Becoming licensed is not for the timid
Pub Date: 1/1/2003
Ask any knowledgeable person about which type of business in Montana is the most difficult to get into, and you might get several answers. But certainly among them will be open pit mining and the gambling business.
While Montana's gambling regulations are incredibly rigorous some would say burdensome licensed operators do not dispute the importance and legitimacy of the firm investigation, regulation and enforcement practices employed by Montana gambling authorities.
The initial application process itself is designed to weed out unsuitable or unsavory characters early on, says Kati Kintli, one of the state's leading private practitioners of liquor and gaming law.
"My clients understand that liquor and gambling require close regulation. They want their industry squeaky clean and above board," Kintli states. "But they better have fortitude," she adds.
Those who have been through the licensing process generally recommend hiring an attorney with a liquor and gaming law specialization not a lawyer who merely "dabbles" in the field. Applicants spend an average of $3,000 and as much as $7,000 on legal assistance.
"The application form for a gambling license alone is 20 pages long," says Mark Staples, another specialist in gaming and liquor law. "But first, you have to apply and be approved to hold a liquor license, a prerequisite to ever applying for a gaming license."
First, if an existing license or licensed business is to be purchased, a buy/sell contract must be completed. Then, applicants must decide how they will structure their business entity: individual, sole proprietor, partnership, limited liability company, corporation, etc. Next, secure the application forms from the Department of Revenue and the Gambling Control Division of the Department of Justice.
"All documents relating to the formation of the business such as organization bylaws, organizational meeting minutes, stocks issued, actual stock certificates, stock subscription agreements will need to be produced and filed," Kintli says.
Principle owners of a licensed enterprise must be residents of Montana and must document it.
"All proprietors, partners, members, managers, shareholders, officers and directors must be listed. Each will be separately investigated as to their potential 't hreat to effective regulation,' the broad catch-phrase invoked by regulators to determine suitability of anyone connected with the business," Kintli notes.
Each person involved with the business will be required to fill out a five-page triplicate "Personal History Statement" form.
You will need to identify the type of license you are seeking, your position in the business, your current employer information even military service records.
You will fill out an extensive criminal history section including all details regarding any misdemeanor or felony charges and convictions. "Felons who have been convicted within five years of the application, or have been placed or remain on probation, need not apply," says Staples.
You will be expected to give details regarding any lawsuit in which you may have been involved and disposition of the case. You may be asked to provide information about spouses, parents, siblings, children. You will be asked about your personal financial history, specifically bankruptcies.
"These are sworn statements. Providing false information is a prosecutable criminal offense and will likely result in denial or subsequent revocation of a license," Kintli says.
Then you sign an "Authorization for Examination and Release of Information," which justice department investigators will use to obtain and view any documents necessary to affirm your personal history statement.
Investigators will search the Criminal Justice Information Network and other data bases for information on anyone connected in any way with the business or the application.
In the meantime, department personnel will have published legal notices in local newspapers advising the public of the pending liquor license application or transfer. Members of the public can file a protest that triggers a legal hearing governed by rules of jurisprudence.
Now things really begin to get complex as investigators "follow the money."
"All sources of funds for the purchase and capitalization must be identified and explained," Staples says. You will fill out and submit the "Source of Funding Statement" accompanied by an Authorization for Release of Information which entitles investigators to acquire and study anything relating to your financial history and status.
Regulators will want to document valuation of the assets, money to be paid down, contract to be carried by seller, at what interest rate and at what repayment schedule. You will be expected to produce evidence and records regarding how you acquired your own funds. The financial documentation requirements apply to anyone investing or loaning money to the business.
If you borrow from a bank, that simplifies the transaction as you merely produce all loan documents, repayment schedules, checks, deposit slips, etc.
If you secure funding from "non-institutional lenders," the source of those funds must be identified and will be investigated. Non-institutional lenders will also fill out the personal history statement and are subject to investigation, Kintli says.
You must document who will be your accountant, your banker, who will prepare your taxes. Your proposed premise will need to be inspected and approved by fire, health and building inspectors.
Next, a justice department investigator will conduct a personal interview where you will essentially be asked to recite the information contained in the filed documents, "which can be a frightening and intimidating experience," Kintli says.
A new all-beverage license application fee is as high as $800, Kintli says. There is also a $200 processing fee. A catering endorsement is another $250. A gambling license application costs a minimum of $500 but gambling control personnel can charge applicants by the hour for processing, and fees often exceed the initial $500 substantially.
There is your annual federal Special Occupational Tax of $250 (suspended for three years by Congress beginning Oct., 2004)'; local business license fee, local liquor license fee and perhaps your $60 food purveyor's permit.
Each gaming machine you operate requires a $220-$240 annual permit (a form for each one, plus meter readings and audit tapes attached). If you are a new owner, the previous owner must file the "Letter of Permit Withdrawal" forms, accompanied by meter readings, audit tapes, etc. If you take on a new partner or an existing one departs, you must amend each machine permit as well as your liquor and gambling licenses.
A live card game license (a 15-page application) will cost $250. A second table permit is $500. Card dealers will have to apply for a dealer's license, be investigated and pay a $150 fee. If you lease your card room to a private contractor, you and your contractor will need to fill out the "Card Room Contractor" forms and, of course, the contractor will be investigated.
"Getting into the liquor and gaming business isn't easy, and It's meant to be just that. But it has proven effective in keeping these businesses in the hands of Montanans who are of good character," Staples says.
"Staying in the business requires adhering to another whole set of complex regulations. But that's another story for another day."
Source: Special Reports published by Continental Communications, 125 W. Granite, Suite 102, Butte, MT 59701'; e-mail .