APNewsBreak: Fla. to probe 2nd sweepstakes chain

Published on NewsOK Modified: March 22, 2013 at 5:51 pm •  Published: March 22, 2013
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ST. AUGUSTINE, Fla. (AP) — Fresh off a nearly $300 million racketeering case involving a veterans' charity that benefited from simulated gambling at Internet cafes, Florida regulators will investigate a children's cancer group connected to a cafe network that is four times bigger.

The new probe comes in response to Associated Press inquiries about Children's Cancer Cooperative, a group that operates out of a South Carolina bingo parlor, shares a lawyer with Allied Veterans of the World and has collected cash from more than 200 of the sweepstakes cafes in Florida.

In exchange for the money that has flowed into the Children's Cancer Cooperative from the cafes, the charity's name is listed as sponsoring sweepstakes prizes offered at the cafes, giving players the impression money lost on the fast-moving games mimicking Vegas-style slots goes to help sick kids.

As with the Allied Veterans case announced earlier this month, the central questions will be how much money the cafes raised, how much of that should have been taxed, and how much ultimately went to charity.

When authorities in Florida charged 57 people in the Allied Veterans case, they labeled Jacksonville attorney Kelly Mathis — who has also for years represented Children's Cancer Cooperative — the architect of the scheme. The resulting political and legal maelstrom triggered the resignation of Republican Lt. Gov. Jennifer Carroll, who had done consulting work for the charity, and sent top elected officials from both parties in Florida and North Carolina scrambling to return or at least explain the more than $1 million in campaign contributions they accepted from donors linked to Allied.

The revelations also have ignited a debate in Florida about how well the industry is regulated, how the millions of dollars flowing in and out of the cafes can be properly policed and whether enough of it is going to charities, a chief reason the cafes are allowed to operate tax-free and outside the realm of sanctioned gambling. The Florida House overwhelmingly approved a bill Friday that seeks to outlaw sweepstakes gaming.

Allied Veterans operated out of about 50 strip-mall Internet cafes scattered throughout the state, which sell customers time online at computer terminals that feature sweepstakes games that simulate slot machines.

Only about 2 percent — about $6 million over four years — of the money raised by cafes affiliated with Allied actually went to assist veterans, according to prosecutors. And most of the money that Allied Veterans took in wasn't listed on its tax forms, as is required.

Though the Children's Cancer Cooperative has reported donating nearly $3 million to cancer hospitals and dozens of other charities, according to an AP review of public records, it is impossible for outsiders to discern through public sources just how much of the total take from the affiliated cafes that represents.

"This is just one more example of why all Internet casinos must be shut down," Florida Agriculture Commissioner Adam Putnam, who oversees the sweepstakes industry, told the AP this week. "I am ashamed that businesses in Florida are lining their pockets by using veterans and vulnerable children to further their greed."

Out of jail on a $200,000 bond, Mathis said Wednesday he did legal work for Children's Cancer Cooperative, but knows nothing about how much cash the charity got or how it the money was distributed.

"Occasionally they have asked for my advice for operating a legal sweepstakes, which I provided to them," Mathis said. "I had no involvement in what they gave or where they gave it."

Harold T. Dukes Sr., who founded the Children's Cancer Cooperative in South Carolina in 1999, could not be reached for comment.

Records found by the AP show Mathis registered the Children's Cancer Cooperative in Florida in 2009. It is also registered in at least six other states where sweepstakes games are popular — Texas, Alabama, North Carolina, Kentucky, Virginia and Iowa.

Casinos consider such sweepstakes cafes unfair competition because they typically don't pay taxes and often operate in states were gambling is supposed to be illegal. Their ties to charity also lend them a veneer of legitimacy while discouraging law enforcement officials from shutting them down, said David Stewart, a Washington attorney who represents the casino gaming industry.

"It's hard to come up with a more sympathetic cause than children with cancer," Stewart said. "It makes people feel good about going there, makes it more socially acceptable because it's all for a good cause."

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