to a material fact
pertaining to the qualification criteria.
When the September 30, 2015, letter was sent, the bureau was not yet aware that
Joseph Kingston wanted to transfer his interest, such that item 4, which requested "any
transactional documents for the purchase of the cardroom interest," did not necessarily refer
to Joseph Kingston's possible transfer.
20. Casino did not supply the requested information by the October 14, 2015,
deadline, or request additional time to do so. At that time, because the Commission's 2009
referral of the matter to an evidentiary hearing was still pending, Casino did not view the
September 30, 2015, request as appropriate. Casino and its owners then believed that
Casino's qualification for licensure should have been decided through an evidentiary hearing
based on its and its owners' previous 1999 applications.
The Commission's Retraction of the Referral to an Evidentiary Hearing and Direction to the -
Bureau to Update its Investigation
21. On November 3, 2015, Ms. Asuncion sent a letter to the Commission

requesting that it reconsider its 2009 decision to refer the matter to hearing. At that time, a
statement of issues had not been filed and an evidentiary hearing had not been set. Ms.
Asuncion's letter noted that the bureau's initial background information investigation report
recommending denial of the applications was submitted to the Commission on September 17,
2008, and "[Oven the lengthy passage of time, the Bureau now believes that updated
background investigations are necessary to determine if Sahara Dunes Casino, L.P. and its
owners are presently suitable for licensure." In the November 3, 2015, letter, the bureau
requested that the Commission "direct the applicants to submit Applications for State
Gambling License for Sahara Dunes Casino, L.P.; Sahara Dunes Management, Inc.; Joseph
Kingston; and Ted Kingston along with the appropriate deposits and fees. In addition, the
Bureau is also requesting all transactional documents for the purchase of an interest in the
cardroom or a change in the ownership structure along with copies of all contracts and
agreements." At the time, the bureau wanted to redo the investigation with "fresh"
information.
22. On November 17, 2015, Mr. Zuniga, wrote to the Commission on Casino's
behalf, responding to the bureau's November 3, 2015, request. Mr. Zuniga's response
contended that the existing proceedings had already been unreasonably delayed, and the
15
applicants had always been prepared to respond to the fmdings contained in the bureau's
2008 report to demonstrate their suitability for licensure. Mr. Zuniga's letter asked the
Commission to sustain its original recommendation to refer the matter to an evidentiary
hearing and to deny the bureau's request to seek updated applications. Mr. Zuniga's letter
contended that the bureau's over five-year delay in pursuing an evidentiary hearing and its
request for updated information was "improper at best and a violation of due process at
worst."
23. The Commission considered the bureau's request at its February 25, 2016,
meeting. Bureau employees Ms. Asuncion and Ms. Morrow were present during the
meeting, as was Mr. Zuniga. It was then noted that over seven years had passed since the
Commission referred the matter to an evidentiary hearing. No fault was found with the
applicants for that delay, and the bureau did not explain why no statement of issues had ever
been prepared to proceed with the evidentiary hearing. During the February 25, 2016,
Commission meeting, Mr. Zuniga stated that Joseph Kingston's health was failing, and
"since he's gone through this once. He doesn't want to go through it again and so he as part
of this process wants to transfer to his cousin." The Commission voted to retract its 2009
referral of the 2008 denial recommendation to an evidentiary hearing and directed the bureau
to "update" its 2008 background investigation report.'
24. Given Mr. Zuniga's representation to the Commission on February 25, 2016,
in the presence of bureau supervisory employees Ms. Asuncion and Ms. Morrow, regarding
Mr. Kingston's desire to transfer his interest to his cousin as "part of this process," the
bureau was then well aware that Joseph Kingston planned to transfer his interest when it later
requested additional information from Casino and its owners to update its investigation.'
25. Mr. Zuniga testified about a conversation he had with bureau employees
sometime during late February 2016, after the Commission voted to retract the earlier
evidentiary hearing referral. According to Mr. Zuniga, during that conversation, they
discussed Joseph Kingston's "inability to go through another application round."
16 The Commission also voted to direct the bureau to "prepare an analysis of the
current ownership structure and the proposed Transfer of Shares from Clyde Kingston to
Rachel Kingston to Ted Kingston." Those ownership changes were not part of the
allegations regarding cause to deny the license contained in the Third Statement of Issues.
17 Ms. Ward was asked numerous questions during this hearing about when, after
February 25, 2016, she learned about Joseph Kingston's plans. However, based on the
transcript of the February 25, 2016, Commission meeting, it was clear that the bureau, by
virtue of Ms. Ward's direct supervisor Ms. Asuncion's and Assistant Director Morrow's
attendance at that meeting, already knew about Joseph Kingston's desire to transfer his
interest as of February 25, 2016.
16
The Bureau's 2016 Requests for Information and Casino's and its Owners' Responses18
THE BUREAU'S MARCH 3, 2016, LET TER
26. After the Commission retracted its previous evidentiary hearing referral, Ms.
Ward sent a letter, dated March 3, 2016, to Mr. Zuniga requesting that the following
information be submitted to the bureau by no later than March 13, 2016:
1. Applications for State Gambling License (BGC-030) for

Sahara Dunes Casino, L. P.; Sahara Dunes Management, Inc.;
Joseph Kingston; Ted Kingston, and any other individuals who
have ownership interests in the cardroom.

Information (BGC-015A) form [sic] for Joseph Kingston and
Ted Kingston.

Information (BGC-015B) forms and background deposits for
Sahara Dunes Casino, L.P. and Sarah [sic] Dunes Management,
Inc.
4. An organizational chart showing the ownership structure of

Lake Elsinore Hotel and Casino and Sahara Dunes Casino, L.P.
5. Any transactional documents for the purchase of [sic] the

transfer"of shares or the purchase of cardroom ownership
interest.
6. A list of all contracts and agreements between the applicants

7. A list of all contracts and agreements between the cardroom

8. Identify the Chief Executive Officer or President, Chief

Financial Officers [sic] or Treasurer, Secretary, and any
Directors for Sahara Dunes Casino, L. P. and Sahara Dunes
Management, Inc.
18 The findings regarding the bureau's requests, Casino's and some of its owners'
efforts to provide responsive information, documentation provided to the bureau, and the
related correspondence are organized in chronological order in this portion of this decision.
17
9. Statements of Net Worth for all applicants ending December
31, 2015 and 2014.
10. Statements of Income and Expense for all applicants ending

December 31, 2015 and 2014.
11. Balance Sheets and Profit and Loss Statements for Sahara
Dunes Casino, L.P. and Sahara Dunes Management, Inc.
12. A full year of bank statements for all bank accounts from
January through December 2015.
13. Accounts [sic] statements for Stock and Bond accounts for
the months of October through December 2015.
The bureau did not receive any of the information requested by the March 13, 2016,
deadline. Casino and some of its owners later provided some of the requested information as
set forth below.
THE POTENTIAL TRANSFER OF JOSEPH KINGSTON'S OWNERSHIP INTEREST TO

CHAD BENSON
27. According to Mr. Benson, the idea that he would acquire Joseph Kingston's
ownership interest came up in early 2016 during a conversation with Ted Kingston. In
anticipation of acquiring Joseph Kingston's interest, Mr. Benson requested that Mitchell &
Associates, LLC, Certified Public Accountants, conduct a valuation of Casino. On March
26, 2016, Mitchell & Associates, LLC, completed a summary report stating its conclusions
regarding the fair market value of a 100 percent interest, in the limited partnership.
28. Mr. Zuniga testified about a conversation he had with some bureau employees,
although he could not recall with whom he spoke or when, during which he told the bureau
that "an alternative to Joseph Kingston applying" would be that Chad Benson "would apply
and basically take his spot as the other applicant for Joseph's shares." According to Mr.
Zuniga, the bureau employees he spoke to responded by "saying to have him, Chad Benson,
send in an application for ownership."
Mr. Benson's Owner Applicant Submission to the Bureau
29. On April 14, 2016, Mr. Benson completed and signed a Gambling
Establishment Owner Applicant-Individual Supplemental Background Investigation
Information form, which he sent to the bureau with approximately 300 pages of
documentation, including supplemental forms, tax returns, and bank statements. 19 Mr.
Benson did not, however, include a state gambling license application with that package
19 Only the cover page was submitted as evidence at this hearing.
18
because he mistakenly assumed that the key employee application he had already submitted
was sufficient.'
The bureau received,Mr. Benson's gambling owner applicant supplemental

information package on April 18, 2016, and on April 20, 2016, the bureau returned the
package to Mr. Benson. The bureau's cover letter stated (emphasis on original):
On April 18, 2016, the Bureau received a package consisting of

a Gambling Establishment Owner Application-Individual
Background Investigation Information form and supporting
documents. It is not clear why this was sent as the Bureau has
not received an Application for a State Gambling License. As
such, the Bureau is returning the supplemental form and all the
supporting documents.
After Mr. Benson received the bureau's April 20, 2019, letter, he asked Mr. Zuniga if
he should fill out an application form and resubmit it to the bureau. Mr. Zuniga then
recommended that Mr. Benson hold onto the supplemental information he had submitted
until the issues with Joseph Kingston's license were straightened out. Mr. Zuniga explained
to Mr. Benson that the bureau would not allow Joseph Kingston to transfer his interest unless
the bureau received an application from Joseph Kingston.21
Mr. Benson's Preparation of Transaction Documents22
30. Mr. Benson prepared purchase and sale agreements regarding the anticipated
transfer of Joseph Kingston's interest in Casino. On April 19, 2016, Mr. Benson and Joseph
Kingston signed the Purchase and Sale Agreement for Mr. Benson to acquire Joseph
20 Around the same time, Mr. Benson's Interim Key Employee License Application
was pending with the bureau related to Mr. Benson serving as Casino's Chief Operations
Officer.
21 It was unclear exactly when Mr. Zuniga may have told Mr. Benson to hold onto his
documentation until the issues with Joseph Kingston's application were worked out. But Mr.
Zuniga's statement to Mr. Benson that the bureau would not allow the transfer until Joseph
Kingston submitted an application was consistent with the bureau's position that Joseph
Kingston needed to be "fully" licensed before a transfer could be approved.
22 Although Joseph Kingston stated in his affidavit that he prepared the transaction
documents, Mr. Benson's credible hearing testimony describing his preparation of the
transaction documents was given greater weight, as Joseph Kingston was not subject to
cross-examination to assess what he may have meant in his affidavit.
19
Kingston's interest in the limited partnership and the Purchase and Sale Agreement for Mr.
Benson to acquire Joseph Kingston's ownership interest in Management, Inc.23
31. On April 20, 2016, Mr. Benson emailed copies of the Mitchell & Associates
appraisal and the two purchase and sale agreements to Mr. Zuniga, with the expectation that
Mr. Zuniga would send the purchase and sale agreements to the bureau. Mr. Benson did not
ever send them to the bureau. Mr. Benson and Joseph Kingston did not complete the
transaction because the transfer was never approved by the Commission. Mr. Benson
learned sometime after the bureau recommended denial of Casino's application that Mr.
Zuniga had not sent the purchase and sale agreements to the bureau.
THE BUREAU'S APRIL 22, 2016, LETTER
32. On April 22, 2016, Ms. Ward sent another letter to Mr. Zuniga, which she
referred to as a "Final Notice," seeking the applications and other information that had been
requested in the March 3, 2016, letter, and extending the deadline to April 29, 2016.
APPLICATION AND SUPPLEMENTAL INVESTIGATIVE BACKGROUND INFORMATION

FORMS SUBMITTED TO THE BUREAU ON APRIL 25, 2016
33. On April 25, 2016, the bureau received one application and two supplemental
background investigation information forms from Ted Kingston. He supplied the application
and forms directly to the bureau, along with a box of voluminous documents that were not
submitted as evidence during this hearing.
Application for State Gambling License (form BGC 030) (Exhibit 25, pages 1 to 4)
34. An "Application for State Gambling License" (faun BGC 030), included with
the April 25, 2016, submission, had the name "Lake Elsinore Casino" written under the
heading "Name of Gambling Establishment (Cardroom)" and the name "Ted Kingston"
written under the heading "Name of Applicant (Individual or Entity)." According to Ted
Kingston, this was Casino's application for a state gambling license. Ms. Ward, however,
considered this document to be Ted Kingston's application for a state gambling license as a
limited partner of Management, Inc. because he checked the "Limited Partner" box under
section 4 of the application.
On page 2 of 4 of the application, under "section 1," regarding "type of application,"

the form asked the applicant to check one of two boxes, as either the "Owner-Licensee," if
23 According to Mr. Benson, when he drafted the agreements, he incorrectly assumed,

based on tax returns filed under the name "JTI, Inc.," that "JTI, Inc." was Management,
Inc.'s corporate name. Therefore, the agreement he drafted pertaining to the sale of Joseph
Kingston's interest in Management, Inc. inaccurately indicated that "JTI, Inc." was the
corporate name, and that the name "Sahara Dunes Management, Inc." was a "dba" or
fictitious business name.
20
the applicant was the "owner of the gambling enterprise for which the license certificate shall
be issued," or as the "Endorsed Licensee," if the applicant was someone who "shall be
endorsed on the gambling enterprise license certificate." If the first ("Owner-Licensee") box
was checked, sole proprietors were instructed to "submit one application with all sections
completed except 3a and 3b" and all other "owner-licensee" types were instructed to
complete "all sections except 4." If the second ("Endorsed Licensee") box was checked,
individual applicants were instructed to "[c]omplete sections 4, 5(B), and 7," and entity
applicants were instructed to "[c]omplete sections 3, 5(B), and 7." Ted Kingston did not
follow the instructions on this form, as the application he submitted had neither of the two
boxes in section 1 checked, and sections 2a 2b, 3a, 3b, 4, 5(A), 5(B), 6, and 7 were all
completed, despite the written instructions regarding which portions should be filled out
depending on who was submitting the application.
Under section 2a, the "Gambling Establishment (cardroom) Name" was listed as
"Lake Elsinore Casino," with Casino's address, and section 2b, regarding employee work
permit certification, was completed. In section 3a, regarding entity structure, the "Limited
Partnership" box was checked. In section 3b, regarding "Entity Information," the following
was written under the "Entity Name" heading: "Sahara Dunes Casino dbalLake Elsinore
Hotel & Casino." Additionally, in section 3b, Joseph Kingston and Ted Kingston were both
identified as partners, with each owning a 50 percent interest.' Under section 4, regarding
"Individual Applicant Information," the "Limited Partner" box was checked and Ted
Kingston's name and identifying information was written. Ted Kingston signed and dated
section 7 of the application on April 14, 2016, listing his title as "Partner."
Gambling Establishment Owner Applicant-Individual Supplemental

Background Investigation Information (form BGC-APP, 015A)
(Exhibit 25, pages 5 to 19)
35. A Gambling Establishment Owner Applicant-Individual Supplemental

Background Information (form BGC-APP, 015A) was included with the April 25, 2016,
submission. Ted Kingston testified that he believed this was "the start of the individual
application." Ms. Ward considered this document to be Ted Kingston's gambling
establishment owner/applicant individual supplemental background investigation information
form.
This document included personal information about Ted Kingston, including his
residence address; the identities of his children, dependents, and parents; information about
his siblings; information about his experience and employment; a single page titled "Lake
Elsinore Casino list of lawsuits last 10 years"; details about other licenses, including an off-
track betting license from the California Horse Racing Association, an alcohol license from
24
During his hearing testimony, Ted Kingston explained that this was essentially
correct because Ted and Joseph Kingston each owned 50 percent of Management, Inc.'s
shares, although technically Management, Inc. held a five percent interest and Ted and
Joseph Kingston each held 47.5 percent interests in the limited partnership.
21
California Alcohol Beverage Control (ABC), and an alcohol license from Utah's ABC;
information about his non-gambling business interests; his personal expenditures, assets and
liabilities; lists of contracts for Lake Elsinore Casino; and lists of contracts for Ted Kingston.
This supplemental background investigation information form did not include the required
"Supporting Documentation Checklist" page, and it was not signed.
Gambling Establishment Owner Entity Supplemental Information for

State Gambling License (form BGC-APP 015B) (Exhibit 24)
36. A completed "Gambling Establishment Owner Entity Supplemental

Information for State Gambling License" (form BGC-APP 015B) was also submitted on
April 25, 2016. This document listed Ted Kingston under the heading "Name of Business
Applicant," and it included the "Supporting Documentation Checklist," which Ted Kingston
signed on April 22, 2016, but the signature line did not have a place for Ted Kingston to list
his "title." Ted Kingston testified that this document was his individual supplemental
information form, but Ms. Ward believed it was for the limited partnership because it
provided information "pertaining to the partnership." This document did not include an
authorization to release information, which the bureau needed to check databases as part of
its investigation.
The following was provided as part of this supplemental background investigation

information:
• A list of "Lake Elsinore Casino lawsuits" for the last 10 years;
• A list of employees other than directors or officers;
• Financial Statements of Sahara Dunes Casino LTD' for the year ending
December 31, 2014;
Financial Statements of Sahara Dunes Casino LTD for the year ending December
31, 2013;
• Business License issued by the City of Lake Elsinore to the Lake Elsinore Hotel
& Casino;
• Certificate to Operate issued by the Commission, with an expiration date of

December 31, 2016;
• "Lake Elsinore Casino Organizational Chart," dated March 2013; and
25
It was not explained during this hearing why some records referred to the
partnership as "Sahara Dunes Casino LTD" and other records referred to it as "Sahara Dunes
Casino LP."
22
• A single page titled "Ownership Structure," listing Management, Inc. as the
general partner, with a five percent interest; Ted Kingston and Joseph Kingston
as the limited partners, with each holding a 47.5 percent interest; and Ted
Kingston as president of Management, Inc.
THE APRIL 28, 2016, TELEPHONE CONFERENCE AND OTHER TELEPHONE

COMMUNICATIONS
37. On April 28, 2016, Ms. Asuncion and bureau analyst Casey Albert26 spoke
with Mr. Zuniga over the telephone about Casino's state gambling license application.
During that call, Ms. Asuncion and Mr. Albert verbally told Mr. Zuniga "what was required"
for the bureau to take a "fresh look" at the applicants. Ms. Asuncion initially testified that,
during this call, she "did not believe" Mr. Zuniga said anything about Mr. Kingston's desire
to transfer his interest, and he did not say transactional documents had been signed.
However, during cross-examination, she recalled participating in a telephone conversation
during which they went over the application and what was "required of the parties to transfer
the ownership interest," which she believed was discussed during the April 28, 2016,
telephone conversation referenced in the bureau's May 2, 2016, letter.'
The bureau's witnesses agreed that they had more than one verbal conversation with
Mr. Zuniga regarding Casino's application, and Mr. Zuniga estimated that there were at least
five such conversations between February 25, 2016, and September of 2016. Although Mr.
Zuniga could not recall specific dates or the specific bureau employees involved, he testified
that, at some point, he told the bureau's employees that he had transactional documents
regarding the proposed transfer from Joseph Kingston to Mr. Benson, and "they told me not
to send it in."28
THE BUREAU'S MAY 2, 2016, REQUEST
38. On May 2, 2016, Ms. Ward sent a letter to Mr. Zuniga stating that the bureau
had received some of the information previously requested, but noting that, as discussed
during an April 28, 2016, telephone conference between Ms. Asuncion, Mr. Albert, and Mr.
Zuniga, there were "certain items" that were "still outstanding." The May 2, 2016, letter
requested that the following documents be provided by May 16, 2016:
26 Mr. Albert did not testify at this hearing or provide a written declaration.
27 The May 2, 2016, letter is discussed below.
28 While the bureau's witnesses acknowledged having more than one conversation
with Mr. Zuniga, they could not recall the dates of the conversations either. They denied
ever being told that any proposed transactional documents existed, and they denied
discouraging Casino, its owners, or Mr. Benson from submitting such documentation. As is
discussed further below, Mr. Zuniga's testimony that the bureau told him not to submit the
transaction documents was not credible.
23
1. Balance Sheets and Profit and Loss Statements for Sahara
Dunes Management, Inc. for the years ending December 2014
and 2015.
2. A full year of bank statements for all bank accounts for

Sahara Dunes Management, Inc. and Joseph Kingston from
January through December 2015.
3. Applications for State Gambling License (BGC-030)'for

Sahara Dunes Management, Inc.; Joseph Kingston; and any
other individuals who have ownership interests in the cardroom.

Information (BGC-015A) form for Joseph Kingston.
5. Individual Supplemental Background Investigation ,

Information (BGC-015B) forms [sic] and background deposits
for Sahara Dunes Management, Inc.
6. Any transactional documents for the transfer of shares for the

purchase of cardroom ownership interest.
7. The gift letter from Rachel Kingston to Ted Kingston, in

which she gifted her interest in Lake Elsinore Hotel and Casino.
8. A list of all contracts and agreements between Joseph

Kingston and any outside parties.
9. Statements of Net Worth for all applicants ending December

31, 2015 and 2014.
10. Statements of Income and expense for all applicants ending

December 31, 2015 and 2014.
11. Accounts statements for Stock and Bond accounts for the
months of October through December 2015.
12. Tax return [sic] for all applicants for the years 2013, 2014,
and 2015, except for Ted Kingston's 2014 tax return, which we
have received.
Ms. Ward testified that as of May 2, 2016, the bureau had not received the items
listed in the letter she sent that day, and the letter also sought some additional information
that had not previously been requested, but which she considered important to the bureau
making a licensing recommendation. Item No. 8 in the May 2. 2016, letter could have been
24
considered to include a request for documentation of a proposed transfer of Joseph
Kingston's interest. However, during her hearing testimony Ms. Ward stated that, when she
sent the May 2, 2016, letter, she did not then understand what Joseph Kingston wanted to do
with his interest.29
The May 2, 2016, letter did not request that Casino or Ted Kingston submit
Applications for State Gambling License (BGC-030) or Individual Supplemental
Background Investigation Information forms. The absence of such requests in the May 2,
2016, letter suggested the bureau had received Casino's and Ted Kingston's applications and
supplemental background investigation information forms.
MR. ZUNIGA'S MAY 11, 2016, LEI1ER REGARDING THE TRANSFER OF RACHEL
KINGSTON'S INTEREST TO TED KINGSTON AND JOSEPH KINGSTON'S SITUATION
39. On May 11, 2016, Mr. Zuniga sent a letter to the bureau that discussed
Casino's ownership structure. That letter provided information about the conveyance of
Clyde Kingston's interest to his wife, Rachel Kingston, who then gave the interest to Ted
Kingston.
40. Mr. Zuniga's May 11, 2016, letter also reiterated that Joseph Kingston did not
desire, or have the physical and/or mental capacity, to go through the application and
background investigation process again and wanted to transfer his ownership interest to his
cousin, Chad Benson.3° In this regard, Mr. Zuniga's letter stated:
As I had indicated in a previous phone call with you, Joseph

Kingston has no desire nor the physical and mental capability to
go through another licensing process.
On May 4, 2016, I met with Joseph at his office in Salt Lake

City, UT. We spoke for over an hour and he related the
following to me:
29As was noted above, the bureau was already aware since at least February 25, 2016,
based on Mr. Zuniga's statements during the Commission meeting that day, that Mr.
Kingston wanted to convey his interests in Casino to Mr. Benson.
30 Joseph Kingston sent a similar letter to the Commission, dated May 18, 2016, in
which he wrote: "I simply cannot do this. My health and that of my wife's [sic] has been
declining in the past few years. Hers from cancer and mine was diabetes and the
complications. I am ready to retire. I respectfully request that I be allowed to transfer my
debt to Chad Benson, my cousin. I asked for nothing in compensation as I do not believe my
shares have much value and it is more important for me to do away with this large amount of
financial obligation and allow me to free up my portfolio for my family."
25
• He and his wife are in their mid-sixties and their health has
deteriorated significantly over the past few years
• Joseph's wife has breast cancer
• Joseph is suffering from advanced diabetes
• Joseph also takes several medications; one of which affects

mental alertness and decision-making
Joseph told me that he has not been overly involved in the

gambling establishment's operation and sees the investment as
one that he desires not to have in his later years as he focuses on
his health and remaining time with his family. It should be
noted that men in the Kingston family rarely live to their 70's.
Joseph further is attempting to leave his estate as debt-free as

possible. With the debt from the gambling establishment being
removed from his portfolio, it would ease his heir's [sic]
financial responsibilities.
Joseph is desirous to transfer his ownership interest (which is

debt) of the casino to his cousin, Chad Benson [sic] in
accordance with Gambling Control Act, Article 6, section 19892
(a) and Article 7, section 19900(3). Chad is currently a holder
of an interim Key Employee license and is working at the casino
in the capacity of Chief Operations Officer. Chad is agreeable
to accept transfer of the ownership interest and assume the debt.
Chad understands the licensing process and is ready to proceed
after the transfer is hopefully approved and a Temporary
Gambling License is issued.
During his hearing testimony, Mr. Zuniga elaborated on his observations of Joseph
Kingston when he visited him in Utah. Mr. Zuniga said that, when he met with Joseph
Kingston that day, he observed Joseph Kingston "trail off' and "lose concentration," and
Joseph Kingston "wasn't all there."
THE APPLICATION FOR STATE GAMBLING LICENSE SUBMITTED ON MAY 18, 2016
(ExHIBIT 29)
41. On May 18, 2016, the bureau received an Application for State Gambling
License (BGC 030) that had been completed by Ted Kingston. This application listed both
"Sahara Dunes Mgmt., Inc." and "Lake Elsinore Casino" under the heading "Name of
Gambling Establishment (Corporation)." The name "Ted Kingston" was written under the
26
heading "Name of Applicant (Individual or Entity)." Similar to the other application Ted
Kingston completed and submitted in April 2016, he did not check either of the boxes under
section 1 of the application form to indicate whether the applicant was the "Owner-Licensee"
or the "Endorsed Licensee." He also completed sections 2a, 3a, 3b, 4, 5(A), (B), 6, and 7,
despite the written instructions under section 131 regarding how the application should be
completed.
Under section 2b, the "Gambling Establishment (cardroom) Name" was listed as
"Sahara Dunes Management, Inc.," and "N/A" was written under section 2b. Under section
3a, regarding "Entity Structure," the "Corporation" box was checked. Section 3b listed the
"entity name" as "Sahara Dunes Management, Inc.," stated that Ted Kingston was "Pres."
and owned 2.5 percent and "Joe Kingston" was "Vice Pres." and owned 2.5 percent.32
Section 4 was completed with information about Ted Kingston, with the "officer" box
checked. Ted Kingston signed the application (section 7) as "Pres." on May 11, 2016.
Handwritten on the first page of the application, right after Ted Kingston's name, was the
number "GEOW-003733," which Ted Kingston stated he did not write.'
The parties disputed whether this was Management, Inc.'s application or Ted
Kingston's application. Ted Kingston testified that this document was an application he
completed for Management, Inc.; he explained that he wrote his name as the "applicant"
because he thought that when the form asked for the "name of applicant," that it "wanted the
person that was filling it out on behalf of the corporation." Mr. Zuniga also reviewed this
exhibit during the hearing and testified that this was Management, Inc.'s application,
although Mr. Zuniga acknowledged that the application was not complete because it did not
include the supplemental background investigation information form that the bureau needed.
Ms. Ward considered this application to be Ted Kingston's application as an officer of
Management, Inc.; she did not consider it to be Management, Inc.'s application. Some of
Assistant Director Morrow's testimony contradicted Ms. Ward's interpretation of this
document. And at the very least, the confusing nature of the bureau's forms, as well as the
31 The instructions in section 1 of this application, which appeared to be the version of

the same form, were the same as included on the application the bureau received on April 25,
2016.
32 These percentages obviously differed from the other evidence presented that Ted
and Joseph Kingston each owned 50 percent of the shares of Management, Inc. During his
testimony, Ted Kingston explained that because Management, Inc. owned a 5 percent
interest in the limited partnership, and Ted and Joseph Kingston each owned equal shares of
Management, Inc., he wrote 2.5 percent on this document to represent their equal halves of
Management, Inc.'s 5 percent interest.
33 That number is the LIS identifying number the bureau assigned to Ted Kingston as
a 50 percent shareholder of Management, Inc., as listed in the bureau's September 23, 2016,
report recommending denial.
27
confusing manner in which Ted Kingston completed the forms, became abundantly clear
during Ms. Morrow's testimony.
During direct examination, Ms. Morrow testified about this document (Exhibit 29) as
follows (March 6, 2019, Transcript, pp. 132:18-134:5)34:
Q . . . Let's look at Exhibit 29.
A (Peruses document)
Q What is that?
A This is an application for state gambling license.
Q And who is the applicant?
A (Peruses document) It looks like it's Sahara Dunes

Management, Inc.
Q I'm sorry. What?
A It looks like it's Sahara Dunes Management, Inc.
Q And what is the basis of reaching that conclusion?
A (Peruses document) I'm sorry. This looks like it's an

application for Ted Kingston.
M • • • [id
Q ... So you said that this is an application for Ted

Kingston. What's the basis for that conclusion?
A He is listed as the applicant on the first page and the

individual applicant information on the third page.
Q Okay. And third page being BCG140?
A Yes.
34 The reporter's certified transcript of the hearing was lodged by complainant,

marked for identification, and included with the exhibits submitted in this matter.
28
Q And that's in section 4?
A Yes.
On cross-examination, Ms. Morrow further testified (March 6, 2019, Transcript, pp.

134:25-135:21):
Q You initially responded that you looked at Exhibit 29 as

an application on behalf of Sahara Dunes Management,
Inc; correct?
A Correct.
Q I assume that's because you looked at the box on page 1,

in the middle left, where it says Sahara Dunes
Management, Inc. DBA or Lake Elsinore Casino,
correct.
It was actually because I looked at page 2 and saw the

entity information filled at the bottom, but I noticed that
the type of application at the top wasn't completed.
Q Okay. So, and you've been - - you've been with the

Bureau for 10 years?
A Correct.
Q Correct? And with some tie into the licensing side of the
licensing division of the Bureau the whole time?
A Yes.
Q And yet, you were confused initially when you looked at

Exhibit 29: correct?
A Upon first glance, yes.
THE BUREAU'S Two JUNE 29, 2016, LETTERS
42. On June 29, 2016, the bureau sent two letters to Mr. Amiga, one from Ms.
Ward and one from Ms. Asuncion.
///
29
The June 29.2016, Letter from Ms. Ward (Exhibit 32)
43. Ms. Ward's letter was described as a "Final Notice" and stated that the bureau
required additional information to proceed with its background investigation. The letter
noted that the bureau had "received some of the information that was previously requested;
however, Joseph Kingston has not submitted his Application for State Gambling License
(BGC-030) with the necessary supporting documentation, indicating his ownership interest
as a shareholder of Sahara Dunes Management, Inc. and as a partner of Sahara Dunes
Casino, LP." The letter then stated that "out of an abundance of caution and fairness, we are
granting Joseph Kingston one final opportunity to comply," and it gave Joseph Kingston
until July 9, 2016, to provide the following information:
1. Two Applications for State Gambling License (BGC-030)

indicating Joseph Kingston's ownership interest as a shareholder
of Sahara Dunes Management, Inc. and as a partner of Sahara
Dunes Casino, LP.
2. Individual Supplemental Background Investigation (BGC-

015A) form, along with all required documents listed on the
form.
Ms. Ward's June 29, 2016, letter, did not state that Casino, Management, Inc., or Ted
Kingston had failed to submit any required applications, supplemental background
investigation forms, or any necessary documentation, nor did the letter request additional
information from anyone other than Joseph Kingston. During her hearing testimony, Ms.
Ward stated that the purpose of this letter was to give "Joseph Kingston a final opportunity to
comply." She also testified that as of June 29, 2016, Management, Inc. still had not
complied with the bureau's requests, although she agreed that was not mentioned in this
letter and she was not sure why Management, Inc.'s failure to comply was not mentioned.
She stated that may have been an "oversight." Despite Ms. Ward's explanation, her June 29,
2016, letter's failure to request that Management, Inc. to submit anything suggested the
bureau had already received Management, Inc's application and supplemental background
investigation information.
The June 29, 2016, Letter from Ms. Asuncion (Exhibit 33)
44. Ms. Asuncion's June 29, 2016, letter noted that Mr. Zuniga had advised that
Joseph Kingston was not physically and mentally able to submit an application for a State
Gambling License and responded to Mr. Zuniga's May 11, 2016, letter. Ms. Asuncion's
letter stated: "We understand your concerns; however, the Gambling Control Act (CGA)
requires the licensure of all individuals who actively receive profits from a cardroom's
operations. Since Joseph Kingston is still an active owner, he must submit the requested
Applications and supporting documentation." Ms. Asuncion's letter also stated the following
regarding Mr. Kingston's desire to transfer his interest to his cousin, Chad Benson:
30
It is our understanding that Joseph Kingston desires to transfer
his ownership interest in the cardroom to his cousin, Chad
Benson. In order for a transfer of cardroom interest to occur,
the transferor and transferee must be fully licensed, and the
transactional document must be reviewed by the Bureau of
Gambling Control and approved by the California Gambling
Control Commission. Joseph Kingston only has a provisional
license, and we have not to date received an Application for
Chad Benson. Thus, in order to consider this request, we must
receive completed application packages as well as an official
transactional document from Mr. Kingston describing his
proposed transfer.
The Bureau has repeatedly requested the above documentation

from you, by letters dated September 30, 2015; March 3, 2016;
April 22, 2016; and most recently in our deficiency letter dated
May 10, 2016. In order to proceed with your request, please
submit the transactional document and completed application
packages for Joseph Kingston and Chad Benson as soon as
possible, but no later than July 9, 2016. Failure to address the
above issues may result in a denial of Joseph Kingston . . . .
During her hearing testimony, Ms. Asuncion stated that when she sent this letter, she
understood Joseph Kingston was ill, but that the "Gambling Control Act requires that the full
partnership apply and be found suitable for licensing before Mr. Kingston can actually
transfer his ownership interest to someone else."' Ms. Asuncion testified that although she
understood Joseph Kingston wanted to transfer his interest to Chad Benson, in her letter, she
"emphasized" that Joseph Kingston and Chad Benson both "had to submit an application,
along with the supplemental information and transactional documents." Ms. Asuncion noted
that the information in this letter was not different from anything she had previously told Mr.
Zuniga. Ms. Asuncion acknowledged that she had never encountered a situation where an
old and/or sick licensee had refused to submit an application.
MR. ZUNIGA'S JULY 11, 2016, LETTER
45. On July 11, 2016, Mr. Zuniga wrote to Ms. Ward to respond to the June 29,
2016, letters from Ms. Ward and Ms. Asuncion. In his July 11, 2016, letter, he advised:
As you acknowledge, Mr. Kingston's [sic] is physically and

mentally unable to respond to the Bureau's request for
3' While the Act requires all partners to apply, Ms. Asuncion did not point to any
specific portion of the Act requiring Joseph Kingston to apply and be found suitable for
licensing before he could transfer his interest. This legal issue is addressed further in the
Legal Conclusions section of this decision.
31
additional information. He is aware of the implications of his
inability to fulfill this request and is willing to accept the
consequences due to his inability to personally respond to these
requests.
Unfortunately, the arduous nature of collecting and reviewing

the information requested is not within his capabilities at this
time. As you know, this unique situation which has been. unduly
prolonged by the delay in proceeding with the Evidentiary
Hearing, has taken its toll on this applicant. It has been his
desire to transfer his ownership interest. However, given the
fact that a denial recommendation for him as an owner is
imminent due to his inability to provide the information you are
requesting, please be advised that Mr. Kingston, Sahara Dunes
Management, Inc. and Sahara Dunes Casino, LP, will take
necessary steps to comply with all statutes/regulations
governing the protection of assets from unlicensed owners. This
includes the creation of a trust account to safeguard any
shares/distributions which can no longer be made to Mr.
Kingston.' The ownership group will do what is necessary to
continue with the licensing process with full knowledge that Mr.
Kingston will be subject to denial as stated in your
correspondence.
At this time, the cardroom will not enter into transactions that
will affect Mr. Kingston's ownership interest until such time
that the gambling establishment's State gambling license issue
is ultimately resolved.
According to Mr. Zuniga, when he wrote this letter, he had the proposed transaction
documents that Mr. Benson had sent him, but he did not forward them to the bureau because
"[t]hey told me not to." However, he could not recall when that conversation occurred or
who told him that, and he did not mention that fact in any of his letters to the bureau. His
inability to provide such details cast serious doubt on the veracity of his testimony on this
topic. Additionally, because Casino and its owners were relying on Mr. Zuniga's advice
when dealing with these important licensing issues, Mr. Zuniga would be motivated to blame
the bureau because, if Mr. Zuniga had failed to notify the bureau of the existence of the
transaction documents, it could certainly put him in an awkward position with his clients.
Given Mr. Zuniga's inherent bias, his failure to mention the transactional documents in his
letters to the bureau, and his inability to recall more specific information regarding what
would have been a significant development, his testimony that an unidentified bureau
employee told him not to submit the transactional documents was found not to be credible.
36 There was no evidence presented at the hearing that any such trust had been
created.
32
On the other hand, complainant's witnesses' denials that they ever "discouraged"
Casino or its owners from submitting information came off as disingenuous given Ms.
Asuncion's June 29, 2016, letter. That letter placed Casino and its owners in a no-win
situation, by requiring, without the benefit of supporting legal authority, that in order for a
transfer of Joseph Kingston's interest to be approved, Joseph Kingston must submit a license
application and supporting documents, which the bureau had repeatedly been told he was
unable to do.
The bureau did not respond to Mr. Zuniga's July 11, 2016, letter.
ADDITIONAL PAGES AND SCHEDULES SUBMITTED TO THE BUREAU IN AUGUST 2016

(ExErmiT 35)
46. On August 29, 2016,37 Mr. Zuniga submitted additional pages and schedules to
the bureau regarding a Gambling Establishment Owner Applicant-Individual Supplemental
Background Investigation Information form completed by Ted Kingston.' Also included
was a "Supporting Documentation Checklist" signed by Ted Kingston, which Ms. Ward
stated was the final page of a supplemental form for an individual. Although most of the
pages concerned Ted Kingston's individual assets and expenses, one of the pages appeared to
list asset and liability figures for an entity, but it did not indicate which entity.
THE BUREAU'S SEPTEMBER 23, 2016, DENIAL RECOMMENDATION
47. Between six and seven months after the Commission directed the bureau to
update its investigation, and less than one month after Ted Kingston provided the additional
schedules on August 29, 2016, the bureau issued its September 23, 2016, report,
recommending denial of Casino's application. The bureau had decided to recommend denial
by September 9, 2016, the date it conducted a pre-denial meeting with Mr. Zuniga.
Ms. Ward described the time from February 25, 2016, until the September 23, 2016,
report as a "relatively short" period of time to complete a level III investigation and decide to
recommend denial. Usually it took eight months to two years39 to conduct an investigation
and make a recommendation. Here, however, the bureau recommended denial so quickly
37 Although the pages contained a stamp showing they were received by the bureau on
August 29, 2016, Ted Kingston's initials and signatures were dated "8/30/16." There was no
explanation regarding this discrepancy; the "8/30/16" date appeared to be an error in light of
the August 29, 2016, email transmitting the pages to the bureau and the bureau's
corresponding August 29, 2016, received stamp.
38 Several of the pages and schedules were blank except for the word "None" and Ted
Kingston's signature.
39 After Casino's 1999 application, it had had taken approximately nine years before
the investigation was completed and the denial recommendation was made.
33
because it never received all the applications and other supporting information it requested
from Casino's owners, so the bureau could not really do an investigation. As a result, the
bureau did not have much work to do in this matter.
Sahara Dunes Management, Inc.'s Use of the "JTI, Inc." Name and Later Name Change to
"JTI Management, Inc."
48. Beginning sometime in the year 2013, Management, Inc. began using the
name "JTI, Inc.," including on its form 11205 federal income tax returns for the years 2012
through 2016. Casino and its owners did not notify the bureau regarding Management, Inc.'s
use of a different name, and the applications and supplemental information forms Ted
Kingston submitted in 2016 did not disclose anything about Management, Inc. using a
different name.
49. In September 2017, after the bureau discovered that "JTI, Inc." was somehow
involved with Casino, bureau employee Ron Ahn sent an email to Mr. Benson asking him to
identify the owners of JTI, Inc., explain whether either Ted or Joseph Kingston owned shares
of JTI, Inc., and submit tax returns for the past five years. Mr. Benson responded by email
on October 16, 2017, with the following information:
1. The owners of JTI Inc. are Ted Kingston and Joseph

Kingston each owning 50%. JTI Inc. is the same as Sahara
Dunes Management Inc. The change was registered with the
IRS but the service we use to maintain the registration with the
California Secretary of State failed to update the name with the
state of California. The EIN number [number redacted] has
always remained the same under both names. Furthermore, the
California state tax returns have been getting filed under the
name JTI Inc.
2. Tax returns are being mailed today for JTI Inc. along with
Sahara Dunes Casino's 2016 return.
50. On February 20, 2018, Management, Inc. filed a Certificate of Amendment of

Articles of Incorporation with the California Secretary of State, changing the corporate name
from "Sahara Dunes Management, Inc." to "JTI Management Inc."
During his hearing testimony, Ted Kingston explained that when Management, Inc.
began using the name "JTI, Inc.," no one checked the name with the Secretary of State.
Before filing the Certificate of Amendment of Articles of Incorporation in 2018, it was
discovered that another entity already had the name "JTI, Inc." It was therefore decided to
change the name to "JTI Management Inc." When Ted Kingston was asked why it had taken
so long for the name to be checked and changed with the Secretary of State, Ted Kingston
responded, "Pretty much just oversight on my part. I didn't see to it that it got done. So I
didn't think about it until we wanted to amend the paperwork and found out." After the
34
amendment was filed, the employer identification and tax ID numbers remained the same, as
did the ownership structure.
51. Ted Kingston explained that Management, Inc. started to use the name "JTI,
Inc." because the names "Sahara Dunes, LP," and "Sahara Dunes Management, Inc." were so
close that it caused confusion. According to Ted Kingston, because of the confusion,
"paperwork filings that we would do to and from the state, for instance, they would send out
the wrong information under the wrong company name. . . . And sometimes when we'd have
a labor dispute, the opposing attorneys would file to the wrong company, and they would
have to go back and file to the right company." He stated there were also several times when
the bureau mixed things up. Ted Kingston said it was his fault that the bureau was not
notified of the name change. He "figured that the ID numbers and the tax ID numbers were
the same," and he "just didn't think about it."
Inconsistencies Regarding the Percentage Ownership Interests in Documents Submitted to

the Secretary of State Regarding the Limited Partnership
52. On May 31, 2017, the limited partnership filed an Amendment to Certificate of
Limited Partnership with the California Secretary of State. That filing included an exhibit
which stated that Joseph Kingston and Ted Kingston each held 21.75 percent interests in the
limited partnership and the general partner's interest was 56.50 percent. Ted Kingston
believed that exhibit showed percentages that existed back when his father was still alive and
it was erroneously supplied to the Secretary of State.
Prosecution Costs
53. Although the Third Amended Statement of Issues requested cost

reimbursement, complainant did not submit any evidence regarding costs.
LEGAL CONCLUSIONS
Complainant's Pleading, Styled as a "Statement of Issues," Sought Both Denial of Licensure

and Revocation of a Provisional License
1. Complainant's operative pleading was titled "Third Amended Statement of

Issues" and sought denial of licensure, which was appropriately alleged in a statement of
issues. (Gov. Code, § 11504; Cal. Code Regs., tit 4, § 12058, subd. (c).)
2. Complainant's pleading also sought cancellation' of a provisional license,

which should have been alleged in an accusation. Business and Professions Code section
19930, subdivision (b), and California Code of Regulations, title 4, section 12554,
4° According to Meriam-Webster (www.meriam-webster.com) "cancellation" is

synonym of "revocation" and vice versa.
35
subdivisions (a) and (c),41 require the bureau to file an accusation under Chapter 5
(commencing with section 11500) of Part 1 of Division 3 of Title 2 of the Government Code
in order to initiate a formal proceeding to pursue revocation or suspension of a license,
registration or peimit.
penult. Government Code section 11503, subdivision (a), further states:
A hearing to determine whether a right, authority, license, or

privilege should be revoked, suspended, limited, or conditioned
shall be initiated by filing an accusation . . . . The accusation
. . . shall be a written statement of charges that shall set forth in
ordinary and concise language the acts or omissions with which
the respondent is charged, to the end that the respondent will be
able to prepare his or her defense. It shall specify the statutes
and rules that the respondent is alleged to have violated, but
shall not consist merely of charges phrased in the language of
those statutes and rules. The accusation . . . shall be verified
unless made by a public officer acting in his or her official
capacity or by an employee of the agency before which the
proceeding is to be held. The verification may be on
information and belief.
belief
3. The Third Amended Statement of Issues sought cancellation of Casino's

provisional license based on the following allegations (at p. 7,11. 10-14):
Respondent's management and operations of the Casino under

the auspices of its provisional license must comply with the
requirements of the Act, and the regulations promulgated
thereunder. Failure to do so renders Respondent unqualified for
licensure and makes Respondent's provisional license subject to
cancellation. (Bus. & Prof. Code, §§
Prof Code, §§ 19857,
19857, subd. (b), 19920 &
19922.)
4. Complainant's pleading put respondent on notice that complainant was

seeking cancellation of respondent's provisional license as well as alleging the grounds and
statutes on which complainant's request was based. Respondent did not object that the
pleading did not include "accusation" in its title. Accordingly, respondent was fully and
fairly apprised of the charges with sufficient certainty to prepare its defense. (See Stoumen v.
Munro (1963) 219 Cal.App.2d 302, 307-308, stating that in "administrative proceedings the
41 Although California Code of Regulations, title 12554, subdivision (c), was cited in
complainant's hearing brief, California Code of Regulations, title 4, section 12550,
subdivision (a), states that chapter 10 (regarding discipline, hearings, and decisions), in
which section 12554 is found, "does not apply to any denial proceedings under the Act."
Chapter 1 of the California Code of Regulations, title 4, which includes section 12058,
contains the procedures for hearings and meetings regarding applications.
36
courts are more interested with fair notice to the accused than they are to adherence to the
technical rules of pleading.")
The Burden and Standard of Proof
5. Respondent bears the burden of proving its qualifications to receive a state

gambling establishment license. (Bus. & Prof. Code, § 19856, subd. (a); Cal. Code of Regs.,
tit. 4, § 12058, subd. (b).)
6. Complainant bears the burden of establishing that the charges supporting

cancellation of the provisional license are true. (Evid. Code, § 500; See Martin v. State
Personnel Board (1972) 26 Cal.App.3d 573, 583.)
7. The standard of proof in this proceeding is the preponderance of the evidence.

(Evid. Code, § 115; Cal. Code Regs., tit. 4, § 12554, subd. (c) (applicable to formal
proceedings to revoke a gambling license); See San Benito Foods v. Veneman (1996) 50
Cal.App.4th 1889, 1892-1895; Imports Performance v. Department of Consumer Affairs,
Bureau of Automotive Repair (2011) 201 Cal.App.4th 911, 916.)
8. California Code of Regulations, title 4, section 12554, subdivision (c), which

applies to formal proceedings to revoke or suspend a gambling license, defines
"preponderance of the evidence" as "such evidence as when considered and compared with
that opposed to it, has more convincing force, and produces a belief in the mind of the fact-
finder that what is sought, to be proved is more likely true than not true."
9. Similarly, the standard has been defined by appellate court decisions as

follows: "'Preponderance of the evidence means evidence that has more convincing force
than that opposed to it.' [Citations.]" (Glage v. Hawes Firearms Company (1990) 226
Cal.App.3d 314, 324-325.) "The sole focus of the legal definition of 'preponderance' in the
phrase 'preponderance of the evidence' is on the quality of the evidence. The quantity of the
evidence presented by each side is irrelevant." (Ibid., italics in original.) "If the evidence is
so evenly balanced that you are unable to say that the evidence on either side of an issue
preponderates, your finding on that issue must be against the party who had the burden of
proving it. [Citation.]" (People v. Mabini (2001) 92 Cal.App.4th 654, 663.)
The Gambling Control Act
10. The Gambling Control Act (Bus. & Prof. Code § 19800 et seq.) governs the
regulation and licensure of gambling establishments. As explained in the Legislative
Findings and Declarations set forth in Business and Professions Code section 19801, the
legislature has determined that "[u]nregulated gambling enterprises are inimical to the public
health, safety, welfare, and good order," Iplublic trust and confidence can only be
maintained by strict and comprehensive regulation" of gambling businesses, and gambling
establishments "must be licensed and regulated to protect the public health, safety, and
37 .
general welfare of the residents of this state as an exercise of the police powers." (Bus. &
Prof. Code § 19801, subds. (d), (h), and (i); see also, Bus. & Prof. Code, § 19971.)
THE COMMISSION'S JURISDICTION, RESPONSIBILI ILES, AND POWERS
11. The California Gambling Control Commission has jurisdiction over the
"operation and concentration, and supervision over gambling establishments in this state and
over all persons or things having to do with the operations of gambling establishments is
vested in the commission." (Bus. & Prof. Code, § 19811, subds. (a) and (b).)
12. Pursuant to Business and Professions Code section 19823, the

Commission is responsible for ensuring that: "[L]icenses, approvals, and permits are
not issued to, or held by, unqualified or disqualified persons, or by persons whose
operations are conducted in a manner that is inimical to the public health, safety, or
welfare" (subdivision (a)(1)); and "there is no material involvement, directly or
indirectly, with a licensed gambling operation, or the ownership or management
thereof, by unqualified or disqualified persons, or by persons whose operations are
conducted in a manner that is inimical to the public health, safety, or welfare"
(subdivision (a)(2)). Section 19823, subdivision (b), defines an "unqualified person"
as "a person who is found to be unqualified pursuant to the criteria set forth in Section
19857," and a "disqualified person" as "a person who is found to be disqualified
pursuant to the criteria set forth in Section 19859."
13. Business and Professions Code section 19824 states:
The commission shall have all powers necessary and proper to

enable it fully and effectually to carry out the policies and
purposes of this chapter, including, without limitation, the
power to do all of the following:
(a) Require any person to apply for a license, permit,

registration, or approval as specified in this chapter, or
regulations adopted pursuant to this chapter.
(b) For any cause deemed reasonable by the commission, deny

any application for a license, permit, or approval provided for in
this chapter or regulations adopted pursuant to this chapter,
limit, condition, or restrict any license, permit, or approval, or
impose any fine upon any person licensed or approved. The
commission may condition, restrict, discipline, or take action
against the license of an individual owner endorsed on the
license certificate of the gambling enterprise whether or not the
commission takes action against the license of the gambling
enterprise.
38
(c) Approve or disapprove transactions, events, and processes as
provided in this chapter.
(d) Take actions deemed to be reasonable to ensure that no

ineligible, unqualified, disqualified, or unsuitable persons are
associated with controlled gambling activities.
(e) Take actions deemed to be reasonable to ensure that

gambling activities take place only in suitable locations.
(f) Grant temporary licenses, permits, or approvals on

appropriate teiiiis and conditions.
(g) Institute a civil action in any superior court against any

person subject to this chapter to restrain a violation of this
chapter. An action brought against a person pursuant to this
section does not preclude a criminal action or administrative
proceeding against that person by the Attorney General or any
district attorney or city attorney.
(h) Issue subpoenas to compel attendance of witnesses and

production of documents and other material things at a meeting
or hearing of the commission or its committees, including
advisory committees.
14. Additionally, Business and Professions Code section 19825 provides:
The commission may require that any matter that the

commission is authorized or required to consider in a hearing or
meeting of an adjudicative nature regarding the denial,
suspension, or revocation of a license, permit, or a finding of
suitability, be heard and determined in accordance with Chapter
5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code.
THE BUREAU'S RESPONSIBILITIES
15. Business and Professions Code section 19826, subdivisions (a), (b), and (e),
set forth the following investigatory functions of the bureau:
The department' shall perform all investigatory functions
required by this chapter, as well as auditing functions under
tribal gaming compacts, and shall have all of the following
responsibilities:
(a) To receive and process applications for any license, permit,

or other approval, and to collect all related fees. The department
shall investigate the qualifications of applicants before any
license, permit, or other approval is issued, and investigate any
request to the commission for any approval that may be required
pursuant to this chapter. The department may recommend the
denial or the limitation, conditioning, or restriction of any
license, permit, or other approval.
(b) To monitor the conduct of all licensees and other persons

having a material involvement, directly or indirectly, with a
gambling operation or its holding company, for the purpose of
ensuring that licenses are not issued or held by, and that there is
no direct or indirect material involvement with, a gambling
operation or holding company by ineligible, unqualified,
disqualified, or unsuitable persons, or persons whose operations
are conducted in a manner that is inimical to the public health,
safety, or welfare.
[¶] ... [111
(e) To initiate, where appropriate, disciplinary actions as

provided in this chapter. In connection with any disciplinary
action, the department may seek restriction, limitation,
suspension, or revocation of any license or approval, or the
imposition of any fine upon any person licensed or approved.
REQUIREMENT THAT GAMBLING ESTABLISHMENTS AND THEIR OWNERS (INCLUDING

PARTNERS, SHAREHOLDERS, OFFICERS, AND DIRECTORS) MUST BE LICENSED
16. Business and Professions Code section 19850 requires that:
Every person who, either as owner, lessee, or employee,

whether for hire or not, either solely or in conjunction with
others, deals, operates, carries on, conducts, maintains, or
42 The Code refers to the "department," which Business and Professions Code section
19805, subdivision (h), defines as the "Department of Justice." The Bureau of Gambling
Control, referred to as the "bureau" in this decision, is a bureau within the Department of
Justice.
40
exposes for play any controlled game in this state, or who
receives, directly or indirectly, any compensation or reward, or
any percentage or share of the money or property played, for
keeping, running, or carrying on any controlled game in this
state, shall apply for and obtain from the commission, and shall
thereafter maintain, a valid state gambling license, key
employee license, or work permit, as specified in this chapter.
In any criminal prosecution for violation of this section, the
punishment shall be as provided in Section 337j of the Penal
Code.
17. Business and Professions Code section 19851 provides:
(a) The owner of a gambling enterprise shall apply for and

obtain a state gambling license. The owner of a gambling
enterprise shall be known as the owner-licensee.
(b) Other persons who also obtain a state gambling license, as

required by this chapter, shall not receive a separate license
certificate, but the license of every such person shall be
endorsed on the license certificate that is issued to the owner of
the gambling enterprise.'
18. Business and Professions Code section 19852, subdivisions (a) and (d), state:
Except as provided in Section 19852.2,44 an owner of a

gambling enterprise that is not a natural person shall not be
eligible for a state gambling license unless each of the following
persons individually applies for and obtains a state gambling
license:
///
43
Consistent with Business and Professions Code section 19851, subdivision (b),
California Code of Regulations, title 4, section 12220.1 states: "(a) The Commission shall
issue a registration or license certificate with an expiration date, applicable, to each primary
owner," and "(b) The Commission shall endorse upon each certificate the names of all other
owners affiliated with the primary owner."
44 Section 19852.2 concerns "card clubs located on any portion of, or contiguous to,
the grounds upon which a racetrack is or had been previously located" and is not applicable
to this case.
41
(a) If the owner is a corporation, then each officer, director, and
shareholder, other than a holding or intermediary company, of
the owner. The foregoing does not apply to an owner that is
either a publicly traded racing association or a qualified racing
association.
[¶] ... [¶]
(d) If the owner is a partnership, then every general and limited

partner of, and every trustee or person, other than a holding or
inteiniediary company, having or acquiring a direct or beneficial
interest in, that partnership owner.
19. Business and Professions Code section 19855 states:
Except as otherwise provided by statute or regulation, every

person who, by statute or regulation, is required to hold a state
license shall obtain the license prior to engaging in the activity
or occupying the position with respect to which the license is
required. Every person who, by order of the commission, is
required to apply for a gambling license or a finding of
suitability shall file the application within 45 calendar days after
receipt of the order.
(a) Any person who the commission determines is qualified to

receive a state license, having due consideration for the proper
protection of the health, safety, and general welfare of the
residents of the State of California and the declared policy of
this state, may be issued a license. The burden of proving his or
her qualifications to receive any license is on the applicant.'
(b) An application to receive a license constitutes a request for a

determination of the applicant's general character, integrity, and
ability to participate in, engage in, or be associated with,
controlled gambling.
(c) In reviewing an application for any license, the commission

shall consider whether issuance of the license is inimical to the
as California Code of Regulations, title 11, section 2142, subdivision (a), also
provides that "[e]very natural person who holds a provisional license as a result of holding a
valid and unexpired annual registration on December 31, 1997, shall be rebuttably presumed
to be suitable for licensure pursuant to the Act."
public health, safety, or welfare, and whether issuance of the
license will undermine public trust that the gambling operations
with respect to which the license would be issued are free from
criminal and dishonest elements and would be conducted
honestly.
STATUTORY CRITERIA TO GRANT OR DENY A GAMBLING LICENSE
21. Business and Professions Code section 19857, subdivisions (a) and (b),
provide:
No gambling license shall be issued unless, based on all of the

information and documents submitted, the commission is
satisfied that the applicant is all of the following:
(a) A person of good character, honesty, and integrity.
(b) A person whose prior activities, criminal record, if any,

reputation, habits, and associations do not pose a threat to the
public interest of this state, or to the effective regulation and
control of controlled gambling, or create or enhance the dangers
of unsuitable, unfair, or illegal practices, methods, and activities
in the conduct of controlled gambling or in the carrying on of
the business and fmancial arrangements incidental thereto.
(c) A person that is in all other respects qualified to be licensed

as provided in this chapter.
22. Business and Professions Code section 19859, subdivisions (a) and (b), state:
The commission shall deny a license to any applicant who is

disqualified for any of the following reasons:
(a) Failure of the applicant to clearly establish eligibility and

qualification in accordance with this chapter.
(b) Failure of the applicant to provide information,

documentation, and assurances required by this chapter or
requested by the chief,46 or failure of the applicant to reveal any
fact material to qualification, or the supplying of information
that is untrue or misleading as to a material fact pertaining to the
qualification criteria.
46As was explained in the Factual Findings, the "Chief' title has since been changed
to "Director."
43
LICENSE APPLICATION REQUIREMENTS
23. Business and Professions Code section 19864 provides that:
(a) Application for a state license or other commission action

shall be submitted to the department on forms furnished by the
department.
(b) The application for a gambling license shall include all of

the following:
(1) The name of the proposed licensee.
(2) The name and location of the proposed gambling

establishment.
(3) The gambling games proposed to be conducted.
(4) The names of all persons directly or indirectly interested in

the business and the nature of the interest.
(5) A description of the proposed gambling establishment and

operation.
(6) Any other information and details the commission may

require in order to discharge its duties properly.
The department shall furnish to the applicant supplemental

forms, which the applicant shall complete and file with the
department. These supplemental forms shall require, but shall
not be limited to requiring, complete information and details
with respect to the applicant's personal history, habits,
character, criminal record, business activities, fmancial affairs,
and business associates, covering at least a 10-year period
immediately preceding the date of filing of the application.
Each applicant shall submit two sets of fingerprints, using "live
scan" [sic] or other prevailing, accepted technology, or on forms
provided by the department. The department may submit one
fingerprint card to the United States Federal Bureau of
Investigation.
44
25. Business and Professions Code section 19866 also requires license applicants
to "make full and true disclosure of all information to the department and the commission as
necessary to carry out the policies of this state relating to licensing, registration, and control
of gambling."
CORPORATE AND PARTNERSHIP INTERESTS IN GAMBLING ESTABLISHMENTS, AND

TRANSFER OF SUCH INTERESTS, INCLUDING DIVESTITURE AFTER A LICENSE IS DENIED
With regard to a person who has had his or her application for a
license denied by the commission, all of the following shall
apply:
(a) Except as provided in subdivision (c), the person shall not be

entitled to profit from his or her investment in any business
entity that has applied for or been granted a state license.
(b) The person shall not retain his or her interest in a business
entity described in subdivision (a) beyond that period prescribed
by the commission.
(c) The person shall not accept more for his or her interest in a
business entity described in subdivision (a) than he or she paid
for it, or the market value on the date of the denial of the license
or registration, whichever is higher.
(d) Nothing in this section shall be construed as a restriction or

limitation on the powers of the commission specified in this
chapter.
(a) If at any time the commission denies a license to, or revokes

the license of, an individual owner of any security issued by a
corporation that applies for or holds an owner license, the
commission shall immediately notify the individual and the
corporation of that fact. The owner of the security shall sell the
security for an amount not greater than fair market value, within
60 calendar days of the denial or revocation. Upon a showing of
due diligence, the commission may extend the time for selling
the security.
45
(b) Beginning upon the date when the commission serves notice
of the denial upon the corporation, it is unlawful for the denied
security owner to do any of the following:
(1) Receive any dividend, income, or interest upon any security

described in subdivision (a), except dividends equal to the good
faith estimate of the owner's personal share of any income tax
due on the ownership interest until the date of the sale, as
determined in writing by an independent certified public
accountant, or as may be necessary to protect the election of the
gambling enterprise to be treated as an "S corporation" under
Subchapter S (commencing with Section 1361) of Chapter 1 of
Subtitle A of the Internal Revenue Code.
(2) Exercise, directly or through any trustee or nominee, any

voting right conferred by any security described in subdivision
(a).
(3) Receive any remuneration in any form from the corporation

for services rendered or for any other purpose.
(c) Every security issued by a corporate owner licensee shall

bear a statement, on both sides of the certificate evidencing the
security, of the restrictions imposed by this section.
28. Business and Professions Code section 19883, subdivision (d), also states that
"[i]f any shareholder who is required to apply for a gambling license fails to apply for the
license within the time required, the shareholder shall be deemed to have been denied a
license for purposes of subdivision (b) of Section 19882."
(a) The purported sale, assignment, transfer, pledge, or other

disposition of any interest in a partnership or limited liability
company that holds a gambling license, or the grant of an option
to purchase the interest, is void unless approved in advance by
the commission.
(b) If at any time the commission denies a license to, or revokes

the license of, an individual owner of any interest described in
subdivision (a), the commission shall immediately notify the
individual and the partnership or limited liability company of
that fact. The individual denied a license, or whose license is
revoked, shall sell his or her interest in an amount not greater
than fair market value, within 60 calendar days of the denial or
46
revocation. Upon a showing of due diligence, the commission
may extend the time for selling the security.
(c) Beginning upon the date when the commission serves a

notice of denial upon the partnership or limited liability
company, it is unlawful for the denied owner of the interest to
do any of the following:
(1) Receive any share of the revenue or interest upon the

partnership or limited liability company interest, except
distributions equal to the good faith estimate of the owner's
personal share of any income tax due on the ownership interest
until the date of the sale as determined in writing by an
independent certified public accountant.
(2) Exercise, directly or through any trustee or nominee, any

voting right conferred by that interest.
(3) Receive any remuneration in any form from the partnership,

for services rendered or for any other purpose.
(d) Every certificate of limited partnership of any limited

partnership or limited liability company holding a gambling
license shall contain a statement of the restrictions imposed by
this section.
To the extent required by this chapter, general partners, limited

partners, lenders, members, managers, holders of evidence of
indebtedness, underwriters, agents, or employees of a
partnership or limited liability company that holds or applies for
a license to own a gambling enterprise shall be licensed
individually. The partnership or limited liability company shall
require these persons to apply for and obtain a gambling license.
A person who is required to be licensed by this section as a
partner, manager, or member shall not hold that position until he
or she secures the required approval of, or a temporary license
issued by, the commission. A person who is required to be
licensed pursuant to a decision of the commission shall apply
for a license within 30 days after the commission requests him
or her to do so.
47
31. Business and Professions Code section 19900, subdivision (a), also states:
(a) Except as may be provided by regulation of the commission,

the following security interests shall not be enforced without the
prior approval of the commission and compliance with
regulations adopted pursuant to subdivision (b):
(1) In a security issued by a corporation that is a holder of a

gambling license in this state.
MI] • • • Elf]
(3) In a security issued by a partnership, limited partnership, or

limited liability company that is a holder of a gambling license
in this state:
Regulatory Authority
32. California Code of Regulations, title 4, section 12050, subdivision (b),

provides:
The Commissioners, or Administrative Law Judge sitting on

behalf of the Commission at an APA hearing, will determine
what, if any, significance the Bureau's or Commission staff's
recommendation shall have regarding the merits of the
application. The Commissioners and Administrative Law Judge
are not bound by the recommendation's rationale or conclusions
in any way.
33. California Code of Regulations, title 4, section 12068, subdivisions (c) and (d),
provide:
When an application is denied or conditions, limitations, or

restrictions are imposed under the Act or this chapter and that
decision is final under Section 12066, any requirements set forth
in the decision shall be complied with, and the following shall
apply to the extent not inconsistent with the decision, as
applicable:
[li] • • • PR]
(c)(1) If the denied applicant is a general or limited partner in a

general or limited partnership licensed, registered, or found
suitable by the Commission, the denied applicant shall resign as
48
a partner according to the date specified in the Commission's
decision and shall so notify the Commission in writing.
(2) If the denied applicant is an owner or holder of an interest in

a limited partnership licensed, registered, or found suitable by
the Commission, the denied applicant and the limited
partnership shall comply with Business and Professions Code
section 19892 and shall so notify the Commission in writing.
(d) If the denied applicant is a principal in a business entity not

otherwise described above that is licensed, registered, or found
suitable by the Commission:
(1) The denied applicant shall resign his or her position within
that entity and divest whatever interest is held in that entity
pursuant to the timelines and instructions specified in the
Commission's decision, and shall so notify the Commission in
writing.
(2) The business entity shall remove the denied applicant from
any principal role in the business entity and shall so notify the
Commission in writing.
34. Similarly, California Code of Regulations, title 4, section 12554, subdivision

(e), allows the Commission to stay a revocation ordered after an administrative hearing of an
accusation in order to allow the person whose license is revoked to sell or divest his or her
interest in the gambling establishment:
(e) If a person's state gambling license for a gambling

establishment is revoked by the Commission pursuant to this
chapter, the Commission may stay such revocation for a
reasonable period of time to allow such person to sell or divest
himself or herself of such person's ownership interest in the
gambling establishment, provided that after the date on which
the revocation is stayed by the Commission, such person shall
not be entitled to, realize, or receive any profits, distributions, or
payments that might directly or indirectly be due to such person
or which arise out of, are attributable to, or are derived from
controlled gambling.
Authority Related to Complainant's Request for an Order Revoking or Cancelling Casino's

Provisional License
35. Complainant asserted that, because the Act requires licensure of all owners of
a card room, if any of its owners are denied licensure, grounds exist to cancel Casino's
49
provisional license, citing Business and Professions Code sections 19920 and 19922 and
California Code of Regulations, title 11, section 2141, subdivision (b).
It is the policy of the State of California to require that all

establishments wherein controlled gambling is conducted in this
state be operated in a manner suitable to protect the public
health, safety, and general welfare of the residents of the state.
The responsibility for the employment and maintenance of
suitable methods of operation rests with the owner licensee, and
willful or persistent use or toleration of methods of operation
deemed unsuitable by the commission or by local government
shall constitute grounds for license revocation or other
disciplinary action.
No owner licensee shall operate a gambling enterprise in

violation of any provision of this chapter or any regulation
adopted pursuant to this chapter.
38. California Code of Regulations, title 11, section 2140, subdivision (c), defines
a "provisional license," such as the annual provisional licenses under which Casino has been
operating since the late 1990s, as "a license that is either granted by operation of law
pursuant to Statutes of 1997, Chapter 867, Section 62, or is issued by the Chief pursuant to
that section."
39. California Code of Regulations, title 11, section 2141, states:
(a) A provisional license is held subject to the same conditions,

restrictions, and limitations on the authorization granted by the
predecessor annual or conditional registration.
(b) A provisional license is held subject to all terms and

conditions under which a state gambling license is held pursuant
to the Act.
(c) A provisional license creates no vested right to the issuance

of a state gambling license.
///
50
Case Law Regarding Application of the Doctrine of Laches and/or Unreasonable Delay to
Bar Governmental Action in Administrative Proceedings
40. In Fahmy v. Medical Board of California (1995) 38 Cal.App.4th 810, the First
District Court of Appeal discussed the application of the laches defense in a matter where the
Medical Board had investigated a case for three years and three months before initiating
proceedings against Dr. Fahmy's medical license. The Medical Board received notice of a
patient death in June 1989 and the accusation was not filed until October 1992. After an
administrative hearing, Dr. Fahmy's license was revoked in July 1993. On appeal, Dr.
Fahmy argued that the board's delay initiating the proceeding denied him the right to a fair
hearing, citing Gates v. Department of Motor Vehicles (1979) 94 Cal.App.3d 921, 925,
which had involved an unexplained 16-month delay between discovery of the facts and the
initiation of revocation proceedings.
The court in Fahmy concluded that laches did not apply because, even if the matter
had been brought earlier, "there was no reason to believe there would have been any more
records than were produced," and even assuming certain records were missing, "their
absence did not affect the outcome of this case." (Fahmy, supra, 38 Cal.App.4th at p. 818.)
In reaching this conclusion, the court stated (id. at p. 815, emphasis in original):
The Gates opinion cites several Supreme Court holdings in State

Bar disciplinary proceedings which "suggest[] that dismissal
would be warranted i f a party established that he was
prejudiced by an unreasonable delay in initiating charges
against him." (94 Cal.App.3d at p. 925, italics added.)
Additional authority similarly emphasizes that the burden of
proving prejudice due to delay rests upon the party asserting the
theory: "Laches is an equitable defense which requires both
unreasonable delay and prejudice resulting from the delay. The
party asserting and seeking to benefit from the laches bar bears
the burden of proof on these factors." (Mt. San Antonio
Community College Dist. v. Public Employment Relations Bd.
(1989) 210 Cal.App.3d 178, 188 [258 Cal.Rptr. 302].) Thus, it
is not enough for a tribunal to simply find that a delay was, by
virtue of the passage of time, unreasonable "as a matter of law."
That finding must be supported by substantial evidence of
prejudice. (Id. at p. 189; see also Brown v. State Personnel Bd.
(1985) 166 Cal.App.3d 1151, 1159 [213 Cal.Rptr. 53] ["` [d]elay
is not a bar unless it works to the disadvantage or prejudice of
other parties.'"].)
The Fahmy court further explained (id. at p. 816):
It is important to remember that "a statute of limitations may not

be created by judicial fiat" (Mt. San Antonio Community
51
College Dist. v. Public Employment Relations Bd., supra, 210
Cal.App.3d at p. 188) and that limitations periods "are products
of legislative authority and control." (Zastrow v. Zastrow
(1976) 61 Cal.App.3d 710, 715 [132 Cal.Rptr. 536].) By
focusing solely on the passage of time, and not on the issue of
disadvantage and prejudice, a court risks imposing a de facto-
and impermissible-statute of limitations in a situation where the
Legislature chose not to create a limitation on actions. Even
inordinately long delays in taking administrative action have
been judicially allowed. (See NLRB v. Ironworkers (1984) 466
U.S. 720 [80 L.Ed.2d 715, 104 S.Ct. 2081], where the delay in
taking administrative action lasted from 1978 until 1982, and
related to wrongdoing which occurred from 1972 onward.)
There is without a doubt a realization on the part of the
Legislature that administrative agencies such as the Medical
Board take action for the public welfare rather than for their
own financial gain, and should not be hampered by time limits
in the execution of their duty to take protective remedial action.
41. Mt. San Antonio Community College Dist. v. Public Employment Relations Bd.
(1989) 210 Cal.App3d 178, which was cited in the Fahmy decision, concerned a petition by a
faculty association to enforce a Public Employment Relations Board (PERB) decision
against the Mt. San Antonio Community College District (district). The faculty had filed
unfair practices charges against the district with PERB in 1977, and after an administrative
hearing, PERB issued a decision in 1983, finding against the district and ordering remedial
actions. (Id. at pp. 183-184.) The faculty then filed an unfair practice charge in 1985,
seeking compliance with PERB's earlier order, and compliance proceedings commenced in
1986. (Id. at p. 185.)
At issue on appeal was whether there was a statute of limitations within which to seek
compliance with PERB's earlier decision, and if not, whether the faculty had waited too long
to seek a compliance hearing, and/or whether PERB unreasonably delayed adjudicating the
matter. (Mt. San Antonio, supra, 210 Cal.App3d at p. 186.) In other words, the dispute was
"about whether compliance proceedings for a prior PERB order were initiated and completed
in a timely manner." (Id., at p. 187.) The court of appeal agreed with PERB's findings that
"the delay in initiation and conclusion of compliance proceedings neither caused nor resulted
in prejudice to petitioner other than the accrual of interest." (Ibid.) The appellate court
explained (id. at p. 188):
While a statute of limitations may not be created by judicial fiat,

an analogous limitations period may provide guidance in
deciding whether laches bars a claim. Laches is an equitable
defense which requires both unreasonable delay and prejudice
resulting from the delay. The party asserting and seeking to
benefit from the laches bar bears the burden of proof on these
52
factors. (Miller v. Eisenhower Medical Center (1980) 27 Ca1.3d
614, 624 [166 Cal.Rptr. 826, 614 P.2d 258]; California
Teachers Assn. v. Governing Board (1987) 195 Cal.App.3d 285,
295-296 [240 Cal.Rptr. 549]; Santa Monica Mun. Employees
Assn. v. City of Santa Monica (1987) 191 Cal.App.3d 1538 [237
Cal.Rptr. 185].)
The District has not met that burden. While the AU found
unreasonable delay in commencing compliance proceedings by
the Association, she affirmatively found the District had
presented no evidence of prejudice. Our review of the
administrative record fails to disclose any. "[I]n the absence of
manifest injustice or a lack of substantial support in the
evidence its [the trial court's] determination will be sustained.
[Citations.]" (Miller v. Eisenhower Medical Center, supra, 27
Ca1.3d at p. 624.) Thus, the District fails the test for
successfully asserting the bar of laches, with but one exception,
which we presently discuss. Because interest was accruing on
the backpay award during the delay of the Association in
seeking and PERB in ordering compliance, PERB found
prejudice. However, PERB responded directly to its finding by
tolling accrual of interest on its backpay award, thereby
eliminating this "last vestige of prejudice" (Conti v. Board of
Civil Service Commissioners (1969) 1 Ca1.3d 351, 360 [82
Cal.Rptr. 337, 461 P.2d 617].)
42. Shea v. Board of Medical Examiners (1978) 81 Cal.App.3d 564 concerned an

administrative proceeding against a doctor to discipline his license based on allegations of
unprofessional conduct. In that case, Dr. Shea argued that a two-year delay between the time
the board heard the matter and issued its decision was unreasonable, and therefore required
dismissal. The Third District Court of Appeal rejected that argument and stated (id. at p.
581):
The contention that the delay of nearly two years between the
time the board heard the matter and the time it issued its
decision is an "unreasonable delay in prosecution" compelling
dismissal is meritless. No statute expressly limits the time
within which the board must issue its decision, and no authority
for his position is presented by Dr. Shea. Prejudice may not be
presumed from delay alone. (Conti v. Board of Civil Service
Commissioners (1969) 1 Ca1.3d 351, 362 [82 Cal.Rptr. 337, 461
P.2d 617].) No claim of prejudice is made by Dr. Shea, nor can
any be discerned; no action was taken against him during the
two years in question. The naked allegation that a two-year
delay is unreasonable must therefore be rejected.
53
43. Green v. Board of Dental Examiners (1996) 47 Cal.App.4th 786 was another
disciplinary action against a dentist. After a former patient complained about Dr. Green in
1987, an accusation was filed in 1990. Another former patient complained in 1991, and the
accusation was amended in 1993. In the meantime, Dr. Green filed a motion to dismiss
based on laches. After an administrative hearing, the board placed Dr. Green's license on
probation in 1994. Dr. Green did not raise the laches defense during the hearing. (Id. at pp.
790-791.) Dr. Green sought a writ of mandamus, arguing that the board's action was
precluded by laches. (Id. at p. 791.) The court of appeal disagreed and explained that Dr.
Green had not only failed to raise the laches defense during the administrative hearing, but he
had also failed to meet his "burden to produce evidence of both delay and prejudice resulting
from the delay." (Id. at pp. 793, 795.) The court of appeal also stated (id. at p. 794):
Even were we to assume arguendo that the defense of laches

was properly presented and argued at the administrative hearing,
Green failed to produce evidence that he was prejudiced by
delays affecting this proceeding. "Delay alone ordinarily does
not constitute laches . . . . What makes the delay unreasonable
in the case of laches is that it results in prejudice. [Citation.]"
(Lam v. Bureau of Security & Investigative Services (1995) 34
Cal.App.4th 29, 36 [40 Cal.Rptr.2d 137].)
Case Law Regarding Application of Equitable Defenses Against Governmental Entities
44. Application of the equitable defenses of estoppel and laches in civil actions
between private parties differs from when those principles are asserted against governmental
entities because when a governmental entity is involved, public policy concerns must be
considered. (Schafer v. City of Los Angeles (2015) 237 Cal.App.4th 1250, 1261-62; Smith v.
County of Santa Barbara (1992) 7 Cal.App.4th 770, 775; Golden Gate Water Ski Club v.
County of Contra Costa (2008) 165 Cal.App.4th 249, 263 (Golden Gate); Pettit v. City of
Fresno (1971) 34 Cal.App.3 d 813, 822-823; City and County of San Francisco v. Pacello
(1978) 85 Cal.App.3d 637 (Pacello); People v. Department of Housing and Community
Development (1975) 45 Cal.App.3d 185 (Department of Housing); City and County of San
Francisco v. Ballard (2006) 136 Cal.App.4th 381 (Ballard); City of Long Beach v. Mansell
(1970) 3 Ca1.3d 462 (Mansell); Morrison v. California Horse Racing Bd. (1988) 205
Cal.App.3d 211 (Morrison); and Feduniak v. California Coastal Corn. (2007) 148
Cal.App.4th 1346)4'
45. In Schafer, the appellate court outlined the elements of equitable estoppel
against a governmental entity as follows (Schafer, supra, 237 Cal.App.4th at p. 1261):
47 Laches and equitable estoppel, which are not the same, have been examined
together in some of these cases while discussing circumstances when it may be appropriate to
apply equitable principles to bar governmental action.
54
The elements of equitable estoppel are "(1) the party to be
estopped must be apprised of the facts; (2) he must intend that
his conduct shall be acted upon, or must so act that the party
asserting the estoppel has a right to believe it was so intended;
(3) the other party must be ignorant of the true state of facts; and
(4) he must rely upon the conduct to his injury. [Citation.]"
[Citations omitted.]
An additional requirement applies in cases involving equitable

estoppel against the government. In such a case, the court must
weigh the policy concerns to determine whether the avoidance
of injustice in the particular case justifies any adverse impact on
public policy or the public interest. [Citations omitted.] Even if
the four elements of equitable estoppel are satisfied, the doctrine
is inapplicable if the court determines that the avoidance of
injustice in the particular case does not justify the adverse
impact on public policy or the public interest. [Citations
omitted.]
46. In the Smith case, the Second District Court of Appeal decided that Santa
Barbara County was not estopped from revoking a permit that had previously been issued in
error. The court noted that estoppel may only apply to the government "in the most
extraordinary case where the injustice is great and the precedent set by the estoppel is
narrow." (Smith, supra, 7 Cal.App.4th at p. 775.) The court explained (ibid.):
The point is that public policy may be adversely affected by the

creation of precedent where estoppel can too easily replace the
legally established substantive and procedural requirements for
obtaining permits.
47. In the Golden Gate case, the appellate court rejected the application of laches
and estoppel and explained (Golden Gate, supra, 165 Ca.App.4th at p. 263-264):
"`Laches is an equitable defense based on the principle that

those who neglect their rights may be barred from obtaining
relief in equity. [Citation.] The defense of laches requires
unreasonable delay plus either acquiescence in the act about
which the plaintiff complains or prejudice to the defendant
resulting from the delay." [Citation.] [¶] Laches is a question
of fact for the trial court, but may be decided as a matter of law
where, as here, the relevant facts are undisputed. [Citation.]'
[Citation.]" (Feduniak, supra, 148 Cal.App.4th at p. 1381, 56
Cal.Rptr.3d 591.) "[A]s with estoppel, laches is not available
where it would nullify an important policy adopted for the
benefit of the public. [Citations.]" (Ibid.) Laches was not
55
available in Feduniak, and it is not available here because
applying it would nullify an important policy adopted for the
public benefit.
The [Golden Gate] Club cites two cases for the proposition the
doctrine of laches is available in land use cases even when the
doctrine of equitable estoppel is not. Although there is some
support for such a proposition in each case, neither compels the
conclusion that delay by the government coupled with reliance
by the landowner will allow the defense of laches where the
damage to the public interest would prevent the application of
equitable estoppel. We can conceive of no reason why the
public interest should be of paramount importance in connection
with the doctrine of estoppel but be outweighed by other
considerations in connection with laches. In any event, in both
People v. Department of Housing and Community Dev. (1975)
45 Cal.App.3d 185, 119 Cal.Rptr. 266 (Department of Housing)
and City and County of San Francisco v. Pacello (1978) 85
Cal.App.3d 637, 149 Cal.Rptr. 705 (Pacello ), the use in
question had been permitted at one time (indeed, in Pacello the
use was permitted at the time of the proceedings), at least one
governmental agency aligned itself with the property owner, and
the evidence strongly indicated the use in question had or would
have little or no detrimental effect on any public interest or
policy. The same considerations are not present here.
48. The court of appeal in Pettit likewise held that the City of Fresno was not
estopped from denying a permit it had previously issued to Pettit in error, even though Pettit
had spent approximately $21,000 on alterations which were allowed by the invalid permit.
The court acknowledged that equitable estoppel may apply against the government in rare
cases as follows (Pettit, supra, 34 Cal.App.3d at p. 820):
It is now well recognized that in unusual cases estoppel may be

applied against the government.
`It is settled that [t]he doctrine of equitable estoppel may be

applied against the government where justice and right require
it. [Citation.]' [Citations.] Correlative to this general rule,
however, is the well-established proposition that an estoppel
will not be applied against the government if to do so would
effectively nullify 'a strong rule of policy, adopted for the
benefit of the public, . . .' [Citation.] The tension between these
twin principles makes up the doctrinal context in which concrete
cases are decided.' (City of Long Beach v. Mansell (1970) 3
Ca1.3d 462, 493, 91 Cal.Rptr. 23, 45, 476 P.2d 423, 445.)
56
The Pettit court explained the importance of protecting the public interest in weighing
an individual party's rights against public policy concerns when considering whether to
allow the government to correct a mistake (id. at p. 823):
In the field of zoning laws, we are dealing with a vital public

interest-not one that is strictly between the municipality and the
individual litigant. All the residents of the community have a
protectable property and personal interest in maintaining the
character of the area as established by comprehensive and
carefully considered zoning plans in order to promote the
orderly physical development of the district and the city and to
prevent the property of one person from being damaged by the
use of neighboring property in a manner not compatible with the
general location of the two parcels. (Neuber v. Royal Realty Co.
(1948) 86 Cal.App.2d 596, 620, 195 P.2d 501.) These
protectable interests further manifest themselves in the
preservation of land values, in esthetic considerations and in the
desire to increase safety by lowering traffic volume. To hold
that the City can be estopped would not punish the City but it
would assuredly injure the area residents, who in no way can be
held responsible for the City's mistake. Thus, permitting the
violation to continue gives no consideration to the interest of the
public in the area nor to the strong public policy in favor of
eliminating nonconforming uses and against expansion of such
uses. (Paramount Rock Co. v. County of San Diego (1960) 180
Cal.App.2d 217, 228-229,
228-229, 44 Cal.Rp
Cal.Rptr.
tr. 317; Rehfeld v. City and
County of San Francisco (1933) 218 Cal. 83, 21 P.2d 419.)
49. In the Pacello case, the appellate court held that the destruction of important
evidence during an eight and one-half year delay amounted to substantial evidence of
prejudice, such that the doctrine of laches barred the City and County of San Francisco's
later action to abate an alleged public nuisance on the Pacellos' property. The property was
built in the 1920s, and beginning in 1929, there was a separate rental unit. The City's
records showed the property had been built as a single-family residence, and the rental unit
was added without a permit, although a 1921 ordinance permitted two-family dwelling units
under certain conditions. When the Pacellos purchased the property in 1961, it included the
rental unit, which they believed was lawful. In 1966, the Pacellos filed a permit application
to apply siding and to "legalize" the building as a two-family dwelling. The zoning
administrator granted the request to apply the siding on the condition that the Pacellos obtain
a permit to remove the second rental unit based on the zoning administrator's contention that
the rental unit violated density restrictions. The Pacellos appealed and an administrative
hearing was held before the Board of Permit Appeals. Following a public hearing, the board
issued a September 14, 1967, order and decision that overruled the zoning administrator and
required that the requested permit be issued. (Pacello, supra, 85 Cal.App.3d at 640-641.)
57
The court of appeal found that laches barred a later abatement action by the City and
County of San Francisco, against the Pacellos and explained its analysis as follows (Pacello,
supra, 85 Cal.App.3d at 644-645):
On its face, the complaint shows an unexplained delay of eight

and one-half years between a cease and desist order by the
zoning administrator and the institution of the present action.
The delay also appears in the stipulated facts and the file of the
Board.
Delay alone will not constitute laches. It must also appear that
some prejudice to the defendant was caused thereby. (Abbott v.
City of Los Angeles (1958) 50 Ca1.2d 438, 459 [326 P.2d 484].)
Whether laches occurred 'is a question in the first instance for
the trial court, and if its conclusion thereon can reasonably be
held to find sufficient support in the evidence, an appellate court
should not interfere therewith.' (Akley v. Bassett, supra., 189
Cal. at p. 648.)
The question becomes: is there substantial evidence of

prejudice to the Pacellos occasioned by the appellant's delay.
Respondents maintain that prejudice is shown in that Mr.
Pacello retired on the strength of the rental income and the
Pacellos have become accustomed to having that additional
income. There is no evidence relating to Mr. Pacello's
employment status, either at the time of the permit appeal or at
the time of the trial below. While we recognize that terminating
benefits a defendant has been receiving because the plaintiff has
been delaying does not, of itself, constitute prejudice (Field v.
Bank of America (1950) 100 Cal.App.2d 311, 314 [223 P.2d
514]), where the delay caused important evidence before the
Board to become unavailable, prejudice is manifest. (Maguire
v. Hibernia S. & L. Soc. (1944) 23 Ca1.2d 719, 736 [146 P.2d
673, 151 A.L.R. 1062].) Such prejudice, plus the unexplained
delay, constitutes laches. There is thus substantial evidence to
support the trial court's finding thereof
The appellant's final contention is that the doctrine of laches is

inapplicable in cases of zoning violations because no vested
right to violate such ordinances can be acquired by repeated
violations. In neither case that appellant cites for this
proposition was the defense of laches raised. Both Donovan v.
City of anta Monica (1948) 88 Cal.App.2d 386 [199 P.2d 51],
and City of Fontana v. Atkinson (1963) 212 Cal.App.2d 499 [28
Cal.Rptr. 25], involved claims of estoppel.
58
50. In Department of Housing, the issue was whether a permit that had been issued
to construct a mobile home park could be rescinded over five years later, after the permit
holder had incurred over $40,000 in expenses in reliance on the permit. The District
Attorney of Nevada County sought a writ of mandate to require the California Department of
Housing to rescind the permit, which had been issued without an environmental impact
report as required by the California Environmental Quality Act (CEQA). (Department of
Housing, supra, 45 Cal.App.3d at p. 188.) The appellate court held that the Department of
Housing violated CEQA when it approved the permit, but that laches applied because the
permit holder had relied on the permit to his detriment. In so holding, the court of appeal
stated: "When the government is a party, invocation of either doctrine - laches or estoppel -
rests upon the belief that government should be held to a standard of 'rectangular rectitude'
in dealing with its citizens." (Department of Housing, supra, 45 Cal.App.3d at p. 196, citing
Farrell v. County of Placer (1944) 23 Cal.2d 624, 627-628.)
51. The Ballard case involved an action for injunctive relief against a high-rise
owner in which the City and County of San Francisco alleged the building was a public
nuisance because its automatic sprinkler system was inadequate under the state building
code. After Ballard purchased the property in 1987, the fire department demanded that he
install a full (as opposed to the existing partial) sprinkler system. The parties engaged in
extensive discussions between May 1987 and March 1989 regarding whether the structure
was a "high-rise" requiring a full sprinkler system, and annual inspections continued until
1989. From June 1989 until 1996, there were no inspections even though annual inspections
were required for high-rise buildings. The City and County filed an action for injunctive and
other relief in 2001, alleging a public nuisance. (Ballard, supra, 136 Cal.App.4th at pp. 387-
392.) The property owner raised a number of defenses, including laches, and the superior
court ruled in the property owner's favor. On appeal, the laches argument was rejected
because the action concerned public safety. (Id. at p. 387.)
The Ballard court explained (Ballard, supra, 136 Cal.App.4th at pp. 393-395):
Our Supreme Court has clarified that equitable remedies such as

estoppel and laches cannot apply when their application would
nullify a public policy. (Kajima, supra, 23 Ca1.4th at p. 316, 96
Cal.Rptr.2d 747, 1 P.3d 63.)
In Kajima, our Supreme Court considered whether bid

preparation costs and lost profits could be recovered against a
public entity under the doctrine of equitable estoppel. (Kajima,
supra, 23 Ca1.4th at pp. 315-317, 96 Cal.Rptr.2d 747, 1 P.3d
63.) The Supreme Court noted that "the competitive bidding
statutes are 'enacted for the benefit of property holders and
taxpayers, and not for the benefit or enrichment of bidders, and
should be so construed and administered as to accomplish such
purpose fairly and reasonably with sole reference to the public
interest."' (Id. at pp. 316-317, 96 Cal.Rptr.2d 747, 1 P.3d 63.)
59
It therefore rejected the equitable remedy because "it is clear
`that neither the doctrine of estoppel nor any other equitable
principle may be invoked against a governmental body where it
would operate to defeat the effective operation of a policy
adopted to protect the public.'" (Id. at p. 316, 96 Cal.Rptr.2d
747, 1 P.3d 63.)
In the present case, the trial court found that requiring Ballard to
install full sprinklers would cost a significant amount of money
because much of these costs could not be passed onto the
tenants due to rent ordinances. It further ruled there was little
evidence to establish full sprinklers were that much better than
partial sprinklers. When considering the policy of full
sprinklers, the court found that they must not be that necessary
because in 1979 the city considered partial sprinklers adequate
protection. In addition, NFPA Standard 13, section 1-6.2
provides: "When partial sprinkler systems are installed the
requirements of this standard shall be used insofar as they are
applicable." The court stated, "If [city] had really judged life
safety to be endangered, and that was the paramount
consideration, it never would have approved partial sprinklers as
satisfying the requirements for existing high-rises, it never
would have ceased making annual inspections of the building
for many years and it would not [have] waited until 2001 to
initiate this action. The conclusion the court draws from
considering all of the evidence on life safety and the effect
which full sprinldering would have on life safety is that the
increment is indeterminate, and [city] has not proven that it is
any more than marginal."
It is not our role to determine whether a partial or a complete

sprinkler system is necessary for adequate fire protection.
Rather, we must consider whether an enforcement action
challenging a party's compliance with fire protection statutes
and regulations constitutes a policy directed towards protecting
the public. There is no doubt that fire hazards and the
prevention of them is a policy adopted to protect the public.
(See City of Bakersfield v. Miller (1966) 64 Ca1.2d 93, 100, 48
Cal.Rptr. 889, 410 P.2d 393 [fire hazard is a nuisance and
therefore city has power to define by statute standard by which
courts are to judge whether nuisance exists].)
Ballard argues that it is undisputed that in 1979 the building

complied with the fire regulations as they were then interpreted.
He also argues that NFPA Standard 13 allows partial sprinkler
60
systems when they have been inspected and approved by the
local enforcing agency and the new interpretation cannot now be
applied against him. City responds that Building Standards
Code section 403.24 does not call for existing high-rises to
conform to the 1976 NFPA Standard 13, but rather to the
current NFPA Standard 13, and it claims the new standard
requires full sprinklers.
The foregoing issues, however, relate to the merits of city's

lawsuit and are immaterial to whether the trial court properly
applied the defense of laches against city's attempt to enforce
regulations regarding fire safety. We are concerned with
whether city's lawsuit concerns a public policy and therefore, as
a matter of law, laches is not available as a defense. We hold
that fire safety is clearly a public policy concern and laches
cannot bar city's claims that the partial sprinkler system in the
building violated the fire prevention regulations for high-rise
structures and thus constituted a public nuisance.
52. In Mansell, the California Supreme Court considered a preemptory writ of

mandate sought by the City of Long Beach to require the city manager and city clerk to
execute and put into effect certain agreements designed to resolve title and boundary
problems in the Alamitos Bay area. The Mansell opinion discussed application of equitable
estoppel to situations concerning title to property and whether application of such an
equitable principle would conflict with the statute of frauds. (Mansell, supra, 3 Ca1.3d 462,
at 487-492.) The Court stated the following regarding application of equitable estoppel (id.
at p. 493):
It is settled that "[t]he doctrine of equitable estoppel may be

applied against the government where justice and right require
it. (United States Fid. & Guar. Co. v. State Board of
Equalization (1956) 47 Ca1.2d 384, 388-389 [303 P.2d 1034]
and cases there collected.)" (Driscoll v. City of Los Angeles,
supra., 67 Ca1.2d 297, 306.) (See generally 28 Am. Jur.2d,
Estoppel and Waiver, §§ 122-133, pp. 782-802; 31 C.J.S.,
Estoppel, §§ 138-147, pp. 675-733.) Correlative to this general
rule, however, is the well-established proposition that an
estoppel will not be applied against the government if to do so
would effectively nullify "a strong rule of policy, adopted for
the benefit of the public, . . . ." (County of San Diego v. Cal.
Water etc. Co. (1947) 30 Ca1.2d 817, 829-830 [186 P.2d 124,
175 A.L.R. 747], see also cases there cited.) The tension
between these twin principles makes up the doctrinal context in
which concrete cases are decided.
61
53. The Morrison case was an appeal after the California Horse Racing Board
(Board) excluded Mr. Morrison from all California racetracks as a result of his earlier
convictions of crimes involving moral turpitude (robbery, bank robbery, and sale of obscene
material). Mr. Morrison argued that the board should be estopped from excluding him from
racetracks because it had already granted him a license and renewed it. After an
administrative hearing, the board's exclusion order was affirmed. (Morrison, supra, 205
Cal.App.3d. at p. 215.) Although the superior court found estoppel applied during a writ
proceeding, the appellate court disagreed. (Id. at p. 216.) In so finding, the appellate court
stated (id. at p. 217):
"The doctrine of equitable estoppel is founded on concepts of

equity and fair dealing. It provides that a person may not deny
the existence of a state of facts if he intentionally led another to
believe a particular circumstance to be true and to rely upon
such belief to his detriment." (Strong v. County of Santa Cruz
(1975) 15 Ca1.3d 720, 725 [125 Cal.Rptr. 896, 543 P.2d 264].)
After discussing credibility problems with Mr. Morrison's contention that he had
disclosed his criminal history before the board granted his license, the appellate court went
on to explain the following regarding Mr. Morrison's estoppel and laches arguments
(Morrison, supra, 205 Cal.App.3d at pp. 218-219):
A second problem with application of estoppel in this case is the

public policy restraints on estopping the government.
("[A]lthough estoppel may be applied against the government
when justice and right require it, the doctrine is inapplicable if it
would result in the nullification of a strong rule of policy
adopted for the benefit of the public." (Strong v. County of
Santa Cruz, supra, 15 Ca1.3d at p. 725.)
Horse racing and wagering are subject to a comprehensive

scheme of regulation under which the Board is empowered to
enact rules for exclusion of "any known bookmaker, known
tout, person who has been convicted of a violation of any
provision of this chapter or of any law prohibiting bookmaking
or any other illegal form of wagering on horseraces, or any other
person whose presence in the inclosure [sic] would, in the
opinion of the board, be inimical to the interests of the state or
of legitimate horseracing, or both." (Bus. & Prof. Code, §
19572.) Implicit in this exclusionary power is the recognition
that the public's interest in legitimate horse racing and wagering
requires its protection from individuals the Board rationally
believes will threaten the honesty, fairness and safety of the
activity. (See Flores v. Los Angeles Turf Club (1961) 55 Cal.2d
736, 744-745 [13 Cal.Rptr. 201, 361 P.2d 921].) It is under this
62
authority that rule 1980(a)(6) was enacted, prohibiting "Persons
who have been convicted of a crime involving moral turpitude"
from wagering or being present within the inclosure [sic]. (Cal.
Code Regs., tit. 4, § 1980, subd. (a)(6).)
The public interest in protection from those whose presence at

racetracks is inimical to legitimate horse racing is strong. In
contrast, the unfairness to Morrison caused by his belated
exclusion, after six years of ownership licensing, is limited. As
he admitted, his ownership and racing of horses does not require
that he be present at the racetracks. He acknowledged that there
are in fact absentee owners who rarely attend the races in which
their California horses run.
"Estoppel will not ordinarily lie against a governmental agency

if the result will be the frustration of a strong public policy."
(Bible v. Committee of Bar Examiners (1980) 26 Ca1.3d 548,
553 [162 Cal.Rptr. 426, 606 P.2d 733].) Here, where strong
public policy underlies the regulation of the types of persons
who can attend and wager on legitimate horse racing, and where
the claimed unfairness to the individual resulting from the
agency's delay in exercising its regulatory power is slight,
estoppel should not be applied. The trial court erred in holding
the Board was estopped from excluding Morrison based on his
1963 bank robbery conviction.
54. In Feduniak, the Sixth District Court of Appeal ruled that the doctrine of
equitable estoppel did not bar the California Coastal Commission from ordering coastal
homeowners in the Pebble Beach area of Monterey County to remove a private pitch and putt
golf course and restore the area to its natural state. The commission had previously
determined that the land was in an environmentally sensitive area and found that
"[i]mplementation of a native revegetation program will restore the site." (Feduniak, supra,
148 Cal.App.4th at pp. 1352-1353.) During the 1980s, the homeowners had agreed to the
commission's conditions and initially complied. However, they later installed the golf
course without notifying the commission. The commission learned about the unapproved
golf course in 2002, after the property had been sold to new owners. The new owners
declined to submit a removal and restoration plan, the commission gave notice in 2003 of its
intent to issue cease-and-desist and restoration orders, and a formal proceeding was
commenced. (Id. at p.1354-1356.)
On appeal, the court found that equitable estoppel did not apply to bar the
commission's action, and stated (Feduniak, supra, 148 Cal.App.4th at p. 1359):
"The venerable doctrine of equitable estoppel or estoppel in

pais, which rests firmly upon a foundation of conscience and
63
fair dealing, [footnote omitted] fmds its classical statement in
the words of Lord Denman: [T]he rule of law is clear, that,
where one by his words or conduct willfully causes another to
believe the existence of a certain state of things, and induces
him to act on that belief, so as to alter his own previous position,
the former is [precluded] from averring against the latter a
different state of things as existing at the same time; . .
[Citation.]" (City of Long Beach v. Mansell (1970) 3 Ca1.3d
462, 488, 91 Cal.Rptr. 23, 476 P.2d 423 (Mansell); see Evid.
Code, § 6238.)
MO • -
The government is not immune from the doctrine, and it may be

applied "'where justice and right require it.' (Mansell, supra, 3
Ca1.3d at p. 493, 91 Cal.Rptr. 23, 476 P.2d 423.) However, it
must not be applied if doing so "would effectively nullify 'a
strong rule of policy, adopted for the benefit of the public. . .
[Citation.]" (Ibid., quoting County of San Diego v. Cal. Water
etc. Co. (1947) 30 Ca1.2d 817, 829-830, 186 P.2d 124.)
Accordingly, "[t]he government may be bound by an equitable
estoppel in the same manner as a private party when the
elements requisite to such an estoppel against a private party are
present and, in the considered view of a court of equity, the
injustice [that] would result from a failure to uphold an estoppel
is of sufficient dimension to justify any effect upon public
interest or policy [that] would result from the raising of an
estoppel." (Mansell, supra, 3 Ca1.3d at pp. 496 197, 91
Cal.Rptr. 23, 476 P.2d 423, italics added.)
The appellate court also stated (Feduniak, supra, 148 Cal.App.4th at p. 1369):
Moreover, we observe that if it were reasonable for the

Feduniaks to think that the restrictions would never be enforced
because they had not been enforced for many years, then more
generally, one could argue against the enforcement of a law that
had not been enforced for many years and seek estoppel on that
ground. However, courts have never accepted such reasoning.
On the contrary, the mere failure to enforce the law, without
more, will not estop the government from subsequently
enforcing it. (See Fontana v. Atkinson (1963) 212 Cal.App.2d
499, 509, 28 Cal.Rptr. 25 [mere failure to enforce zoning
ordinance does not estop later enforcement]; Western Surgical
Supply Co. v. Affleck (1952) 110 Cal.App.2d 388, 392-393, 242
P.2d 929 [same re failure to enforce penal laws]; Caminetti v.
64
State Mut. Life Ins. Co. (1942) 52 Cal.App.2d 321, 326, 126
P.2d 165 [same re Insurance Code].)
Evaluation
55. There was no dispute in this case that Joseph Kingston failed and refused to
submit a new application or any updated supplemental background investigation information
to the bureau as requested in 2016. With respect to Management, Inc., the evidence
established that Ted Kingston attempted to submit an application, but the application he
submitted was confusing for two reasons: the bureau's state gambling license application
form was confusing, and Ted Kingston failed to follow the written instructions on the
application form. Ted Kingston also failed to submit a supplemental background
investigation information form for Management, Inc., which even Casino's consultant, Mr.
Zuniga, agreed was necessary to properly submit an application on behalf of Management,
Inc. There were also failures to fully disclose information about Management, Inc.'s change
in its name, which perhaps might have been provided if Ted Kingston had submitted the
requisite supplemental background investigation information for Management, Inc.
56. Casino argued that either laches or equitable estoppel should operate to bar the
Commission from denying Casino's application because the bureau delayed completing its
investigation of Casino's 1999 application until 2008 and then failed to initiate and proceed
with an administrative hearing as instructed by the Commission in 2009. But the law is clear
that delay alone is not enough to prove that laches should apply; Casino would also need to
show that it was prejudiced by the bureau's delays in processing its application. Casino
failed to show any prejudice as a result of the lengthy delays, other than that its owners
would need to submit current updated information. Indeed, despite the bureau's unexplained
delay between 1999 and 2008, and its later complete (and also unexplained) inaction from
2009 until late 2015, Casino has been allowed to continue operating its business under a
provisional license for the past 20 years.
Equitable estoppel also does not apply as a result of the decline in Joseph Kingston's
health from 1999 until 2016, as there was no evidence presented that the bureau was aware
of the fact that his health was declining until 2016. Nor did the evidence establish that the
circumstances caused by the bureau's unexplained nearly 20-year delay in this case would
somehow justify the adverse impact on the public policy that would occur if, as respondent
suggests, gambling licenses were granted to Casino and its owners without being subjected to
a current background investigation. The Legislature determined that public protection
requires rigorous regulation of gambling, and as part of that regulation, all persons who own
interests in gambling establishments must necessarily apply for licensure, make full
disclosures to the bureau, and be subjected to a thorough background investigation before
licenses are granted.
57. Due to Joseph Kingston's failure to submit an application and supplemental

disclosures and Management, Inc.'s failure to submit the required supplemental information
and provide full disclosures, Casino failed to prove that each of its owners was qualified and
65
suitable for licensure. Accordingly, cause exists to deny Casino's license application
pursuant to Business and Professions Code sections 19856, subdivision (c), 19857,
subdivisions (a) and (b), and 19859, subdivisions (a) and (b).
58. Complainant failed to meet its burden of proving cause to cancel Casino's
provisional license under Business and Professions Code section 19920, which states that
"willful or persistent use or toleration of methods of operation deemed unsuitable by the
commission or by local government shall constitute grounds for license revocation or other
disciplinary action." There was no evidence presented that Casino or its owners engaged in
"willful or persistent use or toleration of methods of operation deemed unsuitable by the
commission or by local government." Complainant also failed to prove that Casino's
provisional license should be cancelled under Business and Professions Code section 19922,
because complainant did not prove Casino was operated "in violation of any provision of this
chapter or any regulation adopted pursuant to this chapter."
59. While the bureau's delay and inaction between 1999 and late 2015 may not
entitle Casino to equitable relief, the manner in which the bureau handled its communications
with Casino and its owners during 2016 warrants allowing Casino and its owners an
opportunity to submit additional information to continue to pursue licensure.
The bureau's written representation to Casino that Joseph Kingston could not obtain
approval to transfer his interest unless he applied for licensure and was "fully licensed"
raised serious concerns for two primary reasons. First, the law does not require that he be
licensed in order to be allowed to transfer his interest. Instead, the Business and Professions
Code requires that a person whose license has been denied must divest his interest, thus
contemplating transfers by persons who are not licensed. There is simply nothing in the
statutes or regulations that supports the position the bureau took. And second, the bureau
was fully aware that the reason Joseph Kingston wanted to transfer his interest to Mr. Benson
was so that Joseph Kingston could avoid going through the application process due to his
failing health. While Casino did not assert that Joseph Kingston was "incompetent" to apply
for licensure, that does not mean the Commission must ignore Joseph Kingston's health
concerns!' The bureau's position was unfair, it was not supported by any legal authority,
and it placed Casino and its owners in the untenable position of facing possible denial of a
state gambling license for a business that had been in the Kingston family for over 25 years.
In order to avoid the fundamental injustice of an outright and immediate denial of Casino's
license application, Joseph Kingston shall be afforded an opportunity to seek approval of a
transfer of his interests to Mr. Benson, and Mr. Benson shall be allowed to submit an
application for licensure.
48 Complainant's closing briefs argued that Casino did not prove Joseph Kingston was
"incompetent," implying that if he were incompetent, that would somehow make a
difference. But the applicable codes and regulations do not require that he be incompetent in
order to be allowed to transfer his interest to avoid going through the application process.
66
Additionally, although the way Ted Kingston completed the bureau's forms certainly
left much to be desired, instead of asking Ted Kingston to clear up the confusion regarding
the manner in which he filled out the forms, as Ms. Ward and Mr. Zuniga testified was
usually the bureau's practice, the bureau sent final June 29, 2016, letters which said nothing
about the bureau's view that Management, Inc.'s had failed to submit an application. Based
on the bureau's correspondence, it was reasonable to believe that the bureau had received
Ted Kingston's and Management, Inc.'s applications, and to also believe that the only
outstanding items were Joseph Kingston's applications and supplemental forms, which
everyone knew would not be forthcoming. When Ted Kingston later submitted some
missing pages in late August 2016, there was no reason to believe he could not have
submitted another four-page application and/or other documentation for Management, Inc. if
he had been alerted that the bureau needed him to do so. Accordingly, Management, Inc.
shall also be allowed an opportunity to submit a complete application package.
60. Complainant argued that public protection requires outright denial of Casino's
license and immediate revocation of its provisional license. But the bureau's previous
lengthy and unexplained 20-year delay and inaction, while it continued to renew Casino's
provisional license every year, undercuts any argument that the circumstances of this case
warrant such an immediate and harsh action.
61. Therefore, although cause exists to deny Casino's license application, the
denial shall be stayed for a reasonable period of time to allow Joseph Kingston to pursue
Commission approval of a transfer of his interest, and to permit Mr. Benson and
Management, Inc. to submit complete application packages.
Cost Recovery
62. Business and Professions Code section 19930, subdivision (b), (d), and (f)
provide:
(b) If, after any investigation, the department is satisfied that a

license, permit, finding of suitability, or approval should be
suspended or revoked, it shall file an accusation with the
commission in accordance with Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the
Government Code.
[1] • • [lf] •
(d) In any case in which the administrative law judge

recommends that the commission revoke, suspend, or deny a
license, the administrative law judge may, upon presentation of
suitable proof, order the licensee or applicant for a license to
pay the department the reasonable costs of the investigation and
prosecution of the case.
67
(1) The costs assessed pursuant to this subdivision shall be fixed
by the administrative law judge and may not be increased by the
commission. When the commission does not adopt a proposed
decision and remands the case to the administrative law judge,
the administrative law judge may not increase the amount of any
costs assessed in the proposed decision.
[111 • • • [If]
(f) For purposes of this section, "costs" include costs incurred

for any of the following:
(1) The investigation of the case by the department.
(2) The preparation and prosecution of the case by the Office of

the Attorney General.
63. Although the Third Amended Statement of Issues sought costs pursuant to
Business and Professions Code section 19930, subdivision (d), complainant did not present
any evidence regarding any costs incurred. Accordingly, complainant's request for cost
recovery is denied.
ORDER
Respondent Sahara Dunes Casino LP's application for a state gambling license 'is
denied. However, the denial is stayed (1) to allow Joseph Kingston and Chad. Benson to
submit documents to seek approval of a transfer of all Joseph Kingston's interests in
respondent Sahara Dunes Casino LP to Chad Benson, and (2) to allow general partner Sahara
Dunes Management, Inc., now known as JTI Management, Inc., to submit a new application
along with a supplemental background investigation information form with supporting
documentation. The following terms and conditions shall apply to this Order:
1. Within 60 days of the effective date of this decision, Joseph Kingston and
Chad Benson shall submit to the bureau copies of all transactional documents related to the
proposed transfer of Joseph Kingston's interests in respondent Sahara Dunes Casino, LP,
doing business as Lake Elsinore Hotel and Casino, and Sahara Dunes Management, Inc.,
now known as JTI Management, Inc., to Mr. Benson.
2. Within 60 days of the effective date of this decision, Chad Benson shall submit
to the bureau an Application for State Gambling License and an Individual Supplemental
Background Investigation Information form, and supporting documents, along with any
required deposits, related to his proposed ownership interests in respondent Sahara Dunes
Casino, LP, doing business as Lake Elsinore Hotel and Casino, and Sahara Dunes
Management, Inc., now known as JTI Management, Inc.
68
3. Within 60 days of the effective date of this decision, Sahara Dunes
Management, Inc., now known as JTI Management, Inc., shall submit to the bureau a
properly completed Application for State Gambling License and an Individual Supplemental
Background Investigation Information form with supporting documents.
4. Joseph Kingston shall not be required to submit a state gambling license

application or an individual supplemental background investigation information form to the
bureau in order to seek approval of the transfer of his ownership interests to Mr. Benson.
5. Should Joseph Kingston, Chad Benson, and/or Sahara Dunes Management,

Inc., now known as JTI Management, Inc., fail to submit the items listed under conditions 1,
2, and/or 3, above, within the time allowed, the stay of the denial shall be lifted and the
application for a state gambling license of respondent Sahara Dunes Casino, LP, doing
business as Lake Elsinore Hotel and Casino, shall be denied.
6. Within 90 days of the effective date of this decision, the bureau shall provide
respondent Sahara Dunes Casino LP, its owners, and Mr. Benson a list of any additional
information to be submitted to the bureau, which requested information must be reasonably
related to the gambling establishment applications. Respondent Sahara Dunes Casino LP, its
owners, and Mr. Benson shall be provided a reasonable amount of time to comply with any
such request.
7. Within 240 days from the effective date of this decision, the bureau shall
review the proposed transfer of Joseph Kingston's ownership interest to Chad Benson and
conduct a background investigation of Respondent Sahara Dunes Casino LP, Chad Benson,
Ted Kingston, and Sahara Dunes Management, Inc., now known as JTI Management, Inc.,
and make recommendations to the Commission regarding the proposed transfer and
licensure.
8. As provided in Business and Professions Code sections. 19879, subdivision (a),

19882, subdivision (b), and 19892, subdivision (c), and the applicable regulations
promulgated under the Act, as of the effective date of this decision, Joseph Kingston shall
not be entitled to profit from his investment in respondent Sahara Dunes Casino LP or its
general partner; receive any remuneration or other benefit from respondent Sahara Dunes
Casino LP or its general partner; or exercise any voting rights as a limited partner of
respondent Sahara Dunes Casino LP or a shareholder of respondent Sahara Dunes Casino
LP's general partner, except as permitted for certain tax purposes as set forth in the Act and
applicable regulations. Joseph Kingston shall be permitted to receive consideration in
exchange for the transfer of his interests in respondent Sahara Dunes Casino LP and its
general partner after such transfer has been approved by the Commission.
9. Respondent Sahara Dunes Casino LP's provisional license shall remain in

place, and shall be eligible for renewal, as long as respondent Sahara Dunes Casino LP's
owners remain in compliance with the terms and conditions of this decision and applicable
provisions of Act and the regulations promulgated thereunder, until such time as the
69
Commission renders a determination regarding Joseph Kingston's proposed transfer and the
qualification for licensure of Mr. Benson, Ted Kingston, and JTI, Management, Inc. and
respondent Sahara Dunes Casino LP.
10. Complainant's request for reimbursement of prosecution and/or enforcement

costs is denied, and respondent Sahara Dunes Casino, L.P. shall not be required to pay any
such costs.
11. The deadlines provided in this decision shall not prevent the parties from
'agreeing to reasonable extensions of time.
DATED: June 7, 2019
DocuSigned by:
\•.—A6BOD1C95F194AE...
THERESA M. BREHL
Administrative Law Judge
Office of Administrative Hearings

Lake Elsinore Casino Proposed Decision

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Lake Elsinore Casino Proposed Decision

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BEFORE THE

CALIFORNIA GAMBLING CONTROL COMMISSION

In the Matter of the Third Amended

SAHARA DUNES CASINO, LP, OAH No. 2017070210

Partners of Sahara Dunes Casino, LP:

Shareholders of Sahara Dunes

Theresa M. Brehl, Administrative Law Judge, Office of Administrative Hearings,

• Complainant submitted the jurisdictional documents, which were marked

• Respondent submitted a Request for Protective Order Sealing Confidential

• The parties timely submitted simultaneous closing argument briefs and

Since applying for a state gambling establishment license in approximately 1999,

In order to obtain a state gambling license, all owners of a gambling establishment

Jurisdictional Background and Allegations of the Third Amended Statement of Issues

THE BUREAU'S 2016 DENIAL RECOMMENDATION5

As is discussed further below, when Ted Kingston, as Management, Inc.'s president,

5 The history related to Casino's previous application is discussed further below.

On April 25, 2016, the Bureau of Gambling Control (Bureau)

Below is a summary of significant findings, all of which will be

• Joseph Kingston has an ownership interest in Lake Elsinore

• Joseph Kingston himself should be denied as an owner

On November 9, 2016, Casino's attorney sent a letter to the Commission voicing

THE COMMISSION'S REFERRAL OF THE MATTER TO AN EVIDENTIARY HEARING

3. According to the minutes of the Commission's November 17, 2016, meeting,

Assistant Bureau Chief Yolanda Morrow responded that they

Because this is a provisional license the Bureau issues these

THE PLEADINGS SUBMITTED IN THIS ADMINISTRATIVE PROCEEDING

5. On December 20, 2017, complainant's predecessor, Nathan DaValle, who was

Respondent cannot be issued a license because, despite repeated

Additionally, Respondent's management and operation of the

The Third Amended Statement of Issues sought an order denying Casino's

Hearing Stipulation, Exhibits, and Witnesses

Complainant's failure to file an accusation to pursue cancellation of Casino's

8. The following bureau employees testified at the hearing:

Complainant also submitted Declarations of bureau employees Investigative Auditor

9. Casino called the following witnesses:

9 Casino's explanation regarding the name change is discussed further below.

• Ted Kingston. Ted Kingston is Casino's general manager, one of Casino's

• Chad Benson. Mr. Benson is Ted Kingston's half-brother, Joseph Kingston's

• Darren Jenkins, M.D. According to Dr. Jenkins's affidavit, Joseph Kingston's

1° As is explained further below, Ted Kingston submitted the applications and

• Joseph Kingston. Joseph Kingston's affidavit discussed his medical conditions

The Bureau's Responsibility to Conduct a Background Investigation of Gambling

Any individual or entity with an ownership interest in a gambling establishment is

Background Information Regarding Casino's History and Operations

17. According to Ted Kingston's uncontroverted testimony, neither he nor Casino

The Bureau's 2008 Denial Recommendation and the Commission's Referral to an

1. Applications for State Gambling License (BGC-030) for

2. Individual Supplemental Background Investigation

3. Individual Supplemental Background Investigation

4. Any transactional documents for the purchase of the

5. A list of all contracts and agreements between the cardroom

21. On November 3, 2015, Ms. Asuncion sent a letter to the Commission

THE BUREAU'S MARCH 3, 2016, LET TER

1. Applications for State Gambling License (BGC-030) for

2. Individual Supplemental Background Investigation

3. Individual Supplemental Background Investigation

4. An organizational chart showing the ownership structure of

5. Any transactional documents for the purchase of [sic] the

6. A list of all contracts and agreements between the applicants

7. A list of all contracts and agreements between the cardroom

8. Identify the Chief Executive Officer or President, Chief

10. Statements of Income and Expense for all applicants ending

THE POTENTIAL TRANSFER OF JOSEPH KINGSTON'S OWNERSHIP INTEREST TO

Mr. Benson's Owner Applicant Submission to the Bureau