To: Honorable Mayor and City Council From: Gerald A. Silva,

City Auditor

Subject: Conditional Approval of Date: October 24, 2003

Stock Transfer

In accordance with the City Council’s request, I am submitting the finding reports from Kafoury, Armstrong, & Company, LLP relating to the Bay 101 Conditional Approval of Stock Transfer. This report represents the second quarter ending June 30, 2003.

It should be noted that,

“During the quarter ended June 30, 2003, management of Sutter’s Place, Inc., d.b.a. Bay 101 made changes to ownership percentages for entities related to Sutter’s Place, Inc., d.b.a. Bay 101. Details of the changes are reported on Exhibit 5. According to the Conditional Approval of Stock Transfer agreement dated August 26, 1994, paragraph 3(d), with respect to any and all existing business in which Tim Bumb and/or George Bumb, Jr. have any financial interest whatsoever with any member or relation of the Bumb family, there shall be no change in the existing percentage allocation and distribution of business income, or percentage of ownership, without justifying in writing, no less than thirty (30) days in advance, to the satisfaction of the Chief of Police, that there are adequate reasons for any such proposed changes(s) which are totally independent of any direct or indirect connection to the cardroom. As of June 30, 2003, with respect to the ownership percentage changes stated above, we are unaware of any such communications between management of Sutter’s Place, Inc., d.b.a. Bay 101 and the Chief of Police.”

Gerald A. Silva

City Auditor

0431

GS:bh

cc:	Carl Mitchell
	Richard Teng