Can Texas revoke a company's bingo license because an officer or director has a criminal record?

Plain-English summary

J. Winston Krause, chair of the Texas Lottery Commission, asked the Attorney General how far the Commission could go in using criminal records to deny or revoke bingo licenses. Bingo in Texas is regulated under the Occupations Code, and bingo-related licenses often go to corporations, partnerships, and other legal entities rather than to a single individual. When an entity applies, it has to name its officers, directors, and certain other people so the Commission can run background checks. The specific worry was whether a conviction belonging to one of those associated individuals could be used against the entity's license.

The AG answered two questions and said no to the broad one. First, Chapter 53 of the Occupations Code, the chapter on the "Consequences of Criminal Conviction," lets a licensing authority suspend or revoke a license when "the person" who holds or seeks it has been convicted of a qualifying offense. The AG read every reference to "a person" or "the person" in subsection 53.021(a) as meaning the same person. A corporation can itself be convicted of a crime and can be a "person," but Chapter 53 does not let the Commission revoke one person's license (the entity's) because a different person (an officer or director) was convicted. Chapter 53 simply lacks the kind of provision found elsewhere in the bingo statute, section 2001.105(b), which expressly lets the Commission refuse a bingo license to an entity when a named individual has a disqualifying conviction.

Second, the AG addressed section 2001.0541, a then-recent statute telling the Commission to adopt rules "as necessary to comply with Chapter 53." Because Chapter 53 itself does not reach an associated individual's conviction, the rulemaking command in section 2001.0541 could not create that authority either. The AG explained that an agency may not use rulemaking to hand itself a new power the statute withholds. So the Commission could investigate and consider an associated individual's entire criminal history, but it lacked authority to deny or revoke the entity's license based solely on that individual's conviction for anything other than gambling, a gambling-related offense, or criminal fraud. Widening that list of disqualifying offenses was a job for the Legislature, not the agency or the Attorney General.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

The Texas Lottery Commission (as the opinion described it): The opinion described the Commission as able to investigate and consider an associated individual's full criminal history, but as lacking authority under Chapter 53 or section 2001.0541 to deny or revoke an entity's bingo-related license based solely on an officer's, director's, or shareholder's conviction for an offense other than gambling, a gambling-related offense, or criminal fraud. The opinion described the bingo statute's own provision, section 2001.105(b), as the source of the Commission's power to act on an associated individual's gambling-type conviction.

Entities holding or seeking bingo-related licenses (as the opinion described it): The opinion treated a corporation or partnership as a "person" that can itself be convicted and so can be reached by subsection 53.021(a) for its own offenses, while describing the entity's license as not subject to denial or revocation under Chapter 53 merely because an associated individual was convicted.

The Legislature (as the opinion described it): The opinion described section 2001.105(b) as showing that the Legislature knew how to disqualify an entity based on an associated individual's criminal history, and said expanding the list of disqualifying offenses beyond gambling, gambling-related offenses, and criminal fraud was for the Legislature rather than the Commission or the Attorney General.

Common questions

Can the Texas Lottery Commission revoke a company's bingo license because one of its officers has a criminal record?
Not on that basis alone, under this opinion. The AG concluded that Chapter 53 of the Occupations Code does not let the Commission deny or revoke an entity's bingo-related license based solely on a conviction of an officer, director, or shareholder.

Can the Commission still look at the criminal history of the people behind a bingo entity?
Yes. The AG said nothing in the law prohibited the Commission from investigating and considering an associated individual's entire criminal history; the limit was on using that individual's conviction, by itself, to deny or revoke the entity's license.

Which convictions could disqualify a bingo entity?
The AG identified gambling, a gambling-related offense, and criminal fraud as the convictions that could disqualify an entity through an associated individual, citing the bingo statute's own provision (section 2001.105(b)).

Did the rule-making statute, section 2001.0541, give the Commission more power?
No. The AG explained that section 2001.0541 only directed the Commission to adopt rules to comply with Chapter 53, and an agency cannot use rulemaking to give itself a power the statute does not grant.

Could the Commission expand the list of disqualifying offenses on its own?
No. The AG said expanding that list to include crimes beyond gambling, gambling-related offenses, and criminal fraud was for the Legislature, not the Commission or the Attorney General.

Background and statutory framework

Bingo-related licenses are issued under the Occupations Code to entities as well as individuals, with "person" defined to include "an individual, partnership, corporation, or other group" (Tex. Occ. Code Ann. § 2001.002(20) (West 2012)). An applicant entity must supply information for criminal background checks on its officers and directors (id. § 2001.102(b)(12)), and the Commission may obtain criminal history information on a person required to be named in an application (id. § 2001.3025(2)). The bingo statute bars a license to an entity when a specified individual has been convicted of gambling, a gambling-related offense, or criminal fraud (id. § 2001.105(b) (West Supp. 2013)).

The request focused on section 2001.0541, directing the Commission to adopt rules "as necessary to comply with Chapter 53" when using criminal history record information (id. § 2001.0541 (West Supp. 2013)), and on Chapter 53, "Consequences of Criminal Conviction," which lets a licensing authority suspend or revoke a license or disqualify a person on the grounds the person has been convicted of certain offenses (id. § 53.021(a) (West Supp. 2013); id. §§ 53.001-.105 (West 2012 & Supp. 2013)). Chapter 53 borrows the Administrative Procedure Act's definition of "person" (id. § 53.001 (West 2012); Tex. Gov't Code Ann. § 2001.003(5) (West 2008)), so an entity can be a "person." A corporation can be convicted of its own offenses (Tex. Penal Code Ann. § 7.22 (West 2011); Vaughan & Sons, Inc. v. State, 737 S.W.2d 805, 811 (Tex. Crim. App. 1987)), but the AG read subsection 53.021(a)'s references to "the person" as a single person, so the chapter does not let an authority revoke one person's license for another person's conviction. The AG applied the rule that an agency may not use rulemaking to assume a power the statute withholds (Pub. Util. Comm'n of Tex. v. City Pub. Serv. Bd. of San Antonio, 53 S.W.3d 310, 316 (Tex. 2001)), and noted the Commission's own then-recent rule declining to apply Chapter 53 to associated individuals of a non-individual entity (16 Tex. Admin. Code § 402.702(a) (2014)), along with its continuing authority to obtain and investigate criminal history (Tex. Occ. Code Ann. § 2001.3025 (West 2012)).

Citations

Statutory provisions:

• Tex. Occ. Code Ann. § 2001.002(20) (West 2012) (definition of "person" for bingo)
• Tex. Occ. Code Ann. § 2001.102(b)(12) (background-check information from applicant entity)
• Tex. Occ. Code Ann. § 2001.3025(2) (authority to investigate criminal history of a person named in an application)
• Tex. Occ. Code Ann. § 2001.105(b) (West Supp. 2013) (bingo license barred for an associated individual's gambling/fraud conviction)
• Tex. Occ. Code Ann. § 2001.0541 (West Supp. 2013) (rules on consequences of criminal conviction)
• Tex. Occ. Code Ann. §§ 53.001-.105 (West 2012 & Supp. 2013) (Chapter 53, Consequences of Criminal Conviction)
• Tex. Occ. Code Ann. § 53.001 (West 2012) (definitions incorporated from the APA)
• Tex. Occ. Code Ann. § 53.021(a) (West Supp. 2013) (grounds to suspend, revoke, or deny a license)
• Tex. Occ. Code Ann. § 2001.3025 (West 2012) (authority to obtain and investigate criminal history)
• Tex. Gov't Code Ann. § 2001.003(5) (West 2008) (APA definition of "person")
• Tex. Penal Code Ann. § 7.22 (West 2011) (criminal responsibility of a corporation or association)
• 16 Tex. Admin. Code § 402.702(a) (2014) (Commission rule on Chapter 53 and non-individual entities)

Cases:

• Vaughan & Sons, Inc. v. State, 737 S.W.2d 805, 811 (Tex. Crim. App. 1987)
• Pub. Util. Comm'n of Tex. v. City Pub. Serv. Bd. of San Antonio, 53 S.W.3d 310, 316 (Tex. 2001)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-1065
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2014/ga1065.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

June 9, 2014

Mr. J. Winston Krause Opinion No. GA-1065
Chair, Texas Lottery Commission
Post Office Box 16630 Re: Whether the Lottery Commission may
Austin, Texas 78761-6630 deny or revoke an entity's bingo-related
license based on the criminal history of an
individual associated with that entity
(RQ-1173-GA)

Dear Mr. Krause:

You ask whether the Texas Lottery Commission (the "Commission") may deny or revoke an entity's bingo-related license based on the criminal history of an individual associated with that entity.[1] You explain that bingo-related licenses are often issued to corporations, partnerships, and other legal entities that are not individual persons. Request Letter at 1; see also TEX. OCC. CODE ANN. § 2001.002(20) (West 2012) (defining "person" as "an individual, partnership, corporation, or other group"). A legal entity seeking a bingo-related license must provide information about its officers, directors, and certain other individuals so that the Commission may conduct background checks. See, e.g., id. § 2001.102(b)(12) (stating that an entity applying for a license to conduct bingo must include "information necessary to conduct criminal background checks on the applicant organization's officers and directors"); see also id. § 2001.3025(2) (authorizing the Commission to investigate and obtain criminal history information to aid in the investigation of "a person required to be named in a license application"). The Commission may not issue a bingo-related license to an entity if an officer, director, or other specified individual of the entity has been convicted of gambling, a gambling-related offense, or criminal fraud. See, e.g., id. § 2001.105(b) (West Supp. 2013) (license to conduct bingo).

You ask about recently-enacted section 2001.0541 of the Occupations Code:

The commission shall adopt rules and guidelines as necessary to comply with Chapter 53 [of the Occupations Code] when using criminal history record information under this chapter to issue or renew a bingo license or to list or renew the listing of an individual in the registry of approved bingo workers.

Id. § 2001.0541 ("Rules on Consequences of Criminal Conviction"). Under subsection 53.021(a),

A licensing authority may suspend or revoke a license, [or] disqualify a person from receiving a license ... on the grounds that the person has been convicted of: (1) an offense that directly relates to the duties and responsibilities of the licensed occupation; (2) an offense that does not directly relate to the duties and responsibilities of the licensed occupation and that was committed less than five years before the date the person applies for the license; [or certain other specified offenses].

Id. § 53.021(a) (emphasis added). Your first question is "whether, under Chapter 53, [a non-individual] entity's license may be denied or revoked if an officer, director, shareholder, or other individual required to be listed in the entity's application has been convicted of an offense listed in subsection 53.021(a)."[2] Request Letter at 2.

Chapter 53, entitled "Consequences of Criminal Conviction," applies broadly to "licensing authorities" with some exceptions. TEX. OCC. CODE ANN. §§ 53.001-.105 (West 2012 & Supp. 2013). The chapter incorporates definitions from the Administrative Procedure Act ("APA"), chapter 2001 of the Government Code. Id. § 53.001 (West 2012). The APA defines the word "person" as "an individual, partnership, corporation, association, governmental subdivision, or public or private organization that is not a state agency." TEX. GOV'T CODE ANN. § 2001.003(5) (West 2008). Thus, "person" in chapter 53 may include legal entities other than an individual.

A corporation or association may be convicted for its own offenses. See TEX. PENAL CODE ANN. § 7.22 (West 2011); Vaughan & Sons, Inc. v. State, 737 S.W.2d 805, 811 (Tex. Crim. App. 1987). Consequently, subsection 53.021(a) of the Occupations Code is applicable when a legal entity is a licensee or applicant that has been convicted of one of the specified offenses, although a legal entity may not be capable of committing all of the offenses listed in subsection 53.021(a). TEX. OCC. CODE ANN. § 53.021(a) (West Supp. 2013) (concerning licensing consequences when the "person" has been convicted for offenses related to the occupation, or for fraud, or for various violent or sexual offenses).

More importantly, all of the references to "a person" or "the person" in subsection 53.021(a) plainly mean the same "person." Id. Accordingly, subsection 53.021(a) does not authorize a licensing authority to deny or revoke the license of one person (the legal entity) for the conviction of an offense by a different person (an individual). Chapter 53 does not have a provision such as subsection 2001.105(b), which allows the Commission to deny a bingo-related license to a legal entity when an officer, director, or other specified individuals of the entity have been convicted of a specified offense. See id. § 2001.105(b). Consequently, to answer your first question, chapter 53 of the Occupations Code does not independently provide the Commission with authority to deny or revoke an entity's bingo-related license based solely on the conviction of an officer, director, or shareholder for a subsection 53.021(a) offense.

You also ask if section 2001.0541 of the Occupations Code independently authorizes the Commission, "when reviewing the criminal history of individuals required to be listed in an entity's license application and deciding whether to deny or revoke that entity's license, ... to consider offenses other than convictions for gambling, gambling-related offenses, and criminal fraud." Request Letter at 2. Section 2001.0541 requires the Commission to "adopt rules and guidelines as necessary to comply with Chapter 53" which, as discussed above, does not authorize a licensing authority to revoke or deny a corporate license based solely on the criminal history of certain persons associated with the entity. TEX. OCC. CODE ANN. § 2001.0541 (West Supp. 2013). Section 2001.0541 should not be construed as authorizing the Commission to write rules and regulations to give itself the power to deny or revoke a license for reasons not set forth in chapters 53 or 2001. An agency such as the Commission may not "exercise what is effectively a new power, or a power contradictory to the statute, on the theory that such a power is expedient for administrative purposes." Pub. Util. Comm'n of Tex. v. City Pub. Serv. Bd. of San Antonio, 53 S.W.3d 310, 316 (Tex. 2001). Thus, while nothing in the law prohibits the Commission from investigating and considering an associated individual's entire criminal history, the Commission lacks authority under current law to revoke or deny a license of an entity based solely on the existence of a conviction of an individual associated with the entity for a crime other than gambling, a gambling-related offense, or criminal fraud. See TEX. OCC. CODE ANN. § 2001.3025 (West 2012) (authorizing the Commission to obtain and investigate the "criminal history" of certain individuals associated with a legal entity). Subsection 2001.105(b) demonstrates that the Legislature knows how to disqualify a license applicant based on the criminal history of an individual associated with the applicant. It is for the Legislature, not this office, to expand the list of disqualifying offenses to include crimes other than gambling, gambling-related offenses, and criminal fraud.

SUMMARY

Chapter 53 of the Occupations Code does not authorize the Lottery Commission to deny or revoke an entity's bingo-related license solely on the basis that an officer, director, or shareholder has been convicted or constructively convicted of an offense specified in section 53.021(a). The Legislature has chosen not to give the Commission the authority to revoke or deny an entity its license for the conviction of an individual required to be listed in the entity's application for an offense other than gambling, a gambling-related offense, or criminal fraud.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

William A. Hill
Assistant Attorney General, Opinion Committee

[1] See Letter from Mr. J. Winston Krause, Chair, Tex. Lottery Comm'n, to Honorable Greg Abbott, Tex. Att'y Gen. at 1 (Dec. 11, 2013), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] The Commission has recently adopted a rule stating that it "will not apply Chapter 53, Occupations Code, to officers, directors, or shareholders of, or other individuals associated with, an applicant that is a nonindividual business entity." 16 TEX. ADMIN. CODE § 402.702(a) (2014). We limit our analysis to the statutory authority that has been granted to the Commission under chapter 53.