APNewsBreak: Fla. to probe 2nd sweepstakes chain
Mar 22, 2013 at 8:30 PM
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 sweepstakes 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 has also been active 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."
To play at the cafes, customers get prepaid cards and then go to a computer to play "sweepstakes." The games, with spinning wheels similar to slot machines, have names such as "Captain Cash," ''Lucky Shamrocks" and "Money Bunny." Winners go back to a cashier with their cards and cash out.
On Wednesday, first-time visitors to Old City Sweepstakes in St. Augustine were asked to sign a registration form identifying any prizes won at the cafe as "a promotion sponsored by Children's Cancer Cooperative Inc." Asked where the money from the cafe goes, the clerk provided a brochure describing Children's Cancer Cooperative as a nonprofit charity established by Dukes.
"Harold feels like God has blessed him his entire life, not only financially but also with his health and the health of his wife, children and grandchildren," the brochure says. "Because of God's abundant blessings, Harold believes that he should share these gift(s) with others. Harold's desire and wishes is to give to others as God has given to him."
The brochure includes color photos of the 76-year-old Dukes with his wife, Rosie, and posing with ill children while handing out huge yellow checks to the Miami Children's Hospital Foundation and the Shriners Hospital for Children in Tampa.
More photos posted on the charity's website include Dukes handing a $10,000 charity check to his local sheriff "for safety of the children and families in Berkeley County" and accepting a framed resolution passed by the South Carolina House of Representatives in 2010 to honor his charitable works.
The brochure describes Dukes as living on a farm outside Charleston, S.C. Records show he also is the owner of Music In Motion Family Fun Center of Summerville, S.C., which offers "jackpot bingo" seven nights a week. Dukes is also listed as the managing partner of Goldmine Arcade, a Florida corporation affiliated with several sweepstakes cafes.
Dukes' wife answered the door at the couple's modest home near Ravenel, S.C., on Wednesday, but said her husband wasn't home. He did not return a message seeking comment about his involvement with Children's Cancer Cooperative.
Dukes is paid $50,000 annually as president of the cancer charity, federal tax records show. His son, Carl Dukes, is the vice president, and other members of his family and business associates have also received money.
Children's Cancer Cooperative reported to the IRS giving away more than $2.5 million between 2009 and 2011. The organization's 2012 return is not yet available, but the charity's web site says it donated another $338,000 last year.
During its initial 2011 investigation into Allied Veterans, records show officials at the Florida Department of Agriculture and Consumer Services reviewed Internet casinos affiliated with Children's Cancer Cooperative after concerns were raised that customers were being told money spent on the games was being provided to charity. Windows at the cafes featured the Children's Cancer logo and large photos showing charity checks being presented to hospitals were prominently displayed inside.
Erin Gillespie, a spokeswoman for the agriculture department, said the agency ordered the cafes to remove the charity's logo and no longer represent that the funds spent there were going to help sick kids. A lobbyist for the cafes said they would comply, and the agency closed its investigation.
Gillespie said regulators were surprised to hear of the glossy Children's Cancer brochure provided to an AP reporter visiting Old City Sweepstakes, which records show a lawyer from Mathis' firm registered with the state in August as a new affiliate of the charity.
Six more new affiliates were registered March 11, days before authorities began issuing arrest warrants in the Allied Veterans case.
Mathis said this week he remembers meeting Dukes when the charity president visited his Jacksonville law office years ago to hire him.
"Mr. Dukes did tell me that they want to give money for children and children's cancer," Mathis said, "which I thought was pretty obvious, given their name."
Associated Press writers Mitch Weiss in Greenville, S.C., Tamara Lush in Jacksonville, Fla., Bruce Smith in Ravenel, S.C., and Gary Fineout in Tallahassee, Fla., and news researchers Rhonda Shafner and Judith Ausuebel in New York contributed to this report.
Follow Biesecker at Twitter/mbieseck.