Sanctions and Decisions

DATE OF HEARING:

HEARING PANEL:

HEARING BEFORE A PANEL OF THE BOARD OF ALBERTA GAMING, LIQUOR AND CANNABIS COMMISSION

IN THE MATTER OF the Gaming, Liquor and Cannabis Act Revised Statutes of Alberta 2000, Chapter G-1, as amended and the Regulation

LICENSEE / REPRESENTATIVE:

REGULATORY SERVICES DIVISION:

and

2491880 Alberta Inc. (Licensee) o/a Diamond Lounge 524 5 Street South Lethbridge, AB T1J 2B8

August 22, 2023

Len Rhodes, Presiding Member Elan Harper, Panel Member Jack Fujino, Panel Member

Manish Makwana, Owner/Operator

Petrina Nash, Hearing Officer

DECISION OF THE HEARING PANEL The Panel finds that the Licensee contravened section 91(1)(a) of the Gaming, Liquor and Cannabis Act (the Act) on three counts and section 104(b) of the Act on one count. The Panel does not find that the Licensee took reasonable steps to prevent the contraventions from occurring, per section 121 of the Act. Further, when given the opportunity to tell the Panel what they would like the Panel to order, both parties were aligned.

As such, and in accordance with sections 91(2) and 94(7)(b) of the Act, the Panel replaces the administrative sanctions imposed by the Regulatory Services Division (Regulatory Services) and cancels Diamond Lounge’s Class-A Minors Allowed (Minors Prohibited after 9:30 p.m.) Liquor Licence numbered 785323-1, effective September 25, 2023.

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I. Jurisdiction and Preliminary Matters [1] By letter dated June 5, 2023 the Regulatory Services Division (Regulatory Services) of Alberta Gaming, Liquor and Cannabis Commission (AGLC) advised 2491880 Alberta Inc., operating as Diamond Lounge, (the Licensee) that the licensee contravened:

•

•

Section 91(1)(a) of the Act: The board may do any one or more of the things referred to in subsection (2) if the board is of the opinion that a licensee or registrant has failed to comply with this Act, an order of the board or a condition imposed on a licence or registration; and Section 104(b) of the Act: A licensee, a registrant, an applicant for a licence or registration and a common carrier and their officers, employees and agents must, on the request of an inspector, the Commission or an employee of the Commission, provide the inspector with records, documents, books of account and receipts and provide a place where they may be inspected, audited examined or copied.

[2] For the alleged contravention of section 91(1)(a) of the Act, Regulatory Services imposed an administrative sanction of a $1,000 fine or, in the alternative, a 4-day suspension of the Licensee’s Class-A Liquor Licence numbered 785323-1 (the licence).

[3] For the alleged contravention of section 104(b) of the Act, Regulatory Services imposed an administrative sanction of a $1,500 fine or, in the alternative, a 6-day suspension of the licence.

[4] The Licensee subsequently applied for a hearing before a Panel of the Board of the AGLC pursuant to section 94(1) of the Act.

[5] In accordance with section 11 of the Act, the Board Chair designated three members of the Board to sit as a Panel to conduct the hearing and make a decision – Len Rhodes (Presiding Member), Elan Harper, and Jack Fujino.

[6] Prior to the hearing, by letter dated July 18, 2023, Regulatory Services advised the Licensee that a second incident occurred where the Licensee was alleged to have contravened:

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Section 91(1)(a) of the Act: The board may do any one or more of the things referred to in subsection (2) if the board is of the opinion that a licensee or registrant has failed to comply with this Act, an order of the board or a condition imposed on a licence or registration.

[7] For the second alleged contravention of section 91(1)(a) of the Act, Regulatory Services imposed a further administrative sanction of $2,000 fine or, in the alternative, an 8-day suspension of the licence.

[8] On July 19, 2023, the Board Chair directed that the Panel would also consider the subsequent incident at the scheduled hearing. Regulatory Services and the Licensee agreed and an updated Notice of Hearing was issued to the parties.

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[9] On July 20, 2023, prior to the hearing, a third, subsequent incident was reported. The Vice President of Regulatory Services, Gary Peck, requested that the Board convene a hearing in accordance with the Administrative Guideline for Violations. Specifically, for the alleged third violation of:

•

Section 91(1)(a) of the Act: The board may do any one or more of the things referred to in subsection (2) if the board is of the opinion that a licensee or registrant has failed to comply with this Act, an order of the board or a condition imposed on a licence or registration.

[10] On July 27, 2023, the Board Chair directed that the Panel would also consider the third incident at the scheduled hearing. The Licensee was notified and agreed. The parties were provided with an Updated Notice of Hearing detailing the addition of the alleged contravention.

[11] The parties and the Hearing Panel were provided with a record containing various documents pertaining to the issues before the panel. The Licensee confirmed receipt of the Updated Notice of Hearing dated August 4, 2023 and the attached hearing record. The following documents were entered into evidence: • Exhibit 1 Hearing Record, including Tabs 1 to 5 • Exhibit 2 Email correspondence from Manish Makwana to Inspector Fowler • Exhibit 3 Operational Reports – March 6, 2023 and April 16, 2023

II. [12]

Issues Did Diamond Lounge contravene sections 91(1)(a) and/or 104(b) of the Act?

[13] If the Licensee contravened section 91(1)(a) of the Act (first violation), should the administrative sanction imposed by Regulatory Services of a $1,000 fine or a 4-day suspension be confirmed, replaced, or cancelled?

[14] If the Licensee contravened section 104(b) of the Act, should the administrative sanction imposed by Regulatory Services of a $1,500 fine or a 6-day suspension be confirmed, replaced, or cancelled?

[15] If the Licensee contravened section 91(1)(a) of the Act (second violation), should the administrative sanction imposed by Regulatory Services of a $2,000 fine or an 8-day suspension be confirmed, replaced, or cancelled?

[16] If the licensee contravened section 91(1)(a) of the Act (third violation), what sanction should the Panel order in accordance with section 91(2) of the Act?

[17] Further, if the Licensee contravened any or all of the above, is there evidence that the Licensee took all reasonable steps to prevent its employee or agent from contravening the provision in accordance with section 121 of the Act?

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III.

Regulatory Services Submissions

[18] Regulatory Services called AGLC Inspectors Riley Fowler and Keith Scotland to give evidence, who have been Inspectors with AGLC for six and four years, respectively. The following is a summary of the evidence provided by Inspectors Fowler and Scotland.

[19] Inspector Fowler authored two incident reports which detail the events that occurred at Diamond Lounge on May 14, 2023 (Incident 1) and July 16, 2023 (Incident 3). Inspector Scotland authored the Incident Report detailing events that occurred on June 4, 2023 (Incident 2) and the subsequent investigation.

Background [20] Diamond Lounge operates in a premises that another liquor licensee previously operated in. The other licensee’s liquor licence was cancelled by a Panel of the Board on February 28, 2022 as a result of a hearing. The individual who had care and control of that operation, Mr. P.N, was found to be ineligible to hold a liquor licence.

[21] After the licence cancellation, Mr. P.N and an associate, C.F., began taking out private special event liquor licences for the same premises, located at 524 5 Street South. An investigation was completed, liquor was seized from C.F. at the premises and a hearing was conducted. A Panel of the Board determined that the seized liquor shall be forfeited to AGLC.

[22]

Regulatory Services blocked the premises from further private special event licensing.

[23] In early 2023, Regulatory Services received a liquor licence application from Mr. Manish Makwana to operate Diamond Lounge at the 5 Street premises.

[24] On March 17, 2023, Inspector Fowler and Manager Vance Wolsky met with Mr. Makwana to determine his suitability to become a licensee and the extent of Mr. Makwana’s associations, if any, with Mr. P.N.

[25] Inspector Fowler advised the Panel that Mr. Makwana previously had a business relationship with Mr. P.N. but that Mr. Makwana stated he did not know him personally.

[26] During the meeting, Inspector Fowler showed Mr. Makwana an advertisement found by Regulatory Services stating that Mr. P.N. would be providing DJ entertainment at Diamond Lounge on March 25, 2023. The advertisement only included Mr. P.N.’s DJ name but Inspector Fowler confirmed that he knew the name to be an alias of Mr. P.N.

[27] Inspector Fowler stated that he believed Mr. Makwana already had a lease in place for the premises when they met on March 17, 2023. He advised that Mr. Makwana denied having any knowledge of the event advertised for March 25, 2023 at the premises.

[28] Mr. Makwana advised Inspector Fowler at the meeting that none of the property in the premises was owned by or would be leased from Mr. P.N. and that it was all owned by the landlord.

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Inspector Fowler advised the Panel that the current landlord of the property is the same landlord that owned the property when it was operated by Mr. P.N.

[29] Inspector Fowler advised the Panel that Regulatory Services was concerned that Mr. P.N. may become involved with the operations of Diamond Lounge as Mr. Makwana was not experienced with a nightclub style operation. For that reason, Inspector Fowler and Mr. Wolsky advised Mr. Makwana that if the liquor licence were issued, there would be conditions placed on the licence.

[30] On March 22, 2023, Inspector Fowler emailed Mr. Makwana with a list of the conditions that would be placed on the liquor licence for Diamond Lounge. Mr. Makwana contacted Inspector Fowler by telephone seeking clarification on the conditions. He stated that he had concerns with the proposed condition prohibiting Mr. P.N. from entering the premises as he indicated he would be “scared” to ask Mr. P.N. to leave the premises due to Mr. P.N.’s criminal history.

[31] Ultimately, Mr. Makwana agreed to the conditions and responded via email (Exhibit 2) that he agreed with the conditions and had reviewed them with the premises manager.

[32] Diamond Lounge’s liquor licence was issued on March 31, 2023, with several conditions as agreed (Exhibit 1, Tab 5). At the time of licensing, the operating procedures and licence conditions were reviewed again with Mr. Makwana and a staff training seminar was offered. Inspector Fowler advised that, to date, Diamond Lounge has neither requested nor participated in a staff training seminar.

[33] Inspector Fowler detailed for the Panel the specific licence conditions that have been allegedly contravened in Incidents 1, 2 and 3:

•

The premises must install and satisfactorily maintain a digital camera security system covering the entirety of the premises, that is operational at all times, excluding washrooms. The digital camera security system must be of sufficient quality to clearly identify individuals in the premises. The monitor and recording system shall be in a locked, secure area within the premises that only staff members have access to. The cameras and lighting must be positioned to clearly capture 24-hour coverage of activity identifying all individuals entering/exiting the premises, including staff areas, and all individuals within the premises. The digital camera security system must have on premises 28-day minimum recording retention in a common format that is easily accessible and contain an accurate time/date stamp not obscuring the image. The digital camera security system must be tested weekly to ensure all cameras and recording equipment are functioning properly. A log of the test results must be kept on the premises and be furnished immediately to an Inspector (as defined by the Gaming, Liquor and Cannabis Act) upon request. Any malfunctions of the digital camera security system must be immediately reported to the AGLC, via the e-mail address inspections.mailbox@aglc.ca. A plan identifying system compliance must be submitted to AGLC for approval. Any changes made to the approved plan must be approved by AGLC before the changes are made. Footage from the recording system must be furnished, as soon as reasonably practicable, to an Inspector upon request.

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•

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, and/or shall not be involved in the operation or management of the premises or the licensee company nor shall they be staff members or entertainers in the premises in any capacity. , and/or shall not be in the premises at any time.

[34] On April 16, 2023, Inspector Fowler conducted an operating check with Inspector Tanya Woo. Mr. P.N. was found to be in the premises and many of the digital security cameras were not working. An Incident Report was submitted and Inspector Fowler requested surveillance video footage for that night.

[35] The premises manager advised Inspector Fowler that the video surveillance system was still in Mr. P.N.’s name and he was unable to access the video footage.

Incident 1 (May 14, 2023) [36] On May 14, 2023 at 12:54 a.m., Inspectors Fowler and Scotland attended Diamond Lounge to conduct an operating check.

[37] A security employee was standing outside the front entrance of the premises. When he spotted the Inspectors, he briskly entered the premises. As the Inspectors got closer to the door, they could hear loud music and shouting.

[38] The Inspectors entered the premises and identified themselves to the security employee. They conducted an inspection of most areas in the premises. They observed three tables that had patrons pouring drinks from unattended bottles of liquor without any locking devices, in contravention of AGLC’s bottle service policies.

[39]

The Inspectors did not observe Mr. P.N. in the premises.

[40] The Inspectors spoke with the premises manager who advised them that all cameras inside the premises were operational, as required by the licence. Inspector Fowler reminded the premises manager that any bottles of liquor purchased by patrons must only be poured or accessible by Diamond Lounge staff.

[41] On May 15, 2023, Inspector Scotland contacted the premises manager and requested that the surveillance video footage from 12:30 a.m. to 1:30 a.m. on May 14, 2023 be provided to him by May 17, 2023.

[42] After three failed attempts to collect the footage, it was finally made available to Inspector Scotland on May 24, 2023. Upon review of the footage, Inspectors Scotland and Fowler observed:

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Only three of seven cameras functioning, with one of the three displaying a distorted image; Neither of the reviewable files showed the main service area;

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The time stamps from the two functional cameras appeared to be one hour ahead of the actual time that was requested and the footage provided did not capture the full hour that was requested; Mr. P.N. walking through the premises towards the rear exit at the time the Inspectors arrived and reentering the premises and walking through the VIP lounge at 1:13 a.m.; and The premises manager looking at Mr. P.N. while Mr. P.N. walks behind the main service bar, which is a staff only area.

[43] Still image captures from the footage were attached to the Incident Report (Exhibit 1, Tab 1). When asked by the Panel how the Inspectors knew that the individual depicted in the images was Mr. P.N., both Inspectors advised that they have spoken with and seen Mr. P.N. a number of times due to his involvement with previous operations on the premises. Both Inspector Fowler and Scotland confirmed with absolute certainty that the individual depicted in the images was Mr. P.N.

[44] Inspector Scotland spoke with the premises manager about the missing video footage on May 25, 2023 and again on May 26, 2023 to discuss Mr. P.N.’s presence in the premises.

[45] The premises manager advised that there was a roof leak at Diamond Lounge which may have been the cause of the cameras not functioning properly but that all cameras would be repaired by a technician within one week.

[46] The premises manager denied that Mr. P.N. was at Diamond Lounge on May 14, 2023. Inspector Scotland advised the premises manager that Mr. P.N. was seen in the surveillance footage entering, exiting and remaining in the premises. The premises manager further denied having knowledge of Mr. P.N.’s attendance that day. Inspector Scotland requested that the premises manager be forthright regarding Mr. P.N. being in the premises as the footage also depicted him looking directly at Mr. P.N. The premises manager then admitted that Mr. P.N. was, in fact, in the premises.

Incident 2 (June 4, 2023) [47] On June 4, 2023, Inspectors Scotland and Woo attended Diamond Lounge to conduct an operating check. Inspector Scotland approached the front entrance and Inspector Woo moved to the rear exterior door.

[48] Inspector Scotland entered the premises and identified himself to the security employee who had briskly entered the premises when he saw Inspector Scotland approaching.

[49] Inspector Scotland completed an inspection of all areas except the washrooms and the kitchen and did not find Mr. P.N. in the premises. Inspector Woo did not observe anyone exiting from the rear and joined Inspector Scotland inside the premises.

[50] Inspector Scotland observed that the requirements for bottle service outlined in AGLC’s policies were not being followed, as there were two tables with bottles on them that were not locked and where no staff were present.

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[51] Inspector Scotland spoke with the premises manager and reminded him of the bottle service requirements. Inspector Scotland also asked the premises manager if he could review the security footage monitor. Inspector Scotland viewed the monitor behind the DJ booth which clearly displayed that only three out of seven cameras were operational.

[52] Inspector Scotland advised the Panel that the Licensee had not contacted Regulatory Services to advise of the system malfunctions, as required by the condition on the licence.

[53] On June 6, 2023, Inspector Scotland met with Mr. Makwana and requested video surveillance footage from June 2 and 4, 2023 to ensure compliance with the licence conditions. The video footage was requested to be provided by June 8, 2023 but it was not provided by Mr. Makwana until June 13, 2023.

[54] Mr. Makwana admitted to Inspector Scotland that the footage would show that Mr. P.N. was in the licensed premises on June 3, 2023 and that he exited shortly before the Inspectors arrived on June 4, 2023. Mr. Makwana stated that there was a birthday party at Diamond Lounge on June 3 and into the early hours of June 4, 2023 and there were approximately 30 patrons in attendance who said they would leave if Mr. P.N. were not allowed in.

[55] Mr. Makwana stated that he did not want to lose business and that he only allowed Mr. P.N. to stay because Mr. Makwana was there and able to supervise. Inspector Scotland advised Mr. Makwana that per his licence condition, Mr. P.N. is not allowed in the premises whether Mr. Makwana is there or not.

[56]

Upon reviewing the footage on June 13, 2023, Inspector Scotland noted:

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Only one of the three requested cameras functioning; Neither of the reviewable files showed the main service area; The time stamps from the two functional cameras appeared to be one hour ahead of the actual time that was requested; and A total of 6 hours and 35 minutes of footage was missing from the time period requested.

Incident 3 (July 16, 2023) [57] On July 16, 2023, Inspectors Fowler and Scotland attended Diamond Lounge. Approximately two blocks away, they observed a white Range Rover they know to be operated by Mr. P.N.

[58] At 12:17 a.m., Inspector Scotland entered through the front door and Inspector Fowler positioned himself at the rear exit.

[59] Upon entry, Inspector Scotland observed Mr. P.N. seated with a group of patrons in the premises.

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[60] Inspector Scotland proceeded to the main service bar and identified himself to Mr. Makwana and the premises manager. Inspector Scotland asked Mr. Makwana why Mr. P.N. was seated at a table in the premises and Mr. Makwana replied that when the lounge is not busy, he “let’s Mr. P.N. stay” but that he advised his security that Mr. P.N. can only be inside if Mr. Makwana is present.

[61] Inspector Scotland informed Mr. Makwana that it did not matter how busy the premises was and reminded Mr. Makwana of the licence condition.

[62] The premises manager approached Mr. P.N. and had a brief conversation with him before he left the premises through the front entrance.

[63]

Inspector Fowler entered the premises at 12:21 a.m. after Mr. P.N. had left.

[64] Inspector Scotland viewed the digital camera security system monitor and noted that one camera was not functioning and another was obscured (Exhibit 1, Tab 3). He also noted that the time stamp on the footage was still one hour ahead of the actual time.

[65] Inspector Scotland reported that Mr. Makwana stated that a camera technician would attend on July 17, 2023 to ensure the camera security system was fully operational.

[66] Inspectors Fowler and Scotland exited the premises at 12:30 a.m. They drove by the white Range Rover parked a short distance from Diamond Lounge and observed Mr. P.N. standing on the sidewalk beside it.

[67] On July 18, 2023, Inspector Scotland contacted Mr. Makwana to advise that an Incident Report was being submitted regarding the July 16, 2023 incident. Inspector Scotland also asked whether the camera system had been fixed. Mr. Makwana advised Inspector Scotland that the technician cancelled but that he would reschedule the visit at a later date.

[68] Inspector Fowler advised the Panel that Regulatory Services has not since received any communication confirming whether the camera system is operational and has found no records that the system was satisfactorily maintained.

[69] Inspector Fowler is of the opinion that Mr. P.N. is involved in the operations of Diamond Lounge in some capacity, based on that fact that Mr. P.N. was initially the registered owner of the security system, was observed in the surveillance footage in staff areas and behind the main service bar, and appears to be regarded as a trusted individual by Diamond Lounge staff.