Beat the BCS. Save College Football.

August 12,2011 VIA CERTIFIED MAIL The Honorable George Jepsen Attorney General State of Connecticut 55 Elm St. Hartford CT 06106 Dear General Jepsen: This letter is to inform you that Playoff PAC has uncovered certain unethical and potentially illegal activities related to the University of Connecticut's 2011 state contract with the Fiesta Bowl organization. The Fiesta Bowl contractually prevented the University from negotiating its own hotel accommodations. Instead, the Bowl required the University, as a condition of participation, to accept the Bowl's preselected hotels, prices, number of rooms, and duration of stay. The University lost $1.7 million on its 2011 Fiesta Bowl trip. Over $460,000 of the University's expenses were for lodging services. Playoff PAC has now discovered that the Bowl received a six-figure payment for "causing" the University to pay particular hotels for lodging services. The payment was made as part of a 20-year, $8.5 million contract with Scottsdale, Arizona hotels. We believe that this arrangement may violate Connecticut's prohibition on "receiving kickbacks" under Conn. Gen. Stat. Ann. § 53a-16Ic. We ask that you thoroughly investigate this arrangement. We have enclosed a 13-page report on this "hotel kickback" transaction to aid your investigations. Please notify me if you have any questions by contacting me at msanderson@playoffpac.com. Sincerely,

Matthew T. Sanderson Co-Founder, PlayoffP AC

Encl: "Hotel Kickbacks" Secured by the Fiesta Bowl, a Bowl Championship Series Organization

_J

i

"Hotel Kickbacks" Secured by the Fiesta Bowl, a Bowl Championship Series Organization
[Tjhe Board ••• has already acted to put into place new bylaws, policies and controls that will ensure such activities do not happen again ..• We are committed to being a model non-profit organization. - Fiesta Bowl Chairman Duane Woods on March 29, 2011

The Fiesta Bowl, a Bowl Championship Series ("BCS") organization, secures for itself over $200,000 in annual payments from the hotels it contractually requires participating schools to frequent. These "hotel kickbacks" are unethical and potentially illegal. The kickbacks are ethically objectionable because the Bowl promotes itself as a trustworthy partner of higher education while pocketing money that should benefit colleges and universities. The kickbacks also appear to violate important laws that govern state contracts in certain jurisdictions. Evidence also suggests that two other BCS Bowls-the Sugar Bowl and the Orange Bowl-may similarly be receiving hotel kickbacks. Those Bowls' activities will be addressed by Playoff PAC in a future report. The Fiesta Bowl is this document's focus. Playoff PAC describes below the process and problems associated with the Fiesta Bowl's efforts to secure hotel kickbacks.

I.

How Does the BCS's Fiesta Bowl Secure Hotel Kickbacks?

Schools that play in BCS Bowl games, including the Fiesta Bowl, must pay their own lodging costs, which can be substantial. 1 BCS Bowls prevent these schools from selecting the hotels where they will stay, negotiating the rates they will pay, or choosing the number of roomnights they will buy. Instead, BCS Bowls require these schools, as a contractual condition of participation, to accept the Bowls' pre-selected hotels, prices, number of rooms, and duration of stay. In the case of the BCS's Fiesta Bowl, hospitality and administrative ease are not the Bowl's motives to insist on this unusual arrangement. Rather, the Bowl aims to procure additional revenue from the hotels it pre-selects to receive schools' business. As discussed below, the Fiesta Bowl secures hotel kickbacks through a three-step transaction: (1) the Bowl contractually commits to "cause" schools to pay for rooms at particular hotels in exchange for the promise of payments; (2) the Bowl earns its payment by inserting a contractual provision that requires schools to stay at a Bowl-designated hotel, pay a non-negotiable rate, and buy a predetermined number of room-nights; and (3) the participating schools, as required by the Fiesta Bowl, pay the Bowl-designated hotels significant amounts. A. Step 1: The BCS's Fiesta Bowl Contractually Commits to "Cause" Schools to Pay for Rooms at Particular Hotels in Exchange for the Promise of Significant Payments

The Fiesta Bowf executed in August 2006 a 20-year contract with the Scottsdale Convention and Visitors Bureau ("SCVB,,).3 SCVB is a non-profit entity through which
1 See, e.g., 2010 NCAA Expense Report for Boise State, available at http://scr.biloESbtz spent $570,000 on meals and lodging).

(disclosing that school

2 The contracting entity was "Fiesta Events, Inc.," a charitable entity within the Fiesta Bowl organization. See Arizona Sports Foundation FYE 2010 IRS Form 990, available at http://scr.bilmQnfps(listingFiestaEvents,Inc.as an affiliated entity).

See generally, Scottsdale Convention & Visitors Bureau and Fiesta Bowl, Hospitality and Promotional Agreement (August 28,2006), available at http://scr.biloyeJHo.
3

1

Scottsdale's tourism-related interests jointly market themselves." SCVB's membership and leadership is dominated by Scottsdale-based hotels and the businesses that service their guests.' The contract is lucrative for the Fiesta Bowl, obliging SCVB to pay an up-front $500,000 fee6 and make annual payments ranging from $218,400 to $786,654.7 In 2011, SCVB's payments and in-kind benefits given to the Bowl8 equaled $277,670 for the 2011 Fiesta Bow1.9 The entire contract is worth $8,526,018 to the Bowl-$8,226,018 in cash and $300,000 in inkind services. 10 What must the Fiesta Bowl do to earn this money? Part of the contract requires the Bowl to provide "hospitality" and "promotional" benefits to SCVB in the form of event tickets, parking passes, and advertising opportunities.I' But these benefits account for only a modest portion of the contract's annual value, as shown by Table 1 below.

Rate for promotional services to other lodging groups associated with Sugar Bowl, from NCAA Bowl Licensing Subcommittee 13

4

See Scottsdale Convention & Visitors Bureau, FYE 2010 IRS Form 990 Part III, Line 1.

5 See Scottsdale Convention & Visitors Bureau, FYE 2010 IRS Form 990 Statement 16 (describing SCVB Board membership). 6 7 8

Hospitality and Promotional Agreement at Section 5 (August 28, 2006), available at http://scr.biloyeJHo. Hospitality and Promotional Agreement at Section 4.7 (August 28, 2006), available at http://scr.biloyeJHo.

The Bowl received an additional $277,670 (see FN 8 for calculation methods) for the National Championship Game, but that amount is excluded here to offer a fairer representation of year- over-year payments to the Bowl.
9 Hospitality and Promotional Agreement at Section 4.7 (August 28,2006), available at http://scr.biloyeJHo. The base value for each game in 2011 was $245,670. In addition to this base amount, SCVB made a $500,000 up-front payment to the Fiesta Bowl that would augment the 2011 base contract value for each game by $20,000 per game. That additional $20,000 attributable to this up-front payment is included in the $277,670 figure for 2011. Please also note that the in-kind services offered by SCVB would add an additional $12,000 per game to the 2011 base contract value. This $12,000 in-kind amount is included in the $277,670 figure for 2011. 10

Hospitality and Promotional Agreement at Section 4.7 (August 28, 2006), available at http://scr.biloyeJHo. and Promotional Agreement at Sections 2 and 3 (August 28,2006), available at http://scr.biloyeJHo. Fiesta Bowl Special Committee Report at 213 (2011), available at http://scr.bilhqPeYT. Attached hereto as Appendix A. (showing blended face-value rate of

II Hospitality 12 13 14

2011 Fiesta Bowl participant's NCAA Expense Report, http://scr.bilhou1x9 $196 per ticket).
15

Attached hereto as Appendix B (showing $20 per ticket as purchase price for event).

2

"Hospitality" and "promotion" services therefore account for an estimated total of just $53,380, based on 2011 prices. And this estimate may value these items too highly. Because the 2011 Fiesta Bowl and Insight Bowl were not in-demand games, the market value of the game tickets and parking passes was far below the listed face value used in Table 1 above." If these "hospitality" and "promotion" benefits were worth relatively little, why did the Fiesta Bowl get an estimated $224,290 more from SCVB for the 2011 Fiesta Bowl game? The Fiesta Bowl received that $224,290 for "caus[ing] both Fiesta Bowl ... teams" and "caus[ing] a minimum of five (5) Fiesta Bowl ... related groups per year representing a minimum of2,000 hotel or resort room nights per year" to stay at SCVB-member hotels.i" (See Figure 1 below.)

162011 Insight Bowl participant's NCAA Expense Report, http://scr.biJojeRS7 $65/ticket).

(showing blended face-value rate of

17 Attached hereto as Appendix B. Per the 2011 Fiesta Bowl Team Manual, tickets are not available for purchase. Estimate therefore assumes $60 purchase price, which is three times the value of "College Football's Biggest Party" tickets. 18 City of Glendale, Fiesta Bowl FAQs, available at http://www.ci.glendale.az.us/news/ documentslFiestaBowlF

AQ. pdf (showing $30 per pass price).

19 For example, the average price for 2011 Fiesta Bowl game tickets was just $105 and tickets sold for as little as $14. See Rebekah L. Sanders, BCS National Championship Game Increases Phoenix-Area Sales, Arizona Republic (Jan. 8,2011); Chip Malafronte, Fiesta Bowl a Costly Venture for UConn, New Haven Register (Mar. 3, 2011). 20 Hospitality and Promotional Agreement at Sections 1.1 and 1.4 (August 28, 2006), available at http://scr.biJoyeJHo.

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Figure l-"Step

1" in Hotel Kickback Transaction
~

SCVB pays $8 million total / $200k to $790k per year

SCVB
Member Hotels

Bowl"cause[s]"

schools to rent rooms at SCVB-member hotels

Put differently, the Fiesta Bowl secures the promise of annual six-figure payments for itselfby contractually guaranteeing that Bowl-participating schools will pay for thousands of room-nights each year at SCVB-member hotels. This handsome reward for the Bowl is not disclosed to schools. The Fiesta Bowl-SCVB contract contains an "anti-publicity" clause that reads:
Except as may be required by law or any governmental authority, or to obtain any consents or approvals required by this Agreement, the parties hereto shall not, without the consent of the other party, make any public disclosure of the existence of this Agreement, the parties hereto, the terms hereof or any other matter related hereto.21

Although the City of Scottsdale disclosed the deal's terms in a 2006 press release to Arizona papers, there is no indication the Bowl has endeavored to inform participating schools.22 For example, contracts with and materials provided to Fiesta Bowl and National Championship Game schools do not mention the payment arrangement.f The Fiesta Bowl's first step in securing hotel kickbacks, then, is contractually committing to "cause" schools to pay for rooms at SeVB hotels in exchange for the promise of significant payments.

B.

Step 2: The BCS's Fiesta Bowl Earns Its Annual Payments by Inserting a Contractual Provision that Requires Schools to Stay at a Bowl-Designated Hotel, Pay a Non-Negotiable Rate, and Buy a Pre-Determined Number of Room-Nights

Each BCS Bowl, including the Fiesta Bowl, executes a separate agreement with each of the schools that will participate in their respective Bowl game or BCS Championship game.
21 22

Hospitality and Promotional Agreement at Section 20 (August 28, 2006), available at http://scr.bi/oyeJHo. 2011 Fiesta Bowl

Carrie Waters, Glendale Expects Bowls to Pay Off, The Arizona Republic (Dec. 29, 2006). See, e.g., 2011 Fiesta Bowl Game Agreement-Oklahoma, available at http://scr.bi/p7sEpk; Team Manual, available at http://scr.bi/06V6iG.
23

4

These game agreements concern a broad range of matters, including ticket purchases, logo usage, awards, gifts, and public appearances.i" The Fiesta Bowl's game agreements also include the following contractual provisions that require schools, as a condition of participation, to lodge at a Bowl-designated hotel, pay a specified price, and purchase a pre-determined number of roomnights:
The Bowl shall arrange for, and the Institution shall take, one hundred fifty (150) rooms at a first class hotel resort to be made available to members of the Institution's football team, football coaches and staff ... with a minimum stay of six (6) nights. Such rooms shall be at the hotel property and room rate shown on Exhibit 3.

The Bowl shall arrange for, and the Institution shall take, one hundred twenty-five (125) rooms at the same hotel resort housing its football team ... to be made available to the Institution's Official Party, with a minimum stay of three (3) nights, one of which shall be game night. Such rooms shall be at the hotel property and room rate shown on Exhibit 3.

The Bowl shall arrange for, and the Institution shall take, one hundred twenty-five (125) rooms to be made available to the Institution for members of the Institution's marching band ... , cheerleaders, mascot, and other guests representing the Institution for a minimum stay of three (3) nights, one of which shall be game night. Such rooms shall be at the first-class hotel property and room rate shown on Exhibit 3.

The Bowl shall arrange for, and the Institution shall take, seventy-five (75) additional rooms for a minimum stay of three (3) nights, one of which shall be game night. Such rooms shall be at the first-class hotel property and at the room rate shown on Exhibit 3.25

Each participating school must therefore pay a non-negotiable rate for a minimum of 1,875 room-nights. Sometimes this minimum room-night requirement is much higher." And schools must purchase those room-nights, even ifthey go unused.27 Notably, the Fiesta Bowl also
24 25

See e.g., 2011 BCS Championship Game Agreement--Auburn,

available at http://scr.bilnpDbKF.

See e.g., 2011 BCS Championship Game Agreement-Auburn at Section 6.1, http://scr.bi/npDbKF; 2011 BCS Championship Game Agreement-Oregon at Section 6.1, http://scr.bilpDvONS; 2011 Fiesta Bowl Game Agreement-Connecticut at Section 6.1, http://scr.bilnFGjUW; 2011 Fiesta Bowl Game Agreement-Oklahoma at Section 6.1, http://scr.bilp7sEpk; 2010 Fiesta Bowl Game Agreement-Boise State at Section 6.1, http://scr.bilj2Rlbk; 2009 Fiesta Bowl Game Agreement-Ohio State at Section 6.1, http://scr.bilfXAWWf; 2009 Fiesta Bowl Game Agreement-Texas at Section 6.1, http://scr.bilropsfV; 2008 Fiesta Bowl Game AgreementOklahoma at Section 6.1, http://scr.bilocgloc; 2007 Fiesta Bowl Game Agreement-Boise State at Section 6.1, http://scr.billvRFT1; 2007 BCS Championship Game Agreement-Florida at Section 6.1, http://scr.biliXJNKv.
26

Chip Malafronte, Arizona Trip Will Cost More than Huskies' Share of Proceeds, New Haven Register (Dec. 15, 20 I 0) (describing the University of Connecticut's "hotel obligation" as being "a total of 550 rooms at three different hotels ranging in price from $125-$225 a night, not including tax, with blocks reserved for either three or seven nights.").
27

See, e.g., Paul Doyle, UConn's Fiesta Pitch: Prestige, Not Profit, The Hartford Courant (Dec. 19,2010). It is worth noting that teams participating in other BCS Bowls have had to pay for unused hotel room-nights. For example, 2011 Sugar Bowl participant Arkansas was required to stay at the Hilton New Orleans Riverside. But Arkansas effectively paid both for the Hilton and another hotel where the team actually stayed for at least one night;

5

dictates which hotel(s) the schools will pay by mandating that "rooms shall be at the hotel property and room rate shown on Exhibit 3." The hotels listed in "Exhibit 3" are the Scottsdale Plaza, Hilton Scottsdale, Intercontinental Montelucia, Fairmont Scottsdale, Chapparral Suites and Westin Kierland Resort & Spa.28 These hotels have been the "school hotels" since at least 2007.29 Each is located in Scottsdale and each is an SCVB member.i'' The Fiesta Bowl's insistence on steering business to certain hotels is problematic. When schools travel to regular-season games at neutral sites, they are free to select and negotiate with hotels that will house their teams and official groups." Their inability to do so at the Fiesta Bowl and certain other bowl games is a source of frustration and difficulty, as reflected in these school administrator statements: • "You're assigned to a hotel. You don't get to bargain what hotel you go to. They tell you what hotel you are in ... Pretty much you are locked into doing things at the hotel.,,32 "The biggest issue is you're assigned a location, assigned a hotel, and the cost is nonnegotiable.t''"

the night before the game. Tim May, Dollars Part of Bowl Picture, The Columbus Dispatch, Dec. 29, 2010; Rachel O'Neal Chaney and Cary Jenkins, RazorbackJans hit hotel buffet as Sugar Bowl excitement pumps up, The Arkansas Democrat Gazette, Jan. 16,2011 ("The lunch was held at the Razorback team's hotel- the Hilton New Orleans Riverside. But no players turned up for the lunch. They had been whisked off to an undisclosed hotel the night before."). Similarly, past Orange Bowl participants Cincinnati and Virginia Tech chose to stay at another hotel on the evening before the game, but still had to foot the bill for the Bowl-selected Fontainebleau Resort Miami Beach and Westin Diplomat. Randy King, Diddy Distraction Causes UC Move (Jan. 1,2009); Nathan Warters, Hokies Shake Up Bowl Preparation, McClatchy-Tribune Regional News (Dec. 16,2008). 2011 BCS Championship Game Agreement-Auburn at Exhibit 3, http://scr.bilnpDbKF; 2011 BCS Championship Game Agreement-Oregon at Exhibit 3, http://scr.bilpDvONS; 2011 Fiesta Bowl Game Agreement-Connecticut at Exhibit 3, http://scr.bilnFGjUW; 2011 Fiesta Bowl Game Agreement-Oklahoma Exhibit 3, http://scr.bilp7sEpk.
29

28

at

Fiesta Bowl Team Manual Excerpts, attached hereto as Appendix C (listing hotel arrangements for 2011,2010, and 2009 games). See also Donna Hogan, Mountaineers are in Valley, fans are in ... New Orleans: West Virginia returns 7,500 Fiesta Bowl tickets, The Tribune, Dec. 29, 2007 (describing West Virginia's hotel accommodations for the 2008 Fiesta Bowl); Oklahoma: Coach Stoops on the Fiesta Bowl, The Official College Sports Network, Jan. 1,2008 (describing Oklahoma's hotel accommodations for the 2008 Fiesta Bowl); Guerin Emig and John E. Hoover, Daily Log, Tulsa World, Dec. 31,2006 (describing Boise State's hotel accommodations for the 2007 Fiesta Bowl); Univ. of Oklahoma, Press Release, Coach Stoops Discusses Fiesta Bowl (Jan. 2, 2007) (describing Oklahoma's hotel accommodations for the 2007 Fiesta Bowl); D.L. Stewart, Ex-Sidney Couple to Exchange Vows at Stadium, Dayton Daily News, Jan. 7,2007 (describing Florida's hotel accommodations for the 2007 BCS Championship Game); Doug Lesmerises, Familiar Setting Warms OSU, The Plain Dealer, Jan. 2, 2007 (describing Ohio State's hotel accommodations for the 2007 BCS Championship Game).
30 Scottsdale Convention and Visitors Bureau, Hotels & Resorts (accessed on Aug. 10,2011), at http://www.scottsdalecvb.comlhotels/resorts/.

See Neutral Site Regular-Season Game Contract, LSU and Oregon (2011), http://scr.biJkA7UJb; Neutral Site Regular-Season Game Contract, Boise State and Virginia Tech (2010), http://scr.bilk6Yq02; Neutral Site Regular-Season Game Contract, BYU and Oklahoma (2009), http://scr.bilr289yM.
31 32

Drew Rubenstein, A Fiesta Loss: Big Bowl Win Doesn't Mean Big $$$, The Dominion Post (Morgantown, W.Va.) (May 4,2008) (quoting West Virginia Deputy Director of Athletics Mike Parsons).

33 Scott M. Reid, Price oJSuccess, Orange County Register (Dec. 26,2007) (quoting University of Maryland Associate Athletic Director Larry Leckonby).

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• •

"We're not talking the Marriott Courtyard at $89.99 a night. .. [and] you're trying to peddle as much as half the inventory. ,,34 "The [BCS] basically has set up structures that are unregulated. They can do almost anything they want ... They've developed all these policies like guaranteeing tickets and those kinds ofthings.,,35

The Fiesta Bowl's mandated hotel arrangement, for example, is less than ideal for schools. Team hotels are over 30 miles from the University of Phoenix Stadium, where both pre-game activities and the game itself are held." Fiesta Bowl participant TCU, in fact, cancelled an important pre-game walk-through practice at the Stadium rather than make the 45-minute drive.37 TCU Coach Gary Patterson later called the hotel a "major distraction," lamenting that "[i]t was hard to get our kids focused and put into one place ... I wish I would have taken them out to a different hotel. ,,38 Despite these frustrations and problems, no administrator or coach has ever conjectured on the record about the Fiesta Bowl's reason for requiring schools to pay a non-negotiable rate for a pre-determined number of potentially unused rooms at hotels that are 45 minutes from the game venue. The Fiesta Bowl's incentive, though, is not difficult to surmise. Again, the Bowl has committed for the next 20 years to "cause" schools to stay at SCVB-member hotels in exchange for the promise of significant payments. The Bowl earns those payments by contractually binding participating schools to frequent the Scottsdale Plaza, Hilton Scottsdale, Intercontinental Montelucia, Fairmont Scottsdale, Chapparral Suites and Westin Kierland Resort & Spa, all of which are SCVB-member hotels. (See Figure 2 below.)

34 Scott M. Reid, Price of Success, Orange County Register (Dec. 26, 2007) (quoting Georgia Tech Associate Director Athletic Director Mollie Mayfield).
35 Under Current Bowl System, Red Ink Part Of The Game, The Hartford Courant, Mar. 4, 2011 (quoting former NCAA Executive Committee Chair Walt Harrison). 362011 37 38

Fiesta Bowl Team Manual Excerpt, attached hereto as Appendix B. (Dec. 31,2010). (Dec. 31, 2010).

Cedric Golden, Frogs Learn to Look Before They Leap, Austin American-Statesman Cedric Golden, Frogs Learn to Look Before They Leap, Austin American-Statesman

7

Figure 2-"Step

2" in Hotel kickback Transaction

,

,'7
",}

¥1,
"

• •• •• :


Bowl binds School to pay SCVB members nonnegotiable rate for pre-set number of room-nights

~ :;? ill

"

' ;;

School

By inserting a contractual provision that prevents schools from negotiating their own arrangements and that requires schools to pay SCVB-member hotels a non-negotiable rate for a pre-determined number of room-nights, the Fiesta Bowl complies with its pre-existing obligation to deliver business to SCVB members and thereby secures payments from SCVB. This constitutes the second part of the Bowl's three-step transaction for securing hotel kickbacks.

C.

Step 3: Schools Pay Fiesta Bowl-Designated Hotels Significant Amounts

Hosting a school that participates in the Fiesta Bowl is an attractive business opportunity for a hotel. The Bowl-mandated minimum number of room-nights guarantees a high occupancy rate. Yet the Bowl-mandated rates also prevent schools from leveraging their large volume of room rentals to aggressively pursue discounts. (See Figure 3 below.)

8

Figure 3-"Step

3" in Hotel Kickback Transaction

SCVB pays $8 million total / $200k to $790k per year

School makes Bowl-mandated

payment to SCVB

!"",'

member hotel for lodging and food expenses

~~
: >

'"

School

Room rentals are just part of the hotel's Bowl-related business. Teams attract fans and members of the media who visit hotel shops and restaurants. More importantly, though, the size of a school's party means that many activities and meals are held at the hotel, as this report about the 2008 Fiesta Bowl describes: Bowls assign teams to specific locations, and WVU was put up in the Scottsdale Plaza Resort. The meals ($773,723.08 total for everyone representing WVU on the trip) often times took place in the team hotel. The most expensive meal was [a] New Year's Day team dinner of$15,848.05 for 132 people, or a little more than $120 per plate. 'There is no doubt it was costly,' [West Virginia Deputy Director of Athletics Mike] Parsons said.39 This "captive" customer base allows a hotel to supplement its room-rental revenue through multiple methods. To be clear, the hotel is not acting in an underhanded manner by offering multiple services to guests. It should be observed, however, that many of a school's food expenses accrue to the Bowl-designated hotel's benefit. And meal and lodging costs are a major driver of "red ink" for BOWl-participating schools, as shown by Table 2 below. (Please note that figures for private school-participants are not included in Table 2 because they are unavailable to outside persons.)

Drew Rubenstein, A Fiesta Loss: Big Bowl Win Doesn't Mean Big $$$, The Dominion Post (Morgantown, W.Va.) (May 4,2008).
39

9

Table 2: Meal and Lodging Expenses by Public-School Participants in Fiesta Bowl-Hosted BCS Bowl Games'"

Public schools that participated in Fiesta-hosted BCS games have paid nearly $8.7 million for meal and lodging services since 2007. A large portion of that sum went to SCVB-member hotels that the Fiesta Bowl contractually required schools to frequent. And the Fiesta Bowl received cash payments totaling" $1,593,097 and in-kind services'f valued at $84,000 during that same period precisely for "causing" schools to pay money to SCVB member hotels. Schools' significant payments to SCVB-member hotels represent the third and final step to the transaction through which the Fiesta Bowl secures hotel kickbacks.

40

See NCAA Expense Reports for each team: 2011 BCS Championship Game--Auburn, http://scr.bi/iiIaJ7; 2011 BCS Championship Game--Oregon, http://scr.biJkAkL3g; 2011 Fiesta Bowl--Oklahoma, http://scr.bi/lxjrJc; 2011 Fiesta Bowl--UConn, http://scr.bi/houlx9; 2010 Fiesta Bowl--Boise State, http://scr.bi/oESbtz; 2009 Fiesta Bowl-Ohio State, http://scr.bi/o2Fkg4; 2009 Fiesta Bowl-Texas, http://scr.bi/ih8TnO; 2008 Fiesta Bowl-Oklahoma, http://scr.bi/oMHh6u; 2008 Fiesta Bowl--West Virginia, http://scr.bi/ivLJxp; 2007 BCS Championship Game-Florida, http://scr.bi/j81Kfq; 2007 BCS Championship Game--Ohio State, http://scr.bi/nOhcxw; 2007 Fiesta Bowl-Boise State, http://scr.bi/mXUgnh; 2007 Fiesta Bowl--Oklahoma, http://scr.bi/gbkPXH.
41

Hospitality and Promotional Agreement at Section 4.7 (August 28,2006), available at http://scr.bi/oyeJHo. The amount from annual payments equaled $1,593,097 and the pro-rata share ($20,000 per game) ofSCVB's $500,000 up-front payment equaled $140,000.
42

Hospitality and Promotional Agreement at Section 4.7 (August 28,2006), available at http://scr.bi/oyeJHo.

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II.

What Is Wrong With the BCS's Fiesta Bowl Securing Hotel Kickbacks?

As demonstrated, the Fiesta Bowl, in exchange for annual payments, contractually binds schools to pay a non-negotiable rate for a pre-determined number of rooms at SCVB-member hotels that are 45 minutes from the game venue. Playoff PAC believes the Fiesta Bowl's actions are legally and ethically problematic for three main reasons: (1) the Fiesta Bowl's hotel kickback transaction violates important rules that govern state contracts in certain jurisdictions; (2) the Fiesta Bowl, which claims to be a trusted partner of higher education, contractually requires school payments to SCVB-member hotels without notifying schools that it receives significant sums for doing so; and (3) the Fiesta Bowl, by thwarting school-negotiated accommodations in exchange for payments, is appropriating benefits that would otherwise accrue to schools.

A.

The Fiesta Bowl's Hotel Kickback Transaction Appears to Violate Important Rules that Govern State Contracts in Certain Jurisdictions

The Fiesta Bowl's hotel kickback transaction seems to violate important rules that govern state contracts in certain jurisdictions. To prevent detrimental mark-ups and collusion among government contractors, many jurisdictions prohibit businesses from paying or receiving "kickbacks" in connection with offering goods or services to state government entities.43 For example, Connecticut state law stipulates:
A person is guilty of receiving kickbacks when he ... knowingly solicits, accepts or agrees to accept any benefit, in cash or in kind, from another person upon an agreement or understanding that such benefit will influence such person's conduct in relation to referring an individual or arranging for the referral of an individual for the furnishing of any goods, facilities or services to such other person under contract to provide goods, facilities or services to a local, state or federal agency.?"

Receiving "kickbacks" is a class D felony.45 In sum, the provision prohibits acceptance of "any benefit" when the "benefit will influence conduct in ... referring" persons goods- or serviceproviders to a Connecticut state entity. For example, an investment adviser who contracts with Connecticut's State Pension Fund, receives a payment from Company X, and then advises the Pension Fund to invest monies in Company X, the investment adviser would be guilty of receiving an unlawful kickback. Other states impose similar rules."

43 See 48 C.F.R. § 52.203-7 (providing anti-kickback requirements for federal-government contracts); Travers v. U.S., 361 F.2d 753 (1st Cir. 1966) (explaining the rationale behind anti-kickback rules generally. 44 45 46

Conn. Gen. Stat. Ann. § 53a-161c. Conn. Gen. Stat. Ann. § 53a-161c(b).

See e.g., Okla. Stat. Ann. tit. 74, § 3404 ("Any person who shall knowingly make or receive, either directly or indirectly, a kickback shall be guilty of a felony, and upon conviction shall be fined not more than Ten Thousand Dollars ($10,000.00) or double the amount of the financial gain or be imprisoned for not more than five (5) years, or both."); Okla. Stat. Ann. tit. 74, § 3402 ("Kickback means the giving of money or any other thing of value either directly or indirectly by or on behalf of any person, or the agent of any person, holding a contract or bidding to obtain a contract with the state for the furnishing of goods or services of any kind to any state employee or any

11

The Fiesta Bowl's hotel-related transactions would likely be considered an unlawful "kickback" under Connecticut law and similar rules in other jurisdictions. The Fiesta Bowl accepted roughly $224,290 in "benefits" from SCVB last year specifically for "causing" (i.e. referring) an SCVB-member hotel to furnish facilities and services to the University of Connecticut, a "state agency" that used its public funds to procure those facilities and services." Indeed, this transaction is nearly identical to the investment-adviser example provided above. Please note that the Fiesta Bowl's hotel-related arrangement may also violate other states' laws that prohibit collusion among state contract-holders.f

B.

The Fiesta Bowl, Which Claims to Be a Trusted Partner of Higher Education, Contractually Requires School Payments to SCVB-Member. Hotels without Notifying Schools that It Receives Significant Sums for Doing So

The Fiesta Bowl holds itself out to schools as a forthright partner. The Bowl's pursuit of hotel kickbacks demonstrates otherwise. Public schools participating in Fiesta-hosted BCS games have spent $8.7 million on meals and lodging since 2007. All told, these schools have lost over $4.5 million on their Bowl trips. This is not an ideal situation for schools. Yet the Bowl inhibits school efforts to stem the bleeding. The Bowl contractually stops schools from selecting a more modest hotel, negotiating more favorable rates, or lowering the number of room-nights they will buy. Why? The Bowl needs the schools to pay SCVB-member hotels so it can earn its annual six-figure payments. The Bowl's actual motive for locking schools into this "money trap" is, as mentioned, undisclosed to schools. The Bowl may trot-out a few five-year-old press releases from a local Arizona government as proof that its deal with SCVB is not "secret." The Bowl's kickback payments may well be common knowledge in Scottsdale. That is immaterial. The kickbacks are unknown in Storrs, Norman, Morgantown, and Boise. The Bowl has not informed the parties that count-the schools-probably because the schools would not abide this arrangement once fully informed. The schools should know the real reason they are contractually bound to pay a nonnegotiable rate for a pre-determined number of rooms at SCVB-member hotels that are 45 minutes from the game venue. Schools are never told, though, because the Fiesta Bowl is an unethical and untrustworthy partner.
person holding a higher tier contract with the state for the furnishing of goods or services, when the giving of which is for the purpose of acquiring or holding such contract with the state.") (emphasis added).
47 48

Conn. Gen. Stat. Ann. § 4-37e(1), (5).

See, e.g., Ala. Code § 41-16-25 ("Any agreement or collusion among bidders or prospective bidders in restraint of freedom of competition by agreement to bid at a fixed price or to refrain from bidding or otherwise shall render the bids of such bidders void. Each bidder shall accompany his bid with a sworn statement that he has not been a party to such an agreement.")

12

C.

The Fiesta Bowl, by Thwarting School-Negotiated Accommodations in Exchange for Payments, Is Appropriating Benefits that Could Otherwise Accrue to Schools

A large group hoping to book an extended stay has considerable purchasing power in the hotel market. Such a group can expect to receive considerable incentives to attract their business. Schools that participate in Fiesta-hosted BCS games are large groups hoping to book an extended stay. SCVB-member hotels, as rational market actors, are willing to offer considerable incentives to attract this business. In a normal situation, those incentives would flow to the schools, which are, after all, paying for the rooms. But those incentives never reach the schools. The Fiesta Bowl inserted itself into the process. The Bowl did not do so constructively. It could have simply liaised between the schools and various hotel groups, allowing schools to ultimately arrange their own accommodations and collect all available incentives offered by the hotel. The Bowl could have even brokered a pre-set arrangement with SCVB-member hotels and then passed all available incentives to schools. Instead, the Fiesta Bowl contractually prevented schools from negotiating their own accommodations and then kept for itself all available incentives offered by SCVB hotels. The Fiesta Bowl effectively appropriated benefits that would have otherwise accrued to schools by thwarting school-negotiated accommodations.

13

Appendix A

ZOII.12 POSTSEASON BOWL CAME CondidoDS or Perform.nee .. ElftuUY~ Swumary

SUPPLEMENT NO. I FIC Bowl UttRllna Call· 41lz/11

NCAA/_f1/U/ct

Appendix B

FRIDAY, DE·CEMBER 31
Fiesta Bawl Block Party

Mill Avenue District. Tempe 5:()O p.rn. - 12:30 a.m. Complimentary tickets per school: SO VIP Attire: Casual

General Admission

tickets: $10 each

The Fiesta Bowl Block Party has been the place to he for both locals and visiting fans !(1 come celebrate New Year's Eve. [I annually features II national recording artist and highlights the best local artists in the stale of Arizona. More than justmusic, the Block Party has activities and attractions Ior all ages. Some of' the highlights are fantastic beer gardens scattered throughout [he event, the Pep Rally featuring the Tostitos Fiesta Bowl's university marching hands, dueling pianos, the Dance Club, Street Jam. magicians and street performers, as well as eight stages of .rocking entertainment: Adding even marc to the excitement. is a huge fireworks display at 10:00 p.m. and at the midnight countdown, ''Fiesta Bowl Invillllitmal pre.wmled hI' Ellie & lv/ie/wei Ziegler The Phoenician, Scottsdale 6:]0 p.m. - II :()(J p.m. Complimentary invitations per SCIMll: 50 Additional tickets lire available at $500 each Attire: Cocktail (no lies required)
The Fiesta Bowl Invitational is nn elegant evening of live entertainment,· dinner and dancing. Distinguished guests' traveling with the teams participating ill the' Tostitos Fiesta Bowl, as we] I as some of the Valley's top business leadersdance the night away at The Phoenician. Guests also enjoy a special silent auction featuring outstanding items, including travel lind entertainment packages, sports mernorubllia and line jewelry. Proceeds from the silent auction benefit Fiesta Bowl charities such as The 100 Club, Please complete the Invitutional Table Form and submit to Christ ine Martin 11(.' later than Friday, December 17. Please note: Athletic Director and President, along with spouses, from both participating universities will be seated at front tables. .

GAME DAY -' SATl1rU1AY,·.JANlJARY

1,2011

To.'.titos Fie... BIIH'1Brings YOIl C(}llege FO(}lbtll/ IS Biggest Partv ·t" Glendale Youth Sports C'0I11J,Jex, Glendale 12:30 p.rn.v- S;JO p.m. Complimentary invitations per school: 50 Additional tickets: $20 each Attlre: Cnsua], sporting nttire.Juyered clothing, comfortable shoes
Alllluall) attracting tens "I' thousands of t:lIls. Cl,llt·!!t.:' 1·\xuha II' s Biflg('~1 Purly i~ 1111 uctlun-pncked celebration full ~It the ultimate tailgare experience ('f'illcd· ... \lr!~ f:!I'Hlico; !:,(t·;tr·upfor the hig )HH!lt! wlule r

cnjo:\i':g

pen rullic-,

jic[rl!rm,m.:~·s

by thl' ljl1i\·t~r~ll) ilt.lr~hin~ h::loli;;

and cheerleaders.

11llllolltnHl!'

h; it

watch the prc,:::tiil1g (11)'.,,1g.~Ii1WS. iIHCr;lc[!\ c gailll:s and f'.H·d iinc! b~\ t:r:l!l~' 1;(1()II'~ rid't'.! price Im:hllk.;; plated meal.

R-6 '

GAME DAy - SATCRIM V, .JANVARY
Fiesta Bowl Stadium Club' Glendale Youth Sports Complex, Glendale 2:30 p.m. - 5:30 p.m, Tickets are available for purchase at $1 (JO'cnch. d.!.!y~;_ Cusual, sporting attire. layered clothing, comfortable shoes.

1,2011

On game day, VIP guests are invited to enjoy the college football festivities Ih.11T1 exclusive area within an College Football's Biggest Party. This upgraded tllilgate features hig screen !dl.'visirllls and musical entertainment as well as a wonderful pre-game meal. Stadium Club creates a game-day atmosphere with team spirited decor and a flair for which the Fic~!a Bowl isknown. , APS Pregtlme Party joblng.com Arena - Lot G,Tllendnle 2:30 p.rn. - 5:30 p.rn. Complimentary tickets pCI' school: 100 Attire: Casual '

Additional tickets: Not available-

This invite-only pre-game party features II private tailgate atmosphere w ith enterta inment and a special, pre-game meal just outside jobing.corn Arena, located across the street from University (If Phoenix Stadium. Tostit,}.\' Fiesta Bowl University of Phoenix Stadium, Glendale ti:O() p.m .. ' (lame Ceremonies 6:.10 p.m .. Kickllff Attire: Casual, layered clothing. eomlortub!e shoes As a member of the Bowl Champiunship Series, the f"mitilos Fiesta Bll",,1 will hnve the I1ppnrtllnity III host the champion of the Big 12 Conference as well as an at-large BCS team. The l'ostitos fiesta Bowl will be played at University of Phoenix Stadium ill (lIcndale and telecast 011 ESPN.

Transportation Chart - Scottsdale Plaza
Property/Venue Airport, Sky Harbor _(Team Arrival & Head Football Coach's Press Conference) Amazing Jake's Food & Fun (Children's Day) Camelback Inn, A JW Marriott Resort & Spa (Media Headquarters & Media Day) Central Phoenix (Parade) Downtown Tempe (Block Party) Fiesta Bowl Office I / Fogo de Chao JPlayer Event) Hilton Scottsdale Resort _(Band Hotel) InterContinental Montelucia Resort & Spa (Alumni Hotel & Kickoff Dinner) Nordstrom, Scottsdale Fashion Square (Ladies Day) The Phoenician (Conference Hotel & Invitational) Scottsdale Community College (Practice Facili_iJI) , St. Vincent de Paul (peA Breakfast) University of Phoenix Stadium (Walk-Through, NCAA Briefing, College Football's Biggest Party, APS Pregame Party. & Tostitos Fiesta Bowl) Travel Distance (miles) 14 Travel Time (minutes)

23 25
7

20
3

13
9' 3 1.1 1 3,9 3 4

22 21
6 4

2
9

6

10
10

5

,

20 31

28 39

A general map of the Valley of the Sun highlighting the official hotel properties and event venues is located in the Appendix. .

©2010

22

Transportation Property/i/enue

Chart - Fairmont

Scottsdale Travel Distance (miles) TravelTime (minutes)

·
2Q 27
11

Airport, Sky Harbor (Team Arrival & Head Football Coach's Press Conference) Amazing Jake's Food & Fun (Children's Day) Camelback Inn, A JW Marriott Resort & Spa (Media Hotel &'Media Day) Central Phoenix (Parade) Chaparral Suites (Band Hotel) Downtown Tempe (Block Party) Fiesta Bowl Office Fogo de Chao (Player Event) InteeContlnental Montelucia Resort & Spa (j(ickoff Dinner) Nordstrom, Scottsdale Fashion Square (Ladies Day) The Phoenician {ConferenceHotel & Invitational) Pinnacle High School ., (Practice Facility) St, Vincent de Paul (Ji'CABreakfast) University of Phoenix Stadium (Walk-Through, NCAA Briefing, College Football's Biggest Party, APS Pregame ParfJl_ Tostitos Fiesta Bowl). & Westin Kierland Resort & Spa (Alumni Hotel)

30 30
19

16.5 10 21.5
11

25 18 27 20
19

9

12.3
11 12 8

25 20 22 14 29 36 7

2?7 32 3.5

A general map of the Valley of the Sun highlighting the official hotel properties and event venues is located in the Appendix. '

©2010

23

Appendix C

ON-CAMPUS MEDIA BLITZ & DINNER - Representatives from the Fiesta Bowl, Scottsdale Convention and Visitors Bureau and City of Glendale will travel to the home city of each of the participating teams and conduct a media blitz immediately following the team's advance site visit. The Fiesta Bowl will schedule media interviews throughout the day to provide information about the game as well as details of our surrounding events leading up to game day. Later that evening, the Fiesta Bowl wiII host a private dinner for up to 12 university and team administrators, coaching staff along with spouses to celebrate your team's success and the upcoming trip to the Tostitos BCS National Championship Game. The Fiesta Bowl requests that the head football coach, athletic director and president, if available, be present. GAME WEEK DESIGNATIONS - The Fiesta Bowl and Bowl Championship Series have predetermined the game week assignments; absolutely no changes will be allowed. The #1 BCS team shall have the right to select its game week hotel package as listed below. Plaza Team Fairmont Team

Hotels:

Team:

Band:
Alumni: Conference: Media:

Practice Facilities:

Scottsdale Plaza Resort Fairmont Scottsdale Hilton Scottsdale Resort Chaparral Suites InterContinental Montelucia Westin Kiel'land , Resort & Spa Resort & Spa The Phoenician Camelback Inn, A JW Marriott Resort & Spa Scottsdale Communiti' College ____ Pinnacle High School

--

TEAM PARTICIPATION ACCEPTANCE & CONTRACTS - Following the official team selection announcement, the Fiesta Bowl will send an official letter of invitation to the athletic directors of the participating universities. In addition, the Fiesta Bowl will draft an official game agreement specifying all business arrangements for participation in our game, which will serve as the binding contract. In the event the university would like to consult with the Fiesta Bowl's legal counsel on any team-related matters or details of the Bowl Championship Series contract, please feel free to contact Craig Williams. Fiesta Bowl General Counsel
Craig Williams Snell and Wilmer (602) 382-6331 (office) (602) 703-6331 (mobile) ckwilliams@swlaw.com

TEAM EXPENSES & PAYMENT - Any miscellaneous expenses incurred, independent of ticket purchases and additional team gifts, are subject to a standard 6.5 percent administrative fee. Any outstanding balances, after April 1, 2011, will be subject to interest at a rate of 1 percent per month. Team payments will be made by AI)('i1 1, 2011, and are wire transferred to a Bowl Championship Series Escrow Account per Bowl Championship Series contract. Any questions regarding team expenses or payment should be directed to Controller Angela Holt at (480) 350-0918. TEAM PER DIEM - The Fiesta Bowl can make arrangements with a local financial institution to breakdown cash pel' diem for the participating teams. If you are interested, please complete the Team Per Diem Request Form and submit it to Christine Martin no later than Monday, December 13. Specific questions regarding per diem arrangements should be directed to Angela Holt at (480) 350-0918.

©2011

4

ON-CAMPUS MEDIA BLITZ & DINNER - Representatives from the Tostitos Fiesta Bowl, Scottsdale Convention and Visitors Bureau and City of Glendale will travel to the home city of each of the participating teams and conduct a media blitz immediately following the team's advance site visit. The Tostitos Fiesta Bowl will schedule media interviews ·throughout the day to provide information about the game as well as details of our surrounding events leading up to game day. Later that evening, the Tostitos Fiesta Bowl will host a private dinner for up to 12 coaches, university and team administrators plus their spouses to .celebrate your team's success and trip to the Tostitos Fiesta Bowl. The Bowl requests that the . head football coach, athletic director and president, if possible, be present. GAME WEEK HOTEL DESIGNATIONS - The Tostitos Fiesta Bowl and Bowl Championship Series have predetermined the· game week assignments; absolutely no changes will be allowed. The Big 12 Champion, if not qualifying for the national championship game, shall have the right to select its game week hotel package. If the Big 12 Champion qualifies for the national championship game, the higher ranked of the two at-large teams shall have the right to select its game week hotel package.
Plaza Team Fairmont Team Fairmont Scottsdale Scottsdale Plaza Resort Chaparral Suites Hilton Scottsdale Resort Westin Kierland InterContinental Montelucia The Phoenician Camelback Inn, A JW Marriott Resort & Spa Scottsdale Community College Pinnacle High School

Hotels:

Team: Band:

Alumni:
'Conference: Media: Practice Facilities:

/

TEAM PARTICIPATION ACCEPTANCE & CONI'RACTS - Following the official team selection announcement, the Tostitos Fiesta Bowl will send an official letter of invitation to the athletic directors of the participating universities. In addition, the Tostitos Fiesta Bowl will draft an official .game agreement specifying all business arrangements for participation in the game, which will serve as the binding contract. In the event theuniversity would like to consult with the Tostitos FiestaBowl's legal counsel on any team-related matters or details of the Bowl Championship Series contract, please feel free to contact : Craig Williams.
Tostitos Fiesta Bowl General Counsel Craig Williams Snell and Wilmer (602) 382-6331 (office) (602) 703"6331 (mobile) ckwilliams@swlaw.com

TEAM EXPENSES'" & PAYMENT - Any miscellaneous expenses incurred, independent of ticket, purchases .and additional team gifts, are subject to a standard 6.5 percent administrative fee. Any outstanding balances, after April 1, 2011, will be subject to interest at a rate of 1 percent per month. Team payments will be made by April 1, 2011, and are wire transferred to a Bowl Championship Series Escrow Account per Bowl Championship Series contract. Any questions regarding team expenses or payment should be direc~ed to Controller Angela Holt at (480) 350-0918. TEAM PER DIEM - The Tostitos Fiesta Bowl can make arrangements with a local financial institution to breakdown cash per diem for the participating teams. If you are interested, please complete the Team Per Diem Request Form and submit it to Christine Martin no later than Friday, December 10. Specific questions regarding per diem arrangements should be directed to Angela Holt (480) 350-0918.

at

©2010

4

ON-CAMPUS MEDIA BRIEFING & DlNNElS, - Representatives from the Tostitos Fiesta Bowl, City of Scottsdale and City of Glendale will travel to the ho~he bit9 of'eachof'the participating teams and conduct a media briefing immediately following the team's advance site visit. The purpose of'the media briefing is (0 provide information about the game as well as details of our surrounding events leading lip to game day, Later that evening, the Tostitos Fiesta Bowl will host tip to 15 university and team administrators and coaching staff to a private dinner to celebrate your team's success and the upcoming trip to the Tostitos Fiesta Bowl. GAME WEEK DESJGNA nONS - The Tostitos' Fiesta Bowl and Bowl Championship Series have predetermined the game week assignments; absolutely 110 changes will be allowed. The Big 12 Champion, if not going to the national championship game, shall have the right to select its game week hotel package as listed below. If the Big 12 Champion is going to the national championship game, the higher ranked of the two at-large teams will have the right to select its game week hotel package.
Plfl'UI Team

Fatrmont Team

Hotels:

Team: Band: Alumni: Conference: Media:

Practice Facilities:

Scottsdale Plaza Resort Fairmont Scottsdale Hilton Scottsdale Resort Chaparral Suites Intel'Contineni!11Montelucia Westin Kierland Resort & Spa Resort&Spa The Phoenician Camelback Inn, A JW Marrlott Resort & Spa Scottsdale Community College Pinnacle High School I

,.
I

,:,'..::

ITINERARIES .: It is important that the Tosti't~s 'iii~~t~ Bowl receive copies of both tentative and final itineraries for the following groups: .

I.
2.

Players, Coaches and Athletic Department Admlnistratiou (Please refer to the Team Arrival segment under the "Administration - Game Week" section)"
President's Office
. I'. ·'1 ,""

These details will aid in finalizing all uspects Of gf\ll1e week from hospitality hours of operation to practice facility coordination and will allow volunteers; hotel staff and transportationpersonnel to be of the utmost assistance when tending to each group's specific needs. Please submit tentative itineraries to Christine Martin by Monday, December 14 and final itineraries no later than Friday, December 18, TEAM PARTICIPATION ACCEPTANCE & CONTRACTS - Following the official team selection announcement, the Tostitos Fiesta Bowl will send an official letter of invitation to the athletic directors of the partlcipatlng universities as the document speclfylng all business arrangements fO·I' participating in mil' bowl game. Pel' the NCAA Postseason Football j-jeii?cib'hok;' acceptance of the invitation to play in the Tostitos Fiesta Bowl must be confirmed in writing 'iiil(1'8~'I~t Tostitos Fiesta Bowl President John Junker to no later than Monday, December 14. Once written 'confirmation is received. this contract is binding. In the event the university would like to consult with the Tostitos Fiesta Bowl's legal counsel on any teamrelated matters 01' details of the Bowl Champi?nsh~J~,~<?l:ies contract, please feel free to contact Craig Williams. .. '.

i

Tostttos Ftesta Bowl Genera! Counse!
Craig Williams Snell and Wllme»
(602) 382·~33.1·(office) (602) 70j·633 i(mobile)

ckwill hllns@swlaw.com
'

..
4

"

©2009

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