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Crystal ball: California State Athletic Commission audit will reveal up to 7-figures $ missing

By Zach Arnold | August 28, 2012

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Rules and regulations from the Department of Consumer Affairs. CALIFORNIA CODE OF REGULATIONS, TITLE 4. BUSINESS REGULATIONS, DIVISION 2. STATE ATHLETIC COMMISSION.

§ 260. Approval Of Sale Of Tickets.

The sale of tickets to an event is prohibited until there is a current seating plan on file with the commission applicable to the event’s arena. Any change in the seating plan submitted also shall be filed prior to the sale of any tickets intended for use with the changed arrangement.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Sections 18640, 18641, 18661, 18665 and 18700, Business and Professions Code.

I predict that the state auditors will discover that the commission isn’t collecting seating charts for all the events they regulate, which means they don’t have a chart to compare ticket sales to when they audit the box office.

§ 261. Complimentary Tickets.

(a) No club or employee shall sell complimentary tickets. All clubs shall be held responsible for the actions of their employees in this connection.

(b) A complimentary ticket is a priced flat ticket for which no charge is made. Complimentary tickets shall be overstamped with the wording “Complimentary-Not to be sold” on the printed face of the ticket. The overstamp shall include the stub end of the ticket retained by the ticket holder. The promoter shall retain a clipped end of each complimentary ticket in the box-office.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Sections 18640 and 18824, Business and Professions Code.

I predict the auditors will discover that inspectors are not following the rules regarding the enforcement of comp tickets and that promoters are skimming off the top of ticket sales by not correctly having tickets labeled & stamped as they should be. If the state did a forensic audit of the box offices, they would be horrified at what they would discover in lost revenue.

§ 262. Courtesy Passes.

(a) Upon receipt of written permission from the commission, licensed clubs may issue script, exchange slips, courtesy or advertising passes or such other types of passes as may be approved by the commission.

Approved passes shall have plainly printed thereon the date of the show, as well as the value and the number of seats to which the pass entitles the bearer thereof. The pass shall be exchanged at the box office for a ticket and the holder shall present such ticket for admission to the ticket taker at the door, the rest of the ticket other than the stub, remaining in the box office to be checked as unsold tickets against the passes in the locked ticket boxes. Both ends of the ticket and the pass must be punched or clipped.

(b) If a club issues passes good only for general admission tickets, such passes shall be printed as specified above. The bearer shall exchange the pass for a ticket which shall be sold from a special roll, the ticket shall be presented for admission to the ticket taker, who shall deposit it in the locked ticket box and passes shall remain in the ticket office, to be checked as unsold tickets against the number of tickets taken from the special roll as shown by the opening and closing numbers. No pass shall be issued for more than one general admission.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Sections 18640, 18824 and 18872, Business and Professions Code.

Think of this as the section regarding fighters, managers, and their ridiculous entourages. I’m sure that if the auditors lined up the amount of courtesy passes given out for a show with the number of tickets collected at the box office, they will see plenty of shows where the figures don’t match up. That and/or the tickets/passes aren’t getting punched or clipped.

§ 264. Admission Of Employees, Press, Commission Members.

No person other than a representative of a commission shall have the right of admission without a ticket for value, complimentary ticket or pass.

For purposes of computing whether the total number of complimentary tickets exceeds twenty-five percent (25%) of the total number of spectators pursuant to Section 18824, a complimentary ticket issued to any person listed below shall be excluded from the calculation of the twenty-five percent (25%) threshold.

(a) Bona fide employees of the management of the club and municipal or county officers on official business. Bona fide employees are:

(1)Those persons, including directors and officers, regularly employed by, or under contract to, the club or regularly engaged in work in business transacted there, when their duties require admission to the place, and when on duty at the time admitted; and

(2) Other persons whose admission to the place is required for the performance of some duty to, or work for, the management of the club.

(b) Newspaper reporters, photographers, telegraphers, and radio announcers, assigned to work by their recognized employers or superiors, policemen and firemen in uniform and on duty, and persons of similar vocation who are admitted with a complimentary ticket to any club for the performance of special duties in connection with any event and whose special duties are the sole reason for their presence and free admission.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Sections 18640, 18641 and 18824, Business and Professions Code.

For this section, consider how many comp tickets have recently been given out to big boxing shows. The Golden Boy event at the Home Depot Center in Carson, California that was headlined by Antonio Tarver had 1,200 paid and over 4,000 comps. The promoter is making money from TV. The state gets a cut. The problem? If you have the majority of your box office as comps, it means the state isn’t collecting revenue. That means special funds like the boxer’s pension fund aren’t seeing revenues.

What this should remind you is the beginning of our CSAC investigation last May when we started digging into the whole ‘no gift’ policy regarding the commission and how they got in trouble for getting tickets. The commissioners had submitted paperwork to the Department of Consumer Affairs for tickets, DCA approved of the ticket allotment, and then the Executive Officer (Bill Douglas) reportedly had calendar documentation showing which commissioners DCA approved for show tickets.

I predict the state auditors will find that the inspectors and the CSAC front office are not following the rules & regulations regarding who gets into shows for free and which people are listed as having comp tickets versus those who aren’t.

§ 267. Reduced Price Tickets.

Any ticket for a boxing event sold for less than the printed price thereon shall be overstamped with the actual price charged. The overstamp shall be placed on the printed face of the ticket as well as the stub retained by the ticket holder.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Sections 18640, Business and Professions Code.

This law makes sense for promoters. You have a block of tickets in a section of seating you need to sell, sell them at a reduced rate in order to look good for television. And, yet, I predict that the state auditors will find that the promoters are not overstamping some of the tickets that have been sold at a reduced rate.

§ 269. Ticket Inventories.

Promoters shall use only tickets from a printer approved by the commission or its authorized representative. Printers shall send by mail to the district office and to the Sacramento commission office a sworn inventory of all tickets delivered to any club. This inventory shall account for any overprints, changes or extras, and a printer’s sample shall be attached. Promoters shall notify printers of this requirement.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Sections 18640 and 18872, Business and Professions Code.

This law, right here, is a scam. Anyone with a brain can see where this law leads you — cronyism. Someone go ask the CSAC front office for a list of approved ticket printers. The answer? You’re not going to get a list.

However, just because a law is a bad one doesn’t mean that you have the right to ignore it — which is exactly what Sacramento is doing here. Rather than being active instead of lazy, DCA & CSAC just ignore the rules & regulations they don’t want to enforce and enforce the ones they care about.

§ 271. Exchanges.

No exchange of tickets shall be made except at the box office, and no ticket shall be redeemed after the show has taken place. Tickets in the hands of agencies shall be returned to the box office not later than one hour after the show has started.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Sections 18640 and 18824, Business and Professions Code.

I predict that the auditors will discover all sorts of mismanagement regarding ticket exchanges at shows. Remember, auditors are now going from show to show to see what’s happening on the ground. Just because inspectors may be on their best behavior around an auditor doesn’t mean that the malfeasance isn’t happening once the eyes of the auditors aren’t looking.

§ 272. Refunds.

Every club holding either boxing or martial arts matches shall have printed on the stub of every ticket sold the following statement:

“Retain this coupon in event of postponement or cancellation. Refund $ _____.”

The price paid for the ticket shall be printed in the foregoing blank space, and the coupon detached and returned to the ticket holder at the entrance gate. This coupon check shall also show the name of the club and date of the contest or exhibition, and shall be redeemed at its face value by the club upon presentation by the purchaser if the advertised main event is postponed or does not take place as advertised. The surety bond shall be conditioned upon the compliance by the club with the provisions of this rule.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Sections 18640 and 18681, Business and Professions Code.

This is to protect the consumers who buy show tickets. Sounds straight-forward enough, right? I suspect the state auditors will discover that this law isn’t always enforced with tickets sold at events.

It should be pointed out that at boxing events, there is a 26 round rule in terms of total rounds for a show. If the card can’t satisfy this requirement, the ring announcer is legally required to get into the ring and announce to the fans that they have the option of getting a refund. Do you think this law is vigorously enforced on the smaller or mid-sized shows? Probably not.

§ 273. Ticket Stubs.

Under no circumstances shall a ticket holder be passed through the gate without having the ticket separated from the stub, or be allowed to occupy a seat unless in possession of the ticket stub. The ticket taker at the door shall separate the ticket from the stub and deposit the ticket in the locked ticket box provided.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Sections 18640 and 18824, Business and Professions Code.

I expect the state auditors to find out that in most cases the stubs aren’t being properly collected. Hard to manage a box office when you can’t do the basics, right?

Without an accurate ticket invoice or ticket manifest, there’s no way that a proper & accurate box office can be done.

§ 274. Seats To Correspond To Tickets.

Ushers shall see that spectators get the seats corresponding with their ticket stubs, and that anyone occupying such seat unlawfully be asked to vacate, and if necessary be ejected.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Section 18640, Business and Professions Code.

This is an ugly one because a lot of times the ushers at smaller shows are the drinking buddies of the promoters. They’re the last folks who want to get into an incident if there’s a riot at a show and they have to actually demonstrate some sort of responsibility.

In many cases, fighters and their entourages will show up and pick whatever empty seats they want to sit in without any hesitation.

§ 276. Counting Tickets.

The commission representative shall check numbers and places of ticket cans at gates and cause them to be sealed and padlocked, and after the show have them opened and tickets counted under his supervision.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Sections 18640, 18825 and 18872, Business and Professions Code.

The serial number on the tickets are supposed to be in sequential order. The ticket counting is supposed to involve ticket cans that are sealed. I predict the state auditors are going to find out that these basic rules are not always being followed and that numbers won’t match up with what’s listed for the box offices.

However, it may turn out to be a pointless exercise because of this following law of Byzantine proportions:

§ 277. Destruction of Tickets.

Tickets and stubs of every description sold or unsold, other than unsold reel tickets, used for any boxing contest or wrestling exhibition shall be removed to the commission district office for audit, if necessary, by a representative of the commission after the promoter and representative have completed computation of gate receipts and taxes due thereon. In the event tickets are not taken by a commission representative they shall be retained by the promoters for a period not to exceed six months. Such tickets may be destroyed after they have been held for at least 30 days and written permission has been granted by the commission for the destruction of such tickets. Tickets shall be kept in separate packages for each show in order that an audit can be made at any time by the commission.

NOTE: Authority cited: Section 18611, Business and Professions Code. Reference: Sections 18640, 18825, 18826 and 18872, Business and Professions Code.

The lead inspector at a show is supposed to collect the tickets and get them to CSAC.

The law says that a promoter should hold onto tickets for up to six months if the inspector has not taken them. If that’s not crazy enough for you, the law states that the promoter can destroy the tickets 30 days after the show if the commission gives the A-OK.

Well, how the hell is CSAC going to be able to audit a show that they think has a suspicious box office if the promoter has the tickets in question and can destroy them a month later? Why would a promoter make any effort to send in the uncollected tickets?

Conclusion

The auditors working for the state of California are about to discover what a huge mess CSAC is.

As I said up above… without an accurate ticket invoice or ticket manifest, there’s no way that a proper & accurate box office can be done.

The question is what happens once they discover what’s wrong. Will they actually fix it? Will they go along with the political game and let the Department of Consumer Affairs try to sunset the commission? Remember, sunsetting the commission simply means DCA takes it private and eliminates what transparency there currently is. It’s not going to improve the quality of regulation whatsoever.

I would remiss in not saying a final word about the judges, referees, doctors, and other licensees who work shows on behalf of CSAC and are paid on a sliding scale based on what is collected at the box office. When you have inspectors who aren’t doing their job in managing the box office properly and you have promoters who can easily circumvent the laws on the books, you end up with officials who are getting stiffed because the box office numbers simply aren’t accurate. If there is no accurate invoice produced for the box office and the inspectors are relying on the promoters to tell them what the final numbers are, guess who gets the screwed? The state of California gets screwed and so do all the officials who work the events as licensees.

The colossal mismanagement of affairs at the California State Athletic Commission by the Department of Consumer Affairs has cost the state an immeasurable amount of money and has also cost CSAC any sort of credibility & respect from the public. Instead of trying to sweep the mess under the rug, the auditors should be ready to instruct the politicians to clean house and to be proactive in ensuring the proper changes. Furthermore, the auditors should instruct the state Legislature to immediately get CSAC out of the Department of Consumer Affairs umbrella. DCA is the problem, not the solution. The fish rots from the head.

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Topics: Boxing, CSAC, Media, MMA, Zach Arnold | 3 Comments » | Permalink | Trackback |

3 Responses to “Crystal ball: California State Athletic Commission audit will reveal up to 7-figures $ missing”

  1. rabies says:

    The DCA better hope the auditors don’t stumble onto this site.

  2. Steve says:

    Next up please- The ridiculous way that Officials’ assignments are being alloted of late. Cronyism you say? You’d think this important task would fall to the Executive Officer, but it seems the political machine is at work here as well. Dig deeper.

  3. […] Tuesday, we posted a very detailed article laying out our case of what auditors working for the state of California may find during their […]

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