1818648 Ontario Inc. o/a Dugout (The) v. Registrar of Alcohol and Gaming, 2014 CanLII 36464

Licence Appeal Tribunal / Tribunal d'appel en matière de permis

DATE: 2014-06-18

FILE: 8574/LLA

CASE NAME: 8574 v. Registrar of Alcohol and Gaming

Appeal from the Notice of Proposal of the Registrar of Alcohol and Gaming under the Liquor Licence Act, R.S.O. 1990, c. L. 19 - to Refuse to Transfer a Licence

1818648 Ontario Inc. o/a Dugout (The) Appellant

-and-

Registrar of Alcohol and Gaming Respondent

REASONS FOR DECISION AND ORDER

ADJUDICATOR: D. Gregory Flude, Vice-Chair

APPEARANCES:

For the Appellant: Raymond Colautti, Counsel

For the Respondent: Phillip Morris, Counsel

Heard in Toronto: May 27, 2014

REASONS FOR DECISION AND ORDER

1The Appellant Corporation appeals the decision of the Registrar of Alcohol and Gaming to refuse to transfer the liquor licence of a licensed establishment called The Dugout. The grounds for the Registrar’s position are set out in the Notice of Proposal to Refuse to Transfer a Licence dated January 8, 2014 and address the fact that three of the four shareholders of the Appellant Corporation have criminal records and one has been involved in several incidents at the casino in Windsor. The Particulars, which are admitted by the Appellant, are set out in paragraph 4 as follows:

On September 27, 2010, Douglas Hogan and Daniel Hogan were convicted of bookmaking contrary to the Criminal Code. At the time, they were owners of the Beach Bar & Grill and some of the bookmaking transactions were completed inside the licensed premises.

Douglas Hogan was refused entry to Caesars Windsor casino on January 29, 2011, April 16, 2011 and October 19, 2011 because he appeared to be intoxicated.

Zackery Knudsen was convicted of driving over 80 on October 7, 2011.

2Douglas and Daniel Hogan are twin brothers. With respect to Mr. Knudsen, the Registrar would like to see as conditions on the Appellant’s licence regarding him, that he not consume alcohol on the licensed premises and that he notify the Registrar within five days if any new charges are laid or convictions registered against him. In his evidence, Mr. Knudsen testified such conditions were acceptable. The greater part of the hearing was devoted to the past conduct of the Hogan brothers. In the evidence, Douglas Hogan’s name appeared more frequently in the documents and oral testimony than Daniel Hogan’s. There was no attempt on the part of the Appellants to separate the activities of the brothers; both entered guilty pleas to the criminal charges; and it appeared clear that the criminal activity was a joint venture, a fact not disputed by the Hogan brothers. Accordingly, the Tribunal will deal with the Hogan brothers’ activity as a joint undertaking and not seek to find greater culpability on the part of one brother rather than the other.

3The Tribunal heard evidence from OPP Constable David Ferris who investigated the Appellant and its shareholders on behalf of the Registrar. In the course of his investigation he was given a number of documents from the police detailing their investigation of the bookmaking activities of the Hogan brothers leading to their conviction. Of particular importance are two documents, a Physical Surveillance Report (Ex 7) regarding Project Alton, the OPP codename for their surveillance of the Hogans, and an Information Chronology, Project Alton (Ex 10). Exhibit 7 was introduced into evidence by the Registrar in Officer Ferris’s examination in chief and Exhibit 10 was tendered by the Appellant in cross-examination. The Tribunal also heard from Rebecca Castillo, Manager of Liquor Eligibility who outlined the concerns of the Registrar regarding the Appellant’s shareholders. Each of the four proposed equal shareholders of the Appellant testified. They are Douglas Hogan, Daniel Hogan, Zackery Knudsen and Nicolas Robert Puim.

4As stated above, the focus of the hearing was on the activities of the Hogan brothers leading up to the September 2010 convictions. The position of the Registrar is that the Hogan brothers were engaged in a highly sophisticated and far reaching gambling operation when they were arrested. The two brothers take the position that they gambled among a group of friends, some 17 or 18 in number, that they recognize that their behaviour was wrong and, having paid their debt to society, they seek to put this matter behind them and move on with their lives. As evidence of their reformed character and commitment to the community, they point to the major contributions they make to charity every year, including running a charity golf tournament involving more than 400 golfers which has raised over $500,000.00 for local charities and extensive sponsorship of other charities and kids sports teams. They point to the fact that they have been in the hospitality business for over twenty years and ran one bar, Beach Bar and Grill, without major incident. They have also been involved in the running of the Dugout for the last three years, again without major incident.

5The statutory test for refusing to licence a corporate licensee applicable in the current circumstances is set out in s. 6 of the Liquor Licence Act R.S.O. 1990, chap. L.19 (the “Act”):

Licence to sell

6. (1) A person may apply to the Registrar for a licence to sell liquor.

Requirements

(2) Subject to subsection (4) or (4.1), an applicant is entitled to be issued a licence to sell liquor except if,

(d) the past or present conduct of the persons referred to in subsection (3) affords reasonable grounds for belief that the applicant will not carry on business in accordance with the law and with integrity and honesty;

(3) Clause (2) (d) applies to the following persons:

1. The applicant.

2. An officer or director of the applicant.

3. A person who is interested in another person, as described in subsection 1 (2).

4. A person having responsibility for the management or operation of the business of the applicant.

6The combination of s. 6 (2)(d) and (3) directs the Tribunal to examine the honesty and integrity of the Hogan brothers, taking into account the whole of their past behaviour, to determine if reasonable grounds exist for belief that, because of their involvement as shareholders, directors or officers, the Appellant corporation will not carry on business in accordance with the law and with integrity and honesty. In conducting this examination, the Tribunal is not limited to the evidence that was admitted at the criminal trial in September 2010. It may consider hearsay evidence and draw reasonable inferences from the totality of the evidence to fully understand the illegal activity leading up to the charges. In conducting this enquiry, the Tribunal has particularly relied on the two exhibits cited above, Exs. 7 and 10.

7Ex. 10 summarises the extent of Project Alton. The starting point, not disputed by the Hogans, was that Douglas Hogan was stopped at the US border on November 22, 2006 and found to have a large amount of undeclared Canadian and US cash together with a bookmaking ledger. The Hogans made a point of explaining that the US Customs and Border Protection Service had ultimately returned the cash. For the purposes of this analysis, this incident establishes that the bookmaking activity was of long standing, commencing some time prior to November 2006. This incident appears to have triggered an OPP investigation. OPP surveillance started in May 2007. The investigation ran until March 2009 when the Hogan brothers were arrested. In February 2009, the OPP came across two telephone numbers associated with pre-paid cell phones. The phones were registered in false names. The brothers bookmaking business was conducted exclusively through these two phones. Pursuant to the provisions of a warrant to intercept telephone calls from these phones, police monitoring determined that, during the 60 days the warrant was in force, the Hogan brothers were out of town for 14 of those days, there were 37 days of betting on one phone and 9 days of betting on the other. In total, $87,000.00 was bet during the monitoring period (Ex. 6).

8Ex. 10 indicates further troubling facts. It appears that the Hogans had an informer within the local ranks of the AGCO inspection department who kept them informed about when and where AGCO inspections would occur. Several entries in February of 2009 relate to information received from the informer. There is also one call on February 10, 2009 when an employee advises Doug Hogan that a police officer’s wife had called the Hogans’ print business “to give a heads up.” Doug Hogan advised his employee that they always have to watch it. Exhibits 8 and 9 indicate that bettors information was kept confidential. Bettors used numbers to place bets. The exhibits assign identities to numbers, albeit nicknames and initials. In cross-examination, Doug Hogan refused to identify the names of bettors, notwithstanding that many had been identified in Ex. 10. It was also not disputed by the Hogans that they had regular hours of business when they would accept bets. The hours were from 6:00 – 7:00 p.m. each day and additionally, 11:00 a.m. to 1:00 p.m. on weekends.

9In their evidence, both Hogan brothers testified that it was their immutable practice to keep their bar business at the Beach separate from their illegal bookmaking business. Undoubtedly, given the vehemence of their assertion of this fact, they were aware that there is a current specific provision placing a duty on licence holders not to permit gaming on the premises. That vehemence came to the fore when Doug Hogan was asked about events on the evening of March 17, 2009. Exhibit 7 is a report from surveillance on Doug Hogan that day. It indicates that at approximately 4:15 p.m. Doug Hogan went to the Beach Bar & Grill. He left at approximately 7:15 p.m. His brother Dan Hogan was already there. Doug Hogan made a number of calls on one of the dedicated betting phones to one of the bettors, DJ. While there was no transcript of the exchange between DJ and Doug Hogan, the notes suggest that Doug Hogan pressed DJ for payment of his betting arrears and arrangements were made to pay the outstanding debt later in the evening at Mr. Hogan’s home. The report also indicates that Doug Hogan took bets while at the bar. When this was put to him in cross-examination, he denied that he took bets while in the bar and went so far as to say that he never removed the betting phones from his residence. Dan Hogan was equally insistent that the bar and betting business were kept apart with no betting taking place in the bar.

10The Tribunal notes that this police investigation resulted in the laying of charges and that illegal bookmaking was admitted during this period. The Tribunal also takes notice of the fact that the Crown was under an obligation to make full disclosure of all outstanding evidence. No issue was taken with any particular of the Crown brief at the hearing. The Tribunal also notes that calls were made during the regular business hours of the betting operation. The surveillance report is inherently reliable. The only possible conclusion the Tribunal can reach on the facts is that betting activity did take place within the licensed premises on March 17, 2009 and that Mr. Hogan has attempted to mislead the Tribunal to avoid the consequences attended on permitting gaming to take place in the bar.

11Overall, it is clear that the bookmaking operation was far reaching and continued over a long period of time. There are references to discussions with bookmakers in Toronto and, of course, the trigger for the OPP investigation was an attempt to take cash and the ledger across the border. The Hogan’s suggestion that it was just a group of friends getting together is undermined by the fact that the amount at stake during the wiretap investigation was $87,000.00. This betting level translates to approximately $800,000.00 turnover on an annualised basis. Clearly this was an extensive betting operation. It was admitted during the guilty plea hearing that the period in question was a quiet period for betting, so the total annual betting is likely higher than that amount. Given the lack of frankness shown by both Doug and Dan Hogan about their activities, the Tribunal is of the view that Doug Hogan is correct when he described the $4,000.00 fine plus $600.00 victim surcharge as “a slap on the wrist.” It appears the 10% commission on the betting ran to approximately $80,000.00 per annum.

12The Hogan brothers have a long and laudable history of community involvement. They led evidence of large sums of money being raised for charity and involvement in many charitable activities. In fact, one of the activities, providing free equipment and ice time for kids’ hockey was started by Mr. Knudsen’s grandfather. There is a long relationship between the Knudsen and Hogan families. Given the community involvement and the fact that the criminal conviction for bookmaking is now four years old, is the Tribunal satisfied that Doug and Dan Hogan can now be invested with the public trust and given authority to operate a bar. The Tribunal finds that they cannot. They have not owned up to and accepted their criminal past. They are still trying to minimise it. They also are attempting to maintain, despite clear evidence to the contrary, that they did not use the Beach Bar & Grill for illegal betting. This indicates to the Tribunal that they are not ready to accept all of the duties and obligations of licence holders.

13In coming to this conclusion, the Tribunal has not considered the three incidents at Caesar’s Windsor. It accepts Doug Hogan’s explanation that the sickness and death of his mother had had a bad effect on him and that his behaviour was as a result of that. It also accepts that he came to understand that relief from his pain was not to be found in excessive alcohol use and that he has reformed that part of his life.

ORDER

14Since this is an appeal by a corporation, the Tribunal can find no impediment to permitting the licence to be transferred to the corporate entity as long as the Hogan brothers have no involvement in the corporation. Mr. Puim expressed concern with proceeding with the investment absent the involvement of the Hogan brothers and it may well be the result of this order that the transfer does not go through. Notwithstanding Mr. Puim’s concerns, the Tribunal orders the Registrar to transfer the licence to the corporate appellant (the” licensee”), should Mr. Knudsen and Mr. Puim continue with the application, on the following terms and conditions:

1. Neither Douglas Hogan nor Daniel Hogan:

a. may have a beneficial interest of any kind, either directly or indirectly, in the licensee, including but not limited to being a holder, directly or indirectly, of shares or other securities;

b. may exercise direct or indirect control over the licensee, including acting as a manager, employee or bookkeeper of the licensee;

c. may be permitted in the licensed premises or

d. may provide direct or indirect financing to the licensee.

2. Zackery Knudsen shall not consume alcohol on the licensed premises; and

3. Zackery Knudsen shall notify the Registrar within five days if he is charged or convicted of any criminal offence.